Exhibit 10.1

ENTEROMEDICS INC.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered on October 3,
2016 (the “Agreement Date”), between ENTEROMEDICS INC. (“Company”), a Delaware
corporation with its principal place of business at 2800 Patton Road, St. Paul,
Minnesota 55113; and Scott P. Youngstrom (“Employee”), a Minnesota resident
whose address is 4230 Mount Curve, Deephaven, MN 55331, for the purpose of
setting forth the terms and conditions of Employee’s employment by Company.

W I T N E S S E T H:

WHEREAS, the Company desires to employ Employee as the Chief Financial Officer
and Chief Compliance Officer of the Company, and for Employee to hold such
position, on the terms and conditions, and for the consideration, hereinafter
set forth and Employee desires to be employed by the Company and hold such
position on such terms and conditions and for such consideration; and

WHEREAS, Employee executed a Nondisclosure and Noncompetition Agreement with the
Company on October 3, 2016 (“Noncompetition Agreement”), which is attached as
Exhibit A to this Agreement and fully incorporated herein.

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and
obligations contained herein, the Company and Employee agree as follows:

ARTICLE I

EMPLOYMENT, TERM AND DUTIES

1.1 Employment. Company hereby employs Employee as its Chief Financial Officer
and Chief Compliance Officer, and Employee accepts such employment and agrees to
perform services for Company pursuant to the terms and conditions set forth in
this Agreement.

1.2 Term. The term of this Agreement shall commence on the Agreement Date and,
unless earlier terminated in accordance with Article III of this Agreement,
shall terminate one year from the Agreement Date (the “Term”); provided,
however, that the Term of this Agreement shall automatically renew for
successive one-year terms thereafter unless, at least 90 days before the
expiration of the initial Term or any additional Term, either party provides
written notice to the other of its or his desire to terminate this Agreement.

1.3 Position and Duties.

1.3.1 Service with Company. During the Term, Employee agrees to perform such
duties and responsibilities as are assigned to him from time to time by
Company’s Chief Executive Officer (the “CEO”) and/or Board of Directors (the
“Board”).

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1.3.2 Performance of Duties. During the Term, Employee agrees to serve Company
in an executive capacity as its Chief Financial Officer and Chief Compliance
Officer, and shall perform such duties as are required by the CEO and/or the
Board.

ARTICLE II

COMPENSATION, BENEFITS AND EXPENSES

2.1 Base Salary. Subject to the provisions of Article III of this Agreement,
during the Term, Company shall pay Employee a “Base Salary” of $300,000.00 on an
annualized basis or such higher annual rate as may from time to time be approved
by the Board. Such Base Salary shall be paid in substantially equal regular
periodic payments, less deductions and withholdings, in accordance with
Company’s regular payroll procedures, policies and practices for executive
officers, as such may be modified from time to time. The Base Salary shall be
reviewed by the Board annually for potential adjustment on the basis of
performance; and Employee shall be eligible, at Company’s sole discretion, for
annual salary increases consistent with Company’s procedures, policies and
practices. If Employee’s Base Salary is increased from time to time during the
Term, the increased amount shall become the Base Salary for the remainder of the
Term and any extensions of the Term and for as long thereafter as required
pursuant to Article III as applicable, subject to any subsequent increases.

2.2 Incentive Compensation. In addition to Base Salary, Company shall make
Employee eligible for such cash and equity awards pursuant to Company’s
Incentive Compensation Plan, if any, as may be applicable and adopted by
Company. Except to the extent as otherwise provided in Article III in connection
with a termination of Employee’s employment, payment of incentive compensation
will be subject to Employee achieving certain objectives set annually by
Employee and the Compensation Committee of the Board, with the target amount of
any cash incentive compensation for any calendar year to be approved by the
Compensation Committee of the Board, which target in no event shall be more than
45% (subject to performance of the specified objectives) of Employee’s Base
Salary in effect from time to time. Employee and the Compensation Committee will
meet and review the objectives set by the Compensation Committee for each
upcoming calendar year before March 31 of such year. Company shall pay any such
incentive compensation for which Employee may be eligible for a calendar year on
or before March 15 of the following year (provided that Employee is employed on
such date). Employee will not be entitled to receive incentive compensation for
any calendar year in which Employee’s employment is terminated, except as may be
provided in Article III.

2.3 Participation in Benefits. During the Term of Employee’s employment by
Company, Employee shall be entitled to participate in the employee benefits
offered generally by Company to its employees, to the extent that Employee’s
position, tenure, salary, health and other qualifications make Employee eligible
to participate. Without limiting the foregoing, Employee shall be eligible to
participate in any pension plan, or group life, health or accident insurance or
any other plan or policy that may presently be in effect or that may hereafter
be adopted by Company for the benefit of its employees and/or corporate officers
generally. Employee is eligible to receive four (4) weeks of vacation on an
annual basis, subject to Company’s “Paid Time Off” policy. Employee’s
participation in such benefits shall be subject to the terms of the applicable
plans, as the same may be amended from time to time. Company does not guarantee
the adoption or continuance of any particular employee benefit during Employee’s
employment; and nothing in this Agreement is intended to, or shall in any way
restrict the right of Company to amend, modify or terminate any of its benefit
plans during the Term of this Agreement.

 

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ARTICLE III

TERMINATION AND COMPENSATION FOLLOWING TERMINATION

3.1 Termination. Subject to the respective continuing obligations of the parties
under this Agreement, this Agreement and Employee’s employment hereunder may be
terminated as of the applicable date, whether before or at the end of the Term
(the “Separation Date”) under any of the following circumstances:

3.1.1 Termination by Mutual Agreement. By mutual written agreement of the
parties at any time, which may specify a Separation Date.

3.1.2 Termination by Employee’s Death. If Employee dies during the Term, the
date of his death shall be his Separation Date.

3.1.3 Termination Due to Employee’s Disability. If Employee becomes Disabled,
the Separation Date shall be the effective date of his resignation or his
discharge by the Company because of the Disability, whichever occurs first. For
purposes of this Agreement, “Disabled” or “Disability” means the incapacity or
inability of Employee, whether due to accident, sickness or otherwise (with the
exception of the illegal use of drugs), to perform the essential functions of
Employee’s position under this Agreement, with or without reasonable
accommodation (provided that no accommodation that imposes undue hardship on
Company will be required) for an aggregate of 90 days during any period of 180
consecutive days, or such longer period as may be required under applicable law.

If Employee (or his legal representative, if applicable) does not agree with the
Company’s decision to terminate his employment hereunder because of Disability,
the question of Employee’s Disability shall be subject to the certification of a
qualified medical doctor mutually agreed to by Company and Employee (or, in the
event of Employee’s incapacity to designate a doctor, Employee’s legal
representative). In the absence of such agreement, each such party shall
nominate a qualified medical doctor and the two doctors shall select a third
doctor, who shall make the determination as to Employee’s Disability. The
decision of the designated physician shall be binding upon the parties in the
same manner as the decision of an arbitrator under Section 4.5.

3.1.4 Termination by Company for Cause. Company may terminate this Agreement and
Employee’s employment for Cause immediately upon written notice to Employee. For
purposes of this Agreement, “Cause” means: (a) willful breach of Employee’s
duties to Company or willful breach of this Agreement; (b) Employee’s conviction
of any felony or any crime involving fraud, dishonesty, or moral turpitude;
(c) Employee’s willful participation in any fraud against or affecting Company
or any subsidiary, affiliate, customer, supplier, client, agent, or employee
thereof; or (d) any other act that Company reasonably determines constitutes
gross or willful misconduct materially detrimental to Company including, but not
limited to, unethical practices, dishonesty, disloyalty, or any other acts
harmful to Company; provided, however that a for Cause termination pursuant to
clause (a), if susceptible of cure, which determination is in the

 

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sole discretion of Company to make, shall not become effective unless Employee
fails to cure such failure to perform or breach within 30 days after his receipt
of written notice from Company, such notice to describe such failure to perform
or breach and identity what reasonable actions shall be required to cure such
failure to perform or breach.

For purposes of this Section 3.1.4, no act, or failure to act, on Employee’s
part shall be considered “dishonest” or “willful” unless done, or omitted to be
done, by Employee in bad faith and without reasonable belief that his action or
omission was in or not opposed to, the best interest of Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the advice of counsel for Company shall be
conclusively presumed to be done, or omitted to be done, by Employee in good
faith and in the best interests of Company. Furthermore, the term “Cause” shall
not include ordinary negligence or failure to act, whether due to an error in
judgment or otherwise, if Employee has exercised substantial efforts in good
faith to perform the duties reasonably assigned or appropriate to his position.

3.1.5 Termination by Employee without Good Reason. Employee may at any time
voluntarily terminate his employment under this Agreement, for any reason or no
reason, with 30 days’ written notice.

3.1.6 Termination by Company without Cause. Company may terminate Employee’s
employment under this Agreement at any time for any reason or no reason with
30 days’ written notice, except that no notice shall be required for a
termination without Cause following a “Change in Control” as defined in
Employee’s Incentive Stock Option Agreement(s) or Non-Incentive Stock Option
Agreement(s), as the case may be, with Company (collectively, the “Stock Option
Agreements”).

3.1.7 Termination by Employee for Good Reason. Employee may at any time
voluntarily terminate his employment pursuant to this Agreement for Good Reason
(as defined below); provided, however, that any resignation by Employee for Good
Reason shall not be effective unless and until the following two conditions have
been satisfied: (a) he has notified Company in writing of the facts that he
believes constitute Good Reason, within 90 days after such facts first becomes
known to him; and (b) Company fails to cure such Good Reason within 30 days
after its receipt of that notice. Employee’s resignation shall be effective
before the end of that 30-day period as of any earlier date on which Company
refuses to cure or denies the existence of such Good Reason. The effective date
of any resignation for Good Reason shall be a Separation Date. If Company timely
cures such Good Reason, or it is determined that the reason for Employee’s
resignation was not a Good Reason, he shall be deemed not to have resigned
unless he elects to resign under Section 3.1.5.

For purposes of this Agreement, “Good Reason” means, at any time: (a) the
assignment by Company to Employee of employment duties, functions or
responsibilities that are significantly different from, and result in a
substantial diminution of, Employee’s duties, functions or responsibilities,
including without limitation any requirement that Employee report to another
officer of Company, rather than directly to the Board; (b) a material reduction
in Employee’s Base Salary or the minimum target amount provided under
Section 2.2 for his cash incentive compensation for any calendar year; (c) a
Company requirement that Employee be based at any office or location more than
25 miles from Employee’s primary work location before the date of this
Agreement; or (d) any other action or inaction that constitutes a material
breach of this Agreement by Company.

 

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3.1.8 Termination at End of Term. The termination of this Agreement and
Employee’s employment, as of the end of the initial Term or any additional Term,
pursuant to the operation of the provisions of Section 1.2, shall entitle
Employee only to the payments provided in Sections 3.2.1 and 3.3.

3.2 Compensation following Termination of Employment. If Employee’s employment
pursuant to this Agreement is terminated before the end of the Term, or by
Company as of the end of the Term, Employee shall be entitled to the following
compensation and benefits upon such termination:

3.2.1 Payment of Base Salary. If Employee’s employment is terminated pursuant to
any subsection of Section 3.1, Company shall, within 14 calendar days following
the Separation Date, pay to Employee, Employee’s surviving spouse (or, if none,
Employee’s estate), as the case may be, any amounts due to Employee for Base
Salary through the Separation Date.

If a termination occurs pursuant to Section 3.l.5 (by Employee without Good
Reason), when Company receives Employee’s notice Company shall have the option,
at its discretion (a) to continue to engage Employee’s services through the
30 day notice period until the Separation Date, or (b) terminate the use of
Employee’s services during the 30 day notice period before the Separation Date
but treat Employee as if he were providing services through the 30 day notice
period until the Separation Date for purposes of determining Employee’s
compensation due him pursuant to this Section 3.2.1.

3.2.2 Payment of Severance for Termination by Company without Cause or by
Employee for Good Reason. If (a) Employee’s employment is terminated pursuant to
either of Sections 3.1.6 (by Company without Cause) or 3.1.7 (by Employee for
Good Reason), (b) Employee has executed and delivered to Company, within 60 days
after the effective date of that termination, a written release in substantially
the same form as is attached hereto as Exhibit B, and (c) the rescission period
specified therein has expired, Company shall, subject to any payment delay
required by Section 3.2.6, continue to pay, as severance pay, Employee’s Base
Salary (at the rate in effect on the Separation Date, for a period of 12 months
following the Separation Date, and Employee shall be permitted to exercise all
shares that are vested under his Options as of the Separation Date and those
Options that would have vested within one year following the Separation Date
immediately or at any time during the five-year period (but not after the end of
each Option’s original term) following the Separation Date. Such payments of
Base Salary will be at the usual and customary pay intervals of Company and will
be subject to all appropriate deductions and withholdings. For purposes of
Employee’s qualification for severance pay, his right to any series of such
payments due under this Agreement is treated as the right to a series of
separate payments, each of which is subject to all of the requirements of this
Section 3.2.2.

3.2.3 Payment of Severance at End of Term. If (a) Employee’s employment
terminates pursuant to Section 3.1.8, (b) Employee has executed and delivered to
Company,

 

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within 60 days after the effective date of that termination, a written release
in substantially the same form as is attached hereto as Exhibit B, and (c) the
rescission period specified therein has expired, Company shall, subject to any
payment delay required by Section 3.2.6, continue to pay, as severance pay,
Employee’s Base Salary at the rate in effect on the Separation Date, for a
period of 12 months following the Separation Date, and Employee shall be
permitted to exercise all shares vested under his Options as of the Separation
Date and those Options that would have vested within one year following the
Separation Date immediately or at any time during the five-year period (but not
after the end of each Option’s original term) following the Separation Date.

3.2.4 Effects of Change in Control. Upon the occurrence of a Change in Control
(as defined in Section 3.1.6), Company agrees that, notwithstanding any contrary
provisions of the Stock Option Agreements or Company’s Stock Incentive Plan, the
vesting schedule of Employee’s stock options granted in the Stock Option
Agreements (the “Options”) shall accelerate such that on the date the Change in
Control is completed, 100% of any then-unvested shares subject to the Options
held by Employee shall immediately vest; provided, however, that if, in
connection with the consummation of the transaction resulting in the Change in
Control, Employee receives a cash payment with respect to each Option (after
they become fully vested) equal to the difference or “spread’’ between (a) the
per share amount paid to holders of Company’s common stock in such transaction
and (b) the per share exercise price under the applicable Stock Option
Agreement, his Options shall be cancelled upon the consummation of the Change in
Control in exchange for such cash payment; provided, further, that if in
connection with or within the first two years after the Change in Control (as
defined in Section 3.1.6), Employee’s employment is terminated pursuant to
either of Sections 3.1.6 (by Company without Cause) or 3.1.7 (by Employee for
Good Reason), and (a) Employee has executed and delivered to Company, within 60
days after the effective date of that termination, a written release in
substantially the same form attached hereto as Exhibit B, and (b) the rescission
period specified therein has expired, then, in addition to the payments under
Section 3.2.2:

(A) within 14 calendar days following the Separation Date, the Company shall
also pay to Employee, or Employee’s surviving spouse (or, if none, Employee’s
estate), as the case may be, any amounts to which Employee is entitled as of the
Separation Date, as a pro rata portion of any unpaid cash incentive compensation
determined under Section 2.2 for the calendar year in which the Separation Date
occurs. That pro rated cash incentive compensation shall be based on whether
Employee’s objectives were achieved (also pro rated to the extent possible)
during the portion of the year before the Separation Date; and the pro rated
amount shall be based on the number of days in that portion, as compared with
the entire year; and

(B) the vesting schedule of Options held by Employee shall accelerate such that
on the Separation Date connected with or after a Change in Control, 100% of any
unvested shares under the Options shall immediately vest and shall be
exercisable immediately or at any time during the five-year period (but not
after the end of each Option’s original term) following the Separation Date,
notwithstanding any contrary provisions of the Stock Option Agreements or
Company’s Stock Incentive Plan; provided, however, that if, in connection with
the consummation of the transaction resulting in the Change in Control, Employee
receives a cash payment with respect to each Option (after they become fully
vested under this paragraph) equal to the difference or “spread” between (a) the
per share amount paid to holders of Company’s

 

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common stock in such transaction and (b) the per share exercise price under the
applicable Stock Option Agreement, his Options shall be cancelled upon the
consummation of the Change in Control in exchange for such cash payment. The
parties hereto agree and acknowledge that, with respect to any Options
previously granted to Employee that were intended by the parties to be treated
as “incentive stock options” within the meaning of Code Section 422, such
Options, to the extent they may be exercised by Employee more than 90 days
following the Separation Date, shall be treated as non-qualified Options,
notwithstanding any contrary provisions of the Stock Option Agreements.

3.2.5 General Provision Regarding Treatment of Options. Except as otherwise
specified in Sections 3.2.2 and 3.2.4 of this Agreement, the terms of the Stock
Incentive Plan and Stock Option Agreements, as applicable, shall govern the
treatment of the Options following the Separation Date.

3.2.6 Potential Delay of Severance Payments. If, as of the Separation Date,
(a) Company’s common stock is publicly traded (as determined under Code
Section 409A), (b) Employee is a “specified employee” (as determined under Code
Section 409A), and (c) any portion of the severance pay due Employee under
Sections 3.2.2, 3.2.3 (and, if applicable, paragraph (A) of Section 3.2.4) would
exceed the sum of the applicable limited separation pay exclusions (or otherwise
not qualify for any exclusion) as determined pursuant to Code Section 409A, then
payment of the excess amount shall be delayed until the first regular payroll
date of Company following the six month anniversary of Employee’s Separation
Date (or the date of his death, if earlier than that anniversary), and shall
include a lump sum equal to the aggregate amounts that Employee would have
received had payment of this excess amount commenced as provided in
Sections 3.2.2, 3.2.3 (and, if applicable, paragraph (A) of Section 3.2.4) after
the Separation Date. If Employee continues to perform any services for Company
(as an employee or otherwise) after the Separation Date, such six month period
shall be measured from the date of Employee’s “separation from service” as
defined pursuant to Code Section 409A. Each payment under this Agreement shall
be treated as a separate payment for purposes of Code Section 409A.

3.3 Benefits Following Certain Employment Terminations. If Employee’s employment
is terminated pursuant to any of Sections 3.1.2, 3.1.3, 3.1.6, 3.l.7 or 3.1.8,
Company shall provide, at the sole cost of Company (except for any share of the
cost for benefits for Employee and Employee’s spouse and any eligible dependents
that Employee was required to pay immediately before the Separation Date),
continuing coverage under any of its medical, dental and life insurance programs
for Employee (if Employee survives) and Employee’s spouse and any eligible
dependents, to the extent any such coverage was in effect for any of those
individuals immediately before the Separation Date and is extended under COBRA.
The Company’s provision of continuing coverage will end after the greater of the
following periods: (a) if applicable, the period during which Employee is
entitled to receive his Base Salary as severance pay under Section 3.2.2 or
3.2.3; or (b) the first 12 months after the Separation Date, irrespective of any
then pre-existing health conditions of Employee, Employee’s spouse or any
eligible dependents; provided, however, that Company may discontinue any such
coverage for which it does not receive timely payment of Employee’s share of the
cost due after the Separation Date; and provided further that, in each case,
such continued participation is not prohibited by any applicable laws or would
not otherwise jeopardize the tax qualified status of any such programs. All
reimbursement under this Section 3.3 shall terminate upon commencement of new

 

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employment by Employee with an employer that offers health care coverage to its
employees. If any such continuing participation is prohibited by applicable law
or would otherwise jeopardize the tax qualified status of any medical, dental or
life insurance plan and, as a result, Company terminates any such coverage, it
shall promptly reimburse Employee (or Employee’s spouse and eligible dependents,
as the case may be) for the cost of obtaining comparable third party coverage
irrespective of any then preexisting health conditions of any of them who was
covered immediately before the Separation Date. Any period of continuing
coverage under this Section 3.3 shall run at the same time as the applicable
continuing coverage required to be offered to Employee, Employee’s spouse or
eligible dependents under applicable laws.

Except as otherwise provided in this Section 3.3, the benefits to which Employee
(or, as applicable, Employee’s spouse, eligible dependents or estate) may be
entitled upon termination of his employment, pursuant to the plans and policies
of Company described in Article II of this Agreement, shall be determined and
paid in accordance with such plans, policies and applicable laws.

3.4 Surrender of Records and Property. Upon termination of Employee’s employment
with Company, Employee shall deliver promptly to Company all Confidential
Information as defined in Section 4.1 and all Company property including, but
not necessarily limited to records, manuals, books, blank forms, documents,
letters, memoranda, business plans, minutes, notes, notebooks, reports, computer
disks, computer software, computer programs (including source code, object code,
on-line files, documentation, testing materials and plans and reports), computer
print-outs, member or customer lists, credit cards, keys, identification,
products, access cards, designs, drawings, sketches, devices, specifications,
formulae, data, tables or calculations or copies thereof, and all other tangible
or intangible property relating in any way to the business of Company that are
the property of Company or any subsidiary or affiliate, if any, or which relate
in any way to the business, products, practices or techniques of Company or any
subsidiary or affiliate.

ARTICLE IV

MISCELLANEOUS PROVISIONS

4.1 Company Remedies. Employee acknowledges and agrees that the restrictions and
agreements contained in this Agreement and in the Noncompetition Agreement that
is attached as Exhibit A to this Agreement are reasonable and necessary to
protect legitimate interests of Company; that the services to be rendered by
Employee are of a special, unique and extraordinary character; that it would be
difficult to replace such services; that any violation of the Noncompetition
Agreement would be highly injurious to Company; that Employee’s violation of the
Noncompetition Agreement would cause Company irreparable harm that would not be
adequately compensated by monetary damages; and that the remedy at law for any
breach of any of the provisions of the Noncompetition Agreement will be
inadequate. Accordingly, Employee specifically agrees that Company shall be
entitled, in addition to any remedy at law, to preliminary and permanent
injunctive relief and specific performance for any actual or threatened
violation of this Agreement and to enforce the provisions of the Noncompetition
Agreement.

 

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4.2 Assignment. This Agreement shall not be assignable, in whole or in part, by
Employee without the written consent of Company and any purported or attempted
assignment or transfer of this Agreement or any of Employee’s duties,
responsibilities or obligations hereunder shall be void. This Agreement shall
inure to the benefit of and be binding upon Employee, Employee’s heirs and
personal representatives. This Agreement shall inure to the benefit of and be
binding upon Company and its successors and assigns. Notwithstanding the
foregoing, Company may not, without the written consent of Employee, assign its
rights and obligations under this Agreement to any business entity that has
become the successor to Company in the event of a sale, merger, liquidation or
similar transaction. After any such assignment by Company to which Employee has
given such consent, Company shall be discharged from all further liability
hereunder and such successor assignee shall thereafter be deemed to be Company
for the purposes of all provisions of this Agreement.

4.3 Notices. All notices, requests, demands and other communications under this
Agreement shall be in writing, shall be deemed to have been duly given on the
date of service if personally served on the parties to whom notice is to be
given, or on the third day after mailing if mailed to the parties to whom notice
is given, whether by first class, registered, or certified mail, and properly
addressed as follows:

 

  If to Company, at:   

EnteroMedics Inc.

2800 Patton Road

St. Paul, MN 55113

  If to Employee, at:   

Scott P Yougstrom

4230 Mount Curve

Deephaven, MN 55331

Any party may change the address for the purpose of this Section by giving the
other written notice of the new address in the manner set forth above.

4.4 Governing Law/Venue. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Minnesota, without regard to conflicts of laws principles thereof. The parties
irrevocably consent and agree that the venue of any cause of action seeking
injunctive relief shall be Minnesota District Court, Hennepin County, and the
parties further irrevocably consent to the personal jurisdiction of the
Minnesota District Court for any such action.

4.5 Arbitration. The parties irrevocably consent that, except to the extent
provided in this section and Section 4.4, any litigation or other dispute
arising between the parties, in connection with the interpretation or
enforcement of this Agreement, that has not been settled through negotiation
within a period of 30 days after the date on which either party shall first have
notified the other party in writing of the existence of the dispute, shall be
settled by final and binding arbitration under the then-applicable Employment
Arbitration Rules of the American Arbitration Association (“AAA”); and a court
judgment on the award may be entered in any court having competent jurisdiction.
Notwithstanding the foregoing, neither party shall be entitled or required to
seek arbitration regarding any cause of action that would entitle such party to
injunctive relief.

 

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Any such arbitration shall be conducted by one neutral arbitrator appointed by
mutual agreement of the parties or, failing such agreement, in accordance with
the AAA Rules. The arbitrator shall be an experienced attorney with a background
in employment law. Any arbitration shall be conducted in Minneapolis, Minnesota.
An arbitration award may be enforced in any court of competent jurisdiction.
Notwithstanding any contrary provision in the AAA Rules, the following
additional procedures and rules shall apply to any such arbitration:

 

  (a) Each party shall have the right to request from the arbitrator, and the
arbitrator shall order upon good cause shown, reasonable and limited pre-hearing
discovery, including: (i) exchange of witness lists, (ii) no more than two
(2) depositions under oath of named witnesses at a mutually convenient location
(neither deposition to exceed seven (7) hours), (iii) written interrogatories
(no more than twenty-five (25) in number), and (iv) document requests (no more
than twenty-five (25) in number, including subparts);

 

  (b) Upon conclusion of the pre-hearing discovery, the arbitrator shall
promptly hold a hearing upon the evidence to be adduced by the parties and shall
promptly render a written opinion and award;

 

  (c) The arbitrator may award damages consistent with the terms of this
Agreement but may not award or assess punitive damages against either party; and

 

  (d) Each party shall bear 50% of the fees and costs of the arbitrator, subject
to the power of the arbitrator, in his or her sole discretion, to award all such
fees and costs to the prevailing party.

4.6 Construction. Notwithstanding the general rules of construction, both
Company and Employee acknowledge that both parties were given an equal
opportunity to negotiate the terms and conditions contained in this Agreement,
and agree that the identity of the drafter of this Agreement is not relevant to
any interpretation of the terms and conditions of this Agreement.

To the extent any provision of this Agreement may be deemed to provide a benefit
to Employee that is treated as non-qualified deferred compensation pursuant to
Code Section 409A, such provision shall be interpreted in a manner that
qualifies for any applicable exemption from compliance with Code Section 409 or,
if such interpretation would cause any reduction of benefit(s), such provision
shall be interpreted (if reasonably possible) in a manner that complies with
Code Section 409A and does not cause any such reduction.

4.7 Severability. In the event any provision of this Agreement (or portion
thereof) shall be held illegal or invalid for any reason, said illegality or
invalidity shall not in any way affect the legality or validity of any other
provision of this Agreement. To the extent any provision (or portion thereof) of
this Agreement shall be determined to be invalid or unenforceable in any
jurisdiction, such provision (or portion thereof) shall be deemed to be deleted
from this Agreement as to such jurisdiction only, and the validity and
enforceability of the remainder of such provision and of this Agreement shall be
unaffected.

4.8 Entire Agreement. This Agreement, including the Noncompetition Agreement
that is attached as its Exhibit A and fully incorporated herein, is the final,
complete and exclusive

 

10

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agreement of the parties and sets forth the entire agreement between Company and
Employee with respect to Employee’s employment by Company, and there are no
undertakings, covenants or commitments other than as set forth herein. The
Agreement may not be altered or amended, except by a writing executed by
Employee and a member of the Board. This Agreement supersedes, terminates,
replaces and supplants any and all other prior understandings or agreements
between the parties relating in any way to the hiring or employment of Employee
by Company.

4.9 Survival. The parties expressly acknowledge and agree that the provisions of
this Agreement that by their express or implied terms extend beyond the
expiration of this Agreement or the termination of Employee’s employment under
this Agreement, shall continue in full force and effect, notwithstanding
Employee’s termination of employment under this Agreement or the expiration of
this Agreement.

4.10 Waivers. No failure on the part of either party to exercise, and no delay
in exercising, any right or remedy under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any right or remedy
under this Agreement preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by any related document
or by law.

4.11 Attorneys’ Fees for Negotiating Agreement. Upon receipt by Company of a
statement for legal services from the attorneys representing Employee, Company
shall reimburse Employee or pay on behalf of Employee the reasonable and
necessary attorneys’ fees and associated expenses incurred by Employee in
connection with the negotiation of this Agreement, provided, that such fees and
expenses shall not exceed $5,000.00.

4.12 Attorneys’ Fees for Resolving Disputes. If any party to this Agreement is
made or shall become a party to any litigation (including arbitration) commenced
by or against the other party involving the enforcement of any of the rights or
remedies of such party, or arising on account of a default of the other party in
its performance of any of the other party’s obligations hereunder, then the
prevailing party in such litigation shall be entitled to receive from the other
party all costs incurred by the prevailing party in such litigation, plus
reasonable attorneys’ fees to be fixed by the court or arbitrator (as
applicable), with interest thereon from the date of judgment or arbitrator’s
decision at the rate of 8% or, if less, the maximum rate permitted by law.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

ENTEROMEDICS INC. By   /s/ Dan W. Gladney   Its: Chief Executive Officer

/s/ Scott P. Youngstrom Scott P. Youngstrom

 

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Exhibit A

Nondisclosure and Noncompetition Agreement

(attached)

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EnteroMedics Inc.

Nondisclosure and Noncompetition Agreement

This is an agreement between Scott Youngstrom (“Employee”) and EnteroMedics
Inc., its affiliates, successors and assigns (“Employer”). The parties agree
that Employer would be substantially harmed if Employee competes with Employer
during employment with Employer or after termination of employment with
Employer. The parties further agree that Employer would be substantially harmed
if Employee were to disclose its Confidential, Proprietary and Trade Secret
Information.

Therefore, in consideration of Employer’s employment of Employee for monetary
compensation, benefits, access to Employer’s Trade Secrets and/or Confidential
Information, and/or other valuable consideration provided by Employer, Employee
agrees as follows:

I. Nondisclosure of Confidential, Proprietary, and Trade Secret Information

Employee agrees not to disclose Confidential Information to any other third
party or company, other than in connection with Employee’s employment with
Employer, or use such information, directly or indirectly, for any purpose
whatsoever, without the prior written consent of Employer.

For purposes of this Agreement, “Confidential Information” means any information
that is not generally known to the public or to other persons who can obtain
economic value from its disclosure or use; information which derives independent
economic benefit from not being known to such persons; and information about the
activities or business of Employer that is not generally known to others engaged
in similar business or activities, its products, services, finances, trade
secrets, contracts, patents filed or pending, the techniques used in completing
customer projects, research and development, data and information, processes,
designs, engineering, marketing plans or techniques, organization or operation.
The foregoing list is intended to be illustrative rather than comprehensive.
Additionally, the term “confidential information” shall mean any confidential
information as that term is defined in any Agreement Employer may have with its
customers or other third parties from time to time.

II. Assignment of Inventions

 

A)

Disclosure and Assignment of Inventions and Other Works. During the term of this
Agreement and for one year following the Separation Date, Employee shall
promptly disclose to Employer in writing all ideas, improvements and
discoveries, whether or not such are patentable or copyrightable, and whether or
not in writing or reduced to practice (“Inventions”) and any writings, drawings,
diagrams, charts, tables, databases, software (in object or source code and
recorded on any medium), and any other works of authorship, whether or not such
are copyrightable (“Works of Authorship”) that are conceived, made, discovered,
written or created by Employee alone or jointly with any person, group or
entity, whether during the normal hours of his employment at Employer or on
Employee’s own time. Employee hereby assigns all rights to all such Inventions
and Works of Authorship to Employer. Employee shall give Employer all the
assistance it reasonably requires for Employer to perfect, protect, and use its
rights to such

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  Inventions and Works of Authorship. Employee shall sign all such documents,
take all such actions and supply all such information that Employer considers
necessary or desirable to transfer or record the transfer of Employer’s entire
right, title and interest in such Inventions and Works of Authorship and to
enable Employer to obtain exclusive patent, copyright, or other legal protection
for Inventions and Works of Authorship anywhere in the world, provided Employer
shall bear all reasonable expenses of Employee in rendering such cooperation.

 

B) Prior Inventions. Employee has set forth on Exhibit A attached hereto a list
of all significant Inventions, to the best of his knowledge, that Employee has,
alone or jointly with others, made prior to his employment with Employer that
Employee considers to be Employee’s property or the property of third parties
and that Employee wishes to exclude from the scope of this Agreement
(collectively referred to as “Prior Inventions”). If no such disclosure is
attached, or permission supporting evidence is available, Employee represents
that there are no Prior Inventions. If, during Employee’s employment with
Employer, Employee incorporates a Prior Invention into an Employer product or
process, Employer is hereby granted a nonexclusive, royalty-free, irrevocable,
perpetual, worldwide license (with rights to sublicense through multiple tiers
of sublicenses) to make, have made, modify, use and sell such Prior Invention.
Notwithstanding the foregoing, Employee agrees that Employee will not
incorporate, or permit to be incorporated, Prior Inventions in any Employer
Inventions without Employer’s prior written consent.

 

C) Notice and Acknowledgement. In accordance with Minnesota Statute § 181.78,
the foregoing paragraph does not require Employee to assign or offer to assign
to Employer any of Employee’s rights in an Invention that Employee developed
entirely on Employee’s own time without using Employer’s equipment, supplies,
facilities or trade secret information, and (a) that does not relate directly to
Employer’s business or to Employer’s actual or demonstrably anticipated research
or development, or (b) that does not result from any work performed by Employee
for Employer. For the purpose of this Section, “Employer’s business” shall be
defined as development pertaining to implantable medical devices to treat
obesity or devices to apply signals to a vagus nerve to treat a gastrointestinal
disorder (e.g., obesity, pancreatitis or irritable bowel syndrome).

 

   To the extent a provision in this Agreement purports to require Employee to
assign Inventions otherwise excluded by this paragraph, the provision is against
the public policy of the State of Minnesota and is unenforceable. By signing
this Agreement, Employee acknowledges receipt of the notification required by
Minnesota Statute § 181.78.

III. Noncompete and Nonsolicitation

 

A)

Agreement Not to Compete. During the Term of Employee’s employment by Employer,
and for a period of 12 consecutive months from the date of Termination of such
employment for whatever reason (whether occasioned by Employee or Employer),
Employee shall not, directly or indirectly, in any place in the world, render
services to any conflicting organization, or engage in competition with
Employer, in any manner or

 

2

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  capacity, nor direct any other individual or business enterprise to engage in,
competition with Employer in any manner or capacity, (e.g., as an advisor,
principal, agent, partner, officer, director, stockholder of more than 1% of the
outstanding shares of the capital stock of a publicly traded company, employee,
member of any association or limited liability company or otherwise) on any
products competitive with Employer’s existing products, any products competitive
with Employer’s announced products or any products competitive with Employer’s
pending products that have not yet been announced but which Employee has, or
should have, actual or constructive knowledge. For the purposes of this Section,
“conflicting organization” shall be defined as any person, corporation or entity
that competes with any product, process or service, in existence or under
development, of Employer pertaining to implantable medical devices to treat
obesity or devices to apply signals to a vagus nerve to treat a gastrointestinal
disorder (e.g., obesity, pancreatitis or irritable bowel syndrome).

 

B) Agreement Not to Solicit. Employee hereby acknowledges that Employer’s
customers constitute vital and valuable aspects of its business on a worldwide
basis. In recognition of that fact, for a period of one year following the
termination of this Agreement for any reason whatsoever, Employee shall not
solicit, or assist anyone else in the solicitation of, any of Employer’s
then-current customers to terminate their respective relationships with Employer
and to become customers of any enterprise with which Employee may then be
associated, affiliated or connected.

 

C) Agreement Not to Recruit. Employee hereby acknowledges that Employer’s
employees, consultants and other contractors constitute vital and valuable
aspects of its business and missions on a worldwide basis. In recognition of
that fact, for a period of one year following the termination of this Agreement
for any reason whatsoever, Employee shall not solicit, or assist anyone else in
the solicitation of, any of Employer’s then-current employees, consultants and
other contractors to terminate their respective relationships with Employer and
to become employees, consultants and other contractors of any enterprise with
which Employee may then be associated, affiliated or connected.

IV. Employer Remedies

Employee acknowledges and agrees that the restrictions and agreements contained
in this Agreement are reasonable and necessary to protect legitimate interests
of Employer, that the services to be rendered by Employee are of a special,
unique and extraordinary character, that it would be difficult to replace such
services, that any violation of this Agreement would be highly injurious to
Employer, Employee’s violation of any provision of this Agreement would cause
Employer irreparable harm that would not be adequately compensated by monetary
damages, and that the remedy at law for any breach of this Agreement will be
inadequate. Accordingly, Employee specifically agrees that Employer shall be
entitled, in addition to any remedy at law, to preliminary and permanent
injunctive relief and specific performance for any actual or threatened
violation of this Agreement and to enforce the provisions of this Agreement.
Should a breach of the agreement occur, Employer will be entitled to recover
costs, including attorney’s fees, incurred in enforcing the terms of the
Agreement for each breach. If a Court finds any part of the Agreement to be
invalid, the remainder of the provisions shall remain in full force and effect
to the extent possible.

 

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V. Governing Law/Venue

The validity, interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of Minnesota, without regard to
conflicts of laws principles thereof. The parties irrevocably consent and agree
that the venue of any cause of action seeking injunctive relief shall be
Minnesota District Court, Hennepin County, and the parties further irrevocably
consent to the personal jurisdiction of the Minnesota District Court for any
such action.

VI. Construction

Notwithstanding the general rules of construction, both Employer and Employee
acknowledge that both parties were given an equal opportunity to negotiate the
terms and conditions contained in this Agreement, and agree that the identity of
the drafter of this Agreement is not relevant to any interpretation of the terms
and conditions of this Agreement.

VII. Severability

In the event any provision of this Agreement (or portion thereof) shall be held
illegal or invalid for any reason, said illegality or invalidity shall not in
any way affect the legality or validity of any other provision of this
Agreement. To the extent any provision (or portion thereof) of this Agreement
shall be determined to be invalid or unenforceable in any jurisdiction, such
provision (or portion thereof) shall be deemed to be deleted from this Agreement
as to such jurisdiction only, and the validity and enforceability of the
remainder of such provision and of this Agreement shall be unaffected.

VIII. Waiver

Failure by Employer to enforce any provision of this Agreement will not
constitute a waiver of or a prohibition against any further enforcement of that
provision or any other provision of this Agreement.

IX. Entire Agreement and Amendment

This Agreement supersedes all previous agreements between the parties concerning
the subject matter of this Agreement. All amendments to this Agreement must be
in writing and signed by the parties to be effective.

X. At Will Employment

This Agreement is not an employment agreement for any specified period of time
and Employee understands that either Employee or Employer may terminate the
employment relationship at any time and for any reason or no reason at all.

XI. Succession and Survival

This Agreement and the rights, duties and obligations of this Agreement shall
survive the termination of Employee’s employment with Employer and shall inure
to the benefit of and shall be binding upon Employee’s heirs, assigns and
personal representatives and the successors of Employer.

 

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Executed this 3rd day of October, 2016.

 

EMPLOYEE By:   /s/ Scott P. Youngstrom Printed Name: Scott P. Youngstrom

 

ENTEROMEDICS INC. By:   /s/ Dan W. Gladney Printed Name: Dan W. Gladney Its:
Chief Executive Officer

 

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EXHIBIT A

 

To:   EnteroMedics Inc. From:     Date:     Subject:   Prior Inventions

 

1. Except as listed in Section 2 below, the following is a complete list of all
inventions or improvements relevant to the subject matter of my employment by
EnteroMedics, Inc. (“Employer”) that have been made or conceived or first
reduced to practice by me alone or jointly with others prior to my engagement by
Employer:

 

☒ No inventions or improvements.

 

☐ See below:

 

 

 

 

 

 

 

 

 

 

☐ Additional sheets attached

 

2. Due to a prior confidentiality agreement, I cannot complete the disclosure
under Section 1 above with respect to inventions or improvements generally
listed below, the proprietary rights and duty of confidentiality with respect to
which I owe to the following parties:

 

     Invention or Improvement    Party(ies)    Relationship   1.   

 

  

 

  

 

  2.   

 

  

 

  

 

  3.   

 

  

 

  

 

 

☐ Additional sheets attached

 

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EXHIBIT B

CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE

This Confidential Separation Agreement and General Release (hereinafter
“Agreement”) is entered into by and between                      (hereinafter
“you”) and EnteroMedics Inc. (hereinafter “EnteroMedics”).

WHEREAS, you and EnteroMedics entered into an Employment Agreement dated
                     (“Employment Agreement”) which terminates effective
                    , except as to certain provisions outlined below;

WHEREAS, EnteroMedics wishes to provide you with the separation benefits
described in Section 2 below; and

WHEREAS, you and EnteroMedics want to fully and finally settle all issues,
differences, and claims, whether potential or actual, between you and
EnteroMedics, including, but not limited to, any claim that might arise out of
your employment with EnteroMedics or the termination of your employment with
EnteroMedics;

NOW, THEREFORE, in consideration of the provisions and of the mutual covenants
contained herein, you and EnteroMedics agree as follows:

1. Separation from Employment. Effective                      (your “date of
separation”), your employment with EnteroMedics terminates. Except as provided
in this Agreement, all benefits and privileges of employment end as of your date
of separation.

2. Separation Benefits. As consideration for your promises and obligations under
this Agreement, and subject to the terms and conditions of this Agreement,
including the release of claims set forth below, EnteroMedics agrees to pay you,
as separation pay, the gross amount of                     , less applicable
deductions and withholdings for state and federal taxes, which amount represents
12 months of your base salary as of your date of separation. The separation pay
will be divided and paid to you in substantially equal periodic payments at the
usual and customary pay intervals of EnteroMedics, less deductions and
withholdings. The payments will begin within 30 business days of the date on
which EnteroMedics receives this Agreement signed by you, provided that you do
not revoke or rescind this Agreement as set forth below. You agree that you are
not entitled to the separation benefits provided to you in this Agreement if you
do not sign this Agreement.

3. Incentive Compensation. You are not entitled to receive incentive
compensation for calendar year                     .

4. Medical, Dental, and Life Insurance. If you elect to extend
EnteroMedics-provided medical, dental, and/or life insurance coverage under
COBRA after your date of separation, then EnteroMedics will provide, at its sole
cost (except for any share of the cost for benefits for you and your spouse and
any eligible dependents that you were required to pay immediately before your
date of separation) such extended coverage for you and your spouse and any
eligible dependents, to the extent any such coverage was in effect for any of
you and those individuals immediately before your date of separation, for 12
calendar months after your date of separation. EnteroMedics’ obligations under
this Section 4 shall terminate upon commencement

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of new employment by you with an employer that offers health care coverage to
its employees. You agree that any COBRA premium paid on your behalf and/or any
reimbursement made to you for COBRA premiums paid by you will be treated as
taxable by EnteroMedics. Except as otherwise provided in this Section 4, the
benefits to which you (or, as applicable, your spouse and eligible dependents)
may be entitled upon termination of your employment shall be determined and paid
in accordance with such plans, policies and applicable laws.

5. Stock Options. All options to purchase shares of common stock of EnteroMedics
held by you (the “Options”) are subject to the terms of one or more Stock Option
Agreements between you and the Company (each, an “Option Agreement”) and were
granted pursuant to the EnteroMedics Inc. Amended and Restated 2003 Stock
Incentive Plan, as amended (the “Plan”). Pursuant to the terms and conditions
set forth in the Option Agreements, EnteroMedics agrees that, notwithstanding
anything to the contrary set forth in such Option Agreements or the Plan, during
the two-year period following your date of separation, you shall be permitted to
exercise any Option immediately to the extent that such Option was vested as of
your date of separation or would have vested within one year of your date of
separation had your employment with Company not terminated. Notwithstanding
anything to the contrary set forth in such Option Agreements or the Plan,
EnteroMedics shall have a right, following your date of separation, to buy back
all such Options based on the per share exercise price under the applicable
Option Agreement. The parties agree and acknowledge that, with respect to any
Options that were intended by the parties to be treated as “incentive stock
options” within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, such Options, to the extent they may be exercised by you more than
90 days following your date of separation, shall be treated as non-qualified
options, notwithstanding any provision in the Option Agreements to the contrary.

6. Confidential Information; Noncompetition and Nonsolicitation. You executed an
Executive Employment Agreement with EnteroMedics, a copy of which is attached
hereto as Exhibit A. All provisions of the Employment Agreement that, by their
terms, survive the termination of your employment will continue in full force
and effect and are not negated or otherwise affected by this Agreement,
including but not limited to Section 4.1: Company Remedies; Section 4.4:
Governing Law/Venue; Section 4.5: Arbitration; and the Nondisclosure and
Noncompetition Agreement attached to the Employment Agreement as its Exhibit A
and fully incorporated therein.

7. Return of EnteroMedics Property. You acknowledge that, on or before the date
you sign this Agreement, you have returned all EnteroMedics property in your
possession, including, but not limited to, all files, memoranda, documents,
records, copies of the foregoing, any EnteroMedics credit card, computer, fax
machine, printer, copier, keys, access cards, and any other property of
EnteroMedics in your possession. You also acknowledge that, on or before the
date you sign this Agreement, you have provided EnteroMedics with any and all
pass codes and/or personal identification numbers used by you to access the
EnteroMedics computer system, e-mail system, and/or the Internet, and/or
documents or files contained on and saved in the EnteroMedics computer system.

8. Duty to Cooperate. You agree that, beginning on the date you are presented
with this Agreement, you will cooperate with EnteroMedics with respect to the
transition of your duties, the preservation of effective operations and customer
service, and EnteroMedics’

 

2

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strategic and commercial initiatives. As part of your agreement to cooperate,
you will provide a list identifying the status of major projects under way,
pending customer interactions, the status of sale cycles with customers, the
names and contact information of key contacts at customers, and any other
information reasonably requested by EnteroMedics regarding your duties and
responsibilities. You further agree that, in the 30 day period following your
acceptance of this Agreement you will periodically make yourself accessible and
available during normal business hours for consultation with EnteroMedics
representatives in connection with the transition of your duties and
responsibilities. You agree that such consultation may include appearing from
time to time at the office of EnteroMedics for conferences.

9. Confidentiality. You agree that the existence and terms and conditions of
this Agreement (other than Exhibit A) shall remain confidential and that you
will not disclose any information concerning the provisions of this Agreement to
any person or entity, including, but not limited to, any present or former
employee of EnteroMedics. These confidentiality provisions are subject to the
following exceptions: you may disclose the provisions of this Agreement to your
attorneys, accountants, tax and financial advisors, and immediate family, or in
the course of legal proceedings involving EnteroMedics, or in response to a
subpoena, court order, or inquiry by a government agency. You further agree
that, if any information concerning the provisions of this Agreement is revealed
as permitted by this section, you shall inform the recipient of the information
that it is confidential, and the recipient shall agree to keep the information
confidential.

10. Release. By this Agreement, you intend to settle any and all claims that you
have or may have against EnteroMedics as a result of EnteroMedics hiring you,
your employment with EnteroMedics, and the decision to terminate your employment
with EnteroMedics. You agree that, in exchange for EnteroMedics’ promises in
this Agreement, and in exchange for the consideration provided to you by
EnteroMedics, described above in Section 2, you, on behalf of your heirs,
successors and assigns, hereby release and discharge EnteroMedics, its
predecessors, successors, assigns, parents, affiliates, subsidiaries, and
related companies, and their officers, directors, shareholders, agents,
servants, employees, and insurers (collectively “the Released Parties”) from all
liability for damages and from all claims that you may have against the Released
Parties occurring up through the date you sign this Agreement. You understand
and agree that your release of claims in this Agreement includes, but is not
limited to, any claims you may have under: Title VII of the Federal Civil Rights
Act of 1964, as amended; the Americans with Disabilities Act; the Equal Pay Act;
the Employee Retirement Income Security Act; the Age Discrimination in
Employment Act of 1967, as amended; the Older Workers Benefit Protection Act;
the Family and Medical Leave Act; the Worker Adjustment and Retraining
Notification Act of 1988; the False Claims Act; the Minnesota Human Rights Act;
Minnesota Equal Pay for Equal Work Law, Minn. Stat. §§ 181.66–181.71; Minn. §
181.81 (age discrimination); Minn. Stat. § 176.82 (retaliatory discharge); Minn.
Stat. §§ 181.931, 181.932, 181.935 (whistleblower protection); Minn. Stat. §§
181.940–181.944 (family leave); or any other federal, state, or local statute,
ordinance, or law.

You also agree and understand that you are giving up all other claims, whether
grounded in contract or tort theories, including but not limited to: wrongful
discharge; breach of contract; any claim for unpaid compensation (including, but
not limited to, any claims for PTO or severance except as set forth in this
Agreement, or for incentive compensation); tortious

 

3

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interference with contractual relations; promissory estoppel; detrimental
reliance; breach of the implied covenant of good faith and fair dealing; breach
of express or implied promise; breach of manuals or other policies; breach of
fiduciary duty; assault; battery; fraud; false imprisonment; invasion of
privacy; intentional or negligent misrepresentation; defamation, including
libel, slander, discharge defamation and self-publication defamation; discharge
in violation of public policy; whistleblower; qui tam actions; intentional or
negligent infliction of emotional distress; or any other theory, whether legal
or equitable.

You understand that nothing contained in this Agreement, including but not
limited to this Section 10, will be interpreted to prevent you from filing a
charge with the Equal Employment Opportunity Commission (“EEOC”), or any other
governmental agency, or from participating in or cooperating with an EEOC or
other governmental agency investigation or proceeding. However, you agree that
you are waiving the right to monetary damages or other individual legal or
equitable relief awarded as a result of any such proceeding.

11. Time to Accept. You are hereby informed that the terms of this Agreement
shall be open for acceptance and execution by you through and including
                    , during which time you may consult with an attorney and
consider whether to accept this Agreement. Changes to this Agreement, whether
material or immaterial, will not restart the running of this acceptance period.
You hereby are advised to consult with an attorney prior to signing this
Agreement.

12. Right to Revoke and Rescind. You are hereby informed of your right to revoke
your release of claims, insofar as it extends to potential claims under the Age
Discrimination in Employment Act, by informing EnteroMedics of your intent to
revoke your release of claims within 7 calendar days following your signing of
this Agreement. You are also informed of your right to rescind your release of
claims, insofar as it extends to potential claims under the Minnesota Human
Rights Act, by delivering a written rescission to EnteroMedics within 15
calendar days after your signing of this Agreement. You understand that any such
revocation or rescission must be made in writing and delivered by hand or by
certified mail, return receipt requested, postmarked on or before the last day
within the applicable revocation period to: Greg Lea, Senior Vice President, CFO
and COO, EnteroMedics, Inc., 2800 Patton Road, St. Paul, MN 55113.

If you exercise your right to revoke or rescind this Agreement, EnteroMedics
may, at its option, either nullify this Agreement in its entirety, or keep it in
effect in all respects other than as to that portion of your release of claims
that you have revoked or rescinded. You agree and understand that if
EnteroMedics chooses to nullify the Agreement in its entirety, EnteroMedics will
have no obligations under this Agreement to you or to others whose rights derive
from you.

13. Entire Agreement. This Agreement, as well as the exhibits hereto and any
agreements referenced herein, is the final, complete and exclusive agreement of
the parties and sets forth the entire agreement between EnteroMedics and you
with respect to your employment by EnteroMedics, and there are no undertakings,
covenants or commitments other than as set forth herein. The Agreement may not
be altered or amended, except by a writing executed by you and a member of the
Board. Except as otherwise indicated, this Agreement supersedes, terminates,
replaces and supplants any and all prior understandings or agreements between
the parties relating in any way to you hiring or employment by EnteroMedics.

 

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14. Governing Law. The laws of the State of Minnesota will govern the validity,
construction and performance of this Agreement, without regard to the conflict
of law provisions of any other jurisdictions. If any part of this Agreement is
construed to be in violation of any law, such part shall be modified to achieve
the objective of the parties to the fullest extent permitted and the balance of
this Agreement shall remain in full force and effect. If such modification is
not possible, said provision will be deemed severable from the remaining
provisions of this Agreement and the balance of this Agreement shall remain in
full force and effect.

15. Remedies. To the extent that the EnteroMedics wishes to pursue remedies
against you under Section 7.1 of the Employment Agreement, you and EnteroMedics
agree that such action shall be venued in Minnesota District Court, Hennepin
County. For any other dispute, you and EnteroMedics irrevocably consent that any
litigation commenced or arising in connection with the interpretation or
enforcement of this Agreement that has not been settled through negotiation
within a period of thirty (30) days after the date on which either party shall
first have notified the other party in writing of the existence of a dispute
shall be settled by final and binding arbitration under the then-applicable
Employment Arbitration Rules of the American Arbitration Association (“AAA”).
Any such arbitration shall be conducted by one (1) neutral arbitrator appointed
by mutual agreement of the parties or, failing such agreement, in accordance
with the AAA Rules. The arbitrator shall be an experienced attorney with a
background in employment law. Any arbitration shall be conducted in Minneapolis,
Minnesota. An arbitration award may be enforced in any court of competent
jurisdiction. Notwithstanding any contrary provision in the AAA Rules, the
following additional procedures and rules shall apply to any such arbitration:

 

  (A) Each party shall have the right to request from the arbitrator, and the
arbitrator shall order upon good cause shown, reasonable and limited pre-hearing
discovery, including: (i) exchange of witness lists, (ii) no more than two
(2) depositions under oath of named witnesses at a mutually convenient location
(neither deposition to exceed seven (7) hours), (iii) written interrogatories
(no more than twenty-five (25) in number), and (iv) document requests (no more
than twenty-five (25) in number, including subparts);

 

  (B) Upon conclusion of the pre-hearing discovery, the arbitrator shall
promptly hold a hearing upon the evidence to be adduced by the parties and shall
promptly render a written opinion and award;

 

  (C) The arbitrator may award damages or injunctive relief consistent with the
terms of this Agreement but may not award or assess punitive damages against
either party; and

 

  (D) Each party shall bear his or its own costs and expenses of the arbitration
and one-half (1/2) of the fees and costs of the arbitrator, subject to the power
of the arbitrator, in his or her sole discretion, to award all such reasonable
costs, expenses and attorneys’ fees to the prevailing party.

 

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16. No Admission. Nothing in this Agreement is intended to be, and nothing will
be deemed to be, an admission of liability by EnteroMedics or you that either
party has violated any state or federal statute, local ordinance or principle of
common law, or that either party has engaged in any wrongdoing.

17. Waiver. No waiver of any provision of this Agreement shall be binding unless
executed in writing by the party making the waiver. The waiver by either party
of a breach by the other party of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.

IN WITNESS WHEREOF, the parties have duly executed this Agreement on the dates
set forth below to be effective as of the date shown below.

I acknowledge and agree that I have read this Agreement in its entirety and that
I agree to the conditions and obligations set forth herein. Further, I agree
that I have had adequate time to consider the terms of this Agreement and that I
am voluntarily entering into this Agreement with a full understanding of its
meaning. I understand that I am hereby advised to consult with an attorney
before signing this Agreement.

 

      Dated:  

 

                Scott P. Youngstrom         ENTEROMEDICS INC. Dated:  

 

      By  

 

        Its  

 

 

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