A Medical Device Daily

PainCare Holdings (Orlando, Florida), a provider of medical and surgical solutions and services to treat pain, reported reaching an agreement, in principle, to settle a shareholder derivative lawsuit pending before the U.S. District Court for the Middle District of Florida, brought against certain of the company’s officers and directors in connection with the restatement of financials reported earlier this year.

PainCare said that the proposed settlement provides for strengthening PainCare’s corporate governance practices, with the terms approved by a special committee of the company’s board and the full board. The agreement is subject to final documentation and court approval.

The settlement includes no admission of liability by PainCare or any of the officers Thomas Crane, chairman of the special committee and an independent director, said, “Following an in-depth investigation by the special committee of independent directors, it is clear that company officials named in the lawsuit acted professionally, responsibly and with the highest fiduciary care. PainCare’s officers were timely in their response to changes and new interpretations of prevailing accounting rules and regulations, resulting in the need to revise the company’s financial reporting practices. This process has yielded what we believe to be a state-of-the-art corporate governance platform that is sure to greatly enhance board stewardship on a moving forward basis.”

The committee was assisted by independent counsel Alan Stone of Morris, Nichols, Arsdt & Tunnell.

Randy Lubinsky, CEO of PainCare, said the result of the lawsuit “empowers PainCare with a much stronger framework on which we can progress our business plan and successfully pursue future growth opportunities.”

Among the settlement terms and conditions:

• board expansion with the appointment of a new board member to provide additional governance expertise and public company experience;

• adoption of amended corporate by-laws mandating that directors will not serve on more than three corporate boards, including that of PainCare;

• amendment of company bylaws to require board members to attend a minimum of 75% of all combined board and committee meetings;

• amendment of bylaws to require that in the event of a company-sponsored stock repurchase program, no board member can purchase or sell shares without the approval of the majority of the board members;

• amendment of bylaws to stipulate that no options previously issued to any individual be subject to repricing without expressed authorization of a majority of the independent, non-employee board members;

• either external legal counsel or internal legal counsel to be responsible for conducting an annual investigation of PainCare’s governance and board stewardship to ensure compliance with industry practices, the results reported to the board.

William Federman of Federman & Sherwood (Dallas/ Oklahoma City, Oklahoma), the shareholders’ derivative counsel, said that the agreement “reflects PainCare’s desire and intent to adopt greatly enhanced policies and practices to protect and promote the best interests of its shareholders. We, too, are pleased with the outcome and expect that PainCare and its shareholders will greatly benefit from the Company’s enhanced corporate governance practices.”

Through a network of acquired or managed physician practices and ambulatory surgery centers, PainCare provides diagnosis and treatment of pain stemming from neurological and musculoskeletal conditions and disorders. Through its Amphora subsidiary it provides advanced intraoperative monitoring and interpretation services to hospitals and surgeons; through its Caperian subsidiary it offers medical real estate and development services.