Candela Corporation engages in the development and commercialization of laser and light-based systems that allow physicians and personal care practitioners to treat various cosmetic and medical conditions worldwide.

According to a press release dated April 02, 2008, the Complaint charges Candela and certain of its officers and directors with violations of the Securities Exchange Act of 1934.

The Complaint alleges that during the Class Period, Defendants issued materially false and misleading statements regarding the Company’s business and financial results. According to the Complaint, the true facts, which were known by Defendants but concealed from the investing public, were as follows: (i) that the Company was quickly losing market share to competitors as it lacked a competitive multi-configuration/multi-application device; and (ii) that the Company had received communications from Palomar Medical Technologies, Inc. (“Palomar”) regarding the alleged infringement of Palomar’s patents by Candela, which was material information for investors as Palomar had made it a pattern and practice of suing the cosmetic laser industry for infringement and had successfully forced numerous competitors to license its technology and, at a minimum, the prospect of patent litigation presented increased costs to the Company; and (iii) based on the foregoing, Defendants lacked a reasonable basis for their positive statements about the Company, its earnings and prospects.

On August 21, 2006, after the close of the market, Candela issued a press release announcing its financial results for its fourth fiscal quarter and fiscal year 2006. For the fourth quarter, the Company reported net income of $0.10 per share – far below analysts’ earnings expectations of $0.23 per share. In response to the announcement, the price of Candela stock declined from $14.49 per share to $10.33 per share on extremely heavy trading volume.

According to the Company’s FORM 10-Q for the quarterly period ended December 27, 2008, on April 2 and April 22, 2008, respectively, two substantially similar putative class action lawsuits, entitled Western Pa. Elec. Employees Pension Fund, et al., 1:08-cv-10551-DPW and Caballero v. Candela Corp., et al., Civ. No. 1:08-cv-10673-DPW, were filed against Candela and two of its officers in the United States District Court for the District of Massachusetts purporting to assert claims for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seeking, among other things, compensatory damages and reasonable costs and expenses. On July 10, 2008, the court consolidated the cases and appointed lead Plaintiff and lead Counsel. On August 25, 2008, lead Plaintiff filed a consolidated amended Complaint purporting to be brought on behalf of all open-market purchasers of Candela common stock from November 1, 2005 through August 21, 2006, and alleging that Candela made certain false and misleading statements to investors expressing optimism regarding its financial condition and failed to disclose (i) the possibility that Palomar, one of Candela’s leading competitors, would initiate patent enforcement litigation against Candela and (ii) that Candela was purportedly losing market share to its competitors.

On January 16, 2009, the parties to the Consolidated Class Action and the Derivative Action filed stipulations of settlement, together with supporting documents, in the United States District Court for the District of Massachusetts and Massachusetts Superior Court for Middlesex County, respectively. Under the terms of the proposed Consolidated Class Action settlement, Candela will pay $3.85 million into a settlement fund for the benefit of the class members. Under the terms of the proposed Derivative Action settlement, Candela will pay for attorneys’ fees and has agreed to adopt certain corporate governance changes. Candela’s insurer will fund all payments contemplated by the proposed settlements. Neither the Company nor any of the individual Defendants admit any wrongdoing under either of the proposed settlements, which are being entered into in return for the release of all claims. The proposed settlements were subject to preliminary and final approval by the respective courts.

On June 23, 2009, the settlement hearing was held before Judge Douglas P. Woodlock. Judge Woodlock approved the settlement, approved the plan of distribution of settlement proceeds and awarded Plaintiffs' Counsel's attorneys' fees and expenses. The action was dismissed with prejudice.