Contract analysis

I. Executive Summary and Purpose This memorandum provides internal legal guidance to Solstice Biomedical Devices Ltd. ("Solstice" or "SBD") and its wholly owned subsidiary Solstice Biomedical, Inc. ("SBI" or "Buyer") regarding the earnout covenant obligations assumed under the Stock Purchase Agreement dated August 20, 2024 (the "SPA") in connection with SBI's acquisition of 100% of the outstanding common stock and ve

1. To identify and explain each earnout-related covenant obligation imposed on the Buyer under the SPA, including the commercially reasonable efforts standard, the minimum R&D budget requirement, restrictions on key personnel, and the prohibition on discontinuation or abandonment of the ArthroNav program;

2. To recommend compliance procedures and internal governance mechanisms designed to ensure that Solstice and SBI satisfy their earnout covenant obligations in full and create a contemporaneous record of compliance;

3. To summarize the milestone definitions, deadlines, and payment mechanics governing the earnout consideration;

4. To explain the Earnout Escrow Reserve mechanics, including the structure, release conditions, and investment provisions of the escrow; and

5. To outline the dispute resolution framework applicable to earnout-related disagreements between the Buyer and the Sellers' Representative. We note that Dr. Marcus Ellsworth, the former co-founder and Chief Executive Officer of Meridian, serves as the Sellers' Representative under the SPA. In that capacity, Dr. Ellsworth has authority to act on behalf of all Sellers with respect to earnout determinations, indemnifi

II. Overview of the Earnout Structure A. Earnout Milestones and Payment Amounts The SPA establishes two discrete earnout milestones, each tied to a specific FDA regulatory clearance event relating to the ArthroNav Platform. The milestones and corresponding payment amounts are as follows: Milestone 1: ArthroNav Generation 1.0 — FDA 510(k) Clearance Milestone 1 is achieved upon the receipt of FDA 510(k) clearance of th

III. Buyer's Affirmative Earnout Covenants Under the SPA The SPA imposes four principal categories of affirmative earnout covenants on the Buyer during the Earnout Period. Each covenant is described in detail below, together with our compliance recommendations. Failure to satisfy these covenants could expose the Buyer to a claim by the Sellers' Representative that the Buyer breached its earnout obligations, potential

IV. Earnout Milestone Tracking — Recommended Internal Procedures A. Regulatory Timeline and Critical Path As noted in Section II.C above, the ArthroNav Platform's regulatory pathway is based on the FDA 510(k) premarket notification process, with the Marlowe Asset Management Robotic Surgical Assist System (K203847) as the predicate device. The current status of the regulatory program and the critical path milestones a

1. Completion of bench testing and verification/validation (V&V) studies — including mechanical performance testing, electrical safety testing (IEC 60601-1 series), biocompatibility assessments (if applicable to patient-contacting components), software verification and validation (IEC 62304), and usability/human factors studies (IEC 62366-1);

2. Preparation and internal review of the 510(k) submission package — including the summary of substantial equivalence, device description, performance data, labeling, and all supporting documentation;

3. Pre-submission correspondence with FDA — if any additional Q-Sub meetings are warranted (e.g., to address questions arising from V&V results or to confirm the FDA's expectations regarding specific testing requirements);

4. Formal 510(k) filing date — the date on which the 510(k) submission is submitted to FDA via the electronic Submission Template and Resource (eSTAR) system;

5. FDA review clock start (acceptance/acknowledgment date) — the date on which FDA acknowledges receipt and acceptance of the 510(k) submission, which starts the statutory review clock;

6. FDA Additional Information (AI) requests and response deadlines — any AI requests issued by the FDA during the review process, together with the deadlines for Buyer's responses (which pause the FDA review clock); 7. 510(k) clearance decision — the issuance of a 510(k) clearance letter (or, alternatively, a not-substantially-equivalent determination or other adverse action) by FDA; and

8. Post-clearance actions — any conditions of clearance, post-market requirements, or labeling commitments imposed by FDA. Milestone 2 — Generation 2.0 Software Module: The ArthroNav Software Module for Real-Time Cartilage Mapping (Generation 2.0 upgrade) is likely to require a separate 510(k) submission or, potentially, a supplement to the Generation 1.0 clearance, depending on the nature and extent of the software

V. Earnout Payment Mechanics A. Determination of Milestone Achievement Milestone achievement under the SPA is determined by the occurrence of a specific, objectively verifiable event: the issuance of an FDA 510(k) clearance letter for the applicable ArthroNav product on or before the applicable milestone deadline. Upon receipt of FDA 510(k) clearance, the Buyer is required to take the following steps:

1. Prompt Written Notification: The Buyer must promptly notify the Sellers' Representative in writing of the FDA clearance, specifying the date of clearance, the product cleared, and the applicable milestone achieved. The notice should be delivered in accordance with the SPA's notice provisions (see Section X below).

2. Copy of FDA Clearance Letter: The Buyer must provide the Sellers' Representative with a copy of the FDA 510(k) clearance letter (i.e., the "K-letter") issued by CDRH.

3. Payment: The applicable earnout payment is due within the timeframe specified in the SPA following FDA clearance. Calderwood & Harkness recommends that the Buyer confirm the exact payment window per the SPA — typically, earnout payment provisions specify a period of ten (10) to fifteen (15) business days following the clearance event. For planning purposes, the Buyer should be prepared to wire the applicable earno

VI. Earnout Escrow Reserve A. Structure and Purpose At the Closing, the Buyer funded a separate Earnout Escrow Reserve in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000). This amount was deposited into a designated sub-account (Account No. KES-2024-EO-09184) at Keystone Escrow Services, Inc. (the "Escrow Agent"), held at First Continental Trust Co., N.A. The purpose of the Earnout Escrow Reserve

VII. Dispute Resolution Framework for Earnout Disagreements A. Triggering a Dispute Disputes regarding the earnout may arise in several contexts. The most likely scenarios include: • The Sellers' Representative disagrees with the Buyer's determination that a milestone was not achieved (e.g., the Buyer asserts that the FDA clearance was not received by the applicable deadline, or the Buyer contends that the clearance

1. Selection of Expert: The independent regulatory consultant is to be mutually selected by the Buyer and the Sellers' Representative. The expert should be an individual with recognized expertise in the FDA 510(k) regulatory process, medical device regulatory affairs, and the specific device category relevant to the ArthroNav Platform (orthopedic surgical robotics).

2. Fallback Appointment: If the parties cannot agree on the identity of the regulatory consultant within the timeframe specified in the SPA (Calderwood & Harkness recommends confirming the exact period — typically thirty (30) days from the date of the dispute notice), the consultant will be appointed by the American Arbitration Association (AAA) in accordance with its applicable rules for expert determination proceed

3. Proceedings: The expert will conduct such proceedings as the expert deems appropriate, which may include document review, written submissions by the parties, and (at the expert's discretion) oral presentations. The procedural details are subject to the terms of the SPA and any supplemental procedural agreement between the parties and the expert.

4. Determination: The expert's determination is final and binding on both parties, absent manifest error or fraud. This means that the parties have waived their right to appeal or challenge the expert's decision in court, except in the narrow circumstances of demonstrable manifest error (i.e., a clear and obvious factual or legal mistake) or fraud. C. Scope of Expert's Review The expert's authority under the SPA exte

VIII. Interplay with Other SPA Provisions A. Earnout and Indemnification The earnout obligations under the SPA are separate and distinct from the indemnification framework. The indemnification provisions of the SPA govern the parties' respective obligations with respect to breaches of representations and warranties, breaches of pre-closing covenants, and certain specified indemnifiable matters. The indemnification ca

IX. Recommended Action Items and Compliance Calendar A. Immediate Actions (November 2024) The following action items should be completed by the Solstice and SBI teams as promptly as practicable following receipt of this memorandum:

1. Establish a Discrete ArthroNav R&D Cost Center. Conor Muldoon's finance team should establish a dedicated cost center within SBI's financial systems for tracking all ArthroNav R&D expenditures. The cost center should be structured to capture the qualifying expenditure categories identified in Section III.B above, with monthly internal reporting to General Counsel.

2. Confirm Regulatory Submission Timeline. Patrick Lennox should schedule a meeting with Dr. Raj Subramanian and Dr. Niamh Cassidy to confirm the current regulatory submission timeline for the Generation 1.0 510(k), identify any risks or dependencies, and establish the baseline timeline against which future progress will be measured.

3. Schedule Initial Quarterly Earnout Compliance Review. An initial quarterly earnout compliance review meeting should be scheduled for Q1 2025 (January or February 2025), with participation from Patrick Lennox, Helena Byrne, Dr. Cassidy, Dr. Subramanian, and Conor Muldoon. Calderwood & Harkness should be invited to participate (at least for the initial meeting) to provide guidance on the compliance framework.

4. Circulate This Memorandum. This memorandum should be circulated to all relevant Solstice and SBI personnel identified herein, with an express reminder that it constitutes privileged and confidential attorney-client communication and should not be shared outside of the Solstice internal legal and management team. B. Ongoing / Recurring Actions The following recurring actions should be implemented on the schedule in

X. Notice Provisions All earnout-related notices, communications, and deliveries between the Buyer and the Sellers' Representative must comply with the notice provisions of the SPA. The designated notice addresses are as follows: Notices to the Sellers' Representative: Dr. Marcus Ellsworth [At his designated address for notices as set forth in the SPA] With a copy to: Whitmore Crane & Pfeiffer LLP One Liberty Place 1

XI. Conclusion and Availability Calderwood & Harkness LLP remains available to advise Solstice Biomedical Devices Ltd. and Solstice Biomedical, Inc. on all matters related to earnout compliance, communications with the Sellers' Representative, dispute resolution procedures, escrow administration, and any other questions arising under the SPA or the related transaction documents. We encourage the Solstice team to cons