Exhibit 10.1

CHANGE OF CONTROL AGREEMENT

 

Parties: SurModics, Inc.

(“Company”)

9924 West 74th Street

Eden Prairie, MN 55344-3523

Timothy J. Arens

(“Executive”)

13795 Pennock Avenue

Apple Valley, MN 55124

 

Date: February 9, 2012

RECITALS:

1. Executive currently serves as the Vice President and interim Chief Financial
Officer of the Company, and Executive has extensive knowledge and experience
relating to the Company’s business.

2. The parties recognize that a “Change of Control” may materially change or
diminish Executive’s responsibilities and substantially frustrate Executive’s
commitment to the Company.

3. The parties further recognize that it is in the best interests of the Company
and its stockholders to provide certain benefits payable upon a “Change of
Control Termination” to encourage Executive to continue in his position in the
event of a Change of Control.

4. The parties further desire to provide certain benefits payable upon a
termination of Executive’s employment following a Change of Control.

5. The parties further recognize that it is in the best interests of the Company
to protect confidential, proprietary, and trade secret information of the
Company, to prevent unfair competition by former executives of the Company
following separation of their employment with the Company, and to secure
cooperation from former executives with respect to matters related to their
employment with the Company.

AGREEMENTS:

1. Term of Agreement. Except as otherwise provided herein, this Agreement shall
commence on the date executed by the parties and shall continue in effect until
the third anniversary of the date set forth above; provided, however, that if a
Change of Control shall occur before such three-year anniversary, this Agreement
shall continue in effect for a period of twelve (12) months beyond the date of
such Change of Control. If, anytime during the term of this Agreement and prior
to a Change of Control, Executive’s employment with the Company

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terminates for any reason or no reason, or if Executive no longer serves as an
executive officer of the Company, this Agreement shall immediately terminate,
and Executive shall not be entitled to any of the compensation and benefits
described in this Agreement. Any rights and obligations accruing before the
termination or expiration of this Agreement shall survive to the extent
necessary to enforce such rights and obligations.

2. “Change of Control.” For purposes of this Agreement, “Change of Control”
shall mean any one or more of the following events occurring after the date of
this Agreement:

 

  (a) The purchase or other acquisition by any one person, or more than one
person acting as a group, of stock of the Company that, together with stock held
by such person or group, constitutes more than 50% of the total combined value
or total combined voting power of all classes of stock issued by the Company;
provided, however, that if any one person or more than one person acting as a
group is considered to own more than 50% of the total combined value or total
combined voting power of such stock, the acquisition of additional stock by the
same person or persons shall not be considered a Change of Control;

 

  (b) A merger or consolidation to which the Company is a party if the
individuals and entities who were shareholders of the Company immediately prior
to the effective date of such merger or consolidation have, immediately
following the effective date of such merger or consolidation, beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of less than fifty percent (50%) of the total combined voting power of all
classes of securities issued by the surviving entity for the election of
directors of the surviving corporation;

 

  (c) Any one person, or more than one person acting as a group, acquires or has
acquired during the twelve (12) month period ending on the date of the most
recent acquisition by such person or persons, direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of stock of the Company constituting thirty-five percent (35%) or more of the
total combined voting power of all classes of stock issued by the Company;

 

  (d) The purchase or other acquisition by any one person, or more than one
person acting as a group, of substantially all of the total gross value of the
assets of the Company during the twelve-month period ending on the date of the
most recent purchase or other acquisition by such person or persons. For
purposes of this Section 2(d), “gross value” means the value of the assets of
the Company or the value of the assets being disposed of, as the case may be,
determined without regard to any liabilities associated with such assets;

 

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  (e) A change in the composition of the Board of the Company at any time during
any consecutive twelve (12) month period such that the “Continuity Directors”
cease for any reason to constitute at least a fifty percent (50%) majority of
the Board. For purposes of this event, “Continuity Directors” means those
members of the Board who either:

 

  (1) were directors at the beginning of such consecutive twelve (12) month
period; or

 

  (2) were elected by, or on the nomination or recommendation of, at least a
two-thirds (2/3) majority of the then-existing Board of Directors.

In all cases, the determination of whether a Change of Control has occurred
shall be made in accordance with the Internal Revenue Code of 1986, as amended
(the “Code”), Section 409A and the regulations, notices and other guidance of
general applicability issued thereunder.

3. “Change of Control Termination.” For purposes of this Agreement, “Change of
Control Termination” shall mean any of the following events occurring upon or
within twelve (12) months after a Change of Control:

 

  (a) The termination of Executive’s employment by the Company for any reason,
with or without cause, except for termination resulting from conduct by
Executive constituting (i) a felony involving moral turpitude under either
federal law or the law of the state of the Company’s incorporation, or
(ii) Executive’s willful failure to fulfill his employment duties with the
Company; provided, however, that for purposes of this clause (ii), an act or
failure to act by Executive shall not be “willful” unless it is done, or omitted
to be done, in bad faith and without any reasonable belief that Executive’s
action or omission was in the best interests of the Company; or

 

  (b) The termination of employment with the Company by Executive for “Good
Reason.” Such termination shall be accomplished by, and effective upon,
Executive giving written notice to the Company of his decision to terminate.
“Good Reason” shall mean a good faith determination by Executive, in Executive’s
sole and absolute judgment, that any one or more of the following events has
occurred, at any time during the term of this Agreement or after a Change of
Control; provided, however, that such event shall not constitute Good Reason if
Executive has expressly consented to such event in writing or if Executive fails
to provide written notice of his decision to terminate, which notice describes
the event giving rise to the resignation, within ninety (90) days of the
occurrence of such event and the Company has not cured the event within thirty
(30) days after receiving such notice from Executive.

 

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  (1) A material change in Executive’s duties, responsibilities, or authority,
or any removal of Executive from or any failure to re-elect Executive to any
position which has the effect of materially diminishing Executive’s duties,
responsibility or authority;

 

  (2) A material reduction, in the aggregate, by the Company in Executive’s base
salary (as increased from time to time), variable pay opportunities (including
short and long-term cash incentives and equity-based compensation), or the
employee benefits to which Executive is entitled to participate in irrespective
of any standard waiting periods with respect to the same, unless such material
reduction is generally applicable to all executive officers of the Company;

 

  (3) A requirement imposed by the Company on Executive that results in
Executive being based at a location that is outside of a fifty (50) mile radius
of Executive’s prior job location; or

 

  (4) Any material breach by the Company of any employment agreement between
Executive and the Company.

Termination for “Good Reason” shall not include Executive’s death or a
termination for any reason other than one of the events specified in clauses
(1) through (4) above.

For purposes of Section 4 of this Agreement only, with respect to the timing of
payments thereunder, “Change of Control Termination” shall mean the date of
Executive’s “separation from service” with the Company within the meaning of
Section 409A(a)(2)(A)(i) of the Code (with “Company” for purposes of this
paragraph to include any business entity that is treated as a single employer
with the Company under the rules of Section 414(b) and (c) of the Code).

4. Compensation and Benefits. Upon a termination of Executive’s employment for
any reason, Executive shall be entitled to receive all salary and other
compensation earned by Executive through the date of such termination at the
rate in effect immediately prior to such termination, and all other amounts to
which Executive may be entitled to receive under any compensation plan
maintained by the Company, subject to any distribution requirements contained in
such compensation plans. In addition, subject to the conditions and limitations
contained in this Agreement, upon a Change of Control Termination, Executive
shall be entitled to all of the following compensation and benefits:

 

  (a) Within five (5) business days after a Change of Control Termination, the
Company shall pay to Executive a severance payment equal to two (2) times the
sum of (i) Executive’s base salary as of the date of the Change of Control
Termination, and (ii) an amount equal to Executive’s target short-term incentive
opportunity for the year in which the Change of Control Termination occurs;

 

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  (b) The Company shall continue to provide Executive, at the Company’s expense,
with coverage under its life, health, or dental benefit plans at a level
comparable to the benefits which Executive was receiving or entitled to receive
immediately prior to the Change of Control Termination or, if greater, at a
level comparable to the benefits which Executive was receiving immediately prior
to the event which constituted Good Reason. Such coverage shall continue for
eighteen (18) months following such Change of Control Termination or, if
earlier, until Executive is eligible to be covered for such benefits through his
employment with another employer or continuation coverage under Section 4980B
(COBRA) otherwise ends;

 

  (c) All outstanding Options or Stock Appreciation Rights shall become
immediately exercisable, and the risks of forfeiture on any outstanding
Restricted Stock Awards or Restricted Stock Unit Awards shall immediately lapse.
For purposes of this Agreement, “Option,” “Stock Appreciation Rights,”
“Restricted Stock Awards” and “Restricted Stock Unit Awards” shall have the
meaning set forth in the SurModics, Inc. 2009 Equity Incentive Plan, or any
successor plan; and

 

  (d) All shares or units subject to all outstanding Performance Awards shall
become immediately vested and payable at the target performance objectives set
forth in said Performance Awards. For purposes of this Agreement, “Performance
Awards” and “Performance Period” shall have the meaning set forth in the
SurModics, Inc. 2009 Equity Incentive Plan, or any successor plan.

The parties intend that the payment described in Section 4(a) shall be excluded
from deferred compensation as a “short-term deferral” under Treas. Reg.
§ 1.409A-1(b)(4). The parties intend that the continuation of health and dental
benefits described in Section 4(b) shall be excluded from deferred compensation
pursuant to the medical benefits exception for separation pay plans under Treas.
Reg. § 1.409A-1(b)(9)(v)(B).

The parties intend that the continuation of life insurance benefits described in
Section 4(b) shall be excluded from deferred compensation as separation pay due
to an involuntary separation from service under Treas. Reg.
§ 1.409A-1(b)(9)(iii), and the amounts payable for such continuation of life
insurance coverage shall not exceed two times the lesser of (x) Executive’s
annualized compensation based on the annual rate of pay for services to the
Company for the calendar year prior to the calendar year in which the Change of
Control Termination occurs (adjusted for any increase during the year that was
expected to continue indefinitely if Executive had not separated from service)
or (y) the compensation limit under

 

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Section 401(a)(17) of the Code for the year in which the Change of Control
Termination occurs. Further, in no event shall the benefits described in
Section 4(b) extend beyond December 31st of the second calendar year following
the calendar year in which the Change of Control Termination occurs.

Notwithstanding the foregoing, if any of the payments described in Section 4
above are subject to the requirements of Code Section 409A and the Company
determines that Executive is a “specified employee” as defined in Code
Section 409A as of the date of the Change of Control Termination, such payments
shall not be paid or commence earlier than the date that is six months after the
Change of Control Termination, but shall be paid or commence during the calendar
year following the year in which the Change of Control Termination occurs and
within 30 days of the earliest possible date permitted under Code Section 409A.

5. Limitation on Change of Control Payments. This Section 5 applies only in the
event the Company determines that this Agreement is subject to the limitations
of Code Section 280G, or any successor provision, and the regulations issued
thereunder. The intent of this Section 5 is to reduce any Change of Control
Benefits, as defined below, that would otherwise be characterized as a
“parachute payment” as defined in Code Section 280G and be subject to an
additional excise tax under Code Section 4999 by the minimum amount necessary to
avoid characterization as a parachute payment and avoid the imposition of the
excise tax, but only if doing so would provide a more favorable net after-tax
result to the Executive than if the Change in Control Benefits were not reduced
and the Executive were subject to the excise tax.

 

  (a)

In the event the Change of Control Benefits payable to Executive would
collectively constitute a “parachute payment” as defined in Code Section 280G,
and if the “net after-tax amount” of such parachute payment to Executive is less
than what the net after-tax amount to Executive would be if the Change of
Control Benefits otherwise constituting the parachute payment were limited to
the maximum “parachute value” of Change of Control Benefits that Executive could
receive without giving rise to any liability for any excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then the Change of Control Benefits
otherwise constituting the parachute payment shall be reduced so that the
parachute value of all Change of Control Benefits, in the aggregate, will equal
the maximum parachute value of all Change of Control Benefits that Executive can
receive without any Change of Control Benefits being subject to the Excise
Tax. Should such a reduction in Change of Control Benefits be required,
Executive shall be entitled, subject to the following sentence, to designate
those Change of Control Benefits under this Agreement or the other arrangements
that will be reduced or eliminated so as to achieve the specified reduction in
Change of Control Benefits to Executive and avoid characterization of such
Change of Control Benefits as a parachute payment. The Company will provide
Executive with all information reasonably requested by Executive to permit
Executive to make such designation. To the extent that Executive’s ability to
make such a

 

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  designation would cause any of the Change of Control Benefits to become
subject to any additional tax under Code Section 409A, or if Executive fails to
make such a designation within ten business days of receiving the requested
information from the Company, then the Company shall achieve the necessary
reduction in the Change of Control Benefits by reducing them in the following
order: (a) reduction of cash payments payable under this Agreement;
(b) reduction of other payments and benefits to be provided to Executive;
(c) cancellation or reduction of accelerated vesting of equity-based awards that
are subject to performance-based vesting conditions; and (d) cancellation or
reduction of accelerated vesting of equity-based awards that are subject only to
service-based vesting conditions. If the acceleration of the vesting of
Executive’s equity-based awards is to be cancelled or reduced, such acceleration
of vesting shall be reduced or cancelled in the reverse order of the date of
grant.

 

  (b) For purposes of this Section 5, a “net after-tax amount” shall be
determined by taking into account all applicable income, excise and employment
taxes, whether imposed at the federal, state or local level, including the
Excise Tax, and the “parachute value” of the Change of Control Benefits means
the present value as of the date of the Change of Control for purposes of Code
Section 280G of the portion of such Change of Control Benefits that constitutes
a parachute payment under Code Section 280G(b)(2).

 

  (c) For purposes of this Section 5, “Change of Control Benefits” shall mean
any payment, benefit or transfer of property in the nature of compensation paid
to or for the benefit of Executive under any arrangement which is considered
contingent on a Change of Control for purposes of Code Section 280G, including,
without limitation, any and all of the Company’s salary, incentive payments,
restricted stock, stock option, equity-based compensation or benefit plans,
programs or other arrangements, and shall include benefits payable under this
Agreement.

 

  (d) For clarity, the Company shall have no obligation to provide any “tax
gross-up” payment related to the Excise Tax in the event the Change of Control
Benefits that would otherwise be characterized as a parachute payment are not
reduced as set forth in Section 5(a) above and Executive is subject to the
Excise Tax.

6. Withholding Taxes. The Company shall be entitled to deduct from all payments
or benefits provided for under this Agreement any federal, state or local income
and employment-related taxes required by law to be withheld with respect to such
payments or benefits.

 

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7. Post-Termination Obligations and Conditions.

 

  (a) In the event of termination of Executive’s employment, the sole obligation
of the Company under this Agreement will be its obligation to make the payments
called for by Sections 4 and 5 hereof, as the case may be, and the Company will
have no other obligation to Executive or to Executive’s beneficiary or estate.

 

  (b) Notwithstanding the foregoing provisions of Section 4, the Company will
not be obligated to make any payments to Executive under Sections 4(a) through
4(d) unless: (i) Executive has signed a release of claims in favor of the
Company and its affiliates and related entities, and their directors, officers,
insurers, employees and agents, provided such release shall not require
Executive to release claims Executive may have for indemnification from the
Company or rights of Executive under this Agreement; (ii) all applicable
rescission periods provided by law for releases of claims shall have expired and
Executive shall have signed and not rescinded the release of claims; and
(iii) Executive is in strict compliance with the terms of this Agreement as of
the dates of such payments.

 

  (c) Immediately upon termination of Executive’s employment with the Company
for any reason, Executive will resign all positions then held as a director or
officer of the Company and of any affiliated entity of the Company.

 

  (d) Upon termination of Executive’s employment with the Company, Executive
shall promptly deliver to the Company any and all Company records and any and
all Company property in Executive’s possession or under Executive’s control,
including, without limitation, manuals, books, blank forms, documents, letters,
memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes,
source codes, data, tables or calculations and all copies thereof, documents
that in whole or in part contain any trade secrets or confidential, proprietary
or other secret information of the Company and all copies thereof, and keys,
access cards, access codes, passwords, credit cards, personal computers,
telephones, and other electronic equipment belonging to the Company.

 

  (e)

Following termination of Executive’s employment with the Company for any reason,
Executive will, upon reasonable request of the Company or its designee,
cooperate with the Company in connection with the transition of Executive’s
duties and responsibilities for the Company; consult with the Company regarding
business matters that Executive was directly and substantially involved with
while employed by the Company; and be reasonably available, with or without
subpoena, to be interviewed, review documents or things, give depositions,
testify, or engage in other

 

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  reasonable activities in connection with any litigation or investigation, with
respect to matters that Executive then has or may have knowledge of by virtue of
Executive’s employment by or service to the Company or any related entity;
provided, however, that: (i) the Company shall not unreasonably request such
cooperation of Executive; (ii) the Company shall reimburse Executive or pay
directly any reasonable expenses actually incurred in connection with such
cooperation and assistance by Executive; and (iii) Executive shall not be
required to assist or cooperate with the Company to the extent such assistance
or cooperation would prevent Executive from performing, or would materially
interfere with Executive’s performance of, the duties or responsibilities of his
then-current occupation.

 

  (f) Executive will not at any time disparage, defame, or besmirch the
reputation, character, image, products, or services of the Company or any of its
affiliates, or the reputation or character of any of its current or former
directors, officers, employees, or agents; provided that nothing in this
Section 7(f) is intended to prevent or interfere with Executive making any
required or reasonable communications with, or providing information to, any
governmental, law enforcement, or stock exchange agency or representative, or in
connection with any governmental investigation, court, administrative or
arbitration proceeding.

 

  (g) The Company will direct its executive officers to not at any time
disparage, defame, or besmirch the reputation, character or image of Executive;
provided that nothing in this Section 7(g) is intended to prevent or interfere
with the Company or its executive officers from making any required or
reasonable communications with, or providing information to, any governmental,
law enforcement, or stock exchange agency or representative, or in connection
with any governmental investigation, court, administrative or arbitration
proceeding.

8. Successors and Assigns. This Agreement shall inure to the benefit of and
shall be enforceable by Executive, his heirs and the personal representative of
his estate, and shall be binding upon and inure to the benefit of the Company
and its successors and assigns. The Company will require the transferee of any
sale of all or substantially all of the business and assets of the Company or
the survivor of any merger, consolidation or other transaction expressly to
agree to honor this Agreement in the same manner and to the same extent that the
Company would be required to perform this Agreement if no such event had taken
place. Failure of the Company to obtain such agreement before the effective date
of such event shall be a material breach of this Agreement within the meaning of
Section 3(b)(4) of this Agreement.

9. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this

 

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Agreement or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt. All notices to the Company shall be
directed to the attention of the Board of Directors of the Company.

10. Captions. The headings or captions set forth in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.

11. Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Minnesota.

12. Construction. Wherever possible, each term and provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any term or provision of this Agreement is invalid or
unenforceable under applicable law, (a) the remaining terms and provisions shall
be unimpaired, and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the unenforceable term or
provision.

13. Amendment; Waivers. This Agreement may not be modified, amended, waived or
discharged in any manner except by an instrument in writing signed by both
parties hereto. The waiver by either party of compliance with any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other provision of this Agreement, or of any subsequent breach by such
party of a provision of this Agreement.

14. Section 409A. This Agreement is intended to satisfy, or be exempt from, the
requirements of Section 409A(a)(2), (3) and (4) of the Code, including current
and future guidance and regulations interpreting such provisions, and should be
interpreted accordingly.

15. Non-Competition, Invention, Non-Disclosure Agreement. Executive acknowledges
and agrees that Executive shall continue to comply with the terms of Executive’s
Non-Competition, Invention, Non-Disclosure Agreement with the Company, dated
February 26, 2007 (the “Non-Competition Agreement”), a copy of which has been
provided to Executive with this Agreement. Executive specifically acknowledges
that the consideration Executive received in exchange for signing the
Non-Competition Agreement was adequate. Executive further acknowledges that the
Company would not enter into this Agreement without having the protections it
has under the Non-Competition Agreement and therefore the consideration
Executive is receiving in exchange for signing this Agreement constitutes
additional consideration that the Company is providing in exchange for Executive
agreeing to remain bound by the obligations under the Non-Competition Agreement.

16. Entire Agreement. This Agreement sets forth Executive’s sole and exclusive
remedy with respect to severance benefits payable to Executive upon a Change of
Control Termination, and except for the Non-Competition Agreement supersedes all
prior or contemporaneous negotiations, commitments, agreements (written or oral)
and writings between the Company and Executive with respect to the subject
matter hereof, including but not limited to any negotiations, commitments,
agreements or writings relating to any severance benefits payable

 

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to Executive, and constitutes the entire agreement and understanding between the
parties hereto. All such other negotiations, commitments, agreements and
writings will have no further force or effect, and the parties to any such other
negotiation, commitment, agreement or writing will have no further rights or
obligations thereunder.

16. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

17. Arbitration. Any dispute arising out of or relating to this Agreement or the
alleged breach of it, or the making of this Agreement, including claims of fraud
in the inducement, shall be discussed between the disputing parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding, such dispute cannot be resolved, such dispute shall be settled
by binding arbitration. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The arbitrator shall be a
retired state or federal judge or an attorney who has practiced securities or
business litigation for at least 10 years. If the parties cannot agree on an
arbitrator within 20 days, any party may request that the chief judge of the
District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration
will be conducted pursuant to the provisions of this Agreement, and the
commercial arbitration rules of the American Arbitration Association, unless
such rules are inconsistent with the provisions of this Agreement. Limited civil
discovery shall be permitted for the production of documents and taking of
depositions. Unresolved discovery disputes may be brought to the attention of
the arbitrator who may dispose of such dispute. The arbitrator shall have the
authority to award any remedy or relief that a court of this state could order
or grant; provided, however, that punitive or exemplary damages shall not be
awarded. Unless otherwise ordered by the arbitrator, the parties shall share
equally in the payment of the fees and expenses of the arbitrator. The
arbitrator may award to the prevailing party, if any, as determined by the
arbitrator, all of the prevailing party’s costs and fees, including the
arbitrator’s fees, and expenses, and the prevailing party’s travel expenses,
out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

 

SURMODICS, INC. By:    /s/ Gary R. Maharaj   Gary R. Maharaj Its   President and
Chief Executive Officer   /s/ Timothy J. Arens   Timothy J. Arens

 

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