Document:

exv10w28

 

EXHIBIT 10.28

SEPARATION AGREEMENT AND GENERAL RELEASE

     This Separation Agreement and General Release (this “Agreement”) is made and entered into by
and between Stefan M. Lemperle, M.D., a resident of the State of California (“Dr. Lemperle”), and
Artes Medical, Inc., a Delaware corporation (the “Company”), and inures to the benefit of each of
the Company’s current, former and future parents, subsidiaries, related entities, employee benefit
plans and each of their respective fiduciaries, predecessors, successors, officers, directors,
stockholders, agents, attorneys, employees and assigns.

RECITALS

     A. The Company’s Board of Directors (the “Board”) removed Dr. Lemperle as the Company’s Chief
Executive Officer on October 26, 2006.

     B. Dr. Lemperle has agreed to resign from the Board and as an employee of the Company as of
November 17, 2006 (the “Resignation Date”).

     C. Dr. Lemperle and the Company wish permanently to resolve any and all disputes arising out
of the cessation of Dr. Lemperle’s service to the Company as an officer, director and employee.

AGREEMENT

     THEREFORE, in consideration of the mutual promises and covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed by and between Dr. Lemperle, on the one hand, and the Company, on
the other, as follows:

     1. Resignation.

          1.1 Dr. Lemperle hereby acknowledges his removal as the Company’s Chief Executive Officer on
October 26, 2006, and hereby irrevocably resigns as (a) an employee of the Company and (b) a
director of the Board, each to be effective as of the Resignation Date.

          1.2 Contingent upon this Agreement becoming effective as provided in Section 29 of this
Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth in Sections 7 and 8 of
this Agreement and subject to the disclosure requirements applicable to the Company under the rules
and regulations promulgated by the Securities and Exchange Commission (the “SEC”), the Company
agrees to prepare and issue a press release (both in the U.S. and internationally) regarding Dr.
Lemperle’s services to the Company and his resignation from the Board and as an employee of the
Company that is acceptable to the Company, Dr. Lemperle and the underwriters currently
participating in the Company’s proposed initial public offering. The form of the press release is
attached hereto as Exhibit A.

     2. Wages, Vacation Time, Expenses. Dr. Lemperle hereby agrees that the Company has
paid him all of his wages and all of his accrued and unused vacation time through the Resignation
Date (less federal and state withholding and other applicable taxes), and has been reimbursed by
the Company for all reimbursable business expenses incurred by him

 

 

through the Resignation Date. Dr. Lemperle and the Company agree that he had accrued and
unused vacation time of 240 hours as of the Resignation Date.

     3. Severance Payments.

          3.1 Contingent upon this Agreement becoming effective as provided in Section 29 of this
Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth in Sections 7 and 8 of
this Agreement, the Company agrees to pay Dr. Lemperle a severance payment of $81,250.00 (minus
federal and state withholding and other applicable taxes) in lieu of any bonus related to fiscal
years 2005 and 2006, payable on the Effective Date. Other than this severance payment in Section
3.1, Dr. Lemperle agrees that he is not entitled to any bonus or other compensation payments from
the Company for his services through the Resignation Date.

          3.2 Contingent upon this Agreement becoming effective as provided in Section 29 of this
Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth in Sections 7 and 8 of
this Agreement, the Company agrees to pay to Dr. Lemperle the amount of $25,000.00 per month (minus
federal and state withholding and other applicable taxes) commencing on the one month anniversary
of the Effective Date and continuing on each of the next eleven monthly anniversaries of the
Effective Date thereafter.

          3.3 Contingent upon this Agreement becoming effective as provided in Section 29 of this
Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth in Sections 7 and 8 of
this Agreement and contingent upon the Company completing a Qualifying Transaction (as defined
below) prior to March 31, 2007, the Company agrees to pay to Dr. Lemperle an amount of $650,000
(minus federal and state withholding and other applicable taxes) payable as follows: $250,000 on
the Effective Date and $400,000 within ten (10) business days of the closing date of the Qualifying
Transaction. For purposes of this Agreement, a “Qualifying Transaction” shall mean (a) an initial
public offering of the Company’s Common Stock through a firm commitment underwritten offering in
which the Company raises gross proceeds of at least $40 million (an “IPO”); (b) any other
transaction or series of related financing transactions after the Effective Date in which the
Company raises gross proceeds of at least $40 million (whether by sale of debt, equity or a
combination thereof); (c) any sale of fifty percent (50%) or more of the Company’s voting
securities for a gross aggregate consideration of at least $40 million (whether paid in cash,
equity or otherwise); (d) any sale of all or substantially all of the Company’s assets for a gross
aggregate consideration of at least $40 million (whether paid in cash, equity or otherwise); or (e)
any merger, consolidation or other combination of the Company with or into another entity, in which
the Company’s stockholders receive an aggregate gross consideration of at least $40 million
(whether paid in cash, equity or otherwise).

          3.4 Termination of Severance Obligations. The Company’s obligations under Sections
3.1, 3.2 and 3.3 shall immediately terminate upon a determination by the Company’s Board of
Directors that Dr. Lemperle has materially breached any term of this Agreement, including the
covenants set forth in Section 4 below. The Company will promptly provide Dr. Lemperle with
written notice of its determination, and if Dr. Lemperle disagrees with the Board’s determination,
Dr. Lemperle can appeal such determination by arbitration in accordance with Section 32 below.

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          3.5 Non-Exclusive Remedy. The Company’s remedy to terminate its severance obligations
under Sections 3.1, 3.2 and 3.3 pursuant to Section 3.4 is not the Company’s exclusive remedy, and
shall not limit any rights or remedies which may otherwise be available to the Company at law or in
equity, including the Company’s right to seek damages from Dr. Lemperle for any breach of his
covenants and obligations to the Company, whether arising under this Agreement, or any other
agreement between the Company and Dr. Lemperle.

     4. Covenants. Dr. Lemperle agrees and covenants as follows:

          4.1 Not to make any voluntary statements, written or verbal, or cause or encourage others to
make any statements that reference the Company, its products, proprietary information or
intellectual property without the prior written consent of the President of the Company if such
statements would lead a reasonable person to conclude that Dr. Lemperle currently is affiliated
with the Company, or an agent or representative of the Company. This provision shall apply to
scientific publications, articles and papers, oral and written presentations at conferences or
symposia, or any other public dissemination of information that references the Company, its
business, products, patents, trademarks or any other intellectual or proprietary information of the
Company, all of which shall be submitted to the President for review and written approval prior to
any such publication or presentation.

          4.2 Reasonably assist and cooperate with the Company, and the Company’s agents, in completing
an audit of all past issuances of securities by the Company and evaluating and resolving all
potential claims related to rights to receive or ownership of the Company’s securities, which shall
include, but is not limited to, (A) providing the Company with full and timely disclosure and with
access to all available information related to the past issuances of the Company’s securities and
potential claims by third parties related to their rights to receive or ownership of the Company’s
securities (including claims by actual and potential investors, finders, placement agents, brokers,
consultants, employees and directors), (B) assist the Company in resolving any potential claims and
disputes related to same; and (C) assist in preparing and execute, under penalty of perjury, a
disclosure report for the Company’s Audit Committee, which contains representations and warranties
by Dr. Lemperle, regarding the Company’s past issuances of securities and potential claims related
to the rights of third parties to receive or their ownership of the Company’s securities.

          4.3 Reasonably assist and cooperate with the Company, and the Company’s agents, in responding
to any questions or issues related to the Company and/or its officers, directors, employees and
consultants during the time Dr. Lemperle was employed by the Company (including any questions or
issues related to the actions of Professor Gottfried Lemperle) raised by the U.S. Securities and
Exchange Commission, the Company’s auditors, the Company’s Board of Directors or any committee
thereof, the Company’s investment bankers, the Company’s legal counsel, or any other federal, state
or foreign regulatory body.

          4.4 Assist and cooperate fully with the Company, and the Company’s agents, in sending written
requests (in the form prepared by the Company) in order to obtain the necessary stockholder
approvals for matters the Board has determined are necessary to comply with federal, state or
foreign securities laws or would otherwise help facilitate the Company’s IPO or any financings or
transactions to raise funds to support the Company’s operations through

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December 31, 2007, which shall include voting (and instructing Creative Microspheres, Inc. to
vote) all then outstanding Securities (as defined below) in favor of such matters or actions. Dr.
Lemperle agrees not to take any actions or make any communications to the Company’s stockholders
that are contrary to or inconsistent with the purposes of any written requests Dr. Lemperle sends
to the Company’s stockholders pursuant to this Section 4.4.

          4.5 Reasonably assist and cooperate with the Company, and the Company’s agents, in responding
to any questions or issues raised by the U.S. FDA or any similar foreign regulatory body; and not
to take any action that may potentially cause the Company or the Company’s clinical investigators,
Scientific Advisory Board members or customers to be in violation of the the FDA’s rules and
regulations or the rules and regulations of any other federal, state or foreign regulatory agency
that has or may have in the future jurisdiction over the Company or its products.

          4.6 Reasonably assist and cooperate with the Company, and the Company’s agents, in resolving
the outstanding dispute between the Company and Melvin Ehrlich regarding Mr. Ehrlich’s warrant
dated January 18, 2004.

          4.7 Reasonably assist and cooperate with the Company, and the Company’s agents, in resolving
the outstanding claims against the Company, and its officers and directors, arising out of the
Company’s termination of the employment of William von Brendel, Harald Schreiber and Michael
Salazar.

          4.8 Reasonably assist and cooperate with the Company, and the Company’s agents, in perfecting
the Company’s interest in and protecting the Company’s rights to the intellectual property covered
by the Intellectual Property Agreements (as defined below). Assist and cooperate fully with the
Company, and the Company’s agents, in maintaining the Company’s patent protection for ArteFill and
the Company’s future products under development, including, but not limited to, (A) preventing
third parties from successfully challenging the validity or enforceability of, or infringing, U.S.
Patent No. 5,344,452 (the “452 Patent”) or the Company’s other intellectual property rights, (B)
obtaining an extension of the term of the 452 Patent from the U.S. PTO and (C) enforcing the
Company’s patent and other intellectual property rights against third parties. Dr. Lemperle shall
not take any action or make any statements that challenge the validity of the 452 Patent or any of
the Company’s other intellectual property rights.

          4.9 Assist and cooperate with the Company, and its agents, in completing a transaction with
SpineOvations, Inc., including the necessary assignment of intellectual property rights.

          4.10 Reasonably assist and cooperate with the Company, and its agents, in enforcing its rights
and protecting the Company’s interests in the agreements the Company has previously entered into
with Gottfried Lemperle, Martin Lemperle, FormMed BioMedicals AG and MediPlant GmbH Biomaterials &
Medical Devices (which shall specifically include all agreements with their former parents,
subsidiaries, related entities, officers, directors, stockholders and agents). A copy of each of
the Company’s Termination and General Release, dated May 11, 2006, and Separation Agreement, dated
March 16, 2006, with Gottfried Lemperle is attached hereto as Exhibits B and C,
respectively.

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          4.11 Reasonably assist and cooperate with the Company, and its agents, in any lawsuit or
proceeding filed against the Company (and any other third party) arising out of or relating to
events that occurred during the period prior to the Resignation Date, subject to Dr. Lemperle’s
rights under the United States Constitution.

          4.12 Reasonably assist and cooperate with the Company, and its agents, in obtaining signed
lock up agreements from the Company’s stockholders as required by the underwriters in the Company’s
planned IPO. Upon request by the Company, Dr. Lemperle agrees to send written requests (in the form
prepared by the Company) to those stockholders identified by the Company and encourage such
stockholders to promptly sign and return to the Company the requested lock-up agreements. Dr.
Lemperle will inform such stockholders in writing that he has resigned from the Company, and that
he fully supports the Company’s planned IPO and recommends that the stockholders promptly return
executed lock-up agreements to the Company. Dr. Lemperle further agrees not to take any actions
that would violate the rules and regulations promulgated by the SEC or that may otherwise impede
the Company’s planned IPO (e.g., violations of the SEC’s quiet period). Dr. Lemperle agrees not to
take any actions or make any communications to the Company’s stockholders that are contrary to or
inconsistent with the purposes of any written requests Dr. Lemperle sends to the Company’s
stockholders pursuant to this Section 4.12.

          4.13 Promptly notify the Company in writing if he is contemplating an affiliation of any sort
with any other person, corporation, firm, partnership or other entity that competes in any line of
business engaged in or that may be engaged in by the Company based on its intellectual property
rights, including, but not limited to, SpineOvations, Inc.

          4.14 Dr. Lemperle covenants not to solicit votes or encourage other stockholders of the
Company to take actions or to vote their shares of stock against or in a manner contrary to the
actions or matters recommended to the Company’s stockholders for approval by a majority of the
Board, for a period of thirty-six (36) months from the Resignation Date.

          4.15 None of the covenants in this Section 4 require Dr. Lemperle to investigate independently
any actions or any conduct of third parties.

          4.16 If, in carrying out his obligations under this Section 4, Dr. Lemperle incurs
out-of-pocket expenses, the Company shall reimburse Dr. Lemperle for such out-of-pocket expenses;
provided all such expenses must be pre-approved by the Company and the Company’s payment is
contingent on Dr. Lemperle providing the Company with invoices for such expenses, supported by
reasonable documentation.

     5. Equity Holdings and Form S-1 Disclosure.

          5.1 Stock. Dr. Lemperle hereby acknowledges that he individually holds 100,000 shares
of Common Stock and that he beneficially owns through Creative Microspheres, Inc. 1,042,507 shares
of Common Stock , 771,836 shares Series C-1 Preferred Stock and 42,338 shares of Series D Preferred
Stock (collectively, the “Stock”).

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          5.2 Options. In addition, the Company has granted Dr. Lemperle the following options
(the “Stock Options”) to purchase the indicated shares of Common Stock at the indicated exercise
price in the table below.

	 	 	 	 	 	 	 	 	 
	Option Grant	 	Number of	 	Per Share
	        Date	 	Shares	 	Exercise Price
	Nov. 16, 2001
	 	 	300,000	 	 	$	0.35	 
	June 30, 2006
	 	 	200,000	 	 	$	1.85	 
	Total:
	 	 	500,000	 	 	 	 	 

          5.3 Warrants. In addition, Dr. Lemperle holds a warrant to purchase 20,000 shares of
Common Stock at an exercise price of $1.25 per share and beneficially owns a warrant through
Creative Microspheres, Inc. to purchase 743,005 shares of Series C-1 Preferred Stock at an exercise
price of $1.00 per share (collectively, the “Warrants”). In June 2006, Dr. Lemperle and Creative
Microspheres, Inc. each agreed to amend their respective Warrants to extend the termination date of
the Warrants beyond the closing date of the Company’s IPO, in exchange for eliminating their
ability to exercise the Warrants through the cashless exercise provisions of the Warrants. A copy
of each of the amendments to the Warrants is attached hereto as Exhibit D. Dr. Lemperle
and Creative Microspheres, Inc. each acknowledge that they must exercise their warrant shares in
accordance with the terms and conditions of their respective Warrants, as amended. Dr. Lemperle and
Creative Microspheres, Inc. each acknowledge that they have read their respective Warrants and the
warrant amendments..

          5.4 Acknowledgement. Dr. Lemperle acknowledges and agrees that the Stock listed in
Section 5.1, the Stock Options to acquire shares of Common Stock listed in Section 5.2 and Warrants
to purchase shares of Common Stock and Series C-1 Preferred Stock listed in Section 5.3 sets forth
Dr. Lemperle’s and Creative Micospheres, Inc.’s, including Dr. Lemperle’s and Creative
Microspheres, Inc.’s respective spouses, executors, administrators, stockholders, assigns, and
successors, entire interest in or right to acquire the capital stock of the Company (or rights or
other securities exercisable or convertible into the capital stock of the Company), and that
neither he nor Creative Microspheres, Inc. nor their respective spouses, executors, administrators,
stockholders, assigns and successors have any right to acquire or purchase any additional shares of
capital stock or rights or other securities exercisable or convertible for capital stock
(collectively, the “Securities”).

          5.5 Amendment of Stock Options. Contingent upon this Agreement becoming effective as
provided in Section 29 of this Agreement and upon Dr. Lemperle’s satisfaction of the requirements
set forth in Sections 7 and 8 of this Agreement, the Company agrees to amend the terms of the Stock
Options to provide that:

               (i) all unvested option shares under the Stock Options shall immediately vest on the Effective
Date.

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               (ii) Dr. Lemperle will have three hundred sixty five (365) days from the Effective Date in
which to exercise all or a portion of the Stock Options.

     Dr. Lemperle acknowledges and agrees that the extension of the period in which he may exercise
his vested Stock Options from ninety (90) to three hundred sixty five (365) days will have the
effect of automatically converting any of the Stock Options that are currently Incentive Stock
Options (“ISO”) to Non-Qualified Stock Options (“NSO”). Dr. Lemperle further acknowledges that
ISOs and NSOs are treated differently under the tax laws. For example, upon the exercise of a
Stock Option following its conversion to an NSO, Dr. Lemperle will recognize immediate taxable
income in an amount equal to the excess of (i) the fair market value of the purchased shares at the
time of exercise over (ii) the aggregate exercise price paid for those shares. This income will be
subject to federal and state income and employment tax withholding, even though Dr. Lemperle is not
an employee of the Company at the time of exercise. As a result, when Dr. Lemperle elects to
exercise any of Stock Option converted to an NSO, he will be required to deliver a check to the
Company not only for the exercise price of the purchased shares but also for the applicable
withholding taxes.

     Dr. Lemperle acknowledges that he is solely responsible for seeking his own legal and tax
advice on such matters. Dr. Lemperle further acknowledges that he must exercise his vested options
in accordance with the terms and conditions of the agreements evidencing his Stock Options, as
specifically amended herein. Dr. Lemperle acknowledges that he has read the documents evidencing
his Stock Options.

          5.6 Lock-Up Agreements.

               (i) Lock-Up in Connection with Registration. In connection with an initial public
offering of the Company’s common stock or the Company’s registration of its stock with the SEC
(including pursuant to Form 10 or Form 10-SB), Dr. Lemperle and Creative Microspheres, Inc. hereby
agree not to (A) offer, pledge, sell contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of the Company’s Common Stock
or any securities convertible into or exercisable or exchangeable for the Company’s Common Stock
(including the Securities) or (B) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (A) or (B) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise without the prior written consent of
the Company or the underwriters in an underwritten offering, as the case may be, for a period of
180 days from the effective date of such registration statement filed with the SEC.

               (ii) Volume Restrictions. In addition to any other restrictions and limitations on
the transfer of the Securities under applicable federal and state securities laws and the other
agreements to which Dr. Lemperle and Creative Microspheres, Inc. are bound (including Sections 7
and 8 below), for a period of twelve (12) months after the Effective Date, Dr. Lemperle and
Creative Microspheres each agree that each sale of the Securities (which shall include any offer,
pledge, contract to sell, any option, right or warrant to sell, lend, or otherwise transfer or
dispose of, directly or indirectly, any of the economic consequences of ownership of

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the Securities) shall be made in compliance with the volume restrictions applicable to an
“affiliate” of the Company under Rule 144 of the Securities Exchange Act of 1933, as amended.

               (iii) Stop-Transfer Instructions. In order to enforce the foregoing covenants, the
Company may impose stop-transfer instructions with respect to the Securities. Further, the Company
is not required to recognize or complete any transfers on its stock ledger that do not comply with
the restrictions set forth in this Section 5.6.

               (iv) Transferees and Pledgees Bound. In addition to the other transfer restrictions
set forth in this Section 5.6, Dr. Lemperle and Creative Microspheres, Inc. each agree that they
will not transfer or pledge the Securities unless each transferee and pledgee agrees with the
Company in writing to be bound by all of the provisions of this Section 5.6.

     6. Representations and Warranties by Dr. Lemperle. Dr. Lemperle hereby represents and
warrants to the Company that to the best of his knowledge the statements in Amendment No. 3 to the
Company’s Registration Statement on Form S-1 (No. 333-134086), filed with the SEC on November 7,
2006 (the “Registration Statement”), regarding Dr. Lemperle’s, Gottfried Lemperle’s, Martin
Lemperle’s, Creative Micospheres, Inc.’s, FormMed BioMedicals AG’s and MediPlant GmbH Biomaterials
& Medical Devices’ agreements and transactions with the Company and each of these party’s
respective stock, warrant and option ownership in the Company are true and correct in all material
respects. He further represents and warrants that to the best of his knowledge the Registration
Statement and the Company’s PMA for ArteFill as amended by Amendment No. 34 filed by the Company
with the FDA, as of the date of this Agreement, does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the
statements therein not misleading.

     7. Voting Agreement. In exchange for the promises and covenants made by the Company
under this Agreement, Dr. Lemperle agrees to deliver an executed copy of the Voting Agreement
attached hereto as Exhibit E related to the Securities.

     8. IPO Lock-Up Agreements. Dr. Lemperle and Creative Microspheres, Inc. shall execute
the lock-up agreement required by the Company’s underwriters in the proposed IPO, a copy of which
is attached hereto as Exhibit F (the “IPO Lock-Up Agreements”). Dr. Lemperle agrees to
obtain and provide to the Company IPO Lock-Up Agreements executed by Gottfried Lemperle and Martin
Lemperle. Dr. Lemperle agrees to promptly send a written request (in the form prepared by the
Company) to those stockholders identified by the Company on Schedule A and to encourage
such stockholders to promptly sign and return to the Company the requested lock-up agreements. Dr.
Lemperle will inform such stockholders in writing that he has resigned from the Company, and that
he fully supports the Company’s planned IPO and recommends that the stockholders promptly return
executed lock-up agreements to the Company. Dr. Lemperle agrees not to take any actions or make
any communications to the Company’s stockholders that are contrary to or inconsistent with the
purposes of any written requests Dr. Lemperle sends to the Company’s stockholders pursuant to this
Section 8.

     9. Issuance of Common Stock. On September 15, 2004, the Company granted Dr. Lemperle
an option to purchase 500,000 shares of Common Stock at an exercise price of $1.00

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per share, which option has expired pursuant to its terms. On November 6, 2006, the Company
filed a demand for arbitration with the American Arbitration Association against Melvin Ehrlich,
who served as our President and Chief Operating Officer from January 15, 2004 through April 5,
2004. In the arbitration, the Company is seeking declaratory relief regarding the number of shares
of common stock Mr. Ehrlich is entitled to purchase under a warrant issued to him in connection
with his employment agreement (the “Ehrlich Warrant”). The Company contends Mr. Ehrlich is
entitled to purchase 110,800 shares under the Ehrlich Warrant. Mr. Ehrlich contends that he is
entitled to purchase up to 2,000,000 shares of common stock under the Ehrlich Warrant, contingent
upon the Company’s satisfaction of certain milestones (the “Ehrlich Claim”). No later than five
(5) business days after the date the Ehrlich Claim is finally settled or resolved (the “Resolution
Date”), the Company agrees to issue Dr. Lemperle a warrant (the “Lemperle Warrant”) to purchase
that number of shares of common stock of the Company determined by the following formula:

	 	 	 	 	 	 	 	 	 
	 

	 	X
	 	=
	 	(610,800 shares(FMV — $1.00 per share)) — A	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	FMV	 	 

     Where:

          X = the number of shares of Common Stock exercisable, if any, under the Lemperle Warrant.

          FMV = the fair market value of the Company’s Common Stock on the Resolution Date, which shall
be determined as follows: if the Company’s Common Stock is traded on a securities exchange or
listed on the Nasdaq Stock Market, the FMV shall be deemed to be the average of the closing prices
of the securities on such exchange over the thirty (30) day period ending three (3) days prior to
the Resolution Date; if the Company’s Common Stock is actively traded over-the-counter, the FMV
shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over
the thirty (30) day period ending three (3) days prior to the Resolution Date; and if there is no
active public market for the Company’s Common Stock, the FMV shall be the fair market value
thereof, as determined in good faith by the Board.

          A = the aggregate consideration, if any, paid or payable by the Company to Mr. Ehrlich to
finally resolve or settle the Ehrlich Claim (including cash, stock, rights to purchase stock or
other consideration). If the Company issues Mr. Ehrlich any shares of Common Stock or the right to
purchase shares of Common Stock, the value of such shares or right to purchase shares shall be
calculated by multiplying the number of shares issued or issuable by the Company to Mr. Ehrlich by
the FMV and then subtracting from this amount the aggregate purchase or exercise price payable by
Mr. Ehrlich for such shares.

     The Lemperle Warrant will be exercisable for a period of twelve (12) months from the issue
date and have an exercise price of $1.00 per share. The Company agrees to use commercially
reasonable efforts to minimize any cash, stock or other consideration paid to Mr. Ehrlich in
connection with the Ehrlich Claim and to resolve the Ehrlich Claim within eighteen (18) months of
the Resignation Date. The Company agrees to keep Dr. Lemperle and any counsel retained by Dr.
Lemperle appraised of their discussions with Mr. Ehrlich. The shares of

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Common Stock and exercise prices set forth in this Section 9 shall be appropriately adjusted to
reflect any stock splits, stock dividends, combinations or other recapitalizations (i.e., if the
Company completes a reverse stock split after the Resignation Date, the share numbers shall be
appropriately reduced and the exercise prices shall be appropriately increased). Pursuant to
Section 20 of this Agreement, the Company’s obligations under this Section 9 shall be a binding
obligation on any successors or assigns of the Company, including the surviving entity following
any Qualifying Transaction.

     If the Resolution Date does not occur within eighteen (18) months of the Resignation Date, the
Company shall issue Dr. Lemperle the Lemperle Warrant based on the above formula, with the
exception that “A” shall be the aggregate consideration, if any, last offered by the Company to Mr.
Ehrlich in writing to resolve or settle the Ehrlich Claim (including cash, stock, rights to
purchase stock or other consideration).

     10. Health Benefits. Dr. Lemperle acknowledges that he has been provided with forms
by which he may maintain his participation in the Company’s group health insurance plan pursuant to
the terms of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). In exchange for the
general release given and the other promises and covenants made by Dr. Lemperle under this
Agreement, and contingent upon this Agreement becoming effective as provided in Section 29 of this
Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth in Sections 7 and 8 of
this Agreement, the Company agrees that if Dr. Lemperle timely elects to continue his participation
in the Company’s group health insurance plans pursuant to COBRA, then the Company shall pay the
COBRA premium(s) on Dr. Lemperle’s behalf for a period of twelve (12) months commencing on the
Resignation Date (the “COBRA Period”); provided Dr. Lemperle does not otherwise become eligible to
participate in another employer’s group insurance plan. If Dr. Lemperle desires to continue his
participation beyond the end of the COBRA Period, and is eligible to continue his participation
pursuant to COBRA, he understands and agrees that he shall be fully responsible for making the
necessary premium payments in order to continue such coverage. Nothing herein shall be deemed to
permit Dr. Lemperle to continue participating in any life insurance, long-term disability benefits,
or accidental death and dismemberment plans maintained by the Company after the Resignation Date.
Nothing herein shall limit the right of the Company to change the provider and/or the terms of its
group health insurance plans at any time hereafter. Dr. Lemperle hereby acknowledges that he has
no dependents eligible for participation in the COBRA benefits offered under this Section 10.

     11. Contractual Obligations

          11.1 Existing Agreements. Dr. Lemperle acknowledges that he is a party to and remains
bound by the terms and conditions of those certain Confidentiality Agreements and
Employee/Officer/Consultant Invention Agreements by and between the Company and him, dated January
18, 2005 and August 23, 2005, and attached hereto as Exhibit G, and the terms and
conditions of the agreements related to the Company’s intellectual property (including patent
applications) and Dr. Lemperle’s assignments of his intellectual property rights to the Company
(collectively, the “Intellectual Property Agreements”).

10

 

          11.2 Scope of Existing Agreements. Dr. Lemperle hereby acknowledges and agrees that
the Intellectual Property Agreements cover the entire period from his first employment with the
Company through the Resignation Date. For purposes of clarity, Dr. Lemperle acknowledges and
agrees that through the Intellectual Property Agreements he has assigned to the Company all
Proprietary Information (as defined below) and Inventions (as defined below) that he has made,
conceived, reduced to practice or developed (in whole or in part, either alone or jointly with
others) during the time he provided services to the Company, and that such Proprietary Information
and Inventions shall be the sole property of the Company to the maximum extent permitted by law.
Although this assignment of Inventions shall not apply to any assignment prohibited by California
Labor Code Section 2870, Dr. Lemperle represents that he has no ownership or licensed rights to
any Inventions or improvements at the time of signing this Agreement that he believes are not
covered by the Intellectual Property Agreements. For purposes of this Agreement, “Proprietary
Information” includes, but is not limited to, trade secrets, copyrights, ideas, techniques,
know-how, inventions (whether patentable or not), and/or any other information of any type relating
to medical devices, product designs, compounds, formulae, injection techniques, configurations,
toolings, documentation, recorded data, schematics, source code, object code, master works,
algorithms, flow charts, works of authorship, mechanisms, research, manufacture, improvements,
assembly, installation, intellectual property, including patents and patent applications, business
plans, past or future financing, marketing, forecasts, pricing, customers, the salaries, duties,
qualifications, performance levels, and terms of compensation of employees, and/or cost or other
financial data concerning any of the foregoing or the Company and its operations generally. For
purposes of this Agreement, “Inventions” includes all improvements, inventions, discoveries, works
of authorship, mask works, computer programs, formulae, ideas, processes, techniques, know-how, and
data, whether or not patentable. At all times after the Resignation Date, Dr. Lemperle agrees that
he will keep in confidence and trust and will not use or disclose any Proprietary Information or
anything relating to it without the prior written consent of an officer of the Company.

          11.3 Further Assurances. Dr. Lemperle agrees to perform, after the Resignation Date,
all acts deemed necessary or desirable by the Company to permit and assist it, at the Company’s
expense, in obtaining and enforcing patents (including the 452 Patent), copyrights or other rights
on any inventions covered by the Intellectual Property Agreements. Such acts may include, but are
not limited to, execution of documents and assistance or cooperation in legal proceedings. Dr.
Lemperle hereby irrevocably designates and appoints the Company and its duly authorized officers
and agents, as his agents and attorney-in-fact to act for and on his behalf and instead of Dr.
Lemperle, to execute and file any applications or related findings and to do all other lawfully
permitted acts to further the prosecution and issuance of patents, copyrights or other rights
covered by the Intellectual Property Agreements with the same legal force and effect as if executed
by him.

          11.4 Remedies. Dr. Lemperle understands and agrees that the Intellectual Property
Agreements, his agreements and covenants under this Section 11, and his duties thereunder and
hereunder, survive the termination of his employment with the Company, and will survive the
expiration or termination of this Agreement. Dr. Lemperle acknowledges that a remedy at law for
any breach or threatened breach by him of the provisions of the Intellectual Property Agreements
would be inadequate, and he therefore agrees that the Company shall be entitled to injunctive
relief in case of any such breach or threatened breach. Dr. Lemperle

11

 

expressly agrees that the covenants set forth in this Section 11 are reasonable and necessary
to protect the Company and its legitimate business interests, and to prevent the unauthorized
dissemination of confidential information to competitors of the Company. Dr. Lemperle also agrees
that the Company will be irreparably harmed and that damages alone cannot adequately compensate the
Company if there is a violation of the provisions of this Section 11 by Dr. Lemperle, and that
injunctive relief against Dr. Lemperle is essential for the protection of the Company. Therefore,
in the event of any such breach, it is agreed that, in addition to any other remedies available,
the Company shall be entitled as a matter of right to injunctive relief in any court of competent
jurisdiction, plus attorneys’ fees actually incurred for the securing of such relief.

     12. Non-Interference and Non-Solicitation. For one (1) year immediately following the
last severance payment made by the Company to Dr. Lemperle pursuant to Section 3.2 above, Dr.
Lemperle agrees not to interfere with the business of the Company, including, but not limited to,
taking any actions to solicit, induce, or otherwise cause (i) any employee or consultant of the
Company to terminate his or her employment or engagement with the Company, or to reduce his or her
time commitment or scope of services provided to the Company, or (ii) any customer or client of the
Company to purchase or obtain the products or services of any firm or business organization which
offers a product that competes with one of the Company’s products. The foregoing restrictions
shall apply to Dr. Lemperle regardless of whether he is acting directly or indirectly, alone or in
concert with others. Dr. Lemperle understands and agrees that he cannot and will not do indirectly
that which he cannot do directly.

     13. Nondisparagement.

          13.1 Nondisparagement by Dr. Lemperle. Dr. Lemperle agrees that he will not (directly
or indirectly) make any voluntary statements, written or verbal, or cause or encourage others to
make any such statements that defame, disparage or in any way criticize the reputation, business
practices or conduct of the Company or the Company Releasees (as defined in Section 14.1 below).
Dr. Lemperle further agrees to comply in all respects with the nondisparagement provisions set
forth in the Settlement and License Agreement, dated October 31, 2005, among the Company, BioForm
Medical, Inc., BioForm Medical Europe B.V. and Dr. Martin Lemperle.

          13.2 Nondisparagement by the Company. The Company agrees that it will not (directly
or indirectly) make any voluntary statements, written or verbal, or cause or encourage others to
make any such statements that defame, disparage or in any way criticize the reputation, business
practices or conduct of Dr. Lemperle; provided, however, that Dr. Lemperle hereby acknowledges and
agrees that any statements, written or verbal, made pursuant to or for purposes of complying with
the rules and regulations of the SEC, the FDA or any other federal, state or foreign governmental
or regulatory agency shall not be deemed to be a breach of this Section 13.2.

          13.3 Company Website. Contingent upon this Agreement becoming effective as provided
in Section 29 of this Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth
in Sections 7 and 8 of this Agreement and contingent upon the Company completing a Qualifying
Transaction by March 31, 2007, the Company agrees to add and to maintain a founders page to its
U.S. and international websites (to be located under the

12

 

“Company” tab on the home page of the website, and placed just below the heading “Board of
Directors” and just above the heading “Careers”) within ten (10) business days of the closing of
the Qualifying Transaction which will include the curriculum vitae (“CV”) and photos of Dr.
Lemperle and Gottfried Lemperle as the co-founders of the Company; provided the CVs and photos must
be acceptable to the Company (i.e., the CVs must be consistent in style, content and length as the
CVs of the Company’s officers and directors) and the webpages must inform the reader regarding the
resignation/separation of Dr. Lemperle and Gottfried Lemperle from the Company; provided, further,
the Company may immediately remove the CVs if either Dr. Lemperle or Gottfried Lemperle are charged
criminally for a violation of the FDA’s rules or regulations or any other federal or state law that
may cause adverse publicity for the Company or the Company’s Board of Directors determine that Dr.
Lemperle has materially breached any term of this Agreement, including the covenants set forth in
Section 4 above.

          13.4 Emails to Dr. Lemperle. Until February 28, 2007, the Company and Dr. Lemperle
agree that the Company will automatically notify the senders of emails sent to the email address
slemperle@artesmedical.com that Dr. Lemperle has resigned from the Company. The notification will
provide the sender with contact information for the Company, if the sender desires to communicate
about a matter related to the Company, its business or its products, and an email address for Dr.
Lemperle (Stefan@slemperle.com), if the sender has a personal matter for Dr. Lemperle, unrelated to
the Company, its business or products. After February 28, 2007, the Company and Dr. Lemperle agree
that the Company may turn off the slemperle@artesmedical.com address.

     14. General Release.

          14.1 General Release by Dr. Lemperle. In consideration of the mutual promises and
covenants contained herein, Dr. Lemperle for himself, his heirs, executors, administrators, assigns
and successors, fully and forever releases and discharges the Company and each of its current,
former and future parents, subsidiaries, related entities, employee benefit plans and each of their
respective fiduciaries, predecessors, successors, officers, directors, stockholders, attorneys,
agents, employees and assigns (collectively, the “Company Releasees”), with respect to any and all
claims, liabilities and causes of action, of every nature, kind and description, in law, equity or
otherwise, which have arisen, occurred or existed at any time prior to the signing of this
Agreement, including, without limitation, any and all claims, liabilities and causes of action
arising out of or relating to Dr. Lemperle’s equity ownership in the Company, Dr. Lemperle’s
employment with the Company or the cessation of that employment, Dr. Lemperle’s assignment of
intellectual property to the Company, or Dr. Lemperle’s service as an officer or director of the
Company or the cessation of that service; provided, however, that nothing herein shall release the
Company Releasees from any obligations, representations, warranties or other duties under this
Agreement or impair the right or ability of Dr. Lemperle or any of the Lemperle Releasees to
enforce the terms thereof.

          14.2 General Release by the Company. In consideration of the mutual promises and
covenants contained herein, the Company and the Company Releasees fully and forever release and
discharge Dr. Lemperle and his descendants, dependents, executors, administrators, attorneys and
agents (collectively, the “Lemperle Releasees”), with respect to any and all claims, liabilities
and causes of action, of every nature, kind and description, in law, equity

13

 

or otherwise, which have arisen, occurred or existed at any time prior to the signing of this
Agreement, including, without limitation, any and all claims, liabilities and causes of action
arising out of or relating to Dr. Lemperle’s employment with the Company or Dr. Lemperle’s service
as an officer or director of the Company; provided, however, that nothing herein shall release the
Lemperle Releasees from any obligations, representations, warranties or other duties under this
Agreement or the Intellectual Property Agreements (including, but not limited to, Section 6) or
impair the right or ability of the Company or any of the Company Releasees to enforce the terms
thereof.

          14.3 Knowing Waiver of Employment Related Claims. Dr. Lemperle understands and agrees
that he is waiving any and all rights he may have had, now has, or in the future may have, to
pursue against any of the Company Releasees any and all remedies available to him under any
employment-related causes of action, including without limitation, claims of wrongful discharge,
breach of contract, breach of the covenant of good faith and fair dealing, fraud, violation of
public policy, defamation, discrimination, personal injury, physical injury, emotional distress,
claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in
Employment Act, the Americans With Disabilities Act, the Federal Rehabilitation Act, the Family and
Medical Leave Act, the California Fair Employment and Housing Act, the California Family Rights
Act, the Equal Pay Act of 1963, the provisions of the California Labor Code and any other federal,
state or local laws and regulations relating to employment, conditions of employment (including
wage and hour laws) and/or employment discrimination. Notwithstanding the foregoing, nothing in
this Agreement affects Dr. Lemperle’s right to indemnification pursuant to California Labor Code
Section 2802 as a result of his services as an officer and director of the Company, or prohibits
Dr. Lemperle from filing a charge with any relevant Federal, State or local administrative agency,
but Dr. Lemperle agrees not to participate in, and agrees to waive his rights with respect to any
monetary or other financial relief arising from any such administrative proceeding.

          14.4 Waiver of Civil Code § 1542. Dr. Lemperle (on his behalf and on behalf of the
Lemperle Releasees) expressly waives any and all rights and benefits conferred upon him by Section
1542 of the Civil Code of the State of California, which states as follows:

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

Dr. Lemperle (on his behalf and on behalf of the Lemperle Releasees) expressly agrees and
understands that the release given by him pursuant to this Agreement applies to all unknown,
unsuspected and unanticipated claims, liabilities and causes of action which Dr. Lemperle may have
against the Company or any of the other Company Releasees.

     Similarly, the Company (on its behalf and on behalf of the Company Releasees) expressly waives
any and all rights and benefits conferred upon it by Section 1542 of the Civil Code of the State of
California, which states as follows:

14

 

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

The Company (on its behalf and on behalf of the Company Releasees) expressly agrees and understands
that the release given by it pursuant to this Agreement applies to all unknown, unsuspected and
unanticipated claims, liabilities and causes of action which the Company may have against Dr.
Lemperle or any of the other Lemperle Releasees.

     15. Severability of Release Provisions. The parties agree that if any provision of
the release given by Dr. Lemperle or the Company, respectively, under this Agreement is found to be
unenforceable, it will not affect the enforceability of the remaining provisions and the courts may
enforce all remaining provisions to the extent permitted by law.

     16. Promise to Refrain from Suit or Administrative Action. Dr. Lemperle promises and
agrees that he will never sue the Company or any of the other Company Releasees, or otherwise
participate in any legal or administrative proceedings against the Company or any of the other
Company Releasees or in any way facilitate or encourage any third party, employee or stockholder to
sue the Company or any of the other Company Releases, with respect to any claim covered by the
release provisions of this Agreement.

     17. Confidentiality of Agreement. Dr. Lemperle promises and agrees that, unless
compelled by legal process, he will not disclose to others and will keep confidential both the fact
of and the terms of this Agreement, including the amounts referred to in this Agreement, except
that he may disclose this information to his spouse and to his attorneys, accountants and other
professional advisors to whom the disclosure is necessary to accomplish the purposes for which Dr.
Lemperle has consulted such professional advisors. Dr. Lemperle expressly promises and agrees
that, unless compelled by legal process, he will not disclose to any present or former employees of
the Company the fact or the terms of this Agreement. Similarly, the Company promises and agrees
that, unless required under the rules and regulations of the SEC (as determined by the Company
based on the advice of its corporate counsel) or compelled by legal process, it will not disclose
to others and will keep confidential both the fact of and the terms of this Agreement, including
the amounts referred to in this Agreement, except that it may disclose this information to its
attorneys, accountants and other professional advisors to whom the disclosure is necessary to
accomplish the purposes for which the Company has consulted such professional advisors.

     18. Integrated Agreement. The parties acknowledge and agree that no promises or
representations were made to them concerning the subject matter of this Agreement which do not
appear written herein and that this Agreement contains the entire agreement of the parties on the
subject matter thereof. The parties further acknowledge and agree that parol evidence shall not be
required to interpret the intent of the parties.

     19. Voluntary Execution. The parties hereby acknowledge that they have read and
understand this Agreement and that they sign this Agreement voluntarily and without coercion.

15

 

     20. Waiver, Amendment and Modification of Agreement; Assignment. The parties agree
that no waiver, amendment or modification of any of the terms of this Agreement shall be effective
unless in writing and signed by all parties affected by the waiver, amendment or modification. No
waiver of any term, condition or default of any term of this Agreement shall be construed as a
waiver of any other term, condition or default. The rights and liabilities of the parties hereto
shall bind and inure to the benefit of their respective successors, heirs, executors and
administrators, as the case may be.

     21. Representation by Counsel.

          21.1 Dr. Lemperle acknowledges and agrees that he has had the right and sufficient opportunity
to be represented by counsel of his own choosing. Dr. Lemperle further acknowledges and agrees
that Heller Ehrman LLP (“Heller Ehrman”) is legal counsel for the Company solely, and that he is
not relying on the Company or Heller Ehrman for legal advice regarding this Agreement. The parties
further acknowledge that they have entered into this Agreement voluntarily, without coercion, and
based upon their own judgment and not in reliance upon any representations or promises made by the
other party or parties, other than those contained within this Agreement. The parties further
agree that if any of the facts or matters upon which they now rely in making this Agreement
hereafter prove to be otherwise, this Agreement will nonetheless remain in full force and effect.

          21.2 Contingent upon this Agreement becoming effective as provided in Section 29 of this
Agreement and upon Dr. Lemperle’s satisfaction of the requirements set forth in Sections 7 and 8 of
this Agreement, the Company agrees to reimburse Dr. Lemperle for the legal fees paid to his legal
counsel for services rendered on his behalf in connection with this Agreement, provided that Dr.
Lemperle or his counsel shall provide to Company redacted copies of such legal fee invoices; and
provided that the total amount of reimbursement for such fees shall not exceed $35,000 in any
event.

     22. California Law. The parties agree that this Agreement and its terms shall be
construed under California law, without reference to rules of conflicts of law.

     23. Drafting. The parties agree that this Agreement shall be construed without regard
to the drafter of the same and shall be construed as though each party to this Agreement
participated equally in the preparation and drafting of this Agreement.

     24. Counterparts. This Agreement may be signed in counterparts and said counterparts
shall be treated as though signed as one document.

     25. Return of Company Property.

          25.1 Dr. Lemperle has returned to the Company all of his access keys and electronic passes to
the Company’s premises, his Company laptops and computers, his blackberry, all Company records in
his possession, and all samples of ArteFill and Skin Test syringes. It is understood and agreed
that Dr. Lemperle shall return all other property in his possession which belongs to the Company
immediately upon demand therefor. Dr. Lemperle specifically promises and agrees that he shall not
retain copies of any company documents or files following the termination of this Agreement.

16

 

          25.2 The Company has returned or agrees to return Dr. Lemperle’s personal property set forth
on Schedule B hereto.

     26. Attorneys’ Fees. Subject to the provisions of Section 21.2 above, each party
shall be responsible for its own legal fees incurred in connection with the entering into of this
Agreement.

     27. Period to Consider Terms of Agreement. Dr. Lemperle acknowledges that this
Agreement was first presented to him on November 17, 2006 , that the terms of this Agreement have
been negotiated by counsel for both parties, and that he is entitled to have 21 days’ time in which
to consider the Agreement. Dr. Lemperle acknowledges that he understands that he has the right to
obtain the advice and counsel from the legal representative of his choice, and that he executes
this Agreement having had sufficient time within which to consider its terms. Dr. Lemperle
represents that if he executes this Agreement before 21 days have elapsed, he does so voluntarily,
and that he voluntarily waives any remaining consideration period.

     28. Revocation of Agreement. Dr. Lemperle understands that after executing this
Agreement, he has the right to revoke it within seven (7) days after his execution of it. Dr.
Lemperle understands that this Agreement will not become effective and enforceable unless the seven
day revocation period passes and Dr. Lemperle does not revoke the Agreement in writing. Dr.
Lemperle understands that this Agreement may not be revoked after the seven day revocation period
has passed. Dr. Lemperle understands that any revocation of this Agreement must be made in writing
and delivered to the Company (to the attention of the Company’s Chief Legal Officer) within the
seven day period, and that if he does so revoke the Agreement, he shall not be entitled to receive
any of the benefits described herein.

     29. Effective Date. This Agreement shall become effective on the eighth (8th) day
after execution by Dr. Lemperle, so long as Dr. Lemperle has not revoked it within the time and in
the manner specified in Section 28 of this Agreement.

     30. Injunctive Relief; Consent to Jurisdiction. Dr. Lemperle acknowledges and agrees
that damages will not be an adequate remedy in the event of a breach of any of his obligations
under this Agreement. Dr. Lemperle therefore agrees that the Company shall be entitled (without
limitation of any other rights or remedies otherwise available to the Company and without the
necessity of posting a bond) to obtain an injunction from any court of competent jurisdiction
prohibiting the continuance or recurrence of any breach of this Agreement. Dr. Lemperle hereby
submits to the jurisdiction and venue in the federal district court for the Southern District of
California and in the courts of the State of California in San Diego County, California. Dr.
Lemperle further agrees that service upon him in any such action or proceeding may be made by first
class mail, certified or registered, to Dr. Lemperle’s address as last appearing on the records of
the Company.

     31. Notice. Any notices provided hereunder must be in writing and such notices or any
other written communication shall be deemed effective: (i) upon personal delivery to the party to
be notified; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of
the recipient or, if not sent during normal business hours, then on the next business day; (iii)
three days after having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier,
specifying

17

 

next day delivery, with written verification of receipt. If notice is to be provided to the
Company, Dr. Lemperle shall use the Company’s primary office location; and if notice is to be
provided to Dr. Lemperle, the Company shall use Dr. Lemperle’s address as listed in the Company’s
payroll records. Any payments made by the Company to Dr. Lemperle under the terms of this
Agreement shall be delivered to Dr. Lemperle either in person or at the address as listed in the
Company’s payroll records.

     32. Arbitration. Any dispute or claim arising out of or in connection with this
Agreement will be finally settled by binding arbitration in San Diego, California in accordance
with the then-current employment rules of the American Arbitration Association by one (1)
arbitrator appointed in accordance with said rules. The arbitrator shall apply California law,
without reference to rules of conflicts of law or rules of statutory arbitration, to the resolution
of any dispute. Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in
accordance with this paragraph, without breach of this arbitration provision.

     33. Survival. Sections 1.1, 4, 5.4, 5.6, 6, 7, 8 and 11 through 33 shall survive
termination or expiration of this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the dates below:

	 	 	 	 	 
	 	 	 
	Dated: November 17, 2006 	/s/  Stefan M. Lemperle, M.D.
 	 
	 	Stefan M. Lemperle, M.D. 	 
	 	 	 
	 

	 	 	 	 	 	 	 
	 	 	ARTES MEDICAL, INC.	 	 
	 
	 	 	 	 	 	 
	Dated: November 17, 2006

	 	By
	 	/s/ Christopher J. Reinhard
 

	 	 
	 

	 	 	 	Christopher J. Reinhard	 	 
	 

	 	 	 	Executive Chairman of the Board	 	 

	 	 	 	 	 
	ACKNOWLEDGED AND AGREED:	 	 
	 
	 	 	 	 
	CREATIVE MICROSPHERES, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Seyed Hadi Sadr
 

	 	 
	 
	 	 	 	 
	Name:

	 	Seyed Hadi Sadr	 	 
	 
	 	 	 	 
	Its:

	 	President	 	 
	 
	 	 	 	 
	Dated: November 17, 2006	 	 

[SIGNATURE PAGE TO SEPARATION AGREEMENT AND GENERAL RELEASE]

 

 

Exhibit A

Press Release re Resignation

Intentionally Omitted

 

 

Exhibit B

Termination Agreement with Gottfried Lemperle

Intentionally Omitted

 

 

Exhibit C

Separation Agreement and Release

with Gottfried Lemperle

Intentionally Omitted

 

 

Exhibit D

Warrant Amendments

Intentionally Omitted

 

 

Exhibit E

Voting Agreement

 

 

Exhibit E

VOTING AGREEMENT

     This Voting Agreement (this “Agreement”) is entered into as of November 17, 2006 (the
“Effective Date”), by and between Artes Medical, Inc., a Delaware corporation (“Artes Medical”),
Stefan Lemperle, M.D., a resident of the State of California (“Dr. Lemperle”) and Creative
Microspheres, Inc. (“CMI”). Artes Medical, Dr. Lemperle and CMI are collectively referred to
hereon as the “Parties.”

RECITALS

     A. This Agreement is executed and delivered by the Parties hereto in connection with that
certain Separation Agreement and General Release between Artes Medical and Dr. Lemperle (the
“Separation Agreement”).

     B. As of the Effective Date, Dr. Lemperle and CMI own or hold the securities of Artes Medical
set forth on Exhibit A attached hereto (collectively, the “Securities”). The Securities
and all shares of voting stock (including any other securities with voting rights) of Artes Medical
that may hereafter be acquired or beneficially owned (directly or indirectly) by Dr. Lemperle
and/or CMI are collectively referred to herein as the “Voting Shares.”

     C. Dr. Lemperle is the beneficial owner of all shares held by (or purchasable) by CMI as set
forth in Exhibit A.

     D. The obligations of Artes Medical in the Separation Agreement are conditioned upon the
execution and delivery of this Agreement.

     E. To induce Artes Medical to consummate the transactions contemplated in the Separation
Agreement, Dr. Lemperle and CMI desire to provide for the voting of the Voting Shares in accordance
with the agreements, terms and conditions set forth in this Agreement.

AGREEMENT

     In consideration of the mutual promises and covenants set forth herein and in the Separation
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

     1. Voting of Shares. During the term of this Agreement, Dr. Lemperle and CMI hereby
unconditionally agree to vote all of the Voting Shares held by or beneficially owned (directly or
indirectly) by Dr. Lemperle or CMI in the manner directed by the majority vote of the Nominating
and Corporate Governance Committee of the Board of Directors of Artes Medical (the “Committee”) in
any election of directors and upon any and all matters in question (including, but not limited to,
waivers of contractual or statutory rights) which may be brought before the stockholders of Artes
Medical (or any class(es) or series of stockholders of Artes Medical) at any stockholders’ meeting
or by other means for consent, including any written consent (including, waivers of contractual or
statutory rights) of stockholders.

 

 

     2. Successors in Interest. The provisions of this Agreement shall be binding upon the
successors in interest to any of the Voting Shares. Neither Dr. Lemperle nor CMI shall transfer
(including, any offer, pledge, contract to sell, contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of), directly or indirectly, any of the Voting Shares unless and until the person to whom
such Voting Shares are to be transferred shall first have executed a written agreement with Artes
Medical, substantially in the form of this Agreement and as agreed to by Artes Medical, pursuant to
which such person becomes a party to this Agreement and agrees to be bound by all the provisions
hereof as if such person was a party hereunder.

     3. Legend.

          a. Each certificate representing any of the Voting Shares (including certificates issued upon
exercise of outstanding options and warrants) shall bear a legend (the “Legend”) reading as
follows:

“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS OF A VOTING AGREEMENT (A COPY OF WHICH
MAY BE OBTAINED WITHOUT CHARGE FROM THE ISSUER). BY ACCEPTING ANY INTEREST IN SUCH SHARES
THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL
THE PROVISIONS OF SUCH VOTING AGREEMENT.”

          b. Except as otherwise provided herein, Artes Medical agrees that, during the term of this
Agreement, it will not remove, and will not permit to be removed (upon registration of transfer,
reissuance or otherwise), the Legend from any such certificate and will place, or cause to be
placed, the Legend on any new certificate issued to represent the Voting Shares theretofore
represented by a certificate carrying the Legend.

     4. No Revocation. This voting agreements contained herein are coupled with an
interest and may not be revoked during the term of this Agreement.

     5. Termination. This Agreement shall terminate upon the first to occur of (i) one
year from the Effective Date or (ii) the closing date upon which Artes Medical consummates its
first sale of its Common Stock in a firm commitment underwritten public offering pursuant to a
registration statement under the Securities Act of 1933, as amended.

     6. Further Assurances. Each of the Parties hereto shall execute and deliver all
additional documents and instruments and shall do any and all acts and things reasonably requested
in connection with the performance of its obligations undertaken in this Agreement.

     7. Stock Splits, Stock Dividends, Etc. In the event of a stock split, stock dividend,
recapitalization, reorganization or the like, any securities issued with respect to the Voting
Shares shall become subject to this Agreement and shall be endorsed with the Legend.

2

 

     8. Representations.

          (a) Dr. Lemperle and CMI hereby represent and warrant that: (1) the execution, delivery and
performance of this Agreement and any instrument required hereunder are not in conflict with the
terms of any instrument or agreement to which he is a party or by which he is bound or affected;
(2) this Agreement is a legal, valid and binding agreement of Dr. Lemperle and CMI, enforceable
against such Parties in accordance with its terms; (3) neither Dr. Lemperle nor CMI will take any
action inconsistent with the purposes of this Agreement; (4) on the Effective Date, Dr. Lemperle
and CMI are the beneficial owners of the Voting Shares set forth on Exhibit A; (5) on the
Effective Date, the Voting Shares were free and clear of any liens, pledges, security interests,
claims, options, rights of first refusal, co-sale rights, charges or other encumbrances of any kind
or nature; (6) the statements set forth in Recitals B and C above are true and correct; and (7) on
the Effective Date, Dr. Lemperle and CMI did not beneficially own any securities of Artes Medical
other than as set forth on Exhibit A.

          (b) Artes Medical hereby represents and warrants that: (1) it has full power and authority to
enter into this Agreement and to carry out the provisions hereof; (2) this Agreement constitutes a
valid and legally binding obligation of Artes Medical, enforceable in accordance with its terms;
(3) the execution, delivery and performance of this Agreement do not conflict with any agreement,
instrument or understanding, oral or written, to which Artes Medical is a party, or by which it may
be bound; and (4) Dr. Lemperle is entitled to receive such additional securities as provided for in
Section 9 of the Separation Agreement, which securities are not included on Exhibit A
hereto.

     9. Enforceability/Severability. The Parties hereto agree that each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid under applicable law.
If any provision of this Agreement shall nevertheless be held to be prohibited by or invalid under
applicable law, (a) such provision shall be prohibited or invalid only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Agreement and (b) the Parties shall, to the extent permissible by applicable
law, amend this Agreement, or enter into a voting trust agreement under which the Voting Shares
shall be transferred to the voting trust created thereby, so as to make effective and enforceable
the intent of this Agreement.

     10. Governing Law. This Agreement will be governed by and construed under the laws of
the State of California as applied to agreements among California residents entered into and to be
performed entirely within California, without respect to any applicable conflict of law rules.

     11. Counterparts. This Agreement may be executed in one or more counterparts and the
signatures delivered by telecopy, each of which shall be deemed an original, with the same effect
as if the signatures were upon the same instrument and delivered in person.

     12. Notices. All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient or, if not sent during normal business hours, then on the next business day; (c)

3

 

three days after having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) one day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.

     13. Remedies.

          a. Irrevocable Proxy. Dr. Lemperle and CMI hereby constitute and appoint each of the
then serving members of the Committee, and each of them, with full power of substitution, as the
proxies of Dr. Lemperle and CMI with respect to the matters set forth herein, and hereby authorizes
each of them to represent and to vote, if and only if Dr. Lemperle and/or CMI attempt to vote
(whether by proxy, in person or by written consent), or to fail to vote, in a manner which is
inconsistent with the terms of this Agreement, all of the Voting Shares held by Dr. Lemperle and
CMI as directed by a majority of the then serving members of the Committee pursuant to and in
accordance with the terms and provisions of this Agreement. The proxy granted pursuant to the
immediately preceding sentence is given in consideration of the agreements and covenants of Artes
Medical in connection with the transactions contemplated by the Separation Agreement and this
Agreement and, as such, is coupled with an interest and shall be irrevocable unless and until this
Agreement terminates or expires pursuant to Section 5 hereof. Dr. Lemperle and CMI hereby revoke
any and all previous proxies with respect to the Voting Shares and shall not hereafter, unless and
until this Agreement terminates or expires pursuant to Section 5 hereof, purport to grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any of the Voting
Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or
understanding with any person, directly or indirectly, to vote, grant any proxy or give
instructions with respect to the voting of any of the Voting Shares, in each case, with respect to
any of the matters set forth herein.

          b. Specific Enforcement. Dr. Lemperle and CMI each acknowledge and agree that Artes
Medical will be irreparably damaged in the event any of the provisions of this Agreement are not
performed by Dr. Lemperle and CMI in accordance with their specific terms or are otherwise
breached. Accordingly, it is agreed that Artes Medical and shall be entitled to an injunction to
prevent breaches of this Agreement and to specific enforcement of this Agreement and its terms and
provisions in any action instituted in any court of the United States or any state having subject
matter jurisdiction.

          c. Remedies Cumulative. All remedies, either under this Agreement or by law or
otherwise afforded to Artes Medical, shall be cumulative and not alternative.

     14. Successors and Assigns. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the Dr. Lemperle and
CMI (including transferees of any of the Voting Shares).

     15. Amendments and Waivers. Any term hereof may be amended and the observance of any
term hereof may be waived only with the written consent of each of the Parties. Any amendment or
waiver so effected will be binding upon any assignee or transferee thereof.

4

 

     20. Representation by Counsel. Dr. Lemperle and CMI each acknowledge and agree that
they have had the right and sufficient opportunity to be represented by counsel of their own
choosing. Dr. Lemperle and CMI further acknowledges and agrees that Heller Ehrman LLP (“Heller
Ehrman”) is legal counsel for Artes Medical solely, and that they are not relying on Artes Medical
or Heller Ehrman for legal advice regarding this Agreement.

     16. Entire Agreement. This Agreement and the Separation Agreement contain the entire
understanding of the Parties, and there are no further or other agreements or understandings,
written or oral, in effect between the Parties relating to the subject matter hereof except as
expressly referred to herein.

[SIGNATURE PAGE TO FOLLOW]

5

 

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

	 	 	 	 	 
	Artes Medical, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Christopher J. Reinhard	 	 
	 

	 	 	 	 
	Name:

	 	Christopher J. Reinhard
	 	 
	Title:

	 	Executive Chairman	 	 
	 
	 	 	 	 
	Stefan M. Lemperle, an Individual	 	 
	 
	 	 	 	 
	/s/ Stefan M. Lemperle, M.D.	 	 
	 	 	 
	 
	 	 	 	 
	Creative Microspheres, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Seyed Hadi Sadr	 	 
	 

	 	 	 	 
	Name:

	 	Seyed Hadi Sadr	 	 
	Its:

	 	President	 	 

[Signature Page to Voting Agreement]

 

 

Exhibit A

Securities

Stock. Dr. Lemperle hereby acknowledges that he individually holds 100,000 shares of Common Stock
and that he beneficially owns through Creative Microspheres, Inc. 1,042,507 shares of Common Stock, 771,836 shares Series C-1 Preferred Stock and 42,338 shares of Series D Preferred Stock
(collectively, the “Stock”).

Options. In addition, Artes Medical has granted Dr. Lemperle the following options (the “Stock
Options”) to purchase the indicated shares of Common Stock at the indicated exercise price:

	 	 	 	 	 	 	 	 	 
	Option Grant	 	Number of	 	Per Share
	      Date	 	Shares	 	Exercise Price
	Nov. 16, 2001
	 	 	300,000	 	 	$	0.35	 
	June 30, 2006
	 	 	200,000	 	 	$	1.85	 
	Total:
	 	 	500,000	 	 	 	 	 

Warrants. In addition, Dr. Lemperle holds a warrant to purchase 20,000 shares of Common Stock at
an exercise price of $1.25 per share and beneficially owns a warrant through Creative Microspheres,
Inc. to purchase 743,005 shares of Series C-1 Preferred Stock at an exercise price of $1.00 per
share (collectively, the “Warrants”).

 

 

Exhibit F

IPO Lock-Up Agreements

Intentionally Omitted

 

 

Exhibit G

Confidentiality Agreements and Employee/Officer/Consultant Invention Agreements

Intentionally Omitted

 

 

Schedule A

Stockholders to Contact re IPO Lock-Up Agreements

Intentionally Omitted

 

 

Schedule B

Lemperle Personal Property

Paintings from his former office*

Personal effects (delivered on November 17, 2006)

Personal papers (delivered on November 17, 2006)

 

(*Dr. Lemperle shall be responsible for hiring a third party and paying such third party to remove
the artwork from his former office, packing the artwork for delivery and transporting the artwork
from the Company’s headquarters to Dr. Lemperle’s residence in San Diego.)exv10w29

 

EXHIBIT 10.29

November 27, 2006

Ms. Diane S. Goostree

President and Chief Operating Officer

Artes Medical USA, Inc.

5870 Pacific Center Boulevard

San Diego, CA 92121

     Re: First Amended Offer of Employment

Dear Ms. Goostree:

This First Amended Offer of Employment (“First Amendment”) is intended to replace the first
sentence of the first paragraph of your Offer of Employment letter dated February 13, 2006 (“Offer
Letter”) and to add a new paragraph following the ninth paragraph of the Offer Letter.

It is a pleasure to offer you a regular, full-time position as Chief Executive Officer and
President of the Company, effective as of the date of this First Amendment; and you will report the
affairs of the Company to the Board of Directors.

Following your election to the Board of Directors to fill a vacancy and appointment to the office
of Chief Executive Officer, should the Board of Directors remove you from the office of Chief
Executive Officer, with or without cause, or should you resign from the position of Chief Executive
Officer, whether voluntary or involuntary, you agree that you will be deemed to have automatically
resigned from the Board of Directors as of the effective date of that removal or resignation. You
agree that the Company will effectuate that resignation from the Board of Directors by dating the
Notice of Resignation as of the effective date of your removal or resignation as the Company’s
Chief Executive Officer, which resignation has been signed by you and is attached to this First
Amendment as Exhibit A.

Except as modified by this Amended Offer of Employment, the terms and conditions of the Offer
Letter will control and are in full force and effect. Additional terms and conditions of your new
position as Chief Executive Officer will be contained in a separate agreement which will be
mutually acceptable to you and the Company.

If you accept this First Amendment, please sign below and return the fully executed letter to us
within five (5) business days. You should keep one copy of this letter for your own records.

Should you need any additional information or assistance, please do not hesitate to call.

Sincerely,

	 	 	 	 
	 	 	 
	/s/ Christopher J. Reinhard
 	 
	Christopher J. Reinhard 	 
	Executive Chairman 	 
	 

cc: Amy Fager

 

 

ACCEPTANCE OF AMENDED EMPLOYMENT OFFER

I have read, understand and accept the foregoing terms and conditions of employment as amended by
the First Amendment.

	 	 	 
	Date: November 27, 2006	 	
/s/ Diane S. Goostree
 

Diane S. Goostree

 

 

Exhibit A

(Notice of Resignation)

 

 

RESIGNATION NOTICE

Date: _____________________

Artes Medical, Inc.

5870 Pacific Center Blvd.

San Diego, CA 92121

Attn: Board of Directors

I hereby confirm my resignation as a member of the Board of Directors of Artes Medical, Inc. (the
“Company”), effective immediately as of (i) the date written above; and (ii) the date I no longer
hold the position of CEO of the Company for any reason.

	 	 	 	 	 
	 	 	 
	 	                                                   /s/ Diane S. Goostree
 	 
	 	Diane S. Goostree

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