1037-00004 · Solstice Biomedical Devices Ltd · Settlement Negotiation

counterproposal-letter-htb-to-sc.docx DOCUMENT Litigation

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WITHOUT PREJUDICE — FOR SETTLEMENT PURPOSES ONLY

May 28, 2025

HARGROVE, TATE & BENNINGTON LLP 900 North King Street, Suite 1200 Wilmington, DE 19801

VIA ELECTRONIC MAIL AND HAND DELIVERY

Marcus Delgado, Esq. Partner Calderwood & Harkness LLP 1201 Market Street, Suite 2500 Wilmington, DE 19801

Re: Apex Surgical Innovations, Inc. v. Solstice Biomedical, Inc., Case No. 1:24-cv-00587-RGA (U.S. District Court for the District of Delaware) — Without-Prejudice Settlement Counterproposal

Dear Marcus:

I. Acknowledgment and Framing

I write on behalf of our client, Apex Surgical Innovations, Inc. ("Apex"), in response to your without-prejudice settlement proposal letter dated May 22, 2025, transmitted on behalf of your clients, Solstice Biomedical Devices Ltd. and Solstice Biomedical, Inc. (collectively, "Solstice"). We acknowledge receipt of that letter and appreciate the effort reflected in its preparation.

Apex is encouraged by Solstice's continued willingness to engage constructively in settlement discussions. The second settlement conference held before Magistrate Judge Colleen Pratt on May 12, 2025 was productive in narrowing the areas of disagreement between the parties, and your May 22 letter is a welcome indication that Solstice shares Apex's interest in exploring a consensual resolution. We note that your proposal reflects meaningful progress from the positions taken by both parties at the March 17, 2025 mediation session before the Honorable Margaret Forsythe (Ret.) at Amberstone ADR Services, which, as you know, did not result in a resolution at that time.

That said, having reviewed Solstice's proposal carefully with Apex's senior leadership and its damages expert, Apex believes that several material terms of your proposal require significant revision before they can form the basis of a definitive settlement. In particular, the proposed lump-sum payment amount, the running royalty rate, and certain structural provisions of the license and covenant not to sue fall materially short of what Apex considers appropriate in light of the strength of its litigation position and the substantial remaining economic life of the patents-in-suit.

This letter constitutes Apex's formal counterproposal to Solstice's May 22 settlement proposal. It is communicated without prejudice and for settlement purposes only, consistent with Federal Rule of Evidence 408 and Delaware Rule of Evidence 408. Nothing in this letter shall be construed as an admission of fact, liability, or the merits of any claim or defense. All of Apex's rights, claims, positions, and defenses in Case No. 1:24-cv-00587-RGA are fully and expressly reserved.

II. Background Context and Apex's Litigation Position

As context for the terms set forth herein, we briefly summarize the posture of the litigation and Apex's assessment of its case.

Apex commenced this action on May 9, 2024, asserting claims of patent infringement against Solstice under 35 U.S.C. § 271(a). The complaint, as amended, alleges infringement of three utility patents: U.S. Patent No. 9,814,237 (the "'237 Patent"), U.S. Patent No. 10,271,884 (the "'884 Patent"), and U.S. Patent No. 10,932,105 (the "'105 Patent"). All three patents name Dr. Raymond Szabo as the inventor and are duly assigned to Apex. The patents relate to innovations in laparoscopic trocar assembly design, including novel seal mechanisms, blade retraction systems, and cannula stabilization features that represent significant advances in the field.

The accused products are Solstice's PrecisionEdge™ PE-5000 Series, PE-12000 Series, and PE-15000 Series laparoscopic trocar assemblies. These product lines represent the core of Solstice's surgical access device business in the United States and account for a substantial share of Solstice's U.S. revenue.

The Court's December 6, 2024 Claim Construction Order (Dkt. 112) was, in Apex's assessment, highly favorable to Apex. Of the nine disputed claim terms presented for construction, four were construed in a manner consistent with or substantially aligned with Apex's proposed constructions. Of particular importance, the Court adopted Apex's proposed construction of the terms "retractable cutting assembly" (Claim 1 of the '884 Patent) and "radially expandable stabilization element" (Claim 3 of the '105 Patent), both of which Apex believes are squarely met by the PE-12000 and PE-15000 Series products, respectively. These constructions significantly strengthen Apex's infringement case and narrow the available non-infringement arguments that Solstice can present to a jury.

Most recently, on May 5, 2025, the Court denied both Solstice's Motion for Summary Judgment of non-infringement as to the PE-5000 Series (Dkt. 184) and Apex's Cross-Motion for Partial Summary Judgment of infringement as to the PE-12000 Series (Dkt. 191). While the denial of Apex's cross-motion was not the outcome Apex sought, the Court's ruling confirms the existence of genuine disputes of material fact on both sides — disputes that Apex is confident would be resolved in its favor by the jury at the trial currently scheduled to commence on September 30, 2025 before the Honorable Richard G. Andrews.

Turning to damages, Apex's expert, Hugh Danaher, CFA, of Keystone Valuation Advisors LLC, has calculated reasonable royalty damages in the amount of $31,800,000. Mr. Danaher's calculation is based on combined U.S. sales of the accused PrecisionEdge™ products totaling approximately $74,600,000 during the damages period (calendar years 2021 through the third quarter of 2024) and a weighted average gross margin of 61.3%. Mr. Danaher's analysis applies the Georgia-Pacific fifteen-factor framework, incorporates comparable license agreements in the surgical device industry, and accounts for Apex's established licensing program. Apex is confident that Mr. Danaher's opinions will be admitted in full and will be persuasive to a jury.

To be clear, Apex is making this counterproposal in the interest of avoiding the significant expense and inherent uncertainty associated with a jury trial, and not because of any perceived weakness in its claims, its damages position, or its prospects at trial. The terms proposed herein reflect a genuine and substantial discount from the damages that Apex believes it would recover at trial, and they are offered in a spirit of good faith and in recognition of the mutual benefits of a negotiated resolution.

III. Response to Solstice's Proposal — Overview

Apex acknowledges and appreciates the general structural framework proposed in your May 22 letter, which contemplates a license-and-dismissal settlement comprising the following elements: (a) a lump-sum payment by Solstice to Apex for past damages attributable to the sale of accused products during the damages period; (b) a running royalty payable by Solstice to Apex for future sales of licensed products; (c) a non-exclusive patent license under the patents-in-suit; (d) a covenant not to sue by Apex covering a broader family of related patents; (e) a mutual release of all claims, counterclaims, and defenses asserted in the litigation; and (f) a stipulated dismissal with prejudice of Case No. 1:24-cv-00587-RGA.

Apex agrees that this general framework provides an appropriate basis for settlement and is willing to proceed on this structure. However, Apex proposes revised terms on several critical points, as detailed in Sections IV through XII below. We address each component in turn.

IV. Lump-Sum Payment — Apex's Revised Terms

A. Amount. We acknowledge that Solstice's May 22 proposal included a lump-sum payment figure that was intended to address Apex's past damages claims. However, Apex views the proposed amount as materially below what is appropriate given the scope and strength of Apex's infringement and damages positions. As noted above, Apex's damages expert has calculated reasonable royalty damages of $31,800,000 for the period through Q3 2024 alone, and Apex believes those damages will only increase as additional sales data for Q4 2024 and the first three quarters of 2025 become available at trial.

Accordingly, Apex counterproposal a total lump-sum payment of $8,750,000. This figure represents approximately 27.5% of Apex's claimed reasonable royalty damages — a substantial concession by Apex that reflects the discount inherent in any pre-trial settlement. The figure also takes into account the significant remaining economic life of the patents-in-suit: the '237 Patent does not expire until June 22, 2035; the '884 Patent does not expire until September 15, 2036; and the '105 Patent does not expire until January 10, 2038. Given that these patents collectively have more than a decade of remaining enforceable life, the lump-sum is intended to address only past infringement, while the running royalty (discussed in Section V below) will compensate Apex for the value of the prospective license grant.

Apex believes that $8,750,000 represents a fair and reasonable resolution of the past damages component of this dispute, particularly in light of: (i) the favorable claim construction rulings; (ii) the strong infringement case that Apex intends to present at trial; (iii) the breadth and duration of Solstice's accused sales; and (iv) the credible and well-supported damages analysis prepared by Mr. Danaher.

B. Payment Structure — Two Tranches

To facilitate the prompt conclusion of this matter while accommodating what Apex understands to be Solstice's preference for staged payment, Apex proposes that the lump-sum of $8,750,000 be paid in two tranches, as follows:

Tranche 1: Five Million Two Hundred Fifty Thousand Dollars ($5,250,000), due and payable within ten (10) business days of the execution of the Definitive Settlement Agreement by all parties.

Tranche 2: Three Million Five Hundred Thousand Dollars ($3,500,000), due and payable no later than September 15, 2025.

Both tranches shall be deposited by wire transfer of immediately available funds into an escrow account maintained by an independent escrow agent. Apex proposes Tidewater Fiduciary Services, Inc., located at 300 Delaware Avenue, Suite 1400, Wilmington, Delaware 19801, as the escrow agent. Tidewater is a well-established Delaware fiduciary services firm with extensive experience handling settlement escrow arrangements in patent litigation. Funds deposited into escrow shall be released to Apex within three (3) business days of deposit, in accordance with an escrow agreement to be executed by the parties and Tidewater.

Apex requires that the timely receipt of the Tranche 1 payment serve as a condition precedent to the effectiveness of the patent license grant and the covenant not to sue described in Sections VI and VII below. In other words, neither the license nor the covenant shall become effective unless and until the Tranche 1 payment has been received by the escrow agent and released to Apex. This condition is essential to protect Apex's interests and to ensure that Solstice does not obtain the benefit of a license or covenant before Apex has received meaningful consideration.

In the event that Solstice fails to make the Tranche 2 payment by September 15, 2025, such failure shall constitute a material breach of the Definitive Settlement Agreement, entitling Apex, at its election, to: (a) terminate the patent license and covenant not to sue, effective immediately upon written notice to Solstice; (b) reinstate all claims against Solstice that were the subject of the mutual release; and (c) recover the outstanding balance of $3,500,000, together with interest accrued from the due date at the rate of 5% over the federal funds rate or the Delaware statutory rate, whichever is greater, plus Apex's reasonable attorneys' fees and costs incurred in enforcing this provision.

V. Running Royalty — Apex's Revised Terms

A. Royalty Rate

Apex acknowledges that Solstice proposed a running royalty rate in its May 22 letter. However, the rate proposed by Solstice is, in Apex's view, below what is justified by the value of the intellectual property at issue and the established royalty benchmarks in the surgical device industry.

Apex counterproposal a running royalty of 3.75% of Net Sales of Licensed Products, to commence on the date of execution of the Definitive Settlement Agreement and to continue for the remaining life of the Licensed Patents (i.e., through the expiration date of the last-to-expire Licensed Patent, currently projected to be January 10, 2038).

This rate is grounded in the Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), reasonable royalty analysis performed by Mr. Danaher. In his expert report, Mr. Danaher identified and analyzed six comparable patent license agreements in the surgical and medical device field, with effective royalty rates ranging from 2.8% to 7.2% of net sales. After adjusting for differences in scope, duration, exclusivity, and the nature of the licensed technology, Mr. Danaher concluded that a hypothetical negotiation between a willing licensor and a willing licensee, conducted at the time infringement began, would have yielded an agreed royalty rate in the range of 3.5% to 4.5% of net sales. The proposed rate of 3.75% falls at the lower end of that range and reflects the settlement discount inherent in a negotiated resolution.

For purposes of the license and royalty provisions, "Licensed Products" shall be defined as: (i) the PrecisionEdge™ PE-5000 Series laparoscopic trocar assemblies; (ii) the PrecisionEdge™ PE-12000 Series laparoscopic trocar assemblies; (iii) the PrecisionEdge™ PE-15000 Series laparoscopic trocar assemblies; and (iv) any successor, replacement, modified, or substantially similar products sold by Solstice Biomedical Devices Ltd., Solstice Biomedical, Inc., or any of their direct or indirect wholly owned subsidiaries. The intent of this definition is to ensure that Solstice cannot avoid royalty obligations by making cosmetic or insubstantial modifications to its accused products or by introducing successor products that practice the same patented technology under a different product designation.

B. Definition of Net Sales

For purposes of calculating the running royalty, "Net Sales" shall mean gross invoiced sales of Licensed Products, less only the following deductions, to the extent actually incurred, separately identified on the applicable invoice or other documentation, and directly attributable to the sale of Licensed Products:

(a) actual product returns and allowances (including credit for defective or damaged products);

(b) contractual trade, quantity, and cash rebates actually paid or credited to customers;

(c) government-mandated chargebacks, including chargebacks under federal supply schedule contracts, Medicaid rebates, and equivalent programs;

(d) outbound freight, insurance, and shipping charges to the extent separately stated on the invoice and borne by Solstice; and

(e) sales, use, value-added, and excise taxes to the extent separately stated on the invoice and actually paid to the applicable taxing authority.

No other deductions shall be permitted. Without limiting the generality of the foregoing, no deduction shall be permitted for marketing, promotional, administrative, or overhead expenses, and no deduction shall be permitted for intercompany transfers or sales between Solstice and any affiliate or subsidiary at prices that are less than arm's length. In the event of any intercompany transfer of Licensed Products at less than fair market value, Net Sales shall be calculated based on the price at which the Licensed Products are ultimately sold to an unaffiliated third-party end purchaser.

All deductions must be documented and verifiable by reference to contemporaneous business records. Apex reserves the right to challenge any claimed deduction that it believes is inflated, unsupported, or inconsistent with the terms of the agreement.

C. Royalty Floor and Cap

To ensure that the running royalty provides meaningful minimum compensation for the license grant while also providing Solstice with economic certainty, Apex proposes the following annual floor and cap:

Annual Royalty Floor: Five Hundred Thousand Dollars ($500,000) per calendar year, commencing with calendar year 2026. This floor is payable regardless of the actual level of Net Sales. If royalties calculated based on actual Net Sales are less than $500,000 in any calendar year, Solstice shall pay the difference between the calculated amount and $500,000 as a "true-up" payment with the fourth-quarter royalty report.

Annual Royalty Cap: One Million Eight Hundred Thousand Dollars ($1,800,000) per calendar year. If royalties calculated based on actual Net Sales exceed $1,800,000 in any calendar year, Solstice's royalty obligation for that year shall be capped at $1,800,000 and no further royalty shall be due with respect to that calendar year.

For the calendar year in which the license commences (2025), the floor and cap shall be prorated based on the number of days remaining in the calendar year following the effective date of the license.

By way of illustration, based on Solstice's reported FY 2023 U.S. Net Sales of approximately $22.4 million for the PrecisionEdge™ product lines and assuming approximately 8% year-over-year growth, projected CY 2026 Net Sales would be approximately $24.2 million. At a royalty rate of 3.75%, the estimated Year 1 (CY 2026) royalty would be approximately $907,500 — well within the floor-cap range and reflective of a commercially reasonable royalty obligation.

D. Reporting and Payment Mechanics

Solstice shall deliver to Apex written royalty reports within forty-five (45) days after the end of each calendar quarter (i.e., by May 15, August 14, November 14, and February 13, respectively). Each royalty report shall include, at a minimum:

(a) product-by-product Net Sales figures for the applicable quarter, broken down by Licensed Product series (PE-5000, PE-12000, PE-15000, and any successor products);

(b) an itemized breakdown of all deductions claimed from gross invoiced sales, with supporting documentation;

(d) a cumulative year-to-date summary of Net Sales, deductions, and royalties paid.

Royalty payments shall be due concurrently with the delivery of each quarterly royalty report and shall be made by wire transfer of immediately available funds to an account designated by Apex. Late payments shall bear interest at the rate of 1.5% per month or the maximum rate permitted by applicable law, whichever is less, from the date due until the date of payment.

E. Audit Right

Apex shall have the right, at its election and upon not less than thirty (30) days' prior written notice to Solstice, to audit Solstice's books and records relating to the calculation of Net Sales and royalties. Such audit right may be exercised no more than once per calendar year and shall cover the period since the last audit (or, in the case of the first audit, since the effective date of the license).

The audit shall be conducted by an independent certified public accounting firm selected by Apex and reasonably acceptable to Solstice, during normal business hours and at Solstice's principal office or such other location where the relevant records are maintained. The audit shall be conducted at Apex's sole expense, subject to the following exception: if the audit reveals an underpayment exceeding five percent (5%) of the total royalty amount due for any audited period, Solstice shall (i) promptly reimburse Apex for the full cost of the audit, (ii) pay the deficiency within fifteen (15) business days of written notice of the audit findings, and (iii) pay interest on the underpaid amount at the rate applicable to late payments, from the date the underpayment should have been made through the date of actual payment. The independent accounting firm shall be required to enter into an appropriate confidentiality agreement with Solstice prior to commencing the audit.

VI. License Grant — Apex's Revised Terms

A. Scope. Apex is prepared to grant Solstice a non-exclusive, non-transferable, worldwide license under the '237 Patent, the '884 Patent, and the '105 Patent, together with any continuations, continuations-in-part, divisionals, or reissues of any of the foregoing (collectively, the "Licensed Patents"), subject to the terms and conditions set forth herein and in the Definitive Settlement Agreement and Patent License Agreement.

The license shall be limited to the following field of use: the design, manufacture, use, sale, offer for sale, and importation of laparoscopic surgical access devices, including trocar assemblies and related components. The license shall not extend to any other field of use, including without limitation open surgery instruments, robotic surgery platforms, endoscopic devices, or any other medical device or product category.

The license shall be personal to Solstice Biomedical Devices Ltd. and its wholly owned subsidiary, Solstice Biomedical, Inc. The license shall not be assignable or transferable by Solstice to any third party, whether by operation of law, merger, sale of assets, or otherwise, except in connection with a change of control of Solstice Biomedical Devices Ltd. For purposes of this provision, a "change of control" shall mean the acquisition by any person or entity (or group of persons or entities acting in concert) of more than fifty percent (50%) of the outstanding voting equity securities of Solstice Biomedical Devices Ltd. In the event of a change of control, the license shall continue in effect for the benefit of the successor entity, provided that the successor assumes all obligations under the Settlement Agreement and Patent License Agreement.

B. Sublicense Right

Solstice shall have a limited right to sublicense under the Licensed Patents, restricted strictly to contract manufacturers engaged by Solstice for the sole purpose of manufacturing Licensed Products on Solstice's behalf. Any such sublicense shall be in writing, shall incorporate terms consistent with and no less restrictive than the Patent License Agreement, and shall terminate automatically upon the termination of the applicable manufacturing relationship between Solstice and the contract manufacturer.

Solstice shall have no right to sublicense the Licensed Patents to distributors, resellers, original equipment manufacturers, joint venture partners, or any other third party for any purpose whatsoever.

Apex shall receive written notice of the grant of any sublicense within fifteen (15) business days of the effective date of such sublicense, together with a copy of the sublicense agreement (which may be redacted to remove commercially sensitive pricing information not relevant to the scope of the sublicense grant). Failure to provide timely notice of a sublicense shall constitute a material breach of the Patent License Agreement.

VII. Covenant Not to Sue — Apex's Revised Terms

In addition to the patent license described in Section VI, Apex is prepared to provide Solstice with a covenant not to sue covering the Apex Trocar Patent Family, which comprises fourteen (14) issued U.S. utility patents and six (6) pending continuation applications, all directed to laparoscopic trocar technology. The covenant not to sue is intended to provide Solstice with broader freedom to operate in the licensed field than would be afforded by the license alone, and Apex views this as a significant additional concession beyond the scope of the patents-in-suit.

The covenant not to sue shall be subject to the following limitations and conditions:

(a) Covered Entities. The covenant shall extend only to Solstice Biomedical Devices Ltd., Solstice Biomedical, Inc., and any entity that is a direct or indirect wholly owned subsidiary of Solstice Biomedical Devices Ltd. as of the effective date of the covenant. The covenant shall not extend to any other entity, including any acquirer of Solstice's assets (as distinguished from a change-of-control transaction involving equity), joint venture partners, customers, or distributors.

(b) Scope. The covenant shall cover only products in the licensed field of use (i.e., laparoscopic surgical access devices) and shall not extend to products in any other field of use.

(c) Duration. The covenant shall remain in effect during the term of the Patent License Agreement. Upon expiration or termination of the Patent License Agreement, the covenant shall terminate concurrently.

(d) Automatic Termination. The covenant shall terminate automatically and without notice upon any material breach of the Definitive Settlement Agreement or the Patent License Agreement by Solstice, including but not limited to failure to make timely royalty payments, failure to make lump-sum payments, or unauthorized sublicensing or assignment. Upon such termination, Apex shall be entitled to assert any and all claims under the Apex Trocar Patent Family against Solstice, without any limitation or estoppel arising from the covenant.

VIII. Most-Favored Licensee Provision

Your May 22 letter requested the inclusion of a most-favored licensee clause. Apex is willing to include such a provision, provided it is carefully and precisely defined to avoid unintended consequences.

Specifically, Apex proposes the following: if, at any time during the term of the Patent License Agreement, Apex enters into a license agreement with any third party for the Licensed Patents (or any subset thereof) at a running royalty rate lower than 3.75% of net sales in the same or a substantially comparable field of use (i.e., laparoscopic surgical access devices), Solstice's running royalty rate shall be adjusted prospectively, effective as of the first calendar quarter following the effective date of the third-party license, to match the lower rate granted to the third party. For the avoidance of doubt, the adjustment shall be prospective only and shall not entitle Solstice to any retroactive adjustment or refund of royalties previously paid.

This most-favored licensee provision shall not apply to:

(a) licenses granted in settlement of litigation with third parties where the circumstances of the litigation — including the scope of claims asserted, the products at issue, the duration of the license, and the other consideration exchanged — are materially different from those of this settlement;

(b) licenses granted as part of cross-license arrangements where the royalty rate reflects a mutual exchange of patent rights;

(d) licenses in which the effective royalty rate is structured as a lump-sum payment rather than a running royalty, unless the lump-sum can be converted to an equivalent per-unit or percentage-of-sales rate for purposes of comparison.

In the event that the most-favored licensee provision is triggered, Apex shall provide written notice to Solstice within thirty (30) days of the execution of the relevant third-party license. The specific notification protocol, including the information to be provided and any confidentiality obligations applicable to the disclosure, shall be addressed in a separate side letter to be executed contemporaneously with the Definitive Settlement Agreement.

IX. Mutual Release and Dismissal

Apex agrees to the entry of a full mutual release of all claims, counterclaims, cross-claims, and defenses asserted or that could have been asserted by either party in Case No. 1:24-cv-00587-RGA, effective upon the terms and conditions set forth in the Definitive Settlement Agreement. The release shall extend to all predecessors, successors, affiliates, subsidiaries, officers, directors, employees, agents, and attorneys of both parties.

The action shall be dismissed with prejudice by stipulation of the parties, with each party bearing its own costs and attorneys' fees. The Stipulation of Dismissal, substantially in the form attached as Exhibit E to the Definitive Settlement Agreement, shall be filed with the Court within fifteen (15) days after Apex confirms receipt of the Tranche 1 payment into the designated escrow account. Based on the proposed timeline, Apex estimates that the Stipulation of Dismissal would be filed on or about July 1, 2025.

As part of the dismissal, Solstice shall withdraw with prejudice its counterclaims for declaratory judgment of non-infringement and declaratory judgment of invalidity of the '237, '884, and '105 Patents (Counterclaims I and II, Dkt. 38), as well as its affirmative defense of inequitable conduct. The withdrawal of the inequitable conduct defense is of particular importance to Apex, as that defense — which Apex vigorously disputes on the merits — has no basis in fact or law and should not be left as an unresolved cloud over Apex's patent portfolio.

X. Confidentiality

All terms and conditions of the settlement, including the existence and substance of this counterproposal, the financial terms of the Definitive Settlement Agreement, the royalty rate, the lump-sum payment amounts, and all related correspondence and communications between the parties, shall be subject to mutual confidentiality obligations to be set forth in the Definitive Settlement Agreement.

Neither party shall disclose any Confidential Settlement Information to any person or entity, except as follows:

(a) as required by applicable law, regulation, court order, or legal process, provided that the disclosing party provides the other party with prompt written notice (to the extent permitted by law) and cooperates in seeking appropriate protective measures;

(b) to the disclosing party's outside auditors (Glenmore & Byrne LLP for Solstice; Creston Perry LLP for Apex), insurers, and lenders, in each case under obligations of confidentiality no less restrictive than those set forth in the Definitive Settlement Agreement;

(d) to professional advisors (including legal, tax, and financial advisors) under obligations of confidence; and

(e) in connection with any proceeding to enforce the terms of the Definitive Settlement Agreement or related agreements.

The parties shall issue a joint public statement limited to the following language: "The matter has been resolved on mutually agreeable terms." No other public statement regarding the settlement shall be made by either party without the prior written consent of the other party. Any press release, SEC filing, or other public disclosure that references the settlement must be approved in advance by both parties.

Any breach of the confidentiality provisions shall entitle the non-breaching party to seek immediate injunctive relief in the U.S. District Court for the District of Delaware without the requirement of posting a bond. In addition, the parties shall negotiate a liquidated damages provision to address breaches of confidentiality; the amount of such liquidated damages shall be agreed upon during the negotiation of the Definitive Settlement Agreement.

XI. Governing Law and Dispute Resolution

The Definitive Settlement Agreement, the Patent License Agreement, the Covenant Not to Sue, and all related agreements and exhibits 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 under or in connection with the Definitive Settlement Agreement, the Patent License Agreement, the Covenant Not to Sue, or any related agreement shall be resolved exclusively in the United States District Court for the District of Delaware, and each party irrevocably submits to the jurisdiction of that court for purposes of any such dispute. The parties waive any objection to venue in the District of Delaware and any claim of inconvenient forum.

XII. Definitive Documentation and Timeline

Apex is committed to resolving this matter promptly and efficiently. To that end, Apex expects the following definitive agreements and related documents to be negotiated, finalized, and fully executed no later than June 16, 2025:

1. Settlement Agreement and Mutual Release;

2. Patent License Agreement (to be appended as Exhibit A);

3. Covenant Not to Sue (to be appended as Exhibit B);

4. List of Licensed Patents and Pending Applications (to be appended as Exhibit C);

5. Form of Royalty Report (to be appended as Exhibit D);

6. Form of Stipulation of Dismissal with Prejudice (to be appended as Exhibit E);

7. Agreed Joint Public Statement (to be appended as Exhibit F);

8. Escrow Agreement with Tidewater Fiduciary Services, Inc.; and

9. Side Letter regarding the Most-Favored Licensee notification protocol.

Apex proposes the following drafting protocol: upon agreement on principal terms (whether through acceptance of this counterproposal or through further negotiation resulting in an agreed term sheet), Calderwood & Harkness shall prepare and circulate the initial draft of the Definitive Settlement Agreement, incorporating the agreed terms. Hargrove, Tate & Bennington will review the draft and provide comments within five (5) business days of receipt. The parties shall thereafter work in good faith to finalize all documents within the timeline set forth above. Apex believes this allocation of drafting responsibility is appropriate given that the settlement will involve a license and covenant from Apex to Solstice, and the initial drafting of such documents by the licensee's counsel is consistent with customary practice.

XIII. Conditions and Reservations

Apex reiterates that this counterproposal is made without prejudice to all of Apex's rights, claims, positions, and remedies in Case No. 1:24-cv-00587-RGA and in any other proceeding. Nothing in this letter constitutes or shall be construed as an admission regarding: (a) the merits or viability of Solstice's defenses, including its non-infringement positions, invalidity contentions, or inequitable conduct allegations; (b) the scope or construction of any claim of the '237, '884, or '105 Patents; (c) the amount of damages to which Apex is entitled; or (d) any other issue of fact, law, or equity.

Apex expressly reserves the right to proceed to trial on September 30, 2025, and to seek the full measure of damages and equitable relief to which it is entitled, in the event that the parties are unable to reach agreement on definitive settlement terms.

This counterproposal shall remain open for acceptance or further negotiation until June 6, 2025. If Apex has not received a substantive written response from Solstice by that date, Apex will reassess its litigation posture, including whether to resume full trial preparation without further settlement discussions. Apex notes that the pretrial order deadline is currently set for August 15, 2025, and trial counsel will need adequate time to prepare.

XIV. Closing

Apex has made this counterproposal in good faith and with a genuine desire to resolve this matter efficiently and on terms that appropriately recognize the value of Apex's intellectual property portfolio. The terms set forth herein represent significant concessions from the damages and relief that Apex believes it would obtain at trial, and they are offered in the spirit of pragmatic compromise.

I invite you to contact me at your earliest convenience to discuss these terms. I would suggest that we arrange a call to include the principals — specifically, Martin Hale, General Counsel of Apex Surgical Innovations, Inc., and Eamon Rourke, General Counsel of Solstice Biomedical Devices Ltd. — at a mutually convenient time during the week of June 2, 2025. Additionally, Dr. Priya Chandrasekaran, Apex's Chief IP Officer, is available to participate in any discussions regarding the technical scope of the patent family, the field-of-use definitions, or the identification of Licensed Products and successor products.

I can be reached directly at (302) 555-4780 or by email at vstanton@htblaw.com.

We look forward to hearing from you.

Very truly yours,

HARGROVE, TATE & BENNINGTON LLP

By: ________

Victoria Stanton Partner

900 North King Street, Suite 1200 Wilmington, DE 19801 Tel: (302) 555-4780

Email: vstanton@htblaw.com

On behalf of Apex Surgical Innovations, Inc.

cc:

Martin Hale, General Counsel, Apex Surgical Innovations, Inc.

Dr. Priya Chandrasekaran, Chief IP Officer, Apex Surgical Innovations, Inc.

Derek Loomis, Associate, Hargrove, Tate & Bennington LLP

This letter and its contents are protected by Federal Rule of Evidence 408 and Delaware Rule of Evidence 408 and are inadmissible in any judicial, arbitral, or administrative proceeding. This communication is privileged and confidential and is intended solely for the addressee. If you have received this communication in error, please notify the sender immediately and destroy all copies.

WITHOUT PREJUDICE — FOR SETTLEMENT PURPOSES ONLY
May 28, 2025
HARGROVE, TATE & BENNINGTON LLP 900 North King Street, Suite 1200 Wilmington, DE 19801
VIA ELECTRONIC MAIL AND HAND DELIVERY
Marcus Delgado, Esq. Partner Calderwood & Harkness LLP 1201 Market Street, Suite 2500 Wilmington, DE 19801
Re: Apex Surgical Innovations, Inc. v. Solstice Biomedical, Inc., Case No. 1:24-cv-00587-RGA (U.S. District Court for the District of Delaware) — Without-Prejudice Settlement Counterproposal
Dear Marcus:
I. Acknowledgment and Framing
I write on behalf of our client, Apex Surgical Innovations, Inc. ("Apex"), in response to your without-prejudice settlement proposal letter dated May 22, 2025, transmitted on behalf of your clients, Solstice Biomedical Devices Ltd. and Solstice Biomedical, Inc. (collectively, "Solstice"). We acknowledge receipt of that letter and appreciate the effort reflected in its preparation.
Apex is encouraged by Solstice's continued willingness to engage constructively in settlement discussions. The second settlement conference held before Magistrate Judge Colleen Pratt on May 12, 2025 was productive in narrowing the areas of disagreement between the parties, and your May 22 letter is a welcome indication that Solstice shares Apex's interest in exploring a consensual resolution. We note that your proposal reflects meaningful progress from the positions taken by both parties at the March 17, 2025 mediation session before the Honorable Margaret Forsythe (Ret.) at Amberstone ADR Services, which, as you know, did not result in a resolution at that time.
That said, having reviewed Solstice's proposal carefully with Apex's senior leadership and its damages expert, Apex believes that several material terms of your proposal require significant revision before they can form the basis of a definitive settlement. In particular, the proposed lump-sum payment amount, the running royalty rate, and certain structural provisions of the license and covenant not to sue fall materially short of what Apex considers appropriate in light of the strength of its litigation position and the substantial remaining economic life of the patents-in-suit.
This letter constitutes Apex's formal counterproposal to Solstice's May 22 settlement proposal. It is communicated without prejudice and for settlement purposes only, consistent with Federal Rule of Evidence 408 and Delaware Rule of Evidence 408. Nothing in this letter shall be construed as an admission of fact, liability, or the merits of any claim or defense. All of Apex's rights, claims, positions, and defenses in Case No. 1:24-cv-00587-RGA are fully and expressly reserved.
II. Background Context and Apex's Litigation Position
As context for the terms set forth herein, we briefly summarize the posture of the litigation and Apex's assessment of its case.
Apex commenced this action on May 9, 2024, asserting claims of patent infringement against Solstice under 35 U.S.C. § 271(a). The complaint, as amended, alleges infringement of three utility patents: U.S. Patent No. 9,814,237 (the "'237 Patent"), U.S. Patent No. 10,271,884 (the "'884 Patent"), and U.S. Patent No. 10,932,105 (the "'105 Patent"). All three patents name Dr. Raymond Szabo as the inventor and are duly assigned to Apex. The patents relate to innovations in laparoscopic trocar assembly design, including novel seal mechanisms, blade retraction systems, and cannula stabilization features that represent significant advances in the field.
The accused products are Solstice's PrecisionEdge™ PE-5000 Series, PE-12000 Series, and PE-15000 Series laparoscopic trocar assemblies. These product lines represent the core of Solstice's surgical access device business in the United States and account for a substantial share of Solstice's U.S. revenue.
The Court's December 6, 2024 Claim Construction Order (Dkt. 112) was, in Apex's assessment, highly favorable to Apex. Of the nine disputed claim terms presented for construction, four were construed in a manner consistent with or substantially aligned with Apex's proposed constructions. Of particular importance, the Court adopted Apex's proposed construction of the terms "retractable cutting assembly" (Claim 1 of the '884 Patent) and "radially expandable stabilization element" (Claim 3 of the '105 Patent), both of which Apex believes are squarely met by the PE-12000 and PE-15000 Series products, respectively. These constructions significantly strengthen Apex's infringement case and narrow the available non-infringement arguments that Solstice can present to a jury.
Most recently, on May 5, 2025, the Court denied both Solstice's Motion for Summary Judgment of non-infringement as to the PE-5000 Series (Dkt. 184) and Apex's Cross-Motion for Partial Summary Judgment of infringement as to the PE-12000 Series (Dkt. 191). While the denial of Apex's cross-motion was not the outcome Apex sought, the Court's ruling confirms the existence of genuine disputes of material fact on both sides — disputes that Apex is confident would be resolved in its favor by the jury at the trial currently scheduled to commence on September 30, 2025 before the Honorable Richard G. Andrews.
Turning to damages, Apex's expert, Hugh Danaher, CFA, of Keystone Valuation Advisors LLC, has calculated reasonable royalty damages in the amount of $31,800,000. Mr. Danaher's calculation is based on combined U.S. sales of the accused PrecisionEdge™ products totaling approximately $74,600,000 during the damages period (calendar years 2021 through the third quarter of 2024) and a weighted average gross margin of 61.3%. Mr. Danaher's analysis applies the Georgia-Pacific fifteen-factor framework, incorporates comparable license agreements in the surgical device industry, and accounts for Apex's established licensing program. Apex is confident that Mr. Danaher's opinions will be admitted in full and will be persuasive to a jury.
To be clear, Apex is making this counterproposal in the interest of avoiding the significant expense and inherent uncertainty associated with a jury trial, and not because of any perceived weakness in its claims, its damages position, or its prospects at trial. The terms proposed herein reflect a genuine and substantial discount from the damages that Apex believes it would recover at trial, and they are offered in a spirit of good faith and in recognition of the mutual benefits of a negotiated resolution.
III. Response to Solstice's Proposal — Overview
Apex acknowledges and appreciates the general structural framework proposed in your May 22 letter, which contemplates a license-and-dismissal settlement comprising the following elements: (a) a lump-sum payment by Solstice to Apex for past damages attributable to the sale of accused products during the damages period; (b) a running royalty payable by Solstice to Apex for future sales of licensed products; (c) a non-exclusive patent license under the patents-in-suit; (d) a covenant not to sue by Apex covering a broader family of related patents; (e) a mutual release of all claims, counterclaims, and defenses asserted in the litigation; and (f) a stipulated dismissal with prejudice of Case No. 1:24-cv-00587-RGA.
Apex agrees that this general framework provides an appropriate basis for settlement and is willing to proceed on this structure. However, Apex proposes revised terms on several critical points, as detailed in Sections IV through XII below. We address each component in turn.
IV. Lump-Sum Payment — Apex's Revised Terms
A. Amount. We acknowledge that Solstice's May 22 proposal included a lump-sum payment figure that was intended to address Apex's past damages claims. However, Apex views the proposed amount as materially below what is appropriate given the scope and strength of Apex's infringement and damages positions. As noted above, Apex's damages expert has calculated reasonable royalty damages of $31,800,000 for the period through Q3 2024 alone, and Apex believes those damages will only increase as additional sales data for Q4 2024 and the first three quarters of 2025 become available at trial.
Accordingly, Apex counterproposal a total lump-sum payment of $8,750,000. This figure represents approximately 27.5% of Apex's claimed reasonable royalty damages — a substantial concession by Apex that reflects the discount inherent in any pre-trial settlement. The figure also takes into account the significant remaining economic life of the patents-in-suit: the '237 Patent does not expire until June 22, 2035; the '884 Patent does not expire until September 15, 2036; and the '105 Patent does not expire until January 10, 2038. Given that these patents collectively have more than a decade of remaining enforceable life, the lump-sum is intended to address only past infringement, while the running royalty (discussed in Section V below) will compensate Apex for the value of the prospective license grant.
Apex believes that $8,750,000 represents a fair and reasonable resolution of the past damages component of this dispute, particularly in light of: (i) the favorable claim construction rulings; (ii) the strong infringement case that Apex intends to present at trial; (iii) the breadth and duration of Solstice's accused sales; and (iv) the credible and well-supported damages analysis prepared by Mr. Danaher.
B. Payment Structure — Two Tranches
To facilitate the prompt conclusion of this matter while accommodating what Apex understands to be Solstice's preference for staged payment, Apex proposes that the lump-sum of $8,750,000 be paid in two tranches, as follows:
Tranche 1: Five Million Two Hundred Fifty Thousand Dollars ($5,250,000), due and payable within ten (10) business days of the execution of the Definitive Settlement Agreement by all parties.
Tranche 2: Three Million Five Hundred Thousand Dollars ($3,500,000), due and payable no later than September 15, 2025.
Both tranches shall be deposited by wire transfer of immediately available funds into an escrow account maintained by an independent escrow agent. Apex proposes Tidewater Fiduciary Services, Inc., located at 300 Delaware Avenue, Suite 1400, Wilmington, Delaware 19801, as the escrow agent. Tidewater is a well-established Delaware fiduciary services firm with extensive experience handling settlement escrow arrangements in patent litigation. Funds deposited into escrow shall be released to Apex within three (3) business days of deposit, in accordance with an escrow agreement to be executed by the parties and Tidewater.
Apex requires that the timely receipt of the Tranche 1 payment serve as a condition precedent to the effectiveness of the patent license grant and the covenant not to sue described in Sections VI and VII below. In other words, neither the license nor the covenant shall become effective unless and until the Tranche 1 payment has been received by the escrow agent and released to Apex. This condition is essential to protect Apex's interests and to ensure that Solstice does not obtain the benefit of a license or covenant before Apex has received meaningful consideration.
In the event that Solstice fails to make the Tranche 2 payment by September 15, 2025, such failure shall constitute a material breach of the Definitive Settlement Agreement, entitling Apex, at its election, to: (a) terminate the patent license and covenant not to sue, effective immediately upon written notice to Solstice; (b) reinstate all claims against Solstice that were the subject of the mutual release; and (c) recover the outstanding balance of $3,500,000, together with interest accrued from the due date at the rate of 5% over the federal funds rate or the Delaware statutory rate, whichever is greater, plus Apex's reasonable attorneys' fees and costs incurred in enforcing this provision.
V. Running Royalty — Apex's Revised Terms
A. Royalty Rate
Apex acknowledges that Solstice proposed a running royalty rate in its May 22 letter. However, the rate proposed by Solstice is, in Apex's view, below what is justified by the value of the intellectual property at issue and the established royalty benchmarks in the surgical device industry.
Apex counterproposal a running royalty of 3.75% of Net Sales of Licensed Products, to commence on the date of execution of the Definitive Settlement Agreement and to continue for the remaining life of the Licensed Patents (i.e., through the expiration date of the last-to-expire Licensed Patent, currently projected to be January 10, 2038).
This rate is grounded in the Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), reasonable royalty analysis performed by Mr. Danaher. In his expert report, Mr. Danaher identified and analyzed six comparable patent license agreements in the surgical and medical device field, with effective royalty rates ranging from 2.8% to 7.2% of net sales. After adjusting for differences in scope, duration, exclusivity, and the nature of the licensed technology, Mr. Danaher concluded that a hypothetical negotiation between a willing licensor and a willing licensee, conducted at the time infringement began, would have yielded an agreed royalty rate in the range of 3.5% to 4.5% of net sales. The proposed rate of 3.75% falls at the lower end of that range and reflects the settlement discount inherent in a negotiated resolution.
For purposes of the license and royalty provisions, "Licensed Products" shall be defined as: (i) the PrecisionEdge™ PE-5000 Series laparoscopic trocar assemblies; (ii) the PrecisionEdge™ PE-12000 Series laparoscopic trocar assemblies; (iii) the PrecisionEdge™ PE-15000 Series laparoscopic trocar assemblies; and (iv) any successor, replacement, modified, or substantially similar products sold by Solstice Biomedical Devices Ltd., Solstice Biomedical, Inc., or any of their direct or indirect wholly owned subsidiaries. The intent of this definition is to ensure that Solstice cannot avoid royalty obligations by making cosmetic or insubstantial modifications to its accused products or by introducing successor products that practice the same patented technology under a different product designation.
B. Definition of Net Sales
For purposes of calculating the running royalty, "Net Sales" shall mean gross invoiced sales of Licensed Products, less only the following deductions, to the extent actually incurred, separately identified on the applicable invoice or other documentation, and directly attributable to the sale of Licensed Products:
(a) actual product returns and allowances (including credit for defective or damaged products);
(b) contractual trade, quantity, and cash rebates actually paid or credited to customers;
(c) government-mandated chargebacks, including chargebacks under federal supply schedule contracts, Medicaid rebates, and equivalent programs;
(d) outbound freight, insurance, and shipping charges to the extent separately stated on the invoice and borne by Solstice; and
(e) sales, use, value-added, and excise taxes to the extent separately stated on the invoice and actually paid to the applicable taxing authority.
No other deductions shall be permitted. Without limiting the generality of the foregoing, no deduction shall be permitted for marketing, promotional, administrative, or overhead expenses, and no deduction shall be permitted for intercompany transfers or sales between Solstice and any affiliate or subsidiary at prices that are less than arm's length. In the event of any intercompany transfer of Licensed Products at less than fair market value, Net Sales shall be calculated based on the price at which the Licensed Products are ultimately sold to an unaffiliated third-party end purchaser.
All deductions must be documented and verifiable by reference to contemporaneous business records. Apex reserves the right to challenge any claimed deduction that it believes is inflated, unsupported, or inconsistent with the terms of the agreement.
C. Royalty Floor and Cap
To ensure that the running royalty provides meaningful minimum compensation for the license grant while also providing Solstice with economic certainty, Apex proposes the following annual floor and cap:
Annual Royalty Floor: Five Hundred Thousand Dollars ($500,000) per calendar year, commencing with calendar year 2026. This floor is payable regardless of the actual level of Net Sales. If royalties calculated based on actual Net Sales are less than $500,000 in any calendar year, Solstice shall pay the difference between the calculated amount and $500,000 as a "true-up" payment with the fourth-quarter royalty report.
Annual Royalty Cap: One Million Eight Hundred Thousand Dollars ($1,800,000) per calendar year. If royalties calculated based on actual Net Sales exceed $1,800,000 in any calendar year, Solstice's royalty obligation for that year shall be capped at $1,800,000 and no further royalty shall be due with respect to that calendar year.
For the calendar year in which the license commences (2025), the floor and cap shall be prorated based on the number of days remaining in the calendar year following the effective date of the license.
By way of illustration, based on Solstice's reported FY 2023 U.S. Net Sales of approximately $22.4 million for the PrecisionEdge™ product lines and assuming approximately 8% year-over-year growth, projected CY 2026 Net Sales would be approximately $24.2 million. At a royalty rate of 3.75%, the estimated Year 1 (CY 2026) royalty would be approximately $907,500 — well within the floor-cap range and reflective of a commercially reasonable royalty obligation.
D. Reporting and Payment Mechanics
Solstice shall deliver to Apex written royalty reports within forty-five (45) days after the end of each calendar quarter (i.e., by May 15, August 14, November 14, and February 13, respectively). Each royalty report shall include, at a minimum:
(a) product-by-product Net Sales figures for the applicable quarter, broken down by Licensed Product series (PE-5000, PE-12000, PE-15000, and any successor products);
(b) an itemized breakdown of all deductions claimed from gross invoiced sales, with supporting documentation;
(c) the calculation of the royalty due for the quarter; and
(d) a cumulative year-to-date summary of Net Sales, deductions, and royalties paid.
Royalty payments shall be due concurrently with the delivery of each quarterly royalty report and shall be made by wire transfer of immediately available funds to an account designated by Apex. Late payments shall bear interest at the rate of 1.5% per month or the maximum rate permitted by applicable law, whichever is less, from the date due until the date of payment.
E. Audit Right
Apex shall have the right, at its election and upon not less than thirty (30) days' prior written notice to Solstice, to audit Solstice's books and records relating to the calculation of Net Sales and royalties. Such audit right may be exercised no more than once per calendar year and shall cover the period since the last audit (or, in the case of the first audit, since the effective date of the license).
The audit shall be conducted by an independent certified public accounting firm selected by Apex and reasonably acceptable to Solstice, during normal business hours and at Solstice's principal office or such other location where the relevant records are maintained. The audit shall be conducted at Apex's sole expense, subject to the following exception: if the audit reveals an underpayment exceeding five percent (5%) of the total royalty amount due for any audited period, Solstice shall (i) promptly reimburse Apex for the full cost of the audit, (ii) pay the deficiency within fifteen (15) business days of written notice of the audit findings, and (iii) pay interest on the underpaid amount at the rate applicable to late payments, from the date the underpayment should have been made through the date of actual payment. The independent accounting firm shall be required to enter into an appropriate confidentiality agreement with Solstice prior to commencing the audit.
VI. License Grant — Apex's Revised Terms
A. Scope. Apex is prepared to grant Solstice a non-exclusive, non-transferable, worldwide license under the '237 Patent, the '884 Patent, and the '105 Patent, together with any continuations, continuations-in-part, divisionals, or reissues of any of the foregoing (collectively, the "Licensed Patents"), subject to the terms and conditions set forth herein and in the Definitive Settlement Agreement and Patent License Agreement.
The license shall be limited to the following field of use: the design, manufacture, use, sale, offer for sale, and importation of laparoscopic surgical access devices, including trocar assemblies and related components. The license shall not extend to any other field of use, including without limitation open surgery instruments, robotic surgery platforms, endoscopic devices, or any other medical device or product category.
The license shall be personal to Solstice Biomedical Devices Ltd. and its wholly owned subsidiary, Solstice Biomedical, Inc. The license shall not be assignable or transferable by Solstice to any third party, whether by operation of law, merger, sale of assets, or otherwise, except in connection with a change of control of Solstice Biomedical Devices Ltd. For purposes of this provision, a "change of control" shall mean the acquisition by any person or entity (or group of persons or entities acting in concert) of more than fifty percent (50%) of the outstanding voting equity securities of Solstice Biomedical Devices Ltd. In the event of a change of control, the license shall continue in effect for the benefit of the successor entity, provided that the successor assumes all obligations under the Settlement Agreement and Patent License Agreement.
B. Sublicense Right
Solstice shall have a limited right to sublicense under the Licensed Patents, restricted strictly to contract manufacturers engaged by Solstice for the sole purpose of manufacturing Licensed Products on Solstice's behalf. Any such sublicense shall be in writing, shall incorporate terms consistent with and no less restrictive than the Patent License Agreement, and shall terminate automatically upon the termination of the applicable manufacturing relationship between Solstice and the contract manufacturer.
Solstice shall have no right to sublicense the Licensed Patents to distributors, resellers, original equipment manufacturers, joint venture partners, or any other third party for any purpose whatsoever.
Apex shall receive written notice of the grant of any sublicense within fifteen (15) business days of the effective date of such sublicense, together with a copy of the sublicense agreement (which may be redacted to remove commercially sensitive pricing information not relevant to the scope of the sublicense grant). Failure to provide timely notice of a sublicense shall constitute a material breach of the Patent License Agreement.
VII. Covenant Not to Sue — Apex's Revised Terms
In addition to the patent license described in Section VI, Apex is prepared to provide Solstice with a covenant not to sue covering the Apex Trocar Patent Family, which comprises fourteen (14) issued U.S. utility patents and six (6) pending continuation applications, all directed to laparoscopic trocar technology. The covenant not to sue is intended to provide Solstice with broader freedom to operate in the licensed field than would be afforded by the license alone, and Apex views this as a significant additional concession beyond the scope of the patents-in-suit.
The covenant not to sue shall be subject to the following limitations and conditions:
(a) Covered Entities. The covenant shall extend only to Solstice Biomedical Devices Ltd., Solstice Biomedical, Inc., and any entity that is a direct or indirect wholly owned subsidiary of Solstice Biomedical Devices Ltd. as of the effective date of the covenant. The covenant shall not extend to any other entity, including any acquirer of Solstice's assets (as distinguished from a change-of-control transaction involving equity), joint venture partners, customers, or distributors.
(b) Scope. The covenant shall cover only products in the licensed field of use (i.e., laparoscopic surgical access devices) and shall not extend to products in any other field of use.
(c) Duration. The covenant shall remain in effect during the term of the Patent License Agreement. Upon expiration or termination of the Patent License Agreement, the covenant shall terminate concurrently.
(d) Automatic Termination. The covenant shall terminate automatically and without notice upon any material breach of the Definitive Settlement Agreement or the Patent License Agreement by Solstice, including but not limited to failure to make timely royalty payments, failure to make lump-sum payments, or unauthorized sublicensing or assignment. Upon such termination, Apex shall be entitled to assert any and all claims under the Apex Trocar Patent Family against Solstice, without any limitation or estoppel arising from the covenant.
VIII. Most-Favored Licensee Provision
Your May 22 letter requested the inclusion of a most-favored licensee clause. Apex is willing to include such a provision, provided it is carefully and precisely defined to avoid unintended consequences.
Specifically, Apex proposes the following: if, at any time during the term of the Patent License Agreement, Apex enters into a license agreement with any third party for the Licensed Patents (or any subset thereof) at a running royalty rate lower than 3.75% of net sales in the same or a substantially comparable field of use (i.e., laparoscopic surgical access devices), Solstice's running royalty rate shall be adjusted prospectively, effective as of the first calendar quarter following the effective date of the third-party license, to match the lower rate granted to the third party. For the avoidance of doubt, the adjustment shall be prospective only and shall not entitle Solstice to any retroactive adjustment or refund of royalties previously paid.
This most-favored licensee provision shall not apply to:
(a) licenses granted in settlement of litigation with third parties where the circumstances of the litigation — including the scope of claims asserted, the products at issue, the duration of the license, and the other consideration exchanged — are materially different from those of this settlement;
(b) licenses granted as part of cross-license arrangements where the royalty rate reflects a mutual exchange of patent rights;
(c) licenses granted to academic, research, or non-profit institutions for non-commercial purposes; or
(d) licenses in which the effective royalty rate is structured as a lump-sum payment rather than a running royalty, unless the lump-sum can be converted to an equivalent per-unit or percentage-of-sales rate for purposes of comparison.
In the event that the most-favored licensee provision is triggered, Apex shall provide written notice to Solstice within thirty (30) days of the execution of the relevant third-party license. The specific notification protocol, including the information to be provided and any confidentiality obligations applicable to the disclosure, shall be addressed in a separate side letter to be executed contemporaneously with the Definitive Settlement Agreement.
IX. Mutual Release and Dismissal
Apex agrees to the entry of a full mutual release of all claims, counterclaims, cross-claims, and defenses asserted or that could have been asserted by either party in Case No. 1:24-cv-00587-RGA, effective upon the terms and conditions set forth in the Definitive Settlement Agreement. The release shall extend to all predecessors, successors, affiliates, subsidiaries, officers, directors, employees, agents, and attorneys of both parties.
The action shall be dismissed with prejudice by stipulation of the parties, with each party bearing its own costs and attorneys' fees. The Stipulation of Dismissal, substantially in the form attached as Exhibit E to the Definitive Settlement Agreement, shall be filed with the Court within fifteen (15) days after Apex confirms receipt of the Tranche 1 payment into the designated escrow account. Based on the proposed timeline, Apex estimates that the Stipulation of Dismissal would be filed on or about July 1, 2025.
As part of the dismissal, Solstice shall withdraw with prejudice its counterclaims for declaratory judgment of non-infringement and declaratory judgment of invalidity of the '237, '884, and '105 Patents (Counterclaims I and II, Dkt. 38), as well as its affirmative defense of inequitable conduct. The withdrawal of the inequitable conduct defense is of particular importance to Apex, as that defense — which Apex vigorously disputes on the merits — has no basis in fact or law and should not be left as an unresolved cloud over Apex's patent portfolio.
X. Confidentiality
All terms and conditions of the settlement, including the existence and substance of this counterproposal, the financial terms of the Definitive Settlement Agreement, the royalty rate, the lump-sum payment amounts, and all related correspondence and communications between the parties, shall be subject to mutual confidentiality obligations to be set forth in the Definitive Settlement Agreement.
Neither party shall disclose any Confidential Settlement Information to any person or entity, except as follows:
(a) as required by applicable law, regulation, court order, or legal process, provided that the disclosing party provides the other party with prompt written notice (to the extent permitted by law) and cooperates in seeking appropriate protective measures;
(b) to the disclosing party's outside auditors (Glenmore & Byrne LLP for Solstice; Creston Perry LLP for Apex), insurers, and lenders, in each case under obligations of confidentiality no less restrictive than those set forth in the Definitive Settlement Agreement;
(c) to the disclosing party's directors, officers, and senior management on a need-to-know basis;
(d) to professional advisors (including legal, tax, and financial advisors) under obligations of confidence; and
(e) in connection with any proceeding to enforce the terms of the Definitive Settlement Agreement or related agreements.
The parties shall issue a joint public statement limited to the following language: "The matter has been resolved on mutually agreeable terms." No other public statement regarding the settlement shall be made by either party without the prior written consent of the other party. Any press release, SEC filing, or other public disclosure that references the settlement must be approved in advance by both parties.
Any breach of the confidentiality provisions shall entitle the non-breaching party to seek immediate injunctive relief in the U.S. District Court for the District of Delaware without the requirement of posting a bond. In addition, the parties shall negotiate a liquidated damages provision to address breaches of confidentiality; the amount of such liquidated damages shall be agreed upon during the negotiation of the Definitive Settlement Agreement.
XI. Governing Law and Dispute Resolution
The Definitive Settlement Agreement, the Patent License Agreement, the Covenant Not to Sue, and all related agreements and exhibits 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 under or in connection with the Definitive Settlement Agreement, the Patent License Agreement, the Covenant Not to Sue, or any related agreement shall be resolved exclusively in the United States District Court for the District of Delaware, and each party irrevocably submits to the jurisdiction of that court for purposes of any such dispute. The parties waive any objection to venue in the District of Delaware and any claim of inconvenient forum.
XII. Definitive Documentation and Timeline
Apex is committed to resolving this matter promptly and efficiently. To that end, Apex expects the following definitive agreements and related documents to be negotiated, finalized, and fully executed no later than June 16, 2025:
1. Settlement Agreement and Mutual Release;
2. Patent License Agreement (to be appended as Exhibit A);
3. Covenant Not to Sue (to be appended as Exhibit B);
4. List of Licensed Patents and Pending Applications (to be appended as Exhibit C);
5. Form of Royalty Report (to be appended as Exhibit D);
6. Form of Stipulation of Dismissal with Prejudice (to be appended as Exhibit E);
7. Agreed Joint Public Statement (to be appended as Exhibit F);
8. Escrow Agreement with Tidewater Fiduciary Services, Inc.; and
9. Side Letter regarding the Most-Favored Licensee notification protocol.
Apex proposes the following drafting protocol: upon agreement on principal terms (whether through acceptance of this counterproposal or through further negotiation resulting in an agreed term sheet), Calderwood & Harkness shall prepare and circulate the initial draft of the Definitive Settlement Agreement, incorporating the agreed terms. Hargrove, Tate & Bennington will review the draft and provide comments within five (5) business days of receipt. The parties shall thereafter work in good faith to finalize all documents within the timeline set forth above. Apex believes this allocation of drafting responsibility is appropriate given that the settlement will involve a license and covenant from Apex to Solstice, and the initial drafting of such documents by the licensee's counsel is consistent with customary practice.
XIII. Conditions and Reservations
Apex reiterates that this counterproposal is made without prejudice to all of Apex's rights, claims, positions, and remedies in Case No. 1:24-cv-00587-RGA and in any other proceeding. Nothing in this letter constitutes or shall be construed as an admission regarding: (a) the merits or viability of Solstice's defenses, including its non-infringement positions, invalidity contentions, or inequitable conduct allegations; (b) the scope or construction of any claim of the '237, '884, or '105 Patents; (c) the amount of damages to which Apex is entitled; or (d) any other issue of fact, law, or equity.
Apex expressly reserves the right to proceed to trial on September 30, 2025, and to seek the full measure of damages and equitable relief to which it is entitled, in the event that the parties are unable to reach agreement on definitive settlement terms.
This counterproposal shall remain open for acceptance or further negotiation until June 6, 2025. If Apex has not received a substantive written response from Solstice by that date, Apex will reassess its litigation posture, including whether to resume full trial preparation without further settlement discussions. Apex notes that the pretrial order deadline is currently set for August 15, 2025, and trial counsel will need adequate time to prepare.
XIV. Closing
Apex has made this counterproposal in good faith and with a genuine desire to resolve this matter efficiently and on terms that appropriately recognize the value of Apex's intellectual property portfolio. The terms set forth herein represent significant concessions from the damages and relief that Apex believes it would obtain at trial, and they are offered in the spirit of pragmatic compromise.
I invite you to contact me at your earliest convenience to discuss these terms. I would suggest that we arrange a call to include the principals — specifically, Martin Hale, General Counsel of Apex Surgical Innovations, Inc., and Eamon Rourke, General Counsel of Solstice Biomedical Devices Ltd. — at a mutually convenient time during the week of June 2, 2025. Additionally, Dr. Priya Chandrasekaran, Apex's Chief IP Officer, is available to participate in any discussions regarding the technical scope of the patent family, the field-of-use definitions, or the identification of Licensed Products and successor products.
I can be reached directly at (302) 555-4780 or by email at vstanton@htblaw.com.
We look forward to hearing from you.
Very truly yours,
HARGROVE, TATE & BENNINGTON LLP
By: ________
Victoria Stanton Partner
900 North King Street, Suite 1200 Wilmington, DE 19801 Tel: (302) 555-4780
Email: vstanton@htblaw.com
On behalf of Apex Surgical Innovations, Inc.
cc:
Martin Hale, General Counsel, Apex Surgical Innovations, Inc.
Dr. Priya Chandrasekaran, Chief IP Officer, Apex Surgical Innovations, Inc.
Derek Loomis, Associate, Hargrove, Tate & Bennington LLP
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