Contract analysis

I. Opening and Purpose I write on behalf of our clients, Solstice Biomedical Devices Ltd. and its wholly owned United States subsidiary, Solstice Biomedical, Inc. (collectively, "Solstice"), to present a comprehensive settlement proposal for consideration by your client, Apex Surgical Innovations, Inc. ("Apex"), in the above-referenced action. As you know, both parties participated in a second settlement conference o

II. Background and Context The current litigation posture warrants a candid assessment by both parties of the costs, risks, and benefits of continuing to trial versus reaching a negotiated resolution. The parties have engaged in extensive and hotly contested discovery over the past fourteen months. Fact discovery is complete, and the Court has ruled on multiple discovery disputes. On December 6, 2024, the Honorable R

III. Assessment of Litigation Risk Informing the Proposal The settlement framework presented in this letter is informed by a realistic and balanced assessment of both parties' litigation positions and the inherent uncertainties of patent litigation. While Solstice does not concede any liability — and Indeed maintains robust defenses to each of Apex's infringement claims — Solstice acknowledges the commercial desirabi

IV. Proposed Settlement Framework — Overview Solstice proposes a comprehensive license-and-dismissal settlement comprising the following seven integrated elements:

1. A lump-sum payment from Solstice to Apex, as compensation for past sales of the accused PrecisionEdge™ products during the damages period;

2. A running royalty on future sales of Licensed Products for the remaining life of the Licensed Patents;

3. A non-exclusive patent license under the three asserted patents and related continuations, divisionals, and reissues;

4. A covenant not to sue covering the broader Apex trocar patent family, providing Solstice with commercial certainty beyond the three specifically asserted patents;

5. A mutual release of all claims, counterclaims, and defenses in the pending action;

6. Dismissal with prejudice of Case No. 1:24-cv-00587-RGA, with each party bearing its own costs and attorneys' fees; and

7. Mutual confidentiality obligations governing the terms of the settlement. Each of these elements is discussed in detail below.

V. Proposed Lump-Sum Payment Solstice proposes a lump-sum payment to Apex in the amount of Eight Million Seven Hundred Fifty Thousand Dollars ($8,750,000) as compensation for past sales of the accused PrecisionEdge™ products during the damages period. To accommodate Solstice's cash flow requirements and capital planning cycle, Solstice proposes that the lump-sum payment be made in two tranches, as follows: Tranche 1:

VI. Proposed Running Royalty In addition to the lump-sum payment described above, Solstice proposes a running royalty at a rate of 3.75% of Net Sales of Licensed Products for the remaining life of the Licensed Patents. The key terms of the running royalty are as follows: Licensed Products. "Licensed Products" shall mean the PrecisionEdge™ PE-5000 Series, PE-12000 Series, and PE-15000 Series laparoscopic trocar assemb

VII. Proposed Patent License Terms The patent license to be included in the definitive settlement agreement would contain the following material terms: License Grant. Apex would grant to Solstice a non-exclusive, non-transferable license under the Licensed Patents, subject to the running royalty and other terms described herein. The license would be transferable solely in connection with a change of control of Solsti

VIII. Proposed Covenant Not to Sue As a critical component of the proposed settlement framework, Solstice requests that Apex provide a covenant not to sue with respect to the broader Apex Trocar Patent Family. Solstice understands that the Apex Trocar Patent Family encompasses a portfolio of fourteen (14) issued United States patents and six (6) pending continuation applications, of which only the three asserted pate

IX. Most-Favored Licensee Provision Solstice proposes the inclusion of a most-favored licensee clause in the definitive settlement and license agreement. Specifically, if Apex enters into a license agreement with any third party for the Licensed Patents — whether in settlement of litigation or otherwise — at a running royalty rate lower than 3.75% of net sales, Solstice's running royalty rate would adjust prospective

X. Mutual Release and Dismissal The definitive settlement agreement would include a full and unconditional mutual release of all claims, counterclaims, defenses, causes of action, and demands of every kind and nature, whether known or unknown, that have been asserted or could have been asserted by either party in Case No. 1:24-cv-00587-RGA, arising out of or relating to the manufacture, use, sale, offer for sale, or

XI. Confidentiality All terms and conditions of the settlement, including the financial terms, the license terms, and the existence and content of this proposal letter and all related communications, shall be subject to mutual confidentiality obligations in the definitive settlement agreement. Neither party shall disclose the terms of the settlement to any third party except as follows: (a) to each party's directors,

XII. Governing Law The definitive settlement agreement, including the patent license agreement, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict-of-laws principles. Any dispute arising out of or relating to the settlement agreement or patent license that is not resolved by the Court in the exercise of retained jurisdiction (if applicable) shall be

XIII. Proposed Process and Timeline Solstice proposes the following timeline for concluding a settlement based on this framework: If Apex is amenable to this framework — whether in its current form or with modifications that the parties negotiate — Calderwood & Harkness LLP will prepare an initial draft of the definitive settlement agreement, patent license agreement, escrow agreement, Stipulation of Dismissal, and a

XIV. Reservation of Rights This proposal is made without prejudice and without any admission of liability, infringement, validity, or enforceability. Solstice expressly reserves all rights, claims, defenses, counterclaims, and affirmative defenses it has asserted or may assert in Case No. 1:24-cv-00587-RGA or in any other forum. Nothing in this letter or in any discussions arising from this letter constitutes or shal

XV. Closing We believe the proposal set forth in this letter provides a constructive, good-faith basis for resolving this matter on terms that are fair and commercially reasonable for both parties. The framework is designed to provide Apex with meaningful near-term compensation through the lump-sum payment, an ongoing revenue stream through the running royalty with a guaranteed annual floor, and the protection of its