Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement ("Agreement") is entered into among the United States
of America, acting through the United States Department of Justice and on behalf
of the Office of Inspector General of the Department of Health and Human
Services ("0IG-HHS"), the TRICARE Management Activity ("TMA"), the United States
Office of Personnel Management ("OPM"), the United States Department of Veterans
Affairs ("VA"), and Office of Workers' Compensation Programs of the United
States Department of Labor ("DOL-OWCP") (collectively "the United States");
Kevin J. Ryan ("Relator"); and TranS1, Inc., now known as Baxano Surgical, Inc.,
("TranS1"), through their authorized representatives. Collectively, all of the
above will be referred to as "the Parties."

 

RECITALS

 

A.           TranS1 is a Delaware corporation headquartered in Raleigh, North
Carolina. At all relevant times herein, TranS1 developed, manufactured,
distributed, marketed, and sold medical devices in the United States, including
devices sold under the trade name of AxiaLIF® that are cleared by the United
States Food and Drug Administration (FDA) for use in axial lumbar interbody
fusion (AxiaLIF), a minimally-invasive surgical technique that was developed as
an alternative to traditional open and invasive surgical techniques such as
anterior lumbar interbody fusion (ALIF). Unlike the ALIT procedure in which
surgeons typically access the lower spine through the abdomen, the AxiaLIF
procedure entails accessing the lower spine through an approximately 1-inch
incision next to the tailbone. Effective May 31, 2013, TranS1 reorganized and
changed its name to Baxano Surgical, Inc. Baxano Surgical, Inc. is the corporate
successor to TranS1, and it agrees that Baxano has assumed all liabilities and
obligations arising under this Agreement.

 

 

 

 

B.           On April 21, 2011, Relator filed a qui tam action in the United
States District Court for the District of Maryland captioned United States ex
rel. Ryan v. TranS1, Inc., Civil No. MJG 11-1041 (D. Md.), pursuant to the qui
tam provisions of the False Claims Act, 31 U.S.C. § 3730(b) (the Civil Action).

 

C.           The United States contends that TranS1 submitted or caused to be
submitted claims for payment to the Medicare Program ("Medicare"), Title XVIII
of the Social Security Act, 42 U.S.C. §§ 1395-1395kkk-1, and to the Medicaid
Program ("Medicaid"), Title XIX of the Social Security Act, 42 U.S.C. §§
1396-1396v. The United States further alleges that TranS1 caused claims for
payment of AxiaLIF to be submitted to the TRICARE program, 10 U.S.C. §§
1071-1110b; the Federal Employees Health Benefits Program ("FEHBP"), 5 U.S.C. §§
8901-8914; the following DOL-OWCP programs: the Federal Employees' Compensation
Act ("FECA"), 5 U.S.C. § 8101 et seq.; and caused purchases of AxiaLIF by the
VA, 38 U.S.C. §§ 1701-1743 (collectively, the "Other Federal Health Care
Programs").

 

D.           The United States contends that it has certain civil claims, as
specified in Paragraph 5, below, against TranS1 for engaging in the following
conduct during the period January 1, 2008 through September 30, 2011
(hereinafter referred to as the "Covered Conduct"):

 

(1) TranS1 knowingly caused providers to submit claims for minimally-invasive
AxiaLIF procedures using incorrect diagnosis or procedure codes, including codes
intended for invasive ALIF procedures, such as 22558, or for unlisted spine
procedures, 22899, which in some cases resulted in providers receiving greater
reimbursement than that to which they were entitled; (2) TranS1 knowingly
offered and paid illegal remuneration to certain physician providers for
participating in speaker programs and consultant meetings in a manner intended
to induce them to use TranS1 products in violation of the Federal Anti-Kickback
Statute, 42 U.S.C. § 1320a-7b(b); and (3) TranS1 knowingly promoted the sale and
use of axial lumbar interbody fusion devices for uses that were not approved or
cleared by FDA, including in certain spine procedures involving complex
deformity affecting vertebral levels other than the levels for which AxiaLIF is
FDA-cleared. Some of these uses were not reasonable and necessary for the
diagnosis or treatment of an illness or injury, contrary to 42 U.S.C. §
1395y(a)(1)(A), and thus were not covered by Medicare, Medicaid, or the Other
Federal Health Care Programs.

 

 

 

 

As a result of the foregoing conduct, the Government alleges that TranS1
knowingly caused false or fraudulent claims to be submitted to, or caused
purchases by, Medicare, Medicaid, and the Other Federal Health Care Programs.

 

E.           This Settlement Agreement is made in compromise of disputed claims.
This Settlement Agreement is neither an admission of liability by TranS1 nor a
concession by the United States that its claims are not well founded. TranS1
expressly denies the allegations of the United States and Relator set forth
herein and in the Civil Action.

 

F.           TranS1 has entered or will be entering into a separate settlement
agreement with the state of North Carolina in settlement of the Covered Conduct
under which North Carolina's claims are released.

 

G.           Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of
the proceeds of this Settlement Agreement and to Relator's reasonable expenses,
attorneys' fees and costs.

 

To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, and in consideration of the mutual promises and
obligations of this Settlement Agreement, the Parties agree and covenant as
follows:

 

 

 

 

TERMS AND CONDITIONS

 

1.          TranS1 shall pay to the United States the sum $6,000,000 (the
"Settlement Amount"), plus interest accrued thereon at the rate of 2% per annum
from February 11, 2013, and continuing until and including the day before the
final payment is made under this Agreement. On the Effective Date of this
Agreement, this sum shall constitute a debt due and immediately owing to the
United States. The Settlement Amount shall be paid as follows;

 

a.           TranS1 shall pay to the United States the Settlement Amount plus
interest accrued thereon at the rate of 2% per annum, in accordance with the
payment schedule attached hereto as Exhibit A. Within seven (7) days after the
Effective Date cif this Agreement, TranS1 shall pay the United States the
initial fixed payment in the amount of $546,027.40 and thereafter make principal
payments with interest according to the schedule in Exhibit A.

 

b.           All payments set forth in Paragraph 1(a) shall be made to the
United States by electronic funds transfer pursuant to written instructions to
be provided by the Department of Justice. The entire balance of the Settlement
Amount, or any portion thereof, plus any interest accrued on the principal as of
the date of any prepayment, may be prepaid without penalty.

 

 

 

 

2.          In the event that TranS1 fails to pay the Settlement Amount as
provided in Paragraph 1 and Exhibit A, within seven (7) calendar days of the
date upon which each such payment is clue, TranS1 shall be in Default of its
payment obligations ("Default"). The United States will provide a written Notice
of Default, and TranS1 shall have an opportunity to cure such Default within
seven (7) calendar days from the date of receipt of the Notice of Default.
Notice of Default will be delivered to Peter Spivack, Esq., Hogan Lovells US
LLP, 555 Thirteenth Street, N.W., Washington, D.C. 20004, or to such other
representative as TranS1 shall designate in advance in writing. If TranS1 fails
to cure the Default within seven (7) calendar days of receiving the Notice of
Default, the remaining unpaid balance of the Settlement Amount shall become
immediately due and payable, and interest on TranS1's share shall thereafter
accrue at the rate of 12% per annum, compounded daily from the date of Default,
on the remaining unpaid total (principal and interest balance). TranS1 shall
upon execution of this Settlement Agreement enter into a Consent Judgment. The
United States, at its sole discretion, may

 

(a)          offset the remaining unpaid balance from any amounts due and owing
to TranS1 by any department, agency, or agent of the United States at the time
of the Default; or

 

(b)          exercise any other rights granted by law or in equity, including
the option of referring such matters for private collection. TranS1 agrees not
to contest any offset imposed and not to contest any collection action
undertaken by the United States pursuant to this Paragraph, either
administratively or in any state or federal court, except on the grounds of
actual payment to the United States. At its sole option, the United States
alternatively may rescind this Agreement and pursue the Civil Action or bring
any civil and/or administrative claim, action, or proceeding against TranS1 for
the claims that would otherwise be covered by the releases provided in
Paragraphs 5 — 10, below. In the event that the United States opts to rescind
this Agreement pursuant to this Paragraph, TranS1 agrees not to plead, argue, or
otherwise raise any defenses of statute of limitations, laches, estoppel or
similar theories, to any civil or administrative claims that are (a) filed by
the United States against TranS1 within 120 days of written notification that
this Agreement has been rescinded, and (b) relate to the Covered Conduct, except
to the extent these defenses were available on or before April 21, 2011.

 

 

 

 

3.          Conditioned upon the United States receiving the initial fixed
payment in the amount of $546,027.40 from TranS1, as described in Paragraph I
.a, above, and as soon as feasible after receipt, the United States shall pay
$92,824.61 to Relator by electronic funds transfer. Contingent upon the United
States receiving each additional payment from TranS1 identified in the schedule
in Exhibit A, as soon as feasible after receipt of each payment, the United
States agrees to make the corresponding additional payment to Relator according
to the schedule in Exhibit A.

 

4.          TranS1 has entered or will be entering into a separate settlement
agreement with Relator under which Relator will release all claims arising under
31 U.S.C. § 3730(d) for expenses and attorney's fees and costs arising from the
filing of the Civil Action.

 

5.          Subject to the exceptions in Paragraph 11 (concerning excluded
claims) below, and conditioned upon TranS1's full payment of the Settlement
Amount, and subject to Paragraph 21, 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 releases TranS1, together with its
current or former direct or indirect parent and member corporations; direct and
indirect subsidiaries; direct or indirect brother or sister corporations;
divisions; current or former owners; and officers, directors, employees, and
affiliates; and the successors and assignees of any of them, from any civil or
administrative monetary claim the United States has 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. §§
3801-3812; any statutory provision creating a cause of action for civil damages
or civil penalties for which the Civil Division of the Department of Justice has
actual and present authority to assert and compromise pursuant to 28 C.F.R. Part
0, Subpart I, 0.45(d); or the common law theories of payment by mistake,
disgorgement, unjust enrichment, and fraud.

 

 

 

 

6.          Subject to the exceptions in Paragraph 11 below, and conditioned
upon TranS1's full payment of the Settlement Amount, and subject to Paragraph
21, below (concerning bankruptcy proceedings commenced within 91 days of the
Effective Date of this Agreement or any payment made under this Agreement),
Relator, for himself and for his heirs, successors, attorneys, agents, and
assigns, releases TranS1, together with its current or former direct or indirect
parent and member corporations; direct and indirect subsidiaries; direct or
indirect brother or sister corporations; divisions; current or former owners;
and officers, directors, employees, and affiliates; and the successors and
assignees of any of them, from any civil monetary claim the relator has on
behalf of the United States for the Covered Conduct under the False Claims Act,
31 U.S.C. §§ 3729- 3733.

 

7.          In consideration of the obligations of TranS1 in this Agreement and
the Corporate Integrity Agreement (CIA), entered into between OIG-HHS and
TranS1, and conditioned upon TranS1 's full payment of the Settlement Amount,
the OIG-HHS agrees to release and refrain from instituting, directing, or
maintaining any administrative action seeking exclusion from Medicare, Medicaid,
and other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(0)
against TranS1 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, and other
prohibited activities) for the Covered Conduct, except as reserved in Paragraph
11 (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 TranS1 from Medicare, Medicaid, and other Federal health care
programs under 42 U.S.C. § 1320a-7(a) (mandatory exclusion) based upon the
Covered Conduct. 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 11, below.

 

 

 

 

8.          In consideration of the obligations of TranS1 set forth in this
Agreement, and conditioned upon TranS1's full payment of the Settlement Amount,
TMA agrees to release and refrain from instituting, directing, or maintaining
any administrative action seeking exclusion from the TRICARE Program against
TranS1 under 32 C.F.R. § 199.9 for the Covered Conduct, except as reserved in
Paragraph 11 (concerning excluded claims), below, and as reserved in this
Paragraph. TMA expressly reserves authority to exclude TranS1 from the TRICARE
Program under 32 C.F.R. §§ 199.9 (f)(1)(i)(A), (f)(1)(i)(B), and (f)(1)(iii),
based upon the Covered Conduct. Nothing in this Paragraph precludes TMA or the
TRICARE Program from taking action against entities or persons, or for conduct
and practices, for which claims have been reserved in Paragraph 11, below.

 

9.          In consideration of the obligations of TranS1 in this Agreement, and
conditioned upon TranS1's full payment of the Settlement Amount, OPM agrees to
release and refrain from instituting, directing, or maintaining any
administrative action against TranS1 under 5 U.S.C. § 8902a or 5 C.F.R. Part 970
for the Covered Conduct, except as reserved in Paragraph 11 (concerning excluded
claims), below and except if required by 5 U.S.C. § 8902a(b). Nothing in this
Paragraph precludes OPM from taking action against entities or persons, or for
conduct and practices, for which claims have been reserved in Paragraph 11,
below.

 

 

 

 

10.         In consideration of the obligations of TranS1 in this Agreement, and
conditioned upon TranS1's full payment of the Settlement Amount, DOL-OWCP agrees
to release and refrain from instituting, directing, or maintaining any
administrative action seeking exclusion and debarment from the FECA program
against TranS1 under 20 C.F.R. § 10.815 for the Covered Conduct, except as
reserved in Paragraph 11 (concerning excluded claims), below and except if
excluded by the OIG-1-11-IS pursuant to 42 U.S.C. § 1320a-7(a). Nothing in this
Paragraph precludes the OWCP of the DOL from taking action against entities or
persons, or for conduct and practices, for which claims have been reserved in
Paragraph 11, below.

 

11.         Notwithstanding the releases given in Paragraphs 5 — 10 of this
Agreement, or any other term of this Agreement, the following claims of the
United States are specifically reserved and are not released:

 

a.Any 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;

 

 

 

 

d.Any liability to the United States (or its agencies) for any conduct other
than the Covered Conduct;

 

e.Any liability based upon obligations created by this Agreement;

 

f.Any liability for express or implied warranty claims or other claims for
defective or deficient products or services, including quality of goods and
services;

 

g.Any liability for failure to deliver goods or services due; and

 

h.Any liability for personal injury or property damage or for other
consequential damages arising from the Covered Conduct.

 

12.         Relator and his heirs, successors, attorneys, agents, and assigns
shall not object to this Agreement but agree and confirm that this Agreement is
fair, adequate, and reasonable under all the circumstances, pursuant to 31
U.S.C. § 3730(c)(2)(B). Relator expressly waives the opportunity for a hearing
on any objections to the Settlement Agreement pursuant to 31 U.S.C. §
3730(c)(2)(B). Conditioned upon Relator's receipt of the payments described in
Paragraph 3, Relator and his heirs, successors, attorneys, agents, and assigns
fully and finally release, waive, and forever discharge the United States, its
agencies, officers, agents, employees, and servants, from any claims arising
from the filing of the Civil Action or under 31 U.S.C. § 3730, and from any
claims to a share of the proceeds of this Agreement and/or the Civil Action.

 

13.         Relator, for himself and for his heirs, successors, attorneys,
agents, and assigns, releases TranS1, and its officers, agents, and employees,
from any liability to Relator arising from the filing of the Civil Action, or
under 31 U.S.C. § 3730(d) for expenses or attorney's fees and costs.

 

 

 

 

14.         In consideration of the obligations of Relator set forth in this
Agreement, TranS1 for itself and for its partners, heirs, successors,
transferees, attorneys, agents and assigns, releases Relator from any and all
liability, claims, demands, actions or causes of action whatsoever, known or
unknown, fixed or contingent, in law or in equity, in contract or in tort, under
any federal or state statute or regulation or at common law or that it otherwise
would have standing to bring against Relator.

 

15.         TranS1 waives and shall not assert any defenses TranS1 may have to
any criminal prosecution or administrative action relating to the Covered
Conduct that may be based in whole or in part on a contention that, under the
Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the
Excessive Fines Clause in 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.

 

16.         TranS1 fully and finally releases the United States, its agencies,
officers, agents, employees, and servants, from any claims (including attorney's
fees, costs, and expenses of every kind and however denominated) that TranS1 has
asserted, could have asserted, or may assert in the future against the United
States, its agencies, officers, agents, employees, and servants, related to the
Covered Conduct and the United States' investigation and prosecution thereof.

 

 

 

 

17.         The Settlement Amount shall not be decreased as a result of the
denial of claims for payment now being withheld from payment by any Medicare
contractor (e.g., Medicare Administrative Contractor, fiscal intermediary,
carrier), TRICARE or FEHBP carrier or payer, or any state or federal payer,
related to the Covered Conduct; and TranS1 agrees not to resubmit to any
Medicare contractor, TRICARE or FEHBP carrier or payer, or any state or federal
payer any previously denied claims related to the Covered Conduct, and agrees
not to appeal any such denials of claims.

 

18.         TranS1 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. §§ 1395-1395kkk-1 and 1396-1396w-5; and the
regulations and official program directives promulgated thereunder) incurred by
or on behalf of TranS1, its present or former officers, directors, employees,
shareholders, and agents in connection with:

 

(1)the matters covered by this Agreement;

 

(2)the United States' audit(s) and civil and criminal investigations of the
matters covered by this Agreement;

 

(3)TranS1's investigation, defense, and corrective actions undertaken in
response to the United States' audit(s) and civil and criminal investigations in
connection with the matters covered by this Agreement (including attorney's
fees);

 

(4)the negotiation and performance of this Agreement;

 

 

 

 

(5)the payment TranS1 makes to the United States pursuant to this Agreement and
any payments that TranS1 may make to Relator, including costs and attorney's
fees; and

 

(6)the negotiation of, and obligations undertaken pursuant to the CIA to:

 

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

 

(b)          prepare and submit reports to the OIG-HHS are unallowable costs for
government contracting purposes and under the Medicare Program, Medicaid
Program, TRICARE Program, and Federal Employees Health Benefits Program (FEHBP)
(hereinafter referred to as Unallowable Costs).

 

b.           Future Treatment of Unallowable Costs: Unallowable Costs shall be
separately determined and accounted for by TranS1, and TranS1 shall not charge
such Unallowable Costs directly or indirectly to any contracts with the United
States or any State Medicaid program, or seek payment for such Unallowable Costs
through any cost report, cost statement, information statement, or payment
request submitted by TranS1 or any of its subsidiaries or affiliates to the
Medicare, Medicaid, TRICARE, or FEHBP Programs.

 

 

 

 

c.           Treatment of Unallowable Costs Previously Submitted for Payment:
TranS1 further agrees that within 90 days of the Effective Date of this
Agreement it shall identify to applicable Medicare and TRICARE fiscal
intermediaries, carriers, and/or contractors, and Medicaid and FEHBP 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
TranS1 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. TranS1 agrees that the United States, at a
minimum, shall be entitled to recoup from TranS1 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.

 

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 the
affected agencies. The United States reserves its rights to disagree with any
calculations submitted by TranS1 or any of its subsidiaries or affiliates on the
effect of inclusion of Unallowable Costs (as defined in this Paragraph) on
TranS1 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 audit, examine, or re-examine TranS1's books and records
to determine that no Unallowable Costs have been claimed in accordance with the
provisions of this Paragraph.

 

 

 

 

19.         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 20 (waiver for beneficiaries
paragraph), below.

 

20.         TranS1 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 payers based upon the claims defined as Covered Conduct.

 

21.         TranS1 warrants that it has reviewed its financial situation and
that it currently is solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(1)(B)(ii)(I), and shall remain solvent following 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 new value given to TranS1, 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
to which TranS1 was or became indebted to on or after the date of this transfer,
within the meaning of I 1 U.S.C. § 548(a)(1).

 

22.         If within 91 days of the Effective Date of this Agreement or of any
payment made under this Agreement, TranS1 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 TranS1's debts, or seeking to adjudicate TranS1 as bankrupt or
insolvent; or (b) seeking appointment of a receiver, trustee, custodian, or
other similar official for TranS1 or for all or any substantial part of TranS1's
assets, TranS1 agrees as follows:

 

 

 

 

a.           TranS1's obligations under this Agreement may not be avoided
pursuant to 11 U.S.C. § 547, and TranS1 shall not argue or otherwise take the
position in any such case, proceeding, or action that: (i) TranS1's obligations
under this Agreement may be avoided under 11 U.S.C. § 547; (ii) TranS1 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 TranS1.

 

b.           If TranS1's obligations under this Agreement are avoided for any
reason, including, but not limited to, through 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 TranS1 for the claims that
would otherwise be covered by the releases provided in Paragraphs 5 —10, above.
TranS1 agrees that (i) any such claims, actions, or proceedings brought by the
United States are not subject to an "automatic stay" pursuant to II U.S.C. §
362(a) as a result of the action, case, or proceedings described in the first
clause of this Paragraph, and TranS1 shall not argue or otherwise contend that
the United States' claims, actions, or proceedings are subject to an automatic
stay; (ii) TranS1 shall 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 proceeding that are
brought by the United States within 120 calendar days of written notification to
TranS1 that the releases have been rescinded pursuant to this Paragraph, except
to the extent such defenses were available on April 21, 2011; and (iii) the
United States has a valid claim against TranS1 in the amount of $17,250,000, and
the United States may pursue its claim in the case, action, or proceeding
referenced in the first clause of this Paragraph, as well as in any other case,
action, or proceeding.

 

 

 

 

c.           TranS1 acknowledges that its agreements in this Paragraph are
provided in exchange for valuable consideration provided in this Agreement.

 

23.         On the effective date of this Agreement or any date thereafter the
United States shall file in the Civil Action a Notice of Intervention as to the
Covered Conduct. Upon receipt of the initial fixed payment in the amount of
$546,027.40 from TranS1, as described in Paragraph I.a, above, the United States
and the Relator shall promptly sign and file in the Civil Action a Joint
Stipulation of Dismissal as follows:

 

a.           The stipulation of dismissal shall be subject to the terms and
conditions of this Agreement. The dismissal shall be with prejudice as to the
United States' and Relator's claims as to the Covered Conduct;

 

b.           The stipulation of dismissal shall be without prejudice as to the
United States and with prejudice as to Relator as to all other allegations set
forth in the Civil Action.

 

24.         Each Party shall bear its own legal and other costs incurred in
connection with this matter, including the preparation and performance of this
Agreement.

 

25.         Each party and signatory to this Agreement represents that it freely
and voluntarily enters in to this Agreement without any degree of duress or
compulsion.

 

 

 

 

26.         This Agreement is governed by the laws of the United States, The
exclusive jurisdiction and venue for any dispute relating to this Agreement is
the United States District Court for the District of Maryland. For purposes of
construing this Agreement, this Agreement shall be deemed to have been drafted
by all Parties to this Agreement and shall not, therefore, be construed against
any Party for that reason in any subsequent dispute.

 

27.         This Agreement constitutes the complete agreement between the
Parties. This Agreement may not be amended except by written consent of the
Parties.

 

28.         The undersigned counsel represent and warrant that they are fully
authorized to execute this Agreement on behalf of the persons and entities
indicated below.

 

29.         This Agreement may be executed in counterparts, each of which
constitutes an original and all of which constitute one and the same Agreement.

 

30.         This Agreement is binding on TranS1's successors, transferees,
heirs, and assigns.

 

31.         This Agreement is binding on Relator's successors, transferees,
heirs, and assigns.

 

32.         All parties consent to the United States' disclosure of this
Agreement, and information about this Agreement, to the public.

 

33.         This Agreement is effective on the date of signature of the last
signatory to the Agreement (Effective Date of this Agreement). Facsimiles of
signatures shall constitute acceptable, binding signatures for purposes of this
Agreement.

 

 

 

 

THE UNITED STATES OF AMERICA

 

DATED: June 28, 2013 BY: /s/ Thomas Corcoran       THOMAS CORCORAN       THOMAS
H. BARNARD       Assistant United States Attorneys
Office of the United States Attorney
for the District of Maryland       DATED: June 26, 2013 BY: /s/ Colin M. Huntley
      COLIN M. HUNTLEY       Trial Attorney       Commercial Litigation
Branch Civil Division       United States Department of Justice         DATED:
June 24, 2013 BY: /s/ Robert K. DeConti       ROBERT K. DECONTI       Assistant
Inspector General for Legal Affairs
Office of Counsel to the Inspector General
Office of Inspector General       U,S. Department of Health and Human Services

 

 

 

 

DATED: June 24, 2013

BY: /s/ Bryan T. Wheeler

BRYAN T. WHEELER

Associate General Counsel for PAUL J. HUTTER General Counsel

TRICARE Management Activity United States Department of Defense

 

DATED: June 25, 2013

BY: /s/ Shirley R. Patterson

SHIRLEY R. PATTERSON

Assistant Director for Federal Employee Insurance Operations

United States Office of Personnel Management

 

DATED: June 25, 2013

BY: /s/ David Cope

DAVID COPE Debarring Official

Office of the Assistant Inspector General for Legal Affairs United States Office
of Personnel

 

DATED: June 24, 2013

BY: /s/ Julia Tritz

JULIA TRITZ

Acting Deputy Director, Division of Federal Employees' Compensation

Office of Workers' Compensation Programs United States Department of Labor

 

 

 

 

TRANS1, INC.

 

DATED: June 27, 2013 BY: /s/ Ken Reali       KEN REALI       President & Chief
Executive Officer               On Behalf of TranS1, Inc., now known as Baxano
Surgical, Inc.

 

DATED: June 28, 2013 BY: /s/ Peter S. Spivack       PETER S. SPIVACK, ESQ. Hogan
Lovells US LLP               Counsel to TranS1, Inc., now known as Baxano
Surgical, Inc.

 

 

 

 

RELATOR

 

DATED: June 24, 2013 BY: KEVIN J. RYAN               Relator

 

DATED: June 26, 2013 BY: JAY P . HOLLAND, ESQ.
VERONICA NANNIS, ESQ.
Joseph, Greenwald & Luke., P.A.       Counsel to Relator Kevin J. Ryan

 

 

 

 

EXHIBIT A

 

Payment Date  Payment   Interest   Principal   Balance Owed                   
$6,000,000.00  July 1, 2013  $546,027.40   $46,027.40   $500,000.00  
$5,500,000.00  October 1, 2013  $703,058.76   $27,500.00   $675,558.76  
$4,824,441.24  January 2, 2014  $703,058.76   $24,122.21   $678,936.55  
$4,145,504.70  April 1, 2014  $703,058.76   $20,727.52   $682,331.24  
$3,463,173.46  July 1, 2014  $703,058.76   $17,315.87   $685,742.89  
$2,777,430.57  October 1, 2014  $703,058.76   $13,887.15   $689,171.61  
$2,088,258.96  January 2, 2015  $703,058.76   $10,441.29   $692,617.47  
$1,395,641.50  April 1, 2015  $703,058.76   $6,978.21   $696,080.55  
$699,560.95  July 1, 2015  $703,058.75   $3,497.80   $699,560.95   $0.00  Total 
$6,170,497.45   $170,497.45   $6,000,000.00