CONFIDENTIAL SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS
Exhibit 10.32
CONFIDENTIAL SETTLEMENT AGREEMENT
AND RELEASE OF ALL CLAIMS
AND RELEASE OF ALL CLAIMS
This Confidential Settlement Agreement and Release of All Claims (“Agreement”) is made by and
between Artes Medical, Inc. (the “Company”), a Delaware corporation and Xxxxxx X. Xxxxxxxxx (“Xx.
Xxxxxxxxx”).
A. The Company terminated Xx. Xxxxxxxxx’x employment on or about October 27, 2006.
B. On or about November 16, 2006, Xx. Xxxxxxxxx filed a Demand for Arbitration before the
American Arbitration Association (the “Action”), alleging, among other things, wrongful termination
and breach of the covenant of good faith and fair dealing.
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 all
claims and issues that have been raised, or could have been raised, in relation to Xx. Xxxxxxxxx’x
employment with the Company, the termination thereof, and arising out of or in any way related to
the acts, transactions or occurrences between Xx. Xxxxxxxxx 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 will pay Xx. Xxxxxxxxx, as W-2 income, the equivalent of 14 months salary,
totaling One Hundred Ninety-Eight Thousand, Three Hundred Thirty-Three Dollars and Thirty-Three
Cents ($198,333.33), less all applicable holdings.
1.2 The Company will pay Xx. Xxxxxxxxx, as W-2 income, bonus compensation of Fifty-Six
Thousand Dollars ($56,000), less all applicable withholdings.
1.3. The compensation referred to in paragraphs 1.1 and 1.2 will be paid to Xx. Xxxxxxxxx
within three (3) business days following the Effective Date of this Agreement.
1.4 Contingent upon this Agreement becoming effective as set forth in paragraph 18 below, the
Company agrees to amend the Stock Options which were granted as of September 15, 2004 and June 30,
2006 (“Stock Options”), such that Xx. Xxxxxxxxx will be entitled to 16 months of additional stock
option vesting with respect to the Stock Options. Xx. Xxxxxxxxx will have a total of 174,583 stock
options which will fully vest on the Effective Date of this Agreement as shown on Exhibit A,
attached hereto. Additionally, Xx. Xxxxxxxxx shall have 12 months after the Effective Date of this
Agreement to exercise his vested options as set forth on Exhibit A. The 174,583 number of shares
is based on the Company’s pre-IPO (initial public offering) stock option schedule. Thus, such
shares will 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 Xx.
Xxxxxxxxx may be granted will be less than the 174,583 shares as shown in the schedule, attached as
Exhibit A. Pricing of options is also subject to increase to reflect the reverse split as shown on
Exhibit A.
1.5 Xx. Xxxxxxxxx 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”). Xx. Xxxxxxxxx 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, Xx. Xxxxxxxxx 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 Xx. Xxxxxxxxx is
not an employee of the Company at the time of exercise. As a result, when Xx. Xxxxxxxxx elects to
exercise any 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.
1.6 Xx. Xxxxxxxxx acknowledges that he is solely responsible for seeking his own legal and tax
advice on such matters. Xx. Xxxxxxxxx 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. Xx. Xxxxxxxxx acknowledges that he has read the documents evidencing
his Stock Options.
1.7 The Company will reimburse Xx. Xxxxxxxxx, within thirty (30) days of receipt of reasonable
proof of such expenses, the COBRA premium(s) paid by Xx. Xxxxxxxxx on Xx. Xxxxxxxxx’x behalf for a
period of twelve (12) months commencing on the date of Xx. Xxxxxxxxx’x separation of employment
from the Company (the “COBRA Period”); provided Xx. Xxxxxxxxx does not otherwise become eligible to
participate in another employer’s group insurance plan. If Xx. Xxxxxxxxx desires to continue his
participation beyond the end of the COBRA Period, and is eligible to continue his participation
pursuant to COBRA, Xx. Xxxxxxxxx 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 Xx.
Xxxxxxxxx to continue participating in any life insurance, long-term disability benefits, or
accidental death and dismemberment plans maintained by the Company after the date of his separation
of employment from the Company. 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.
1.8 Xx. Xxxxxxxxx shall indemnify, hold harmless and defend the Company from any claims, tax
liability, interest, penalties, attorneys’ fees or costs which the Company is required to pay as a
result of Xx. Xxxxxxxxx’x failure to report the Settlement Compensation to the proper taxing
authorities.
2. Dismissal of the Action. Upon executing this Agreement, Xx. Xxxxxxxxx agrees to
obtain dismissal of the Action in its entirety, with prejudice, by taking all necessary steps to
secure such dismissal.
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3. Release of Claims.
3.1 Xx. Xxxxxxxxx for himself and his heirs, agents, assigns, executors, successors and each
of them, unconditionally, irrevocably and absolutely, releases and discharges the Company and any
parent and subsidiary corporations, divisions, and affiliated corporations, partnerships or other
affiliated 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 the
transactions or occurrences between them to date, to the fullest extent permitted by law,
including, but not limited to, Xx. Xxxxxxxxx’x employment with the Company, the termination of that
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 way
connected with Xx. Xxxxxxxxx’x employment with the Company. This release is intended to have the
broadest possible application and includes any and all tort, contract, common law, constitutional
or other statutory claims, including, but not limited to, alleged violations of Title VII of the
Civil Rights Act of 1964 and the California Fair Employment and Housing Act, the Americans with
Disabilities Act, and all claims for attorneys’ fees, costs and expenses. This release does not
affect any vested rights that Xx. Xxxxxxxxx may have acquired during the course of his employment
with the Company, or any other obligations owed by the parties pursuant to the Proprietary
Information and Inventions Agreement, and Indemnification Agreement, entered into between Xx.
Xxxxxxxxx and the Company, copies of which are attached hereto as Exhibits B and C, respectively.
3.2 This release does not extend to claims which, as a matter of law, cannot be waived, such
as the right to indemnification under California Labor Code Section 2802 and California Corporation
Code Section 317.
3.3 Xx. Xxxxxxxxx and the Company declare and represent that they intend this Agreement to be
complete and not subject to any claim of mistake, and that the release herein expresses a full and
complete release and, regardless of the adequacy or inadequacy of the consideration, intend the
release to be final and complete. Xx. Xxxxxxxxx executes this release with the full knowledge that
this release covers all possible claims against the Releasees to the fullest extent permitted by
law.
4. California Civil Code Section 1542 Waiver. Xx. Xxxxxxxxx expressly acknowledges
and agrees that all rights under section 1542 of the California Civil Code are expressly waived.
That statute reads as follows:
A general release does not extend to claims which the creditor does not know of or
suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the
debtor.
5. Representation Concerning Filing of Legal Actions. Xx. Xxxxxxxxx represents that,
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 with any
governmental agency, with the exception of the Action. Xx. Xxxxxxxxx further agrees that, to the
fullest extent permitted by law, he will not prosecute, nor allow to be prosecuted on his
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behalf, in any administrative agency, whether state or federal, or in any court, whether state
or federal, any claim or demand of any type related to the matters released herein, it being the
intention of Xx. Xxxxxxxxx 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 other
related in any way to the matters discharged herein. If any action is brought, this Agreement will
constitute an affirmative defense thereto.
6. Warrants. As of immediately prior to the Company’s completion of a 4.25-to-one
reverse split of its Common Stock on December 19, 2006, Xx. Xxxxxxxxx held a warrant to purchase
42,500 shares of Common Stock at an exercise price of $1.00 per share which was fully paid, a
warrant to purchase 25,000 shares of Common Stock at an exercise price of $1.25 per share, and a
warrant to purchase 50,000 shares of Common Stock at an exercise price of $1.25 per share
(collectively, the “Warrants”). In June 2006, Xx. Xxxxxxxxx elected to exercise (a) by delivery of
the exercise price in cash, the warrant to purchase 42,500 shares of Common Stock and (b) pursuant
to the “cashless exercise” provisions in the warrants, the warrants to purchase 25,000 and 50,000
shares of Common Stock, each contingent and effective upon the closing of the IPO. A copy of each
of the elections by Xx. Xxxxxxxxx is attached hereto as Exhibit D-1. Xx. Xxxxxxxxx acknowledges
that as a result of the elections described above, the Company’s 4.25-to-one reverse stock split
and the completion of the Company’s IPO at an initial price to the public of $6.00 per share on
December 26, 2006, Xx. Xxxxxxxxx currently holds the shares of Common Stock set forth on Exhibit
D-2.
7. Nondisparagement. Xx. Xxxxxxxxx agrees that he will not 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 any of the other Releasees. The Company agrees that it will not 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 Xx.
Xxxxxxxxx. The parties acknowledge and agree that any statements, written or verbal, made for
purposes of complying with the rules and regulations of the SEC, the FDA, or any federal, state or
foreign governmental or regulatory agency, or any other law, shall not be deemed to be a breach of
this paragraph 7.
8. Referral. The Company shall endeavor to direct all inquiries concerning Xx.
Xxxxxxxxx to its Human Resources department. In response to inquiries, the Company will only
verify the dates of Xx. Xxxxxxxxx’x employment and his job title.
9. Reemployment. Xx. Xxxxxxxxx agrees that he will not apply for employment or
otherwise request to be considered for employment with the Company, or any of its subsidiaries,
either in his former capacity or in any other position or capacity.
10. Confidentiality.
10.1 The parties agree that the terms and conditions of this Agreement, as well as the
discussions that led to the terms and conditions of this Agreement (collectively referred to as the
“Confidential Settlement Information”) are intended to remain confidential between Xx. Xxxxxxxxx
and the Company.
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10.2 The Company may disclose the amount of the Settlement Compensation, and other terms
deemed in good faith to be strictly necessary for the conduct of its business, subject to a “need
to know” basis.
10.3 Xx. Xxxxxxxxx agrees that he will not disclose the Confidential Settlement Information to
any other person, except that Xx. Xxxxxxxxx may disclose such information to his spouse, his
attorney(s) and accountant(s), if any, to the extent needed for legal advice or income tax
reporting purposes. When releasing this information to any such person, Xx. Xxxxxxxxx shall advise
the person receiving the information of its confidential nature. Neither Xx. Xxxxxxxxx, nor anyone
to whom the Confidential Settlement Information has been disclosed will respond to, or in any way
participate in or contribute to, any public discussion, notice or other publicity concerning the
Confidential Settlement Information.
10.4 If Xx. Xxxxxxxxx is asked about the Action by anyone other than those individuals
specifically identified in paragraph 10.3, he may respond only as follows: “The matter has been
resolved.”
11. Liquidated Damages for Violating Confidentiality Provisions. The parties
understand and agree that the confidentiality provisions of this Agreement, as set forth in
paragraph 10 above, are a material part of this Agreement. The parties agree to refrain from
violating these provisions. The parties understand and agree that it is difficult to ascertain the
measure of damages in the event of a breach of this provision. For the foregoing reasons, if any
of the provisions of paragraph 10 are breached, upon proof of breach, the breaching party will pay
to the non-breaching party, liquidated damages in the sum of ten thousand dollars ($10,000).
Further, in the event of a breach by Xx. Xxxxxxxxx, the Company will not be obligated to pay any
sums remaining under the terms of this Agreement to Xx. Xxxxxxxxx, if any. In the event of a
breach in accordance with this provision, all other provisions of this Agreement will remain in
full force and effect, except as provided herein.
12. No Admissions. By entering into this Agreement, Xx. Xxxxxxxxx and the Company
make no admission that they have engaged, or are now engaging, in any unlawful conduct. It is
understood that this Agreement is not an admission of liability, that there has been no trial or
adjudication of any issue of law or fact herein, and that the parties specifically deny liability
and intend merely to avoid expense by entering into this Agreement.
13. Notice. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight
delivery service, certified mail with postage prepaid, or confirmed facsimile. Notice should be
delivered to the following addresses:
Notice to Artes Medical, Inc.:
|
Notice to Xxxxxx X. Xxxxxxxxx: | |
Xxxxxx Xxxxxx LLP
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Law Office of Xxxx X. Xxxxxxx | |
Xxxxxx X. Xxxxxx, Esq.
|
Xxxx X. Xxxxxxx, Esq. | |
0000 Xx Xxxxx Xxxxxxx Xxxxx
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000 Xxxx X. Xxxxxx, Xxxxx 0000 | |
Xxx Xxxxx, XX 00000
|
Xxx Xxxxx, XX 00000 | |
Fax: (000) 000-0000
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Fax: (000) 000-0000 |
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14. Entire Agreement/Modification. This Agreement is intended to be the entire
agreement 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 no
collateral agreements or representations, written or oral, regarding the settlement of claims
between the parties, other than those set forth in this Agreement. This Agreement may be amended
only by a written instrument executed by all parties hereto.
15. Severability. In the event any provision of this Agreement shall be found
unenforceable by an arbitrator or a court of competent jurisdiction, the provision shall be deemed
modified to the extent necessary to allow enforceability of the provision as so limited, it being
intended that the Company shall receive the benefits contemplated herein to the fullest extent
permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator
or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability
of the remaining provisions shall not be affected thereby.
16. Applicable Law. The validity, interpretation and performance of this Agreement
shall be construed and interpreted according to the laws of the State of California.
17. Full Defense. This Agreement may be pled as a full and complete defense to, and
may be used as a basis for an injunction against, any action, suit or other proceeding that may be
prosecuted, instituted or attempted by Xx. Xxxxxxxxx in breach hereof. The parties agree that in
the event an action or proceeding is instituted by either party in order to enforce the terms or
provisions of this Agreement, the prevailing party shall be entitled to an award of reasonable
costs and attorneys’ fees incurred in connection with enforcing this Agreement.
18. Older Workers’ Benefit Protection Act. Xx. Xxxxxxxxx acknowledges that the
Company has advised him to review this Agreement with an attorney before signing it. Xx. Xxxxxxxxx
has 21 days within which to review and consider this Agreement before signing it. Should Xx.
Xxxxxxxxx decide not to use the entire 21 days, Xx. Xxxxxxxxx knowingly and voluntarily waives any
claim that he was not in fact given that period of time or did not use the entire 21 days to
consult an attorney and/or consider this Agreement. Xx. Xxxxxxxxx may revoke the Agreement for up
to seven calendar days after signing it, and this Agreement shall not become effective or
enforceable until the revocation period has passed (the “Effective Date). Any revocation of this
Agreement must be in writing addressed to and received by Human Resources on behalf of the Company
no later than 5:00 p.m. on the seventh day after Xx. Xxxxxxxxx signs it. If Xx. Xxxxxxxxx revokes
this Agreement, he will not receive any of the benefits described in this Agreement. This
Agreement does not waive or release any rights or claims Xx. Xxxxxxxxx may have under the Age
Discrimination in Employment Act that arise after the execution of this Agreement.
19. Attorneys’ Fees and Costs. Both parties to this Agreement agree that they will
bear their own attorneys’ fees, costs and all other expenses in connection with the matters
released in this Agreement.
20. Good Faith. The parties agree to do all things necessary and to execute all
further documents necessary and appropriate to carry out and effectuate the terms and purposes of
this Agreement.
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21. Counterparts. This Agreement may be executed by facsimile signature, and in
separate counterparts, each of which shall be deemed an original and all of which, when taken
together, shall constitute one and the same instrument.
THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND
EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATE
SHOWN BELOW.
Dated: January 31, 2007
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/s/ Xxxxxx X. Xxxxxxxxx
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|||||
| Xxxxxx X. Xxxxxxxxx | ||||||
Dated: January 31, 2007
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Artes Medical, Inc. | |||||
| By: | /s/ Xxxxx X. Xxxxxxxx
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|||||
APPROVED AS TO FORM: |
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Dated: January 31, 2007
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Law Office of Xxxx X. Xxxxxxx | |||||
| /s/ Xxxx X. Xxxxxxx | ||||||
| Attorneys for Xxxxxx X. Xxxxxxxxx | ||||||
Dated: January 31, 2007
|
XXXXXX XXXXXX LLP | |||||
| /s/ Xxxxxx X. Xxxxxx | ||||||
| Attorneys for Artes Medical, Inc. | ||||||
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Exhibit A
(Options Summary)
(Options Summary)
[Intentionally Omitted]
Exhibit B
(Proprietary Information and Inventions Agreement)
(Proprietary Information and Inventions Agreement)
[Intentionally Omitted]
Exhibit C
(Indemnification Agreement)
(Indemnification Agreement)
[Intentionally Omitted]
Exhibit D-1
(Warrant Elections)
(Warrant Elections)
[Intentionally Omitted]
Exhibit D-2
(Statement of Holdings)
(Statement of Holdings)
[Intentionally Omitted]
