SETTLEMENT AGREEMENT
EXHIBIT 10.24
This Settlement Agreement (this “Agreement”) is made as of May 12, 2006 (the “Effective Date”)
by and between Artes Medical, Inc. (“Artes Medical” or the “Company”) and Xxxxxx, Xxxxxxxx &
Company, Incorporated, as successor in interest to Xxxx Xxxxx Xxxx Xxxxxx, Incorporated (“Xxxxxx
Xxxxxxxx”).
RECITALS
A. The Company and Xxxx Xxxxx Xxxx Xxxxxx, Incorporated (“Xxxx Xxxxx”) are parties to a letter
agreement, dated on or about September 27, 2004, as amended pursuant to a letter agreement dated on
or about September 28, 2005 (collectively, the “Xxxx Xxxxx Agreement”).
B. Subsequent to the last amendment of the Xxxx Xxxxx Agreement, substantially all of Xxxx
Xxxxx’x Capital Markets business was acquired by Stifel Financial Corp. and, in connection with
this transaction, the Xxxx Xxxxx Agreement was assigned to Xxxxxx Xxxxxxxx.
C. The Company is currently in the process of preparing a Registration Statement for a firm
commitment underwritten public offering of its common stock pursuant to the Securities Act of 1933,
as amended, in which Xxxxx and Company, LLC (“Cowen”) and Lazard Capital Markets LLC (“Lazard”) are
serving as joint lead managing underwriters (the “2006 IPO”).
D. Disputes have arisen between the parties regarding their respective rights and obligations
under the Xxxx Xxxxx Agreement. The parties hereto desire to terminate the Xxxx Xxxxx Agreement
and settle and resolve any disputes between them relating to the Xxxx Xxxxx Agreement as of the
date hereof upon the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the execution of this Agreement and the mutual
promises and covenants contained in the following paragraphs, the Company and Xxxxxx Xxxxxxxx agree
as follows:
1. Termination of Prior Agreement. Effective immediately, the Company and Xxxxxx
Xxxxxxxx agree that the Xxxx Xxxxx Agreement shall be terminated and canceled in its entirety and
shall have no further force or effect. The parties hereto further agree that neither party shall
have any ongoing obligations or rights under the Xxxx Xxxxx Agreement. Notwithstanding the
foregoing or anything to the contrary in this Agreement, the Company and Xxxxxx Xxxxxxxx expressly
agree that: (a) no payments made to either Xxxx Xxxxx or Xxxxxx Xxxxxxxx pursuant to the Xxxx Xxxxx
Agreement prior to the date hereof are refundable or subject to any credit, set-off, refund or
counterclaim whatsoever, (b) Warrant No. LE-1, dated December 22, 2005, issued to Xxxx Xxxxx to
purchase 200,000 shares of the Company’s Series E Preferred Stock at an exercise price of $2.50 per
share is validly issued, outstanding and enforceable against the Company in accordance with its
terms, and (c) Sections II(F) (and the related Attachment A), IV(D) and IV(F) of the Xxxx Xxxxx
Agreement (the “Surviving Provisions”) shall remain in full force and effect and neither party has
waived or released its rights or obligations thereunder.
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2. Termination Consideration. In consideration for Xxxxxx Xxxxxxxx’ agreement to
terminate the Xxxx Xxxxx Agreement as set forth in Section 1 above and its general release below,
the Company agrees:
(a) to pay Xxxxxx Xxxxxxxx $500,000 in cash within five days of the Effective Date; and
(b) to offer Xxxxxx Xxxxxxxx the opportunity (if it so elects) to be included as a co-managing
underwriter in the 2006 IPO at a minimum fixed participation level of 20% of the aggregate number
of shares of the Company’s Common Stock to be offered in the 2006 IPO and to compensate Xxxxxx
Xxxxxxxx for such minimum fixed participation level in accordance with the underwriting agreement
to be entered into in connection with the 2006 IPO and otherwise on the same terms and conditions
as the other underwriters participating in the 2006 IPO (including payment of expenses and fees).
Xxxxxx Xxxxxxxx hereby agrees that the Company is under no obligation to complete the 2006
IPO; and the Company hereby agrees that Xxxxxx Xxxxxxxx is under no obligation to serve as a
co-managing underwriter for the 2006 IPO. If Xxxxxx Xxxxxxxx elects to participate as an
underwriter in the 2006 IPO, it agrees to provide customary services to the Company as a
co-managing underwriter. The consideration payable to Xxxxxx Xxxxxxxx pursuant to subsection 2(b)
above in connection with its service as an underwriter for the 2006 IPO will be set forth in a
customary underwriting agreement to be entered into by the Company with the lead managing
underwriters, Xxxxxx Xxxxxxxx and any other underwriter participating in the 2006 IPO. For
purposes of clarity, Xxxxxx Xxxxxxxx shall only be entitled to compensation as an underwriter under
Section 2(b) if the 2006 IPO is declared effective and the Company closes the 2006 IPO. If (i) the
Company’s Board of Directors, acting in good faith in accordance with their fiduciary duties,
determines by written consent or at a duly convened meeting of the Board of Directors that it would
be in the best interests of the Company and its stockholders to stop pursing the 2006 IPO and the
Company actually withdraws their registration statement or (ii) Cowen and Lazard both inform the
Company in writing that they are unwilling to pursue the 2006 IPO, then Xxxxxx Xxxxxxxx shall have
no further rights to serve as an underwriter or in any other capacity in connection with any
subsequent underwritten public offering of the Company or any other transaction or financing
pursued by the Company and shall not be entitled to any compensation or other consideration
pursuant to Section 2(b).
3. Releases and Representations and Warranties.
(a) Release by Xxxxxx Xxxxxxxx. Subject to and conditioned upon the Company’s full
compliance with the terms of this Agreement, including but not limited to Section 2 above, Xxxxxx
Xxxxxxxx does hereby unconditionally, irrevocably and absolutely release, discharge, waive and
relinquish any and all loss, liability, claims, demands, causes of action or suits of any kind,
nature, character and description whatsoever, whether known or unknown, however arising, fixed or
contingent, whether in law and/or in equity, related directly or indirectly, which Xxxxxx Xxxxxxxx
now has or hereafter may be entitled to claim against Artes Medical or its owners, directors,
officers, employees, representatives, agents, attorneys, stockholders, insurers, divisions,
successors and assigns, and any related holding, parent, sister or subsidiary corporations or
affiliates (collectively, “Artes Released Parties”), arising from or in
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connection with the Xxxx Xxxxx Agreement and the transactions contemplated thereby; provided,
however, that the foregoing release shall not apply to the Surviving Provisions or to any of the
terms and provisions of this Agreement.
(b) Release by Artes Medical. Subject to and conditioned upon Xxxxxx Xxxxxxxx’ full
compliance with the terms of this Agreement, including but not limited to Section 2 above, Artes
Medical does hereby unconditionally, irrevocably and absolutely release, discharge, waive and
relinquish any and all loss, liability, claims, demands, causes of action or suits of any kind,
nature, character and description whatsoever, whether known or unknown, however arising, fixed or
contingent, whether in law and/or in equity, related directly or indirectly, which Artes Medical
now has or hereafter may be entitled to claim against Xxxxxx Xxxxxxxx or its owners, directors,
officers, employees, representatives, agents, attorneys, stockholders, insurers, divisions,
successors and assigns, and any related holding, parent, sister or subsidiary corporations or
affiliates (collectively, “Xxxxxx Xxxxxxxx Released Parties”), arising from or in connection with
the Xxxx Xxxxx Agreement and the transactions contemplated thereby; provided, however, that the
foregoing release shall not apply to the Surviving Provisions or to any of the terms and provisions
of this Agreement.
(c) No Further Action. Xxxxxx Xxxxxxxx irrevocably and absolutely agrees that Xxxxxx
Xxxxxxxx will not prosecute nor allow to be prosecuted on its behalf, in any administrative agency,
whether federal or state, or in any court, whether federal or state, or in any foreign jurisdiction
any claim or demand of any type related to the matters released above, it being the intention of
the Parties that with the execution by Xxxxxx Xxxxxxxx of this release, Artes Medical and the Artes
Released Parties will be absolutely, unconditionally and forever discharged of and from all
obligations to or on behalf of Xxxxxx Xxxxxxxx related in any way to the matters discharged herein.
Artes Medical irrevocably and absolutely agrees that Artes Medical will not prosecute nor allow to
be prosecuted on its behalf, in any administrative agency, whether federal or state, or in any
court, whether federal or state, or in any foreign jurisdiction any claim or demand of any type
related to the matters released above, it being the intention of the Parties that with the
execution by Artes Medical of this release, Xxxxxx Xxxxxxxx and the Xxxxxx Xxxxxxxx Released
Parties will be absolutely, unconditionally and forever discharged of and from all obligations to
or on behalf of Artes Medical related in any way to the matters discharged herein.
(d) Section 1542 Waiver.
(i) Xxxxxx Xxxxxxxx hereby acknowledges and represents that it has been informed by its
attorneys of, and is familiar with, Section 1542 of the Civil Code of the State of California,
which reads as follows:
A general release does not extend to claims which the creditor does
not know of 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.
Xxxxxx Xxxxxxxx hereby waives and relinquishes any and all rights and benefits under Section
1542 of the Civil Code, if any, as presently in effect and as amended from time to time hereafter,
and under any successor thereto, with respect to the matters released herein.
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(ii) Artes Medical hereby acknowledges and represents that it has been informed by its
attorneys of, and is familiar with, Section 1542 of the Civil Code as quoted above. Artes Medical
hereby waives and relinquishes any and all rights and benefits under Section 1542 of the Civil
Code, if any, as presently in effect and as amended from time to time hereafter, and under any
successor thereto, with respect to the matters released herein.
4. Integrated Agreement. The parties acknowledge and agree that no promises or
representations were made to them which do not appear written herein and that this Agreement
contains the entire agreement of the parties on the subject matter thereof, and such Agreement
supersedes all previous oral and written and all contemporaneous oral negotiations, commitments and
understandings. The parties further acknowledge and agree that parol evidence shall not be
required to interpret the intent of the parties.
5. Waiver, Amendment and Modification. 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.
6. Representation by Parties. Each of the parties 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 or any attorneys,
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.
7. Successors and Assigns. The terms and conditions of this Agreement shall inure to
the benefit of and be binding on the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party, other than the parties
hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this Agreement.
8. Severability. If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
9. New York Law. Consistent with the Xxxx Xxxxx Agreement, the parties agree that
this Agreement and its terms shall be governed by, and construed in accordance with, the laws of
the State of New York, without regard to such state’s principles of conflicts of laws.
10. Counterparts. This Agreement may be signed in counterparts and said counterparts
shall be treated as though signed as one document.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.
COMPANY: | ARTES MEDICAL, INC. | |||
By: | /s/ Xxxxx X. Xxxxx | |||
Xxxxx X. Xxxxx Chief Financial Officer |
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XXXXXX XXXXXXXX: | XXXXXX, XXXXXXXX & COMPANY, INCORPORATED | |||
By: | /s/ Xxxxxxx X. Xxxxxxxxx | |||
Name: | Xxxxxxx X. Xxxxxxxxx | |||
Title: | Executive Vice President | |||
[SIGNATURE PAGE TO SETTLEMENT AGREEMENT]