Matter No.: 10294.0017
Eamon, Brendan —
I am pleased to report that I spoke with Victoria Stanton at Hargrove, Tate & Bennington this afternoon and we have reached agreement in principle on all principal settlement terms. This is an excellent result for Solstice, and I want to lay out the full picture so we are all aligned as we move into documentation.
**Agreed Principal Terms:**
1. **Lump-Sum Payment:** $8,750,000, payable in two tranches: - Tranche 1: $5,250,000, due within 10 business days of execution of the definitive settlement agreement (effectively by June 30, 2025, assuming execution on or around June 16). - Tranche 2: $3,500,000, due on or before September 15, 2025.
2. **Escrow:** Both tranche payments will be deposited into escrow at Tidewater Fiduciary Services, Inc. (I have identified Jennifer Hsu, VP Escrow Services, as our contact there) and released to Apex within 3 business days of deposit. Victoria has confirmed Apex is comfortable with this structure.
3. **Running Royalty:** 3.75% of Net Sales of Licensed Products, defined as the PrecisionEdge PE-5000, PE-12000, and PE-15000 series and successor products.
4. **Net Sales Definition:** Gross invoiced sales less returns, rebates, chargebacks, freight, and sales taxes. This is consistent with standard industry definitions and tracks the definition used in Apex's own prior license agreements.
5. **Royalty Floor:** $500,000 per calendar year, beginning calendar year 2026.
6. **Royalty Cap:** $1,800,000 per calendar year.
7. **License Grant:** Non-exclusive, non-transferable (except in connection with a change of control of Solstice Biomedical Devices Ltd. or Solstice Biomedical, Inc.), worldwide, under the '237, '884, and '105 Patents and any continuations, divisionals, or reissues thereof. Field of use: laparoscopic surgical access devices. Limited sublicense rights for contract manufacturers of Licensed Products.
8. **Covenant Not to Sue:** Apex will covenant not to assert any patent in the Apex Trocar Patent Family (all 14 issued patents and 6 pending applications) against Solstice, its subsidiaries, or their customers in the licensed field for the duration of the license term.
9. **Most-Favored Licensee:** Agreed. If Apex enters into a license with any third party under the licensed patents at a running royalty rate lower than 3.75%, Solstice's rate will adjust prospectively to match the lower rate. Victoria and I agreed to memorialize the notification protocol in a side letter to the definitive agreement.
10. **Audit Right:** Apex will have an annual audit right over Solstice's royalty records, conducted at Apex's sole expense. However, if an audit reveals an underpayment exceeding 5% of amounts due for the audited period, Solstice will bear the cost of the audit. This is a standard provision and consistent with the Board's instructions.
11. **Mutual Release:** Full mutual release of all claims, counterclaims, and defenses asserted or that could have been asserted in *Apex Surgical Technologies, Inc. v. Solstice Biomedical, Inc.*, Case No. 1:24-cv-00587-RGA (D. Del.).
12. **Dismissal:** Stipulation of Dismissal with Prejudice, each party bearing its own costs and attorneys' fees.
13. **Confidentiality:** All settlement terms will be treated as confidential. The parties will issue a joint public statement limited to agreed language along the lines of "the matter has been resolved on mutually agreeable terms." No financial terms will be disclosed.
14. **Governing Law:** Delaware.
**Next Steps:**
- **Term Sheet:** C&H will prepare and circulate a binding Term Sheet reflecting the above terms for execution by both parties. Our target is execution by **June 10, 2025**.
- **Definitive Documentation:** Following Term Sheet execution, we will prepare the first draft of the Definitive Settlement Agreement and all exhibits, including: (a) the patent license agreement; (b) the covenant not to sue; (c) the schedule of licensed patents and pending applications; (d) the form of quarterly royalty report; (e) the stipulation of dismissal with prejudice; and (f) the agreed form of joint public statement. We will also prepare the escrow agreement with Tidewater. Peter Vassiliev is already working on the definitive agreement structure, and Christy Bauer will handle the escrow agreement and coordination with Tidewater. Our target for execution of definitive documentation is **June 16, 2025**.
- **Court Notification:** Upon execution of the Term Sheet, C&H will file a letter to the Honorable Judge Richard G. Andrews and Magistrate Judge Pratt notifying the Court that the parties have reached a settlement in principle and requesting that the September 30, 2025 trial date and all remaining pre-trial deadlines be vacated.
- **Insurance Notification:** C&H will send a settlement reporting letter to Sandra Keene at Halcyon Specialty Insurance Co. (Policy HSI-IP-2023-04891) notifying of the resolution. As previously discussed, the policy covers defense costs only and not settlement payments, but timely notification is required under the policy terms.
- **Tax and Antitrust Memoranda:** Peter — please prepare (i) the memorandum on U.S. and Irish tax implications of the lump-sum and royalty payments, addressing withholding tax obligations under the U.S.–Ireland income tax treaty and the payment flow through Solstice Biomedical, Inc. (EIN 84-3291056), and (ii) a brief antitrust considerations memorandum regarding the license structure. Eamon, this will also assist Niamh and the team at Glenmore & Byrne in their analysis.
**Assessment:**
I want to underscore that this is a very favorable outcome for Solstice. The $8.75M lump-sum, combined with running royalties capped at $1.8M per year, represents a small fraction of the $31.8M in damages that Apex was claiming through Hugh Danaher's report. Even under conservative assumptions, Solstice's total settlement cost over the life of the patents is likely to fall in the range of $18–22M — well below the litigation risk exposure and, critically, providing Solstice with broad freedom to operate under the full Apex Trocar Patent Family through 2038. The most-favored licensee clause and the comprehensive covenant not to sue add meaningful long-term value.
Thank you all for the tireless effort throughout this litigation — from both sides of the Atlantic. I look forward to getting the documentation finalized and putting this matter to rest.
Best regards,
Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com
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From: Eamon Rourke To: Marcus Delgado Cc: Brendan Molloy , Catherine Bloom , Christy Bauer Date: Tuesday, June 3, 2025, 10:15 AM EDT Subject: RE: Apex Settlement Negotiations — Progress Update After Friday Call [PRIVILEGED]
Matter No.: 10294.0017
Marcus,
Good news. I briefed Dr. Tierney and the Board last evening (Dublin time) and they have reviewed your recommendation and the Risk Assessment Memorandum in detail. The Board approves the proposed terms as follows:
- **Lump-sum:** $8,750,000, structured as two tranches — Tranche 1 of $5,250,000 and Tranche 2 of $3,500,000, with Tranche 2 payable on or before September 15, 2025. - **Running royalty:** 3.75% of Net Sales, with a $500,000 annual floor and $1,800,000 annual cap. - **All other terms** as outlined in your email of June 2 — non-exclusive worldwide license, full patent family covenant, mutual release, dismissal with prejudice, sublicense rights for contract manufacturers, and confidentiality.
A few additional points from the Board discussion:
1. **Most-Favored Licensee:** The Board considers this provision important and would like the team to insist on it. Given the competitive dynamics in the trocar market — particularly with Meridian Surgical and Lakepoint Medical both potentially in Apex's licensing crosshairs — the Board wants assurance that Solstice is not paying a premium relative to competitors. Please make clear to Victoria that this is a firm requirement for Solstice.
2. **Escrow:** The Board prefers that all lump-sum payments pass through an independent escrow agent rather than direct wire transfers to Apex. We agree with your suggestion of Tidewater Fiduciary Services — please proceed with establishing that relationship.
3. **Audit Rights:** We understand Apex will likely insist on an audit right over Solstice's royalty payment records. We are fine with an annual audit conducted at Apex's expense, with Solstice bearing the audit cost only if a discrepancy exceeding 5% of the amounts due for the audited period is identified. This is a standard provision and we see no reason to resist it.
4. **Joint Public Statement:** The Board is firm that any public statement be limited to words along the lines of "the matter has been resolved on mutually agreeable terms." Absolutely no disclosure of financial terms, royalty rates, or other specifics. Fiona is particularly sensitive to this given analyst coverage ahead of the Q3 earnings call.
5. **Governing Law:** Delaware is acceptable.
On the **tax memorandum** — I want to reiterate this request. Niamh Cassidy is coordinating with Glenmore & Byrne on the Irish side, but we need C&H's analysis of U.S. withholding tax implications and the optimal payment flow structure between Apex, the escrow agent, Solstice Biomedical, Inc. (the Delaware subsidiary), and Solstice Biomedical Devices Ltd. (the Irish parent). Please prioritize this alongside the Term Sheet drafting.
Let's get this wrapped up. The team in Dublin is eager to put this behind us and focus on the next-generation product launch.
Best,
Eamon Rourke General Counsel Solstice Biomedical Devices Ltd. Sandyford Business District Dublin D18 Y2X7, Ireland Tel: +353 1 555 8200 erourke@solsticebiomed.com
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From: Marcus Delgado To: Eamon Rourke , Brendan Molloy Cc: Catherine Bloom , Christy Bauer , Peter Vassiliev Date: Monday, June 2, 2025, 3:22 PM EDT Subject: RE: Apex Settlement Negotiations — Progress Update After Friday Call [PRIVILEGED]
Matter No.: 10294.0017
Eamon, Brendan —
Wanted to give you a prompt update following my call with Victoria Stanton on Friday, May 30. We had a substantive and productive discussion, and the gap between the parties has narrowed considerably. Here is a summary of where things stand on each key term:
**Lump-Sum:** Apex moved down to $9.5M (from their counterproposal of $11.2M). I countered at $8.5M. Victoria indicated that Apex would likely settle in the $8.5–9.0M range provided the royalty terms are acceptable. I believe we can land this at **$8.75M** as a split-the-difference resolution.
**Running Royalty:** We discussed the range of 3.5–4.0%. I pushed for 3.75% as a natural midpoint, and Victoria indicated that number could work for Apex if the lump-sum lands at $8.75M or above. This is within the Board's authorized range of up to 4.0%.
**Field of Use:** Victoria conceded that "laparoscopic surgical access devices" is an acceptable field of use, dropping Apex's prior insistence on the narrower "laparoscopic trocar assemblies" limitation. This is a significant win — it ensures the PrecisionEdge line and any future evolution of Solstice's product portfolio in the surgical access space are covered.
**Covenant Not to Sue:** Apex is now willing to provide a covenant not to sue covering the full Apex Trocar Patent Family for products in the licensed field. This was one of the Board's highest priorities, and we achieved it. Solstice will have freedom to operate under all 14 issued patents and 6 pending applications without risk of future assertion.
**Sublicense Rights:** Apex is willing to permit sublicenses limited to contract manufacturers of Licensed Products. This addresses Solstice's operational need given the PE-15000 manufacturing arrangements.
**Most-Favored Licensee:** Victoria said Apex would consider this but needs to discuss further with Dr. Chandrasekaran. I made clear this is an important term for Solstice and we will be pressing for it in the next round.
**Tranche Structure:** Apex is willing to accept two tranches provided Tranche 1 is at least 60% of the total and Tranche 2 is paid within 90 days. This aligns with Brendan's preference.
**Royalty Cap/Floor:** Victoria expressed general willingness to discuss a cap and floor mechanism. She asked that we propose specific numbers. I have not yet shared our target figures ($500K floor / $1.8M cap) and will hold those for the formal counter-counterproposal.
**My Recommendation:**
Based on the trajectory of negotiations and the remaining gap, I recommend the following as Solstice's final position:
- Lump-sum: **$8,750,000** (60/40 split — Tranche 1 of $5,250,000 due within 10 business days of execution; Tranche 2 of $3,500,000 due on or before September 15, 2025). - Running royalty: **3.75% of Net Sales**. - Royalty floor: **$500,000 per calendar year**, beginning CY 2026. - Royalty cap: **$1,800,000 per calendar year**. - Insist on the most-favored licensee clause. - All other terms as previously discussed: non-exclusive worldwide license, full family covenant, mutual release, dismissal with prejudice, sublicense rights for contract manufacturers, and confidentiality.
I believe Victoria will recommend acceptance of these terms to Martin Hale and Dr. Chandrasekaran. The overall package represents a meaningful discount to Apex's litigation risk exposure and provides them with a guaranteed revenue stream through 2038.
I am circulating separately a **Risk Assessment Memorandum (Trial vs. Settlement)** to Dr. Tierney, Eamon, and Brendan, which compares these proposed settlement terms against the costs, risks, and potential outcomes of proceeding to the September 30 trial. The memorandum considers (among other factors) trial outcome probabilities, the post-Markman claim construction landscape, the strength of Dr. Marchetti's damages rebuttal, the impact of the denied summary judgment motions, and the additional litigation costs through trial (estimated at $1.2–1.5M).
**Eamon** — I need you to confirm final Board authority on the $8.75M lump-sum and 3.75% royalty rate so I can finalize terms with Victoria this week. If the Board is aligned, our target is execution of a binding Term Sheet by **June 10**.
Please let me know your availability for a call tomorrow morning if there are any questions.
Best regards,
Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com
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From: Brendan Molloy To: Marcus Delgado , Eamon Rourke Cc: Catherine Bloom , Christy Bauer Date: Thursday, May 29, 2025, 8:03 AM EDT Subject: RE: Apex Settlement Negotiations — Counterproposal Received [PRIVILEGED]
Matter No.: 10294.0017
Marcus, Eamon —
I've run the numbers on Apex's counterproposal overnight and wanted to share my analysis before our call this morning.
**Apex's Counter at Face Value:**
At $11.2M lump-sum plus 4.75% running royalty on estimated Year 1 Net Sales of $24.2M, the annual royalty burden would be approximately $1,149,500 in Year 1. Projecting forward over the remaining 13-year life of the '105 Patent (expiring 2038) and assuming modest annual growth of 6–8% in U.S. PrecisionEdge Net Sales, cumulative running royalties over the patent life could reach $18–22M. Combined with the $11.2M lump-sum, the total cost to Solstice would be approximately **$29–33M** — which, not coincidentally, is in the neighborhood of Apex's original $31.8M damages claim. This is clearly designed to achieve close to their full damages number through the settlement structure. Obviously unacceptable.
**Solstice's Proposed Counter at $8.5M + 3.5%:**
At $8.5M lump-sum plus 3.5% running royalty, Year 1 running royalty would be approximately $847,000. With a royalty cap of $1.8M per year, total running royalties over the 13-year patent life would be capped at approximately **$23.4M** absolute maximum. Combined with the $8.5M lump-sum, the absolute ceiling is roughly $31.9M — but under realistic growth assumptions, the actual total is more likely in the **$18–22M** range. That is a significantly different economic picture, particularly given the cap mechanism, and one the Board and I can support from a financial planning standpoint.
**Royalty Floor and Cap:**
I strongly support Marcus's suggestion of a royalty floor ($500,000/year) and cap ($1,800,000/year). These provide budget certainty for Solstice and allow us to model the settlement cost with confidence in our financial projections. The floor is a manageable minimum commitment, and the cap ensures we are protected against upside growth scenarios where our Net Sales significantly outperform projections — which, frankly, is the scenario we are planning for given the PE-15000 market trajectory.
**Tranche Structure:**
I want to reiterate my strong preference for two tranches. My recommendation is $5.0–5.5M at closing, with the remainder payable 90 days later. This aligns with Solstice's cash flow cycle — our Q2 period is capital-intensive given the Dublin manufacturing line expansion, and we will be in a much stronger cash position once Q3 receivables begin coming in (July/August). A 60/40 split with Tranche 2 due in mid-September works well for us.
I can confirm that I am able to arrange funds per this structure. Tranche 1 can be funded from operating cash and our existing deposit accounts at Ridgeway Trust Bank. Tranche 2 may require a short-term draw on the U.S. revolving credit facility through Penmark Savings Bank, but that is manageable and I've already had preliminary discussions with our relationship manager.
Available for the call this morning at your convenience.
Brendan Molloy Chief Financial Officer Solstice Biomedical Devices Ltd. Sandyford Business District Dublin D18 Y2X7, Ireland Tel: +353 1 555 8250 bmolloy@solsticebiomed.com
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From: Marcus Delgado To: Eamon Rourke , Brendan Molloy Cc: Catherine Bloom , Christy Bauer , Peter Vassiliev Date: Wednesday, May 28, 2025, 5:47 PM EDT Subject: RE: Apex Settlement Negotiations — Counterproposal Received [PRIVILEGED]
Matter No.: 10294.0017
Eamon, Brendan —
We received Apex's without-prejudice counterproposal letter from Victoria Stanton at Hargrove, Tate & Bennington today (dated May 28). I want to walk you through their revised terms and provide my assessment.
**Apex's Counterproposal:**
- **Lump-sum:** $11,200,000 (down from their opening demand of $14.5M — a reduction of $3.3M, or roughly 23%). - **Running royalty:** 4.75% of Net Sales (down from 5.5%). - **License scope:** Apex is willing to extend the license to the full Apex Trocar Patent Family, which is consistent with our request. However, they want to limit the **field of use** strictly to "laparoscopic trocar assemblies." This is meaningfully narrower than the "laparoscopic surgical access devices" language we proposed, which would also cover ancillary products like optical access systems and radially expanding access platforms. I view this as a significant issue — Solstice's product development roadmap extends well beyond trocar assemblies, and a narrow field leaves the company exposed to assertion on next-generation products. - **Covenant not to sue:** Apex proposes limiting the covenant to products "substantially similar" to the current PrecisionEdge PE-5000, PE-12000, and PE-15000. This is unacceptably narrow. A "substantially similar" limitation would allow Apex to argue that any meaningful product redesign or next-generation platform falls outside the covenant's scope. We need a covenant tied to the field of use, not to specific product configurations. - **Sublicense rights:** Not offered. This is a problem given Solstice's use of two contract manufacturers for PE-15000 production. - **Payment terms:** Apex insists on a single lump-sum payment within 30 days of execution. No tranche structure. - **Most-favored licensee:** Not offered. - **Confidentiality:** Agreed in principle. - **Dismissal with prejudice:** Agreed.
**My Assessment:**
The gap remains significant on the two headline economic terms. Our lump-sum offer of $6.5M versus their counter of $11.2M puts us roughly $4.7M apart. On the royalty rate, we are at 3.0% and they are at 4.75% — a spread of 175 basis points. However, I am encouraged by the fact that Apex moved meaningfully on the lump-sum (23% reduction) and royalty rate (75 bps reduction) in their first counter. This signals genuine willingness to negotiate, not posturing for trial.
The non-economic terms present both challenges and opportunities. The narrow field-of-use restriction and the "substantially similar" covenant language are problematic and I view them as non-starters in their current form. The absence of sublicense rights for contract manufacturers is also a practical issue we must address. On the positive side, Apex's willingness to extend the license to the full patent family is significant and was not a given.
**Recommendation:**
I recommend we respond with a revised offer in the range of **$8.0–8.5M** on the lump-sum (this remains within the Board's authorized ceiling of $9M and represents a meaningful move from our opening position). On the royalty rate, I recommend moving to **3.5%**, which is the midpoint of the range and positions us for a potential landing zone around 3.5–3.75%. We should be firm on the broader field of use ("laparoscopic surgical access devices"), the full family covenant not tied to specific products, and sublicense rights for contract manufacturers.
This is also the right moment to introduce two additional terms we held back from the opening proposal: the **most-favored licensee clause** and the **royalty cap/floor concepts**. These serve as meaningful negotiating chips — the MFL clause gives Apex pause because it constrains their future licensing program, and the cap/floor provides structure that could make a slightly higher headline royalty rate more palatable to Apex by guaranteeing them minimum annual revenue.
I'd like to schedule a **call tomorrow morning (May 29)** — ideally at 9:00 AM EDT / 2:00 PM Dublin time — to discuss our response strategy before I prepare the counter-counterproposal. Eamon, Brendan, please confirm your availability and whether Dr. Tierney would like to join.
Best regards,
Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com
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From: Eamon Rourke To: Marcus Delgado Cc: Brendan Molloy , Catherine Bloom , Christy Bauer Date: Friday, May 23, 2025, 11:20 AM EDT Subject: RE: Apex Settlement Negotiations — Proposal Letter Sent [PRIVILEGED]
Matter No.: 10294.0017
Marcus,
Thanks for confirming the proposal letter went out. Fiona and I have reviewed the terms as sent, and we are comfortable with the opening position. Nicely framed.
A few follow-up points:
**Payment Logistics:** I've spoken with Brendan this morning, and he confirms he can arrange funds within 10 business days of execution for a tranche up to $6M. That amount can be sourced from Solstice's existing operating accounts and deposit balances. Anything above $6M in a single payment would require drawing on the Solstice US revolving credit facility through Penmark Savings Bank, which is available but introduces a modest interest cost and some internal approval steps. For this reason, Brendan and I continue to strongly prefer splitting the lump-sum into two tranches — 60% at closing, 40% payable within 60 to 90 days. Please ensure this is part of our negotiating position going forward.
**Tax Considerations:** I've asked Niamh Cassidy (VP, Regulatory & IP) to coordinate with our Irish auditors at Glenmore & Byrne LLP on the tax treatment of both the lump-sum and running royalty payments. The key question is withholding tax implications under the U.S.–Ireland income tax treaty. As you know, Solstice Biomedical Devices Ltd. is the Irish parent entity, and the settlement payments will most likely flow through Solstice Biomedical, Inc. — our Delaware subsidiary, EIN 84-3291056 — which is the named defendant in the litigation. There may be withholding obligations on the royalty component, and potentially on the lump-sum depending on how it is characterized (damages payment vs. license fee). Could C&H prepare a memorandum on the U.S. and Irish tax implications? We'd want to have this in hand before we finalize definitive documentation.
**Entity Coverage:** On a related point — please ensure that the definitive settlement agreement and license clearly identify **both** Solstice Biomedical Devices Ltd. (the Irish parent) and Solstice Biomedical, Inc. (the Delaware subsidiary) as parties and licensees. The license needs to cover the entity that actually manufactures, imports, and sells the PrecisionEdge products in the U.S. (the subsidiary), but also the parent to ensure there is no gap in coverage from an IP assertion standpoint.
We'll await Victoria's response. If there's engagement, I'd like to schedule a direct call between the negotiating teams for the week of May 26 — let me know if that would be appropriate at this stage or if you prefer to keep initial exchanges in writing.
Best,
Eamon
Eamon Rourke General Counsel Solstice Biomedical Devices Ltd. Sandyford Business District Dublin D18 Y2X7, Ireland Tel: +353 1 555 8200 erourke@solsticebiomed.com
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From: Marcus Delgado To: Eamon Rourke , Brendan Molloy Cc: Catherine Bloom , Christy Bauer , Peter Vassiliev Date: Thursday, May 22, 2025, 6:14 PM EDT Subject: RE: Apex Settlement Negotiations — Proposal Letter Sent [PRIVILEGED]
Matter No.: 10294.0017
Eamon, Brendan —
I wanted to confirm that our formal without-prejudice settlement proposal letter was delivered to Victoria Stanton at Hargrove, Tate & Bennington LLP by hand and email this afternoon, May 22. The letter sets forth the following principal terms:
- **Lump-sum payment:** $6,500,000. - **Running royalty:** 3.0% of Net Sales of PrecisionEdge PE-5000, PE-12000, and PE-15000 series products and successors. - **License:** Non-exclusive, worldwide, under the full Apex Trocar Patent Family (14 issued patents and 6 pending applications), in the field of laparoscopic surgical access devices. - **Covenant not to sue:** Apex to covenant not to assert any patent in the Apex Trocar Patent Family against Solstice for products in the licensed field. - **Mutual release** of all claims, counterclaims, and defenses in Case No. 1:24-cv-00587-RGA. - **Dismissal with prejudice**, each side bearing its own fees and costs. - **Confidentiality** obligations regarding settlement terms.
The letter is marked "without prejudice" and "for settlement purposes only," consistent with FRE 408. I have not included the most-favored licensee clause, royalty cap, or tranche payment structure in this initial proposal — as discussed, we are holding those as negotiating tools for subsequent rounds.
Victoria acknowledged receipt by email late this afternoon and indicated informally that she would revert within approximately one week after consulting with Martin Hale (Apex's General Counsel) and Dr. Priya Chandrasekaran (Apex's Chief IP Officer). I take this as a positive signal — she did not reject the proposal out of hand or characterize it as unreasonable, which suggests there is genuine room to negotiate.
**Brendan** — one administrative item: given the trajectory of discussions, I'd recommend beginning preliminary discussions with Solstice's banking relationships regarding wire transfer logistics for a lump-sum payment in the $7–9M range. If negotiations move quickly following Apex's response, we may need to be in a position to execute and fund within a compressed timeframe. I don't want payment mechanics to become a bottleneck.
I'll keep the full team updated as soon as we hear back from HTB.
Best regards,
Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com
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From: Marcus Delgado To: Christy Bauer , Catherine Bloom , Peter Vassiliev Date: Wednesday, May 21, 2025, 10:05 AM EDT Subject: RE: Apex Settlement Negotiations — Initial Framework & Next Steps [PRIVILEGED]
Matter No.: 10294.0017
Christy, Catherine, Peter —
Thanks for the Georgia-Pacific analysis update, Christy — excellent work by you and Peter. The benchmarking data from Apex's prior licenses is particularly useful and should give us strong ammunition in the negotiation. Let me address your questions regarding the proposal letter:
**Proposal Letter Strategy:**
The initial proposal letter to Victoria Stanton — which I plan to finalize and send tomorrow, May 22 — will include the following:
1. **Lump-sum:** $6.5M, per the Board's authorized opening number. 2. **Running royalty:** 3.0% of Net Sales, consistent with the low end of the supportable range from the Georgia-Pacific analysis. 3. **License scope:** We will request the license and covenant not to sue cover the **full Apex Trocar Patent Family** (all 14 issued patents and 6 pending applications), per the Board's clear instructions. This is critical to Solstice's freedom-to-operate objectives and should be framed as a necessary condition for Solstice to justify any significant payment. 4. **License structure:** Non-exclusive, non-transferable (except in connection with a change of control of Solstice), worldwide, in the field of laparoscopic surgical access devices, with limited sublicense rights for contract manufacturers.
**What I'm holding back for later rounds:**
- The **most-favored licensee clause** — this is a powerful negotiating chip and I don't want to introduce it in the opening proposal. We will deploy this in the counterproposal round, where it can serve as a trade for movement on the royalty rate or other terms. Christy, your instinct on this was exactly right. - The **royalty cap** — same logic. We'll introduce the cap and floor concepts when we respond to their counterproposal. This gives us something to offer in exchange for concessions on the headline numbers. - The **tranche payment structure** — Brendan's preference for 60/40 is noted. I'll introduce this as a practical accommodation when we get closer to landing the overall deal, rather than leading with it.
**Ridgeline Valuation:**
I reviewed Dr. Arthur Gaines's valuation summary from Ridgeline IP Analytics over the weekend. His conclusion that the three asserted patents represent roughly 40–50% of the overall value of the Apex Trocar Patent Family supports our positioning of the lump-sum in the $6–9M range. If Apex's own damages expert pegs the full family value at $31.8M (generously), then a risk-adjusted value of the three asserted patents alone is approximately $12.7–15.9M before discounting for litigation risk. Apply a 50% litigation discount (appropriate given the balanced Markman outcome and denied summary judgment motions on both sides), and you arrive at $6.4–8.0M for the asserted patents. The fact that we are seeking a license to the full family for $6.5M opening is a strong value proposition, and one I intend to emphasize in the proposal letter.
**Escrow Mechanics:**
For the lump-sum payment, I plan to propose that funds be deposited through an independent escrow agent for orderly release. I'd suggest **Tidewater Fiduciary Services** in Wilmington — we've used them on several prior matters and they are responsive and well-priced. I'll include this as a proposed mechanic in a later round, not the initial letter.
**Timing:**
I want to emphasize that we need to maintain urgency. The September 30, 2025 trial date is firm, and pre-trial motions, final exhibit lists, and witness lists will all be due in August. If we are going to settle this matter, we need to have definitive documentation in hand by **mid-June** at the latest to allow time for execution, escrow funding, and filing the stipulation of dismissal. Every week of delay is a week of additional trial preparation cost.
**Peter** — please begin outlining the structure of a definitive settlement agreement and license agreement so we can move quickly if and when terms align. I'd suggest starting from the Wellspring/Corbin precedent we used last year, which has a similar structure (lump-sum plus running royalty, non-exclusive license, covenant not to sue, dismissal stipulation). Christy can provide the patent list and field-of-use definitions once we finalize the proposal letter.
Thank you both for the thorough work. Let's keep the momentum going.
Marcus
Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com
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From: Christy Bauer To: Marcus Delgado , Catherine Bloom Cc: Peter Vassiliev Date: Tuesday, May 20, 2025, 2:38 PM EDT Subject: RE: Apex Settlement Negotiations — Initial Framework & Next Steps [PRIVILEGED]
Matter No.: 10294.0017
Marcus, Catherine —
Peter and I are finalizing the Georgia-Pacific Factor Analysis memorandum, which I will circulate separately later today. In the meantime, I wanted to flag a few observations from the analysis that are directly relevant to the settlement proposal, along with a couple of structural ideas for the negotiation.
**Georgia-Pacific Analysis — Key Observations:**
We've worked through all fifteen factors in detail. The highlights most pertinent to the negotiation are:
- **Factor 11 (extent of the infringer's use)** and **Factor 13 (apportionable profit)** are the most significant drivers of the royalty rate analysis. Our review supports a reasonable royalty in the range of **2.5–4.0%** of Net Sales. The lower end is supported by the availability of non-infringing design-around alternatives (which we identified through Dr. Kessler's technical expert report) and Solstice's own substantial design contributions to the PrecisionEdge platform. The upper end is driven by the strong gross margins on the accused products (61.3% weighted average) and the competitive significance of the patented trocar tip geometry.
- **Apex's existing licenses** (identified from Apex's document production, Bates Nos. APEX-014200 through APEX-014385) reveal two prior licenses in the trocar technology space: - A 2019 license to Keystone Surgical, Inc. at a running royalty of 3.0% of net sales, covering 4 patents from the Apex Trocar Family. - A 2021 license to Compass MedTech LLC at a running royalty of 4.5% of net sales, covering 8 patents from the same family, with a broader field of use.
The weighted average of these comparable licenses is approximately 3.75%, which falls squarely within our target range and provides strong factual support for Solstice's position. Notably, Apex will have difficulty arguing that a rate above 4.5% is reasonable when their own licensing history shows a ceiling at that level.
- The **weighted average gross margin of 61.3%** on the accused products, while high, must be weighed against Solstice's own design contributions, marketing investments, and the availability of non-infringing alternatives. Under a proper apportionment analysis (Factor 13), the patented features account for a meaningful but not dominant share of the products' commercial success.
**Most-Favored Licensee Provision:**
I want to raise the idea of requesting a **most-favored licensee (MFL) clause** in the settlement license. Under this provision, if Apex subsequently licenses the same patents (or a subset thereof) to a third party at a running royalty rate lower than Solstice's rate, Solstice's rate would automatically adjust downward to match. This is a common provision in patent settlement agreements and serves two purposes: (1) it protects Solstice against being disadvantaged relative to competitors who may negotiate later licenses on more favorable terms; and (2) it provides a meaningful check on Apex's future licensing behavior.
Given the size of the Apex Trocar Patent Family (14 issued patents, 6 pending), Apex is very likely to pursue additional licensing activity in the trocar space. The MFL clause would give Solstice meaningful long-term protection and could be a significant value driver.
**Sublicense Rights:**
I also recommend that we negotiate **sublicense rights limited to contract manufacturers**. Solstice currently uses two contract manufacturers for PE-15000 production — Aethon Manufacturing (Galway) and Precision Dynamics Corp. (San Jose). Without sublicense rights, those contract manufacturers' activities could technically constitute infringement under the licensed patents, creating ongoing risk. The sublicense right should be limited to the manufacture of Licensed Products on behalf of Solstice and should not extend to independent commercial activities by the contract manufacturers.
**Question for Marcus:** Should we include the MFL clause and sublicense rights in the initial proposal letter to Victoria Stanton, or hold them as negotiating chips for later rounds? I could see arguments either way — including them upfront signals thoroughness and seriousness, but holding them back gives us additional leverage in the counterproposal phase.
I'll have the full Georgia-Pacific memorandum to you by end of day.
Christy
Christy Bauer Senior Associate Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4120 cbauer@calderwoodharkness.com
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From: Eamon Rourke To: Marcus Delgado Cc: Brendan Molloy , Catherine Bloom , Christy Bauer , Peter Vassiliev Date: Tuesday, May 20, 2025, 9:42 AM EDT Subject: RE: Apex Settlement Negotiations — Initial Framework & Next Steps [PRIVILEGED]
Matter No.: 10294.0017
Marcus,
Thank you for the comprehensive summary. I discussed your email and the current posture with Dr. Fiona Tierney and the Board yesterday evening (Dublin time). Here are the Board's instructions:
**Settlement Authority — Updated:**
1. **Lump-sum:** The Board authorizes an opening lump-sum offer of **$6.5 million**. The Board is prepared to go up to **$9 million** total lump-sum if necessary to reach a deal, but the negotiating team should exhaust movement at lower levels before approaching that ceiling. The Board views the $9M figure as a firm cap absent exceptional circumstances.
2. **Running royalty:** Authority up to **4.0%** of Net Sales. However, the team should negotiate hard for **3.0% or below** — 4.0% is the walk-away ceiling, not the target. The Board's preference is to land at or below 3.5%.
3. **License scope:** The Board has a **strong preference** for a license covering the **full Apex Trocar Patent Family** — all 14 issued patents and 6 pending applications — not just the three asserted patents ('237, '884, '105). Solstice needs comprehensive freedom to operate. The PrecisionEdge product roadmap extends through 2030, and we cannot accept ongoing assertion risk from unasserted members of the same patent family. If Apex resists licensing the full family, the Board would view that as a significant negative and it would reduce our willingness to pay a premium on the economic terms.
4. **Royalty cap:** The Board would like to see a **cap on annual running royalties** in the range of **$1.5–2.0 million per year** to provide budget certainty. This is important for our financial planning and investor communications.
**Financial Context:**
Brendan has run internal projections based on the FY 2025–2030 business plan. Assuming approximately 8% annual growth over FY 2023's $22.4M in U.S. PrecisionEdge Net Sales, Year 1 (FY 2025) Net Sales would be approximately **$24.2M**. At a royalty rate of 3.75% (the midpoint of our range), that implies an annual royalty of roughly **$907,500** — manageable within current operating margins, particularly with a cap in the $1.5–2.0M range to protect against upside scenarios.
Brendan also asks me to relay a question regarding the **lump-sum payment structure**. Q2 2025 is a capital-intensive period for Solstice given the manufacturing line expansion at our Dublin facility, and a single large outflow could create short-term cash flow pressure. Brendan would prefer to structure the lump-sum in **two tranches** — a 60/40 split, with the second tranche payable 60–90 days after the first. Is this something we can propose to Apex?
**Insurance:**
I want to confirm the insurance picture with you, as this is relevant to the Board's economic analysis. Solstice's IP litigation insurance through **Halcyon Specialty Insurance Co.** (Policy HSI-IP-2023-04891) covers **defense costs only** — it does not cover settlement payments, license fees, or royalty obligations. The entire settlement amount will be borne by Solstice out of operating funds. For context, total defense fees and costs through June 1 are approaching **$2.85 million**, of which Halcyon has covered all amounts above the **$250,000 self-insured retention**. We should ensure that C&H's fee invoices continue to be submitted to Halcyon's claims team (Sandra Keene) in a timely manner through the conclusion of the matter.
**Next Steps:**
Please keep the full team updated after the proposal letter goes out. Once we see Apex's initial reaction, I'd like to schedule a call — ideally with Victoria Stanton's team — for the week of May 26 to begin the substantive back-and-forth. Fiona has also asked to be briefed directly after any material development; I'll handle that on my end.
Best,
Eamon
Eamon Rourke General Counsel Solstice Biomedical Devices Ltd. Sandyford Business District Dublin D18 Y2X7, Ireland Tel: +353 1 555 8200 erourke@solsticebiomed.com
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From: Marcus Delgado To: Eamon Rourke , Brendan Molloy Cc: Catherine Bloom , Christy Bauer , Peter Vassiliev Date: Monday, May 19, 2025, 4:17 PM EDT Subject: Apex Settlement Negotiations — Initial Framework & Next Steps [PRIVILEGED]
Matter No.: 10294.0017
Eamon, Brendan —
I am writing to lay out the current landscape following the second settlement conference before Magistrate Judge Colleen Pratt on May 12 and to frame our negotiating strategy as we move into direct settlement discussions with Apex.
As you know, both sides showed a constructive posture at the May 12 conference, and Judge Pratt encouraged the parties to engage in intensive direct negotiations. Accordingly, we are now commencing substantive without-prejudice settlement discussions with Victoria Stanton and her team at Hargrove, Tate & Bennington LLP. I want to ensure we are fully aligned on objectives, authority, and strategy before I send a formal proposal letter.