EXHIBIT A
to the Settlement Agreement and Mutual Release dated June 16, 2025
Apex Surgical Innovations, Inc. v. Solstice Biomedical, Inc. Case No. 1:24-cv-00587-RGA United States District Court for the District of Delaware
PATENT LICENSE AGREEMENT (NON-EXCLUSIVE)
PATENT LICENSE AGREEMENT (NON-EXCLUSIVE)
This Patent License Agreement (Non-Exclusive) (this "Agreement") is entered into as of June 16, 2025 (the "Effective Date"), by and among:
APEX SURGICAL INNOVATIONS, INC., a corporation organized and existing under the laws of the State of Delaware, with its principal offices located at 1220 North Market Street, Suite 550, Wilmington, Delaware 19801 (Employer Identification Number: 51-0483762) (hereinafter referred to as "Licensor" or "Apex");
and
SOLSTICE BIOMEDICAL DEVICES LTD., a private limited company organized under the laws of Ireland (Companies Registration Office Number: 648217), with its registered office located at Unit 14, Clonskeagh Business Park, Clonskeagh Road, Dublin 14, D14 YF28, Ireland (hereinafter referred to as "Licensee" or "Solstice");
and
SOLSTICE BIOMEDICAL, INC., a corporation organized and existing under the laws of the State of Delaware (Employer Identification Number: 84-3291056), with its principal offices located at 3800 Concord Pike, Suite 410, Wilmington, Delaware 19803 (hereinafter referred to as "Solstice US" and, together with Solstice, a co-licensee under this Agreement).
Apex, Solstice, and Solstice US are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Apex is the owner by assignment of certain United States patents relating to surgical access device technology, including U.S. Patent No. 9,814,237, U.S. Patent No. 10,271,884, and U.S. Patent No. 10,932,105, together with all related continuations, continuations-in-part, divisionals, reissues, and re-examinations thereof (collectively, the "Apex Trocar Patent Family");
WHEREAS, Apex filed a patent infringement action against Solstice Biomedical, Inc. in the United States District Court for the District of Delaware, captioned Apex Surgical Innovations, Inc. v. Solstice Biomedical, Inc., Case No. 1:24-cv-00587-RGA (the "Action"), alleging infringement of certain claims of the foregoing patents by Solstice's PrecisionEdge™ line of laparoscopic trocar assemblies;
WHEREAS, the Parties have entered into that certain Settlement Agreement and Mutual Release dated June 16, 2025 (the "Settlement Agreement"), resolving all claims, counterclaims, and defenses asserted by the Parties in the Action;
WHEREAS, pursuant to the Settlement Agreement, Apex has agreed to grant Solstice and Solstice US a non-exclusive license under the Licensed Patents (as defined below) on the terms and conditions set forth in this Agreement; and
WHEREAS, the Parties desire to set forth the complete terms and conditions of such license in this Agreement, which is attached as Exhibit A to the Settlement Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties set forth herein, and for other good and valuable consideration (including the lump-sum and running royalty payments set forth in the Settlement Agreement and this Agreement), the receipt and sufficiency of which are hereby acknowledged by each of the Parties, the Parties agree as follows:
ARTICLE I DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Settlement Agreement.
Section 1.1 — "Action." "Action" means the patent infringement action captioned Apex Surgical Innovations, Inc. v. Solstice Biomedical, Inc., Case No. 1:24-cv-00587-RGA, pending in the United States District Court for the District of Delaware before the Honorable Richard G. Andrews, United States District Judge, together with all associated proceedings, motions, and counterclaims therein.
Section 1.2 — "Affiliate." "Affiliate" means, with respect to any Party, any entity that directly or indirectly controls, is controlled by, or is under common control with such Party. For purposes of this definition, "control" means the direct or indirect ownership of fifty percent (50%) or more of the outstanding voting securities of an entity, or the possession of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities, by contract, or otherwise. For the avoidance of doubt, as of the Effective Date, Solstice US is an Affiliate of Solstice.
Section 1.3 — "Change of Control." "Change of Control" means, with respect to Solstice or Solstice US, the occurrence of any of the following events: (a) a merger, consolidation, reorganization, or other business combination transaction in which the equity holders of Solstice or Solstice US (as applicable) immediately prior to such transaction hold, in the aggregate, less than fifty percent (50%) of the total voting power of all outstanding voting securities of the surviving or resulting entity immediately following such transaction; (b) the sale, transfer, exclusive license, or other disposition of all or substantially all of the assets of Solstice or Solstice US (as applicable) in a single transaction or series of related transactions; or (c) the acquisition by any person, entity, or "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under such Act) of more than fifty percent (50%) of the outstanding voting securities of Solstice or Solstice US (as applicable).
Section 1.4 — "Contract Manufacturer." "Contract Manufacturer" means a third-party manufacturer engaged by Solstice, Solstice US, or any of their respective Affiliates under a bona fide written manufacturing agreement, solely for the purpose of manufacturing Licensed Products on behalf of, and for subsequent sale by, Solstice, Solstice US, or their Affiliates. A Contract Manufacturer shall not include any distributor, reseller, or other entity that purchases Licensed Products for resale on its own account.
Section 1.5 — "Effective Date." "Effective Date" means June 16, 2025, being the date on which this Agreement is executed by all Parties and which is coterminous with the effective date of the Settlement Agreement.
Section 1.6 — "Field of Use." "Field of Use" means the design, development, manufacture, use, import, offer for sale, sale, and distribution of laparoscopic surgical access devices, including without limitation trocar assemblies, trocar cannula systems, obturators, and related surgical access instruments designed for use in minimally invasive laparoscopic surgical procedures.
Section 1.7 — "Licensed Patents." "Licensed Patents" means the following United States patents, together with all continuations, continuations-in-part (solely to the extent that the claims thereof are entitled to a priority date of one or more of the patents identified in clauses (a) through (c) below), divisionals, reissues, re-examinations, and extensions of any of the foregoing:
(a) U.S. Patent No. 9,814,237, entitled "Locking Seal Assembly for Minimally Invasive Surgical Access Device," issued November 14, 2017, with an expiration date of June 22, 2035;
(b) U.S. Patent No. 10,271,884, entitled "Retractable Blade Deployment Mechanism for Trocar Systems," issued April 30, 2019, with an expiration date of September 15, 2036;
(c) U.S. Patent No. 10,932,105, entitled "Integrated Insufflation Valve and Seal for Laparoscopic Trocar," issued March 2, 2021, with an expiration date of January 10, 2038; and
(d) any and all continuations, continuations-in-part (subject to the limitation stated above), divisionals, reissues, re-examinations, and patent term extensions of any of the patents identified in clauses (a) through (c) above.
A complete listing of the Licensed Patents, including the fourteen (14) issued United States patents and six (6) pending continuation applications comprising the Apex Trocar Patent Family as of the Effective Date, is set forth in Exhibit C (List of Licensed Patents and Pending Applications) to the Settlement Agreement, which is incorporated herein by reference. A summary of the three principal asserted patents is set forth in Schedule 1 to this Agreement.
Section 1.8 — "Licensed Products." "Licensed Products" means the following products manufactured, sold, or distributed by or on behalf of Solstice, Solstice US, or their Affiliates:
(a) the PrecisionEdge™ PE-5000 Series (5 mm trocar assembly);
(b) the PrecisionEdge™ PE-12000 Series (12 mm trocar assembly);
(c) the PrecisionEdge™ PE-15000 Series (15 mm trocar assembly); and
(d) any successor products thereto, meaning any product manufactured, sold, or distributed by or on behalf of Solstice, Solstice US, or their Affiliates that, absent the license granted under this Agreement, would infringe one or more valid and enforceable claims of the Licensed Patents (a "Successor Product").
A listing of Licensed Products as of the Effective Date is set forth in Schedule 2 to this Agreement. For the avoidance of doubt, the determination of whether a Successor Product falls within the definition of Licensed Products shall be made on a claim-by-claim basis by reference to the claims of the Licensed Patents as issued or as may be amended through reissue or re-examination.
Section 1.9 — "Net Sales." "Net Sales" means the gross amounts invoiced by Solstice, Solstice US, their Affiliates, and authorized sublicensees for Licensed Products sold or otherwise transferred to unaffiliated third parties in bona fide, arm's-length transactions, less the following deductions to the extent actually incurred, allowed, or accrued and separately identified on the applicable invoices or in the seller's customary accounting records maintained in accordance with generally accepted accounting principles consistently applied:
(a) trade discounts, quantity discounts, cash discounts, and rebates (including chargebacks and rebates paid or credited to group purchasing organizations, managed care organizations, and government health programs);
(b) credits, allowances, and refunds for returns of Licensed Products;
(c) chargebacks and retroactive price adjustments, including those arising from government-mandated pricing programs;
(d) freight, shipping, handling, and insurance charges actually borne by the seller and included in the invoiced amount; and
(e) sales taxes, use taxes, value-added taxes, excise taxes, customs duties, and similar governmental charges imposed on the sale of Licensed Products (but excluding income taxes imposed on the seller).
For the avoidance of doubt:
(i) Licensed Products distributed as free samples or for clinical evaluation at no charge shall not be included in Net Sales;
(ii) transfers of Licensed Products between or among Solstice, Solstice US, their Affiliates, and Contract Manufacturers shall not be counted as Net Sales; rather, the first subsequent sale or transfer to an unaffiliated third party shall be the transaction counted for purposes of calculating Net Sales; and
(iii) in the event that a Licensed Product is sold as part of a bundle or kit containing other products that are not Licensed Products, Net Sales shall be calculated based on the reasonable fair market value of the Licensed Product component of such bundle or kit, as determined by reference to the standalone selling price of the Licensed Product, or, if no standalone selling price is reasonably ascertainable, by a reasonable allocation methodology consistently applied.
Section 1.10 — "Royalty Cap." "Royalty Cap" means one million eight hundred thousand United States dollars ($1,800,000) per calendar year, as further described in Section 3.4.
Section 1.11 — "Royalty Floor." "Royalty Floor" means five hundred thousand United States dollars ($500,000) per calendar year, beginning with calendar year 2026, as further described in Section 3.3.
Section 1.12 — "Royalty Rate." "Royalty Rate" means three and three-quarters percent (3.75%) of Net Sales.
Section 1.13 — "Settlement Agreement." "Settlement Agreement" means that certain Settlement Agreement and Mutual Release dated June 16, 2025, by and among Solstice Biomedical Devices Ltd., Solstice Biomedical, Inc., and Apex Surgical Innovations, Inc., together with all exhibits, schedules, and annexes thereto, as may be amended from time to time in accordance with its terms.
Section 1.14 — "Territory." "Territory" means worldwide. Although the Licensed Patents are United States patents, the license granted hereunder encompasses all activities worldwide to the extent such activities are implicated by or would give rise to liability under the Licensed Patents, including without limitation the importation of Licensed Products into the United States and the manufacture of Licensed Products outside the United States for sale or use in the United States.
ARTICLE II GRANT OF LICENSE
Section 2.1 — License Grant. Subject to the terms and conditions of this Agreement and the Settlement Agreement, and in consideration of the lump-sum payment set forth in Section 3.1 and the running royalty payments set forth in Section 3.2, Apex hereby grants to Solstice and Solstice US (collectively, the "Licensees") a non-exclusive, non-transferable (except as expressly set forth in Section 2.3), royalty-bearing, worldwide license under the Licensed Patents to make, have made (through Contract Manufacturers in accordance with Section 2.2), use, import, offer for sale, sell, and otherwise dispose of Licensed Products within the Field of Use in the Territory during the Term of this Agreement. The license granted under this Section 2.1 shall be effective as of the Effective Date and shall continue for the Term specified in Section 11.1, unless earlier terminated in accordance with Article XI. For the avoidance of doubt, the license granted hereunder is non-exclusive, and nothing in this Agreement shall prevent Apex from practicing the Licensed Patents itself, licensing the Licensed Patents to any other person or entity, or granting any other rights in the Licensed Patents to third parties. The Parties acknowledge and agree that the royalty obligations applicable to this license are set forth in Article III of this Agreement.
Section 2.2 — Sublicense Rights.
(a) Solstice and Solstice US may grant sublicenses under the Licensed Patents solely to Contract Manufacturers, and solely for the purpose of manufacturing Licensed Products on behalf of and for subsequent sale by Solstice, Solstice US, or their Affiliates. Solstice and Solstice US shall not grant sublicenses for any other purpose or to any other person or entity without the prior written consent of Apex.
(b) Each sublicense granted pursuant to this Section 2.2 shall:
(i) be in writing and executed by authorized representatives of Solstice or Solstice US (as applicable) and the Contract Manufacturer;
(ii) be consistent with and subordinate to the terms and conditions of this Agreement in all respects, and shall expressly provide that the Contract Manufacturer's rights under the sublicense are derived from and limited by this Agreement;
(iii) require the Contract Manufacturer to comply with confidentiality obligations no less protective than those set forth in Article X of this Agreement and the corresponding confidentiality provisions of the Settlement Agreement;
(iv) prohibit the Contract Manufacturer from granting further sublicenses under the Licensed Patents;
(v) require the Contract Manufacturer to maintain complete and accurate records of Licensed Products manufactured, which records shall be available for audit in accordance with Section 4.3 upon reasonable notice; and
(vi) terminate automatically and without further action by any Party upon the termination or expiration of this Agreement for any reason.
(c) Solstice shall provide Apex with written notice, including the legal name, address, and principal place of business of the Contract Manufacturer, within thirty (30) days of the grant of any sublicense under this Section 2.2. Such notice shall be delivered in accordance with Section 12.7.
(d) Solstice and Solstice US shall remain primarily liable for all acts and omissions of any sublicensee (including any Contract Manufacturer) as if such acts and omissions had been performed by Solstice or Solstice US directly, including without limitation liability for any breach of this Agreement, infringement of the Licensed Patents, and indemnification obligations under Article VIII.
Section 2.3 — Non-Transferability; Change of Control Exception.
(a) This Agreement and the license granted hereunder may not be assigned, transferred, or delegated by Solstice or Solstice US, in whole or in part, whether by operation of law or otherwise, without the prior written consent of Apex, which consent may be granted or withheld in Apex's sole and absolute discretion; provided, however, that no such consent shall be required in connection with a Change of Control of Solstice or Solstice US.
(b) In the event of a Change of Control of Solstice or Solstice US, the license granted under this Agreement shall remain in full force and effect for the benefit of the surviving or acquiring entity, subject to the following conditions:
(i) the license shall not extend to any products of the acquirer or its other affiliates (other than the Licensees and their pre-existing Affiliates) that were not Licensed Products as of immediately prior to the closing of the Change of Control transaction;
(ii) the acquirer or surviving entity shall assume in writing all obligations of Solstice or Solstice US (as applicable) under this Agreement; and
(iii) the running royalty obligations under Article III shall continue to apply on the same terms with respect to Licensed Products, and Net Sales of the acquirer's other products (which are not Licensed Products) shall be excluded from the calculation of Net Sales hereunder.
(c) Written notice of any assignment of this Agreement in connection with a Change of Control shall be provided to Apex within thirty (30) days of the closing of the applicable transaction, together with a copy of the written assumption agreement referenced in Section 2.3(b)(ii) above.
(d) Any purported assignment, transfer, or delegation in violation of this Section 2.3 shall be null and void and of no force or effect.
Section 2.4 — Reservation of Rights. All rights not expressly granted to Solstice and Solstice US under this Agreement are reserved by Apex. Without limiting the generality of the foregoing:
(a) nothing in this Agreement shall be construed to grant Solstice or Solstice US any license by implication, estoppel, or otherwise, except as expressly set forth in Section 2.1;
(b) the license granted hereunder does not extend to any products outside the Field of Use;
(c) the license granted hereunder does not extend to any patents or other intellectual property rights of Apex other than the Licensed Patents; and
(d) Apex retains the full and unrestricted right to practice the Licensed Patents, to license the Licensed Patents to any third party, and to enforce the Licensed Patents against any person or entity other than the Licensees and their authorized sublicensees acting within the scope of the license granted hereunder.
Section 2.5 — No Implied License to Third Parties. The sale of Licensed Products by Solstice, Solstice US, their Affiliates, or authorized sublicensees shall not be deemed to grant to any purchaser, end user, or other third party any sublicense or implied license under the Licensed Patents beyond the normal and customary exhaustion of patent rights that attaches to the authorized sale of a patented article. Nothing in this Agreement shall be construed to obligate Apex to refrain from enforcing the Licensed Patents against any third party, including any customer or end user of Solstice, for activities that fall outside the scope of patent exhaustion.
ARTICLE III ROYALTY PAYMENTS
Section 3.1 — Lump-Sum Consideration. In accordance with Section 4.2 of the Settlement Agreement, Solstice shall pay to Apex a lump-sum settlement payment in the aggregate amount of eight million seven hundred fifty thousand United States dollars ($8,750,000), payable in two tranches as follows:
(a) Tranche 1: Five million two hundred fifty thousand United States dollars ($5,250,000), due and payable on or before June 30, 2025; and
(b) Tranche 2: Three million five hundred thousand United States dollars ($3,500,000), due and payable on or before September 15, 2025.
Such lump-sum payment constitutes partial consideration for the license granted under Section 2.1 of this Agreement and for the releases, covenants, and other undertakings of Apex under the Settlement Agreement. The terms and conditions governing the lump-sum payment, including payment mechanics, wire transfer instructions, and consequences of late payment, are set forth in the Settlement Agreement and are incorporated herein by reference. The lump-sum payment is non-refundable and non-creditable against running royalties.
Section 3.2 — Running Royalty. Beginning on the Effective Date and continuing throughout the Term of this Agreement, Solstice shall pay to Apex a running royalty equal to three and three-quarters percent (3.75%) of Net Sales of Licensed Products (the "Running Royalty"). The Running Royalty obligation shall commence as of the calendar quarter in which the Effective Date falls (i.e., the third calendar quarter of 2025, July 1 through September 30, 2025), and shall be calculated and paid on a quarterly basis in accordance with Section 3.5. For informational purposes only, and without creating any binding obligation or guarantee, the Parties acknowledge that the estimated Running Royalty for calendar year 2026 is approximately nine hundred seven thousand five hundred United States dollars ($907,500), based on projected Net Sales of approximately twenty-four million two hundred thousand United States dollars ($24,200,000), which projection reflects an assumed eight percent (8%) annual growth rate over Solstice's fiscal year 2023 United States sales of approximately twenty-two million four hundred thousand United States dollars ($22,400,000). Such estimate is provided for reference only and shall not limit or modify the actual Running Royalty obligation as calculated under this Section 3.2.
Section 3.3 — Royalty Floor.
(a) Beginning January 1, 2026, and for each full calendar year thereafter during the Term of this Agreement, the aggregate annual Running Royalty payable by Solstice to Apex shall not be less than the Royalty Floor of five hundred thousand United States dollars ($500,000).
(b) If the Running Royalties calculated pursuant to Section 3.2 for any calendar year (beginning with calendar year 2026) are less than the Royalty Floor, Solstice shall pay to Apex the difference between the Royalty Floor and the actual Running Royalties for such year. Such true-up payment shall be included in and paid together with the fourth-quarter (Q4) royalty payment for such calendar year, due no later than February 14 of the following calendar year.
(c) For the avoidance of doubt, the Royalty Floor shall not apply to any partial calendar year. Accordingly, no Royalty Floor obligation shall apply to the period from the Effective Date through December 31, 2025, nor to any partial calendar year in which this Agreement is terminated prior to December 31 (except as provided in Section 11.4 with respect to proration upon termination for convenience).
Section 3.4 — Royalty Cap.
(a) Notwithstanding anything to the contrary in Section 3.2, the aggregate Running Royalty payable by Solstice to Apex in any single calendar year shall not exceed the Royalty Cap of one million eight hundred thousand United States dollars ($1,800,000).
(b) If cumulative Running Royalties for a calendar year reach the Royalty Cap, no further Running Royalty shall be due or payable by Solstice for the remainder of that calendar year. Any overpayment of Running Royalties in excess of the Royalty Cap for a calendar year shall be credited against the Running Royalty payment due for the immediately following calendar quarter (or, if such overpayment occurs in the final year of the Term, shall be refunded by Apex within thirty (30) days of Apex's receipt of the corresponding royalty report).
(c) The Royalty Cap shall not apply to or reduce the lump-sum payment described in Section 3.1.
Section 3.5 — Payment Terms.
(a) Running Royalties shall be calculated and paid on a quarterly basis, within forty-five (45) days after the end of each calendar quarter during the Term. The royalty payment schedule shall be as follows:
(b) All payments under this Agreement shall be made in United States dollars. Running Royalty payments shall be made by wire transfer of immediately available funds to a bank account designated in writing by Apex from time to time. If Apex so designates in writing, payments may be made through escrow at Tidewater Fiduciary Services, Inc. (or such successor escrow agent as Apex may designate), in accordance with escrow instructions to be mutually agreed by the Parties.
(c) In the event that Net Sales are denominated in a currency other than United States dollars, such amounts shall be converted to United States dollars using the average of the daily closing exchange rates published by the Wall Street Journal (or, if unavailable, by the European Central Bank) for the last business day of each month during the applicable calendar quarter.
Section 3.6 — Late Payments. Any Running Royalty payment, Royalty Floor true-up payment, or other payment due under this Agreement that is not received by Apex within the applicable payment period specified herein shall bear interest from the date on which such payment was due until the date on which such payment is received by Apex, at a rate equal to the lesser of (a) one and one-half percent (1.5%) per month (eighteen percent (18%) per annum), compounded monthly, or (b) the maximum rate of interest permitted by applicable law. The accrual of such interest shall be in addition to, and not in limitation of, any other rights or remedies available to Apex under this Agreement, the Settlement Agreement, or applicable law.
Section 3.7 — Taxes and Withholding.
(a) All Running Royalty payments and other amounts payable by Solstice to Apex under this Agreement are exclusive of any applicable withholding taxes, value-added taxes, goods and services taxes, sales taxes, use taxes, or similar governmental charges or levies. Solstice shall be responsible for the payment of all such taxes imposed on or with respect to payments made by Solstice under this Agreement, except for income taxes imposed on Apex's net income.
(b) If Solstice or Solstice US is required by applicable law to withhold or deduct any taxes from any payment due to Apex under this Agreement, the amount of the payment to Apex shall be reduced by the amount of such withholding or deduction, and Solstice shall remit the withheld or deducted amount to the appropriate governmental authority in accordance with applicable law. Solstice shall provide Apex with official tax receipts, certificates, or other documentation evidencing such withholding or deduction within thirty (30) days of the date on which such withholding or deduction is made.
(c) The Parties acknowledge that the tax treatment of payments under this Agreement, including any applicable withholding obligations, may be subject to the provisions of the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, as amended (the "U.S.-Ireland Income Tax Treaty"), and the related tax analysis set forth in the Settlement Agreement. The Parties shall cooperate in good faith and use commercially reasonable efforts to minimize the amount of any withholding taxes applicable to payments under this Agreement, to the extent lawfully permitted, including by timely completing and exchanging any required tax forms (including IRS Form W-8BEN-E and any applicable treaty benefit claim forms).
ARTICLE IV ROYALTY REPORTS AND RECORDS
Section 4.1 — Royalty Reports. Concurrently with each quarterly Running Royalty payment, Solstice shall furnish to Apex a written royalty report in the form attached as Exhibit D to the Settlement Agreement (the "Royalty Report"), which form is incorporated herein by reference. Each Royalty Report shall set forth, with respect to the applicable calendar quarter, the following information in reasonable detail:
(a) the total number of units of Licensed Products sold during the quarter, broken out by product line (PE-5000 Series, PE-12000 Series, PE-15000 Series, and any Successor Products);
(b) gross amounts invoiced for Licensed Products sold during the quarter, broken out by product line;
(c) an itemization of each category of deduction from gross invoiced amounts used to arrive at Net Sales, including trade discounts, quantity discounts, rebates, credits and allowances for returns, chargebacks and retroactive price adjustments, freight and shipping charges, and applicable taxes, in each case broken out by product line to the extent reasonably practicable;
(d) Net Sales for the quarter, in aggregate and by product line;
(e) the Running Royalty calculated at the Royalty Rate of 3.75% of Net Sales for the quarter;
(f) cumulative Running Royalties paid and payable for the calendar year to date (including the amount due for the current quarter); and
(g) a notation of the application of the Royalty Floor or the Royalty Cap, if applicable, including (i) in the case of the Royalty Floor, the amount of any true-up payment required, and (ii) in the case of the Royalty Cap, the amount of any credit to be carried forward.
Each Royalty Report shall be certified by an authorized financial officer of Solstice or Solstice US as being true, complete, and accurate in all material respects as of the date of such report.
Section 4.2 — Record-Keeping. Solstice and Solstice US shall maintain complete and accurate books and records relating to the manufacture, sale, distribution, and other disposition of Licensed Products, in sufficient detail to enable the verification of Net Sales and the calculation of all royalty payments due under this Agreement. Such books and records shall be maintained in accordance with generally accepted accounting principles consistently applied (International Financial Reporting Standards as adopted by Ireland in the case of Solstice, and United States Generally Accepted Accounting Principles in the case of Solstice US) for a period of not less than five (5) years following the end of the calendar year to which such records relate. For informational purposes, the Parties acknowledge that, as of the Effective Date, Solstice's independent auditors are Glenmore & Byrne LLP (Dublin, Ireland) and Apex's independent auditors are Creston Perry LLP (Wilmington, Delaware).
Section 4.3 — Audit Rights.
(a) Apex shall have the right, exercisable no more than once per calendar year, upon at least thirty (30) days' prior written notice to Solstice, to engage an independent certified public accounting firm reasonably acceptable to Solstice (such acceptance not to be unreasonably withheld, conditioned, or delayed) to examine and audit Solstice's and Solstice US's books and records solely for the purpose of verifying Net Sales and the accuracy of royalty payments for any period within the preceding three (3) calendar years. For the avoidance of doubt, a nationally recognized "Big Four" accounting firm shall be deemed reasonably acceptable to Solstice.
(b) Each such audit shall be conducted during normal business hours at the offices of Solstice or Solstice US (as applicable) where the relevant records are maintained, and shall not unreasonably interfere with Solstice's or Solstice US's normal business operations. Solstice shall make available to the auditing firm all books, records, and supporting documentation reasonably necessary to conduct the audit, and shall cause its relevant personnel to cooperate with the auditing firm.
(c) The cost and expense of each such audit shall be borne by Apex; provided, however, that if any audit reveals an underpayment of Running Royalties exceeding five percent (5%) of the amount actually due for any audited period (whether a single quarter or an annual period), Solstice shall bear the reasonable cost and expense of such audit, including the auditing firm's fees.
(d) Any underpayment of Running Royalties revealed by an audit shall be paid by Solstice to Apex within thirty (30) days of Solstice's receipt of the final audit report, together with interest on the underpaid amount calculated at the rate specified in Section 3.6, accruing from the date on which such underpayment was originally due. Any overpayment revealed by an audit shall be credited against the next quarterly Running Royalty payment (or, if no further payments are due, shall be refunded by Apex within thirty (30) days of Apex's receipt of the final audit report).
(e) All information obtained or reviewed by Apex or its auditing firm during any audit conducted pursuant to this Section 4.3 shall be treated as Confidential Information of Solstice in accordance with Article X. The auditing firm shall, as a condition to conducting the audit, enter into a confidentiality agreement with Solstice on terms reasonably acceptable to Solstice, restricting the use and disclosure of information obtained during the audit to the sole purpose of verifying Net Sales and royalty payments.
ARTICLE V INTELLECTUAL PROPERTY OWNERSHIP AND MAINTENANCE
Section 5.1 — Ownership. Nothing in this Agreement shall be construed to transfer, convey, or assign any ownership interest in any Licensed Patent from Apex to Solstice, Solstice US, or any other person or entity. Apex retains all right, title, and interest in and to the Licensed Patents, including all rights to enforce, license, and dispose of the Licensed Patents, subject only to the license granted to Solstice and Solstice US under this Agreement. The Parties acknowledge that Dr. Raymond Szabo is the named inventor on U.S. Patent Nos. 9,814,237, 10,271,884, and 10,932,105. This Agreement does not affect or alter the inventorship designations on any Licensed Patent, nor does it grant Solstice or Solstice US any right to challenge the inventorship or ownership of any Licensed Patent.
Section 5.2 — Patent Maintenance.
(a) Apex shall be responsible, at its own cost and expense, for the maintenance and prosecution of the Licensed Patents during the Term of this Agreement, including the timely payment of all maintenance fees, annuities, and other official fees required to maintain the Licensed Patents in force.
(b) Apex shall not, without providing at least thirty (30) days' prior written notice to Solstice:
(i) abandon any Licensed Patent or any claim thereof;
(ii) fail to pay any maintenance fee, annuity, or other official fee due on any Licensed Patent; or
(iii) disclaim, surrender, or otherwise voluntarily limit the scope of any claim of any Licensed Patent.
(c) If Apex determines, in its sole discretion, to abandon any Licensed Patent, to allow any Licensed Patent to lapse, or to cease prosecution of any pending application within the Licensed Patents, Apex shall provide Solstice with no less than sixty (60) days' prior written notice of such determination. Upon receipt of such notice, Solstice may, by written request delivered to Apex within thirty (30) days of Solstice's receipt of Apex's notice, elect to maintain or continue prosecution of such Licensed Patent at Solstice's sole cost and expense. In such event, Apex shall reasonably cooperate with Solstice and shall execute such documents and take such actions as may be reasonably necessary to enable Solstice to maintain such Licensed Patent, provided that (i) Apex shall not be required to incur any out-of-pocket expense in connection therewith (all such expenses to be borne by Solstice), and (ii) Apex shall retain ownership of such Licensed Patent.
Section 5.3 — Prosecution of Pending Applications. With respect to the six (6) pending continuation applications identified in Exhibit C to the Settlement Agreement, Apex shall use commercially reasonable efforts to prosecute such applications through issuance as United States patents, including by responding to office actions and conducting examiner interviews as Apex deems appropriate in the exercise of its reasonable business judgment. Solstice shall have no right to direct, control, or approve the prosecution strategy for any such pending application. Notwithstanding the foregoing, Apex shall, upon Solstice's written request (not to be made more frequently than quarterly), keep Solstice reasonably informed of the status of such pending applications, including the issuance of any office actions, the filing of any responses thereto, and the issuance of any patent resulting therefrom.
ARTICLE VI ENFORCEMENT AND DEFENSE OF LICENSED PATENTS
Section 6.1 — Infringement by Third Parties.
(a) As between the Parties, Apex shall retain the sole and exclusive right, but not the obligation, to enforce the Licensed Patents against third-party infringers, including the right to initiate and prosecute any legal, administrative, or other proceeding against any such infringer, in any jurisdiction and before any court, tribunal, or governmental body, at Apex's own cost and expense. Nothing in this Agreement shall be construed to require Apex to enforce any Licensed Patent against any third party.
(b) If Solstice or Solstice US becomes aware of any actual or suspected infringement of any Licensed Patent by a third party, or of any claim by a third party that any Licensed Patent is invalid or unenforceable, Solstice or Solstice US (as applicable) shall promptly notify Apex in writing, providing such details as are reasonably available regarding the nature and scope of the infringement or challenge.
(c) Prior to deciding whether to institute or maintain any enforcement action relating to a Licensed Patent against a third party operating within the Field of Use, Apex shall consult with Solstice in good faith regarding such decision, taking into account Solstice's views and commercial interests. Notwithstanding the foregoing, the ultimate decision whether to institute, maintain, settle, or dismiss any enforcement action shall be Apex's, in its sole discretion, and Solstice shall have no right to compel Apex to bring or maintain any such action.
Section 6.2 — Cooperation. In any enforcement action brought by Apex relating to a Licensed Patent, Solstice and Solstice US shall cooperate with Apex at Apex's reasonable request and at Apex's cost and expense, including by:
(a) providing relevant non-privileged documents and information relating to Licensed Products and the Licensed Patents;
(b) making knowledgeable personnel of Solstice and Solstice US available for testimony (including deposition and trial testimony) at mutually convenient times; and
(c) consenting to be joined as a party to such action, if joinder is required for Apex to maintain standing, provided that Apex shall bear all costs associated with Solstice's participation and shall indemnify Solstice against any costs, expenses, or liabilities incurred by Solstice as a result of such joinder.
Section 6.3 — Third-Party Challenges.
(a) If any Licensed Patent is challenged by a third party, including in any inter partes review, post-grant review, or ex parte reexamination proceeding before the United States Patent and Trademark Office, or in any litigation or other proceeding before any court or tribunal, Apex shall have sole control over the defense of such Licensed Patent in such proceeding, at Apex's own cost and expense.
(b) Apex shall keep Solstice reasonably informed of the status of any challenge to a Licensed Patent that could materially affect the scope or validity of the license granted hereunder, including by providing Solstice with copies of any petition, decision, or order issued in connection therewith, promptly upon Apex's receipt or filing of the same.
(c) Apex shall consult with Solstice in good faith before entering into any settlement of a third-party challenge to a Licensed Patent that would (i) narrow or invalidate any claim of a Licensed Patent that covers a Licensed Product, (ii) grant a license to a third party on terms more favorable than those granted to Solstice hereunder with respect to the Field of Use, or (iii) otherwise materially and adversely affect Solstice's rights under this Agreement. Notwithstanding the foregoing, the ultimate decision whether to settle any such challenge shall be Apex's, in its sole discretion.
ARTICLE VII REPRESENTATIONS AND WARRANTIES
Section 7.1 — Apex Representations and Warranties. Apex hereby represents and warrants to Solstice and Solstice US as of the Effective Date as follows:
(a) Ownership. Apex is the sole and exclusive owner by assignment of the entire right, title, and interest in and to each of the Licensed Patents, free and clear of any liens, encumbrances, security interests, or adverse claims, except for the license granted to Solstice and Solstice US under this Agreement and such other non-exclusive licenses as may have been granted by Apex to third parties prior to the Effective Date.
(b) Authority. Apex has the full right, power, and authority to enter into this Agreement and to grant the license set forth in Section 2.1. The execution, delivery, and performance of this Agreement by Apex have been duly authorized by all necessary corporate action on the part of Apex, and this Agreement constitutes the legal, valid, and binding obligation of Apex, enforceable against Apex in accordance with its terms (subject to applicable bankruptcy, insolvency, and similar laws affecting creditors' rights generally and to general equitable principles).
(c) Subsistence. The Licensed Patents are subsisting and, to Apex's knowledge, have not been held invalid, unenforceable, or not infringed by any court, tribunal, or governmental body of competent jurisdiction in any final, non-appealable decision or order.
(d) No Conflicting Obligations. There are no outstanding liens, encumbrances, exclusive licenses, or other agreements that would materially impair Apex's ability to grant the license herein or that would materially interfere with Solstice's exercise of the rights granted under this Agreement.
(e) No Litigation. Except for the Action, there is no pending litigation, arbitration, or administrative proceeding (including any inter partes review, post-grant review, or reexamination) of which Apex has knowledge challenging the validity, enforceability, or ownership of any Licensed Patent.
Section 7.2 — Solstice Representations and Warranties. Each of Solstice and Solstice US hereby represents and warrants to Apex as of the Effective Date as follows:
(a) Authority. Such Party has the full right, power, and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery, and performance of this Agreement by such Party have been duly authorized by all necessary corporate action on the part of such Party, and this Agreement constitutes the legal, valid, and binding obligation of such Party, enforceable against such Party in accordance with its terms (subject to applicable bankruptcy, insolvency, and similar laws affecting creditors' rights generally and to general equitable principles).
(b) No Conflicting Agreements. The execution, delivery, and performance of this Agreement by such Party do not and will not conflict with, violate, or result in a breach of (i) such Party's organizational documents, (ii) any material agreement, contract, or instrument to which such Party is a party or by which it is bound, or (iii) any applicable law, rule, or regulation.
(c) Accuracy of Financial Information. The financial information previously provided by Solstice and Solstice US to Apex in connection with the negotiation of the Settlement Agreement and this Agreement, including historical sales data for the Licensed Products, was true, complete, and accurate in all material respects as of the date such information was provided.
Section 7.3 — Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE VII, APEX MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, WITH RESPECT TO THE LICENSED PATENTS, THE LICENSE GRANTED HEREUNDER, OR THE LICENSED PRODUCTS, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, OR NON-INFRINGEMENT OF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS. WITHOUT LIMITING THE FOREGOING, APEX DOES NOT WARRANT (A) THAT ANY LICENSED PATENT IS VALID OR ENFORCEABLE, (B) THAT THE EXERCISE OF THE LICENSE GRANTED HEREUNDER WILL NOT INFRINGE ANY PATENT, TRADE SECRET, COPYRIGHT, TRADEMARK, OR OTHER INTELLECTUAL PROPERTY RIGHT OF ANY THIRD PARTY, OR (C) THAT THE MANUFACTURE, USE, IMPORTATION, OFFER FOR SALE, SALE, OR OTHER DISPOSITION OF LICENSED PRODUCTS WILL NOT GIVE RISE TO LIABILITY UNDER ANY APPLICABLE LAW OR REGULATION. SOLSTICE AND SOLSTICE US ACKNOWLEDGE THAT THEY ARE SOPHISTICATED PARTIES THAT HAVE CONDUCTED THEIR OWN DUE DILIGENCE AND ARE NOT RELYING ON ANY REPRESENTATION OR WARRANTY NOT EXPRESSLY SET FORTH IN THIS AGREEMENT.
ARTICLE VIII INDEMNIFICATION
Section 8.1 — Indemnification by Solstice. Solstice and Solstice US, jointly and severally, shall indemnify, defend, and hold harmless Apex and its officers, directors, employees, agents, successors, and assigns (collectively, the "Apex Indemnitees") from and against any and all third-party claims, actions, suits, proceedings, demands, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of litigation) (collectively, "Losses") arising out of or related to:
(a) the manufacture, use, sale, offer for sale, importation, distribution, or other disposition of Licensed Products by Solstice, Solstice US, their Affiliates, or any sublicensee, including without limitation any product liability claim, personal injury claim, or property damage claim;
(b) any breach by Solstice or Solstice US of any representation, warranty, covenant, or obligation under this Agreement; or
(c) any act or omission of any sublicensee (including any Contract Manufacturer) in connection with the manufacture, handling, storage, or distribution of Licensed Products.
Section 8.2 — Indemnification by Apex. Apex shall indemnify, defend, and hold harmless Solstice, Solstice US, and their respective officers, directors, employees, agents, successors, and assigns (collectively, the "Solstice Indemnitees") from and against any and all Losses arising out of or related to any breach by Apex of its representations and warranties set forth in Section 7.1 of this Agreement.
Section 8.3 — Indemnification Procedures.
(a) Notice. A Party seeking indemnification under this Article VIII (the "Indemnified Party") shall provide the other Party (the "Indemnifying Party") with prompt written notice of any claim, action, suit, or proceeding for which indemnification is sought (a "Claim"), including a description in reasonable detail of the facts and circumstances giving rise to such Claim and the amount of Losses claimed (to the extent then known or reasonably estimable). The failure of the Indemnified Party to provide timely notice shall not relieve the Indemnifying Party of its indemnification obligations under this Article VIII, except to the extent that the Indemnifying Party is materially prejudiced by such delay.
(b) Defense and Settlement. The Indemnifying Party shall have the right, at its sole cost and expense, to assume and control the defense of any Claim, including the selection of counsel, provided that such counsel is reasonably acceptable to the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Claim at its own expense with counsel of its own choosing. The Indemnifying Party shall not settle, compromise, or consent to the entry of judgment with respect to any Claim without the prior written consent of the Indemnified Party (such consent not to be unreasonably withheld, conditioned, or delayed); provided, however, that the Indemnified Party's consent shall be required for any settlement that (i) imposes any non-monetary obligation or restriction on the Indemnified Party, (ii) admits or concedes liability or wrongdoing on the part of the Indemnified Party, or (iii) does not include a full and unconditional release of the Indemnified Party from all liability with respect to such Claim.
(c) Cooperation. The Indemnified Party shall cooperate with the Indemnifying Party in the defense of any Claim, including by providing access to relevant documents, records, and personnel, at the Indemnifying Party's reasonable request and expense.
ARTICLE IX LIMITATION OF LIABILITY
Section 9.1 — Consequential Damages Exclusion. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR ANY OTHER THEORY OF LIABILITY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY REGARDLESS OF WHETHER SUCH DAMAGES ARISE FROM BREACH OF CONTRACT, BREACH OF WARRANTY, TORT, OR ANY OTHER CAUSE OF ACTION. Notwithstanding the foregoing, this limitation of liability shall not apply to:
(a) Losses arising from a breach of the confidentiality obligations set forth in Article X;
(b) a Party's indemnification obligations under Article VIII; or
(c) Solstice's payment obligations under Article III (including Running Royalties, the Royalty Floor, and late payment interest).
Section 9.2 — Cap on Liability. EXCEPT FOR (A) SOLSTICE'S PAYMENT OBLIGATIONS UNDER ARTICLE III AND SOLSTICE'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 8.1, AND (B) APEX'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 8.2, NEITHER PARTY'S AGGREGATE LIABILITY UNDER THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, SHALL EXCEED THE TOTAL AMOUNT OF LUMP-SUM AND RUNNING ROYALTY PAYMENTS ACTUALLY RECEIVED BY APEX UNDER THIS AGREEMENT AND THE SETTLEMENT AGREEMENT DURING THE TWELVE (12)-MONTH PERIOD IMMEDIATELY PRECEDING THE DATE ON WHICH THE EVENT GIVING RISE TO SUCH LIABILITY FIRST OCCURRED.
ARTICLE X CONFIDENTIALITY
Section 10.1 — Confidential Information. The terms and conditions of this Agreement, including without limitation the Royalty Rate, the Royalty Floor, the Royalty Cap, the lump-sum payment amounts, Net Sales figures, Royalty Reports, audit findings, and all other financial and commercial terms hereof (collectively, "Confidential Information"), shall be treated as confidential by each Party and shall not be disclosed to any third party except as expressly permitted under this Article X. The confidentiality obligations set forth in this Article X shall supplement, and not replace, the confidentiality obligations set forth in Section 8 of the Settlement Agreement, which are incorporated herein by reference.
Section 10.2 — Exceptions. The confidentiality obligations set forth in Section 10.1 shall not apply to information that:
(a) is or becomes generally available to the public through no fault of, or breach of this Agreement by, the receiving Party;
(b) was known to the receiving Party prior to disclosure by the disclosing Party, as demonstrated by the receiving Party's written records;
(c) is independently developed by the receiving Party without use of or reference to any Confidential Information of the disclosing Party, as demonstrated by the receiving Party's written records;
(d) is received by the receiving Party from a third party that is not, to the receiving Party's knowledge, subject to any obligation of confidentiality with respect to such information; or
(e) is required to be disclosed by the receiving Party pursuant to applicable law, regulation, judicial order, or governmental request, provided that the receiving Party (i) provides the disclosing Party with prompt written notice of such requirement (to the extent legally permitted), (ii) cooperates with the disclosing Party, at the disclosing Party's expense, in seeking a protective order or other appropriate remedy to limit the scope of such disclosure, and (iii) discloses only such information as is legally required to be disclosed.
Section 10.3 — Permitted Disclosures. Notwithstanding Section 10.1, either Party may disclose the terms and conditions of this Agreement, including Confidential Information, to the following persons and entities, provided that each such person or entity is bound by professional ethical obligations or written contractual confidentiality obligations at least as protective as those set forth in this Article X:
(a) such Party's legal, financial, tax, and accounting advisors, including without limitation Calderwood & Harkness LLP, Hargrove, Tate & Bennington LLP, Kendrick & Lau LLP, Glenmore & Byrne LLP, Creston Perry LLP, Pinnacle Economics Group LLC, and Ridgeline IP Analytics LLC;
(b) such Party's independent auditors;
(c) Halcyon Specialty Insurance Co., solely to the extent required under the terms of Insurance Policy No. HSI-IP-2023-04891 or any successor policy providing intellectual property liability coverage to Solstice;
(d) potential acquirers, investors, or financing sources in a bona fide Change of Control transaction or financing, subject to such potential acquirer, investor, or financing source having entered into a customary non-disclosure agreement with the disclosing Party prior to any such disclosure; and
(e) such Party's officers, directors, and employees who have a reasonable need to know the terms hereof in connection with the performance of such Party's obligations under this Agreement, provided that such persons are subject to confidentiality obligations no less protective than those set forth herein.
ARTICLE XI TERM AND TERMINATION
Section 11.1 — Term. This Agreement shall be effective as of the Effective Date and shall continue in full force and effect until the expiration of the last to expire of the Licensed Patents (i.e., January 10, 2038, being the expiration date of U.S. Patent No. 10,932,105, "Integrated Insufflation Valve and Seal for Laparoscopic Trocar"), unless earlier terminated in accordance with this Article XI (the "Term"). Upon the natural expiration of the Term (as distinguished from early termination), the consequences set forth in Section 11.6 shall apply.
Section 11.2 — Termination for Material Breach.
(a) Either Party may terminate this Agreement upon written notice to the other Party if the other Party commits a material breach of any provision of this Agreement and fails to cure such breach within sixty (60) days after receipt of written notice from the non-breaching Party specifying the nature of the breach in reasonable detail and demanding its cure.
(b) Notwithstanding the foregoing, a failure by Solstice or Solstice US to make any Running Royalty payment, Royalty Floor true-up payment, or other payment required under Article III within the time period specified herein shall constitute a material breach of this Agreement and shall not be deemed cured unless and until all past-due amounts (including all accrued interest calculated in accordance with Section 3.6) are paid in full within the sixty (60)-day cure period.
(c) Termination pursuant to this Section 11.2 shall be without prejudice to any other rights or remedies available to the non-breaching Party under this Agreement, the Settlement Agreement, or applicable law, including the right to seek damages for breach.
Section 11.3 — Termination for Insolvency. Either Party may terminate this Agreement immediately upon written notice to the other Party if the other Party:
(a) files a voluntary petition in bankruptcy or is the subject of an involuntary petition in bankruptcy that is not dismissed within ninety (90) days of filing;
(b) makes a general assignment for the benefit of creditors;
(c) has a receiver, administrator, examiner, or similar officer appointed over all or a substantial portion of its assets or business, and such appointment is not vacated or stayed within ninety (90) days;
(d) admits in writing its inability to pay its debts as they become due; or
(e) is the subject of any other insolvency, reorganization, liquidation, or similar proceeding under the laws of any jurisdiction.
The Parties acknowledge that, to the extent permitted by applicable law, this Agreement shall be treated as an executory contract for purposes of any bankruptcy or insolvency proceeding, and the non-debtor Party shall be entitled to all protections available under Section 365(n) of the United States Bankruptcy Code (11 U.S.C. § 365(n)) or any similar provision of applicable non-U.S. insolvency law.
Section 11.4 — Termination by Solstice for Convenience. Solstice may terminate this Agreement at any time, with or without cause, upon ninety (90) days' prior written notice to Apex, subject to the following conditions: