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




 





 

















 


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 


 


19

















 


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.


 


20
















 


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; 


 


21

















 


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.


 


22

















 


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 


 


23

















 


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;


 


24

















 


(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

















 


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

















 


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

















 


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 


 


28

















 


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

















 


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

  



 


30

















 


	
   

  	
   

  	
        /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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