Exhibit 10.1

 

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

 

Case No. 08-CV-2102-REB-MJW

(Consolidated with Civil Action Nos. 08-CV-02467-REB-MJW and

09-cv-00161-REB-MJW)

 

DOUGLAS A. KOPP, derivatively on behalf of Nominal Defendant

The Spectranetics Corporation,

 

Plaintiff,

 

v.

 

EMILE J. GEISENHEIMER,

DAVID G. BLACKBURN,

R. JOHN FLETCHER,

MARTIN T. HART,

JOSEPH M. RUGGIO, M.D.,

JOHN G. SCHULTE, and

CRAIG M. WALKER, M.D.

 

Defendants,

 

And

 

THE SPECTRANETICS CORPORATION,

 

Nominal Defendant.

 

STIPULATION OF SETTLEMENT

 

 

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This Stipulation of Settlement (the “Stipulation”), dated as of September 10,
2010, is made and entered into by and among the following parties, by and
through their respective counsel of record:  (1) the Settling Derivative
Plaintiffs (as defined below), on behalf of themselves and derivatively on
behalf of The Spectranetics Corporation (“Spectranetics” or the “Company,” as
defined below); (2)  the Settling Derivative Defendants (as defined below); and
(3) Spectranetics (collectively, and as defined below, the “Settling Derivative
Parties”).  The Settlement set forth in this Stipulation (the “Settlement”) is
intended by the Settling Derivative Parties to fully, finally and forever
resolve, discharge and settle the Released Claims (as defined below) against the
Released Derivative Parties (as defined below), upon and subject to the terms
and conditions hereof and subject to the approval of the U.S. District Court for
the District of Colorado (the “Federal Court”) pursuant to Rule 23.1 of the
Federal Rules of Civil Procedure.

 

I.                                         THE DERIVATIVE ACTIONS AND RELATED
LITIGATION

 

1.                                      Background

 

Spectranetics develops, manufactures, markets, and distributes single-use
fiber-optic laser catheters for use in minimally invasive surgical procedures to
clear blocked arteries within the body.  It has a range of laser catheters that
are used to treat peripheral arterial disease (“PAD”) by removing stenoses and
occlusions in the legs both above and below the knee.  Spectranetics also has a
range of laser catheters used to clear blockages in and around the heart.

 

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On September 4, 2008, the FDA and the U.S. Immigration and Customs Enforcement
(“ICE”) executed a search warrant on Spectranetics.  The search warrant
requested information in four areas related to potential violations of FDA and
immigration rules and regulations including (i) the promotion, use, testing,
marketing and sales regarding certain of the Company’s products for the
treatment of in-stent restenosis, payments made to medical personnel and an
identified institution for this application, (ii) the promotion, use, testing,
experimentation, delivery, marketing and sales of catheter guidewires and
balloon catheters manufactured by certain third parties outside of the United
States, (iii) two post-market studies completed during the period from 2002 to
2005 and payments to medical personnel in connection with those studies and
(iv) compensation packages for certain of the Company’s personnel.

 

On December 29, 2009, the Company announced that it had reached a resolution
with the United States Department of Justice (DOJ) and the Office of Inspector
General (“OIG”) of the U.S. Department of Health and Human Services regarding
the federal investigation which had commenced on September 4, 2008.  As part of
the resolution, in December 2009, the Company entered into a Non-Prosecution
Agreement with the DOJ, a civil Settlement Agreement with the DOJ and the OIG,
and a five-year Corporate Integrity Agreement with the OIG.  There were no
criminal charges brought against the Company.  As part of the Settlement
Agreement, the Company also expressly denied the contentions of the United
States, except those specifically included in the Non-Prosecution Agreement, and
there was no admission of wrongdoing by the Company.

 

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2.                                      The Derivative Actions

 

On or after September 29, 2008, two shareholder derivative actions were filed in
Federal Court, entitled Douglas A. Kopp v. Emile J. Geisenheimer, et al., Civil
Case No. 08-cv-02102-REB-MJW, and Peter Y. Kiama v. John Schulte, et al., Civil
Case No. 08-cv-02467-REB-CBS (the “Federal Actions”).  On November 24, 2009, the
Federal Court issued an order consolidating the Federal Actions and appointing
Federman & Sherwood as Lead Counsel and Bader & Associates as Liaison Counsel.

 

On January 13, 2009, a shareholder derivative action was filed in the District
Court, El Paso County, Colorado (the “State Court”), entitled Martin and Violet
Clarke v. John Schulte, et al., Case No. 2009-CV-567 (the “State Action”).  On
January 27, 2009, the State Action was removed from the State Court to the
Federal Court and entitled Martin and Violet Clarke v. John Schulte, et al.,
Civil Case No. 09-cv-00161-PAB-MJW (the “Clarke Action”).  On February 6, 2009,
the Federal Court issued an order consolidating the Clarke Action with the
Federal Actions (collectively, the “Derivative Actions”) under the caption
Douglas A. Kopp v. Emile J. Geisenheimer, et al., Civil Case
No. 08-cv-02102-REB-MJW.

 

The Complaints in the Derivative Actions named as Defendants the following
former and/or current officers and members of the Board of Directors (the
“Board”) of Spectranetics:  Emile J. Geisenheimer, David G. Blackburn, R. John
Fletcher, Martin T. Hart, Joseph M. Ruggio, M.D., John G. Schulte, Guy Childs
and Craig M. Walker, M.D. (collectively, the “Individual Defendants”).  The
Complaints also named Spectranetics as Nominal Defendant.  Generally, the
Complaints in the Derivative Actions alleged that

 

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Individual Defendants breached fiduciary duties owed to Spectranetics and its
shareholders by, inter alia, (1) causing or allowing the Company to disseminate
to the market materially misleading and inaccurate information through public
statements and disclosures; (2) placing their own personal interests above the
Company’s; (3) failing to prevent the Company and its officers and directors
from committing actions which would, and did, injure the Company; and/or
(4) failing to establish and maintain adequate accounting and internal controls
at the Company.

 

Pursuant to Spectranetics’ unopposed request, all formal proceedings in the
Derivative Actions were stayed pending resolution of the Motions to Dismiss in
the Class Action (as defined below) though the parties participated in five
status conferences with the Court during the pendency of the Derivative Actions.

 

3.                                      The Class Action

 

On or after September 23, 2008, six federal securities class action complaints,
including Hancook v. Spectranetics Corp., 08-cv-02048-REB-KLM, were filed
against Spectranetics and various other defendants, including John G. Schulte,
Guy A. Childs, Emile J. Geisenheimer, Jonathan W. McGuire, Donald Fletcher, and
Craig M. Walker, M.D.  These cases alleged class periods either between
April 19, 2007 and September 4, 2008 or April 26, 2005 and September 4, 2008. 
Pursuant to a Court Order dated January 16, 2009, these complaints were
consolidated in the Federal Court and captioned In re Spectranetics Corporation
Securities Litigation, Civil Case No. 08-cv-02048-REB-KLM (the “Class Action”).

 

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By Order dated June 15, 2009, the Federal Court appointed the Spectranetics
Investor Group — comprised of Genesee County Employees’ Retirement System, the
Wayne County Employees’ Retirement System, and Peter J. Tortora — as Lead
Plaintiff (hereinafter, “Class Action Plaintiff”), appointed Labaton Sucharow
LLP and Brower Piven as Co-Lead Counsel, and appointed The Shuman Law Firm as
Liaison Counsel.

 

The Class Action Plaintiff filed a Consolidated Class Action Complaint (the
“Class Action Complaint”) on August 4, 2009.  The Class Action Complaint
asserted claims against Spectranetics and various individual defendants
(collectively, the “Class Action Defendants”) for alleged violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934.  The Class Action
Complaint sought recovery for purchasers of Spectranetics common stock during
the period between March 16, 2007 and September 4, 2008, inclusive.  On
September 18, 2009, Spectranetics and the other defendants to the Class Action
filed a Motion to Dismiss the Class Action Complaint, which the Class Action
Plaintiff opposed.

 

The Class Action Plaintiff sought and received permission from the Federal Court
to file a Supplemental Class Action Complaint on February 10, 2010.  On
March 12, 2010, Spectranetics and the other defendants to the Class Action filed
a Supplemental Motion to Dismiss the Supplemental Class Action Complaint, which
the Class Action Plaintiff opposed.

 

The settlement of the Class Action (as described below) has obviated the need
for any hearing or ruling on any Motion to Dismiss.

 

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4.                                      Settlement Negotiations and Mediation

 

Shortly after counsel for the Class Action Plaintiff and Class Action Defendants
began to discuss the possible settlement of the Class Action in January 2010,
counsel for the Settling Derivative Parties began a dialogue regarding the
possible settlement of the Derivative Actions.  During the course of this
dialogue the Settling Derivative Parties exchanged certain non-public
information with each other.  Thereafter, on March 25, 2010, the Settling
Derivative Parties participated in a joint mediation session (the “Mediation”)
with the Settling Class Action Parties.  The Honorable Nicholas H. Politan
(Ret.) (“Judge Politan” or the “Mediator”) presided over this joint Mediation,
which occurred after extensive briefing of Judge Politan by the Settling
Class Action Parties and the Settling Derivative Parties.  At the Mediation,
there were discussions with Judge Politan concerning, inter alia, the respective
claims and defenses, expert damages analyses, legal analyses, the discovery and
motion practice conducted and expected to be conducted in the Class Action and
the Derivative Actions, the evidence expected to be offered by the parties at
trial, and other important factual and legal issues and matters relating to the
merits of the Class Action and the Derivative Actions.

 

The Settling Derivative Parties did not reach a settlement at the March 2010
Mediation, but through subsequent negotiations and conferences, including
additional discussions with Judge Politan, the Settling Derivative Plaintiffs
and the Settling Derivative Defendants were able to reach an agreement in
principle providing for the settlement of the Derivative Actions. The
Class Action Plaintiff and the Class Action Defendants also were able to reach
an agreement in principle providing for the settlement of the Class Action, the
substance of which is reflected in a Stipulation of

 

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Settlement for the Class Action.  Concurrent with the submission of this
Stipulation, the Settling Class Action Parties will submit their Stipulation of
Settlement for the Class Action to the Court, dated as of September 7, 2010, and
attached hereto as Exhibit B (without exhibits).

 

5.                                      Discovery, Investigation, and Research
Conducted by Settling Derivative Plaintiffs

 

Derivative Plaintiffs’ Counsel (as defined below) have conducted a thorough
investigation of the facts and legal issues associated with the prosecution and
Settlement of the Derivative Actions.  This discovery and investigation has
included, inter alia, (1) a comprehensive review of the Company’s public
filings, annual reports, and other public statements; (2) the review of certain
non-public information; (3) preparing a mediation brief; (4) attending the
formal Mediation and participating in numerous additional discussions with the
Mediator and counsel for the Settling Derivative Defendants; (5) researching
corporate governance issues; and (6) research into the applicable law with
respect to the claims asserted in the Derivative Actions and the potential
defenses thereto.

 

II.                                     CLAIMS OF THE SETTLING DERIVATIVE
PLAINTIFFS AND BENEFITS OF SETTLEMENT

 

The Settling Derivative Plaintiffs believe that the claims asserted in the
Derivative Actions have merit and that the evidence developed to date in the
Derivative Actions supports the claims asserted.  The Settling Derivative
Plaintiffs assert and believe that the Board breached fiduciary duties owed to
Spectranetics and its shareholders by, inter alia, causing or allowing the
Company to disseminate to the market materially

 

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misleading and inaccurate information through public statements and disclosures;
placing their own personal interests above the Company’s; failing to prevent the
Company and its officers and directors from committing actions which would, and
did, injure the Company; and/or failing to establish and maintain adequate
accounting and internal controls at the Company.

 

However, the Settling Derivative Plaintiffs recognize and acknowledge the
expense and length of continued proceedings, trial and appeals.  The Settling
Derivative Plaintiffs also have taken into account the uncertain outcome and the
risk of any litigation, especially in complex actions such as the Derivative
Actions, as the Settling Derivative Plaintiffs are also mindful of the inherent
problems of proof under and possible defenses to the claims asserted in the
Derivative Actions, including the defenses asserted by the Settling Derivative
Defendants during the litigation, in settlement negotiations, and in the
mediation proceedings.

 

In light of the foregoing, the Settling Derivative Plaintiffs believe that the
Settlement set forth in this Stipulation confers substantial benefits upon
Spectranetics and Current Spectranetics Shareholders.  Based on their
evaluation, and their substantial experience in this area of the law, Derivative
Plaintiffs’ Counsel has determined that the Settlement set forth in the
Stipulation is in the best interests of the Settling Derivative Plaintiffs,
Spectranetics and Current Spectranetics Shareholders.

 

III.                                 SETTLING DERIVATIVE DEFENDANTS’ STATEMENT
AND DENIALS OF WRONGDOING AND LIABILITY

 

The Settling Derivative Defendants have denied and continue to deny each and all
of the claims and contentions alleged by the Settling Derivative Plaintiffs in
the

 

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Derivative Actions.  The Settling Derivative Defendants assert that their
conduct was proper and that there was no breach of fiduciary or other duties,
deny any liability or wrongdoing whatsoever, including, but not limited to, each
of the allegations asserted in the Derivative Actions and assert that the
Derivative Actions are subject to a number of procedural defenses.  Settling
Derivative Defendants have further asserted, and continue to assert, that at all
relevant times, they acted in good faith, and in a manner they reasonably
believed to be in the best interests of Spectranetics and its shareholders.

 

Nonetheless, the Settling Derivative Defendants have concluded that further
conduct of the Derivative Actions would be protracted and expensive, and that it
is desirable that the Derivative Actions be fully and finally settled in the
manner and upon the terms and conditions set forth in this Stipulation in order
to limit further expense, inconvenience and distraction, to dispose of the
burden of protracted litigation, and (on the part of the Settling Derivative
Defendants) to permit the operation of the Company’s business without further
distraction and diversion of the Company’s executive personnel with respect to
matters at issue in the Derivative Actions.  The Settling Derivative Defendants
also have taken into account the uncertainty and risks inherent in any
litigation, especially in complex cases like this litigation.

 

The Settling Derivative Defendants have, therefore, determined that it is
desirable and beneficial to them that the Derivative Actions be settled in the
manner and upon the terms and conditions set forth in this Stipulation.  The
Settling Derivative Defendants enter into this Stipulation and Settlement
without in any way admitting to or

 

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acknowledging any fault, liability, or wrongdoing of any kind.  There has been
no adverse determination by any court against any of the Settling Derivative
Defendants on the merits of the claims asserted by the Settling Derivative
Plaintiffs.  Neither this Stipulation, nor any of its terms or provisions, nor
any of the negotiations or proceedings connected with it, shall be construed as
an admission or concession by any of the Settling Derivative Defendants of the
merit or truth of any of the allegations or wrongdoing of any kind on the part
of any of the Settling Derivative Defendants.  The Settling Derivative
Defendants enter into this Stipulation and Settlement based upon, among other
things, the Settling Parties’ agreement herein that, to the fullest extent
permitted by law, neither the Settlement nor any of the terms or provisions of
this Stipulation or of a Memorandum of Understanding entered into between
Derivative Plaintiffs’ Counsel, counsel for Spectranetics, and counsel for David
G. Blackburn, Guy A. Childs, R. John Fletcher, Emile J. Geisenheimer, Martin T.
Hart, Joseph M. Ruggio, M.D., and Craig M. Walker, M.D. on June 18, 2010 (the
“MOU”), nor any of the negotiations or proceedings connected therewith, shall be
offered as evidence in the Derivative Actions or in any pending or future civil,
criminal, or administrative action or other proceeding to establish any
liability or admission by any of the Settling Derivative Defendants, or to any
of their respective Related Entities, or any other matter adverse to any of the
Settling Derivative Defendants, or any of their respective Related Entities,
except as expressly set forth herein.  The Settling Derivative Defendants have
determined that the Settlement set forth in the Stipulation is in the best
interests of Spectranetics and Current Spectranetics Shareholders.

 

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IV.                                TERMS OF STIPULATION AND AGREEMENT OF
SETTLEMENT

 

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Settling
Derivative Plaintiffs and the Settling Derivative Defendants, by and through
their respective counsel of record, that, subject to the approval of the Court,
the Derivative Actions and the Released Claims shall be finally and fully
compromised, settled, and released, and the Derivative Actions shall be
dismissed with prejudice, upon and subject to the terms and conditions of the
Stipulation, as follows:

 

1.                                        Definitions

 

As used in the Stipulation the following terms have the meanings specified
below:

 

1.1                                 “Class Action Settlement Cash” shall mean
the principal amount of $8.5 million in cash to be paid for and on behalf of the
Settling Class Action Defendants pursuant to the settlement of the Class Action.

 

1.2                                 “Company” or “Spectranetics” shall mean
Nominal Defendant The Spectranetics Corporation, a Delaware corporation, and all
of its predecessors, successors, present and former parents, subsidiaries,
divisions, and related or affiliated entities.

 

1.3                                 “Current Spectranetics Shareholders” shall
mean all record and or beneficial owners of Spectranetics common stock as of the
date of this Stipulation.

 

1.4                                 “Derivative Plaintiffs’ Counsel” shall mean
Lead Counsel Federman & Sherwood.

 

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1.5                                 “Effective Date” shall mean the first date
by which all of the events and conditions specified in Section IV, ¶
6.2(a)-(e) of this Stipulation have been met and have occurred.

 

1.6                                 “Final” shall mean, with respect to the
Judgment, that one of the following events has occurred:  (1) the time for
appealing the Judgment has expired; (2) following a final affirmance on appeal
of the Judgment, the time to seek further discretionary review (including,
without limitation, from the United States Supreme Court) has expired, or if
discretionary review is allowed, such discretionary review proceedings are
subsequently dismissed with prejudice or the Judgment is finally affirmed on
discretionary review; or (3) following a final dismissal of an appeal from the
Judgment, the time to seek further discretionary review (including, without
limitation, from the United States Supreme Court) has expired, or if
discretionary review is allowed, such discretionary review proceedings are
subsequently dismissed with prejudice or the dismissal being challenged is
itself finally affirmed on discretionary review.  Any proceeding or order, or
any appeal or appeal for a writ of certiorari pertaining solely to any
application for attorneys’ fees, costs or expenses, shall not in any way delay
or preclude the Judgment from becoming Final.

 

1.7                                 “Insurers” shall mean U.S. Specialty
Insurance Company, Hudson Insurance Company, and Carolina Casualty Insurance
Company.

 

1.8                                 “Judgment” shall mean the judgment to be
rendered by the Court dismissing the Derivative Actions with prejudice as to all
of the Settling Derivative Defendants, substantially in the form and content
attached hereto as Exhibit D.

 

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1.9                                 “Person” shall mean an individual,
corporation (including all divisions and subsidiaries), limited liability
corporation, professional corporation, partnership, limited partnership, limited
liability partnership, association, joint stock company, estate, legal
representative, trust, unincorporated association, government or any political
subdivision or agency thereof, and any business or legal entity and their
spouses, heirs, predecessors, successors, representatives, and assigns.

 

1.10                           “Released Claims” shall collectively mean all
claims (including “Unknown Claims” as defined in ¶ 1.18 below), debts, demands,
rights, liabilities and causes of action of every nature and description
whatsoever, known or unknown, whether in contract, tort, equity or otherwise,
whether or not concealed or hidden, asserted or that might have been asserted in
this or any other forum or proceeding, including, without limitation, claims for
negligence, negligent supervision, gross negligence, indemnification, breach of
duty of care and/or breach of duty of loyalty, fraud, misrepresentation, breach
of fiduciary duty, negligent misrepresentation, unfair competition, insider
trading, professional negligence, mismanagement, corporate waste, breach of
contract, or violations of any state or federal statutes, rules or regulations,
including but not limited to any claims that arise from or relate to the matters
or occurrences that were or could have been alleged in the Derivative Actions,
or any claims related to the public disclosures or the transactions referenced
therein, however described, through and including the period of time from the
alleged date of the commencement of the class period (as set forth in the
Class Action Settlement) until the date of the execution of this Stipulation by
Settling Derivative Plaintiffs against the

 

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Released Derivative Parties (as defined in ¶ 1.11 below) which have been or
could have been alleged in any of the Derivative Actions up through and
including the date of this Stipulation is signed.

 

1.11                           “Released Derivative Parties” means each and
every one of the Settling Derivative Defendants and, whether or not identified
in any Complaint filed in the Derivative Actions, each and all of Spectranetics’
and every Settling Derivative Defendant’s past and present directors, officers
and employees, controlling stockholders, partners, members, affiliates,
principals, agents, representatives, stockholders, predecessors, successors,
parents, subsidiaries, divisions, joint ventures, attorneys, investment bankers,
commercial bankers, underwriters, financial or investment advisors, advisors,
consultants, accountants, insurers, co-insurers and reinsurers, assigns,
spouses, heirs, assigns, executors, personal representatives, marital
communities, associates, related or affiliated entities, general or limited
partners or partnerships, limited liability companies, member firms, estates,
administrators, or any members of their immediate families, or any trusts for
which any of them are trustees, settlers or beneficiaries, or any persons or
other entities in which Spectranetics and/or any Settling Derivative Defendant
has a controlling interest or which is related to or affiliated with
Spectranetics and/or any Settling Derivative Defendant, and any other
representatives of any of these persons or other entities, whether or not any
such Released Derivative Parties were named, served with process or appeared in
the Derivative Actions.

 

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1.12                           “Settling Class Action Defendants” shall mean
Spectranetics, Guy A. Childs, Emile J. Geisenheimer, Jonathan W. McGuire, John
G. Schulte, and Craig M. Walker, M.D.

 

1.13                           “Settling Class Action Parties” shall mean
Settling Class Action Plaintiff and Settling Class Action Defendants.

 

1.14                           “Settling Class Action Plaintiff” shall mean
Class Action Plaintiff The Spectranetics Investor Group, comprised of Genesee
County Employees’ Retirement System, the Wayne County Employees’ Retirement
System, and Peter J. Tortora.

 

1.15                           “Settling Derivative Defendants” shall mean David
G. Blackburn, Guy A. Childs, R. John Fletcher, Emile J. Geisenheimer, Martin T.
Hart, Joseph M. Ruggio, M.D., John G. Schulte, and Craig M. Walker, M.D. and
nominal defendant Spectranetics.

 

1.16                           “Settling Derivative Parties” shall mean Settling
Derivative Defendants and Settling Derivative Plaintiffs.

 

1.17                           “Settling Derivative Plaintiffs” shall mean
Douglas A. Kopp, Peter Y. Kiama, and Martin and Violet Clarke, on behalf of
themselves and derivatively on behalf of Spectranetics.

 

1.18                           “Unknown Claims” shall mean any Released Claims
which the Settling Derivative Plaintiffs do not know or suspect to exist in his,
her or its favor at the time of the release of the Released Derivative Parties
which, if known by him, her or it, might have affected his, her or its
settlement with and release of the Released Derivative Parties, or might have
affected his, her or its decision not to object to, or opt out of, this

 

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Settlement.  With respect to any and all Released Claims, the Settling
Derivative Parties stipulate and agree that, upon the Effective Date, the
Settling Derivative Plaintiffs expressly waive and relinquish, and by operation
of the Judgment shall have expressly waived and relinquished, to the fullest
extent permitted by law, the provisions, rights, and benefits of § 1542 of the
California Civil Code, which provides:

 

A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.

 

The Settling Derivative Plaintiffs expressly waive, and upon the Effective Date
and by operation of the Judgment shall have waived any and all provisions,
rights and benefits conferred by any law of the United States or of any state or
territory of the United States, or principle of common law, which is similar,
comparable or equivalent to § 1542 of the California Civil Code.  The Settling
Derivative Plaintiffs may hereafter discover facts in addition to or different
from those which he, she or it now knows or believes to be true with respect to
the subject matter of the Released Claims, but each of them hereby stipulate and
agree that the Settling Derivative Plaintiffs do settle and release, upon the
Effective Date and by operation of the Judgment shall have, fully, finally, and
forever settled and released any and all Released Claims, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed
or hidden, which now exist, or heretofore have existed upon any theory of law or
equity now existing or coming into existence in the future, including, but not
limited to, conduct which is negligent, intentional, with or without malice, or
a breach of

 

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any duty, law or rule, without regard to the subsequent discovery or existence
of such different or additional facts.  The Settling Derivative Parties
acknowledge that the foregoing waiver was bargained for and a key element of the
Settlement of which this release is a part.

 

2.                                        The Settlement Consideration

 

2.1                                 In full and final settlement of all claims
asserted or referred to in the Derivative Actions, and all claims that have been
or could be asserted against the Settling Derivative Defendants in the
Derivative Actions, Spectranetics has agreed to substantially strengthen the
Company’s internal controls, processes and procedures through the adoption of a
new set of corporate governance principles, which are attached hereto as
Exhibit A.

 

2.2                                 In addition to the substantial corporate
governance changes and releases obtained, as a result of the initiation and
prosecution of the Derivative Actions, participation in the Mediation, and the
subsequent settlement of the Derivative Actions, the Settling Derivative
Plaintiffs have helped to confer substantial financial benefits upon
Spectranetics and Current Spectranetics Shareholders by helping to preserve
funds from the Company’s Insurers for payment of defense costs that otherwise
may have been borne by the Company and by helping to identify a number of
corporate governance changes that the Company has agreed to undertake.

 

2.3                                 Spectranetics and the Board are satisfied
that the foregoing constitutes reasonably equivalent value for the dismissal of
the Derivative Actions with prejudice and the release of the Released Claims,
and is a fair, reasonable and adequate

 

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resolution of the Derivative Actions and the Released Claims on the Company’s
behalf and is in the best interests of the Company and Current Spectranetics
Shareholders.

 

3.                                        Notice Order And Settlement Hearing

 

3.1                                 Promptly after execution of this
Stipulation, but in no event later than ten (10) days after the Stipulation is
signed (unless such time is extended by the written agreement of counsel for the
Settling Derivative Plaintiffs and counsel for the Settling Derivative
Defendants), the Settling Derivative Parties shall submit this Stipulation
together with its Exhibits to the Court and shall jointly apply for entry of an
order (the “Notice Order”), substantially in the form and content of Exhibit C
hereto, requesting preliminary approval of the Settlement set forth in this
Stipulation and approval for Spectranetics to provide notice of the Settlement
to Current Spectranetics Shareholders by filing a “Current Report” on Form 8-K
with the United States Securities & Exchange Commission (the “SEC”) that
includes a copy of the Notice substantially in the form and content of
Exhibit C-1 hereto and including a Notice similar to the Form 8-K on the
Company’s website, where it shall remain posted for at least thirty (30) days. 
The Settling Derivative Parties agree, and the proposed Notice Order shall
provide, that the filing of a Form 8-K and posting notice on the Company’s
website shall constitute adequate notice of this Settlement pursuant to
applicable law and due process.

 

3.2                                 The Settling Derivative Parties shall
request that, after notice is given, the Court hold a final settlement hearing
(the “Settlement Hearing”) and finally approve this Settlement as set forth
herein.  If approval is granted, the Settling Derivative Parties agree that the
Derivative Actions will be dismissed with prejudice as to all Settling

 

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Derivative Defendants pursuant to a stipulated Judgment, substantially in the
form and content of Exhibit D.

 

3.3                                 In the event that the Court orders notice
beyond that described above and in the proposed Notice Order attached as
Exhibit C-1, the costs of such notice will be borne by the Settling Derivative
Defendants.

 

4.                                        Releases

 

4.1                                 Upon the Effective Date, except as set forth
in ¶ 4.3 below, the Settling Derivative Plaintiffs (on their own behalf and
derivatively on behalf of Spectranetics)  and all Current Spectranetics
Shareholders shall release, relinquish and discharge, and by operation of the
Judgment shall have, fully, finally, and forever released, relinquished and
discharged each and all of the Released Derivative Parties from all Released
Claims (including “Unknown Claims”), and from all claims (including “Unknown
Claims”), arising out of, relating to, or in connection with the defense, or
resolution of the Derivative Actions or the Released Claims.  Claims for
violation of this Stipulation (including any exhibits) are preserved.

 

4.2                                 Upon the Effective Date, each of the
Settling Derivative Defendants and/or their Insurers shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever
released, relinquished and discharged the Settling Derivative Plaintiffs and
Derivative Plaintiffs’ Counsel from the filing and prosecution of any lawsuit or
claim by the Settling Derivative Defendants based on any claims (including
“Unknown Claims”) alleged or which could have been alleged in the Derivative
Actions against the Settling Derivative Plaintiffs or Derivative Plaintiffs’
Counsel arising out of, relating to, or

 

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in connection with the commencement, prosecution, assertion or resolution of the
Derivative Actions or the Released Claims.  Claims for violation of this
Stipulation (including any exhibits) are preserved.

 

4.3                             For the avoidance of doubt, nothing contained
herein shall affect the direct claims between or among Spectranetics and the
Settling Derivative Defendants (as opposed to derivative claims brought on
behalf of Spectranetics by a Spectranetics stockholder) as they currently exist
including, by way of example, claims under any applicable indemnity agreement or
undertaking agreement or claims for breach of fiduciary duty, wrongful
termination, breach of contract, tortious interference with contract, or
infliction of emotional distress.  Nothing in the Stipulation nor the fact that
the Stipulation has been executed shall be construed as an admission or
concession by any party regarding the proper interpretation of any applicable
indemnity agreement.

 

4.4                                 Except as otherwise expressly provided for
in this Stipulation, by Delaware law, or in any applicable indemnity agreement,
undertaking agreement, bylaw provision or certificate of incorporation
provision, the Settling Derivative Parties shall each bear their own respective
attorneys’ fees, expenses and costs incurred in connection with the conduct and
settlement of the Derivative Actions, and the preparation, implementation and
performance of the terms of this Stipulation.

 

4.5                                 Pending final determination of whether the
Settlement should be approved, all proceedings and all further activity between
the Settling Derivative Parties regarding or directed toward the Derivative
Actions, save for those activities and proceedings relating to this Stipulation
and the Settlement, shall be stayed.

 

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4.6                                 Pending final determination of whether the
Settlement should be approved, neither the Settling Derivative Plaintiffs or
Spectranetics, nor any of the Current Spectranetics Shareholders shall commence,
maintain or prosecute against the Settling Derivative Defendants or any other
Released Derivative Parties, or any of them, any action or proceeding any court
or tribunal asserting any of the Released Claims.

 

5.                                      Derivative Plaintiffs’ Counsel’s
Attorneys’ Fees And Reimbursement Of Costs and Expenses

 

5.1                                 The Company recognizes and agrees that the
actions taken or to be taken in response to the Derivative Claims, including the
new set of corporate governance principles set forth in Exhibit A, have
conferred substantial benefits on the Company and Current Spectranetics
Shareholders, and that Derivative Plaintiffs’ Counsel therefore should be
entitled to a fee.

 

5.2                                 The Settling Derivative Parties have agreed
that the Settling Derivative Defendants’ Insurers shall pay $350,000 to
Derivative Plaintiffs’ Counsel, subject to Court approval, to cover all
attorneys’ fees, costs and expenses of all counsel to the Settling Derivative
Plaintiffs, including the fees of experts and consultants (the “Fee Award”). 
Spectranetics and the Settling Derivative Defendants shall not otherwise be
liable for any fees or costs incurred by, claimed by or awarded to Derivative
Plaintiffs’ Counsel.

 

5.3                                 The Fee Award shall be funded within twenty
(20) business days of the later of: (1) a Court order preliminarily awarding
such attorneys’ fees, costs and expenses and Court order preliminarily approving
the Settlement of the Class Action; (2) Spectranetics receipt of a W-9 from the
payee to whom the Fee Award shall be paid;

 

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and (3) Spectranetics receipt of wire transfer information from the payee to
whom the Fee Award shall be paid.  The Fee Award shall be paid initially to an
Escrow Account established by Derivative Plaintiffs’ Counsel and shall be
immediately released to Derivate Plaintiffs’ Counsel upon entry of the Judgment
by the Court even if appeals are taken from the Fee Award.  In the event that
this Stipulation and the Settlement set forth herein do not become Final for any
reason, or the Judgment or the Order making the Fee Award is reversed or
modified on appeal, and in the event that the Fee Award has been paid to any
extent, then Derivative Plaintiffs’ Counsel shall within five (5) business days
from the event which precludes the Effective Date from occurring, or such
reversal or modification, refund the fees, expenses, and costs previously paid
to them in connection with payment of the Fee Award.  Such refund shall be a
joint obligation of the Derivative Plaintiffs’ Counsel.  Derivative Plaintiffs’
Counsel, as a condition of receiving such attorneys’ fees, costs and expenses,
on behalf of themselves and each partner and/or shareholder of them, agree that
the law firms and their partners and/or shareholders are subject to the
jurisdiction of the Court for the purpose of enforcing this ¶ 5.3 of this
Stipulation.  Without limitation, Derivative Plaintiffs’ Counsel’s law firms and
their partners and/or shareholders agree that the Court may, upon application of
Settling Derivative Defendants, summarily issue orders, including, but not
limited to, judgments and attachment orders, and may make appropriate findings
of or sanctions for contempt against it should Derivative Plaintiffs’ Counsel
fail timely to repay any portion of the Fee Award previously paid to them.

 

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5.4                                 Based on the benefits that Derivative
Plaintiffs’ Counsel believes that Derivative Plaintiffs have achieved through
their prosecution of the Derivative Actions, Derivative Plaintiffs’ Counsel
intends to seek Court approval for an award in the amount of up to $7,000.00
(the “Special Award”) for the Derivative Plaintiffs, to be allocated by
Derivative Plaintiffs’ Counsel.  Neither Spectranetics nor the Settling
Derivative Defendants shall object to the request for Court approval of the
Special Award.  The Special Award shall be paid out of the Fee Award to the
extent that the Special Award is approved by the Court, in whole or in part.

 

5.5                                 Neither Spectranetics nor the Released
Derivative Parties shall have any responsibility for, and no liability
whatsoever with respect to, payment of the Fee Award or any other award of
attorneys’ fees, costs and expenses to Derivative Plaintiffs’ Counsel, or to any
other Person who may assert some claim thereto, except as provided herein.

 

5.6                                 The procedure for and the allowance or
disallowance by the Court of the Fee Award is not part of the Settlement, and is
to be considered by the Court separately from the Court’s consideration of the
fairness, reasonableness and adequacy of the Settlement.  Any order or
proceedings relating to the Fee Award, or any appeal from any order relating
thereto, shall not operate to terminate or cancel this Stipulation, or affect or
delay the finality of the Judgment approving this Stipulation and the Settlement
of the Derivative Actions set forth herein.

 

5.7                                 Derivative Plaintiffs’ Counsel shall be
solely responsible for the allocation among Derivative Plaintiff’s Counsel,
and/or any other Person who may assert some

 

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claim thereto, of any portion of the Fee Award or any other award of attorneys’
fees, costs and expenses.  Neither Spectranetics nor the Released Derivative
Parties shall have any responsibility for, and no liability whatsoever with
respect to, any such allocation whatsoever.  Any dispute among Derivative
Plaintiffs’ Counsel concerning the allocation of the Fee Award or any other
award of attorneys’ fees, costs and expenses shall not operate to terminate or
cancel this Stipulation, or affect or delay the finality of the Judgment
approving this Stipulation and the Settlement set forth herein.

 

6.                                      Conditions Of Settlement, Effect Of
Disapproval, Cancellation Or Termination

 

6.1                                 The Settlement shall be terminated in the
event that any of the following occurs:  (1) any of the conditions set forth in
¶ 6.2 below is not satisfied; (2) the Settlement does not become Final for any
reason; (3) failure on the part of any of the Settling Derivative Parties to
abide, in any material respect, with the terms of this Stipulation.

 

6.2                                 Unless otherwise agreed to in writing, this
Stipulation shall be terminated in the event that any of the following
conditions is not met:

 

(a)                                  The Court has entered the Notice Order, as
required by ¶ 3.1 and ¶ 3.2, above;

 

(b)                                 Preliminary and final approval of this
Stipulation, independent of the determination of the Fee Award;

 

(c)                                  Upon final approval of the Settlement, the
Derivative Actions are dismissed with prejudice as to all Settling Derivative
Defendants pursuant to a stipulated Judgment, substantially in the form and
content of Exhibit B;

 

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(d)                                 The Judgment has become Final;

 

(e)                                  That this Settlement is not otherwise
terminated pursuant to the terms set forth in this Stipulation;

 

6.3                                 In the event that this Stipulation is not
approved by the Court or the Settlement set forth in this Stipulation is
terminated or fails to become effective in accordance with its terms, this
Stipulation and all negotiations and proceedings relating hereto shall be
without prejudice to any or all Settling Derivative Parties who shall be
restored to their respective positions in the Derivative Actions as of
September 10, 2010.  In such event, the terms and provisions of this
Stipulation, with the exception of ¶¶ 1.1-1.18, 4.3, 5.3, 5.4, 5.5, 6.1-6.5,
7.2, 7.3, 7.4, 7.6 and 7.7 herein, shall have no further force and effect with
respect to the Settling Derivative Parties and shall not be used in the
Derivative Actions or in any other proceeding for any purpose and any Judgment
or Order entered by the Court in accordance with the terms of this Stipulation
shall be treated as vacated, nunc pro tunc.

 

6.4                                 In the event this Stipulation shall be
cancelled as set forth in ¶ 6.1 above, the Settling Derivative Plaintiffs and
Settling Derivative Defendants shall, within two weeks of such cancellation,
jointly request a status conference with the Court to be held on the Court’s
first available date.  At such status conference, the Settling Derivative
Plaintiffs and Settling Derivative Defendants shall ask the Court’s assistance
in scheduling continued proceedings in the Derivative Actions as between them. 
Pending such status conference or the expiration of sixty (60) days from the
Settling Derivative Plaintiffs’ and Settling Derivative Defendants’ joint
request for a status conference,

 

25

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whichever occurs first, none of the Settling Derivative Parties shall file or
serve any further motions or discovery requests on any of the other Settling
Derivative Parties in connection with the Derivative Actions, nor shall any
response be due by any Settling Derivative Party to any outstanding pleading by
any other Settling Derivative Party.

 

6.5                                 Neither a modification nor a reversal on
appeal of the Fee Award by the Court to any of the Derivative Plaintiffs’
Counsel shall constitute a condition to the Effective Date or grounds for
cancellation and termination of this Stipulation.

 

7.                                      Miscellaneous Provisions

 

7.1                                 The Settling Derivative Parties
(a) acknowledge that it is their intent to consummate this Settlement and
Stipulation; and (b) agree to cooperate to the extent necessary to effectuate
and implement all terms and conditions of this Stipulation and to exercise their
best efforts to accomplish the foregoing terms and conditions of this
Stipulation.  For the avoidance of doubt, the finality of the Settlement of the
Derivative Actions is not conditioned upon approval of the settlement of the
Class Action, and the Effective Date in the Derivative Actions is not
conditioned upon final approval of settlement of the Class Action.

 

7.2                                 The Settling Derivative Parties intend the
Settlement to be a final and complete resolution of all disputes among them with
respect to the Derivative Actions.  The Settling Derivative Defendants have
denied, and continue to deny, any and all allegations contained in the
Derivative Actions, and they are entering into the Settlement in order to
eliminate the burden, expense, and uncertainties of further litigation.  The
Settlement comprises claims that are contested and shall not be deemed

 

26

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an admission by any Settling Derivative Party as to the merits of any claim or
defense.  While the Settling Derivative Defendants deny that the claims advanced
in the Derivative Actions were meritorious, the Settling Derivative Parties
agree, and the Judgment will state, that the Derivative Actions were filed,
prosecuted and defended in good faith and in accordance with the Federal
Rules of Civil Procedure, including Rule 11 of the Federal Rules of Civil
Procedure, and applicable Colorado law, and are being settled voluntarily after
consultation with competent legal counsel.

 

7.3                                 Neither the Settlement nor the provisions
contained in this Stipulation and the MOU, nor any of the negotiations or
proceedings connected therewith, nor any act performed or document executed
pursuant to or in furtherance of the Settlement or the provisions contained in
this Stipulation and the MOU, is or may be deemed to be, or offered or received
in evidence as, a presumption, concession, or admission of the validity of any
of the Released Claims, or of any fault, liability, omission, or wrongdoing by
any of the Released Derivative Parties and/or Spectranetics, in any civil,
criminal or administrative proceeding in any court, administrative agency or
other tribunal except as required to enforce the Settlement.  The Released
Derivative Parties may file this Stipulation and/or the Judgment in related
litigation as evidence of the Settlement, or in any action that may be brought
against them in order to support a defense or counterclaim based on principles
of res judicata, collateral estoppel, release, good faith settlement, judgment
bar or reduction or any other theory of claim preclusion or issue preclusion or
similar defense or counterclaim.

 

27

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7.4                                 No press announcement, press release, or
other public statement concerning the Settlement may be made by any of the
Settling Derivative Parties without approval from the other Settlement
Derivative Parties, except as required by law.  Any such announcement made
without such consent shall be grounds for termination of the Settlement.

 

7.5                                 All of the Exhibits to this Stipulation are
material and integral parts hereof and are fully incorporated herein by this
reference.

 

7.6                                 This Stipulation may be amended or modified
only by mutual agreement of the Settling Derivative Parties to be negotiated in
good faith, if necessary, to effect the terms of the Settlement, and pursuant to
a written instrument signed by or on behalf of all Settling Derivative Parties
or their successors-in-interest.

 

7.7                                 This Stipulation and the Exhibits attached
hereto constitute the entire agreement among the parties hereto.  The Settling
Derivative Parties expressly warrant that, in entering into this Stipulation,
they relied solely upon their own knowledge and investigation, and not upon any
promise, representation, warrant, or other statement by any party or any person
representing any party to this Stipulation, not expressly contained in this
Stipulation or its Exhibits.  Except as otherwise provided herein, each party
shall bear its own costs.

 

7.8                                 This Stipulation is deemed to have been
prepared by counsel for the Settling Derivative Parties, as a result of arms’
length negotiations among the Settling Derivative Parties.  Whereas all Settling
Derivative Parties have contributed

 

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substantially and materially to the preparation of this Stipulation, it shall
not be construed more strictly against one Party than another.

 

7.9                                 This Stipulation shall be binding upon, and
inure to the benefit of, the successors and assigns of the Settling Derivative
Parties and their respective agents, successors, executors, heirs and assigns.

 

7.10                           Each counsel or other Person executing this
Stipulation or any of its Exhibits on behalf of any party hereto hereby warrants
that such person has the full authority to do so.  All orders and agreements
entered during the course of the Derivative Actions relative to the
confidentiality of information shall survive this Stipulation.

 

7.11                           This Stipulation may be executed by facsimile and
in one or more counterparts.  All executed counterparts and each of them shall
be deemed to be one and the same instrument.  Counsel for the parties to the
Stipulation shall exchange among themselves original signed counterparts and a
complete set of original executed counterparts shall be filed with the Court.

 

7.12                           The Court shall retain jurisdiction with respect
to implementation and enforcement of the terms of this Stipulation, and all
parties hereto and their counsel submit to the jurisdiction of the Court for
purposes of implementing and enforcing the Settlement embodied in this
Stipulation.

 

7.13                           The rights and obligations of the parties to this
Stipulation, and all disputes arising out of or relating to this Stipulation,
shall be governed by, and construed and

 

29

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enforced in accordance with, the substantive laws and procedural rules of the
State of Colorado.

 

IN WITNESS WHEREOF, the parties have hereto caused the Stipulation to be
executed, by their duly authorized attorneys, as of September 10, 2010.

 

 

 

 

 

 

    /s/ William B. Federman

 

 

William B. Federman

 

 

FEDERMAN & SHERWOOD

 

 

10205 North Pennsylvania Avenue

 

 

Oklahoma City, OK 73120

 

 

Telephone:

405-235-1560

 

 

Facsimile:

405-239-2112

 

 

Email: wbf@federmanlaw.com

 

 

 

 

 

Lead Counsel for Derivative Plaintiffs

 

 

 

 

 

 

 

 

    /s/ Bruce G. Vanyo

 

 

Bruce G. Vanyo

 

 

Richard H. Zelichov

 

 

KATTEN MUCHIN ROSENMAN LLP

 

 

2029 Century Park East, Suite 2600

 

 

Los Angeles, CA 90067-3012

 

 

Telephone:

310-788-4400

 

 

Facsimile:

310-788-4471

 

 

Email: bruce.vanyo@kattenlaw.com

 

 

Email: richard.zelichov@kattenlaw.com

 

 

 

 

 

Counsel for Nominal Defendant

 

 

The Spectranetics Corporation

 

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      /s/ Kevin J. Toner

 

 

Kevin J. Toner

 

 

PATTON BOGGS LLP

 

 

1185 Avenue of the Americas

 

 

New York, NY 10036

 

 

Telephone:

646-557-5100

 

 

Facsimile:

646-557-5101

 

 

Email: ktoner@pattonboggs.com

 

 

 

 

 

Counsel for Defendants Emile J. Geisenheimer, David G. Blackburn, R. John
Fletcher, Martin T. Hart, Joseph M. Ruggio, M.D., Guy Childs and Craig M.
Walker, M.D.

 

 

 

 

 

 

 

 

    /s/ Stephen C. Schulte

 

 

Stephen C. Schulte

 

 

WINSTON & STRAWN LLP

 

 

35 WEST WACKER DRIVE

 

 

CHICAGO, IL 60601-9703

 

 

TELEPHONE:

312.558.5600

 

 

FACSIMILE:

312.558.5700

 

 

 

 

 

 

Counsel For Defendant

 

 

John G. Schulte

 

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