Exhibit 10.2
SETTLEMENT AGREEMENT
I. PARTIES
This Settlement Agreement (“Agreement”) is entered into among the United States
of America, acting through the United States Department of Justice and the
United States Attorney’s Office for the District of Colorado, on behalf of the
Office of Inspector General (“OIG-HHS”) of the Department of Health and Human
Services (“HHS”), (collectively the “United States”); and the Spectranetics
Corporation (“Spectranetics”) (hereafter referred to as “the Parties”), through
their authorized representatives.
II. PREAMBLE
As a preamble to this Agreement, the Parties agree to the following:
A. At all relevant times, Spectranetics, a Delaware corporation headquartered in
Colorado Springs, Colorado, distributed, marketed and sold the following medical
devices in the United States: the CVX-300 Medical Laser and the CliRpath Turbo
Laser Catheter, the TURBO Elite Laser Ablation Catheter, and the TURBO-Booster
Laser Guide Catheter (collectively the “Subject Medical Devices”).
B. In 2008, the United States Attorney for the District of Colorado and the
United States Department of Justice, Office of Consumer Litigation, along with
the Federal Food and Drug Administration (“FDA”), commenced an investigation of
Spectranetics (the “Federal Criminal Investigation”), and, on September 4, 2008
executed a search warrant at the company’s headquarters in Colorado Springs,
Colorado.

 

 

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C. Spectranetics has entered into a non-prosecution agreement with the United
States Attorney for the District of Colorado, dated of even date herewith, to
conclude the Federal Criminal Investigation of Spectranetics.
D. The United States contends that Spectranetics engaged in the following
conduct (hereinafter referred to as the “Covered Conduct”). The United States
contends that:
1. From January 1, 2003, through June 30, 2005, Spectranetics conducted a
clinical registry, known as CORAL, but failed to ensure that the registry
complied with Federal regulations relating to the protection of human subjects
and to conduct all aspects of the CORAL clinical registry according to the
appropriate standards of scientific integrity, including the requirement to
obtain fully-informed consent of all participants pursuant to 45 C.F.R. §
46.116.
2. Spectranetics failed to report to the FDA serious adverse events related to
its medical devices and experienced by participants in the CORAL clinical
registry and a follow-up clinical registry, known as CORAL REEF, as required
under 21 U.S.C. § 360i and 21 C.F.R. § 803, and failed to furnish all
information and material required in its post-approval annual report to the FDA
as required by 21 U.S.C. § 360i and 21 C.F.R. §§ 814.82(a)(7) and
814.84(b)(2)(i);
3. In 2005, Spectranetics imported surgical guidewires manufactured by Future
Medical Designs, Ltd. in Japan into the United States contrary to law (18 U.S.C.
§ 545 and 21 USC. §§ 331(a)) and provided them to physicians for use in patients
despite the fact that such devices had never been approved by the FDA and were
not the subject of an Investigational Device Exemption or otherwise approved by
the FDA;
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Settlement Agreement
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4. In 2007, Spectranetics imported percutaneous transluminal angioplasty balloon
catheters manufactured by Bavarian Medizin Technologie GmbH in Germany into the
United States contrary to law (18 U.S.C. § 545 and 21 USC. §§ 331(a)) and
provided them to physicians for use in patients despite the fact that such
devices had never been approved by the FDA and were not the subject of an
Investigational Device Exemption or otherwise approved by the FDA; and,
5. From July 1, 2007, through September 4, 2008, Spectranetics promoted the
Subject Medical Devices for certain procedures involving infra-inguinal in-stent
restenosis, a use that has not been approved by the FDA, in violation of the
Food Drug & Cosmetic Act (21 U.S.C. §§ 331(a) and 352(f)).
E. The United States alleges that Spectranetics caused certain false and/or
fraudulent claims to be submitted to the Medicare program, Title XVIII of the
Social Security Act, 42 U.S.C. §§ 1395-1395iii, relating to the Covered Conduct.
F. The United States contends that it has certain civil claims against
Spectranetics, as specified in Section III, Paragraph 2, below, for engaging in
the Covered Conduct.
G. The United States also contends that it has certain administrative claims
against Spectranetics as specified in Section III, Paragraph 3, below, for
engaging in the Covered Conduct.
H. Except as otherwise expressly provided in the non-prosecution agreement
referenced in Paragraph C, Spectranetics denies the contentions of the United
States. This Agreement is made in compromise of disputed claims. This Agreement
is neither an admission of facts nor liability nor other expression reflecting
upon the merits of the dispute by Spectranetics nor a concession by the United
States that its claims are not well founded.
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Settlement Agreement
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I. To avoid the delay, expense, inconvenience, and uncertainty of protracted
litigation of these claims, the Parties mutually desire to reach a full and
final settlement pursuant to the terms and conditions set forth below.
III. TERMS AND CONDITIONS
1. Spectranetics agrees to pay to the United States the sum of Four Million Nine
Hundred Thousand Dollars ($4,900,000.00) (the “Settlement Amount”). The
Settlement Amount shall be paid by electronic funds transfer pursuant to written
instructions to be provided by the United States Attorney’s Office for the
District of Colorado. Spectranetics agrees to make this electronic funds
transfer no later than five (5) working days after the Effective Date of this
Agreement.
2. Subject to the exceptions in Paragraph 5 below (concerning excluded claims),
in consideration of the obligations of Spectranetics in this Agreement,
conditioned upon Spectranetics’s full payment of the Settlement Amount, and
subject to Paragraph 13 below (concerning bankruptcy proceedings commenced
within 91 days of the Effective Date of this Agreement or any payment made under
this Agreement), the United States (on behalf of itself, its officers, agents,
agencies, and departments) agrees to release Spectranetics from any civil or
administrative monetary claim the United States has or may have for the Covered
Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Civil Monetary
Penalties Law, 42 U.S.C. § 1320a-7a; the Program Fraud Civil Remedies Act, 31
U.S.C. §§ 3801-12; or the common law theories of payment by mistake, unjust
enrichment, and fraud. No individuals are released by this Agreement.
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Settlement Agreement
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3. In consideration of the obligations of Spectranetics set forth in this
Agreement, and the Corporate Integrity Agreement entered into between OIG-HHS
and Spectranetics, conditioned on Spectranetics’s payment in full of the
Settlement Amount, and subject to Paragraph 13 below (concerning bankruptcy
proceedings commenced within 91 days of the Effective Date of this Agreement or
any payment under this Agreement), the OIG-HHS agrees to release and refrain
from instituting, directing, or maintaining any administrative action seeking
exclusion from the Medicare, Medicaid, and other Federal health care programs
(as defined in 42 U.S.C: § 1320a-7b(f)) against Spectranetics under 42 U.S.C. §
1320a-7a (Civil Monetary Penalties Law), or 42 U.S.C. § 1320a-7(b)(7)
(permissive exclusion for fraud, kickbacks or other prohibited activities), for
the Covered Conduct, except as reserved in Paragraph 6 (concerning excluded
claims), below, and as reserved in this Paragraph. The OIG-HHS expressly
reserves all rights to comply with any statutory obligations to exclude
Spectranetics from Medicare, Medicaid, or other Federal health care programs
under 42 U.S.C. § 1320a-7(a) (mandatory exclusion) based upon the Covered
Conduct and/or the Federal Criminal investigation. Nothing in this Paragraph
precludes the OIG-HHS from taking action against entities or persons, or for
conduct and practices, for which claims have been reserved in Paragraph 4,
below.
4. Notwithstanding any term of this Agreement, specifically reserved and
excluded from the scope and terms of this Agreement as to any entity or person
(including Spectranetics) are the following claims of the United States:
(a) Any criminal, civil, or administrative liability arising under Title 26,
U.S. Code (Internal Revenue Code);
(b) Any criminal liability;
(c) Except as explicitly stated in this Agreement, any administrative liability,
including mandatory exclusion from Federal health care programs;
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Settlement Agreement
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(d) Any liability to the United States (or its agencies) for any conduct other
than the Covered Conduct;
(e) Any liability based upon such obligations as are created by this Agreement;
(f) Any liability for express or implied warranty claims or other claims for
defective or deficient products and services, including quality of goods and
services;
(g) Any liability for personal injury or property damage or for other
consequential damages arising from the Covered Conduct;
(h) Any liability for failure to deliver items or services due; or

(i) Any liability of individuals, including officers and employees.
5. Spectranetics waives and shall not assert any defenses it may have to any
criminal prosecution or administrative action relating to the Covered Conduct
based in whole or in part on a contention that, under the Double Jeopardy Clause
of the Fifth Amendment of the Constitution, or the Excessive Fines Clause of the
Eighth Amendment of the Constitution, this Agreement bars a remedy sought in
such criminal prosecution or administrative action. Nothing in this paragraph or
any other provision of this Agreement constitutes an agreement by the United
States concerning the characterization of the Settlement Amount for purposes of
the Internal Revenue laws, Title 26 of the United States Code.
6. Spectranetics fully and finally releases, waives and discharges the United
States, its agencies, employees, servants, and agents from any claims (including
attorneys’ fees, costs, and expenses of every kind and however denominated) that
Spectranetics has asserted, could have asserted, or may assert in the future
against the United States, its agencies, employees, servants, and agents,
related to or arising from the Covered Conduct or the United States’
investigation of the Covered Conduct.
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Settlement Agreement
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7. Spectranetics agrees to the following:
(a) Unallowable Costs Defined. All costs (as defined in the Federal Acquisition
Regulation, 48 C.F.R § 31.205-47 and in Titles XVIII and XIX of the Social
Security Act, 42 U.S.C. §§ 1395-1395ggg and 1396-1396v, and the regulations and
official program directives promulgated thereunder) incurred by or on behalf of
Spectranetics, its predecessors, parents, divisions, subsidiaries, or
affiliates, and its present or former officers, directors, employees, and agents
in connection with the following shall be “unallowable costs” on all Government
contracts and under Federal health care programs:
(1) the matters covered by this Agreement;
(2) the United States’ audit and civil and any criminal investigation of the
matters covered by this Agreement;
(3) Spectranetics’s investigation, defense, and any corrective actions
undertaken in response to the United States’ audit, civil, and any criminal
investigation in connection with the matters covered by this Agreement
(including attorneys’ fees);
(4) the negotiation and performance of this Agreement;
(5) the payments Spectranetics makes to the United States pursuant to this
Agreement; and
(6) the negotiation of and obligations undertaken pursuant to the CIA to:

  (i)   retain an independent review organization to perform annual reviews as
described in Section III of the CIA; and

  (ii)   prepare and submit reports to the OIG-HHS.

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Settlement Agreement
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However, nothing in this Paragraph 7.a.(6) affects the status of costs that are
not allowable based on any other authority applicable to Spectranetics. (All
costs described or set forth in this Paragraph are hereafter, “Unallowable
Costs.”)
(b) Future Treatment of Unallowable Costs. These Unallowable Costs shall be
separately determined and accounted for by Spectranetics and Spectranetics shall
not charge such Unallowable Costs directly or indirectly to any contracts with
the United States of any State Medicaid program, or seek payment for such
Unallowable Costs through any cost report, cost statement, information
statement, or payment request submitted by Spectranetics or any of its
subsidiaries or affiliates to any Federal health care program.
(c) Treatment of Unallowable Costs Previously Submitted for Payment.
Spectranetics further agrees that, within 90 days of the Effective Date of this
Agreement, it shall identify to applicable Medicare fiscal intermediaries,
carriers, and/or contractors and other Federal health care program fiscal
intermediaries or fiscal agents, any Unallowable Costs (as defined in this
Paragraph) included in payments previously sought from the United States or any
State Medicaid program, including, but not limited to, payments sought in any
cost reports, cost statements, information reports, or payment requests already
submitted by Spectranetics, or any of its subsidiaries or affiliates, and shall
request, and agree, that such cost reports, cost statements, information
reports, or payment requests, even if already settled, be adjusted to account
for the effect of the inclusion of the Unallowable Costs. Spectranetics agrees
that the United States, at a minimum, shall be entitled to recoup from
Spectranetics any overpayment plus applicable interest and penalties as a result
of the inclusion of such Unallowable Costs on previously-submitted cost reports,
information reports, cost statements, or requests for payment.
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Settlement Agreement
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Any payments due after the adjustments have been made shall be paid to the
United States pursuant to the direction of the Department of Justice and/or of
the affected agencies. The United States reserves its rights to disagree with
any calculations submitted by Spectranetics or any of its subsidiaries or
affiliates on the effect of inclusion of Unallowable Costs on Spectranetics’ or
any of its subsidiaries’ or affiliates’ cost reports, cost statements, or
information reports.
(d) Nothing in this Agreement shall constitute a waiver of the rights of the
United States to examine or re-examine Spectranetics’s books and records to
determine that no Unallowable Costs have been claimed in accordance with the
provisions of this Paragraph.
8. Spectranetics agrees to cooperate fully and truthfully with the United
States’ investigation of individuals and entities not released in this
Agreement. Upon reasonable notice, Spectranetics shall encourage and agrees not
to impair the cooperation of its directors, officers, and employees and use
reasonable efforts to make available and encourage the cooperation of its former
directors, officers, and employees for interviews and testimony, consistent with
the rights and privileges of such individuals.
9. This Agreement is intended to be for the benefit of the Parties only. The
Parties do not release any claims against any other person or entity, except to
the extent provided for in Paragraph 10 (Waiver for Beneficiaries paragraph),
below.
10. Spectranetics agrees that it waives and shall not seek payment for any of
the health care billings covered by this Agreement from any health care
beneficiaries or their parents, sponsors, legally responsible individuals, or
third party payors based upon the claims defined as Covered Conduct.
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Settlement Agreement
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11. Spectranetics warrants that it has reviewed its financial situation and that
it is currently solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(1)(B)(ii)(1), and shall remain solvent following its payment to the
United States of the Settlement Amount. Further, the Parties warrant that, in
evaluating whether to execute this Agreement, they (a) have intended that the
mutual promises, covenants, and obligations set forth constitute a
contemporaneous exchange for the new value given to Spectranetics, within the
meaning of 11 U.S.C. § 547(c)(1); and (b) conclude that these mutual promises,
covenants, and obligations do, in fact, constitute such a contemporaneous
exchange. Further, the Parties warrant that the mutual promises, covenants, and
obligations set forth herein are intended to and do, in fact, represent a
reasonably equivalent exchange of value that is not intended to hinder, delay,
or defraud any entity that Spectranetics was or became indebted to on or after
the date of this transfer, within the meaning of 11 U.S.C. § 548(a)(1).
12. If within 91 days of the Effective Date of this Agreement or of any payment
made under this Agreement, Spectranetics commences, or a third party commences,
any case, proceeding, or other action under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors (a) seeking to have any order
for relief of Spectranetics’s debts, or seeking to adjudicate Spectranetics as
bankrupt or insolvent; or (b) seeking appointment of a receiver, trustee,
custodian, or similar official for Spectranetics or for all or any substantial
part of Spectranetics’s assets, Spectranetics agrees as follows:
(a) Spectranetics’s obligations under this Agreement may not be avoided pursuant
to 11 U.S.C. § 547 or 548, and Spectranetics shall not argue or otherwise take
the position in any such case, proceeding, or action that: (i) Spectranetics’s
obligations under this Agreement may be avoided under 11 U.S.C. § 547 or 548;
(ii) Spectranetics was insolvent at the time this Agreement was entered into, or
became insolvent as a result of the payment made to the United States; or
(iii) the mutual promises, covenants, and obligations set forth in this
Agreement do not constitute a contemporaneous exchange for new value given to
Spectranetics.
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Settlement Agreement
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(b) If Spectranetics’ obligations hereunder are avoided for any reason,
including, but not limited to, the exercise of a trustee’s avoidance powers
under the Bankruptcy Code, the United States, at its sole option, may rescind
the releases in this Agreement, and bring any civil and/or administrative claim,
action, or proceeding against Spectranetics for the claims that would otherwise
be covered by the releases provided in this Agreement. Spectranetics agrees that
(i) any such claims, actions or proceedings brought by the United States
(including any proceedings to exclude Spectranetics from participation in
Medicare, Medicaid, or other federal health care programs) are not subject to an
“automatic stay” pursuant to 11 U.S.C. Section 362(a) as a result of the action,
case or proceeding described in the last clause of this Paragraph, and that
Spectranetics shall not argue or otherwise contend that the United States’
claims, actions or proceedings are subject to an automatic stay; (ii) that
Spectranetics will not plead, argue or otherwise raise any defenses under the
theories of statute of limitations, laches, estoppel, or similar theories, to
any such civil or administrative claims, actions, or proceedings which are
brought by the United States within 30 calendar days of written notification to
Spectranetics that the releases herein have been rescinded pursuant to this
Paragraph, except to the extent such defenses were available before the
Effective Date of this Agreement; and (iii) the United States has a valid claim
against Spectranetics in the amount of at least $4,900,000, plus applicable
multipliers and penalties, and the United States may pursue its claims in the
case, action or proceeding referenced in the first clause of this Paragraph, as
well as in any other case, action, or proceeding; and,
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Settlement Agreement
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(c) Spectranetics acknowledges that its agreements in this Paragraph are
provided in exchange for valuable consideration provided in this Agreement.
13. Each Party shall bear its own legal and other costs incurred in connection
with this matter, including the preparation and performance of this Agreement.
14. Spectranetics represents that this Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.
15. This Agreement is governed by the laws of the United States. The Parties
agree that the exclusive jurisdiction and venue for any dispute arising between
and among the Parties under this Agreement shall be the United States District
Court for the District of Colorado, except that disputes arising under the CIA
shall be resolved exclusively through the dispute resolution provisions set
forth in the CIA.
16. This Agreement constitutes the complete agreement between the Parties. This
Agreement may not be amended except by written consent of the Parties.
17. The individuals signing this Agreement on behalf of Spectranetics represent
and warrant that they are authorized by Spectranetics to execute this Agreement.
The United States signatories represent that they are signing this Agreement in
their official capacities and that they are authorized to execute this
Agreement.
18. This Agreement may be executed in counterparts, each of which constitutes an
original and all of which constitute one and the same Agreement.
19. This Agreement is binding on Spectranetics’s successors, transferees, heirs,
and assigns.
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Settlement Agreement
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20. This Agreement is effective on the date of signature of the last signatory
to the Agreement (the “Effective Date”). Facsimiles of signatures shall
constitute acceptable binding signatures for purposes of this Agreement.
21. For purposes of construction, this Agreement shall be deemed to have been
drafted by all Parties to the Agreement and shall not, therefore, be construed
against any Party for that reason in any subsequent dispute.

          UNITED STATES OF AMERICA

DAVID M. GAOUETTE
Acting United States Attorney
District of Colorado    
 
       
By:
  /s/ Edwin Winstead   Dated: 12-18-09
 
       
 
  EDWIN WINSTEAD    
 
  Assistant U.S. Attorney    
 
  Civil Health Care Fraud Coordinator    
 
  United States Attorney’s Office    
 
  District of Colorado    
 
       
By:
  /s/ Jamie Ann Yavelberg   Dated: 12-22-09
 
       
 
  JAMIE ANN YAVELBERG    
 
  Assistant Director    
 
  Commercial Litigation Branch Civil Division    
 
  United States Department of Justice    
 
       
By:
  /s/ Gregory Demske   Dated: 12-22-09
 
       
 
  GREGORY DEMSKE    
 
  Office of Counsel to the Inspector General    
 
  U.S. Department of Health and Human Services    

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Settlement Agreement
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          THE SPECTRANETICS CORPORATION    
 
       
By:
  /s/ Emile Geisenheimer   Dated: 12-17-09
 
       
 
  EMILE GEISENHEIMER    
 
  Chief Executive Officer    
 
  Spectranetics Corporation    
 
        HOGAN & HARTSON LLP    
 
       
By:
  /s/ Michael Theis   Dated: 12-18-09
 
       
 
  PETER S. SPIVACK    
 
  MICHAEL C. THEIS    
 
  Hogan & Hartson LLP    
 
  Counsel for the Spectranetics Corporation    

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Settlement Agreement
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