Exhibit 10.31**CONFIDENTIAL SETTLEMENT AGREEMENT****AND RELEASE OF ALL CLAIMS**     This Confidential Settlement Agreement and Release of All Claims (“Agreement”) is made by andbetween Artes Medical, Inc.(the “Company”), a Delaware corporation and William von Brendel (“Mr.von Brendel”).     A. The Company terminated Mr. von Brendel’s employment on or about October 26, 2006.     B. On or about November 16, 2006, Mr. von Brendel filed a Demand for Arbitration before theAmerican Arbitration Association (the “Action”), alleging wrongful termination, breach of contract,breach of the covenant of good faith and fair dealing and fraud.     C. The Company denies any wrongdoing and disputes the allegations of the Action.     D. The parties desire to avoid the potential inconvenience of litigation by settling allclaims and issues that have been raised, or could have been raised, in relation to Mr. vonBrendel’s employment with the Company, the termination thereof, and arising out of or in any wayrelated to the acts, transactions or occurrences between Mr. von Brendel and the Company to date,on the terms set forth below.     THEREFORE, in consideration of the promises and mutual agreements set forth in this Agreement,it is agreed by and between the undersigned as follows:     1. Settlement Compensation.      1.1 The Company agrees to pay to Mr. von Brendel, 12 months salary totaling One HundredSeventy Thousand Dollars ($170,000). Mr. von Brendel will be paid in 26 pay periods as W-2 income.Mr. von Brendel will receive gross pay each pay period in the amount of $6,538.46, less allapplicable withholdings. The operative date of such payments is October 27, 2006. The Companywill make all payments necessary to bring Mr. von Brendel’s pay current within two weeks of theeffective date of this Agreement as described in paragraph 17 below.     1.2 The Company will pay Mr. von Brendel, as W-2 income, bonus compensation of Fifty-SixThousand Dollars ($56,000), less all applicable withholdings, upon the earlier of (i) the datefinal bonuses are distributed to all employees and executive officers of the Company; or (ii) March31, 2007.     1.3 Mr. von Brendel will also be entitled to 12 months of additional stock option vesting.Mr. von Brendel will have a total of 230,187 stock options which will fully vest on the date theAgreement is executed by the parties. Mr. von Brendel shall have 12 months after the date theAgreement is executed by the parties to exercise his options. This 230,187 number of shares isbased on the Company’s pre-IPO (initial public offering) stock option schedule. Thus, such shareswill be subject to the same reverse split identified in the Company’s S-1 registration filing(1:4.25), and therefore the actual number of shares Mr. von Brendel may be granted will be
 

 
less than the 230,187 shares as shown in the schedule, attached as Exhibit A. Pricing ofoptions is also subject to increase to reflect the reverse split as shown on Exhibit A.     1.4 Mr. von Brendel shall indemnify, hold harmless and defend the Company from any claims, taxliability, interest, penalties, attorneys’ fees or costs which the Company is required to pay as aresult of Mr. von Brendel’s failure to report the Settlement Compensation described herein to theproper taxing authorities.     2. Dismissal of the Action. Upon executing this Agreement, Mr. von Brendel agrees toobtain dismissal of the Action in its entirety, with prejudice, by taking all necessary steps tosecure such dismissal.     3. Release of Claims.     3.1 Mr. von Brendel for himself and his heirs, agents, assigns, executors, successors and eachof them, unconditionally, irrevocably and absolutely, releases and discharges the Company and anyparent and subsidiary corporations, divisions, and affiliated corporations, partnerships or otheraffiliated entities of the Company, past and present, as well as the Company’s employees, officers,directors, agents, successors and assigns (“Releasees”), from all claims related in any way to thetransactions or occurrences between them to date, to the fullest extent permitted by law,including, but not limited to, Mr. von Brendel’s employment with the Company, the termination ofthat employment, and all other losses, liabilities, claims, charges, demands and causes of action,known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any wayconnected with Mr. von Brendel’s employment with the Company. This release is intended to have thebroadest possible application and includes any and all tort, contract, common law, constitutionalor other statutory claims, including, but not limited to, alleged violations of Title VII of theCivil Rights Act of 1964 and the California Fair Employment and Housing Act, the Americans withDisabilities Act, and all claims for attorneys’ fees, costs and expenses. However, nothing hereinis intended to affect any vested rights Mr. von Brendel may have obtained during the course of hisemployment with the Company, or affect Mr. von Brendel’s obligations to the Company pursuant tothat certain Proprietary Information and Inventions Agreement entered into between Mr. von Brendeland the Company.     3.2 This release does not extend to claims which, as a matter of law, cannot be waived, suchas a right to indemnification under Labor Code Section 2802.     3.3 Mr. von Brendel and the Company declare and represent that they intend this Agreement tobe complete and not subject to any claim of mistake, and that the release herein expresses a fulland complete release and, regardless of the adequacy or inadequacy of the consideration, intend therelease to be final and complete. Mr. von Brendel executes this release with the full knowledgethat this release covers all possible claims against the Releasees to the fullest extent permittedby law.     4. California Civil Code Section 1542 Waiver. Mr. von Brendel expressly acknowledgesand agrees that all rights under section 1542 of the California Civil Code are expressly waived.That statute reads as follows:
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A general release does not extend to claims which the creditor does not know of orsuspect to exist in his or her favor at the time of executing the release, which ifknown by him or her must have materially affected his or her settlement with thedebtor.     5. Representation Concerning Filing of Legal Actions. Mr. von Brendel representsthat, as of the date of this Agreement, there are no pending lawsuits, charges, complaints,petitions, claims or other accusatory pleadings against any of the Releasees in any court or withany governmental agency, with the exception of the Action. Mr. von Brendel further agrees that, tothe fullest extent permitted by law, he will not prosecute, nor allow to be prosecuted on hisbehalf, in any administrative agency, whether state or federal, or in any court, whether state orfederal, any claim or demand of any type related to the matters released herein, it being theintention of Mr. von Brendel that with the execution of this release, Releasees will be absolutely,unconditionally and forever discharged of and from all obligations to or on behalf of each otherrelated in any way to the matters discharged herein. If any action is brought, this Agreement willconstitute an affirmative defense thereto.     6. Nondisparagement. Mr. von Brendel agrees that he will not make any voluntarystatements, written or verbal, or cause or encourage others to make any such statements thatdefame, disparage or in any way criticize the reputation, business practices or conduct of theCompany or any of the other Releasees.     7. Referral. The Company shall endeavor to direct all inquiries concerning Mr. vonBrendel to its Human Resources department. In response to inquiries, the Company will only verifythe dates of Mr. von Brendel’s employment and his job title.     8. Reemployment. Mr. von Brendel agrees that he will not apply for employment orotherwise request to be considered for employment with the Company or its affiliates, either in hisformer capacity or in any other position or capacity.     9. Confidentiality.     9.1 The parties agree that the terms and conditions of this Agreement, as well as thediscussions that led to the terms and conditions of this Agreement (collectively referred to as the“Confidential Settlement Information”) are intended to remain confidential between Mr. von Brendeland the Company.     9.2 The Company may disclose the amount of the Settlement Compensation, and other terms deemedin good faith to be strictly necessary for the conduct of its business, subject to a “need to know”basis.     9.3 Mr. von Brendel agrees that he will not disclose the Confidential Settlement Informationto any other person, except that Mr. von Brendel may disclose such information to his spouse, hisattorney(s) and accountant(s), if any, to the extent needed for legal advice or income taxreporting purposes. When releasing this information to any such person, Mr. von Brendel shalladvise the person receiving the information of its confidential nature. Neither Mr.
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von Brendel nor anyone to whom the Confidential Settlement Information has been disclosed willrespond to, or in any way participate in or contribute to, any public discussion, notice or otherpublicity concerning the Confidential Settlement Information.     9.4 If Mr. von Brendel is asked about the Action by anyone other than those individualsspecifically identified in paragraph 9.3, he may respond only as follows: “The matter has beenresolved.”     10. Liquidated Damages for Violating Confidentiality Provisions. Mr. von Brendelunderstands and agrees that the confidentiality provisions of this Agreement, as set forth inparagraph 9 above, is a material part of this Agreement. Mr. von Brendel agrees to refrain fromviolating these provisions. Further, the parties understand and agree that it is difficult toascertain the measure of damage to the Company in the event of a breach of this provision by Mr.von Brendel. For the foregoing reasons, if any of the provisions of paragraph 9 are breached, theCompany shall not be obligated to pay any sums remaining under the terms of this Agreement to Mr.von Brendel, if any, and Mr. von Brendel will pay, upon proof of breach, to the Company liquidateddamages in the sum of ten thousand dollars ($10,000). In the event of Mr. von Brendel’s breach inaccordance with this provision, all other provisions of this Agreement will remain in full forceand effect.     11. No Admissions. By entering into this Agreement, Mr. von Brendel and the Companymake no admission that they have engaged, or are now engaging, in any unlawful conduct. It isunderstood that this Agreement is not an admission of liability, that there has been no trial oradjudication of any issue of law or fact herein, and that the parties specifically deny liabilityand intend merely to avoid expense by entering into this Agreement.     12. Notice. Any notice required or permitted by this Agreement shall be in writingand shall be deemed sufficient upon receipt, when delivered personally or by courier, overnightdelivery service, certified mail with postage prepaid, or confirmed facsimile. Notice should bedelivered to the following addresses:   **Notice to Artes Medical, Inc.:** **Notice to William von Brendel:**Heller Ehrman LLP Gregory M. Garrison, Esq.Joseph M. Parker, Esq. Garrison & McInnis, L.L.P.4350 La Jolla Village Drive 2650 Camino Del Rio North7th Floor Suite 108San Diego, CA 92122 San Diego, CA 92108Fax: (858) 450-8499 Fax: (619) 299-4787     13. Entire Agreement/Modification. This Agreement is intended to be the entireagreement between the parties and supersedes and cancels any and all other and prior agreements,written or oral, between the parties regarding this subject matter. It is agreed that there are nocollateral agreements or representations, written or oral, regarding the settlement of claimsbetween the parties, other than those set forth in this Agreement. This Agreement may be amendedonly by a written instrument executed by all parties hereto.
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     14. Severability. In the event any provision of this Agreement shall be foundunenforceable by an arbitrator or a court of competent jurisdiction, the provision shall be deemedmodified to the extent necessary to allow enforceability of the provision as so limited, it beingintended that the Company shall receive the benefits contemplated herein to the fullest extentpermitted by law. If a deemed modification is not satisfactory in the judgment of such arbitratoror court, the unenforceable provision shall be deemed deleted, and the validity and enforceabilityof the remaining provisions shall not be affected thereby.     15. Applicable Law. The validity, interpretation and performance of this Agreementshall be construed and interpreted according to the laws of the State of California.     16. Full Defense. This Agreement may be pled as a full and complete defense to, andmay be used as a basis for an injunction against, any action, suit or other proceeding that may beprosecuted, instituted or attempted by Mr. von Brendel in breach hereof. The parties agree that inthe event an action or proceeding is instituted by either party in order to enforce the terms orprovisions of this Agreement, the prevailing party shall be entitled to an award of reasonablecosts and attorneys’ fees incurred in connection with enforcing this Agreement.     17. Older Workers’ Benefit Protection Act. Mr. von Brendel acknowledges that theCompany has advised him to review this Agreement with an attorney before signing it. Mr. vonBrendel has 21 days within which to review and consider this Agreement before signing it. ShouldMr. von Brendel decide not to use the entire 21 days, Mr. von Brendel knowingly and voluntarilywaives any claim that he was not in fact given that period of time or did not use the entire 21days to consult an attorney and/or consider this Agreement. Mr. von Brendel may revoke theAgreement for up to seven calendar days after signing it, and this Agreement shall not becomeeffective or enforceable until the revocation period has passed. Any revocation of this Agreementmust be in writing addressed to and received by Human Resources on behalf of the Company no laterthan 5:00 p.m. on the seventh day after Mr. von Brendel signs it. If Mr. von Brendel revokes thisAgreement, he will not receive any of the benefits described in this Agreement. This Agreementdoes not waive or release any rights or claims Mr. von Brendel may have under the AgeDiscrimination in Employment Act that arise after the execution of this Agreement.     18. Attorneys’ Fees and Costs. Both parties to this Agreement agree that they willbear their own attorneys’ fees, costs and all other expenses in connection with the mattersreleased in this Agreement.     19. Good Faith. The parties agree to do all things necessary and to execute allfurther documents necessary and appropriate to carry out and effectuate the terms and purposes ofthis Agreement.     20. Counterparts. This Agreement may be executed by facsimile signature, and inseparate counterparts, each of which shall be deemed an original and all of which, when takentogether, shall constitute one and the same instrument.
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     THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH ANDEVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATESHOWN BELOW.       Dated: January 9, 2007 /s/ William von Brendel         William von Brendel         Dated: January 10, 2007 Artes Medical, Inc.           By:      /s/ Christopher J. Reinhard                  Christopher J. Reinhard         **APPROVED AS TO FORM**:             Dated: January 9, 2007 Gregory M. Garrison           /s/ Gregory M. Garrison         Gregory M. Garrison    Attorneys for William von Brendel         Dated: January 9, 2007 HELLER EHRMAN LLP           /s/ Joseph M. Parker         Joseph M. Parker, Esq.    Attorneys for Artes Medical, Inc.  
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Exhibit A