Arthrocare Corporation

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Arthrocare Corporation Securities Settlement

The lawsuit was settled for $12 million in cash. There is no claim form to file in this settlement. The following is a summary of the proceedings in this lawsuit: ‘On February 2, 2014, ArthroCare entered into an agreement and plan of merger (the Merger Agreement) with Smith & Nephew, pursuant to which Smith & Nephew agreed to acquire (and ultimately acquired) ArthroCare (the Merger) for $48.25 in cash per share of ArthroCare common stock (the Merger Consideration). Concurrently with the execution of the Merger Agreement, Smith & Nephew entered into voting agreements with the Individual Defendants (as defined below) and OEP (the Voting Agreements), which agreements required, among other things, that the Individual Defendants and OEP vote all of his, her, or its shares of ArthroCare stock in favor of the adoption and approval of the Merger Agreement and approval of the Merger and other transactions contemplated by the Merger Agreement. On February 3, 2014, Smith & Nephew issued a press release announcing the Merger and the Merger Agreement. Beginning on February 4, 2014, eight class action and/or derivative lawsuits were filed in the Court against various combinations of Defendants (as defined below) and other parties that are not named as Defendants (as defined below) in the Action, challenging and seeking to enjoin the Merger on various grounds: King v. ArthroCare Corp., C.A. No. 9313-VCL; Rybacki v. ArthroCare Corp., C.A. No. 9336-VCL; Dixon v. ArthroCare Corp., C.A. No. 9347-VCL; Machcinski v. ArthroCare Corp., C.A. No. 9344-VCL; State-Boston Retirement Sys. v. Fitzgerald, C.A. No. 9346-VCL; Peterson v. ArthroCare Corp., C.A. No. 9374-VCL; Anderson v. ArthroCare Corp., C.A. No. 9426-VCL; and Orovitz v. Fitzgerald, C.A. No. 9450-VCL. The parties to the consolidated Action include: (i) Co-Lead Plaintiffs; and (ii) defendants ArthroCare Corporation (ArthroCare); David Fitzgerald, Christian P. Ahrens, Gregory A. Belinfanti, Barbara D. Boyan, James Foster, Terrence Geremski, Tord B. Lendau, Peter L. Wilson, and Fabiana Lacerca-Allen (collectively, the Individual Defendants); Smith & Nephew plc, Smith & Nephew, Inc., and Rosebud Acquisition Corporation (collectively, Smith & Nephew); JPMorgan Chase & Co. and J.P. Morgan Securities LLC (together, JPM); and One Equity Partners LLC (with OEP AC Holdings, LLC, OEP, and, together with ArthroCare, the Individual Defendants, Smith & Nephew, and JPM, Defendants, and together with Co-Lead Plaintiffs, the Parties, each a Party). Beginning on February 12, 2014, plaintiffs in the various actions filed motions to expedite proceedings and served on Defendants and third parties various discovery requests and subpoenas duces tecum and ad testificandum. On February 25, 2014, March 14, 2014, and March 19, 2014, the Court entered orders consolidating the eight complaints under the caption In re ArthroCare Corp. Stockholder Litigation, Consol. C.A. No. 9313-VCL. On March 6, 2014, ArthroCare filed a preliminary proxy statement on Schedule 14A (the Preliminary Proxy) with the United States Securities and Exchange Commission (the SEC). On March 14, 2014, the Court entered an order that, among other things, designated plaintiffs State-Boston Retirement System, Anderson, and Halasey as Co-Lead Plaintiffs and the law firms of Labaton Sucharow LLP, Prickett, Jones & Elliott, P.A., and Kessler Topaz Meltzer & Check, LLP as Co-Lead Counsel. On March 18, 2014, Co-Lead Plaintiffs filed a Verified Consolidated Class Action and Derivative Complaint (the Complaint). The Complaint alleges, among other things, that the Individual Defendants breached their fiduciary duties to ArthroCare stockholders by approving the Merger and the Merger Agreement and that ArthroCare, Smith & Nephew, OEP, and JPM aided and abetted such breaches. The Complaint further alleges that: (a) OEP breached, and that the Individual Defendants failed to enforce, certain standstill provisions (the Standstill) contained in the August 14, 2009 Securities Purchase Agreement (the SPA) pursuant to which OEP acquired shares of ArthroCare stock; (b) the Merger violates 8 Del. C. § 203 (Section 203) because Smith & Nephew allegedly became an owner of 15% or more of ArthroCare voting securities and an interested stockholder in ArthroCare (as those terms are defined in Section 203) by engaging affiliates of OEP, J.P. Morgan Securities LLC and a JPM subsidiary, as its financial advisor and loan underwriter, respectively, in connection with the Merger, and thereby allegedly entering into certain agreements, arrangements, and understandings with those entities; and (c) the Preliminary Proxy contained materially misleading information or omitted material information regarding the Merger. On March 21, 2014, the Court held a telephonic scheduling conference at which it scheduled a hearing for April 28, 2014, to hear argument on Co-Lead Plaintiffs anticipated motion to preliminarily enjoin the Merger. The Court also scheduled an expedited trial for April 28-29, 2014, on Co-Lead Plaintiffs claims that the Merger, if consummated, would violate Section 203. Beginning on March 21, 2014, Defendants commenced the expedited and rolling production of documents. On March 23, 2014, the Parties executed a stipulation and proposed order to govern discovery in the Action, which proposed order was entered by the Court on March 24, 2014 (the Confidentiality Order). On March 29, 2014, the Parties executed a scheduling stipulation and order that provided for, among other things, the substantial completion of document discovery by April 7, 2014; the completion of fact depositions by April 17, 2014; and briefing from April 16, 2014 to April 26, 2014 on Co-Lead Plaintiffs anticipated motion for preliminary injunction and the Parties arguments with respect to Co-Lead Plaintiffs claims based on Section 203, which scheduling stipulation and order was entered by the Court on March 31, 2014. Plaintiffs served three sets of document requests and one set of interrogatories on Defendants. Defendants responded to all of these requests and, along with third parties, produced more than 192,000 pages of documents. Co-Lead Plaintiffs represent that Co-Lead Counsel reviewed these materials and retained financial experts to analyze and provide guidance on Co-Lead Plaintiffs claims for damages and the fairness of the Merger Consideration. In accordance with the scheduling stipulation and order, the Parties scheduled multiple depositions, starting with two depositions scheduled for April 9, 2014, with an additional eight depositions contemplated thereafter. On April 3, 2014, ArthroCare filed a definitive proxy statement on Schedule 14A (the Definitive Proxy) with the SEC. The Definitive Proxy included, among other things, certain revised and additional disclosures concerning the Merger (the Supplemental Disclosures). Defendants (to the extent applicable to any given Defendant) acknowledge that the pendency and prosecution of the Action were causal factors underlying ArthroCare decision to include the Supplemental Disclosures in the Definitive Proxy. Co-Lead Plaintiffs and their counsel believe that, with the addition of the Supplemental Disclosures, the Definitive Proxy is materially complete. In late March 2014, counsel for certain of the Parties began arms-length discussions regarding potential grounds to resolve the Action. On April 9, 2014, the Parties entered into a memorandum of understanding (the MOU), which reflected the Parties agreement with respect to the terms of the Settlement and which contemplated that the Settlement would be reflected in greater detail in a definitive agreement.’

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