CALDERWOOD & HARKNESS LLP

CALDERWOOD & HARKNESS LLP
Attorneys at Law 590 Lexington Avenue, 35th Floor New York, New York 10022
MEMORANDUM
FROM: Leonard Cross, Specialist Partner, Tax Calderwood & Harkness LLP 590 Lexington Avenue, 35th Floor New York, NY 10022
TO: Patrick Lennox, General Counsel & Company Secretary Solstice Biomedical Devices Ltd. Solstice House, 14 Fitzwilliam Place Dublin 2, D02 YF82, Ireland
CC: Helena Byrne, EVP, Corporate Development & Strategy, Solstice Biomedical Devices Ltd. Conor Muldoon, CFO, Solstice Biomedical Devices Ltd. Beatrice Holloway, Responsible Partner, M&A, Calderwood & Harkness LLP Eleanor Voss, Tax Partner, Brindoval & Albright LLP, 200 Park Avenue, Suite 4100, New York, NY 10166
DATE: October 31, 2024
RE: Section 338(h)(10) Election Forms — Acquisition of Meridian Surgical Technologies, Inc. (EIN: 84-3192057) by Solstice Biomedical, Inc.
Matter No.: 1037-00006
I. Purpose and Summary
This memorandum accompanies the completed Internal Revenue Service Form 8023 (Elections Under Section 338 for Corporations Making Qualified Stock Purchases) and related state election forms prepared in connection with the joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), by Solstice Biomedical, Inc., a Delaware corporation ("Buyer"), and the shareholders of Meridian Surgical Technologies, Inc., a Delaware corporation (the "Target," "Meridian," or the "Company"), pursuant to Section 10.08 of that certain Stock Purchase Agreement dated August 20, 2024, by and among Buyer, Solstice Biomedical Devices Ltd. (as Buyer Parent Guarantor), the Sellers named therein, and Dr. Marcus Ellsworth, in his capacity as Sellers' Representative (the "Stock Purchase Agreement" or "SPA").
The Section 338(h)(10) election, once properly filed, will cause the stock purchase of one hundred percent (100%) of the outstanding shares of common stock and the cancellation of all 550,000 vested stock options of Meridian to be treated as a deemed asset acquisition for United States federal income tax purposes, and for the purposes of each state that conforms to or follows the federal election. The election is made jointly by Buyer and the Sellers (including Dr. Marcus Ellsworth, Pennfield Growth Partners, LP, Arch Hill Ventures Fund II, LLC, Catherine Pryor, and the remaining stockholders and option holders), as required under IRC § 338(h)(10) and Treasury Regulations § 1.338(h)(10)-1.
The enclosed forms have been prepared by the undersigned, Leonard Cross of Calderwood & Harkness LLP, in coordination with and with input from Eleanor Voss, Tax Partner at Brindoval & Albright LLP, Buyer's independent tax advisor. The forms have been prepared for execution by the authorized officers of Buyer and the Sellers' Representative (Dr. Marcus Ellsworth, acting in his capacity as Sellers' Representative pursuant to the Sellers' Representative Appointment and Joinder Agreement executed in connection with the Stock Purchase Agreement).
We respectfully request that the relevant parties execute the enclosed forms in accordance with the signing instructions set forth in Exhibit G to this memorandum and return executed originals to our offices at their earliest convenience.
II. Background on the Transaction
On October 31, 2024 (the "Closing Date"), Solstice Biomedical, Inc., a Delaware corporation and wholly owned subsidiary of Solstice Biomedical Devices Ltd. (an Irish private limited company, Companies Registration Office Number 648217) (the "Parent"), completed the acquisition of one hundred percent (100%) of the outstanding shares of common stock of Meridian Surgical Technologies, Inc. (Delaware corporation, Delaware File Number 5819734, Employer Identification Number 84-3192057) pursuant to the terms and conditions of the Stock Purchase Agreement. Concurrently with the acquisition of the outstanding common stock, all 550,000 vested stock options to purchase shares of common stock of Meridian outstanding under the Meridian 2019 Equity Incentive Plan were cancelled in exchange for cash consideration equal to the excess, if any, of the per-share merger consideration over the applicable exercise price.
The aggregate base purchase price for the acquisition was Two Hundred Twenty Million Dollars ($220,000,000) in cash, subject to customary adjustments for net working capital, transaction expenses, indebtedness, and cash on hand as set forth in the Stock Purchase Agreement. In addition, the Stock Purchase Agreement provides for an earnout of up to an additional Thirty-Five Million Dollars ($35,000,000) in contingent consideration payable upon the achievement of specified FDA 510(k) regulatory milestones for the ArthroNav robotic-assisted arthroscopic navigation platform, as follows:
•  Milestone 1: Twenty Million Dollars ($20,000,000), payable upon receipt of FDA 510(k) clearance of the ArthroNav Generation 1.0 system on or before December 31, 2026; and
•  Milestone 2: Fifteen Million Dollars ($15,000,000), payable upon receipt of FDA 510(k) clearance of the ArthroNav Software Module for Real-Time Cartilage Mapping on or before June 30, 2027.
The maximum aggregate consideration payable under the Stock Purchase Agreement is therefore Two Hundred Fifty-Five Million Dollars ($255,000,000).
The acquisition constitutes a "qualified stock purchase" within the meaning of IRC § 338(d)(3) because Buyer acquired at least eighty percent (80%) of the total voting power of the stock of Meridian entitled to vote and at least eighty percent (80%) of the total value of all outstanding stock of Meridian (other than stock described in IRC § 1504(a)(4)) in a single transaction on the acquisition date. In fact, Buyer acquired one hundred percent (100%) of the outstanding equity interests of Meridian, thereby satisfying the qualified stock purchase threshold by a substantial margin.
At the closing, the outstanding revolving credit facility maintained by Meridian with Ironclad Commercial Lending, LLC, having an outstanding principal balance of Seven Million Three Hundred Forty-One Thousand Eight Hundred Twenty-Two Dollars and Sixteen Cents ($7,341,822.16), was paid off in full from the base purchase price proceeds, and all liens securing such facility were released.
III. Overview of the Section 338(h)(10) Election
The parties to the Stock Purchase Agreement have agreed to make a joint election under IRC § 338(h)(10) with respect to the acquisition of Target. The mechanics, effects, and principal benefits of this election are summarized below.
Deemed Transaction Treatment. Under IRC § 338(h)(10) and Treasury Regulations § 1.338(h)(10)-1, the election causes the stock purchase to be treated for federal income tax purposes as if: (a) Target sold all of its assets at fair market value in a single transaction on the acquisition date (October 31, 2024) while Target was still the "old Target" (i.e., as if the sale occurred before the stock acquisition), and then (b) Target was treated as a new corporation ("new Target") purchasing all of those assets as of the beginning of the day after the acquisition date (November 1, 2024). The actual sale of stock is disregarded for federal income tax purposes, and no gain or loss is recognized on the stock sale itself by the Sellers.
Requirement of Joint Consent. The Section 338(h)(10) election requires the joint consent of both the purchasing corporation (Buyer) and the selling shareholders (or, in the case of an S corporation, all S corporation shareholders, or, in the case of a consolidated group, the common parent of the selling consolidated group). Here, Meridian is a C corporation that is not a member of a U.S. consolidated group. Accordingly, the election is made jointly by Buyer and the selling shareholders, acting through Dr. Marcus Ellsworth as Sellers' Representative, pursuant to the authority granted under the Sellers' Representative Appointment and Joinder Agreement and Section 10.08 of the Stock Purchase Agreement.
Stepped-Up Tax Basis (AGUB). The election provides Buyer (as the successor to old Target, or equivalently, as new Target) with a stepped-up tax basis in all of Meridian's assets equal to the "adjusted grossed-up basis" ("AGUB") calculated under IRC § 338(b) and Treasury Regulations § 1.338-5. The AGUB is generally equal to the grossed-up amount realized on the sale of Buyer's recently purchased Target stock (here, the base purchase price of $220,000,000 for 100% of the equity) plus the liabilities of old Target that are treated as assumed by new Target, plus other relevant amounts. This stepped-up basis allows Buyer to claim depreciation and amortization deductions on the restated asset values going forward, thereby generating significant future tax benefits.
Treatment of Sellers. For the Sellers, the transaction is treated as an asset sale at the Target level (followed by a deemed liquidation of old Target). Gain or loss is recognized at the corporate level on the deemed asset sale, and the Sellers are treated as receiving liquidating distributions. Because Meridian is a C corporation, this means that there is a potential for two levels of tax (corporate-level gain on the deemed asset sale, and shareholder-level gain or loss on the deemed liquidating distributions). The Sellers have agreed to this treatment in the Stock Purchase Agreement, and the purchase price and other economic terms reflect the parties' negotiated allocation of the tax costs associated with the election.
Key Benefit to Buyer: Depreciation and Amortization. The principal benefit to Buyer of the Section 338(h)(10) election is the stepped-up basis in all of Target's assets, including goodwill and intangible assets. In particular, the election permits Buyer to amortize the stepped-up basis in goodwill and other Section 197 intangibles over a fifteen (15)-year period under IRC § 197. Given the significant premium paid by Buyer over the book value of Meridian's tangible assets, the majority of the AGUB is expected to be allocated to intangible assets and goodwill, resulting in substantial annual amortization deductions that will reduce Buyer's U.S. federal and state taxable income for fifteen years following the acquisition.
Impact on Net Operating Loss Carryforwards. Meridian has remaining net operating loss carryforwards of approximately One Million One Hundred Thousand Dollars ($1,100,000). As a result of the Section 338(h)(10) election, these NOLs are effectively eliminated. The deemed asset sale at the old Target level will generate gain sufficient to consume any remaining NOLs, and any excess NOLs that might otherwise survive would be forfeited in the deemed liquidation of old Target. No analysis under IRC § 382 (limitation on use of NOLs following an ownership change) is required post-closing because old Target is treated as having been liquidated and dissolved, and new Target takes a fresh-start basis in all assets.
Filing Deadline. The filing deadline for IRS Form 8023 is the fifteenth (15th) day of the ninth (9th) month beginning after the month in which the acquisition date falls. Because the acquisition date is October 31, 2024, the filing deadline is July 15, 2025. We will hold the executed forms and coordinate timely filing with the Internal Revenue Service and applicable state taxing authorities.
IV. Enclosed Forms and Attachments
The following documents are enclosed herewith for review, execution, and filing:
1.  Exhibit A: IRS Form 8023 — Elections Under Section 338 for Corporations Making Qualified Stock Purchases (completed, for execution);
2.  Exhibit B: Schedule of Selling Shareholders (Attachment to Form 8023);
3.  Exhibit C: IRS Form 8883 — Asset Allocation Statement Under Section 338 (AGUB Allocation Statement);
4.  Exhibit D: Pennsylvania Section 338(h)(10) Election Form (Pennsylvania equivalent state election for filing with the Pennsylvania Department of Revenue);
5.  Exhibit E: New Jersey Section 338(h)(10) Election Statement (New Jersey equivalent state election for filing with the New Jersey Division of Taxation, given Meridian's nexus with New Jersey);
6.  Exhibit F: Delaware Conformity Statement — note that Delaware does not impose a corporate income tax on corporations that do not conduct business within the State of Delaware, and Delaware does not have a separate state-level Section 338(h)(10) election form; Delaware conforms to the federal treatment; a brief statement is provided for completeness; and
7.  Exhibit G: Signing Instructions and Execution Pages for the Sellers' Representative and Buyer.
V. Execution Instructions
Buyer Execution. Helena Byrne, in her capacity as President of Solstice Biomedical, Inc., is requested to sign on behalf of Buyer on the "Purchasing Corporation" signature line of Form 8023 and each corresponding state election form. Ms. Byrne's authority to execute these forms derives from her office as President of Buyer and the resolutions of Buyer's board of directors authorizing the acquisition and the Section 338(h)(10) election.
Seller Execution. Dr. Marcus Ellsworth, in his capacity as Sellers' Representative (appointed pursuant to the Sellers' Representative Appointment and Joinder Agreement executed by holders of at least sixty-five percent (65%) of the outstanding shares of Meridian), is requested to sign on behalf of all of the Selling Shareholders on the "Selling Shareholder(s)" signature line of Form 8023 and each corresponding state election form. Dr. Ellsworth's authority to execute these forms on behalf of all Sellers is confirmed by the Sellers' Representative Appointment and Joinder Agreement and Section 10.08 of the Stock Purchase Agreement.
Each party is requested to execute two (2) originals of each form; one executed original will be retained by each party, and additional copies will be made for filing purposes.
The state election forms (Pennsylvania and New Jersey) are to be executed in parallel with the federal Form 8023.
All executed forms are to be returned to and held by Calderwood & Harkness LLP for timely filing with the Internal Revenue Service and the applicable state taxing authorities. We will coordinate filing deadlines and ensure compliance with all applicable filing requirements.
Please do not hesitate to contact me at (212) 554-7200 or lcross@calderwoodharkness.com, or Beatrice Holloway at (212) 554-7150 or bholloway@calderwoodharkness.com, with any questions regarding these forms or the Section 338(h)(10) election.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross Specialist Partner, Tax
Enclosures (as described above)
EXHIBIT A
IRS FORM 8023
ELECTIONS UNDER SECTION 338 FOR CORPORATIONS MAKING QUALIFIED STOCK PURCHASES
(Completed Draft — For Execution)
Department of the Treasury — Internal Revenue Service Form 8023 (Rev. September 2023) Elections Under Section 338 for Corporations Making Qualified Stock Purchases OMB No. 1545-0123
Part I — Purchasing Corporation Information
1a. Name of purchasing corporation: Solstice Biomedical, Inc.
1b. Employer Identification Number (EIN): 93-4017625
1c. Address (number, street, and room or suite no.): 1200 Innovation Drive, Suite 400
1d. City, state, and ZIP code: Wilmington, DE 19801
1e. State of incorporation: Delaware
1f. Date of incorporation: April 22, 2024
1g. Tax year end (month/day): December 31
1h. Name of common parent of purchasing corporation's affiliated group (if applicable): Solstice Biomedical Devices Ltd.
Note: Solstice Biomedical Devices Ltd. is an Irish private limited company (CRO No. 648217) and is not a member of a U.S. consolidated group. Solstice Biomedical, Inc. is the U.S. acquiror entity formed as a wholly owned subsidiary of the Irish parent for purposes of this acquisition. The Irish parent does not have a U.S. Employer Identification Number unless separately obtained.
1i. EIN of common parent (if applicable): N/A (foreign entity)
Part II — Target Information
2a. Name of target: Meridian Surgical Technologies, Inc.
2b. Employer Identification Number (EIN): 84-3192057
2c. Address (number, street, and room or suite no.): 780 Keystone Boulevard, Suite 200
2d. City, state, and ZIP code: King of Prussia, PA 19406
2e. State of incorporation: Delaware
2f. Delaware File Number: 5819734
2g. Tax year end (old Target) (month/day): December 31
2h. Is Target a member of a selling consolidated group? Yes  No
Note: Meridian Surgical Technologies, Inc. is not a member of a U.S. consolidated group. Meridian is a standalone C corporation with individual and institutional fund shareholders.
2i. If "Yes" to 2h, name and EIN of common parent of selling consolidated group: N/A
2j. Is Target an S corporation? Yes  No
Part III — Election Being Made
3a. Check the applicable box to indicate the election being made: Section 338(g) election Section 338(h)(10) election
3b. This is a joint election by the purchasing corporation and the selling shareholders (or the selling consolidated group or S corporation shareholders). Confirmed. This Section 338(h)(10) election is made jointly by Solstice Biomedical, Inc. (purchasing corporation) and the selling shareholders of Meridian Surgical Technologies, Inc. (acting through Dr. Marcus Ellsworth, as Sellers' Representative).
3c. Acquisition date (month, day, year): October 31, 2024
3d. Was a qualified stock purchase made within the meaning of IRC § 338(d)(3)? Yes  No
Explanation: Buyer acquired one hundred percent (100%) of the outstanding stock of Meridian Surgical Technologies, Inc. in a single transaction on October 31, 2024. Specifically, Buyer acquired 7,450,000 shares of common stock (constituting all of the issued and outstanding shares of common stock of Target) and concurrently cancelled 550,000 vested stock options under the Meridian 2019 Equity Incentive Plan in exchange for cash consideration, effectively acquiring rights to one hundred percent (100%) of the equity value of Target. Because Buyer acquired at least eighty percent (80%) of the total voting power and at least eighty percent (80%) of the total value of Target's stock (other than stock described in IRC § 1504(a)(4)) in a single transaction on the acquisition date, the acquisition constitutes a qualified stock purchase.
3e. Total number of shares of Target stock acquired in the qualified stock purchase: 7,450,000 shares of common stock acquired, plus 550,000 vested stock options cancelled for cash consideration.
3f. Percentage of Target stock acquired by vote and value: 100% of vote; 100% of value.
Part IV — Selling Shareholders / Selling Consolidated Group
Since Meridian Surgical Technologies, Inc. is not an S corporation and is not a member of a selling consolidated group, this Part IV reflects the selling shareholders who are parties to the joint election under Section 338(h)(10):
All selling shareholders have consented to the Section 338(h)(10) election through execution of the Stock Purchase Agreement (Section 10.08) and the Sellers' Representative Appointment and Joinder Agreement. The Sellers' Representative, Dr. Marcus Ellsworth, is authorized to sign IRS Form 8023 on behalf of all Selling Shareholders.
Social Security Numbers / Employer Identification Numbers: The SSN or EIN for each selling shareholder is provided on the Schedule of Selling Shareholders attached hereto as Exhibit B. In this transmittal memorandum, personal identification numbers have been redacted for privacy and security purposes; the actual Forms 8023 submitted to the Internal Revenue Service will contain the full, unredacted identification information.
See attached Schedule of Selling Shareholders (Exhibit B) for complete shareholder information.
Part V — Aggregate Deemed Sale Price (ADSP) and Adjusted Grossed-Up Basis (AGUB)
Reference is made to the attached IRS Form 8883 (Asset Allocation Statement Under Section 338), enclosed as Exhibit C, for the detailed AGUB calculation and allocation among asset classes.
Preliminary AGUB Calculation:
The AGUB is calculated in accordance with IRC § 338(b) and Treasury Regulations § 1.338-5 as follows:
(a) Grossed-up amount realized on the sale of Buyer's recently purchased Target stock: $220,000,000. This represents the base purchase price paid by Buyer for one hundred percent (100%) of the equity of Target. Because Buyer acquired 100% of the Target stock in a single transaction, no grossing-up computation is required; the amount realized equals the total consideration paid.
(b) Plus: Liabilities of old Target assumed by new Target. The amount of liabilities assumed by new Target will be determined based on the final closing balance sheet of Meridian as of October 31, 2024. Estimated liabilities include accrued expenses, deferred revenue, trade payables, accrued compensation, and other current liabilities. The Ironclad Commercial Lending, LLC revolving credit facility in the outstanding principal amount of $7,341,822.16 was paid off in full at closing from the purchase price proceeds and is therefore not treated as a liability assumed by new Target for AGUB purposes.
(c) Plus: Other relevant amounts under Treasury Regulations § 1.338-5(b), including, as applicable, selling costs and other adjustments.
(d) Contingent consideration (earnout): Up to $35,000,000 in additional contingent consideration may be paid upon the achievement of specified FDA 510(k) regulatory milestones. Under Treasury Regulations § 1.338-7, contingent additional consideration will be taken into account to increase AGUB in the taxable year(s) in which each contingency is resolved (i.e., upon achievement and payment of Milestone 1 and/or Milestone 2). The preliminary AGUB does not include any amount attributable to unpaid contingent consideration. AGUB will be adjusted upon payment of each earnout milestone, and the incremental AGUB will be allocated among the applicable asset classes under the residual method at that time.
Preliminary estimated AGUB (before contingent consideration): Approximately $220,000,000, plus the amount of assumed liabilities as determined from the final closing balance sheet. The final AGUB computation will be prepared following completion of the post-closing net working capital true-up and receipt of the final closing balance sheet.
Part VI — Signatures
The undersigned hereby make a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, with respect to the qualified stock purchase of Meridian Surgical Technologies, Inc. (EIN: 84-3192057) by Solstice Biomedical, Inc. (EIN: 93-4017625) completed on October 31, 2024.
PURCHASING CORPORATION:
SOLSTICE BIOMEDICAL, INC.
By: ________
Name: Helena Byrne
Title: President
Date: ________
SELLING SHAREHOLDERS (by authorized representative):
DR. MARCUS ELLSWORTH, AS SELLERS' REPRESENTATIVE (On behalf of all Selling Shareholders of Meridian Surgical Technologies, Inc.)
By: ________
Name: Dr. Marcus Ellsworth
Title: Sellers' Representative
Date: ________
EXHIBIT B
SCHEDULE OF SELLING SHAREHOLDERS
(Attachment to IRS Form 8023)
Section 338(h)(10) Election — Acquisition of Meridian Surgical Technologies, Inc.
by Solstice Biomedical, Inc.
Acquisition Date: October 31, 2024
The following schedule sets forth the selling shareholders who are parties to the joint Section 338(h)(10) election made in connection with the qualified stock purchase of Meridian Surgical Technologies, Inc. (EIN: 84-3192057) by Solstice Biomedical, Inc. (EIN: 93-4017625) on October 31, 2024. All share numbers reflect the outstanding common stock of Meridian as of immediately prior to the closing, plus vested stock options cancelled at closing.
The per-share merger consideration across all equity interests (common stock and vested stock options on a fully diluted basis) is calculated as follows: $220,000,000 (base purchase price) ÷ 8,000,000 fully diluted shares = $27.50 per share. The aggregate consideration allocable to common stockholders (after deducting the aggregate option cancellation payments) is $207,515,000, yielding a per-share price to common holders of approximately $207,515,000 ÷ 7,450,000 = $27.8545 per share (before purchase price adjustments for net working capital, transaction expenses, indebtedness, and cash).
Selling Shareholder Schedule
1. Dr. Marcus Ellsworth
•  Address: [Personal address redacted for privacy]
•  SSN: [Redacted]
•  Number of Shares Sold: 2,845,900 shares of common stock
•  Percentage of Total Outstanding Common: 38.2%
•  Pro Rata Share of Base Consideration: Approximately $84,040,000 (based on per-share common stockholder price of approximately $27.8545 per share, before purchase price adjustments)
2. Pennfield Growth Partners, LP
•  Address: 2100 Market Street, 28th Floor, Philadelphia, PA 19103
•  EIN: [Provided on executed form]
•  Number of Shares Sold: 2,235,000 shares of common stock
•  Percentage of Total Outstanding Common: 30.0%
•  Pro Rata Share of Base Consideration: Approximately $62,235,000
3. Arch Hill Ventures Fund II, LLC
•  Address: 450 Boylston Street, Suite 1200, Boston, MA 02116
•  EIN: [Provided on executed form]
•  Number of Shares Sold: 1,490,000 shares of common stock
•  Percentage of Total Outstanding Common: 20.0%
•  Pro Rata Share of Base Consideration: Approximately $41,490,000
4. Catherine Pryor
•  Address: [Personal address redacted for privacy]
•  SSN: [Redacted]
•  Number of Shares Sold: 372,500 shares of common stock
•  Percentage of Total Outstanding Common: 5.0%
•  Pro Rata Share of Base Consideration: Approximately $10,373,000
5. Other Management & Employees (Aggregated)
•  Addresses: Various (individual addresses provided on executed form)
•  SSNs/EINs: [Provided on executed form]
•  Aggregate Number of Shares Sold: 506,600 shares of common stock
•  Aggregate Percentage of Total Outstanding Common: 6.8%
•  Aggregate Pro Rata Share of Base Consideration: Approximately $14,107,000
6. Option Holders (Aggregated)
•  Number of Vested Options Cancelled: 550,000 vested stock options under the Meridian 2019 Equity Incentive Plan
•  Weighted-Average Exercise Price: $4.80 per share
•  Per-Option Net Cancellation Consideration: $27.50 (per-share merger consideration) − $4.80 (weighted-average exercise price) = $22.70 per option
•  Aggregate Option Cancellation Payments: 550,000 × $22.70 = $12,485,000
•  Individual option holder information: [Provided on executed form; individual names, addresses, SSNs, option grants, exercise prices, and net payments are set forth on a separate schedule maintained in the closing binder]
Summary of Consideration
Note: The above amounts reflect the base purchase price only and do not include any contingent earnout payments (up to $35,000,000 additional) or purchase price adjustments for net working capital, transaction expenses, indebtedness, or cash.
Confirmation of Consent to Section 338(h)(10) Election
All selling shareholders listed above have consented to the making of the Section 338(h)(10) election with respect to the acquisition of Meridian Surgical Technologies, Inc. by Solstice Biomedical, Inc. pursuant to Section 10.08 of the Stock Purchase Agreement dated August 20, 2024, and the Sellers' Representative Appointment and Joinder Agreement executed in connection therewith. By executing the Sellers' Representative Appointment and Joinder Agreement, each selling shareholder authorized Dr. Marcus Ellsworth, as Sellers' Representative, to execute IRS Form 8023 and all related state election forms on behalf of all Sellers and to take all actions reasonably necessary to effectuate the Section 338(h)(10) election.
Dr. Marcus Ellsworth, as Sellers' Representative, is authorized to execute the IRS Form 8023 and all state election forms on behalf of all Selling Shareholders.
EXHIBIT C
IRS FORM 8883
ASSET ALLOCATION STATEMENT UNDER SECTION 338
(Completed Draft — For Execution)
Department of the Treasury — Internal Revenue Service Form 8883 (Rev. December 2022) Asset Allocation Statement Under Section 338 OMB No. 1545-1806
Part I — Filer Information
1a. Name of filer: Solstice Biomedical, Inc.
1b. Employer Identification Number (EIN): 93-4017625
1c. Address: 1200 Innovation Drive, Suite 400, Wilmington, DE 19801
1d. Check applicable box: Purchasing corporation making a Section 338(h)(10) election Target (S corporation or member of selling consolidated group) Seller in a Section 338(h)(10) election (common parent or S corporation shareholder)
1e. Tax year of filer to which this form relates: Taxable year ending December 31, 2024 (Buyer's first taxable year)
Part II — Target Information
2a. Name of target: Meridian Surgical Technologies, Inc.
2b. Employer Identification Number (EIN): 84-3192057
2c. Address: 780 Keystone Boulevard, Suite 200, King of Prussia, PA 19406
2d. State of incorporation: Delaware
2e. Acquisition date: October 31, 2024
2f. Was a Section 338(h)(10) election made? Yes
Part III — AGUB Allocation Among Asset Classes
The AGUB is allocated among asset classes using the residual method prescribed by IRC § 338(b)(5) and IRC § 1060, as applied through Treasury Regulations § 1.338-6. Under the residual method, AGUB is allocated first to Class I assets, then sequentially to Class II through Class VI assets (in each case to the extent of the fair market value of the assets in each class), with any remaining AGUB allocated to Class VII (goodwill and going concern value) as the residual.
The following table sets forth the preliminary estimated allocation of AGUB among the seven asset classes. The final allocation will be determined upon completion of the post-closing net working capital true-up, receipt of the final closing balance sheet, and completion of an independent valuation of the Target's intangible assets. The allocation is subject to adjustment in connection with any earnout payments made pursuant to the Stock Purchase Agreement.
Notes to AGUB Allocation
Note on Contingent Consideration (Earnout). The up to Thirty-Five Million Dollars ($35,000,000) in earnout payments is not included in the initial AGUB computation. Under Treasury Regulations § 1.338-7, contingent additional consideration will be taken into account to increase AGUB in the taxable year(s) in which the applicable contingency is resolved. Specifically:
•  Milestone 1: $20,000,000, payable upon receipt of FDA 510(k) clearance of the ArthroNav Generation 1.0 system on or before December 31, 2026. If achieved, AGUB will be increased by $20,000,000 in the taxable year of payment.
•  Milestone 2: $15,000,000, payable upon receipt of FDA 510(k) clearance of the ArthroNav Software Module for Real-Time Cartilage Mapping on or before June 30, 2027. If achieved, AGUB will be increased by $15,000,000 in the taxable year of payment.
Subsequent AGUB increases will be allocated to the appropriate asset classes under the residual method, with the incremental amounts allocated first to any classes where fair market value exceeds the prior allocation, and the remainder to Class VII (goodwill). Amortization schedules will be adjusted as applicable upon each AGUB increase.
Note on Assumed Liabilities. The AGUB includes the amount of liabilities of old Target that are treated as assumed by new Target under Treasury Regulations § 1.338-5. The Ironclad Commercial Lending, LLC revolving credit facility, which had an outstanding principal balance of $7,341,822.16 as of the closing date, was paid off in full at closing from the base purchase price proceeds. Accordingly, the Ironclad facility is not treated as an assumed liability for purposes of the AGUB calculation. Assumed liabilities will include accrued expenses, deferred revenue, trade payables, accrued compensation, and other current liabilities as reflected on the final closing balance sheet.
Note on Finalization. The final AGUB allocation will be prepared by Brindoval & Albright LLP (Eleanor Voss) based on the final closing balance sheet and the results of an independent valuation of the Target's intangible assets. The preliminary estimates set forth in this Form 8883 are subject to revision, and the final form will be filed with Buyer's federal income tax return for the taxable year ending December 31, 2024.
Part IV — Signature
Under penalties of perjury, I declare that I have examined this form, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete.
SOLSTICE BIOMEDICAL, INC.
By: ________
Name: Helena Byrne
Title: President
Date: ________
EXHIBIT D
PENNSYLVANIA SECTION 338(h)(10) ELECTION
Commonwealth of Pennsylvania — Department of Revenue
Corporate Net Income Tax — Section 338(h)(10) Election Filing
Cover Information.  Filing with: Commonwealth of Pennsylvania, Department of Revenue, Bureau of Corporation Taxes, P.O. Box 280700, Harrisburg, PA 17128-0700
Election type: The Commonwealth of Pennsylvania follows the federal Section 338(h)(10) election for Corporate Net Income Tax ("CNI Tax") purposes. Pennsylvania does not maintain a separate, standalone Section 338(h)(10) election form. Instead, Pennsylvania requires that a copy of the executed federal Form 8023 and Form 8883 be attached to the Pennsylvania Corporate Net Income Tax return of the Target for the short-period return ending on the acquisition date, together with a statement of election. This Exhibit constitutes the statement of election and cover sheet for the Pennsylvania filing.
Target's Pennsylvania nexus: Meridian Surgical Technologies, Inc. maintains its principal office and headquarters at 780 Keystone Boulevard, Suite 200, King of Prussia, PA 19406, and its manufacturing facility at 45 Forge Creek Road, Exton, PA 19341, both located within the Commonwealth of Pennsylvania. Meridian has filed Pennsylvania Corporate Net Income Tax returns and is subject to the Pennsylvania CNI Tax.
Pennsylvania filing instructions: The following documents are to be attached to Meridian's final Pennsylvania Corporate Net Income Tax return (short-period return for the period January 1, 2024 through October 31, 2024) and, to the extent required, to Solstice Biomedical, Inc.'s first Pennsylvania Corporate Net Income Tax return:
(a) A copy of the executed IRS Form 8023;
(b) A copy of the executed IRS Form 8883 (Asset Allocation Statement);
(c) This statement of election; and
(d) Any additional schedules or documentation required by the Pennsylvania Department of Revenue.
Pennsylvania Corporate Net Income Tax implications: The deemed asset sale resulting from the Section 338(h)(10) election will be reported on Meridian's short-period Pennsylvania Corporate Net Income Tax return for the period ending October 31, 2024. The gain recognized on the deemed asset sale at the old Target level will be subject to Pennsylvania CNI Tax at the applicable statutory rate. The step-up in basis of Target's assets to AGUB will be reflected on Buyer's (or new Target's) subsequent Pennsylvania Corporate Net Income Tax filings, and depreciation and amortization deductions attributable to the stepped-up basis will be claimed on such returns. Any Pennsylvania net operating loss carryforwards of Meridian, to the extent such state-level NOLs existed, are extinguished by the deemed liquidation of old Target.
Statement of Election
The undersigned hereby state that, in connection with the qualified stock purchase of Meridian Surgical Technologies, Inc. (EIN: 84-3192057) by Solstice Biomedical, Inc. (EIN: 93-4017625) on October 31, 2024, the purchasing corporation and the selling shareholders have made a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, and Treasury Regulations § 1.338(h)(10)-1. A copy of the executed IRS Form 8023 is attached hereto. The parties request that the Commonwealth of Pennsylvania recognize and give effect to this election for Pennsylvania Corporate Net Income Tax purposes.
Purchasing Corporation: Solstice Biomedical, Inc. EIN: 93-4017625 1200 Innovation Drive, Suite 400, Wilmington, DE 19801
Target: Meridian Surgical Technologies, Inc. EIN: 84-3192057 780 Keystone Boulevard, Suite 200, King of Prussia, PA 19406
Acquisition Date: October 31, 2024
Election: Section 338(h)(10)
Signature blocks.  
SOLSTICE BIOMEDICAL, INC. (Purchasing Corporation)
By: ________
Name: Helena Byrne
Title: President
Date: ________
DR. MARCUS ELLSWORTH, AS SELLERS' REPRESENTATIVE (On behalf of all Selling Shareholders of Meridian Surgical Technologies, Inc.)
By: ________
Name: Dr. Marcus Ellsworth
Title: Sellers' Representative
Date: ________
EXHIBIT E
NEW JERSEY SECTION 338(h)(10) ELECTION
State of New Jersey — Division of Taxation
Corporation Business Tax — Section 338(h)(10) Election Statement
Cover Information.  Filing with: State of New Jersey, Division of Taxation, Corporation Business Tax, P.O. Box 666, Trenton, NJ 08695-0666
Basis for New Jersey filing: Meridian Surgical Technologies, Inc. has sufficient nexus with the State of New Jersey to require filing New Jersey Corporation Business Tax ("CBT") returns. Meridian's New Jersey nexus is established through employee presence, sales into the state, and customer relationships within New Jersey.
New Jersey treatment: The State of New Jersey generally conforms to the federal Section 338(h)(10) election for purposes of the New Jersey Corporation Business Tax. New Jersey requires that a statement be attached to the applicable New Jersey CBT return referencing the election, together with copies of the federal forms. New Jersey does not maintain a separate, standalone Section 338(h)(10) election form.
Filing instructions: The following documents are to be attached to Meridian's final New Jersey Corporation Business Tax return (short-period return for the period January 1, 2024 through October 31, 2024) and, to the extent applicable, to Solstice Biomedical, Inc.'s initial New Jersey CBT return:
(a) A copy of the executed IRS Form 8023;
(b) A copy of the executed IRS Form 8883 (Asset Allocation Statement);
(c) This statement of election; and
(d) Any additional schedules or documentation required by the New Jersey Division of Taxation.
New Jersey CBT implications: The deemed asset sale gain will be recognized and reported on Meridian's short-period New Jersey CBT return for the period ending October 31, 2024. The step-up in basis of Target's assets resulting from the election will be available to Buyer (or new Target) on its subsequent New Jersey CBT returns, subject to applicable New Jersey depreciation and amortization rules. Meridian's remaining net operating loss carryforwards of approximately $1,100,000 at the federal level, and any corresponding New Jersey net operating loss carryforwards, will be consumed in the deemed asset sale or forfeited in the deemed liquidation of old Target. New Jersey NOL carryforward rules (including the 80% limitation on NOL usage applicable for certain tax years) are applicable to the extent any New Jersey NOLs are available prior to consumption/forfeiture.
Statement of Election for New Jersey Corporation Business Tax Purposes
The undersigned hereby state that, in connection with the qualified stock purchase of Meridian Surgical Technologies, Inc. (EIN: 84-3192057) by Solstice Biomedical, Inc. (EIN: 93-4017625) on October 31, 2024, the purchasing corporation and the selling shareholders have made a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, and Treasury Regulations § 1.338(h)(10)-1. A copy of the executed IRS Form 8023 is attached hereto. The parties request that the State of New Jersey recognize and give effect to this election for New Jersey Corporation Business Tax purposes.
Purchasing Corporation: Solstice Biomedical, Inc. EIN: 93-4017625 1200 Innovation Drive, Suite 400, Wilmington, DE 19801
Target: Meridian Surgical Technologies, Inc. EIN: 84-3192057 780 Keystone Boulevard, Suite 200, King of Prussia, PA 19406
Acquisition Date: October 31, 2024
Election: Section 338(h)(10)
Signature blocks.  
SOLSTICE BIOMEDICAL, INC. (Purchasing Corporation)
By: ________
Name: Helena Byrne
Title: President
Date: ________
DR. MARCUS ELLSWORTH, AS SELLERS' REPRESENTATIVE (On behalf of all Selling Shareholders of Meridian Surgical Technologies, Inc.)
By: ________
Name: Dr. Marcus Ellsworth
Title: Sellers' Representative
Date: ________
EXHIBIT F
DELAWARE CONFORMITY STATEMENT
Explanation.  Delaware Corporate Income Tax. The State of Delaware does not impose a corporate income tax on corporations that do not conduct business within the State of Delaware. Meridian Surgical Technologies, Inc. is incorporated in Delaware but does not conduct its business operations within the state. Meridian's principal offices are located at 780 Keystone Boulevard, Suite 200, King of Prussia, Pennsylvania, and its manufacturing operations are conducted at 45 Forge Creek Road, Exton, Pennsylvania. Accordingly, Meridian is not subject to the Delaware corporate income tax, and the Section 338(h)(10) election does not give rise to any Delaware corporate income tax filing obligations.
Delaware Franchise Tax. Meridian Surgical Technologies, Inc. is subject to the Delaware annual franchise tax, which is assessed based on the corporation's authorized shares or assumed par value capital method, as applicable. The Delaware franchise tax is not based on corporate income, and accordingly, the Section 338(h)(10) election does not affect the calculation or amount of the Delaware franchise tax.
No Separate State Election Form Required. The State of Delaware conforms to federal income tax treatment and does not require a separate Section 338(h)(10) election filing. No additional election form or statement needs to be filed with the Delaware Division of Revenue or the Delaware Secretary of State in connection with the Section 338(h)(10) election.
Action Items:
(a) Ensure that Meridian's final Delaware annual franchise tax report is filed for the period through the acquisition date. The Delaware annual franchise tax report and payment are due by March 1, 2025.
(b) Update the records with the Delaware Secretary of State to reflect the change of ownership of Meridian Surgical Technologies, Inc. following the closing of the acquisition, if applicable. This may include filing updated officer and director information, as appropriate.
(c) Determine whether Solstice Biomedical, Inc. (as the new sole stockholder of Meridian) needs to file any additional documentation with the Delaware Secretary of State or Division of Revenue.
EXHIBIT G
SIGNING INSTRUCTIONS AND EXECUTION PAGES
I. Instructions to Sellers' Representative
October 31, 2024
Dr. Marcus Ellsworth c/o Whitmore Crane & Pfeiffer LLP (Jonathan Whitmore, Esq.) One Liberty Place 1650 Market Street, Suite 3600 Philadelphia, PA 19103
Dear Dr. Ellsworth:
We write in connection with the Section 338(h)(10) election to be made in connection with the acquisition of Meridian Surgical Technologies, Inc. (the "Company" or "Target") by Solstice Biomedical, Inc. ("Buyer") pursuant to the Stock Purchase Agreement dated August 20, 2024 (the "SPA"). You are receiving this letter in your capacity as Sellers' Representative, duly appointed pursuant to the Sellers' Representative Appointment and Joinder Agreement executed by holders of at least sixty-five percent (65%) of the outstanding shares of common stock of the Company.
As contemplated by Section 10.08 of the SPA, Buyer and the Sellers have agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code with respect to the acquisition. In furtherance of this obligation, we have prepared the election forms described below and respectfully request that you execute each of them in your capacity as Sellers' Representative on behalf of all Selling Shareholders.
Forms requiring your execution:
1.  IRS Form 8023 — Elections Under Section 338 for Corporations Making Qualified Stock Purchases — Two (2) originals. Please sign on the "Selling Shareholders (or authorized representative)" signature line, indicating your title as "Sellers' Representative" and the date of execution.
2.  Pennsylvania Section 338(h)(10) Election Form / Statement — Two (2) originals. Please sign on the Sellers' Representative signature line.
3.  New Jersey Section 338(h)(10) Election Statement — Two (2) originals. Please sign on the Sellers' Representative signature line.
Your signature on each of these forms is made in your capacity as Sellers' Representative, pursuant to the authority granted to you under the Sellers' Representative Appointment and Joinder Agreement and Section 10.08 of the SPA. You are not signing in your individual capacity as a selling shareholder (although you are one of the selling shareholders), but rather as the duly authorized representative of all Selling Shareholders.
Please return all executed originals to:
Leonard Cross Calderwood & Harkness LLP 590 Lexington Avenue, 35th Floor New York, NY 10022
Telephone: (212) 554-7200
Email: lcross@calderwoodharkness.com
Calderwood & Harkness LLP and Brindoval & Albright LLP will coordinate the filing of all executed forms with the Internal Revenue Service and the applicable state taxing authorities by the applicable filing deadlines. The federal filing deadline for Form 8023 is July 15, 2025. We will ensure timely filing of all forms and provide confirmation of filing to all parties.
If you have any questions regarding these forms or the Section 338(h)(10) election, please do not hesitate to contact me at the number above or to have Jonathan Whitmore of Whitmore Crane & Pfeiffer LLP contact me directly.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross Specialist Partner, Tax
II. Instructions to Buyer
October 31, 2024
Helena Byrne President, Solstice Biomedical, Inc. 1200 Innovation Drive, Suite 400 Wilmington, DE 19801
Dear Ms. Byrne:
We write in connection with the Section 338(h)(10) election to be made in connection with Solstice Biomedical, Inc.'s acquisition of Meridian Surgical Technologies, Inc. pursuant to the Stock Purchase Agreement dated August 20, 2024. As contemplated by Section 10.08 of the SPA, Buyer and the Sellers have agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code.
We have prepared the election forms and respectfully request that you execute each of them in your capacity as President of Solstice Biomedical, Inc., on behalf of the Buyer.
Forms requiring your execution:
1.  IRS Form 8023 — Elections Under Section 338 for Corporations Making Qualified Stock Purchases — Two (2) originals. Please sign on the "Purchasing Corporation" signature line, indicating your title as "President" and the date of execution.
2.  IRS Form 8883 — Asset Allocation Statement Under Section 338 — Two (2) originals. Please sign on the authorized officer signature line.
3.  Pennsylvania Section 338(h)(10) Election Form / Statement — Two (2) originals. Please sign on the Purchasing Corporation signature line.
4.  New Jersey Section 338(h)(10) Election Statement — Two (2) originals. Please sign on the Purchasing Corporation signature line.
Please return all executed originals to:
Leonard Cross Calderwood & Harkness LLP 590 Lexington Avenue, 35th Floor New York, NY 10022
Telephone: (212) 554-7200
Email: lcross@calderwoodharkness.com
We will coordinate with Eleanor Voss at Brindoval & Albright LLP to ensure that all forms are timely filed with the IRS and applicable state taxing authorities. If you have any questions, please contact me at the number above.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross Specialist Partner, Tax
III. Execution Pages
The following duplicate signature pages are provided for execution in connection with IRS Form 8023 and the related state election forms. Each party should execute two (2) originals of each signature page. One executed original of each form will be retained by Buyer, one executed original will be retained by the Sellers' Representative, and additional copies will be made for filing and record-keeping purposes.
Execution Page — IRS Form 8023
PURCHASING CORPORATION:
SOLSTICE BIOMEDICAL, INC.
By: ________
Name: Helena Byrne
Title: President
Date: ________
SELLING SHAREHOLDERS (by authorized representative):
DR. MARCUS ELLSWORTH, AS SELLERS' REPRESENTATIVE (On behalf of all Selling Shareholders of Meridian Surgical Technologies, Inc.)
By: ________
Name: Dr. Marcus Ellsworth
Title: Sellers' Representative
Date: ________
Execution Page — IRS Form 8883
FILER (PURCHASING CORPORATION):
SOLSTICE BIOMEDICAL, INC.
By: ________
Name: Helena Byrne
Title: President
Date: ________
Execution Page — Pennsylvania Section 338(h)(10) Election
PURCHASING CORPORATION:
SOLSTICE BIOMEDICAL, INC.
By: ________
Name: Helena Byrne
Title: President
Date: ________
SELLING SHAREHOLDERS (by authorized representative):
DR. MARCUS ELLSWORTH, AS SELLERS' REPRESENTATIVE
By: ________
Name: Dr. Marcus Ellsworth
Title: Sellers' Representative
Date: ________
Execution Page — New Jersey Section 338(h)(10) Election
PURCHASING CORPORATION:
SOLSTICE BIOMEDICAL, INC.
By: ________
Name: Helena Byrne
Title: President
Date: ________
SELLING SHAREHOLDERS (by authorized representative):
DR. MARCUS ELLSWORTH, AS SELLERS' REPRESENTATIVE
By: ________
Name: Dr. Marcus Ellsworth
Title: Sellers' Representative
Date: ________
APPENDIX
KEY TAX FILING DEADLINES AND ACTION ITEMS
I. Filing Deadlines Summary
The following table summarizes the key tax filing deadlines and responsible parties in connection with the Section 338(h)(10) election and related filings arising from the acquisition of Meridian Surgical Technologies, Inc. by Solstice Biomedical, Inc. on October 31, 2024.
II. Coordination Notes
The following coordination items require attention from the identified responsible parties:
1. Final AGUB Allocation and Form 8883. Brindoval & Albright LLP (Eleanor Voss) will prepare the final AGUB allocation and the definitive version of IRS Form 8883 based on the final closing balance sheet of Meridian Surgical Technologies, Inc. and the results of an independent valuation of the Target's intangible assets. The independent valuation is expected to be commissioned by Buyer promptly following the closing and should be completed in advance of the filing deadline for Buyer's 2024 federal income tax return. The preliminary Form 8883 enclosed herewith (Exhibit C) is based on estimates and will be superseded by the final version.
2. Post-Closing Net Working Capital True-Up. The post-closing net working capital true-up process under the Stock Purchase Agreement has a deadline of January 29, 2025 (ninety (90) days after the Closing Date). In the event of a dispute regarding the final net working capital determination, the accounting referee is Hargrove Bennett LLP (Margaret Chen, CPA). The final net working capital determination may affect the AGUB if the final closing net working capital differs from the estimated closing net working capital of $12,175,000 as compared to the Target Net Working Capital of $11,500,000 specified in the SPA. Any purchase price adjustment resulting from the NWC true-up will be reflected in the final AGUB computation and asset allocation.
3. Meridian Short-Period Tax Return. Leonard Cross will coordinate with Dunfield & Associates, P.C. (Howard Dunfield, CPA, Meridian's independent auditors and tax return preparers) regarding the preparation of Meridian's short-period federal income tax return for the period January 1, 2024 through October 31, 2024. This return must reflect the deemed asset sale gain arising from the Section 338(h)(10) election and must have a copy of the executed Form 8023 attached. Dunfield & Associates should be provided with the final AGUB allocation and deemed sale gain computation once available. Sellers' tax counsel (Whitmore Crane & Pfeiffer LLP) should be consulted regarding the tax reporting positions to be taken on Meridian's final return.
4. Earnout Payments and AGUB Recalculation. Any earnout payments made pursuant to the Stock Purchase Agreement will require a recalculation of AGUB and reallocation among asset classes under the residual method prescribed by Treasury Regulations § 1.338-7. Calderwood & Harkness LLP will monitor the milestone deadlines (Milestone 1: December 31, 2026; Milestone 2: June 30, 2027) and advise Buyer and Brindoval & Albright LLP regarding the tax treatment and filing obligations upon the achievement (or non-achievement) of each milestone. Upon payment of any earnout amount, amended or supplemental Forms 8883 will be prepared, and Buyer's amortization schedules for goodwill and other intangible assets will be updated.
5. State Tax Return Filings. Brindoval & Albright LLP will coordinate the filing of Meridian's short-period state income/franchise tax returns (Pennsylvania and New Jersey), ensuring that the applicable state election statements and copies of the federal forms are attached to each return. Buyer's initial state tax returns for Pennsylvania and New Jersey (if filing is required) should similarly reflect the Section 338(h)(10) election and the stepped-up basis in Target's assets.
6. Document Retention and Closing Binder. All executed election forms, supporting schedules, and related correspondence are to be maintained in the transaction closing binder. The specific tab reference for these materials will be assigned per the Closing Binder Index prepared by Calderwood & Harkness LLP. All forms transmitted herewith are marked "DRAFT — FOR EXECUTION" pending final review; the final executed versions will replace the drafts in the closing binder.
III. Status of Forms
All forms enclosed herewith are in DRAFT — FOR EXECUTION status. Final review is pending confirmation from the following parties:
(a) Brindoval & Albright LLP (Eleanor Voss) — confirmation of the preliminary AGUB calculation and the estimated allocation of AGUB among asset classes set forth in Form 8883;
(b) Dunfield & Associates, P.C. (Howard Dunfield) — confirmation of Meridian's closing balance sheet items, including accounts receivable, inventory, fixed assets, and liabilities, which affect the AGUB computation;
(c) Whitmore Crane & Pfeiffer LLP (Jonathan Whitmore) — confirmation on behalf of the Sellers' Representative that the forms are in order for execution; and
(d) Helena Byrne (Buyer) — confirmation that the forms are authorized for execution by the board of directors of Solstice Biomedical, Inc.
Upon receipt of all confirmations, the parties will be requested to execute the forms in accordance with the signing instructions set forth in Exhibit G.
PRIVILEGE AND CONFIDENTIALITY NOTICE
ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
This memorandum and the attached exhibits, schedules, and forms (collectively, the "Materials") have been prepared by Calderwood & Harkness LLP in connection with the rendering of legal advice to Solstice Biomedical Devices Ltd. and its subsidiaries, including Solstice Biomedical, Inc. The Materials are protected by the attorney-client privilege, the work product doctrine, and other applicable privileges and protections.
This communication is intended solely for the use of the addressees and copy recipients identified on the first page of this memorandum. The Materials contain confidential information relating to the acquisition of Meridian Surgical Technologies, Inc. and the related Section 338(h)(10) election. Any unauthorized review, use, disclosure, copying, distribution, or dissemination of the Materials, or any action taken in reliance on the contents of the Materials by persons other than the intended recipients, is strictly prohibited.
If you have received the Materials in error, please notify the sender immediately by telephone at (212) 554-7200 and destroy all copies of the Materials in your possession. Do not retain, copy, or forward the Materials to any third party.
The Materials shall not be disclosed to any third party, including any governmental authority, without the prior written consent of Calderwood & Harkness LLP. Disclosure to third parties may result in a waiver of the attorney-client privilege and/or work product protection. Nothing in the Materials is intended to constitute tax advice to any person other than the addressees, and the Materials may not be relied upon by any third party for any purpose.
© 2024 Calderwood & Harkness LLP. All rights reserved.
Selling Shareholder | Shares Sold / Options Cancelled | Percentage of Outstanding Common
Dr. Marcus Ellsworth | 2,845,900 shares | 38.2%
Pennfield Growth Partners, LP | 2,235,000 shares | 30.0%
Arch Hill Ventures Fund II, LLC | 1,490,000 shares | 20.0%
Catherine Pryor | 372,500 shares | 5.0%
Other Management & Employees (aggregated) | 506,600 shares | 6.8%
Option Holders (aggregated) | 550,000 vested options | N/A (options)
Category | Shares / Options | Aggregate Consideration
Common Stockholders (total) | 7,450,000 shares | $207,515,000
Option Holders (total) | 550,000 options | $12,485,000
Total | 8,000,000 fully diluted | $220,000,000
Asset Class | Description | Estimated Fair Market Value / Allocated AGUB
Class I | Cash and cash equivalents | To be determined from final closing balance sheet. Meridian's estimated cash on hand at closing is subject to the cash adjustment provisions of the Stock Purchase Agreement.
Class II | Actively traded personal property, certificates of deposit, and similar items | Minimal / Not Applicable. Meridian does not hold material actively traded personal property or financial instruments in this class.
Class III | Accounts receivable, mortgages, credit card receivables, and other mark-to-market assets | To be determined based on Meridian's closing accounts receivable balance. The Target Net Working Capital specified in the SPA is $11,500,000; the estimated closing net working capital is $12,175,000. The NWC true-up will affect the final allocation to this class. Accounts receivable will be valued at face amount less an appropriate reserve for doubtful accounts.
Class IV | Inventory (including raw materials, work-in-process, and finished goods) | To be determined based on Meridian's closing inventory of surgical instruments, device components, raw materials, and work-in-process at the King of Prussia and Exton facilities. Inventory will be valued at fair market value, which for finished goods is expected to approximate replacement cost adjusted for condition and obsolescence.
Class V | All assets not in Classes I through IV, VI, or VII — includes tangible personal property such as manufacturing equipment at the Exton manufacturing facility (45 Forge Creek Road, Exton, PA 19341), laboratory and testing equipment, computer hardware, furniture and fixtures, leasehold improvements at both the King of Prussia headquarters and the Exton facility, and motor vehicles | To be determined based on Meridian's fixed asset schedules and depreciation records. Tangible personal property will be valued at fair market value as determined by appraisal or other appropriate valuation methodology.
Class VI | Section 197 intangibles other than goodwill and going concern value | Significant allocation expected. To be determined by formal valuation. Class VI assets include the following identified intangible assets of Meridian:
(a) Patents: Fourteen (14) issued U.S. utility patents, including the key patent U.S. Patent No. 11,432,887 — "Robotic-Assisted Arthroscopic Navigation System and Method" (filing date: March 14, 2019; issue date: September 6, 2022; estimated remaining useful life: approximately 16 years); three (3) pending U.S. patent applications; and six (6) European patents (validated in Germany, France, United Kingdom, Italy, the Netherlands, and Switzerland)
(b) Trademarks: Registered trademarks "Meridian Surgical" (U.S. Reg. No. 5,894,XXX), "ArthroNav" (U.S. Reg. No. 6,112,XXX), and "PrecisionBlade" (U.S. Reg. No. 6,287,XXX), together with associated trade dre