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Litigation settlement. The $1.1 million represent royalties related to a patent license agreement, which was executed and paid in December 2009.

Discontinuation costs—Safe-Cross product line. In the third quarter of 2009, we decided to discontinue the marketing and sales of the Safe-Cross product line, which was acquired from KNC in May 2008. The $1.1 million charge includes a patent impairment charge in the amount of $0. 2 million, impairment of long-lived assets in the amount of $0.4 million, inventory write-offs of $0.2 million and an amount in consideration of estimated remaining obligations to KNC and customers of $0.3 million.

Asset impairment charge. In the third quarter of 2010, we wrote off a capital project in process which is now no longer expected to be complet ed and utilized, due to a recent EPA ruling which effectively limited the useful life of the asset.

Employee termination and lease abandonment costs. In the third quarter of 2010, we terminated 14 employees, primarily within the Vascular Intervention sales organization, as a result of a strategic re-alignment of certain sales territories designed to improve sales productivity. As a result, we recorded severance obligations totaling $0.7 million in the third quarter of 2010.

In the third quarter of 2009, we eliminated certain positions in order to streamline operations. As a result, we recorded severance obligations totaling $240,000. In addition, we recorded a charge for remaining lease obligations in the amount of $126,000 for a portion of a leased facility that is no longer being utilized.

Interest income

Interest income decreased 62% to $36,000 in the third quarter of 2010 from $94,000 in the third quarter of 2009. The decrease in interest income in 2010 is due primarily to a lower investment portfolio balance and to lower interest rates on our invested balances.

Other expense, net

&nb sp;Other expense, net in the third quarter of 2010 included a $12,500 loss on the sale of one of our auction rate security positions. The carrying value of the security was recorded at approximately 86% of par, and we sold it at 85.5% of par, generating a small realized loss on the sale.

Loss before income taxes

The pre-tax loss for the three months ended September 30, 2010 was $6.6 million, compared with a pre-tax loss of $2.5 million for the three months ended September 30, 2009. The current period results included $8.1 million of special items and the prior year third quarter results included $3.1 million of special items, as described above.

Income taxes

During the three months ended September 30, 2010, we increased to 100% our valuation allowance against our U.S. deferred tax asset. The effect of the valuation allowance adjustment was to increase the Company's provision for income taxes by $6.1 million for the three months ended September 30, 2010. Recent events, primarily the third quar ter indictment of former employees, the related $6.5 million accrual for indemnification costs for these employees, and the possibility that such costs could exceed the estimated accrual, caused us to conclude that we no longer meet the accounting criteria for recognizing a portion of our deferred tax asset. See Note 9, “Income Taxes” to our condensed consolidated financial statements for further discussion. Income tax expense in the third quarter of 2010 also included approximately $35,000 comprised of state and foreign income taxes payable.

Net loss

We recorded a net loss for the three month s ended September 30, 2010 of $12.7 million, or $(0.38) per share, compared with a net loss of $2.5 million, or $(0.08) per share, in the three months ended September 30, 2009< /font>.

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Item 2. Management’s Disc ussion and Analysis of Financial Condition and Results of Operations (Cont'd)

Functional currency

The functional currency of Spectranetics International B.V. and Spectranetics Deutschland GmbH is the euro. All revenue and expenses are translated to U.S. dollars in the consolidated statements of operations using weighted average exchange rates during the period. Fluctuation in currency rates during the three months ended September ;30, 2010 as compared with the prior year period caused a decrease in consolidated revenue of approximately $0.3 million and a decrease in consolidated operating expenses of approximately $0.2 million.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont'd)

Selected Consolidated Statements of Operations Data

The following table presents Consolidated Statements of Operations data for the nine months ended September 30, 2010 and September 30, 2009 based on the percentage of revenue for each line item, as well as the dollar and percentage change of each of the items.

Nine Months Ended September 30, 2010 Compared with Nine Months Ended September 30, 2009


		Nine Months Ended September 30,
(in thousands, except for percentages and laser placements)		2010				% of rev (1)			2009				% of rev (1)			$ change 2010-2009				% change 2010-2009
Revenue
Disposable products revenue:
Vascular in tervention		$	46,161			52	%		$	46,736			55	%		$	(575	)		(1	)%
Lead management		30,565				34			26,785			< /td>	31			3,780				14
Total disposable products revenue		76,726				87			73,521				86			3,205				4
Service and other revenue		6,928				8			6,866				8			62				1
Laser equipment revenue:
Equipment sales		1,112				1			1,345				2			(233		)		(17	)
Rental fees		3,846				4			3,444				4			402				12
Total laser equipment revenue		4,958				6			4,789				6			169				4
Total revenue		88,612				100			85,176				100			3,436				4
Gross profit		63,219				71			60,679				71			2,540				4
Operating expenses
Selling, general and administrative		51,436				58			52,089				61			(653		)		(1	)
Research, development and other technology		10,884			12	;		10,973				13			(89		)		(1	)
Federal investigation legal and accrued indemnification costs		6,820				8			2,957				3			3,863				131
Asset impairment charge		—				—			1,090				1			(1,090		)		(100	)
Dicontinuation costs —Safe-Cross® product line		—				—			1,075				1			(1,075		)		(100	)
Asset impairment charge		939				1			—				—			939				—
Employee termination and lease abandonment costs		664				1			536				1			128				24
Total operating expenses		70,743				80			68,720				81			2,023				3
Operating loss		(7,524		)		(8	)		(8,041		)		(9	)		517				(6	)
Other income (expense)
Interest income, net		181				—			345				—			(164		)		(48	)
Other expense, net	< /td>	(21		)		—			(37		)		—			16				(43	)
Loss before income taxes		(7,364		)		(8	)		(7,733		)		(9	)		369				(5	)
Income tax (expense) benefit		(6,212		)		(7	)		102				—			(6,314		)		(6,190	)
Net loss		$	(13,576	)		(15	)%		$	(7,631	)		(9	)%		$	(5,945	)		78	%

Worldwide installed base of laser systems		934							889							45

___________________________________

(1) Percentage amounts may not add due to rounding.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont'd)

Revenue for the nine months ended September 30, 2010 was $8 8.6 million, a 4% increase as compared to $85.2 million for the nine months ended September 30, 2009. This increase is mainly due to increased Lead Management (LM) disposables revenue and increased equipment rental revenue, offset by a decline in Vascular Intervention (VI) disposables revenue compared to the year-ago period. Our product mix changed slightl y year-over-year, with 87% of revenue coming from disposables in the first nine months of 2010 compared with 86% from disposables in the first nine months of 2009. Service and other revenue remained stable at 8% of total revenue in the first nine months of 2010 and 2009, and revenue from laser equipment sales and rentals also remained stable at 6% of total revenue in the first nine months of 2010 and 2009.

VI revenue, which includes products used in both the peripheral and coronary vascular systems, decreased 1% in the first nine months of 2010 as compared with the first nine months of 2009. VI sales include three product categories — atherectomy, which remained flat; crossing solutions, which decreased 2%; and thrombectomy, which decreased 6%, all compared with the first nine months of 2009. The lack of growth in atherectomy revenue was due primarily to a decrease in sales of our Turbo Elite products, as a result of a challenging economic environment, disruption associated with the elimination and realignment of certain sales territories and ongoing competitive product pressures. These declines were partially offset by sales of our Turbo-Tandem product which was launched in March 2010, which generated revenue of $3.5 million in the first nine months of the year. We believe the decrease in crossing solutions product sales is primarily due to the competitive environment, with the introduction by competitors of alternative crossing solutions products towards the end of 2009. We believe the decline in thrombectomy revenue is partially due to ordering patterns adversely impacted as a result of the QuickCat recall announced in July 2010.

LM revenue grew 14% for the nine months ended September& nbsp;30, 2010 as compared with the first nine months of 2009. We continue to believe our LM revenue is increasing primarily as a result of: (1) our expanded sales organization, which was initially established in 2008, (2) clinical data supporting the safety and efficacy of removing problematic pacemaker and defibrillator leads, including results from the four-year Lead Extraction in Contemporary Settings (LExICon) study published in the February 9, 2010 issue of the Journal of the American College of Cardiology, an d (3) expanded guidelines set forth by the Heart Rhythm Society for lead extractions.

Laser equipment revenue was $5.0 million and $4.8 million for the nine months ended September 30, 2010 and 2009, respectively. Rental revenue increased 12% during the first nine months of 2010 as compared to the prior year period. This increase is due primarily to the increase in our installed rental base of laser systems, which increased to 452 at September 30, 2010 from 406 at September 30, 2009, as well as our focus on converting under-performing Cap-Free (fee per procedure) lasers to straight rentals. We sold eight laser systems in the first nine months of 2010 and eight in the same period of the prior year; however, our average sales price of laser systems decreased slightly in 2010 compared to the prior year primarily due to the mix of new vs. remanufactured systems sales. Service and other revenue increased 1%, and was $6.9 million in the first nine months of 2010 and 2009.

We placed 62 laser systems with new customers during the nine months ended September 30, 2010 compared with 94 during the first nine months of last year. Of those new laser placements, 30 laser systems were transfers from the existing installed base during the first nine months of 2010 compared with 55 transfers during the first nine months of 2009. In recent quarters, we have placed more focus on redeploying laser systems from hospitals with low laser-based catheter utilization to hospitals where we believe utilization will be higher, in order to increase productivity per laser system. Both our focus on redeploying laser systems and our emphasis on increasing sales to existing accounts have resulted in fewer net new placements as compared to year-ago periods, which was anticipated. This brings our worldwide installed base of laser systems to 934 (722 in the U.S.) at September 30, 2010.

On a geographic basis, revenue in the United States was $76.3 million during the nine months ended September 30, 2010, an increase of 5% from the first nine months of the prior year. International revenue totaled $12.3 million, a decrease of 2% from the first nine months of 2009. The decrease in international revenue was primarily due to fluctuations in foreign currency exchange rates year over year. A decrease in laser equipment sales revenue, with two laser system sales in the first nine months of 2010 compared to five international laser system sale s in the prior year, was partially offset by increases in equipment rental revenue, which increased 20%. For international disposables revenue, LM revenue increased 12% while VI revenue decreased 4%; service revenue decreased 9%, all compared to the first nine months of 2009.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont'd)

Gross margin for the first nine months of 2010 was 71.3%, up from 71.2% in the first nine months of 2009. The increase in gross margin was primarily due to favorable product mix, as the year-over-year revenue increase was primarily in higher margin disposable products. Cost of products sold in the first nine months of 2010 included the impact of the voluntary product recall and related expenses for product replacement of the QuickCat catheter. Of the total $300,000 charge, $180,000 was related to the costs associated with the return and replacement of product and $120,000 was related to the disposal and write-off of inventory, both of which were recorded as cost of products sold.

Operating expenses

Operating expenses of $70.7 million in the first nine months of 2010 increased by 3% from $68.7 million in the first nine months of 2009. Operating expenses for the first nine months of 2010 and 2009 included a number of special items, which are separately disclosed components within operating expenses in our statement of operations, further de scribed below. In the first nine months of 2010, these special items totaled $8.4 million compared to $5.7 million in the first nine months of 2009.

Operating expenses represented 80% of total revenue in the first nine months of 2010 as compared with 81% of total revenue in the first nine months of 2009. Excluding the special items described below, operating expenses were 70% and 74% of revenue in the first nine months of 2010 and 2009, respectively. Over the past twelve months, our focus on productivity and expense management activities, along with the elimination of certain positions within the Company to streamline operations, have contributed to the reduction in operating expenses as a percentage of revenue as compared with the prior year.

Selling, general and administrative. Year-over-year fluctuations in selling, general and administrative expenses included:


•	Marketing and selling expenses were essentially flat year-over-year, with decreases in U.S. field sales and marketing costs offset by increases in international sales and marketing, due to an increase in staffing within our international sales organization.


•	General and administrative expenses decreased 5%, with year-over-year decreases in regulatory compliance outside consulting costs partially offset by increases in personnel and other miscellaneous expenses.

Research and development. Research, development and other technology expenses decreased 1% year over year, and were $10.9 million for the first nine months of 2010 and 2009. Costs included within research, development and other technology expenses are product development costs, clinical studies costs and royalty costs associated with various license agreements with third-party licensors. Fluctuations in these costs are as follows:


•	Product development and related regulatory costs increased approximately $0.2 million compared to the first nine months of 2009 primarily related to an increase in outside consulting costs to support our regulatory affairs activities.


•	Clinical studies expense decreased by approximately $0.5 million due to the conclusion of several studies that were ongoing in the prior year. We expect these costs to increase upon initiation of the randomized clinical trial to treat ISR, which is subject to approval by the FDA.


•	Royalty expenses increased by approximately $0.3 million due to higher sales of products incorporating technology that we license as well as a higher royalty rate on certain products.

Federal investigation legal and accrued indemnification costs. In the third quarter of 2010, three former employees with whom we have indemnification obligations were indicted on charges related to the subjects of the federal investigation, which significantly increased the likelihood that the former employees’ future defense costs will be substantial and ongoing, and that our indemnification obligations to these employees will exceed the limits of our insurance coverage. Therefore, at Sep tember 30, 2010, we recorded a $6.5 million charge to accrue the low end of our estimate of the range of our contingent liability under the indemnification obligations. We currently estimate that the legal fees in this matter could range from $6.5 million to $11.5 million through trial and that these costs are expected to be paid over the course of the court proceedings. We developed the estimate with the assistance of outside legal counsel familiar with court proceedings similar in nature to the proceedings related

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont'd)

to our indemnification obligations. The actual expenses may be higher or lower than the estimate depending upon final resolution of the matter. See Note 11, “Commitments and Contingencies” to the condensed consolidated financial statements included in this report for further discussion of this matter. In the first nine months of 2009, legal costs related to the federal investigation totaled approximately $3.0 million.

Litigation settlement. The $1.1 million in 2009 represent royalties related to a patent license agreement, which was executed and paid in December 2009.

Discontinuation costs—Safe-Cross product line. In the third quarter of 2009, we decided to discontinue the marketing and sales of the Safe-Cross product line, which was acquired from KNC in May 2008. The $1.1 million charge includes a patent impairment charge in the amount of $0.2 million, impairment of long-lived assets in the amount of $0.4 million, inventory write-offs of $0.2 million, and $0.3 million of estimated remaining obligations to KNC and customers.

Asset impairment charge. In the third quarter of 2010, we wrote off a capital project in process which is now no longer expected to be completed and utilized, due to a recent EPA ruling which effectively limited the useful life of the asset.

In the second and third quarters of 2009, we eliminated certain positions in order to streamline operations. As a result, we recorded severance obligations totaling $410,000 for the nine months ended September 30, 2009. In addition, we recorded a charge for remaining lease obligations in the amount of $126,000 for a portion of a leased facility that is no longer being utilized.

Interest income

Interest income decreased 48% to $181,000 in the first nine months of 2010 from $345,000 in the firs t nine months of 2009. The decrease in interest income in 2010 is due primarily to a lower investment portfolio balance and to lower interest rates on our invested balances.

Other expense, net

Other expense, net in the first nine months of 2010 included a $12,500 loss on the sale of one of our auction rate security positions. The carrying value of the security was recorded at approximately 86% of par, and we sold it at 85.5% of par, generating a small realized loss on the sale.

Loss before income taxes

Pre-tax loss for the nine months ended September 30, 2010 was $7.4 million, compared with a pre-tax loss of $7.7 million for the nine months ended September 30, 2009. The current period results included $8.4 million of special items and the prior year period results included $5.7 million of special items, as described above.

Income taxes

During the three months ended September 30, 2010, we increased to 100% our valuation allowance against our U.S. deferred tax asset. The effect of the valuation allowance adjustment was to increase the Company's provision for income taxes by $6.1 million for the nine months ended September 30, 2010. Recent events, primarily t he third quarter indictment of former employees, the related $6.5 million accrual for indemnification costs for these employees, and the possibility that such costs could exceed the estimated accrual, caused us to conclude that we no longer meet the accounting criteria for recognizing a portion of our deferred tax asset. See Note 9, “Income Taxes” to our condensed consolidated financial statements for further discussion. Income tax expense also included approximately $102,000 comprised of state and foreign income taxes payable for the nine months ended September 30, 2010.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont'd)

Net loss

We recorded a net loss for the nine months ended September 30, 2010 of $13.6 million, or $(0.41) per share, compared with a net loss of $7.6 million, or $(0.24) per share, in the nine months ended September 30, 2009.

Functional currency

The functional currency of Spectranetics International B.V. and Spectranetics Deutschland GmbH is the euro. All revenue and expenses are translated to U.S. dollars in the consolidated statements of operations using weighted average exchange rates during the period. Fluctuation in currency rates during the nine months ended September 30, 2010 as compared with the prior year period caused a decrease in consolidated revenue of approximately $220,000 and a decrease in consolidated operating expenses of approximately $160,000.

Liquidity and Capital Resources

As of September 30, 2010, we had cash, cash equivalents and current investment securities available for sale of $26.4 million, up $7.3 million from December 31, 2009.

As of September 30, 2010, we had long-term investment securities of $4.4 million, a decrease of $5.4 million from $9.8 million at December 31, 2009. Long-term investment securities at September 30, 2010 consisted of certain auction rate securities (ARS) acquired in Jan uary 2008 which we have not been able to liquidate at an acceptable price. We sold one of these securities at 90% of par in the first quarter of 2010, for cash proceeds of $2.7 million. We sold a second security at 85.5% of par in the third quarter of 2010, for cash proceeds of $2.3 million. We also received redemptions of $200,000 and $100,000 on one of the issues of ARS that we continue to hold, at par, in the first and second quarters of 2010, respectively. See further discussion of our ARS in Note 3, “Investment Securities,” to our condensed consolidated financial statements included in this report.

If uncertainties in the credit and capital markets continue, if these markets deteriorate further or if we experience rating downgrades on any investments in our portfolio, including our ARS, the market value of our investment portfolio may decline further. This would negatively affect our financial position, results of operations and liquidity.

Our future liquidity and capital requirements will be influenced by numerous factors, including any future operating losses, the level and timing of future sales and expenditures, the results and sc ope of ongoing research and product development programs, working capital to support our sales growth, receipt of and time required to obtain regulatory clearances and approvals, sales and marketing programs, acceptance of our products in the marketplace, competing technologies, market and regulatory developments, acquisitions, the future course of pending and threatened litigation and the cost of indemnification obligations with former employees. We believe that our cash and cash equivalents and anticipated funds from operations will be sufficient to meet our liquidity requirements through at least the next twelve months. However, there is no assurance that additional funding will not be needed or sought prior to such time. In the event that we require additional working capital to fund future operations and any future acquisitions, we may enter into credit and financing arrangements with one or more independent institutional lenders, sell shares of our common stock or other equity securities, or sell debt securities. There is no assurance that any financing transaction will be available on terms acceptable to us, or at all, or that any financing transaction will not be dilutive to our current stockholders.

Operating Activities. For the nine months ended September 30, 2010, cash provided by operating activities totaled $4.4 million. The primary sources and uses of cash were the following:


(1)	Excluding approximately $16.7 million of non-cash expenses and the $6.5 million of accrued indemnification costs which did not impact cash in the third quarter of 2010, our net loss of $13.6 million yielded $9.6 million of cash from our operating results, prior to changes in our working capital. Non-cash expenses included $7.5 million of

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont'd)

depreciation and amortization, $1.9 million of stock-based compensation, $0.2 million of provision for excess and obsolete inventories, $0.9 million of asset impairment charge and $6.1 million of an increase in the valuation allowance against our deferred tax assets.


(2)	The net decrease in operating assets and liabilities of approximately $5.3 million was due primarily to the following:


•	An increase in equipment held for rental or loan of $2.9 million as a result of placement activity of our laser systems through our rental and evaluation programs;


•	An increase in inventories of $1.0 million due primarily to an increase in disposables production related to new product introductions a nd a higher number of lasers in finished goods inventory at September 30, 2010 as compared to year-end;


•	A decrease in accounts payable and accrued liabilities (excluding the accrued indemnification costs) of approximately $1.4 million, due primarily to the payment of year-end accrued commissions and bonuses and the timing of vendor payments.

The table below presents the change in receivables and inventory in relative terms, through the presentation of financial ratios. Days sales outstanding are calculated by dividing the ending accounts receivable balance, net of reserves for sales returns and doubtful accounts, by the average daily sales for the quarter. Inventory turns are calculated by dividing annualized cost of sales for the quarter by ending inventory. ;


	September 30, 2010	December 31, 2009
Days Sales Outstanding	50	50
Inventory Turns	3.6	4.1

Investing Activities. For the nine months ended September 30, 2010, cash provided by investing activities was $2.3 million, consisting of proceeds from the sale and partial redemption of auction rate securities of $5.4 million, offset by capital expenditures of $3.2 million. In the first quarter of 2010, restricted cash that had previously been held in an escrow fund for a litigation matter had its restriction released, and this cash was invested in a short-term certificate of deposit. The capital expenditures included manufacturing equipment upgrades and replacements as well as additional capital items for research and development projects and additional computer equipment and software purchases.

&nb sp;

Financing Activities. Cash provided by financing activities for the nine months ended September 30, 2010 was $74,000, comprised entirely of proceeds from the sale of common stock to employees and former employees as a result of exercises of stock options.

At September 30, 2010, we had no significant debt or capital lease obligations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Significant items subject to estimates and assumptions include the carrying amount of our investments in auction rate securities; the carrying amount of property and equipment, goodwill and intangible assets; valuation allowances and reserves for receivables, inventories and deferred income tax assets; stock-based compensation; and loss contingencies, including those related to litigation and indemni fication obligations. Actual results could differ from those estimates.

Our critical accounting policies and estimates are included in our 2009 Annual Report on Form 10-K, filed with the SEC on March 15, 2010. During the first nine months of 2010, there were no significant ch anges to the critical accounting policies we disclosed in our 2009 Form 10-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of risks, including changes in interest rates affecting the return on our investments and foreign currency fluctuations. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We attempt to place our investments with high quality issuers and, by policy, limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio. Aside from our auction rate securities, our current surplus cash is primarily invested in money market accounts and short-term certificates of deposit. Marketable securities are classified as available-for-sale, and consequently, are recorded on the balance sheet at fair value with temporary unrealized gains or losses reported as a separate component in stockholders’ equity, net of applicable taxes. At any time, sharp changes in interest rates can affect the value of our investment portfolio and its interest earnings. Currently, we do not hedge these interest rate exposures.

At September 30, 2010, we had $0.8 million of investment securities available for sale that are classified as current on our balance sheet. Since these investments have maturities of less than one year, we do not expect interest rate fluctuations to have a significant impact on their fair values.

We also hold $4.4 million in auction rate securities, classified as long-term on our balance sheet as of September&nbs p;30, 2010, and changes in interest rates and other assumptions in the valuation of these securities may have a significant impact on their valuation. The underlying assets of the auction rate securities we hold are student loans which are guaranteed by the U.S. government under the Federal Family Education Loan Program. Beginning in February 2008, auctions failed for our holdings because sell orders exceeded buy orders. The funds associated with these failed auctions will not be accessible until the issuer calls the security, a successful auction occurs, a buyer is found outside of the auction process, or the security matures.

As of September 30, 2010, the unrealized loss on our auction rate securities was approximately $0.4 million, reducing the par value of the securities of $4.8 million to their fair value of $4.4 million, or approximately 91% of par. The unrealized loss was recorded in earnings in the fourth quarter of 2009 as an other-than-temporary impairment. At December 31, 2009, we also performed a sensitivity analysis in the valuation of our auction rate s ecurities using an estimated date to liquidation of plus or minus one year and a discount rate of plus or minus 50 basis points. The sensitivity analysis with these parameters calculated a valuation ranging from 86% to 96% of par.

Our exposure to foreign currency fluctuations is primarily related to sales of our products in Europe, which are denominated primarily in the euro. Changes in the exchange rate between the euro and the U.S. dollar could adversely affect our revenue and net income. Exposure to foreign currency exchange rate risk may increase over time as our business evolves and our products continue to be introduced into international markets. Currently, we do not hedge against any foreign c urrencies and, as a result, could incur unanticipated gains or losses. For the three months ended September 30, 2010, approximately $0.3 million of decreased revenue and approximately $0.2 million of decreased operating expenses were the result of exchange rate fluctuations of the U.S. dollar in relation to the euro and other European currencies as compared to the prior year period. Accordingly, the net impact of exchange rate fluctuations on the consolidated net loss for the three months ended September 30, 2010 was a decrease in net income of approximately $0.1 million as compared to the prior year.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible co ntrols and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision of and with the participation of our management, including our principal executive and principal financial officers, or persons performing similar functions, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2010. Based on the foregoing, our principal executive and principal financial officers, or persons performing similar functions, concluded that our disclosure controls and procedures were e ffective at the reasonable assurance level.

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II—OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of the Company’s legal proceedings, please refer to Note 11, “Commitments and Contingencies” of the condensed consolidated financial statements included in Part I, Item 1 of this report.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of the Company’s 2009 Annual Report on Form 10-K, and Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

Item 6. Exhibits


3.2	Restated Bylaws of The Spectranetics Corporation.

10.1	Stipulation of Settlement (In re Spectranetics Corporation Securities Litigation, Case No. 08-cv-2048-REB-KLM), incorporated by reference to exhibit previously filed by the Company with its Current Report on Form 8-K filed on September 13, 2010.

10.2	Stipulation of Settlement (Kopp v. Geisenheimer, Case No. 08-cv-2102-REB-MJW), incorporated by reference to exhibit previously filed by the Company with its Current Report on Form 8-K filed on September 21, 2010.

31.1	Rule 13(a)-14(a)/15d-14(a) Certification of principal executive officer.

31.2	Rule 13(a)-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1	Section 1350 Certification of principal executive officer.

32.2	Section 1350 Certification of Chief Financial Officer.

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< br>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	The Spectranetics Corporation
	(Registrant)



November 8, 2010		/s/ Guy A. Childs
		Guy A. Childs
		Chief Financial Officer
		(Duly Authorized Officer and
		Principal Financial Officer)

EX-3.2 2 spectraneticsex3209302010.htm EXHIBIT 3.2 RESTATED BYLAWS OF THE SPECTRANETICS CORP. WebFilings | EDGAR view

Exhibit 3.2

RESTATED BYLAWS

THE SPECTRANETICS CORPORATION

ARTICLE I

Stockholders

Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the an nual meeting.

Section 1.2. Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as expressly provided in a resolution of the Board of Directors, include the power to call such meetings, but such special meetings may not be called by any other person or persons, except as may otherwise be specifically provided in the Certificate of Incorporation.

Section 1.3 Notice of Stockholder Business and Nominations.

(A) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by t he stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation's notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 1.3 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.3.

(2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 1.3, the stockholder must have given timely notice thereof i n writing to the Secretary of the Corporation and any such proposed business other than the nominations of persons for election to the Board of Directors must constitute a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the sixtieth day nor earlier than the close of business on the ninetieth day prior to the first anniversary of the preceding year's annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty days before or after the date of the first anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so received not earlier than the close of business on the ninetieth day prior to such annual meeting and not later than the close of business on the later of the sixtieth day prior to such annual meeting or the tenth day following the day on which public announce ment of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required,

in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the By-laws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notic e and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (ii) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such stockholder's proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 1.3 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 1.3 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (1) by or at the direction of the Board of Directors or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 1.3 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 1.3. In the ev ent the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation's notice of meeting, if the stockholder's notice required by paragraph (A)(2) of this Section 1.3 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the ninetieth day prior to such special meeting and not later than the close of business

on the later of the sixtieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above.

(C) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.3 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.3. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.3 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder's nominee or proposal in compliance with such stoc kholder's representation as required by clause (A)(2)(c)(iv) of this Section 1.3) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 1.3, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.3, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

(2) For purposes of this Section 1.3, "public announcement" shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 1.3, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.3. Nothing in this Section 1.3 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the certificate of incorporation.

Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been tra nsacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 1.5. Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum,

the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 1.4 of these Bylaws until a quorum shall attend. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corpo ration, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in his absence by a Vice President, or in the absence of the foregoing persons, by a chairman designed by the Board of Directors, or in the absence of such designation, by a chairman chosen at the meeting.

Section 1.7. Voting Proxies. Except as otherwise provided by the Certificate of Incorporation, each stockholder shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable i f it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. All elections of directors shall be determined by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote, and except as otherwise required by law, the Certificate of Incorporation or these By-Laws, all oth er matters shall be determined by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote.

Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, or, if

prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 1.9. List of Stockholders Entitled to Vote. The Secretary or Treasurer shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is pr esent. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 1.10. Action By Consent of Stockholders. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any an nual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE II

Board of Directors

Section 2.1. Number; Qualifications. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time as set forth in the Certificate of Incorporation. Directors need not be stockholders.

Section 2.2. Election; Resignation; Removal; Vacancies. The Board of Directors shall initially consist of the persons named as directors in the Certificate of Incorporation, and each director so elected shall hold office until the first annual meeting of stockholders or until his successor is elected and qualified. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect directors each of whom shall hold office for a term of one year or until his successor is elected and qualified. Any director may resign at any time upon written notice to the corporation. Any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled by the procedures set forth in the Certificate of Incorporation, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced or until his succes sor is elected and qualified.

Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of D irectors may from time to time determine, and if so determined, notices thereof need not be given.

Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the President, any Vice President, the Secretary, or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting.

Section 2.5. Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designed by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this bylaw shall constitute presence in person at such meeting.

Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors, a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Except in cases in which the Certificate of Incorporation or these Bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in their absence, by a chairman chosen at the meeting. The Secretary of the Board of Directors shall act as secretary of the meeting, but in his absence, the chairman of the meeting may appoint any person to act as secretary of the meeting.

Section 2.8. Informal Action by Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or perm itted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.

ARTICLE III

Committees

Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by l aw and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it.

Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws.

ARTICLE IV

Officers

Section 4.1. Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a President and Secretary, and it may, if it so determines, choose a Chairman of the Board and a Vice Chairman of the Board from among its members. The Board of Directors may also choose one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his election, and until his successor is elected and qualified or until his earlier resignation or remova l. Any officer may resign at any time upon written notice to the corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.

Section 4.2. Powers and Duties of Executive Officers. The of ficers of the corporation shall have such powers and duties in the management of the corporation as may be prescribed by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his duties.

ARTICLE V

Stock

Section 5.1. Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the corporation, certifying the number of shares owned by him in the corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any su ch certificate or the issuance of such new certificate.

ARTICLE VI

Indemnification

Section 6.1. Right to Indemnification. The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enter prise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the corporation.

Section 6.2. Prepayment of Expenses. The corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or office r in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise.

Section 6.3. Claims. If a claim for indemnification or payment of expenses under this Article is not paid in full within sixty days after a written claim therefor has been received by the corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of providing that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

Section 6.4. Non-Exclusivity of Rights. The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.5. Other Indemnification. The corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

Section 6.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person in respect to any act or omission occurring prior to the time of such repeal or modification.

ARTICLE VII

Miscellaneous

Section 7.1. Fiscal Year. The fiscal year of the corporation shall be determined by resolution of the Board of Directors.

Section 7.2. Seal. The corporate seal shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.

Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Any written waiver of notice, signed b y the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice.

Section 7.4. Interested Directors; Quorum. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purposes, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the di sinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

Section 7.5. Form of Records. Any records maintained by the corporation in the regular courses of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.

Section 7.6 Amendment of Bylaws. These Bylaws may be altered or repealed, and new bylaws made, by the Board of Directors, but the stockholders may make additional bylaws and may alter and repeal any bylaws whether adopted by them or otherwise.

EX-31.1 3 spectraneticsex31109302010.htm EXHIBIT 31.1 WebFilings | EDGAR view

Exhibit 31.1

Certification of principal executive officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Guy A. Childs, certify that:< /div>

1. I have reviewed this quarterly report on Form 10-Q of The Spectranetics Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

< div style="line-height:120%;text-align:left;font-size:10pt;">designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;


b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	disclosed in this report any change in the registrant's internal c ontrol over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

< td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;">

November 8, 2010



	/s/ Guy A. Childs
	Guy A. Childs
	principal executive officer

EX-31.2 4 spectraneticsex31209302010.htm EXHIBIT 31.2 WebFilings | EDGAR view

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Guy A. Childs, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Spectranetics Corporation;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control ove r financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly du ring the period in which this report is being prepared;


b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted ac counting principles;


c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	any fraud, whether or not material, that involves management or other employees who have a significant r ole in the registrant's internal control over financial reporting.


November 8, 2010
	/s/ Guy A. Childs
	Guy A. Childs
	Chief Financial Officer

EX-32.1 5 spectraneticsex32109302010.htm EXHIBIT 32.1 WebFilings | EDGAR view

Exhibit 32.1

Certification of principal executive officer

Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of The Spectranetics Corporation (the “Company”) hereby certifies, to such officer's knowledge, that:


(i)	the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2010 (th e “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and


(ii)	the information contained in the Report fairly presents, in all materi al respects, the financial condition and results of operations of the Company.


November 8, 2010	/s/ Guy A. Chil ds
	Guy A. Childs
	principal executive officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2 6 spectraneticsex32209302010.htm EXHIBIT 32.2 WebFilings | EDGAR view

Exhibit 32.2

Certification of Chief Financial Officer


(i)	the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2010 (the &ldq uo;Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and


(ii)	the information contained in the Report fairly presents, in all material res pects, the financial condition and results of operations of the Company.


November 8, 2010	/s/ Guy A. Childs
	Guy A. Childs
	Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----


Delaware	84-0997049
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)


PART I — FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3.	Quantitative and Qua litative Disclosures About Market Risk	33
ITEM 4.	Controls and Procedures	34

PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	35
ITEM 1A.	Risk Factors	35
ITEM 6.	Exhibits	35
	Signatures	36


	September 30, 2010			December 31, 2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	25,666		$	19,010
Restricted cash	—			817
Investment securities available for sale	761			43
Trade accounts receivable, less allowance for doubtful accounts and sales returns of $766 and $948, respectively	16,274			16,328
Inventories, net	9,343			8,462
Deferred income taxes, current portion, net	210			1,406
Prepaid expenses and other current assets	2,065			2,054
Total current assets	54,319			48,120
Property and equipment, net	29,078			31,475
Long-term investment securities available for sale	4,372			9,800
Deferred income taxes, non-current portion, net	—			5,079
Goodwill	5,569			5,569
Other intangible assets, net	371			586
Other assets	44			54
Total assets	$	93,753		$	100,683

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,597		$	1,514
Accrued liabilities	16,166			11,291
Deferred revenue	2,385			2,357
Tot al current liabilities	20,148			15,162
Accrued liabilities, net of current portion	603			593
Total liabilities	20,751			15,755
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred stock, $.001 par value; authorized 5,000,000 shares; none issued	—			—
Common stock, $.001 par value; authorized 60,000,000 shares; issued and outstanding 33,128,035 and 33,064,217 shares, respectively	33			33
Additional paid-in capital	170,798			168,792
Accumulated other comprehensive (loss) income	(336		)	20
Accumulated deficit	(97,493		)	(83,917		)
Total shareholders’ equity	73,002			84,928
Total liabilities and shareholders’ equity	$	93,753		$	100,683


	Nine Months Ended September 30,
	2010				2009
Cash flows from operating activities:
Net loss	$	(13,576	)		$	(7,631	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	7,484				7,357
Stock-based compensation expense	1,932				2,203
Provision for excess and obsolete inventories	236				290
Accrued indemnification costs	6,500				—
Deferred income taxes	6,110				(167		)
Asset impairment charge	939			&nb sp;	—
Discontinuation costs—Safe-Cross® product line, non-cash portion	—				750
Net change in operating assets and liabilities	(5,275		)		(3,712		)
Net cash provided by (used in) operating activities	4,350				(910		)
Cash flows from investing activities:
Proceeds from sale, redemption or maturity of investment securities	5,416				4,600
Purchases of investment securities	(760		)		—
Capital expenditures	(3,164		)		(2,790		)
Additional purchase price – Kensey Nash milestone payment	—				(1,500		)
Purchase of intangible assets	—				(205		)
Decrease in restricted cash	817				633
Net cash provided by investing activities	2,309				738
Cash flows from financing activities:
Proceeds from the exercise of stock options and employee stock purchase plan	74				1,966
Net cash provided by financing activities	74				1,966
Effec t of exchange rate changes on cash	(77		)		97
Net increase in cash and cash equivalents	6,656				1,891
Cash and cash equivalents at beginning of period	19,010				16,113
Cash and cash equivalents at end of period	$	25,666			$	18,004
Supplemental disclosures of cash flow information
Cash paid for taxes	$	132			$	115
Supplemental disclosure of non-cash investing and financing activities:
Reclassification of goodwill to property and equipment	$	—			$	223


	Three Months Ended September 30,							Nine Months Ended September 30,
	2010			2009				2010				2009
Revenue	$	29,577		$	28,841			$	88,612			$	85,176
Cost of products sold	8,486			7,951				25,393				24,497
Gross profit	21,091			20,890				63,219				60,679
Operating expenses:
Selling, general and administrative	15,963			16,706				51,436				52,089
Research, development and other technology	3,577			3,637				10,884				10,973
Federal investigation legal and accrued indemnification costs	6,527			602				6,820				2,957
Litigation settlement	—			1,090				—				1,090
Discontinuation costs —Safe-Cross® product line	—			1,075				—				1,075
Asset impairment charge	939			—			939				—
Employee termination and lease abandonment costs	664			366				664				536
Total operating expenses	27,670			23,476				70,743				68,720
Operating loss	(6,579		)	(2,586		)		(7,524		)		(8,041		)
Other income (expense):
Interest income, net	36			94				181				345
Other, net	(21		)	—				(21		)		(37		)
Total other income	15			94				160				308
Loss before income taxes	(6,564		)	(2,492		)		(7,364		)		(7,733		)
Income tax (expense) benefit	(6,145		)	—				(6,212		)		102
Net loss	$	(12,709	)	$	(2,492	)		$	(13,576	)		$	(7,631	)
Loss per share — basic and diluted	$	(0.38	)	$	(0.08	)		$	(0.41	)		$	(0.24	)
Weighted average common shares outstanding — basic and diluted	33,122,742			32,662,566		< font style="font-family:inherit;font-size:10pt;">		33,094,133				32,345,484


	September 30, 2010		December 31, 2009
Current investments:
Certificates of deposit	$	761	$	43
Total current investments	761		43
Non-current investments:
Auction rate securities	4,372		9,800
Restricted investment:
Certificate of deposit	—		717

Total investment securities	$	5,133	$	10,560


			Fair Value Measurements at Reporting Date Using
	Balance at September 30, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Auction Rate Securities	$	4,372	$	—	$	—	$	4,372
Certificates of Deposit	761		761		—		—
Total	$	5,133	$	761	$	—	$	4,372


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Auction Rate Securities
Beginning balance at January 1, 2010	$	9,800
Transfers in to Level 3	—
Total realized/unrealized losses
Realized losses: included in earnings	(12		)
Other-than-temporary im pairment: included in earnings	—
Redemptions (at par)	(450		)
Sales	(4,966		)
Ending balance at September 30, 2010	$	4,372

The amount of total losses for the period included in earnings attributable to the change in unrealized losses relating to assets still held at September 30, 2010	$	—


	September 30, 2010			December 31, 2009
Raw materials	$	2,853		$	2,676
Work in process	2,047			1,825
Finished goods	5,191			4,341
Less: Inventory reserve	(748		)	(380		)
	$	9,343		$	8,462


	September 30, 2010				December 31, 2009
Equipment held for rental or loan	$	34,144			$	32,703
Manufacturing equipment and computers	19,560				18,158
Leasehold improvements < /td>	4,458				4,253
Furniture and fixtures	1,642				1,558
Building and improvements	1,245			< div style="overflow:hidden;font-size:10pt;">	1,264
Land	270				270
Less: accumulated depreciation and amortization	(32,241		)		(26,731		)
	$	29,078			$	31,475


	Shares		Weighted Average Exercise Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2010	3,825,688		$	5.10
Granted	699,375		5.73
Exercised	(35,125	)	3.17
Canceled	(437,608	)	5.05
Options outstanding at September 30, 2010	4,052,330		$	5.23	6.42	$	5,741,958
Options exercisable at September 30, 2010	1,916,829		$	6.34	3.94	$	2,324,440


	Shares		Weighted Average Grant-Date Fair Value
Restricted stock awards outstanding at January 1, 2010	50,000		$	4.15
Awarded	34,000		5.22
Vested/Released	(50,000	)	4.15
Awards outstanding at September 30, 2010	34,000		$	5.22


	Shares	Weighted Average Grant-Date Fair Value
Restricted stock units outstanding at January 1, 2010	—	$	—
Awarded	60,000	5.76
Vested/Released	—	—
Units outstanding at September 30, 2010	60,000	$	5.76


	Foreign currency translation loss			Unrealized gain (loss) on investment securities			Accumulated Other Comprehensive Gain (Loss)
Beginning balance, January 1, 2010	$	(23	)	$	43		$	20
Current period change	(313		)	(43		)	(356		)
Ending balance, September 30, 2010	$	(336	)	$	—		$	(336	)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010				2009
Expected life (years)	5.99			5.95			5.98				5.98
Risk-free interest rate	1.28		%	2.32		%	1.79		%		2.14		%
Expected volatility	65.87		%	74.18		%	66.20		%	< /td>	74.37		%
Expected dividend yield	None			None			None				None
Weighted averag e grant date fair value of options granted during the period	$	3.02		$	3.31		$	3.46			$	2.82 < /td>


	Three Months Ended September 30,		Nine Months Ended September 30,
(in thousands)	2010					2009				2010				2009
Revenue
United States	$	25,451		86	%	$	24,525	85	%	$	76,289	86	%	$	72,567	85	%
International	4,126			14		4,316		15		12,323		14		12,609		15
Total revenue	$	29,577		100	%	$	28,841	100	%	$	88,612	100	%	$	85,176	100	%


•	Product development costs decreased slightly compared to the third quarter of 2009, due to the completion of the Turbo-Tandem design improvement project, with lower product development costs partially offset by higher costs in product-related regulatory costs.