Item 1.01
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Entry into a Material Definitive Agreement.
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On October 3, 2017, Wright Medical Technology, Inc.
(WMT), a wholly-owned subsidiary of Wright Medical Group N.V. (the Company), and the Court-appointed attorneys representing plaintiffs in the
metal-on-metal
hip litigation known as
In Re: Wright Medical Technology, Inc., CONSERVE
®
Hip
Implant Products Liability Litigation
, MDL No. 2329 (MDL) and
In re: Wright Hip System Cases
, Judicial Council Coordination Proceeding No. 4710 (JCCP) agreed on a comprehensive settlement intended to
resolve substantially all remaining
metal-on-metal
hip claims pending or tolled in the MDL and JCCP that were not settled in the previously disclosed Master Settlement
Agreement dated November 2, 2016 (the MSA). The comprehensive settlement is evidenced by two Settlement Agreements, dated October 3, 2017 (each, a Settlement Agreement and, collectively, the Settlement
Agreements). The comprehensive settlement is contingent on availability of new insurance proceeds from WMTs insurance carriers by December 31, 2017 totaling at least $35 million.
WMTs maximum liability under the Settlement Agreements will not exceed $89.75 million ($35 million of which would be funded from insurance
proceeds if the above described contingency is met). Claimants who had bilateral revision surgeries will be counted as two claims, but only to the extent both claims separately satisfy all eligibility criteria. The total settlement amount is
allocated as follows:
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1.
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Tranche 1: $7.9 million to settle 49 additional claims that would have been eligible to participate in the MSA but for the claim limit contained therein, which amount will be funded as such claims are settled;
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2.
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Tranche 2: $5.1 million to settle 39 eligible claims of the oldest claimants (by age), which amount will be funded as such claims are settled; and
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3.
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Tranche 3: $76.75 million to settle all remaining eligible claims pending or tolled in the MDL and JCCP existing as of June 30, 2017, and up to 30 new eligible claims arising between July 1, 2017 and
October 1, 2017, which amount will be funded as follows: $45 million by June 30, 2018 and $31.75 million by September 30, 2019. The Tranche 3 settlement is contingent upon WMT receiving at least $35 million of new
insurance payments from applicable carriers by December 31, 2017.
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The actual total settlement amount may be less, but not more,
depending on several factors including the mix of products and claimants in the final settlement pool and the number of claimants electing to
opt-out
of the settlement, as discussed below.
Neither Settlement Agreement requires WMT to escrow any amount to secure its obligations thereunder; however, as additional security, the Company has agreed
to guaranty WMTs obligations under the Settlement Agreements.
Each Settlement Agreement includes a 95%
opt-in
requirement, meaning WMT may terminate either Settlement Agreement prior to any settlement disbursement if claimants holding greater than 5% of eligible claims in Tranches 1 and 2, collectively, or
claimants holding greater than 5% of eligible claims in Tranche 3, elect to
opt-out
of the settlement. No funding of any individual plaintiff settlement under either Settlement Agreement will occur
until the 95%
opt-in
requirement for such agreement has been satisfied or waived. The Settlement Agreements include a methodology for replacement of claims that
opt-out
of the settlement with claims filed in the future, or reduction of the total settlement amount if an insufficient number of claims exist. The Settlement Agreements also include a methodology for replacing a claim initially deemed an eligible claim
that is subsequently determined to be ineligible due to failure to meet the eligibility criteria in the Settlement Agreements.
The Settlement Agreements contain specific eligibility requirements and establish procedures for proof and
administration of claims, execution of individual settlement agreements, determination of the final total settlement amount, and funding of individual settlement amounts by WMT. Eligibility requirements include, without limitation, that the claimant
has a claim pending or tolled in the MDL or JCCP and (subject to certain exceptions) that the claimant has undergone a revision surgery.
The Settlement
Agreements are contingent upon the dismissal without prejudice of pending and tolled claims in the MDL and JCCP that do not meet the inclusion criteria of the MDL or JCCP. Additionally, the Settlement Agreements are contingent upon the dismissal
without prejudice of all remaining
non-revision
claims in the MDL and JCCP, pursuant to a tolling agreement that tolls applicable statutes of limitation and repose for three months from a revision of the
products or determination that a revision of the products is necessary. The parties are in the process of jointly coordinating the closure of the MDL and JCCP to new claims.
As of October 2, 2017, there were approximately 629 claims pending or tolled in the MDL and JCCP that were eligible, and approximately 710 claims (of
which 630 are
non-revisions)
that were ineligible, to participate in the comprehensive settlement. Additionally, as of October 2, 2017, there were approximately 47 claims pending in U.S. courts other than
the MDL and JCCP and approximately 65 claims pending in
non-U.S.
courts that will not be included under the Settlement Agreements.
The Settlement Agreements were entered into solely as a compromise of the disputed claims being settled and are not evidence that any claim has merit nor are
they an admission of wrongdoing or liability by WMT. WMT will continue to vigorously defend
metal-on-metal
hip claims not settled pursuant to the Settlement Agreements.
The foregoing represents only a summary of the material terms of the Settlement Agreements, does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Settlement Agreements, which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form
8-K,
and are incorporated by reference herein.