Artes Medical Announces Plan for Nasdaq Listing Compliance and Agenda for Its Annual Meeting

Business Wire, Sept 2, 2008

Nevertheless, we remain open to any proposal involving a strategic alternative that would maximize value for our stockholders, including a potential change of control transaction, and we encourage Shack (and the Lemperles) to consider this course of action if they wish to obtain control over the direction of the Company.

The Claims Made in Shack's Preliminary Proxy Statement are Inaccurate. Apart from being legally deficient, most, if not all, of the assertions made in Shack's preliminary proxy statement are inaccurate. A discussion of the Company's results and future plans is set forth below, as well as an explanation of the lawsuit recently filed by the Company against the Lemperles and the facts surrounding their instigation and support of the Shack proposals, including the Lemperles' relationships with Shack's director nominees.

The Lemperle Lawsuit

On August 29, 2008, the Company filed suit in San Diego Superior Court against Stefan Lemperle and Gottfried Lemperle for, among other things, breach of contract, fraudulent inducement and intentional and negligent interference with prospective economic advantage relating to their attempts to interfere with the Company's management and operations. The lawsuit seeks both compensatory and punitive damages, as well as injunctive relief.

In sum, the lawsuit alleges that the Lemperles were separated from the Company in 2006, and were provided substantial severance packages in exchange for their complete disassociation from the Company, and their agreement to refrain from interfering with the Company's business. Stefan Lemperle's separation agreement specifically prohibits him from encouraging stockholders to challenge management or decisions of the Company's Board of Directors through November 2009 or from otherwise interfering with the Company's affairs. However, the Company believes that neither Stefan nor Gottfried Lemperle intended to comply with the terms of their separation agreements, and that despite their contractual obligations to the Company, the Lemperles conspired to undermine the Company's management and to take control of the Company -- as evidenced by Shack's proposals seeking to replace a majority of the Company's current directors with individuals hand-picked by the Lemperles (the "Lemperle Nominees"). For example, Terry Knapp and Charles A. Schliebs, both Lemperle Nominees, were recommended to be directors on the Company's Board by Stefan Lemperle in June 2006. Similarly, Barry Vogel and Robert Binkele (both Lemperle Nominees) have close ties with and were introduced to the Company by Stefan Lemperle and a former officer of the Company, respectively. Further, the lawsuit alleges that and the Company believes that the Lemperles shared confidential or proprietary information about the Company, and that they communicated this confidential or proprietary information to other stockholders of the Company, including Shack and/or the Lemperle Nominees in violation of the terms of their separation and confidentiality agreements with the Company.