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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 590 Lexington Avenue, 35th Floor New York, NY 10022

REGULATORY DUE DILIGENCE MEMORANDUM

July 22, 2024

This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in connection with the proposed acquisition of Meridian Surgical Technologies, Inc. by Solstice Biomedical Devices Ltd. It is intended solely for the use of the addressees and other authorized members of the Calderwood & Harkness deal team. This memorandum should not be disclosed to any third party without the prior written consent of counsel. The information and analysis contained herein are based on materials reviewed in the virtual data room, publicly available FDA databases, and discussions with Solstice management and regulatory personnel. No representation or warranty is made as to the completeness or accuracy of the information provided by Meridian, which has not been independently verified except as specifically noted.

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I. EXECUTIVE SUMMARY

This memorandum presents the results of our regulatory due diligence assessment of Meridian Surgical Technologies, Inc. ("Meridian" or "MST"), a Delaware corporation headquartered at 780 Keystone Boulevard, Suite 200, King of Prussia, Pennsylvania 19406, with its principal manufacturing facility located at 45 Forge Creek Road, Exton, Pennsylvania 19341. This assessment has been conducted in connection with the proposed acquisition of Meridian by Solstice Biomedical Devices Ltd. ("Solstice" or "SBD"), an Irish-domiciled strategic acquirer, pursuant to a stock purchase transaction (the "Transaction").

Under the terms currently contemplated by the parties, Solstice will acquire 100% of Meridian's outstanding common stock for an aggregate cash purchase price of $220,000,000 (the "Base Purchase Price"), subject to customary purchase price adjustments for working capital, indebtedness, and transaction expenses. In addition to the Base Purchase Price, the Transaction includes a regulatory-milestone earnout of up to $35,000,000 in additional cash consideration (the "Earnout Consideration") tied to the achievement of FDA 510(k) clearance for Meridian's next-generation ArthroNav robotic-assisted arthroscopy platform. The specific earnout milestones, their associated payment amounts, and the applicable deadlines are discussed in detail in Section VI.E below.

The purpose of this memorandum is to evaluate: (a) Meridian's existing FDA regulatory compliance posture with respect to its currently marketed commercial products; (b) the viability and anticipated timeline of the 510(k) premarket notification pathway for the ArthroNav platform; and (c) the key regulatory risks bearing on the proposed earnout structure. This memorandum is intended to inform the deal team's assessment of transaction risk, negotiation of the Stock Purchase Agreement (the "SPA"), and post-closing integration planning.

Overall Conclusion. Based on our review, Meridian maintains a generally strong FDA compliance posture with respect to its commercially marketed product portfolio. All existing 510(k) clearances are in good standing, and the company has no pending FDA warning letters, consent decrees, or unresolved Form 483 observations. The ArthroNav 510(k) pathway is viable and is supported by favorable — though non-binding — feedback received from FDA during a pre-submission (Q-Sub) meeting completed in March 2024. However, the earnout milestones are subject to timing and technical risks that warrant careful attention in the SPA negotiations and post-closing planning.

Our key findings are summarized as follows:

(i) Existing 510(k) Clearances. All 510(k) clearances for Meridian's commercially marketed products (the PrecisionBlade arthroscopic blade product line and the powered shaver systems) are current and in good standing. No clearances have been withdrawn, suspended, or revoked.

(ii) No Pending FDA Enforcement Actions. There are no pending FDA warning letters, consent decrees, import alerts, seizures, injunctions, or mandatory recalls affecting Meridian or any of its products. The most recent FDA inspection of the Exton manufacturing facility (September 2023) resulted in no Form 483 observations.

(iii) ISO 13485:2016 Certification. Meridian's Exton facility holds ISO 13485:2016 certification issued by Pinnacle Conformity Assessment Services, LLC (Certificate No. PCA-2022-04819). However, this certification expires in April 2025, approximately six months after the anticipated closing date of October 31, 2024. Renewal action is required, and the Buyer should confirm that the recertification process has been initiated.

(iv) ArthroNav Pre-Submission Meeting. Meridian completed a pre-submission (Q-Sub) meeting with FDA in March 2024. FDA generally agreed that the 510(k) pathway is appropriate for the Generation 1.0 ArthroNav system and confirmed the acceptability of the identified predicate device (Marlowe Asset Management Robotic Surgical Assist System, 510(k) No. K203847). FDA feedback on the Generation 2.0 cartilage mapping software module was less definitive.

(v) ArthroNav Submission Timeline. Meridian targets a 510(k) submission for the Generation 1.0 system in Q2 2025, with the identified predicate device providing the basis for establishing substantial equivalence. The Generation 2.0 software module is in an earlier stage of development, and its submission timeline is dependent on Generation 1.0 clearance and further FDA engagement.

In preparing this memorandum, we have consulted with Dr. Niamh Cassidy, Vice President, Regulatory Affairs of Solstice, regarding the technical aspects of the ArthroNav regulatory strategy and Solstice's internal capabilities for supporting post-closing regulatory activities.

Scope of Review. Our regulatory due diligence review encompassed the following sources:

• FDA publicly available databases, including the MAUDE (Manufacturer and User Facility Device Experience) database, the 510(k) Premarket Notification database, the Establishment Registration and Device Listing database, the Warning Letters database, and the Inspection Classification database;

• Meridian's internal regulatory files as produced in the virtual data room maintained by DataVault Solutions (the "Data Room"), including 510(k) submission packages, FDA clearance letters, Q-Sub correspondence, quality system records, and design history files;

• ISO 13485:2016 certification documentation and surveillance audit reports from Pinnacle Conformity Assessment Services, LLC;

• Selected quality system records, including CAPA logs, complaint files, and management review minutes; and

• Discussions with Meridian management, including Dr. Raj Subramanian (CTO) and Linda Fontaine (VP, Quality & Regulatory Compliance), conducted during the management presentation on June 14, 2024.

This memorandum does not address international regulatory requirements (e.g., EU MDR, Health Canada, or TGA) except as noted in the context of ISO 13485 certification. International regulatory matters are being addressed separately by Calderwood & Harkness's international regulatory team.

II. MERIDIAN'S PRINCIPAL BUSINESS AND PRODUCT PORTFOLIO

Meridian Surgical Technologies, Inc. is a medical device company that designs, develops, and manufactures minimally invasive surgical instruments and systems for orthopedic procedures, with a particular focus on arthroscopic surgery. Founded in 2009, Meridian has established itself as a recognized player in the arthroscopic instrumentation market, serving hospitals, ambulatory surgical centers, and orthopedic specialty clinics across the United States and in select international markets.

For the fiscal year ended December 31, 2023, Meridian reported revenues of approximately $87 million, reflecting steady growth in its core product lines. The company employs approximately 312 personnel, including approximately 45 dedicated research and development employees. All commercial manufacturing is conducted at Meridian's Exton, Pennsylvania facility located at 45 Forge Creek Road, Exton, PA 19341. The company's corporate headquarters and administrative offices are located at 780 Keystone Boulevard, Suite 200, King of Prussia, PA 19406.

Meridian's product portfolio comprises three principal lines:

PrecisionBlade Product Line — Proprietary Single-Use Arthroscopic Blades. Meridian's flagship product line consists of various configurations of disposable (single-use) arthroscopic blades marketed under the registered trademark "PrecisionBlade" (U.S. Trademark Registration No. 5,214,793, registered with the United States Patent and Trademark Office). The PrecisionBlade product family encompasses multiple blade geometries, materials (including stainless steel and specialty alloy configurations), and packaging formats designed for use in a range of arthroscopic procedures, including knee, shoulder, hip, and ankle arthroscopy. The PrecisionBlade line represents the largest share of Meridian's current revenues and has an established base of loyal surgeon customers. The product line benefits from a well-documented predicate device chain in the arthroscopic blade category, and Meridian has obtained multiple 510(k) clearances for successive product generations over the past decade.

Powered Shaver Systems. Meridian's second principal product line consists of powered shaver systems used in arthroscopic debridement procedures. The powered shaver product line includes both reusable powered shaver handpieces and complementary disposable shaver blades. The handpieces feature variable speed and torque controls and are designed for compatibility with Meridian's proprietary disposable blade accessories. Meridian has obtained 510(k) clearances for both the reusable handpiece platform and the disposable shaver blade accessories, including a most recent clearance for a next-generation handpiece featuring improved torque and speed control characteristics. The powered shaver product line is the subject of the pending patent infringement litigation discussed in Section VII of this memorandum.

ArthroNav Robotic-Assisted Arthroscopy Platform (In Development). Meridian is developing a next-generation robotic-assisted surgical navigation system — branded as the "ArthroNav" platform — designed to enhance the precision, consistency, and outcomes of minimally invasive orthopedic arthroscopy procedures. The ArthroNav platform is not yet commercially marketed and has not yet received FDA clearance. The ArthroNav platform is the subject of the earnout milestones contemplated in the Transaction and is analyzed in detail in Section VI of this memorandum. The platform represents a strategic extension of Meridian's capabilities from passive instrumentation into active robotic-assisted surgical navigation, and is viewed by both parties as a key value driver of the Transaction.

III. EXISTING FDA 510(k) CLEARANCES — COMMERCIAL PRODUCTS

A. Overview of Meridian's 510(k) Clearance History

Meridian holds current, valid FDA 510(k) clearances for all of its commercially marketed products. We have confirmed each clearance through a review of the FDA's publicly available 510(k) Premarket Notification database and cross-referenced each clearance against the internal 510(k) submission packages and FDA clearance letters produced in the Data Room.

All of Meridian's commercially distributed devices are classified as Class II medical devices under the Federal Food, Drug, and Cosmetic Act ("FDCA") and the applicable FDA classification regulations. Specifically, the PrecisionBlade arthroscopic blade products and the powered shaver systems are classified under 21 CFR Part 888 (Orthopedic Devices), with applicable product codes in the arthroscopic instrument and powered surgical instrument categories. No Meridian products are classified under 21 CFR Part 882 (Neurological Devices) or any other device classification regulation outside of Part 888.

Importantly, no 510(k) clearance held by Meridian has been withdrawn, suspended, or revoked by FDA. There are no pending FDA proceedings that could result in the withdrawal or suspension of any existing clearance. A summary table of all identified 510(k) clearances, including product descriptions, clearance numbers, clearance dates, and product classification codes, is set forth in Appendix A to this memorandum.

B. PrecisionBlade Product Line

Meridian has obtained multiple 510(k) clearances over the past decade covering various configurations within the PrecisionBlade arthroscopic blade family. These clearances encompass different blade geometries (including straight, curved, and hooked configurations), blade materials (stainless steel and specialty alloy variants), and packaging formats (individual sterile packaging and multi-pack configurations). The predicate device chain for the PrecisionBlade line is well-established within the arthroscopic blade category, and each successive 510(k) submission has relied on a clear and defensible chain of substantial equivalence to previously cleared devices, including both Meridian's own prior clearances and third-party predicate devices.

Our review of the clearance documentation revealed no irregularities, deficiencies, or issues of concern. The substantial equivalence arguments presented in the 510(k) submissions are well-supported by performance testing data and comparative analyses. There are no pending supplemental or new 510(k) submissions for the PrecisionBlade product line at this time, and Meridian management has not indicated any plans for near-term submissions related to this product line.

C. Powered Shaver Systems

Meridian holds 510(k) clearances for both the reusable powered shaver handpiece platform and the complementary disposable shaver blade accessories. The most recent clearance in this product line was obtained for a next-generation powered shaver handpiece incorporating improved torque and speed control features, including a variable-speed motor with enhanced responsiveness and a redesigned ergonomic grip. The clearance documentation for this next-generation handpiece, which we reviewed in the Data Room, demonstrates a thorough substantial equivalence analysis relative to both the prior-generation Meridian handpiece (the direct predicate) and third-party cleared devices in the powered surgical instrument category.

No issues were identified in our review of the powered shaver system clearance documentation. The predicate device chains are well-documented, the performance testing protocols are comprehensive, and the FDA clearance letters contain no special conditions, limitations, or post-market requirements beyond standard labeling conditions.

D. Device Listing and Establishment Registration

Meridian's Exton, Pennsylvania manufacturing facility (45 Forge Creek Road, Exton, PA 19341) is registered with FDA as a medical device manufacturing establishment, as required by Section 510 of the FDCA and 21 CFR Part 807. We have confirmed the facility's registration status through a search of the FDA's Establishment Registration and Device Listing database. The registration is current as of the date of this memorandum.

All of Meridian's commercially distributed devices are listed in the FDA's Device Listing database in accordance with the requirements of 21 CFR Part 807, Subpart B. Device listings include appropriate product codes, proprietary names, and other required information. We did not identify any gaps or omissions in the device listing records.

We note that, following the closing of the Transaction, the change of ownership of Meridian will need to be reflected in the establishment registration records. This is a routine administrative update and does not require prior FDA approval, but it should be completed promptly following closing to ensure the accuracy of the FDA registration database. Solstice's regulatory team should coordinate with Linda Fontaine to effect this update.

IV. FDA INSPECTION HISTORY AND COMPLIANCE STATUS

A. Inspection History

The most recent FDA inspection of Meridian's Exton, Pennsylvania manufacturing facility was conducted in September 2023. The inspection was a routine Quality System Regulation ("QSR") surveillance inspection conducted under 21 CFR Part 820. We have reviewed the FDA inspection classification database, which confirms that the September 2023 inspection was classified as "No Action Indicated" ("NAI") — the most favorable classification outcome. Notably, no Form 483 observations were issued during the inspection, indicating that the FDA investigators did not identify any objectionable conditions or practices warranting documentation.

A clean inspection outcome with no Form 483 observations is a positive indicator of Meridian's quality system compliance and reflects well on the company's regulatory posture. In our experience, it is relatively uncommon for a manufacturing facility of Meridian's size and product complexity to receive a completely clean inspection with zero observations, and this outcome speaks favorably to the diligence and effectiveness of Meridian's quality management team.

We reviewed the inspection history files produced in the Data Room, which include records of prior FDA inspections of the Exton facility. The inspection history does not reveal any significant adverse inspection outcomes. We identified no history of "Official Action Indicated" ("OAI") classifications, and the Form 483 observations issued in prior inspections (where any were issued) were promptly addressed through corrective actions documented in the quality system records. A chronology of FDA inspections of the Exton facility is set forth in Appendix B to this memorandum.

B. Warning Letters, Consent Decrees, and Enforcement Actions

Based on our review of the FDA Warning Letters database and the inspection classification database, as well as the representations made by Meridian management during the due diligence process, we confirm that:

• No pending FDA warning letters have been issued against Meridian as of the date of this memorandum. A search of the FDA Warning Letters database for "Meridian Surgical Technologies" returned no results.

• No consent decrees are currently in effect or have historically been entered against Meridian by FDA or the U.S. Department of Justice. There is no history of judicial enforcement actions against the company.

• No FDA import alerts are applicable to Meridian's products. This is expected, as Meridian's manufacturing is conducted domestically, and Meridian is not an importer of finished devices.

• No seizures or injunctions have been sought or obtained by FDA with respect to Meridian's products or operations.

• No mandatory recalls have been ordered by FDA for any Meridian product. The company's recall history (discussed in Section IV.D below) consists solely of one voluntary Class III recall, which has been completed and closed.

The absence of any warning letters, consent decrees, or other enforcement actions is a strong positive indicator of Meridian's regulatory compliance history. This finding is consistent with the clean inspection record discussed above and supports our overall assessment that Meridian maintains an effective quality and regulatory compliance program.

C. Adverse Event Reporting (MAUDE Database)

We conducted a review of the FDA's MAUDE (Manufacturer and User Facility Device Experience) database for Medical Device Reports ("MDRs") associated with Meridian's listed device product codes. The MAUDE database captures adverse event reports submitted by manufacturers, importers, device user facilities, and voluntary reporters relating to medical device injuries, malfunctions, and deaths.

Our review identified a small number of MDRs filed over the past five years in connection with Meridian's commercially distributed products. The volume and nature of these reports are consistent with what would be expected for a company of Meridian's size, product category, and distribution volume. The reported events include isolated instances of blade breakage during use, minor patient tissue irritation, and device packaging integrity complaints. None of the reported events involved patient deaths or serious injuries requiring surgical intervention beyond the index procedure.

Importantly, our analysis did not identify any patterns, clusters, or trends in the adverse event reports that would suggest systemic product defects, recurring manufacturing quality issues, or emerging safety signals. There is no indication that FDA has initiated any investigations, audits, or safety reviews arising from the MAUDE reports associated with Meridian's products. Meridian's complaint handling and MDR reporting procedures, as documented in the quality system records reviewed in the Data Room, appear to be functioning appropriately and in compliance with 21 CFR Part 803 (Medical Device Reporting).

D. Recall History

We reviewed the FDA's recall database (the Res database) for any recalls associated with Meridian's products. Our review identified one recall event:

Class III Recall — PrecisionBlade Packaging Labeling Correction (Approximately 2021). Meridian initiated a voluntary Class III recall approximately three years ago relating to labeling corrections on a specific PrecisionBlade packaging configuration. The recall involved the correction of a labeling error in which the blade geometry designation on the outer packaging did not precisely match the internal label, although the correct blade was contained within the packaging. A Class III recall is the least severe classification, indicating a situation in which the use of or exposure to the product is not likely to cause adverse health consequences. The recall was completed in accordance with the applicable FDA recall procedures, all affected product lots were accounted for, and the recall was closed by FDA. This recall is not considered material to the Transaction.

No Class I recalls (involving a reasonable probability that use of or exposure to the product will cause serious adverse health consequences or death) or Class II recalls (involving a situation in which use of or exposure to the product may cause temporary or medically reversible adverse health consequences) have been identified in connection with any Meridian product. The company's recall history is unremarkable and does not raise any concerns regarding product quality or regulatory compliance.

V. QUALITY MANAGEMENT SYSTEM AND ISO 13485:2016 CERTIFICATION

A. ISO 13485:2016 Certification

Meridian's Exton, Pennsylvania manufacturing facility holds ISO 13485:2016 certification, the internationally recognized quality management system standard for medical device manufacturers. ISO 13485:2016 specifies requirements for a quality management system in which an organization needs to demonstrate its ability to provide medical devices and related services that consistently meet customer and applicable regulatory requirements.

The key details of Meridian's ISO 13485:2016 certification are as follows:

A copy of the ISO 13485:2016 certificate (PCA-2022-04819) is reproduced in Appendix D to this memorandum. The certificate was reviewed in the Data Room and appears to be in good standing. We note that Pinnacle Conformity Assessment Services, LLC is an accredited conformity assessment body; however, we have not independently verified Pinnacle's accreditation status with the relevant accreditation body (e.g., ANAB or an IAF member).

B. Certification Renewal Considerations

The ISO 13485:2016 certificate expires in April 2025 — approximately six months after the anticipated closing date of October 31, 2024. This timeline requires attention, as the recertification process must be initiated and completed prior to the certificate's expiration to avoid a lapse in certification.

A lapse in ISO 13485:2016 certification could have several adverse consequences:

• International Market Access. ISO 13485 certification is a prerequisite for marketing medical devices in many international jurisdictions, including the European Union (under the EU Medical Devices Regulation), Canada (Health Canada), Australia (TGA), and Japan (PMDA). A lapse in certification could interrupt Meridian's ability to distribute products in these markets.

• FDA Submissions. While ISO 13485 certification is not a legal prerequisite for FDA 510(k) submissions, the maintenance of an ISO-certified quality management system is widely viewed by FDA reviewers as a positive indicator of quality system maturity and compliance. A lapse in certification during the pendency of the ArthroNav 510(k) submission could raise questions or concerns during FDA review.

• Customer and Contracting Requirements. Many hospital systems and group purchasing organizations require ISO 13485 certification as a condition of their procurement contracts. A lapse could trigger contractual defaults or loss of preferred vendor status.

Recommendation. The Buyer should confirm, prior to closing, that Meridian's quality team — led by Linda Fontaine, VP, Quality & Regulatory Compliance — has initiated the recertification process with Pinnacle Conformity Assessment Services. Specifically, the Buyer should request confirmation that (a) the recertification audit has been scheduled or is in the process of being scheduled, (b) Meridian's quality management system is prepared for the recertification audit, and (c) there are no known non-conformances or issues that could jeopardize the recertification. We recommend that the SPA include a representation from the Sellers confirming the current status of the ISO certification and a pre-closing covenant requiring Meridian to take all reasonable steps to initiate the recertification process prior to closing.

C. Quality System Regulation (QSR) Compliance

In addition to the ISO 13485:2016 certification, Meridian is subject to the FDA's Quality System Regulation ("QSR"), codified at 21 CFR Part 820. The QSR establishes current good manufacturing practice ("cGMP") requirements for medical device manufacturers, including requirements for management responsibility, design controls, production and process controls, corrective and preventive action ("CAPA"), document controls, and purchasing controls.

Our review of the internal quality system procedures produced in the Data Room indicates that Meridian's quality management system is generally consistent with the requirements of 21 CFR Part 820. Specifically, we reviewed documentation relating to the following QSR subsystems:

• Design Controls (21 CFR §820.30). Meridian maintains documented design control procedures governing the design and development process for new products and product modifications. Design history files reviewed in the Data Room for representative products appear to be complete and well-organized, containing design inputs, design outputs, design reviews, design verification and validation records, and design transfer documentation.

• Production and Process Controls (21 CFR §§820.70–820.75). Manufacturing process documentation, including process validation records, environmental controls, and equipment maintenance records, was reviewed on a sample basis and appeared to be consistent with QSR requirements.

• Corrective and Preventive Action (21 CFR §820.90). Meridian maintains a documented CAPA system. The CAPA log reviewed in the Data Room reflects a reasonable number of open and closed CAPA items, with documented root cause analyses, corrective actions, and effectiveness checks. No open CAPA items appeared to present material regulatory risk.

The September 2023 FDA inspection with no Form 483 observations provides positive independent validation of Meridian's QSR compliance. While a routine surveillance inspection is not a comprehensive audit of every QSR subsystem, the clean inspection outcome is a strong indicator that the overall quality system is functioning effectively.

VI. ARTHRONAV ROBOTIC-ASSISTED ARTHROSCOPY PLATFORM — REGULATORY PATHWAY ANALYSIS

A. Product Description

The ArthroNav platform is a robotic-assisted arthroscopic navigation system designed to enhance the precision, consistency, and clinical outcomes of minimally invasive orthopedic arthroscopy procedures. The platform integrates robotic-assisted instrument guidance with advanced software-based surgical navigation capabilities, enabling the operating surgeon to plan, visualize, and execute arthroscopic procedures with greater accuracy than is achievable with conventional manual techniques.

Two product generations are relevant to the Transaction and the earnout structure:

Generation 1.0 — Core Robotic-Assisted Arthroscopy System. The Generation 1.0 platform encompasses the core robotic-assisted arthroscopy hardware and integrated software. The system includes a robotic arm with multiple degrees of freedom, optical tracking sensors, a real-time surgical navigation display, and integrated software for procedure planning and intraoperative guidance. The Generation 1.0 system is designed to be compatible with standard arthroscopic instruments and to integrate into existing operating room workflows without requiring significant changes to the surgical environment.

Generation 2.0 Upgrade — ArthroNav Software Module for Real-Time Cartilage Mapping. The Generation 2.0 upgrade is a software enhancement to the Generation 1.0 platform that adds real-time cartilage thickness mapping capability. This software module utilizes proprietary algorithms to generate real-time, three-dimensional maps of articular cartilage thickness during arthroscopic procedures, enabling the surgeon to assess cartilage condition and plan interventions with greater precision. The real-time cartilage thickness mapping algorithms are maintained as trade secrets and represent a core element of the ArthroNav platform's competitive differentiation.

The principal inventor and development lead for the ArthroNav platform is Dr. Raj Subramanian, Chief Technology Officer of Meridian. Dr. Subramanian has led the ArthroNav program from its inception and possesses deep technical expertise in robotic-assisted surgical navigation and the proprietary cartilage mapping algorithms. His continued involvement in the program is critical to maintaining the development timeline and achieving the earnout milestones.

The ArthroNav platform is protected by U.S. Patent No. 11,432,887, entitled "Robotic-Assisted Arthroscopic Navigation System and Method," issued on August 2, 2022, and assigned to Meridian Surgical Technologies, Inc. The patent covers key aspects of the robotic-assisted navigation architecture and methodology. In addition, Meridian holds a license to certain background intellectual property from Polytechnic Innovations, Ltd., a UK-based university spinoff. The license agreement provides Polytechnic Innovations with a 2.5% royalty on net sales of ArthroNav products, co-extensive with the life of the licensed patents. The terms of the Polytechnic Innovations license are being reviewed separately by the IP due diligence team and are addressed in the IP Due Diligence Summary Memorandum.

B. Intended Regulatory Pathway: 510(k) Premarket Notification

Meridian intends to pursue FDA clearance for the ArthroNav platform via the 510(k) premarket notification pathway under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 360(k). The 510(k) pathway permits a device manufacturer to obtain FDA clearance to market a new device by demonstrating that the device is "substantially equivalent" to a legally marketed predicate device — that is, a device that was legally marketed prior to May 28, 1976 (pre-amendment device) or a device that has received 510(k) clearance.

Meridian anticipates that the ArthroNav Generation 1.0 system will be classified as a Class II medical device under the FDA's device classification system. Class II devices are subject to general controls (e.g., establishment registration, device listing, adverse event reporting, labeling requirements) and special controls (e.g., performance standards, postmarket surveillance, patient registries, or special labeling requirements) as specified in the applicable classification regulation. The 510(k) pathway is the standard clearance pathway for Class II devices.

Identified Predicate Device. Meridian has identified the Marlowe Asset Management Robotic Surgical Assist System, which received FDA 510(k) clearance under 510(k) No. K203847, as the primary predicate device for the ArthroNav Generation 1.0 submission. The Marlowe Asset Management system is a cleared robotic-assisted surgical system with a similar intended use and technological characteristics to the ArthroNav Generation 1.0 platform. The Marlowe Asset Management system provides a reasonable basis for establishing substantial equivalence for the core robotic-assisted arthroscopic navigation functionality of the ArthroNav platform.

Pathway Analysis. Based on our review of the ArthroNav product design documentation, the intended use statement, the identified predicate device, and the Q-Sub feedback discussed in Section VI.C below, we believe the 510(k) pathway is appropriate for the Generation 1.0 system. The availability of a cleared predicate device with a comparable intended use and technological characteristics supports the substantial equivalence argument. A de novo classification request under Section 513(f)(2) of the FDCA does not appear necessary, as the ArthroNav system does not present a novel device type for which no predicate exists. Similarly, a Premarket Approval ("PMA") application under Section 515 of the FDCA does not appear to be required, as the device does not appear to fall within a Class III classification or present issues of safety and effectiveness that would require the greater level of scientific evidence associated with the PMA pathway. However, it is important to note that the determination of the appropriate regulatory pathway is ultimately within FDA's discretion, and FDA retains the authority to disagree with the manufacturer's pathway selection during the course of formal submission review.

C. Pre-Submission (Q-Sub) Meeting with FDA

Meridian completed a pre-submission (Q-Sub) meeting with FDA in March 2024. The pre-submission process, governed by FDA's guidance document "Requests for Feedback and Meetings for Medical Device Submissions: The Q-Submission Program" (revised October 2023), provides a mechanism for device manufacturers to obtain non-binding FDA feedback on proposed regulatory strategies, submission content, and testing protocols prior to the submission of a formal premarket application.

We reviewed the Q-Sub meeting request, the FDA's written response, and the meeting minutes produced in the Data Room. Copies of the Q-Sub correspondence are referenced in Appendix C to this memorandum. The key outcomes of the Q-Sub meeting are summarized below:

1. Pathway Agreement. FDA generally agreed that the 510(k) premarket notification pathway is appropriate for the ArthroNav Generation 1.0 robotic-assisted arthroscopy system, given the availability of a cleared predicate device and the similarity of intended use and technological characteristics.

2. Predicate Device Confirmation. FDA confirmed that predicate device K203847 (Marlowe Asset Management Robotic Surgical Assist System) is an acceptable predicate for the ArthroNav Generation 1.0 submission. FDA did not identify any concerns with the predicate device selection or the proposed substantial equivalence comparison.

3. Recommended Performance Testing. FDA provided feedback on recommended performance testing protocols for the 510(k) submission, including:

(a) Bench testing for accuracy and repeatability of the robotic navigation system, including end-effector positioning accuracy, path tracking fidelity, and repeatability under simulated surgical conditions;

(b) Software validation in accordance with IEC 62304 (Medical device software — Software life cycle processes), including documentation of software development lifecycle, risk analysis (per ISO 14971), and verification and validation testing;

(c) Biocompatibility testing in accordance with ISO 10993 (Biological evaluation of medical devices) for all patient-contacting materials;

(d) Electrical safety testing in accordance with IEC 60601-1 (Medical electrical equipment — Part 1: General requirements for basic safety and essential performance) and applicable collateral and particular standards.

4. Clinical Data. FDA indicated that clinical data would likely not be required for the Generation 1.0 510(k) submission, provided that the bench testing adequately demonstrates substantial equivalence to the predicate device. However, FDA expressly reserved the right to request clinical data during the formal review process if the submitted bench data does not satisfactorily address all questions of substantial equivalence.

5. Generation 2.0 Software Module. FDA's feedback on the Generation 2.0 ArthroNav Software Module for Real-Time Cartilage Mapping was less definitive. FDA indicated that the appropriate submission pathway for the Generation 2.0 module — whether it could be submitted as a supplement to the Generation 1.0 510(k), or whether it would require a separate, standalone 510(k) submission — would depend on whether the cartilage mapping software module introduces a new intended use or significantly different technology compared to the cleared Generation 1.0 platform. FDA recommended further dialogue on this question, potentially through an additional pre-submission meeting, once the Generation 2.0 module's design and intended use profile are more fully defined.

Important Caveat. Q-Sub feedback is explicitly non-binding. FDA's guidance document and the written Q-Sub response letter state that the feedback provided during the pre-submission process does not constitute a final agency determination and that FDA retains full discretion to take a different position during the formal review of a premarket submission. While Q-Sub feedback is generally reliable and reflective of FDA's likely review posture, it does not guarantee that FDA will follow the same approach during the 510(k) review. This is a standard limitation of the Q-Sub process, and parties should not treat Q-Sub feedback as equivalent to a formal clearance determination.

D. Submission Timeline and Current Development Status

Meridian management has represented that the 510(k) submission for the ArthroNav Generation 1.0 system is targeted for Q2 2025. This timeline is predicated on the successful completion of the following development and testing activities, which are currently underway:

Dr. Subramanian's engineering team is actively developing the test protocols identified during the Q-Sub meeting and is executing the bench testing and software verification/validation activities. Biocompatibility testing is being conducted by an external contract testing laboratory, with results expected in Q4 2024. Electrical safety testing (IEC 60601-1) is planned to commence in Q1 2025 following the completion of final hardware design verification.

The software validation effort, being conducted in accordance with IEC 62304, is the most complex and time-intensive of the testing activities. The ArthroNav software includes both system-level software (controlling the robotic navigation functions) and application-level software (providing the surgical planning and intraoperative guidance interface). Software validation must address all levels of the software architecture and must be supported by comprehensive risk analysis documentation per ISO 14971.

With respect to the Generation 2.0 cartilage mapping software module, this component is in an earlier stage of development. The proprietary algorithms for real-time cartilage thickness mapping are undergoing continued refinement, and additional preclinical testing (including cadaveric studies to validate mapping accuracy) is required before the module can proceed to formal verification and validation activities. The submission timeline for the Generation 2.0 module is dependent on (a) the achievement of Generation 1.0 clearance, which is expected to serve as the foundation for the Generation 2.0 submission, and (b) further engagement with FDA regarding the appropriate submission pathway (as discussed in Section VI.C above). A projected timeline for ArthroNav development milestones is set forth in Appendix E to this memorandum.

E. Relevance to Earnout Milestones

The Stock Purchase Agreement, which is expected to be signed on or about August 20, 2024, will include an earnout provision entitling the Sellers to receive up to $35,000,000 in additional cash consideration upon the achievement of two FDA regulatory milestones. The earnout milestones, their associated payment amounts, and the applicable deadlines are as follows:

The Earnout Period runs from the Closing Date (anticipated to be October 31, 2024) through June 30, 2027 — a period of approximately 32 months. An Earnout Escrow Reserve of $2,500,000 will be deposited at closing with Keystone Escrow Services, Inc. to secure Buyer's payment obligations upon milestone achievement. The earnout escrow is not a cap on earnout payments but rather a mechanism to ensure that funds are readily available for prompt payment upon milestone achievement, reducing the Sellers' counterparty risk.

The earnout structure allocates the greater share of earnout value ($20,000,000) to Milestone 1, reflecting the more advanced development status and greater regulatory certainty associated with the Generation 1.0 system. The $15,000,000 allocated to Milestone 2 reflects both the earlier developmental stage and the greater regulatory uncertainty surrounding the Generation 2.0 software module.

F. Assessment of Likelihood and Timing of 510(k) Clearance

Milestone 1: Generation 1.0 — Deadline December 31, 2026. Assessment: Achievable, with moderate risk of delay.

The Generation 1.0 ArthroNav system has a viable path to 510(k) clearance within the Milestone 1 deadline of December 31, 2026. The analysis supporting this assessment is as follows:

Timeline Modeling. If the 510(k) submission is filed in Q2 2025 as targeted by Meridian management, the statutory FDA review period for a traditional 510(k) submission is 90 calendar days from the date of acceptance. However, in practice, the actual elapsed time from 510(k) submission to clearance decision frequently extends well beyond the 90-day statutory clock. Based on published FDA performance data and our experience with comparable submissions, a realistic total elapsed review timeline for a 510(k) submission of this complexity is approximately 6 to 12 months, accounting for the following factors:

• Additional Information (AI) Requests. It is common for FDA to issue one or more Additional Information requests during the 510(k) review process, particularly for submissions involving complex electromechanical systems with integrated software. An AI request pauses the statutory review clock while the applicant prepares and submits responsive information. A single round of AI requests typically adds 2 to 4 months to the overall review timeline; two rounds of AI requests can add 4 to 8 months.

• Acceptance Review. Prior to commencing substantive review, FDA conducts an acceptance review to confirm that the submission is administratively complete. If the submission is found to be deficient, FDA may issue a "Refuse to Accept" ("RTA") letter, which requires the applicant to address the deficiencies and resubmit. An RTA can add several weeks to several months to the timeline.

• FDA Reviewer Workload. Actual review timelines are influenced by the workload and staffing levels of the reviewing division within the Center for Devices and Radiological Health ("CDRH"). Review times can vary based on the volume of submissions pending before the division at any given time.

Assuming a Q2 2025 submission and a 9 to 12 month total review cycle (inclusive of one round of AI requests), clearance could reasonably be expected between Q1 2026 and Q2 2026. This timeline provides a comfortable margin of approximately 6 to 9 months before the December 31, 2026 deadline. Even if the submission is delayed by one to two quarters (to Q3 or Q4 2025) or the review cycle extends to 12 to 15 months, clearance would likely still be achievable within the December 31, 2026 deadline.

Risk Factors. Notwithstanding the generally favorable timeline analysis, several risk factors could adversely impact the likelihood or timing of Milestone 1 achievement:

1. Development Delays. If bench testing, software validation, biocompatibility testing, or electrical safety testing encounters unexpected difficulties or yields unfavorable results requiring design modifications and re-testing, the 510(k) submission date could be pushed beyond Q2 2025. Software validation, in particular, is a complex and time-intensive process that is susceptible to scope expansion and unforeseen issues.

2. FDA Request for Clinical Data. Although FDA indicated during the Q-Sub meeting that clinical data would likely not be required for the Generation 1.0 submission, FDA expressly reserved the right to request clinical data during formal review. If FDA determines that the bench testing data does not adequately demonstrate substantial equivalence and requests clinical data, this would significantly delay the timeline — potentially by 12 to 18 months or more, depending on the scope of the clinical study required, IRB approval timelines, and patient enrollment.

3. Change in FDA Posture. Q-Sub feedback is non-binding, and FDA's review posture can be influenced by changes in reviewer assignment, division leadership, policy guidance documents, or broader agency priorities. A change in FDA's position on the appropriateness of the 510(k) pathway, the acceptability of the predicate device, or the adequacy of the proposed testing protocols could introduce significant uncertainty and delay.

4. Predicate Device Issues. If the identified predicate device (K203847, Marlowe Asset Management Robotic Surgical Assist System) becomes the subject of any post-market action — such as a recall, safety alert, reclassification proceeding, or withdrawal of clearance — it could undermine the substantial equivalence argument and require Meridian to identify an alternative predicate or restructure its submission strategy.

5. Key Personnel Dependency. The ArthroNav development program is heavily dependent on Dr. Raj Subramanian, who serves as CTO and as the principal inventor and technical lead. Loss of Dr. Subramanian's involvement — whether due to departure, reassignment, or other factors — would materially impact the development timeline and the quality of the 510(k) submission. The SPA is expected to include a covenant restricting Buyer from diverting Dr. Subramanian from ArthroNav development without the consent of the Sellers' Representative.

Overall Probability Assessment. We assess the likelihood of achieving Milestone 1 within the December 31, 2026 deadline as moderate to high, subject to the risk factors noted above. The most significant risk is the potential for FDA to request clinical data, which would likely make the deadline unachievable. However, based on the favorable Q-Sub feedback and the current state of development, we view this scenario as a low-probability (but high-impact) risk.

Milestone 2: Generation 2.0 Software Module — Deadline June 30, 2027. Assessment: More uncertain; tighter timeline with greater technical and regulatory risk.

The Generation 2.0 ArthroNav Software Module for Real-Time Cartilage Mapping presents a more challenging regulatory pathway analysis, reflecting both the earlier stage of development and the greater regulatory uncertainty identified during the Q-Sub meeting.

Development Stage. The Generation 2.0 cartilage mapping software module is in an earlier stage of development compared to the Generation 1.0 system. The proprietary real-time cartilage thickness mapping algorithms are still under active refinement, and additional preclinical testing — including cadaveric validation studies — is required before formal verification and validation activities can commence. The technical complexity of the cartilage mapping algorithms, which must accurately generate real-time three-dimensional maps of articular cartilage thickness from intraoperative data, presents significant engineering challenges. The algorithms are maintained as trade secrets (rather than being covered by the issued patent), which introduces additional IP considerations that are being evaluated by the IP due diligence team.

Regulatory Pathway Uncertainty. FDA's Q-Sub feedback on the Generation 2.0 module was less definitive than its feedback on the Generation 1.0 system. Specifically, FDA did not provide a clear determination as to whether the cartilage mapping software module could be submitted as a supplement to the Generation 1.0 510(k) or whether it would require a separate, standalone 510(k) submission. This determination hinges on whether the software module introduces a "new intended use" or "significantly different technology" compared to the cleared Generation 1.0 platform — a question that cannot be fully resolved until the module's design and intended use profile are more clearly defined. If the Generation 2.0 module requires a separate 510(k), a new predicate device analysis may be needed, and the review timeline would run independently of (and in addition to) the Generation 1.0 clearance timeline.

Timeline Compression. The June 30, 2027 deadline for Milestone 2 provides only approximately six months after the Milestone 1 deadline of December 31, 2026. This compressed timeline presents significant challenges:

• If Generation 1.0 clearance is achieved near the December 31, 2026 deadline (rather than earlier), there would be minimal time to submit and obtain clearance for the Generation 2.0 module before the June 30, 2027 deadline.

• If the Generation 2.0 module requires a separate 510(k) (rather than a supplement), the submission preparation, FDA acceptance review, substantive review, and potential AI request cycles would need to be completed within the remaining time — a challenging proposition under the most favorable assumptions.

• The Generation 2.0 submission is logically dependent on Generation 1.0 clearance as a foundation, meaning that delays in Milestone 1 would cascade into the Milestone 2 timeline.

Risk Factors. In addition to the general risk factors applicable to Milestone 1, the following additional risk factors bear specifically on Milestone 2:

1. Technical Maturity. The cartilage mapping algorithms are still under active development. There is inherent uncertainty regarding whether the algorithms will perform with sufficient accuracy and reliability to support a 510(k) submission within the contemplated timeline.

2. Potential Need for Clinical Data. If FDA views the real-time cartilage mapping software as introducing a new intended use — for example, as a diagnostic tool for assessing cartilage condition rather than merely a navigation aid — FDA may require clinical data to support the 510(k) submission. This would likely make the June 30, 2027 deadline unachievable.

3. Short Window Between Milestones. As noted above, the six-month window between the Milestone 1 and Milestone 2 deadlines provides very little margin for delays or complications.

4. Dependence on Generation 1.0 Clearance. The Generation 2.0 submission strategy is predicated on leveraging the Generation 1.0 clearance as a foundation. If Generation 1.0 clearance is delayed, the cascading impact on the Generation 2.0 timeline could be significant.

Overall Probability Assessment. We assess the likelihood of achieving Milestone 2 within the June 30, 2027 deadline as moderate, with a meaningful risk that this milestone may not be achieved by the deadline even if Milestone 1 is timely achieved. The combination of earlier-stage development, regulatory pathway uncertainty, and timeline compression creates a more challenging risk profile compared to Milestone 1. The deal team should consider whether the SPA should include mechanisms to address a scenario in which Milestone 1 is achieved but Milestone 2 is not — for example, an extension of the Milestone 2 deadline upon achievement of Milestone 1, or a partial payment structure for progress toward Milestone 2.

G. Buyer Covenant Considerations Related to Earnout

The SPA is expected to include several covenants governing the Buyer's obligations with respect to the ArthroNav program during the Earnout Period. Based on the current draft term sheet and our discussions with the deal team, the key covenants are as follows:

1. Commercially Reasonable Efforts. The Buyer will be required to use "commercially reasonable efforts" to pursue the 510(k) submissions for both the Generation 1.0 and Generation 2.0 ArthroNav products during the Earnout Period. The definition of "commercially reasonable efforts" in the earnout context is a critical negotiation point. The Sellers will likely seek a definition that imposes affirmative obligations on the Buyer to devote specified resources and attention to the ArthroNav program, while the Buyer will seek a definition that preserves flexibility to exercise reasonable business judgment in response to changing circumstances.

2. Minimum R&D Budget. The Buyer must maintain a dedicated research and development budget of no less than $6,000,000 per year for the ArthroNav program during the Earnout Period. This covenant provides a quantifiable floor on the Buyer's investment in the ArthroNav program and serves as an objective benchmark for compliance.

3. Key Personnel Protection. The Buyer may not divert Dr. Raj Subramanian from ArthroNav development activities without the prior consent of the Sellers' Representative (Dr. Marcus Ellsworth). This covenant is designed to protect against the risk that the Buyer would reassign Dr. Subramanian to other projects, thereby undermining the ArthroNav development timeline.

4. Non-Abandonment. The Buyer may not discontinue or abandon the ArthroNav program without providing 90 days' prior written notice to the Sellers' Representative. This covenant provides the Sellers' Representative with advance notice of any decision to discontinue the program and an opportunity to engage in dialogue with the Buyer before such a decision is implemented.

5. Dispute Resolution. Disputes regarding earnout achievement are to be resolved by binding expert determination conducted by an independent regulatory consultant mutually selected by the parties. If the parties are unable to agree on the selection of the independent regulatory consultant within 30 days, the consultant will be appointed by the American Arbitration Association. This dispute resolution mechanism is designed to provide a faster and more specialized resolution process than traditional litigation or arbitration.

Recommendation. Solstice should implement robust internal tracking and documentation procedures to demonstrate ongoing compliance with these covenants throughout the Earnout Period. This should include maintaining detailed records of R&D budget expenditures, Dr. Subramanian's time allocation, ArthroNav development activities, FDA correspondence, and all decisions related to the ArthroNav program's regulatory strategy. Failure to maintain adequate documentation could expose the Buyer to claims by the Sellers' Representative that the Buyer failed to use commercially reasonable efforts or otherwise frustrated the earnout — claims that, even if ultimately unsuccessful, would be costly and disruptive to defend. We recommend that Solstice designate a specific individual (ideally Dr. Niamh Cassidy or a member of her team) as the internal "earnout compliance officer" responsible for coordinating documentation and reporting.

VII. PENDING INTELLECTUAL PROPERTY LITIGATION — IMPACT ON REGULATORY POSTURE

One pending patent infringement matter is relevant to the Transaction. In Hartwell Orthopedic Solutions, Inc. v. Meridian Surgical Technologies, Inc., Civil Action No. 2:23-cv-04817, filed in the United States District Court for the Eastern District of Pennsylvania, the plaintiff Hartwell Orthopedic Solutions, Inc. ("Hartwell") alleges that Meridian's powered shaver blade products infringe U.S. Patent No. 10,891,224, which covers a specific powered shaver blade design for arthroscopic debridement applications.

The Hartwell litigation relates exclusively to Meridian's powered shaver product line and does not involve the ArthroNav platform, the PrecisionBlade product line, or any of the intellectual property underlying the ArthroNav development program. There is no indication that the Hartwell patent (U.S. Patent No. 10,891,224) or the allegations in the Hartwell litigation pose a direct obstacle to FDA clearance of the ArthroNav platform. FDA's 510(k) review process evaluates safety and effectiveness and does not adjudicate patent disputes; accordingly, the pendency of patent litigation does not, in itself, impede or delay FDA review.

Meridian's outside litigation counsel in the Hartwell matter is Braddock & Lyle LLP (Philadelphia, PA), with Deborah Lyle serving as lead counsel. Meridian has filed a motion for summary judgment of non-infringement, which is currently pending before the Court. Based on the litigation files reviewed in the Data Room and the assessment provided by Meridian's litigation counsel, Meridian's potential damages exposure in the event of an adverse outcome is estimated at $2.5 million to $5.0 million. This estimate is based on a reasonable royalty analysis and does not account for the possibility of enhanced damages, which Meridian's counsel considers unlikely given the absence of willful infringement.

Regulatory Relevance. While patent disputes do not directly impede FDA review, an adverse outcome in the Hartwell litigation could have indirect regulatory relevance. Specifically, if the Court were to enter a judgment of infringement and issue an injunction, Meridian could be required to implement a design-around for the affected powered shaver blade products. A design-around effort could divert engineering and regulatory resources from the ArthroNav program, potentially impacting the ArthroNav development timeline. However, based on the current posture of the litigation — including Meridian's pending summary judgment motion and the assessment of Meridian's litigation counsel — this scenario does not appear to be a near-term risk. The Hartwell litigation is being addressed in greater detail in the Legal Due Diligence Report being prepared by the Calderwood & Harkness deal team.

VIII. REGULATORY RISKS AND RECOMMENDATIONS

A. Summary of Key Regulatory Risks

Based on the regulatory due diligence review described in this memorandum, we have identified the following key regulatory risks that should be considered in connection with the Transaction:

1. ArthroNav Timeline Risk. Delays in bench testing, software validation, biocompatibility testing, electrical safety testing, or 510(k) submission preparation could push the ArthroNav submission and clearance dates beyond the earnout milestone deadlines. This risk is particularly acute for Milestone 2 (Generation 2.0 software module, due June 30, 2027), which has a tighter timeline and is in an earlier stage of development. The compressed six-month window between the Milestone 1 and Milestone 2 deadlines exacerbates this risk, as any delay in Milestone 1 would cascade into the Milestone 2 timeline.

2. FDA Position Changes. Q-Sub feedback is non-binding, and FDA retains discretion to take a different position during the formal 510(

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 590 Lexington Avenue, 35th Floor New York, NY 10022
REGULATORY DUE DILIGENCE MEMORANDUM
July 22, 2024
This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in connection with the proposed acquisition of Meridian Surgical Technologies, Inc. by Solstice Biomedical Devices Ltd. It is intended solely for the use of the addressees and other authorized members of the Calderwood & Harkness deal team. This memorandum should not be disclosed to any third party without the prior written consent of counsel. The information and analysis contained herein are based on materials reviewed in the virtual data room, publicly available FDA databases, and discussions with Solstice management and regulatory personnel. No representation or warranty is made as to the completeness or accuracy of the information provided by Meridian, which has not been independently verified except as specifically noted.
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I. EXECUTIVE SUMMARY
This memorandum presents the results of our regulatory due diligence assessment of Meridian Surgical Technologies, Inc. ("Meridian" or "MST"), a Delaware corporation headquartered at 780 Keystone Boulevard, Suite 200, King of Prussia, Pennsylvania 19406, with its principal manufacturing facility located at 45 Forge Creek Road, Exton, Pennsylvania 19341. This assessment has been conducted in connection with the proposed acquisition of Meridian by Solstice Biomedical Devices Ltd. ("Solstice" or "SBD"), an Irish-domiciled strategic acquirer, pursuant to a stock purchase transaction (the "Transaction").
Under the terms currently contemplated by the parties, Solstice will acquire 100% of Meridian's outstanding common stock for an aggregate cash purchase price of $220,000,000 (the "Base Purchase Price"), subject to customary purchase price adjustments for working capital, indebtedness, and transaction expenses. In addition to the Base Purchase Price, the Transaction includes a regulatory-milestone earnout of up to $35,000,000 in additional cash consideration (the "Earnout Consideration") tied to the achievement of FDA 510(k) clearance for Meridian's next-generation ArthroNav robotic-assisted arthroscopy platform. The specific earnout milestones, their associated payment amounts, and the applicable deadlines are discussed in detail in Section VI.E below.
The purpose of this memorandum is to evaluate: (a) Meridian's existing FDA regulatory compliance posture with respect to its currently marketed commercial products; (b) the viability and anticipated timeline of the 510(k) premarket notification pathway for the ArthroNav platform; and (c) the key regulatory risks bearing on the proposed earnout structure. This memorandum is intended to inform the deal team's assessment of transaction risk, negotiation of the Stock Purchase Agreement (the "SPA"), and post-closing integration planning.
Overall Conclusion. Based on our review, Meridian maintains a generally strong FDA compliance posture with respect to its commercially marketed product portfolio. All existing 510(k) clearances are in good standing, and the company has no pending FDA warning letters, consent decrees, or unresolved Form 483 observations. The ArthroNav 510(k) pathway is viable and is supported by favorable — though non-binding — feedback received from FDA during a pre-submission (Q-Sub) meeting completed in March 2024. However, the earnout milestones are subject to timing and technical risks that warrant careful attention in the SPA negotiations and post-closing planning.
Our key findings are summarized as follows:
(i) Existing 510(k) Clearances. All 510(k) clearances for Meridian's commercially marketed products (the PrecisionBlade arthroscopic blade product line and the powered shaver systems) are current and in good standing. No clearances have been withdrawn, suspended, or revoked.
(ii) No Pending FDA Enforcement Actions. There are no pending FDA warning letters, consent decrees, import alerts, seizures, injunctions, or mandatory recalls affecting Meridian or any of its products. The most recent FDA inspection of the Exton manufacturing facility (September 2023) resulted in no Form 483 observations.
(iii) ISO 13485:2016 Certification. Meridian's Exton facility holds ISO 13485:2016 certification issued by Pinnacle Conformity Assessment Services, LLC (Certificate No. PCA-2022-04819). However, this certification expires in April 2025, approximately six months after the anticipated closing date of October 31, 2024. Renewal action is required, and the Buyer should confirm that the recertification process has been initiated.
(iv) ArthroNav Pre-Submission Meeting. Meridian completed a pre-submission (Q-Sub) meeting with FDA in March 2024. FDA generally agreed that the 510(k) pathway is appropriate for the Generation 1.0 ArthroNav system and confirmed the acceptability of the identified predicate device (Marlowe Asset Management Robotic Surgical Assist System, 510(k) No. K203847). FDA feedback on the Generation 2.0 cartilage mapping software module was less definitive.
(v) ArthroNav Submission Timeline. Meridian targets a 510(k) submission for the Generation 1.0 system in Q2 2025, with the identified predicate device providing the basis for establishing substantial equivalence. The Generation 2.0 software module is in an earlier stage of development, and its submission timeline is dependent on Generation 1.0 clearance and further FDA engagement.
In preparing this memorandum, we have consulted with Dr. Niamh Cassidy, Vice President, Regulatory Affairs of Solstice, regarding the technical aspects of the ArthroNav regulatory strategy and Solstice's internal capabilities for supporting post-closing regulatory activities.
Scope of Review. Our regulatory due diligence review encompassed the following sources:
• FDA publicly available databases, including the MAUDE (Manufacturer and User Facility Device Experience) database, the 510(k) Premarket Notification database, the Establishment Registration and Device Listing database, the Warning Letters database, and the Inspection Classification database;
• Meridian's internal regulatory files as produced in the virtual data room maintained by DataVault Solutions (the "Data Room"), including 510(k) submission packages, FDA clearance letters, Q-Sub correspondence, quality system records, and design history files;
• ISO 13485:2016 certification documentation and surveillance audit reports from Pinnacle Conformity Assessment Services, LLC;
• Selected quality system records, including CAPA logs, complaint files, and management review minutes; and
• Discussions with Meridian management, including Dr. Raj Subramanian (CTO) and Linda Fontaine (VP, Quality & Regulatory Compliance), conducted during the management presentation on June 14, 2024.
This memorandum does not address international regulatory requirements (e.g., EU MDR, Health Canada, or TGA) except as noted in the context of ISO 13485 certification. International regulatory matters are being addressed separately by Calderwood & Harkness's international regulatory team.
II. MERIDIAN'S PRINCIPAL BUSINESS AND PRODUCT PORTFOLIO
Meridian Surgical Technologies, Inc. is a medical device company that designs, develops, and manufactures minimally invasive surgical instruments and systems for orthopedic procedures, with a particular focus on arthroscopic surgery. Founded in 2009, Meridian has established itself as a recognized player in the arthroscopic instrumentation market, serving hospitals, ambulatory surgical centers, and orthopedic specialty clinics across the United States and in select international markets.
For the fiscal year ended December 31, 2023, Meridian reported revenues of approximately $87 million, reflecting steady growth in its core product lines. The company employs approximately 312 personnel, including approximately 45 dedicated research and development employees. All commercial manufacturing is conducted at Meridian's Exton, Pennsylvania facility located at 45 Forge Creek Road, Exton, PA 19341. The company's corporate headquarters and administrative offices are located at 780 Keystone Boulevard, Suite 200, King of Prussia, PA 19406.
Meridian's product portfolio comprises three principal lines:
PrecisionBlade Product Line — Proprietary Single-Use Arthroscopic Blades. Meridian's flagship product line consists of various configurations of disposable (single-use) arthroscopic blades marketed under the registered trademark "PrecisionBlade" (U.S. Trademark Registration No. 5,214,793, registered with the United States Patent and Trademark Office). The PrecisionBlade product family encompasses multiple blade geometries, materials (including stainless steel and specialty alloy configurations), and packaging formats designed for use in a range of arthroscopic procedures, including knee, shoulder, hip, and ankle arthroscopy. The PrecisionBlade line represents the largest share of Meridian's current revenues and has an established base of loyal surgeon customers. The product line benefits from a well-documented predicate device chain in the arthroscopic blade category, and Meridian has obtained multiple 510(k) clearances for successive product generations over the past decade.
Powered Shaver Systems. Meridian's second principal product line consists of powered shaver systems used in arthroscopic debridement procedures. The powered shaver product line includes both reusable powered shaver handpieces and complementary disposable shaver blades. The handpieces feature variable speed and torque controls and are designed for compatibility with Meridian's proprietary disposable blade accessories. Meridian has obtained 510(k) clearances for both the reusable handpiece platform and the disposable shaver blade accessories, including a most recent clearance for a next-generation handpiece featuring improved torque and speed control characteristics. The powered shaver product line is the subject of the pending patent infringement litigation discussed in Section VII of this memorandum.
ArthroNav Robotic-Assisted Arthroscopy Platform (In Development). Meridian is developing a next-generation robotic-assisted surgical navigation system — branded as the "ArthroNav" platform — designed to enhance the precision, consistency, and outcomes of minimally invasive orthopedic arthroscopy procedures. The ArthroNav platform is not yet commercially marketed and has not yet received FDA clearance. The ArthroNav platform is the subject of the earnout milestones contemplated in the Transaction and is analyzed in detail in Section VI of this memorandum. The platform represents a strategic extension of Meridian's capabilities from passive instrumentation into active robotic-assisted surgical navigation, and is viewed by both parties as a key value driver of the Transaction.
III. EXISTING FDA 510(k) CLEARANCES — COMMERCIAL PRODUCTS
A. Overview of Meridian's 510(k) Clearance History
Meridian holds current, valid FDA 510(k) clearances for all of its commercially marketed products. We have confirmed each clearance through a review of the FDA's publicly available 510(k) Premarket Notification database and cross-referenced each clearance against the internal 510(k) submission packages and FDA clearance letters produced in the Data Room.
All of Meridian's commercially distributed devices are classified as Class II medical devices under the Federal Food, Drug, and Cosmetic Act ("FDCA") and the applicable FDA classification regulations. Specifically, the PrecisionBlade arthroscopic blade products and the powered shaver systems are classified under 21 CFR Part 888 (Orthopedic Devices), with applicable product codes in the arthroscopic instrument and powered surgical instrument categories. No Meridian products are classified under 21 CFR Part 882 (Neurological Devices) or any other device classification regulation outside of Part 888.
Importantly, no 510(k) clearance held by Meridian has been withdrawn, suspended, or revoked by FDA. There are no pending FDA proceedings that could result in the withdrawal or suspension of any existing clearance. A summary table of all identified 510(k) clearances, including product descriptions, clearance numbers, clearance dates, and product classification codes, is set forth in Appendix A to this memorandum.
B. PrecisionBlade Product Line
Meridian has obtained multiple 510(k) clearances over the past decade covering various configurations within the PrecisionBlade arthroscopic blade family. These clearances encompass different blade geometries (including straight, curved, and hooked configurations), blade materials (stainless steel and specialty alloy variants), and packaging formats (individual sterile packaging and multi-pack configurations). The predicate device chain for the PrecisionBlade line is well-established within the arthroscopic blade category, and each successive 510(k) submission has relied on a clear and defensible chain of substantial equivalence to previously cleared devices, including both Meridian's own prior clearances and third-party predicate devices.
Our review of the clearance documentation revealed no irregularities, deficiencies, or issues of concern. The substantial equivalence arguments presented in the 510(k) submissions are well-supported by performance testing data and comparative analyses. There are no pending supplemental or new 510(k) submissions for the PrecisionBlade product line at this time, and Meridian management has not indicated any plans for near-term submissions related to this product line.
C. Powered Shaver Systems
Meridian holds 510(k) clearances for both the reusable powered shaver handpiece platform and the complementary disposable shaver blade accessories. The most recent clearance in this product line was obtained for a next-generation powered shaver handpiece incorporating improved torque and speed control features, including a variable-speed motor with enhanced responsiveness and a redesigned ergonomic grip. The clearance documentation for this next-generation handpiece, which we reviewed in the Data Room, demonstrates a thorough substantial equivalence analysis relative to both the prior-generation Meridian handpiece (the direct predicate) and third-party cleared devices in the powered surgical instrument category.
No issues were identified in our review of the powered shaver system clearance documentation. The predicate device chains are well-documented, the performance testing protocols are comprehensive, and the FDA clearance letters contain no special conditions, limitations, or post-market requirements beyond standard labeling conditions.
D. Device Listing and Establishment Registration
Meridian's Exton, Pennsylvania manufacturing facility (45 Forge Creek Road, Exton, PA 19341) is registered with FDA as a medical device manufacturing establishment, as required by Section 510 of the FDCA and 21 CFR Part 807. We have confirmed the facility's registration status through a search of the FDA's Establishment Registration and Device Listing database. The registration is current as of the date of this memorandum.
All of Meridian's commercially distributed devices are listed in the FDA's Device Listing database in accordance with the requirements of 21 CFR Part 807, Subpart B. Device listings include appropriate product codes, proprietary names, and other required information. We did not identify any gaps or omissions in the device listing records.
We note that, following the closing of the Transaction, the change of ownership of Meridian will need to be reflected in the establishment registration records. This is a routine administrative update and does not require prior FDA approval, but it should be completed promptly following closing to ensure the accuracy of the FDA registration database. Solstice's regulatory team should coordinate with Linda Fontaine to effect this update.
IV. FDA INSPECTION HISTORY AND COMPLIANCE STATUS
A. Inspection History
The most recent FDA inspection of Meridian's Exton, Pennsylvania manufacturing facility was conducted in September 2023. The inspection was a routine Quality System Regulation ("QSR") surveillance inspection conducted under 21 CFR Part 820. We have reviewed the FDA inspection classification database, which confirms that the September 2023 inspection was classified as "No Action Indicated" ("NAI") — the most favorable classification outcome. Notably, no Form 483 observations were issued during the inspection, indicating that the FDA investigators did not identify any objectionable conditions or practices warranting documentation.
A clean inspection outcome with no Form 483 observations is a positive indicator of Meridian's quality system compliance and reflects well on the company's regulatory posture. In our experience, it is relatively uncommon for a manufacturing facility of Meridian's size and product complexity to receive a completely clean inspection with zero observations, and this outcome speaks favorably to the diligence and effectiveness of Meridian's quality management team.
We reviewed the inspection history files produced in the Data Room, which include records of prior FDA inspections of the Exton facility. The inspection history does not reveal any significant adverse inspection outcomes. We identified no history of "Official Action Indicated" ("OAI") classifications, and the Form 483 observations issued in prior inspections (where any were issued) were promptly addressed through corrective actions documented in the quality system records. A chronology of FDA inspections of the Exton facility is set forth in Appendix B to this memorandum.
B. Warning Letters, Consent Decrees, and Enforcement Actions
Based on our review of the FDA Warning Letters database and the inspection classification database, as well as the representations made by Meridian management during the due diligence process, we confirm that:
• No pending FDA warning letters have been issued against Meridian as of the date of this memorandum. A search of the FDA Warning Letters database for "Meridian Surgical Technologies" returned no results.
• No consent decrees are currently in effect or have historically been entered against Meridian by FDA or the U.S. Department of Justice. There is no history of judicial enforcement actions against the company.
• No FDA import alerts are applicable to Meridian's products. This is expected, as Meridian's manufacturing is conducted domestically, and Meridian is not an importer of finished devices.
• No seizures or injunctions have been sought or obtained by FDA with respect to Meridian's products or operations.
• No mandatory recalls have been ordered by FDA for any Meridian product. The company's recall history (discussed in Section IV.D below) consists solely of one voluntary Class III recall, which has been completed and closed.
The absence of any warning letters, consent decrees, or other enforcement actions is a strong positive indicator of Meridian's regulatory compliance history. This finding is consistent with the clean inspection record discussed above and supports our overall assessment that Meridian maintains an effective quality and regulatory compliance program.
C. Adverse Event Reporting (MAUDE Database)
We conducted a review of the FDA's MAUDE (Manufacturer and User Facility Device Experience) database for Medical Device Reports ("MDRs") associated with Meridian's listed device product codes. The MAUDE database captures adverse event reports submitted by manufacturers, importers, device user facilities, and voluntary reporters relating to medical device injuries, malfunctions, and deaths.
Our review identified a small number of MDRs filed over the past five years in connection with Meridian's commercially distributed products. The volume and nature of these reports are consistent with what would be expected for a company of Meridian's size, product category, and distribution volume. The reported events include isolated instances of blade breakage during use, minor patient tissue irritation, and device packaging integrity complaints. None of the reported events involved patient deaths or serious injuries requiring surgical intervention beyond the index procedure.
Importantly, our analysis did not identify any patterns, clusters, or trends in the adverse event reports that would suggest systemic product defects, recurring manufacturing quality issues, or emerging safety signals. There is no indication that FDA has initiated any investigations, audits, or safety reviews arising from the MAUDE reports associated with Meridian's products. Meridian's complaint handling and MDR reporting procedures, as documented in the quality system records reviewed in the Data Room, appear to be functioning appropriately and in compliance with 21 CFR Part 803 (Medical Device Reporting).
D. Recall History
We reviewed the FDA's recall database (the Res database) for any recalls associated with Meridian's products. Our review identified one recall event:
Class III Recall — PrecisionBlade Packaging Labeling Correction (Approximately 2021). Meridian initiated a voluntary Class III recall approximately three years ago relating to labeling corrections on a specific PrecisionBlade packaging configuration. The recall involved the correction of a labeling error in which the blade geometry designation on the outer packaging did not precisely match the internal label, although the correct blade was contained within the packaging. A Class III recall is the least severe classification, indicating a situation in which the use of or exposure to the product is not likely to cause adverse health consequences. The recall was completed in accordance with the applicable FDA recall procedures, all affected product lots were accounted for, and the recall was closed by FDA. This recall is not considered material to the Transaction.
No Class I recalls (involving a reasonable probability that use of or exposure to the product will cause serious adverse health consequences or death) or Class II recalls (involving a situation in which use of or exposure to the product may cause temporary or medically reversible adverse health consequences) have been identified in connection with any Meridian product. The company's recall history is unremarkable and does not raise any concerns regarding product quality or regulatory compliance.
V. QUALITY MANAGEMENT SYSTEM AND ISO 13485:2016 CERTIFICATION
A. ISO 13485:2016 Certification
Meridian's Exton, Pennsylvania manufacturing facility holds ISO 13485:2016 certification, the internationally recognized quality management system standard for medical device manufacturers. ISO 13485:2016 specifies requirements for a quality management system in which an organization needs to demonstrate its ability to provide medical devices and related services that consistently meet customer and applicable regulatory requirements.
The key details of Meridian's ISO 13485:2016 certification are as follows:
A copy of the ISO 13485:2016 certificate (PCA-2022-04819) is reproduced in Appendix D to this memorandum. The certificate was reviewed in the Data Room and appears to be in good standing. We note that Pinnacle Conformity Assessment Services, LLC is an accredited conformity assessment body; however, we have not independently verified Pinnacle's accreditation status with the relevant accreditation body (e.g., ANAB or an IAF member).
B. Certification Renewal Considerations
The ISO 13485:2016 certificate expires in April 2025 — approximately six months after the anticipated closing date of October 31, 2024. This timeline requires attention, as the recertification process must be initiated and completed prior to the certificate's expiration to avoid a lapse in certification.
A lapse in ISO 13485:2016 certification could have several adverse consequences:
• International Market Access. ISO 13485 certification is a prerequisite for marketing medical devices in many international jurisdictions, including the European Union (under the EU Medical Devices Regulation), Canada (Health Canada), Australia (TGA), and Japan (PMDA). A lapse in certification could interrupt Meridian's ability to distribute products in these markets.
• FDA Submissions. While ISO 13485 certification is not a legal prerequisite for FDA 510(k) submissions, the maintenance of an ISO-certified quality management system is widely viewed by FDA reviewers as a positive indicator of quality system maturity and compliance. A lapse in certification during the pendency of the ArthroNav 510(k) submission could raise questions or concerns during FDA review.
• Customer and Contracting Requirements. Many hospital systems and group purchasing organizations require ISO 13485 certification as a condition of their procurement contracts. A lapse could trigger contractual defaults or loss of preferred vendor status.
Recommendation. The Buyer should confirm, prior to closing, that Meridian's quality team — led by Linda Fontaine, VP, Quality & Regulatory Compliance — has initiated the recertification process with Pinnacle Conformity Assessment Services. Specifically, the Buyer should request confirmation that (a) the recertification audit has been scheduled or is in the process of being scheduled, (b) Meridian's quality management system is prepared for the recertification audit, and (c) there are no known non-conformances or issues that could jeopardize the recertification. We recommend that the SPA include a representation from the Sellers confirming the current status of the ISO certification and a pre-closing covenant requiring Meridian to take all reasonable steps to initiate the recertification process prior to closing.
C. Quality System Regulation (QSR) Compliance
In addition to the ISO 13485:2016 certification, Meridian is subject to the FDA's Quality System Regulation ("QSR"), codified at 21 CFR Part 820. The QSR establishes current good manufacturing practice ("cGMP") requirements for medical device manufacturers, including requirements for management responsibility, design controls, production and process controls, corrective and preventive action ("CAPA"), document controls, and purchasing controls.
Our review of the internal quality system procedures produced in the Data Room indicates that Meridian's quality management system is generally consistent with the requirements of 21 CFR Part 820. Specifically, we reviewed documentation relating to the following QSR subsystems:
• Design Controls (21 CFR §820.30). Meridian maintains documented design control procedures governing the design and development process for new products and product modifications. Design history files reviewed in the Data Room for representative products appear to be complete and well-organized, containing design inputs, design outputs, design reviews, design verification and validation records, and design transfer documentation.
• Production and Process Controls (21 CFR §§820.70–820.75). Manufacturing process documentation, including process validation records, environmental controls, and equipment maintenance records, was reviewed on a sample basis and appeared to be consistent with QSR requirements.
• Corrective and Preventive Action (21 CFR §820.90). Meridian maintains a documented CAPA system. The CAPA log reviewed in the Data Room reflects a reasonable number of open and closed CAPA items, with documented root cause analyses, corrective actions, and effectiveness checks. No open CAPA items appeared to present material regulatory risk.
The September 2023 FDA inspection with no Form 483 observations provides positive independent validation of Meridian's QSR compliance. While a routine surveillance inspection is not a comprehensive audit of every QSR subsystem, the clean inspection outcome is a strong indicator that the overall quality system is functioning effectively.
VI. ARTHRONAV ROBOTIC-ASSISTED ARTHROSCOPY PLATFORM — REGULATORY PATHWAY ANALYSIS
A. Product Description
The ArthroNav platform is a robotic-assisted arthroscopic navigation system designed to enhance the precision, consistency, and clinical outcomes of minimally invasive orthopedic arthroscopy procedures. The platform integrates robotic-assisted instrument guidance with advanced software-based surgical navigation capabilities, enabling the operating surgeon to plan, visualize, and execute arthroscopic procedures with greater accuracy than is achievable with conventional manual techniques.
Two product generations are relevant to the Transaction and the earnout structure:
Generation 1.0 — Core Robotic-Assisted Arthroscopy System. The Generation 1.0 platform encompasses the core robotic-assisted arthroscopy hardware and integrated software. The system includes a robotic arm with multiple degrees of freedom, optical tracking sensors, a real-time surgical navigation display, and integrated software for procedure planning and intraoperative guidance. The Generation 1.0 system is designed to be compatible with standard arthroscopic instruments and to integrate into existing operating room workflows without requiring significant changes to the surgical environment.
Generation 2.0 Upgrade — ArthroNav Software Module for Real-Time Cartilage Mapping. The Generation 2.0 upgrade is a software enhancement to the Generation 1.0 platform that adds real-time cartilage thickness mapping capability. This software module utilizes proprietary algorithms to generate real-time, three-dimensional maps of articular cartilage thickness during arthroscopic procedures, enabling the surgeon to assess cartilage condition and plan interventions with greater precision. The real-time cartilage thickness mapping algorithms are maintained as trade secrets and represent a core element of the ArthroNav platform's competitive differentiation.
The principal inventor and development lead for the ArthroNav platform is Dr. Raj Subramanian, Chief Technology Officer of Meridian. Dr. Subramanian has led the ArthroNav program from its inception and possesses deep technical expertise in robotic-assisted surgical navigation and the proprietary cartilage mapping algorithms. His continued involvement in the program is critical to maintaining the development timeline and achieving the earnout milestones.
The ArthroNav platform is protected by U.S. Patent No. 11,432,887, entitled "Robotic-Assisted Arthroscopic Navigation System and Method," issued on August 2, 2022, and assigned to Meridian Surgical Technologies, Inc. The patent covers key aspects of the robotic-assisted navigation architecture and methodology. In addition, Meridian holds a license to certain background intellectual property from Polytechnic Innovations, Ltd., a UK-based university spinoff. The license agreement provides Polytechnic Innovations with a 2.5% royalty on net sales of ArthroNav products, co-extensive with the life of the licensed patents. The terms of the Polytechnic Innovations license are being reviewed separately by the IP due diligence team and are addressed in the IP Due Diligence Summary Memorandum.
B. Intended Regulatory Pathway: 510(k) Premarket Notification
Meridian intends to pursue FDA clearance for the ArthroNav platform via the 510(k) premarket notification pathway under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 360(k). The 510(k) pathway permits a device manufacturer to obtain FDA clearance to market a new device by demonstrating that the device is "substantially equivalent" to a legally marketed predicate device — that is, a device that was legally marketed prior to May 28, 1976 (pre-amendment device) or a device that has received 510(k) clearance.
Meridian anticipates that the ArthroNav Generation 1.0 system will be classified as a Class II medical device under the FDA's device classification system. Class II devices are subject to general controls (e.g., establishment registration, device listing, adverse event reporting, labeling requirements) and special controls (e.g., performance standards, postmarket surveillance, patient registries, or special labeling requirements) as specified in the applicable classification regulation. The 510(k) pathway is the standard clearance pathway for Class II devices.
Identified Predicate Device. Meridian has identified the Marlowe Asset Management Robotic Surgical Assist System, which received FDA 510(k) clearance under 510(k) No. K203847, as the primary predicate device for the ArthroNav Generation 1.0 submission. The Marlowe Asset Management system is a cleared robotic-assisted surgical system with a similar intended use and technological characteristics to the ArthroNav Generation 1.0 platform. The Marlowe Asset Management system provides a reasonable basis for establishing substantial equivalence for the core robotic-assisted arthroscopic navigation functionality of the ArthroNav platform.
Pathway Analysis. Based on our review of the ArthroNav product design documentation, the intended use statement, the identified predicate device, and the Q-Sub feedback discussed in Section VI.C below, we believe the 510(k) pathway is appropriate for the Generation 1.0 system. The availability of a cleared predicate device with a comparable intended use and technological characteristics supports the substantial equivalence argument. A de novo classification request under Section 513(f)(2) of the FDCA does not appear necessary, as the ArthroNav system does not present a novel device type for which no predicate exists. Similarly, a Premarket Approval ("PMA") application under Section 515 of the FDCA does not appear to be required, as the device does not appear to fall within a Class III classification or present issues of safety and effectiveness that would require the greater level of scientific evidence associated with the PMA pathway. However, it is important to note that the determination of the appropriate regulatory pathway is ultimately within FDA's discretion, and FDA retains the authority to disagree with the manufacturer's pathway selection during the course of formal submission review.
C. Pre-Submission (Q-Sub) Meeting with FDA
Meridian completed a pre-submission (Q-Sub) meeting with FDA in March 2024. The pre-submission process, governed by FDA's guidance document "Requests for Feedback and Meetings for Medical Device Submissions: The Q-Submission Program" (revised October 2023), provides a mechanism for device manufacturers to obtain non-binding FDA feedback on proposed regulatory strategies, submission content, and testing protocols prior to the submission of a formal premarket application.
We reviewed the Q-Sub meeting request, the FDA's written response, and the meeting minutes produced in the Data Room. Copies of the Q-Sub correspondence are referenced in Appendix C to this memorandum. The key outcomes of the Q-Sub meeting are summarized below:
1. Pathway Agreement. FDA generally agreed that the 510(k) premarket notification pathway is appropriate for the ArthroNav Generation 1.0 robotic-assisted arthroscopy system, given the availability of a cleared predicate device and the similarity of intended use and technological characteristics.
2. Predicate Device Confirmation. FDA confirmed that predicate device K203847 (Marlowe Asset Management Robotic Surgical Assist System) is an acceptable predicate for the ArthroNav Generation 1.0 submission. FDA did not identify any concerns with the predicate device selection or the proposed substantial equivalence comparison.
3. Recommended Performance Testing. FDA provided feedback on recommended performance testing protocols for the 510(k) submission, including:
(a) Bench testing for accuracy and repeatability of the robotic navigation system, including end-effector positioning accuracy, path tracking fidelity, and repeatability under simulated surgical conditions;
(b) Software validation in accordance with IEC 62304 (Medical device software — Software life cycle processes), including documentation of software development lifecycle, risk analysis (per ISO 14971), and verification and validation testing;
(c) Biocompatibility testing in accordance with ISO 10993 (Biological evaluation of medical devices) for all patient-contacting materials;
(d) Electrical safety testing in accordance with IEC 60601-1 (Medical electrical equipment — Part 1: General requirements for basic safety and essential performance) and applicable collateral and particular standards.
4. Clinical Data. FDA indicated that clinical data would likely not be required for the Generation 1.0 510(k) submission, provided that the bench testing adequately demonstrates substantial equivalence to the predicate device. However, FDA expressly reserved the right to request clinical data during the formal review process if the submitted bench data does not satisfactorily address all questions of substantial equivalence.
5. Generation 2.0 Software Module. FDA's feedback on the Generation 2.0 ArthroNav Software Module for Real-Time Cartilage Mapping was less definitive. FDA indicated that the appropriate submission pathway for the Generation 2.0 module — whether it could be submitted as a supplement to the Generation 1.0 510(k), or whether it would require a separate, standalone 510(k) submission — would depend on whether the cartilage mapping software module introduces a new intended use or significantly different technology compared to the cleared Generation 1.0 platform. FDA recommended further dialogue on this question, potentially through an additional pre-submission meeting, once the Generation 2.0 module's design and intended use profile are more fully defined.
Important Caveat. Q-Sub feedback is explicitly non-binding. FDA's guidance document and the written Q-Sub response letter state that the feedback provided during the pre-submission process does not constitute a final agency determination and that FDA retains full discretion to take a different position during the formal review of a premarket submission. While Q-Sub feedback is generally reliable and reflective of FDA's likely review posture, it does not guarantee that FDA will follow the same approach during the 510(k) review. This is a standard limitation of the Q-Sub process, and parties should not treat Q-Sub feedback as equivalent to a formal clearance determination.
D. Submission Timeline and Current Development Status
Meridian management has represented that the 510(k) submission for the ArthroNav Generation 1.0 system is targeted for Q2 2025. This timeline is predicated on the successful completion of the following development and testing activities, which are currently underway:
Dr. Subramanian's engineering team is actively developing the test protocols identified during the Q-Sub meeting and is executing the bench testing and software verification/validation activities. Biocompatibility testing is being conducted by an external contract testing laboratory, with results expected in Q4 2024. Electrical safety testing (IEC 60601-1) is planned to commence in Q1 2025 following the completion of final hardware design verification.
The software validation effort, being conducted in accordance with IEC 62304, is the most complex and time-intensive of the testing activities. The ArthroNav software includes both system-level software (controlling the robotic navigation functions) and application-level software (providing the surgical planning and intraoperative guidance interface). Software validation must address all levels of the software architecture and must be supported by comprehensive risk analysis documentation per ISO 14971.
With respect to the Generation 2.0 cartilage mapping software module, this component is in an earlier stage of development. The proprietary algorithms for real-time cartilage thickness mapping are undergoing continued refinement, and additional preclinical testing (including cadaveric studies to validate mapping accuracy) is required before the module can proceed to formal verification and validation activities. The submission timeline for the Generation 2.0 module is dependent on (a) the achievement of Generation 1.0 clearance, which is expected to serve as the foundation for the Generation 2.0 submission, and (b) further engagement with FDA regarding the appropriate submission pathway (as discussed in Section VI.C above). A projected timeline for ArthroNav development milestones is set forth in Appendix E to this memorandum.
E. Relevance to Earnout Milestones
The Stock Purchase Agreement, which is expected to be signed on or about August 20, 2024, will include an earnout provision entitling the Sellers to receive up to $35,000,000 in additional cash consideration upon the achievement of two FDA regulatory milestones. The earnout milestones, their associated payment amounts, and the applicable deadlines are as follows:
The Earnout Period runs from the Closing Date (anticipated to be October 31, 2024) through June 30, 2027 — a period of approximately 32 months. An Earnout Escrow Reserve of $2,500,000 will be deposited at closing with Keystone Escrow Services, Inc. to secure Buyer's payment obligations upon milestone achievement. The earnout escrow is not a cap on earnout payments but rather a mechanism to ensure that funds are readily available for prompt payment upon milestone achievement, reducing the Sellers' counterparty risk.
The earnout structure allocates the greater share of earnout value ($20,000,000) to Milestone 1, reflecting the more advanced development status and greater regulatory certainty associated with the Generation 1.0 system. The $15,000,000 allocated to Milestone 2 reflects both the earlier developmental stage and the greater regulatory uncertainty surrounding the Generation 2.0 software module.
F. Assessment of Likelihood and Timing of 510(k) Clearance
Milestone 1: Generation 1.0 — Deadline December 31, 2026. Assessment: Achievable, with moderate risk of delay.
The Generation 1.0 ArthroNav system has a viable path to 510(k) clearance within the Milestone 1 deadline of December 31, 2026. The analysis supporting this assessment is as follows:
Timeline Modeling. If the 510(k) submission is filed in Q2 2025 as targeted by Meridian management, the statutory FDA review period for a traditional 510(k) submission is 90 calendar days from the date of acceptance. However, in practice, the actual elapsed time from 510(k) submission to clearance decision frequently extends well beyond the 90-day statutory clock. Based on published FDA performance data and our experience with comparable submissions, a realistic total elapsed review timeline for a 510(k) submission of this complexity is approximately 6 to 12 months, accounting for the following factors:
• Additional Information (AI) Requests. It is common for FDA to issue one or more Additional Information requests during the 510(k) review process, particularly for submissions involving complex electromechanical systems with integrated software. An AI request pauses the statutory review clock while the applicant prepares and submits responsive information. A single round of AI requests typically adds 2 to 4 months to the overall review timeline; two rounds of AI requests can add 4 to 8 months.
• Acceptance Review. Prior to commencing substantive review, FDA conducts an acceptance review to confirm that the submission is administratively complete. If the submission is found to be deficient, FDA may issue a "Refuse to Accept" ("RTA") letter, which requires the applicant to address the deficiencies and resubmit. An RTA can add several weeks to several months to the timeline.
• FDA Reviewer Workload. Actual review timelines are influenced by the workload and staffing levels of the reviewing division within the Center for Devices and Radiological Health ("CDRH"). Review times can vary based on the volume of submissions pending before the division at any given time.
Assuming a Q2 2025 submission and a 9 to 12 month total review cycle (inclusive of one round of AI requests), clearance could reasonably be expected between Q1 2026 and Q2 2026. This timeline provides a comfortable margin of approximately 6 to 9 months before the December 31, 2026 deadline. Even if the submission is delayed by one to two quarters (to Q3 or Q4 2025) or the review cycle extends to 12 to 15 months, clearance would likely still be achievable within the December 31, 2026 deadline.
Risk Factors. Notwithstanding the generally favorable timeline analysis, several risk factors could adversely impact the likelihood or timing of Milestone 1 achievement:
1. Development Delays. If bench testing, software validation, biocompatibility testing, or electrical safety testing encounters unexpected difficulties or yields unfavorable results requiring design modifications and re-testing, the 510(k) submission date could be pushed beyond Q2 2025. Software validation, in particular, is a complex and time-intensive process that is susceptible to scope expansion and unforeseen issues.
2. FDA Request for Clinical Data. Although FDA indicated during the Q-Sub meeting that clinical data would likely not be required for the Generation 1.0 submission, FDA expressly reserved the right to request clinical data during formal review. If FDA determines that the bench testing data does not adequately demonstrate substantial equivalence and requests clinical data, this would significantly delay the timeline — potentially by 12 to 18 months or more, depending on the scope of the clinical study required, IRB approval timelines, and patient enrollment.
3. Change in FDA Posture. Q-Sub feedback is non-binding, and FDA's review posture can be influenced by changes in reviewer assignment, division leadership, policy guidance documents, or broader agency priorities. A change in FDA's position on the appropriateness of the 510(k) pathway, the acceptability of the predicate device, or the adequacy of the proposed testing protocols could introduce significant uncertainty and delay.
4. Predicate Device Issues. If the identified predicate device (K203847, Marlowe Asset Management Robotic Surgical Assist System) becomes the subject of any post-market action — such as a recall, safety alert, reclassification proceeding, or withdrawal of clearance — it could undermine the substantial equivalence argument and require Meridian to identify an alternative predicate or restructure its submission strategy.
5. Key Personnel Dependency. The ArthroNav development program is heavily dependent on Dr. Raj Subramanian, who serves as CTO and as the principal inventor and technical lead. Loss of Dr. Subramanian's involvement — whether due to departure, reassignment, or other factors — would materially impact the development timeline and the quality of the 510(k) submission. The SPA is expected to include a covenant restricting Buyer from diverting Dr. Subramanian from ArthroNav development without the consent of the Sellers' Representative.
Overall Probability Assessment. We assess the likelihood of achieving Milestone 1 within the December 31, 2026 deadline as moderate to high, subject to the risk factors noted above. The most significant risk is the potential for FDA to request clinical data, which would likely make the deadline unachievable. However, based on the favorable Q-Sub feedback and the current state of development, we view this scenario as a low-probability (but high-impact) risk.
Milestone 2: Generation 2.0 Software Module — Deadline June 30, 2027. Assessment: More uncertain; tighter timeline with greater technical and regulatory risk.
The Generation 2.0 ArthroNav Software Module for Real-Time Cartilage Mapping presents a more challenging regulatory pathway analysis, reflecting both the earlier stage of development and the greater regulatory uncertainty identified during the Q-Sub meeting.
Development Stage. The Generation 2.0 cartilage mapping software module is in an earlier stage of development compared to the Generation 1.0 system. The proprietary real-time cartilage thickness mapping algorithms are still under active refinement, and additional preclinical testing — including cadaveric validation studies — is required before formal verification and validation activities can commence. The technical complexity of the cartilage mapping algorithms, which must accurately generate real-time three-dimensional maps of articular cartilage thickness from intraoperative data, presents significant engineering challenges. The algorithms are maintained as trade secrets (rather than being covered by the issued patent), which introduces additional IP considerations that are being evaluated by the IP due diligence team.
Regulatory Pathway Uncertainty. FDA's Q-Sub feedback on the Generation 2.0 module was less definitive than its feedback on the Generation 1.0 system. Specifically, FDA did not provide a clear determination as to whether the cartilage mapping software module could be submitted as a supplement to the Generation 1.0 510(k) or whether it would require a separate, standalone 510(k) submission. This determination hinges on whether the software module introduces a "new intended use" or "significantly different technology" compared to the cleared Generation 1.0 platform — a question that cannot be fully resolved until the module's design and intended use profile are more clearly defined. If the Generation 2.0 module requires a separate 510(k), a new predicate device analysis may be needed, and the review timeline would run independently of (and in addition to) the Generation 1.0 clearance timeline.
Timeline Compression. The June 30, 2027 deadline for Milestone 2 provides only approximately six months after the Milestone 1 deadline of December 31, 2026. This compressed timeline presents significant challenges:
• If Generation 1.0 clearance is achieved near the December 31, 2026 deadline (rather than earlier), there would be minimal time to submit and obtain clearance for the Generation 2.0 module before the June 30, 2027 deadline.
• If the Generation 2.0 module requires a separate 510(k) (rather than a supplement), the submission preparation, FDA acceptance review, substantive review, and potential AI request cycles would need to be completed within the remaining time — a challenging proposition under the most favorable assumptions.
• The Generation 2.0 submission is logically dependent on Generation 1.0 clearance as a foundation, meaning that delays in Milestone 1 would cascade into the Milestone 2 timeline.
Risk Factors. In addition to the general risk factors applicable to Milestone 1, the following additional risk factors bear specifically on Milestone 2:
1. Technical Maturity. The cartilage mapping algorithms are still under active development. There is inherent uncertainty regarding whether the algorithms will perform with sufficient accuracy and reliability to support a 510(k) submission within the contemplated timeline.
2. Potential Need for Clinical Data. If FDA views the real-time cartilage mapping software as introducing a new intended use — for example, as a diagnostic tool for assessing cartilage condition rather than merely a navigation aid — FDA may require clinical data to support the 510(k) submission. This would likely make the June 30, 2027 deadline unachievable.
3. Short Window Between Milestones. As noted above, the six-month window between the Milestone 1 and Milestone 2 deadlines provides very little margin for delays or complications.
4. Dependence on Generation 1.0 Clearance. The Generation 2.0 submission strategy is predicated on leveraging the Generation 1.0 clearance as a foundation. If Generation 1.0 clearance is delayed, the cascading impact on the Generation 2.0 timeline could be significant.
Overall Probability Assessment. We assess the likelihood of achieving Milestone 2 within the June 30, 2027 deadline as moderate, with a meaningful risk that this milestone may not be achieved by the deadline even if Milestone 1 is timely achieved. The combination of earlier-stage development, regulatory pathway uncertainty, and timeline compression creates a more challenging risk profile compared to Milestone 1. The deal team should consider whether the SPA should include mechanisms to address a scenario in which Milestone 1 is achieved but Milestone 2 is not — for example, an extension of the Milestone 2 deadline upon achievement of Milestone 1, or a partial payment structure for progress toward Milestone 2.
G. Buyer Covenant Considerations Related to Earnout
The SPA is expected to include several covenants governing the Buyer's obligations with respect to the ArthroNav program during the Earnout Period. Based on the current draft term sheet and our discussions with the deal team, the key covenants are as follows:
1. Commercially Reasonable Efforts. The Buyer will be required to use "commercially reasonable efforts" to pursue the 510(k) submissions for both the Generation 1.0 and Generation 2.0 ArthroNav products during the Earnout Period. The definition of "commercially reasonable efforts" in the earnout context is a critical negotiation point. The Sellers will likely seek a definition that imposes affirmative obligations on the Buyer to devote specified resources and attention to the ArthroNav program, while the Buyer will seek a definition that preserves flexibility to exercise reasonable business judgment in response to changing circumstances.
2. Minimum R&D Budget. The Buyer must maintain a dedicated research and development budget of no less than $6,000,000 per year for the ArthroNav program during the Earnout Period. This covenant provides a quantifiable floor on the Buyer's investment in the ArthroNav program and serves as an objective benchmark for compliance.
3. Key Personnel Protection. The Buyer may not divert Dr. Raj Subramanian from ArthroNav development activities without the prior consent of the Sellers' Representative (Dr. Marcus Ellsworth). This covenant is designed to protect against the risk that the Buyer would reassign Dr. Subramanian to other projects, thereby undermining the ArthroNav development timeline.
4. Non-Abandonment. The Buyer may not discontinue or abandon the ArthroNav program without providing 90 days' prior written notice to the Sellers' Representative. This covenant provides the Sellers' Representative with advance notice of any decision to discontinue the program and an opportunity to engage in dialogue with the Buyer before such a decision is implemented.
5. Dispute Resolution. Disputes regarding earnout achievement are to be resolved by binding expert determination conducted by an independent regulatory consultant mutually selected by the parties. If the parties are unable to agree on the selection of the independent regulatory consultant within 30 days, the consultant will be appointed by the American Arbitration Association. This dispute resolution mechanism is designed to provide a faster and more specialized resolution process than traditional litigation or arbitration.
Recommendation. Solstice should implement robust internal tracking and documentation procedures to demonstrate ongoing compliance with these covenants throughout the Earnout Period. This should include maintaining detailed records of R&D budget expenditures, Dr. Subramanian's time allocation, ArthroNav development activities, FDA correspondence, and all decisions related to the ArthroNav program's regulatory strategy. Failure to maintain adequate documentation could expose the Buyer to claims by the Sellers' Representative that the Buyer failed to use commercially reasonable efforts or otherwise frustrated the earnout — claims that, even if ultimately unsuccessful, would be costly and disruptive to defend. We recommend that Solstice designate a specific individual (ideally Dr. Niamh Cassidy or a member of her team) as the internal "earnout compliance officer" responsible for coordinating documentation and reporting.
VII. PENDING INTELLECTUAL PROPERTY LITIGATION — IMPACT ON REGULATORY POSTURE
One pending patent infringement matter is relevant to the Transaction. In Hartwell Orthopedic Solutions, Inc. v. Meridian Surgical Technologies, Inc., Civil Action No. 2:23-cv-04817, filed in the United States District Court for the Eastern District of Pennsylvania, the plaintiff Hartwell Orthopedic Solutions, Inc. ("Hartwell") alleges that Meridian's powered shaver blade products infringe U.S. Patent No. 10,891,224, which covers a specific powered shaver blade design for arthroscopic debridement applications.
The Hartwell litigation relates exclusively to Meridian's powered shaver product line and does not involve the ArthroNav platform, the PrecisionBlade product line, or any of the intellectual property underlying the ArthroNav development program. There is no indication that the Hartwell patent (U.S. Patent No. 10,891,224) or the allegations in the Hartwell litigation pose a direct obstacle to FDA clearance of the ArthroNav platform. FDA's 510(k) review process evaluates safety and effectiveness and does not adjudicate patent disputes; accordingly, the pendency of patent litigation does not, in itself, impede or delay FDA review.
Meridian's outside litigation counsel in the Hartwell matter is Braddock & Lyle LLP (Philadelphia, PA), with Deborah Lyle serving as lead counsel. Meridian has filed a motion for summary judgment of non-infringement, which is currently pending before the Court. Based on the litigation files reviewed in the Data Room and the assessment provided by Meridian's litigation counsel, Meridian's potential damages exposure in the event of an adverse outcome is estimated at $2.5 million to $5.0 million. This estimate is based on a reasonable royalty analysis and does not account for the possibility of enhanced damages, which Meridian's counsel considers unlikely given the absence of willful infringement.
Regulatory Relevance. While patent disputes do not directly impede FDA review, an adverse outcome in the Hartwell litigation could have indirect regulatory relevance. Specifically, if the Court were to enter a judgment of infringement and issue an injunction, Meridian could be required to implement a design-around for the affected powered shaver blade products. A design-around effort could divert engineering and regulatory resources from the ArthroNav program, potentially impacting the ArthroNav development timeline. However, based on the current posture of the litigation — including Meridian's pending summary judgment motion and the assessment of Meridian's litigation counsel — this scenario does not appear to be a near-term risk. The Hartwell litigation is being addressed in greater detail in the Legal Due Diligence Report being prepared by the Calderwood & Harkness deal team.
VIII. REGULATORY RISKS AND RECOMMENDATIONS
A. Summary of Key Regulatory Risks
Based on the regulatory due diligence review described in this memorandum, we have identified the following key regulatory risks that should be considered in connection with the Transaction:
1. ArthroNav Timeline Risk. Delays in bench testing, software validation, biocompatibility testing, electrical safety testing, or 510(k) submission preparation could push the ArthroNav submission and clearance dates beyond the earnout milestone deadlines. This risk is particularly acute for Milestone 2 (Generation 2.0 software module, due June 30, 2027), which has a tighter timeline and is in an earlier stage of development. The compressed six-month window between the Milestone 1 and Milestone 2 deadlines exacerbates this risk, as any delay in Milestone 1 would cascade into the Milestone 2 timeline.
2. FDA Position Changes. Q-Sub feedback is non-binding, and FDA retains discretion to take a different position during the formal 510(

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IV. FDA INSPECTION HISTORY AND COMPLIANCE STATUS

V. QUALITY MANAGEMENT SYSTEM AND ISO 13485:2016 CERTIFICATION

VIII. REGULATORY RISKS AND RECOMMENDATIONS

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