Document:

exv10w16

 

EXHIBIT 10.16

MASTER LICENSE AGREEMENT

THIS AGREEMENT is by and between SurModics, Inc., a corporation of the State of
Minnesota, which has an office at 9924 West 74th Street, Eden Prairie, MN
55344 (hereinafter referred to as SURMODICS), and CABG Medical, Inc., a
corporation of Minnesota, which has an office at 14505 21st Avenue North, Suite
212, Minneapolis, MN 55447 (hereinafter referred to as CABG).

WHEREAS, SURMODICS is engaged in biological, chemical and technical research
and has developed a body of technology and know-how, including reagents,
processes, and devices which the parties believe will improve the performance
of various products and processes of CABG.

WHEREAS, the technology of SURMODICS includes confidential information
(including trade secrets and other know-how) which is proprietary to SURMODICS
and SURMODICS is in the process of securing patent coverage for certain items
of its technology, and continues to maintain the confidentiality of other
portions of its technology.

WHEREAS, CABG and SURMODICS are parties to a Mutual Confidential Disclosure
Agreement dated December 27, 2001 (“Prior Disclosure Agreement”).

WHEREAS, CABG may desire to acquire additional licenses under SURMODICS’
know-how and patent rights, such licenses to be added to this Master Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below and for other good and valuable consideration of which receipt is
acknowledged, the parties agree as follows:

	1.	 	DEFINITIONS
	 
	 	 	The following definitions apply to this Agreement and to all addenda
thereto:
	 
	 	 	a. “Affiliate” means any entity which owns at least 50% of, is at least 50%
owned by, or is under common (at least 50%) ownership with CABG.
	 
	 	 	b. “Effective Date” means the later of the dates on which this Agreement is
signed by the parties, as indicated by the dates on the signature page
hereof.
	 
	 	 	c. “Know-how” means SURMODICS’ trade secrets and other technical
information relating to the surface treatment of medical devices and which
SURMODICS has the right to transmit to others. Know-how includes but is
not limited to information contained in pending patent applications of
Patent Rights and information that is Confidential Information as defined
in Paragraph 13.

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	 	 	d. “Licensed Products” means each of the separately sold Medical Products
specifically described in Attachment B1, B2, and so forth, and which:

	 	 	i. but for the license granted herein the manufacture, use or sale
would infringe (or a surface treatment process employed to produce a
product or a reagent used in such process would infringe) any claim of
Patent Rights, or
	 
	 	 	ii. are produced through the use of SURMODICS’ Know-how.

	 	 	e. “Licensed Product Effective Date” for each license granted herein shall
mean the date specified in the respective Attachment B1, B2, and so forth.
	 
	 	 	f. “Manufacturer” means a non-Affiliate third party which manufactures
Licensed Products for CABG pursuant to a separate agreement with CABG and
subject to the execution by the Manufacturer and SURMODICS of the document
entitled “Manufacturer Agreement and SurModics’ Consent” attached hereto as
Attachment C.
	 
	 	 	g. Medical Products” means products that are specifically defined in
Attachment B1, B2, and so forth.
	 
	 	 	h. “Net Sales” means the total actual billing for sales of Licensed
Products, less the following deductions where they are applicable with
respect to such billings and when separately shown on invoices:

	 	 	i. discounts and promotional items actually allowed and taken;
	 
	 	 	ii. any customs duties, taxes or other governmental excise or charge
upon or measured by the production, sale, transportation, delivery or
use of Licensed Product and actually paid by CABG;
	 
	 	 	iii. amounts allowed or credited on rejections or returns;
	 
	 	 	iv. transportation charges prepaid or allowed.

	 	 	Notwithstanding the above, if any Licensed Product is sold both separately
and as an integral part of a combination product containing one or more
integral components in addition to that Licensed Product, then Net Sales of
that Licensed Product resulting from sales of that combination product will
be calculated by multiplying the Net Sales for the combination product as
calculated above by the fraction A/B where A is the invoice price of the
Licensed Product as sold separately and B is the invoice price of the
combination product.
	 
	 	 	A Licensed Product shall be considered sold when it is invoiced. To assure
SURMODICS the full royalty payment contemplated in this Agreement, CABG
agrees that in the event any Licensed Product is sold to an Affiliate for
purposes of resale, Earned Royalties for that

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	 	 	Licensed Product shall be computed upon the selling price at which such
Licensed Product would ordinarily be sold to a non-Affiliate, rather than
on the selling price of CABG to the Affiliate.
	 
	 	 	i. “Patent Rights” means the patent application(s) and patent(s) identified
in Attachment A hereof, together with all foreign counterparts, divisions,
and continuation applications based thereon, any patent issuing on any of
said applications, and any reissues or extensions based on any of such
patents.
	 
	 	 	j. “Reagents” has the meaning defined in each Attachment B1, B2, and so
forth.
	 
	 	 	k. “SURMODICS’ Technology” has the meaning defined in each Attachment B1,
B2, and so forth.
	 
	 	 	l. “Valid Claim” means a claim of Patent Rights that has not been held
invalid by a court of competent jurisdiction beyond possibility of appeal.
	 
	2.	 	LICENSE
	 
	 	 	a. With respect to the Licensed Product defined in each of Attachments B1,
B2, and so forth, SURMODICS grants to CABG, a separate worldwide license
under SURMODICS’ Patent Rights and Know-how to make, have made for it only
by a properly sublicensed Manufacturer as set forth herein, use, import,
and sell that Licensed Product. The license granted herein is expressly
limited to the specific Licensed Products defined herein, and does not
include the right to sublicense except as set forth in Paragraph 2(b)
below. All licenses granted by SURMODICS to CABG under this Agreement are
non-exclusive unless specifically stated otherwise for a particular
Licensed Product in an Attachment B1, B2, and so forth. Additional terms
of each license are set out in the respective Attachments B1, B2, and so
forth. To the extent of any inconsistency between the terms set forth in
the body of this Agreement and the terms set forth in Attachments B1, B2,
and so forth, the terms set forth in the body of each Attachment B shall be
controlling with respect to the Licensed Product defined in each Attachment
B; however, the terms set forth in the body of this Agreement shall
otherwise control. Each such license shall be effective as of its Licensed
Product Effective Date. The licenses granted to CABG include the right for
CABG to appoint third party distributors of finished Licensed Products that
such distributors purchase from CABG. A properly licensed Manufacturer may
also be appointed as a distributor of Licensed Products at CABG’s
discretion.
	 
	 	 	b. All sublicenses by CABG to a Manufacturer shall be subject to the
following terms and conditions. No sublicense shall be effective unless
and until the document entitled “Manufacturer Agreement and SurModics’
Consent” attached as Attachment C has been executed by the Manufacturer,
delivered to SURMODICS, and signed by SURMODICS. CABG shall be responsible
for and hereby guarantees the performance to SURMODICS by each Manufacturer
of all of the sublicensee obligations provided herein. Each sublicense to
a Manufacturer shall terminate automatically and without notice at such
time as the

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	 	 	separate agreement between CABG and the Manufacturer expires or is
terminated. Each sublicense to a Manufacturer shall terminate
automatically without notice upon termination or expiration of this
Agreement or the relevant license hereunder, and CABG’s agreement with the
Manufacturer must so provide.
	 
	 	 	c. Subject to the license granted herein, SURMODICS shall retain all rights
to the Patent Rights and Know-how. SURMODICS shall retain the right to use
Patent Rights and Know-how for its own research purposes.
	 
	 	 	d. CABG shall notify SURMODICS, in advance and in writing, of the location
of the production of a Licensed Product or any new location to be used for
the production of a Licensed Product.
	 
	 	 	e. In the event any governmental agency in a jurisdiction materially alters
or hinders or prevents enforcement of the terms or provisions of any
license granted herein, SURMODICS may, at its sole discretion, immediately
terminate that license with respect to such jurisdiction.
	 
	3.	 	MILESTONE PAYMENTS
	 
	 	 	For each license granted by SURMODICS, CABG shall make milestone payments
to SURMODICS as set out in the respective Attachment B1, B2, and so forth.
	 
	4.	 	ROYALTIES
	 
	 	 	For each license granted herein, CABG shall pay to SURMODICS a royalty for
each quarter calendar year during the term of this License Agreement which
will be the greater of the royalties of Paragraphs 4(a) or 4(b).
	 
	 	 	a. Earned Royalties shall be calculated as provided for in the respective
Attachment B1, B2, and so forth. Unless otherwise stated in any Attachment
B1, B2, and so forth, no more than one Earned Royalty shall be paid by CABG
for any Licensed Product. However, if any Licensed Product is covered by
more than one Attachment B1, B2, and so forth, then the Earned Royalty rate
shall be the highest rate specified for such Licensed Product.
	 
	 	 	b. Minimum Royalties shall be paid for each Licensed Product as provided
for in the respective Attachment B1, B2, and so forth.
	 
	5.	 	ROYALTY PAYMENTS, REPORTS, RECORDS
	 
	 	 	a. During the term of this Agreement, and for each license granted
hereunder, CABG will make written reports and payments to SURMODICS within
forty-five (45) days after the last day of each calendar quarter ending
March 31, June 30, September 30, and December 31. Each such report shall
state the Net Sales, unit volumes, Earned Royalty, corrections of error in
prior royalty payments, and data and calculations used by CABG to

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	 	 	determine such payments for each of the licenses corresponding to the
respective Attachments B1, B2, and so forth. Each report shall be
accompanied by payment in full of the royalty due SURMODICS for that
quarter. The December 31 quarterly report shall also include a nonbinding
summary forecast of projected sales of Licensed Products and a nonbinding
forecast of reagent usage for the next calendar year. Such reports and
forecasts from CABG shall be considered Confidential Information.
	 
	 	 	b. CABG will maintain, for a period of five (5) years following each sale
of Licensed Product, true and accurate records supporting the reports and
payments made under this Agreement. SURMODICS shall have the right to
carry out an audit of such records no more frequently than once per
calendar year by an independent certified public accountant of its choice.
During CABG’s normal office hours, such accountant shall have reasonable
access to CABG’s offices and the relevant records, files and books of
account, and such accountant shall have the right to examine any other
records reasonably necessary to determine the accuracy of the calculations
provided by CABG under Paragraph 5(a). Such auditors shall be required to
sign a suitable confidentiality agreement reasonably acceptable to CABG
prior to conducting such audit and such auditors may disclose to SURMODICS
only (i) their conclusions regarding the accuracy of royalty payments and
of records related thereto, and (ii) in case of under or over payment of
royalty the amount of under or over payment of royalty computed by such
auditors, but such auditors shall not disclose other information to
SURMODICS without the prior written permission of CABG. Such audit shall
be at SURMODICS’ expense except that if an underpayment error is found for
any twelve month period that exceeds 5% of the payment made to SURMODICS
for that period, then CABG will bear the cost of such audit.
	 
	 	 	c. All royalties on sales of each Licensed Product to be paid to SURMODICS
by CABG under this Agreement shall be paid in U.S. Dollars to SURMODICS in
the United States. For the purpose of calculating Earned Royalties on
sales outside the United States for any calendar quarter, CABG shall
utilize the quarterly revenue for the applicable quarter as derived
utilizing Generally Accepted Accounting Principles (GAAP) as calculated in
U.S. Dollars, consistently applied.
	 
	 	 	d. Any sum required under U.S. tax laws (or the tax laws of any other
government) to be withheld by CABG from payment for the account of
SURMODICS shall be promptly paid by CABG for and on behalf of SURMODICS to
the appropriate tax authorities, and CABG shall furnish SURMODICS with
official tax receipts or other appropriate evidence issued by the
appropriate tax authorities sufficient to enable SURMODICS to support a
claim for income tax credit in respect to any sum so withheld.
	 
	6.	 	TECHNICAL SUPPORT FEES
	 
	 	 	CABG agrees to pay SURMODICS for technical support that SURMODICS provides
to CABG for CABG’s products (“Technical Support Fees”) if such technical
support is provided to CABG under a mutually agreed upon written project
plan. SURMODICS shall charge CABG for such support at SURMODICS’
then-standard rates. As of May 1, 2004,

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	 	 	SURMODICS’ standard rates for Technical Support Fees are $*** per-hour for
standard-testing coating work, $*** per-hour for coating parts used in
human clinical trials, and $*** per-hour for SURMODICS’ analytical
chemistry services. SURMODICS may change its Technical Support Fees with
forty-five (45) days advance written notice to CABG. SURMODICS shall
additionally charge direct materials plus *** percent (*%). Direct
materials may include expenses such as travel and special equipment, but
only as mutually agreed upon in writing. SURMODICS shall invoice CABG
monthly for such Technical Support Fees, and CABG shall make payment to
SURMODICS within forty-five (45) days after the date of the invoice.
	 
	7.	 	TERM
	 
	 	 	a. Unless earlier terminated, each license herein granted shall begin upon
the Licensed Product Effective Date set out in the respective Attachment
B1, B2, and so forth, and shall extend for each Licensed Product so
licensed until expiration of the last to expire patent of Patent Rights
that covers that product or for a period of fifteen (15) years following
the first bona fide commercial sale of such Licensed Product, whichever is
longer.
	 
	 	 	b. Upon expiration of the full term of the license granted herein for any
Licensed Product, and upon full payment by CABG to SURMODICS of all monies
due under this Agreement, the license with respect to Know-how licensed
herein for that Licensed Product shall be deemed paid up and non-exclusive,
if any such license was exclusive.
	 
	8.	 	PATENTS
	 
	 	 	a. CABG shall see to it that all Licensed Products sold by CABG shall be
appropriately marked with the applicable patent numbers, in conformity with
applicable law. SURMODICS shall identify the patents listed in Attachment
A that are applicable with respect to the coating component of each
Attachment B Licensed Product.
	 
	 	 	b. SURMODICS recognizes that it is an objective of CABG to obtain patents
on technology that CABG develops. CABG recognizes that a vital part of
SURMODICS’ business includes licensing SURMODICS’ technology to others
under SURMODICS’ patents and know-how to make, use, and sell products, and
that it is an objective of SURMODICS to enable its present and future
licensees to exploit patent licenses from SURMODICS to produce and sell
products without interference from any patent that CABG might obtain. A
purpose of this Paragraph 8 is to establish a system under which each party
may accomplish its respective objective.
	 
	 	 	c. Title to all developed technology which is conceived or first reduced to
practice before, during, and after the term of this Agreement and which is
solely an invention of employees or agents of SURMODICS shall be in
SURMODICS. SURMODICS shall have the right to determine whether patent or
other intellectual property protection will be sought for any such
invention and shall be solely responsible for all costs associated with
obtaining and maintaining such patent or other intellectual property
protection.

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	 	 	d. Title to all developed technology which is conceived or first reduced to
practice before, during, and after the term of this Agreement and which is
solely an invention of employees or agents of CABG shall be in CABG. CABG
shall have the right to determine whether patent or other intellectual
property protection will be sought for any such invention and shall be
solely responsible for all costs associated with obtaining and maintaining
such patent or other intellectual property protection.
	 
	 	 	e. Intentionally Omitted.
	 
	 	 	f. “CABG/SURMODICS Technology Patent” means a issued patent which contains
a claim that (A) claims an invention conceived or first reduced to practice
during the period from December 27, 2001 (the effective date of the Prior
Disclosure Agreement), to the date of termination of this Agreement solely
by one or more CABG employees or others who are required to assign
inventions to CABG, and (B) is drawn to an invention for SURMODICS’
Technology (as defined in each Attachment B1, B2, and so forth), or its
use, or products or processes arising from such use. Any claim that meets
the criteria of both (A) and (B) above shall be considered a
“CABG/SURMODICS Technology Patent Claim.” With respect to a CABG/SURMODICS
Technology Patent:

	 	 	i. Determination of Rights. At such time as SURMODICS becomes aware
of a patent that may reasonably be construed as a CABG/SURMODICS
Technology Patent, SURMODICS will send a written notice to CABG
identifying the patent in question and requesting a review of such
patent by the parties to determine (A) if such patent contains a
CABG/SURMODICS Technology Patent Claim, and, if so, (B) whether
SURMODICS or a SURMODICS licensee had substantial knowledge of the
thus claimed invention as of the date of its conception by CABG, or
(C) whether the alleged CABG/SURMODICS Technology Patent contained any
Confidential Information of SURMODICS at the time of filing. As used
in this Paragraph 8(f), “substantial knowledge” shall mean, as
demonstrated by written records, the possession of knowledge which, if
available as prior art to the claimed invention, would render the
invention so claimed unpatentable under U.S. patent laws. CABG will
not bring or maintain any legal action against SURMODICS or a
SURMODICS licensee alleging infringement of such CABG/SURMODICS
Technology Patent until issues (A), (B), and (C) of this paragraph
have been determined and agreed upon between CABG and SURMODICS. In
the event the parties can not determine and agree on such issues,
either party may seek resolution through arbitration under Paragraph
24.
	 
	 	 	ii. Grant of License. SURMODICS shall have and is hereby granted a
noncancelable, nonexclusive, worldwide license, with the right to
sublicense, to make, have made for it, use and sell products and
processes covered by each CABG/SURMODICS Technology Patent Claim, in
conjunction with the use of SURMODICS’ Technology, but only to the
extent that (A) such product or its manufacture or use, as of the date
of issuance of such CABG/SURMODICS

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	 	 	Technology Patent, is also covered by any claim of any patent that
SURMODICS has the right to license to others or may have licensed to
others, or (B) SURMODICS can demonstrate that SURMODICS or a SURMODICS
licensee had substantial knowledge of the claimed invention as of the
date of its conception by CABG. In addition, if CABG discloses
Confidential Information of SURMODICS in a patent application,
SURMODICS shall have and is hereby granted a noncancelable,
nonexclusive, worldwide license, with the right to sublicense, to
make, have made for it, use, and sell products and processes covered
by any resulting patent.
	 
	 	 	If SURMODICS or a SURMODICS licensee did not have substantial
knowledge of the invention of an CABG/SURMODICS Technology Patent
Claim as of the date of CABG’s conception of the invention so claimed,
and if no Confidential Information of SURMODICS is disclosed in the
application for the CABG/SURMODICS Technology Patent, then SURMODICS’
right to sublicense shall exclude the right to manufacture, use or
sell Medical Products as “Medical Products” are defined in this
Agreement at the date of issuance of that CABG/SURMODICS Technology
Patent. However, if the application for the CABG/SURMODICS Technology
Patent is filed containing SURMODICS’ Confidential Information,
without the advance written permission of SURMODICS, SURMODICS’ right
to sublicense shall not exclude the right to manufacture, use or sell
Medical Products as “Medical Products” are defined in this Agreement.
	 
	 	 	iii. Royalties Payable by SURMODICS. In return for the license
granted under Paragraph 8(f)(ii), SURMODICS will pay CABG a total of
*** percent (*%) of the royalties (regardless of the number of
CABG/SURMODICS Technology Patent Claims that are licensed to SURMODICS
or the number of licenses involved) that SURMODICS receives from its
sublicensees based on sales by its sublicensees of products that but
for such sublicenses would infringe any CABG/SURMODICS Technology
Patent Claim. Notwithstanding the above, if SURMODICS or a SURMODICS
licensee had substantial knowledge of the invention of a
CABG/SURMODICS Technology Patent Claim as of the date of conception of
the invention, or the application for the CABG/SURMODICS Technology
Patent is filed containing SURMODICS’ Confidential Information, then
the license granted to SURMODICS for such CABG/SURMODICS Technology
Patent Claim shall be considered paid-up.

	 	 	g. With respect to Joint Inventions (inventions made jointly by one or more
employees of each party operating under this Agreement), the parties agree
that mutually acceptable patent counsel shall be retained at the mutual
cost and expense of the parties to render an opinion as to the
patentability thereof and to prepare, file, and prosecute such patent
applications as may reasonably be required to provide protection for such
inventions. The joint inventors each shall be required to assign their
Joint Inventions, including all patent applications therefore and the
resulting patents, if any (“Joint Patents”) to SURMODICS. SURMODICS shall
immediately reassign to CABG an undivided one-half interest to the Joint
Inventions, including all patent applications thereof and resulting Joint
Patents. Either

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	 	 	party may choose at any time, upon written notice to the other, to forego
any further expense of obtaining or maintaining a Joint Patent for a Joint
Invention, and will offer to assign its interest in such Joint Invention,
patent application and/or Joint Patent to the other. If the prospective
assignee party accepts such offer, thereafter it shall at its own expense
prepare and file the necessary assignments and shall be solely responsible
for obtaining and/or maintaining Joint Patent(s) for such Joint Invention.
With respect to Joint Patents:

	 	 	(i) Except as provided in Paragraphs 8(g)(iii) and 8(g)(iv) below,
each party shall have the right to operate under Joint Patents and
grant nonexclusive licenses to others, as they may desire without
accounting to the other party.
	 
	 	 	(ii) Should either party choose to bring suit for infringement by a
third party of any Joint Patents, the party bringing suit shall have
the right to join the other party as a party to the suit to the extent
required by law.
	 
	 	 	(iii) SURMODICS agrees it will not grant licenses for the manufacture,
use, or sale of any products to the extent that the products are
Medical Products as defined in any Attachment B to this Agreement.
	 
	 	 	(iv) CABG agrees it will not grant any licenses for the manufacture,
use, or sale of any products relating to SURMODICS’ Technology for the
purpose of bonding chemicals such as synthetic polymers and
biologically active materials onto surfaces or into matrices or to
other molecules, the use of such chemical species, or the products
resulting from such use.

	 	 	h. The parties agree to execute and exchange upon request such documents as
may be necessary or desirable to carry out the provisions of Paragraphs
8(f) and 8(g).
	 
	 	 	i. Other than as set forth herein, nothing in this Agreement shall be
construed as granting either party any rights under or to any patents,
know-how or other rights of the other.
	 
	 	 	j. To the extent that any dispute arises with respect to patents under this
Paragraph 8, the disputing party shall promptly inform the other party of
the nature of the dispute and the provisions of Paragraph 24 shall apply.
The parties shall execute appropriate amendments or assignment for the
application if necessary to resolve the dispute.
	 
	 	 	k. SURMODICS acknowledges and agrees that it shall not obtain a license or
rights to any invention by operation of this Paragraph 8 that was conceived
or first reduced to practice solely by CABG or jointly by CABG and a third
party prior to December 27, 2001 (the effective date of the Prior
Disclosure Agreement), provided such invention did not result from CABG’s
use of information in breach of its obligations to SURMODICS under the
Prior Disclosure Agreement. Except for any CABG/SURMODICS Technology
Patent or Joint Invention, Paragraph 8 of this Agreement shall not apply to
CABG’s future patents or patent applications.

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	9.	 	ALLOCATION OF ROYALTIES
	 
	 	 	The Earned Royalty rate with respect to any Licensed Product shall be
prospectively reduced to *** percent (*%) of the Earned Royalty rate
set out in Paragraph 4(a) and the respective Attachments B1, B2, and so
forth, to the extent that and during the term that neither the manufacture,
nor the use, nor the sale of that specific Licensed Product (or a surface
treatment process or a reagent used in such process) is covered by any
Valid Claim of Patent Rights. The provisions of this Paragraph 9 shall not
apply to payment of Minimum Royalties as provided in Paragraph 4(b) and the
respective Attachments B1, B2, and so forth.
	 
	10.	 	TERMINATION
	 
	 	 	a. For each license granted herein:

	 	 	CABG’s Right to Terminate for Convenience &
Without Cause

i. CABG shall have the right to terminate each license granted with
respect to each Attachment B1, B2, and so forth, under which such
license was granted, but only in its entirety, at any time upon ninety
(90) days advance written notice. Upon termination of any such
license, CABG shall have no further rights under Patent Rights or
Know-how with respect to the Licensed Product of that license.
However, CABG shall be allowed to sell any inventory of Licensed
Products existing at the time of termination for a period of eighteen
(18) months thereafter (thereafter destroying any remaining
inventory), provided CABG accounts for such sales of inventory and
pays SURMODICS the appropriate Earned Royalty for such sales as set
out in Paragraph 4(a) of this Agreement.
	 
	 	 	SURMODICS’ Right to Terminate for Cause

ii. SURMODICS may terminate this Agreement in whole or with respect to
any license granted herein upon ninety (90) days written notice for
any material breach or default by CABG, including without limitation,
failure to comply with the confidentiality provisions of Paragraph 13,
failure to make reports and payments when due, failure to pay Minimum
Royalties, and withholding or notice of intent to withhold any
royalties provided for in this Agreement. Said termination under this
Paragraph 10(a)(ii) shall become effective at the end of the ninety
(90) day period unless during that period CABG shall first cure such
breach or default.
	 
	 	 	iii. Upon termination of any license under any of the provisions of
this Paragraph 10, but subject to the provisions of Paragraph
10(a)(i), referring to the sale of inventory, CABG shall cease making,
having made, using, importing, and selling the Licensed Products of
such license that are produced through the use of SURMODICS’ Know-how.
SURMODICS shall have the right to seek equitable relief to enforce
the provisions of this Paragraph 10(a)(iii).

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	 	 	b. Either party may terminate this Agreement if the other party hereto is
involved in insolvency, dissolution, bankruptcy or receivership proceedings
affecting the operation of its business.
	 
	 	 	c. Notwithstanding the provisions of Paragraph 20, failure of CABG to
initiate bona fide commercial sales of any Licensed Product by the date set
out for that Licensed Product in the respective Attachment B1, B2, and so
forth, to this Agreement shall permit SURMODICS to terminate the license
for that Licensed Product upon ninety (90) days written notice at any time
prior to the date CABG begins bona fide commercial sales of that Licensed
Product.
	 
	 	 	d. In the event that all licenses granted herein are terminated, SURMODICS
shall have the right to terminate this Agreement in its entirety upon
written notice.
	 
	11.	 	CONTINUING OBLIGATIONS SUBSEQUENT TO TERMINATION
	 
	 	 	a. Upon any termination of this Agreement or any of the licenses granted
herein, the following rights and obligations shall continue to the degree
necessary to permit their complete fulfillment or discharge:

	 	 	i. SURMODICS’ right to receive and CABG’s obligation to pay royalties
to the extent owed; and
	 
	 	 	ii. CABG’s obligation to maintain records and SURMODICS’ right to
audit under Paragraph 5, with respect to sales made and to be made
under Paragraph 10(a)(i); and
	 
	 	 	iii. Any cause of action or claim of either party, accrued or to
accrue, because of any breach or default by the other party; and
	 
	 	 	iv. The parties’ obligations to maintain confidentiality under
Paragraph 13; and
	 
	 	 	v. CABG’s obligation to forebear from use of SURMODICS’ Know-how as
provided in Paragraph 10(a)(iii); and
	 
	 	 	vi. The parties’ obligations under Paragraph 8.

	 	 	b. Within ninety (90) days of the date of termination of this Agreement,
each party shall return all copies of Confidential Information of the
other, except one archival copy which may be retained by the receiving
party for purposes of determining its on-going obligations under this
Agreement.
	 
	12.	 	REPRESENTATIONS AND WARRANTIES
	 
	 	 	a. Each party warrants to the other that it has not accepted and will not
accept commitments or restrictions with respect to its rights or
obligations under this Agreement

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	 	 	which will materially affect the value of the rights granted by SURMODICS
nor the obligations undertaken by CABG.
	 
	 	 	b. Each party warrants to the other that it has the full and unrestricted
right to enter into this Agreement and carry out the obligations hereunder.
	 
	 	 	c. SURMODICS represents and warrants that:

	 	 	i. as of the Effective Date, it has no knowledge of any pending or
threatened challenge to the validity or enforceability of any Patent
Rights in any court; and
	 
	 	 	ii. as of the Effective Date, it has no knowledge of any claim of
patent infringement made against it by a third party with respect to
Licensed Products, except that a claim has been made concerning
possible infringement in the cardiovascular field, but SURMODICS has
not made, and is under no obligation to make, inquiry of its licensees
with respect to this Paragraph 12(c)(ii).

	 	 	d. Except as expressly stated in Paragraphs 12(a) through 12(c), nothing in
this Agreement shall be construed as:

	 	 	i. A warranty or representation by SURMODICS as to the validity or
scope of any Patent Rights; or
	 
	 	 	ii. A warranty or representation that anything made, used, sold, or
otherwise disposed of, or any process practiced, under any License
granted in this Agreement is or will be free from infringement of
patents of third persons; or
	 
	 	 	iii. A requirement that SURMODICS file any patent application, secure
any patent, or maintain any patent in force; or
	 
	 	 	iv. An obligation to bring or prosecute actions or suits against third
parties for infringement of any patent; or
	 
	 	 	v. An obligation to furnish any manufacturing or technical information
not encompassed within Know-how; or
	 
	 	 	vi. Conferring any right on either party to use in advertising,
publicity, or otherwise any trademark or trade name of the other
except as expressly provided in an Attachment B; or
	 
	 	 	vii. Granting by implication, estoppel, or otherwise any licenses or
rights under patents or other proprietary information of SURMODICS
other than those included within Patent Rights and Know-how.

12

 

	 	 	e. EXCEPT AS EXPRESSLY PROVIDED IN PARAGRAPH 25(d) BELOW, WITH RESPECT TO
REAGENTS SUPPLIED AT ANY TIME BY SURMODICS, SURMODICS DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, WITH RESPECT TO REAGENTS SUPPLIED
BY SURMODICS, SURMODICS SHALL NOT BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL,
SPECIAL, EXTRAORDINARY OR PUNITIVE DAMAGES OF ANY DESCRIPTION, WHETHER FOR
DAMAGE TO REPUTATION OR GOODWILL, LOST PROFITS, CLAIMS OF THIRD PARTIES OR
OTHERWISE, WHETHER SUCH ASSERTED DAMAGE PURPORTS TO BE BASED ON WARRANTY OR
GUARANTEE, INDEMNITY OR OTHER CONTRACT, CONTRIBUTION, NEGLIGENCE OR OTHER
TORT, OR OTHERWISE.
	 
	 	 	f. SURMODICS does not make any representations, extend any warranties of
any kind, either express or implied, or assume any responsibilities
whatsoever with respect to use, sale, or other disposition by CABG or its
vendees or transferees of Licensed Products incorporating or made by use of
the Patent Rights and Know-how licensed under this Agreement.
	 
	 	 	g. CABG represents and warrants that the Licensed Products are medical
devices or device-drug combination products subject to regulation under the
U.S. Food, Drug, and Cosmetic Act.
	 
	13.	 	CONFIDENTIALITY
	 
	 	 	a. Each party agrees to retain in confidence all Know-how and other
information received from the other, including without limitation,
information required to be maintained in confidence under prototype
development or manufacturing scale-up or post scale-up relationships
between the parties (“Confidential Information”), for a period of fifteen
(15) years from the date of disclosure or five (5) years from the date of
termination of this Agreement, whichever is longer. Each party agrees that
it will not use Confidential Information of the other for any purpose other
than in accordance with this Agreement. Further, each party agrees that it
will not disclose Confidential Information of the other to any third party
without the advance written approval of the other party. Confidential
Information shall not include information that:

	 	 	i. at the time of its disclosure to the receiving party is available
to the public;
	 
	 	 	ii. after disclosure becomes available to the public through no fault
of the receiving party;
	 
	 	 	iii. the receiving party can show was in its possession at the time of
disclosure to it by the other;

13

 

	 	 	iv. the receiving party can show was received by it from a third party
without breach of a confidential obligation; or
	 
	 	 	v. the receiving party is compelled by application of law or legal
process to divulge, but the receiving party shall provide the
disclosing party with advance written notice before divulging the
information to enable the disclosing party to seek a protective order
or employ other means to preserve the confidential nature of that
information.

	 	 	Even if any such information becomes available to the public, each party
shall not disclose without the other’s prior written approval the fact that
such information was furnished by or originated with the other.
	 
	 	 	b. SURMODICS shall assist CABG’s regulatory compliance efforts by
maintaining and updating a Device Master File with the FDA containing such
information about the SURMODICS Reagents as is finally agreed between
SURMODICS and the FDA. SURMODICS will, at CABG’s request, provide similar
information to regulatory agencies of competent jurisdiction outside the
United States but SURMODICS shall not be obligated to disclose confidential
information to any such foreign agencies except to the extent such agencies
verify, to SURMODICS’ satisfaction, that such information shall be
maintained in secrecy. It is agreed that the information in SURMODICS’
Device Master Files with the FDA and information provided to foreign
regulatory agencies is SURMODICS Confidential Information.
	 
	 	 	c. For the purpose of this entire Paragraph 13, Confidential Information
which is specific shall not be deemed to be within any of the specified
exceptions merely because it is embraced by more general information in
such exception. In addition, any combination of features shall not be
deemed to be within any of the specified exceptions merely because
individual features are in such exception, but only if the combination
itself and its principle of operation are in such exception.
	 
	 	 	d. Notwithstanding the above, CABG specifically agrees that it will not
disclose to any Affiliates or other third party any of SURMODICS’ Know-how
relating to the manufacture of SURMODICS’ chemical reagents, the precise
chemical composition of such reagents, how such reagents are tested, how
they are quality controlled, and any other specific information concerning
the production of such reagents.
	 
	 	 	e. Except as required by law or with the advance written approval of the
other, neither party shall identify the other as the source of any
materials or information transmitted under this Agreement, nor shall the
terms of this Agreement be made known by either party to a third party.
	 
	 	 	f. The provisions of this entire Paragraph 13 shall survive termination of
this Agreement for any reason.

14

 

	 	 	g. Nothing herein shall in any way affect the obligations of the parties
under any prior secrecy or confidential disclosure agreements, including
the Prior Disclosure Agreement, which obligations shall continue in
accordance with the terms of each such agreement. However, this Agreement
supersedes the Prior Disclosure Agreement between the parties with respect
to disclosures made between the parties after the Effective Date of this
Agreement.
	 
	14.	 	ASSIGNMENT
	 
	 	 	This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns, including any
successor by merger or acquisition. Either party may assign its rights and
obligations under this Agreement to a financially responsible third party,
but only in connection with a complete transfer to the third party of the
business to which this Agreement pertains. The assigning party will so
inform the other party to this Agreement without delay of any assignment
made in accordance with the conditions of this Agreement. This Agreement
shall not otherwise be assignable by either party without the prior written
consent of the other party.
	 
	15.	 	GOVERNMENT APPROVAL
	 
	 	 	CABG shall have the sole responsibility, at CABG’s sole expense, for
obtaining any government approvals that may be required for the
investigation or marketing of Licensed Products.
	 
	16.	 	PRODUCT LIABILITY
	 
	 	 	CABG will defend and indemnify SURMODICS against all losses, liabilities,
lawsuits, claims, expenses (including attorney’s fees), costs, and
judgments incurred through personal injury, property damage, or other
claims of third parties, arising from the design, manufacture, use, or sale
of Licensed Products, unless such loss arises solely from SURMODICS’ gross
negligence or willful misconduct.
	 
	17.	 	NO WAIVER
	 
	 	 	Any waiver of any term or condition of this Agreement by either party shall
not operate as a waiver of any other or continued breach of such term or
condition, or any other term or condition, nor shall any failure to enforce
a provision hereof operate as a waiver of such provision or of any other
provision hereof.
	 
	18.	 	NOTICES
	 
	 	 	All communications or other notices required or permitted under this
Agreement shall be in writing and shall be deemed to be given (i) when
personally delivered, (ii) five days after mailing when mailed by
registered or certified mail, postage prepaid, (iii) on the day of

15

 

	 	 	sending when sent by facsimile (with recorded transmission completion), or
(iv) two days after sending when sent by reputable express courier, and
addressed as follows:

If to SURMODICS:
       License
Administration
       SurModics,
Inc.
       9924
West 74th Street
       Eden
Prairie, MN 55344
       FAX
Number: (952) 829-2743

If to CABG:
       Office
of the Chief Executive Officer
       CABG
Medical, Inc.
       14505
21st Avenue North
       Suite 212
       Minneapolis,

MN 55447
       FAX
Number: (763) 258-8008

	 	 	Either party shall have the right to change the person and/or address to
which notices hereunder shall be given, by notice to the other party in the
manner set out above.
	 
	19.	 	CAPTIONS
	 
	 	 	The captions and headings of this Agreement are for convenience only and
shall in no way limit or otherwise affect any of the terms or provisions
contained herein. This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
drafting this Agreement.
	 
	20.	 	FORCE MAJEURE
	 
	 	 	Neither party shall be liable for failure to perform as required by any
provisions of this Agreement where such failure results from a cause beyond
such party’s reasonable control such as acts of God, regulation or other
acts of civil or military authority, required approval(s) of government
bodies, fires, strikes, floods, epidemics, quarantine restrictions, riot,
delays in transportation and inabilities to obtain necessary labor,
materials, or manufacturing facilities. In the event of any delay
attributable to any of the foregoing causes, the time for performance
affected thereby shall be extended for a period equal to the time lost by
reason of such delay. The cumulative effect of all such delays under this
Paragraph 20 shall not exceed one (1) year.
	 
	21.	 	NO AGENCY
	 
	 	 	Nothing in this Agreement authorizes either SURMODICS or CABG to act as
agent for the other as to any matter, or to make any representations to any
third party indicating or implying the existence of any such agency
relationship. SURMODICS and CABG shall

16

 

	 	 	each refrain from any such representations. The relationship between
SURMODICS and CABG is that of independent contractors.
	 
	22.	 	SEVERABILITY
	 
	 	 	The provisions of this Agreement shall be deemed separable. If any
provision in this Agreement shall be found or be held to be invalid or
unenforceable, then the meaning of that provision shall be construed, to
the extent feasible, to render the provision enforceable, and if no
feasible interpretation would save such provision, it shall be severed from
the remainder of this Agreement, which shall remain in full force and
effect unless the provisions that are invalid or unenforceable
substantially impair the value of the entire Agreement to either party. In
such event, the parties shall use their respective reasonable efforts to
negotiate a substitute, valid, and enforceable provision which most nearly
effects the parties’ intent in entering into this Agreement.
	 
	23.	 	GOVERNING LAW
	 
	 	 	For all purposes under this Agreement, the parties agree and admit that
jurisdiction and venue are proper in the Federal District Court, District
of Minnesota. This Agreement shall for all purposes be governed and
interpreted in accordance with the laws of the State of Minnesota, except
for its conflict of laws provisions.
	 
	24.	 	ARBITRATION
	 
	 	 	a. In the event of any dispute concerning this Agreement, including its
interpretation, performance, breach or termination, the procedures of this
Paragraph 24 shall apply; provided, however, that either party shall have
the unrestricted right at any time to seek a court injunction prohibiting
the other party from making unauthorized disclosure or use of Confidential
Information as provided for in Paragraph 13 or unauthorized use of
SURMODICS’ Know-how as provided for in Paragraph 10(a)(iii).
	 
	 	 	b. Both parties will use good faith and reasonable efforts to resolve any
dispute informally and as soon as practical. If any such dispute is not
resolved informally within a reasonable period, then an officer from each
party, having authority to resolve the dispute, will meet at a mutually
agreeable time and place to attempt to resolve the dispute.
	 
	 	 	c. If the parties are unable to resolve a dispute as provided immediately
above, either party may submit the dispute for resolution by mandatory,
binding arbitration in the city of Minneapolis, MN (or such other place as
the parties may mutually agree) under the auspices of the American
Arbitration Association under its Commercial Arbitration Rules. Each party
shall select one independent, qualified arbitrator and the two arbitrators
so selected shall then select a third arbitrator in accordance with the
Commercial Rules. Each party reserves the right to object to any
individual arbitrator (no matter by whom chosen) who has been employed by
or affiliated with a competing organization.

17

 

	 	 	d. The arbitrators, who shall act by majority vote, shall be empowered to
decree any and all relief of an equitable nature, including but not limited
to temporary restraining orders, temporary injunctions, and/or permanent
injunctions, and shall also be able to award damages, with or without an
accounting of costs. Judgment on the award rendered by the arbitrator(s)
may be entered into any court having jurisdiction thereof. Each party
shall bear its own costs and divide other reasonable arbitrator costs
equally.
	 
	25.	 	TERMS OF ORDERS/REAGENTS
	 
	 	 	a. SURMODICS agrees to supply to CABG reasonable quantities of Reagents
(taking into consideration CABG’s actual needs for the coating of Medical
Products), pursuant to mutually agreed upon purchase orders. SURMODICS
shall not unreasonably withhold acceptance of a purchase order.
	 
	 	 	b. SURMODICS will take reasonable steps to adequately stock Reagents.
Delivery by SURMODICS of Reagents to Federal Express, or to another
reputable carrier in the United States, shall constitute delivery to CABG.
	 
	 	 	c. SURMODICS agrees that the prices to CABG for the Reagents shall be the
same as the prices that SURMODICS ordinarily offers to its other clients
for equivalent volume consumption. Each SURMODICS invoice for Reagents
shall be payable in full within forty-five (45) days after the date of the
invoice.
	 
	 	 	d. SURMODICS warrants that each shipment of Reagents supplied to CABG
shall, at the time of shipment, conform to the respective specifications
for those Reagents contained in master files submitted by SURMODICS to the
FDA and maintained by SURMODICS for purposes of premarket approval of
medical devices. SURMODICS’ sole obligation and CABG’s sole remedy, if any
shipment of Reagents does not conform to such specifications, shall be (i)
the replacement of the defective shipment of Reagents, or (ii) at CABG’s
option a refund of the price paid by CABG for the defective Reagents. CABG
shall provide SURMODICS with whatever evidence CABG has regarding the
condition of the Reagents to enable SURMODICS to determine whether the
Reagents were defective at the time of shipment.
	 
	 	 	e. The terms and conditions in this Agreement, together with additional
terms and conditions which may appear in SURMODICS’ written acceptance of
orders from time to time, shall be the exclusive contract terms between the
parties with respect to the purchase of Reagents. In the event of
inconsistencies between the terms of this Agreement and the terms of any
order or acceptance document, the terms of this Agreement shall govern.
SURMODICS objects to any terms set forth in orders for Reagents which are
different from or additional to the provisions of this Agreement, and no
such terms shall be binding upon SURMODICS unless SURMODICS specifically
consents thereto in writing.
	 
	 	 	f. CABG may perform audits of SURMODICS’ quality systems during regular
business hours and upon reasonable advance written notice to SURMODICS. A
confidentiality

18

 

	 	 	agreement between SURMODICS and any third party representative designated
by CABG to perform quality system audits shall be required prior to an
audit. CABG may review documentation provided during the course of an audit
but may not remove originals or copies of such documentation from
SURMODICS’ premises without the consent of SURMODICS. SURMODICS reserves
the right to redact highly confidential information related to its chemical
processes that may be contained in documents to be disclosed during the
course of an audit. All information reviewed or disclosed during the
course of such audit shall be treated as Confidential Information. CABG
agrees to provide SURMODICS with a copy of its final audit report.
	 
	26.	 	ENTIRE AGREEMENT
	 
	 	 	This Agreement, together with all attachments specifically referred to
herein, constitutes the entire agreement between the parties with respect
to the licenses granted herein, and no party shall be liable or bound to
the other in any manner by any warranties, representations or guarantees
except as specifically set forth herein. This Agreement shall not be
altered or otherwise amended except by an instrument in writing signed by
both parties.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date last
written below.

	 	 	 
	 Accepted by:

	 	 Accepted by:
	 SurModics, Inc.

	 	 CABG Medical, Inc.
	 
	 	 
	 /s/ Bruce J. Barclay

	 	 /s/ Manuel A. Villafana, /s/ John L. Babitt
	

	 	

	 Signature

	 	 Signature
	 
	 	 
	 Bruce J. Barclay

	 	 M.A. Villafana, John L. Babitt
	

	 	

	 Printed Name

	 	 Printed Name
	 
	 	 
	 President & Chief Operating Officer

	 	 Chairman/CEO, President
	

	 	

	 Title

	 	 Title
	 
	 	 
	 May 14, 2004

	 	 May 14, 2004
	

	 	

	 Date

	 	 Date

19

 

ATTACHMENT A

SurModics, Inc. U.S. Patents

Hemocompatable Coating formulations

	1.	 	METHOD OF IMPROVING THE BIOCOMPATIBILITY OF SOLID SURFACES

U.S. Patent No. 4,973,493 issued 11/27/1990
	 
	2.	 	BIOCOMPATIBLE COATINGS FOR SOLID SURFACES

U.S. Patent No. 4,979,959 issued 12/25/1990
	 
	3.	 	PREPARATION OF POLYMERIC SURFACES VIA COVALENTLY ATTACHING POLYMERS

U.S. Patent No. 5,002,582 issued 3/26/1991
	 
	4.	 	BIOCOMPATIBLE DEVICE WITH COVALENTLY BONDED BIOCOMPATIBLE AGENT

U.S. Patent No. 5,263,992 issued 11/23/1993
	 
	5.	 	SUBSTRATE SURFACE PREPARATION

U.S. Patent No. 5,512,329 issued 4/30/1996
	 
	6.	 	PHOTOACTIVATABLE CROSS-LINKING AGENTS CONTAINING CHARGED GROUPS FOR WATER
SOLUBILITY

U.S. Patent No. 6,077,698 issued 06/20/2000
	 
	7.	 	SURFACE COATING AGENTS

U.S. Patent No. 6,278,018 B1 issued 08/21/2001
	 
	8.	 	SURFACE COATING AGENT

U.S. Patent No. 6,603,040B1 issued 8/05/2003
	 
	9.	 	SILANE COATING COMPOSITION

U.S. Patent No. 6,706,408B2 issued 3/16/2004

Drug-Delivery Coating formulations

	1.	 	BIOACTIVE AGENT RELEASE COATING

U.S. Patent No. 6,214,901B1 issued 04/10/2001
	 
	2.	 	BIOACTIVE AGENT RELEASE COATING

U.S. Patent No. 6,344,035B1 issued 02/05/2002

20

 

ATTACHMENT B1

Graft Prosthetic Device for Coupling Vascular Members

Hemocompatable and Drug Delivery Coating Formulations

	1.	 	DEFINITIONS
	 
	 	 	The following definitions apply to the license granted under this
Attachment B1 and its operation under the Master License Agreement.
	 
	 	 	a. “Compound” means (a) any “drug” as defined in the Federal Food, Drug and
Cosmetic Act, as amended, or (b) any “biological product” as defined in the
Public Health Service Act, as amended.
	 
	 	 	b. “Drug-Delivery Coating” means chemical compositions comprised of
poly(ethylene-co-vinyl acetate) and poly(butyl methacrylate) components for
the purpose of releasing Compounds from the chemical composition.
	 
	 	 	c. “Hemocompatable Coating” means chemical coating compositions that
contain one or more of the following components: photo-reactive
polyvinylpyrrolidone copolymer, nonphoto-reactive polyvinylpyrrolidone,
photo-reactive heparin, a crosslinking agent known to the parties as PR04,
and a compound for promoting polymer-to-metal adhesion and known to the
parties as TL03, for the purpose of providing a hemocompatable surface to
the Medical Products.
	 
	 	 	d. “Human Clinical Trial” means an implant-study in humans which, at the
time of commencement of the study, is intended to generate data regarding
the safety, efficacy, or both of a Licensed Product to support a regulatory
marketing approval application. If Licensed Products are used in
“compassionate use” implants, the fiftieth (50th) such implant shall be
deemed, for purposes of this Attachment B1, as the commencement of a Human
Clinical Trial.
	 
	 	 	e. “Licensed Products” means each of the separately sold Medical Products
specifically described in this Attachment B1 that bear a Hemocompatable
Coating and a Drug Delivery Coating, and that

	 	 	A. but for the license granted herein the manufacture, use, or sale
would infringe (or a surface treatment process employed to produce a
product or a reagent used in such process would infringe) any claim of
Patent Rights, or
	 
	 	 	B. are produced through the use of SURMODICS’ Know-how.

	 	 	f. “Medical Products” means the vessel connector and flow-limiter
components of a surgically implanted graft prosthetic system for coupling
vascular members in the coronary

21

 

	 	 	vasculature, such as the vessel connector and flow-limiter components of
the devices in the illustrations in U.S. Patent 6,241,764 B1.
	 
	 	 	g. “Reagents” means (A) the photoactivatable compounds produced by
SURMODICS and licensed under this Attachment B1 to provide a Hemocompatable
Coating, and (B) poly(ethylene-co-vinyl acetate) and poly(butyl
methacrylate) compositions supplied by SURMODICS and licensed under this
Attachment B1 to provide a Drug-Delivery Coating.
	 
	 	 	h. “SURMODICS’ Technology” means (A) chemical species that have latent
reactive chemical groups for bonding synthetic polymers and/or biologically
active materials onto surfaces, into matrices, and to other molecules, (B)
chemical coating compositions for the purpose of forming medical device
coatings enabling the elution therefrom of one or more Compounds regardless
of whether such compositions are above or below another coating of any
type, (C) processes and methods used to apply or place synthetic polymers
and/or biologically active materials onto surfaces, into matrices and to
other molecules, and (D) processes and methods used to manufacture and test
such chemical species.
	 
	2.	 	GRANT OF LICENSE
	 
	 	 	a. Nonexclusive License. The license granted under this Attachment B1 is
in all respects non-exclusive.
	 
	 	 	b. Third Party Activities. For the avoidance of doubt, CABG acknowledges
that SURMODICS cannot prevent third parties (including other SURMODICS
Drug-Delivery Coatings licensees), from incorporating Compounds of interest
to CABG into Drug-Delivery Coatings. If any third party (including other
SURMODICS Drug-Delivery Coatings licensees), incorporates Compounds of
interest to CABG into Drug-Delivery Coatings, nothing in this Agreement
shall be construed as (A) requiring SURMODICS to attempt to prevent such
third parties from doing so, or (B) relieving CABG of its obligations to
SURMODICS (including without limitation the obligation to pay royalties
according to the terms of this Agreement). In addition, if any third party
incorporates Compounds of interest to CABG into Drug-Delivery Coatings,
CABG shall not bring any action against SURMODICS for having supplied, or
continuing to supply Reagents to such third party.
	 
	 	 	c. Actions by CABG. Notwithstanding Paragraph 2(b), nothing in this
Agreement shall be construed as preventing CABG from asserting against
third parties any intellectual property rights that CABG may have with
respect to the incorporation of specific Compounds into Drug-Delivery
Coatings.
	 
	 	 	d. Medical Product Representation. CABG represents and warrants that the
Licensed Products are medical devices or device-drug combination products
subject to regulation by the U.S. Food and Drug Administration under the
U.S. Food, Drug, and Cosmetic Act.

22

 

	3.	 	MILESTONE PAYMENTS
	 
	 	 	Within thirty (30) days from the date of marketing approval of Licensed
Product by the U.S. FDA, CABG shall pay SURMODICS consideration of
one million dollars ($1,000,000), which at the sole discretion of CABG may
consist of (i) cash or, (ii) the issuance of shares of common stock of
CABG, if such stock is listed on a National Market such that the
number of shares issued would be computed at A/B, whereby A would
equal one million (1,000,000) and B would equal the 20 day moving average price per share of
CABG common stock prior to such notification from the U.S. FDA of such
approval. The stock must be registered and otherwise saleable on the open
market at all times, and SURMODICS shall be free to sell all or part of
this stock at any time.

	 
	4.	 	ROYALTY PAYMENTS
	 
	 	 	a. Earned Royalty. Following marketing approval of Licensed Product by the
United States FDA, CABG shall pay SURMODICS an earned royalty of ***
percent (*%) on Net Sales of Licensed Product that occur
anywhere in the world. Prior to marketing approval of Licensed Product by
the United States FDA, CABG shall pay SURMODICS an earned royalty as
described in parts (i), (ii), and (iii) below.

	 	 	(i) Net Sales of Licensed Product in the United States.
	 
	 	 	Prior to marketing approval of Licensed Product by the United States
FDA, CABG shall pay SURMODICS an earned royalty of ***
percent (*%) on Net Sales of Licensed Product in the United States.
	 
	 	 	(ii) Net Sales of Licensed Product outside the United States between
the Effective Date and March 31, 2008
	 
	 	 	From the Effective Date to March 31, 2008, CABG shall pay SURMODICS an
earned royalty of *** percent (*%) on Net Sales of
Licensed Product.
	 
	 	 	(iii) Net Sales of Licensed Product outside the United States after
March 31, 2008
	 
	 	 	After March 31, 2008, CABG shall pay SURMODICS an earned royalty of
*** percent (*%) on Net Sales of Licensed Product
prior to marketing approval of a Licensed Product by a regulatory body
of competent jurisdiction; however, after March 31, 2008 and upon
marketing approval of Licensed Product by a regulatory body of
competent jurisdiction outside the United States, CABG shall
thereafter pay SURMODICS *** percent (*%) on Net
Sales of Licensed Product in that jurisdiction.

	 	 	b. Minimum Royalties. Following U.S. FDA approval of Licensed Product, in
no event will the per-unit earned royalty due SURMODICS for the sale of
Licensed Product be less

23

 

	 	 	than $* for each unit of Licensed Product sold by CABG and/or its
Affiliates, even if such $* per-unit royalty would exceed the earned
royalty computed in Paragraph 4(a) above. Other than as set forth in the
preceding sentence, there shall be no minimum annual or quarterly royalty
payable under this Attachment B1.
	 
	5.	 	FREEDOM TO OPERATE
	 
	 	 	a. CABG acknowledges that it has the ultimate responsibility for
determining and ensuring its freedom to operate with respect to the use of
one or more Compounds in a SURMODICS coating on Medical Products (“CABG’s
Freedom to Operate”). At CABG’s request and expense, SURMODICS will
provide technical support of CABG’s efforts to incorporate Compounds on
Medical Products. However, if SURMODICS, at any time, becomes aware of
credible substantive information (including but not limited to a claim from
a third party), that calls into question CABG’s Freedom to Operate,
SURMODICS may notify CABG. The parties promptly shall meet to discuss
whether, to what extent, and under what terms, SURMODICS will continue to
provide (A) Reagents, and/or (B) technical support of CABG’s efforts to
incorporate specific Compounds for CABG’s use on Medical Products.
SURMODICS may, in its sole discretion, with notice to CABG immediately
cease providing Reagents and/or technical support to CABG regarding
specific Compounds if CABG and SURMODICS are not able to agree upon
measures that, in SURMODICS sole discretion, will adequately ensure
SURMODICS that it will not incur liability to a third party or incur
expenses defending itself from third party claims in connection with
continued supply of Reagents and/or technical support to CABG regarding
those specific Compounds.
	 
	 	 	b. If SURMODICS elects to cease providing Reagents and/or technical support
to CABG regarding specific Compounds, SURMODICS shall have no obligation to
refund CABG any amount paid by CABG to SURMODICS under this Agreement, nor
shall SURMODICS be liable for any other costs or expenses incurred by CABG
with respect to those specific Compounds or lost opportunities by CABG.
Further, CABG shall pay SURMODICS

	 	 	(A) the invoice price for all Reagents shipped by SURMODICS to CABG
through the date of SURMODICS’ notice of cessation of supply, and
	 
	 	 	(B) all Technical Support Fees for work performed by SURMODICS through
the date it notifies CABG that SURMODICS will no longer provide
technical support to CABG with respect to specific Compounds.

	 	 	c. Exception. If CABG has on-going development activities, or commences
development activities, in connection with the use of Reagents with
Compounds other than the Compounds for which SURMODICS has served notice
under this Paragraph 5, and if CABG assures SURMODICS in writing that CABG
will not use Reagents with the Compounds in SURMODICS’ notice, then
SURMODICS will supply Reagents and/or technical support for CABG’s use with
the other Compounds. The foregoing shall not limit

24

 

	 	 	SURMODICS’ rights under this Paragraph 5 if SURMODICS thereafter becomes
aware of information (including but not limited to a claim from a third
party) that calls into question CABG’s Freedom to Operate with respect to
such other Compounds.
	 
	6.	 	PERFORMANCE
	 
	 	 	a. The license granted by SURMODICS under this Attachment B1 is subject to
the following efforts by CABG: (A) CABG must initiate at least one Human
Clinical Trial anywhere in the world by July 1, 2005 and thereafter
actively continue at least one Human Clinical Trial while awaiting
regulatory approval of Licensed Products, until all necessary clinical data
to support final application for marketing approval of Licensed products
has been obtained, (B) CABG must actively and continuously pursue
regulatory approval of Licensed Product in the U.S. and abroad, (C) CABG
must begin bona-fide commercial sales of Licensed Product anywhere in the
world by January 1, 2008, and (D) CABG must meet its minimum Technical
Support Fee obligation as set forth in Paragraph 6(b) below. SURMODICS may
terminate the license under this Attachment B1 at any time after July 1,
2005 upon ninety (90) days written notice to CABG if CABG does not meet and
continue to meet the preceding conditions.
	 
	 	 	b. CABG shall pay SURMODICS the minimum Technical Support Fee obligations
set forth in Table 6 below. SURMODICS ‘ charges for Technical Support Fees
during the periods specified in Table 6 will be drawn against CABG’s
minimum Technical Support Fee payment for that period. SURMODICS shall
invoice CABG (as set forth in Paragraph 6 of the Master License Agreement),
for SURMODICS’ technical support that exceeds CABG’s minimum Technical
Support Fee payment for the respective period in Table 6. CABG’s payments
for its minimum Technical Support Fee obligation and for technical support
that exceeds such minimum obligation during the respective period are not
creditable towards any other period and are non-refundable. Technical
Support Fees and the minimum Technical Support Fee obligations in Table 6
do not include pass-through charges to CABG for parts, materials, or
equipment purchased by SURMODICS. For example, SURMODICS will not apply
CABG’s payments for the minimum Technical Support Fee obligations in Table
6 to the cost of parts, materials, or equipment that SURMODICS uses to
build coating equipment for CABG.

Table 6

	 	 	 	 	 
	 	 	CABG’s Minimum	 	 
	 	 	Technical Support	 	 
	 	 	Fee Obligations to	 	 
	Period
	 	SURMODICS
	 	Payment Due Date

	May 1, 2004 to July 31, 2004
	 	$***	 	July 31, 2004
	August 1, 2004 to October 31, 2004
	 	$***	 	October 31, 2004
	November 1, 2004 to January 31, 2005
	 	$***	 	January 31, 2005
	February 1, 2005 to April 30, 2005
	 	$***	 	April 30, 2005

25

 

	 	 	c. If there are four (4) consecutive calendar quarters after June 30, 2007
in which CABG fails to generate earned royalties under Paragraph 4 of this
Attachment B1, then SURMODICS may terminate the license granted herein upon
ninety (90) days written notice to CABG.
	 
	 	 	d. If SURMODICS terminates the license under this Attachment B1 as provided
in this Paragraph 6, SURMODICS shall have no obligation to refund to CABG
any amount paid by CABG to SURMODICS under this Attachment B1, nor shall
SURMODICS be liable for any other costs or expenses incurred by CABG with
respect to activities undertaken by CABG regarding Drug-Delivery Coatings
on Medical Products or lost opportunities by CABG.
	 
	7.	 	USE OF SURMODICS’ TRADEMARK
	 
	 	 	a. CABG may, by the mutual agreement of the parties, use the SURMODICS
trademark identified in Attachment D (“Trademark”) to all Licensed Products
as described below. Trademark shall be applied to all packaging, labels,
tags, advertising and promotional literature, distributional, and other
materials associated with such Licensed Product. The Trademark shall be
affixed in a reasonably prominent fashion to all such Licensed Product
materials and shall be depicted by CABG in a size and clarity that equals
or exceeds that of CABG’s own trademarks that appear on such Licensed
Product materials.
	 
	 	 	b. CABG has been licensed on a worldwide, non-exclusive, royalty-free,
non-transferable basis to use the Trademark, pursuant to the Trademark
License Agreement attached to the Master License Agreement as Attachment D,
and hereby agrees to abide by all of the terms and conditions of such
Trademark License Agreement, as well as the provisions of SURMODICS’
Trademark Usage Policy and Guidelines, in the usage of the Trademark on
such Licensed Products. SURMODICS reserves the right to revoke CABG’s
Trademark License Agreement, and therefore excuse CABG from continuing to
brand the Trademark onto Licensed Product materials at any time for cause
or without cause. SURMODICS likewise reserves the right at any time to add
or subtract SURMODICS trademarks to or from the definition of Trademarks,
and therefore the obligations of this provision.
	 
	 	 	[The Licensed Product Effective Date and signatures follow immediately on
the next page.]

26

 

The Licensed Product Effective Date of this Attachment B1 shall be the date
last written below.

	 	 	 
	 Accepted by:

	 	 Accepted by:
	 SurModics, Inc.

	 	 CABG Medical, Inc.
	 
	 	 
	 /s/ Bruce J. Barclay

	 	 /s/ Manuel A. Villafana, /s/ John L. Babitt
	

	 	

	 Signature

	 	 Signature
	 
	 	 
	 Bruce J. Barclay

	 	 M.A. Villafana, John L. Babitt
	

	 	

	 Printed Name

	 	 Printed Name
	 
	 	 
	 President & Chief Operating Officer

	 	 Chairman/CEO, President
	

	 	

	 Title

	 	 Title
	 
	 	 
	 May 14, 2004

	 	 May 14, 2004
	

	 	

	 Date

	 	 Date

27

 

ATTACHMENT C

Manufacturer Agreement and SurModics’ Consent

             (“Manufacturer”) which is located at
               states, that
it has read and understands the Master License Agreement between SurModics,
Inc. and CABG Medical, Inc. and that it desires to manufacture Licensed Product
for CABG Medical, Inc. as permitted in that Master License Agreement. In
return for SurModics’ consent to manufacture Licensed Product solely for sale
by CABG Medical, Inc. and for other valuable consideration of which receipt and
sufficiency are acknowledged, Manufacturer agrees with SurModics that
Manufacturer shall faithfully carry out and be bound by the obligations imposed
on CABG Medical, Inc., including, without limitation, Paragraphs 8, 10, 11, 13,
14, 16 and 24 of the Master License Agreement.

Manufacturer further agrees:

	1.	 	SURMODICS’ Confidential Information and SURMODICS’ Know-how will
be provided only to employees at the above identified facility who
have a need to know such information for the specific purpose of
manufacturing Licensed Products.
	 
	2.	 	Photo-reactive chemical compounds manufactured by SURMODICS shall
not be transferred by Manufacturer to any third party or to any other
facility of Manufacturer without the express written permission of
SURMODICS.
	 
	3.	 	Employees and agents of Manufacturer will make no attempt to
reverse engineer, in whole or in part, any Confidential Information
(including photo-reactive compounds) of SURMODICS.

This Agreement shall be effective upon the last day written below, and shall
terminate automatically and without notice (i) upon the termination or
expiration of the relevant license under the Master License Agreement, or (ii)
at such time as the separate agreement between CABG Medical, Inc., and the
Manufacturer expires or is terminated.

	 	 	 
	Consented to by

	 	Agreed to by
	SurModics, Inc.

	 	Manufacturer
	 
	 	 
	

	 	

	Signature

	 	Signature
	 
	 	 
	

	 	

	Printed Name

	 	Printed Name
	 
	 	 
	

	 	

	Title

	 	Title
	 
	 	 
	

	 	

	Date

	 	Date

28

 

Attachment D

TRADEMARK LICENSE AGREEMENT

     THIS AGREEMENT is entered into as of the 14th day of May, 2004 (the
“Effective Date”), by and between SurModics, Inc., a Minnesota corporation
having its principal place of business at 9924 West 74th Street, Eden Prairie,
Minnesota 55344 (“SURMODICS”); and CABG Medical, Inc., a Minnesota corporation
having its principal place of business at 14505 21st Avenue North, Suite 212,
Minneapolis, MN 55447 (“CABG”).

     WHEREAS, SURMODICS is the owner of all right, title, and interest in the
SURMODICS trademark further identified in Appendix D-1 (the “Trademark”), for
use in association with the Licensed Product as defined in the Master License
Agreement between the Parties of even date;

     WHEREAS, Under the Master License Agreement, CABG may affix the Trademark
to all product brochures, advertising and promotional materials, product
packaging, labels, tags, distributional, operational, and other materials
associated with such Licensed Products (collectively “Associated Materials”);

     WHEREAS, the Parties want to further specify the terms and conditions for
CABG’s use of such Trademark.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, promises and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties covenant, promise and agree as follows:

ARTICLE I — LICENSE GRANT

     1.1 In order to enable CABG’s use of the Trademark pursuant to the Master
License Agreement, SURMODICS hereby grants CABG a worldwide, non-exclusive;
royalty-free, nontransferable licensed right to use the Trademark solely in
association with Licensed Products and Associated Materials that are
commercialized by CABG under the Master License Agreement, and strictly in
accordance with the terms of this Agreement and SURMODICS’ Trademark Usage
Policy and Guidelines, which is attached hereto as Appendix D-2. This license
does not extend to the use by CABG of the Trademark on any other products or
services, including any of CABG’s medical devices that are not coated with
SURMODICS’ coating technology.

     1.2 Except as expressly provided herein or the Master License Agreement,
no license or right is granted hereby to CABG, by implication or otherwise,
with respect to or under any trademark or patent application, trademark
registration or patent, or other proprietary right of SURMODICS.

1

 

ARTICLE II — OWNERSHIP OF THE TRADEMARK

     CABG acknowledges SURMODICS’ ownership of the Trademark, agrees that it
will do nothing inconsistent with such ownership, and that all use of the
Trademark by CABG shall inure to the benefit of and be on behalf of SURMODICS.
CABG agrees to assist SURMODICS in recording this Agreement with appropriate
government authorities. CABG also agrees that nothing in this Agreement shall
give CABG any right, title or interest in the Trademark other than the right to
use the mark in accordance with this Agreement. CABG agrees that it will not
challenge the title of SURMODICS to the Trademark, or challenge the validity of
the Trademark or this Agreement.

ARTICLE III — QUALITY STANDARDS

     3.1 CABG agrees that the nature and quality of the Licensed Product
identified by the Trademark and all related advertising, promotional,
packaging, and other uses of the Trademark by CABG must conform to standards
set by and under the control of SURMODICS, so as not to cause damage to the
reputation or image of SURMODICS or the Trademark. Before CABG uses the
Trademark in connection with any Licensed Product, CABG shall send SURMODICS
ten (10) finished samples of each Licensed Product for inspection by SURMODICS.
From time to time thereafter, at SURMODICS’ request, CABG shall provide
additional samples to SURMODICS. All samples shall be provided at no charge to
SURMODICS, and SURMODICS shall have the right to destroy such samples during
testing, or retain such samples. SURMODICS shall have the right to conduct
quality tests on the samples provided by CABG, and CABG shall promptly correct
any quality issues involving the Licensed Product at CABG’s expense. The
period for correcting such quality issues shall be stated in SURMODICS’ notice
to CABG.

     3.2 SURMODICS shall also have the right to inspect all facilities at which
CABG manufactures and/or packages, or has manufactured or packaged, the
Licensed Product in connection with which the Trademark is used to determine
whether the Licensed Product are manufactured, packaged, and handled to the
highest standards of quality. Such inspections may be performed at a
reasonable time with prior notice provided by SURMODICS, and no more frequently
than twice a year unless a prior inspection discloses a quality issue that
reasonably requires a subsequent inspection in order to determine that the
issue has been properly corrected. CABG shall institute such corrective
measures as may be prescribed by SURMODICS within the reasonable schedule
prescribed by SURMODICS.

ARTICLE IV — RIGHT TO INSPECT TRADEMARK SPECIMENS

     Before CABG makes any use of the Trademark, CABG shall provide SURMODICS
for its review and prior approval copies of all Licensed Product and Associated
Materials on which the Trademark will appear, including the colors, fonts, and
design elements associated therewith. CABG shall promptly make at its own cost
any changes in the proposed usage of the Trademark requested by SURMODICS.
SURMODICS agrees not to unreasonably withhold its approval of the proposed use.

2

 

ARTICLE V — PROHIBITED USES

     CABG shall not use the Trademark as part of CABG’s corporate name or trade
name, nor permit any third party to do so without the prior, written consent of
SURMODICS. CABG shall not adopt, use, or register any words, phrases, or
symbols, which are identical to or confusingly similar to the Trademark.

ARTICLE VI — ADDITIONAL TRADEMARKS

     SURMODICS shall have the sole right to add additional trademarks owned by
it to the definition of Trademark under this Agreement, or subtract from such
definition trademarks already added. It shall provide CABG notice of any such
changes.

ARTICLE VII — INFRINGEMENT PROCEEDINGS

     CABG agrees to notify SURMODICS of any unauthorized use of the Trademark
by others promptly as it comes to CABG’s attention. SURMODICS shall have the
sole right and discretion but no obligation to bring infringement or unfair
competition proceedings involving the Trademark against such third party.

ARTICLE VIII — TERM AND TERMINATION

     8.1 This Agreement shall commence on the Effective Date, and shall expire
on the date that SURMODICS notifies CABG in writing that it no longer is
required to use the Trademark in association with the Licensed Product and
Associated Materials.

     8.2 Either Party may terminate this Agreement if:

	(a)	 	a Party materially breaches a provision thereof,
the aggrieved Party promptly provides notice specifying in
detail the nature of the breach, the breaching Party fails to
cure such breach within thirty (30) days thereafter, and the
aggrieved Party promptly provides written notice of such
termination; or
	 
	(b)	 	one of the Parties becomes insolvent or otherwise
the subject of a voluntary or involuntary bankruptcy
proceeding.

     8.3 This Agreement may also be terminated by mutual agreement of the
Parties.

     8.4 Upon termination of this Agreement, CABG agrees to immediately
discontinue all use of the Trademark and any term confusingly similar thereto,
and to delete the same from its corporate or business name, to cooperate with
SURMODICS or its appointed agent to apply to the appropriate authorities to
cancel recording of this Agreement from all government records, to destroy all
printed materials bearing the Trademark, and that all rights in the Trademark
and the

3

 

goodwill connected therewith shall remain the property of SURMODICS.
Notwithstanding the foregoing, provided that termination of the Agreement was
not due to CABG’s uncured material breach of this Agreement, CABG shall have
the limited right within six (6) months after the termination or expiration
date of this Agreement to sell off its then existing inventory of Licensed
Product and use its then existing inventory of Associated Materials in the
commercialization of such Licensed Product.

ARTICLE IX — NEW APPLICATIONS

     CABG shall not file any new trademark applications for the Trademark, or
any name or mark that is confusingly similar in the United States or
any foreign countries with respect to any products or services.

ARTICLE X — INDEMNIFICATION AND INSURANCE

     10.1 CABG agrees to indemnify, defend and hold harmless SURMODICS and its
directors, officers, employees, distributors, representatives and agents from
any and all claims, actions, demands, losses, costs, expenses (including but
not limited to reasonable attorneys’ fees and all other expenses of litigation
and the expenses of handling claims), damages, liabilities and obligations
relating to or arising (a) from any use by CABG of the Trademark; (b) from the
Licensed Product or services provided by CABG or its agents that are identified
by the Trademark and which are brought, asserted, commenced or pursued by any
person or entity not a Party to this Agreement against SURMODICS, regardless of
actual or alleged negligence or fault by SURMODICS, including but not limited
to indemnifiable losses relating to sickness, bodily injury, personal injury,
or death of any person, property damage, business damage, or infringement of
intellectual property rights of others.

     10.2 CABG shall maintain comprehensive general liability insurance,
including products liability and contractual liability coverage, in an amount
and for a time period, which shall cover the liability assumed by CABG under
this Agreement, such amount being at least $1,000,000 per occurrence in the
aggregate. CABG shall provide SURMODICS with a certificate of insurance
evidencing the existence of such coverages. CABG shall remain responsible for
any liability above the coverage.

ARTICLE XI — NOTICE

     All notices and other communications required or permitted to be made or
given pursuant to this Agreement shall be in writing, and shall be considered
as properly given or made when personally delivered, mailed, or faxed to the
respective addresses set forth below:

	 	 	 	 	 
	

	 	If to SURMODICS:
	 	SurModics, Inc.
	

	 	 	 	9924 West 74th Street
	

	 	 	 	Eden Prairie, Minnesota 55344
	

	 	 	 	Attn: Licensing Counsel
	

	 	 	 	Fax: (952) 829-2743

4

 

	 	 	 	 	 
	

	 	If to CABG:
	 	CABG Medical, Inc.
	

	 	 	 	14505 21st Avenue North, Suite 212
	

	 	 	 	Minneapolis, MN 55447
	

	 	 	 	Attn: Office of the Chief Executive Officer
	

	 	 	 	Fax: (763) 258-8008

ARTICLE XII — GOVERNING LAW

     This Agreement shall be governed, construed and interpreted in accordance
with the common law and statutory laws of the State of Minnesota, and the
United States of America, without regard to principles of conflict of interest
laws.

ARTICLE XIII — ENFORCEMENT

     Each Party shall have the right to sue the other in connection with any
breach of this Agreement. Such suit shall be instituted and conducted in the
United States District Court, District of Minnesota. Such suit shall be
governed by the local rules of such United States District Court. In the event
of any action or proceeding regarding this Agreement, the prevailing Party
shall recover its attorneys’ fees and costs incurred as a result of such action
or proceeding.

ARTICLE XIV —AMENDMENT

     This Agreement may be changed, modified, or amended only by an instrument
in writing duly executed by each of the Parties hereto.

ARTICLE XV — ENTIRE AGREEMENT AND MODIFICATION

     This Agreement constitutes the full and complete agreement of the Parties
hereto with respect to the subject matter hereof, and supersedes any and all
prior understandings, whether written or oral, no representations having been
made by either Party except as herein specifically set forth. No rights or
obligations other than those expressly recited herein are to be implied from
this Agreement. This Agreement may not be modified, terminated, or discharged
except in a writing specifically citing this Agreement and signed by both
Parties.

ARTICLE XVI — ASSIGNMENT

     This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, but neither this Agreement, nor any
rights hereunder, are assignable directly or indirectly by either Party without
the prior, written consent of the other Party, provided, however, that this
Agreement may be assigned by any Party by operation of law without the consent
of the other Party.

ARTICLE XVII — WAIVER

5

 

     The failure of either Party to insist upon strict performance of any
obligation of the other party hereunder, irrespective of the length of time for
which such failure continues, shall not be a waiver of its right to demand
strict compliance in the future. No consent or waiver, expressed or implied by
either Party, to or of any breach or default in the performance of obligation
hereunder by the other Party shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder. Nothing in this Agreement shall prevent a Party from enforcing its
rights by such remedies as may be available in lieu of termination.

ARTICLE XVIII — COMPLIANCE WITH LAWS

     The Parties agree to comply with all state and federal laws and
regulations applicable to the Licensed Product and this Agreement in the
performance herein.

ARTICLE XIX — SEVERABILITY

     All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
contract shall be interpreted as if such invalid agreements and covenants were
not contained herein.

ARTICLE XX — FURTHER ASSURANCES

     Each Party shall cooperate with the other party including assisting in the
execution and delivery of such further and additional consents and other
documents that may be necessary or appropriate, in order to give effect to the
intent and terms of the Agreement.

ARTICLE XXI — HEADINGS

     The headings used in this Agreement are for reference only and shall not
be used to interpret this Agreement.

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed through their duly authorized and empowered representatives as of the
date set forth above.

	 	 	 
	 Accepted by:

	 	 Accepted by:
	 SurModics, Inc.

	 	 CABG Medical, Inc.
	 
	 	 
	 /s/ Bruce J. Barclay

	 	 /s/ Manuel A. Villafana; /s/ John L. Babitt
	

	 	

	 Signature

	 	 Signature
	 
	 	 
	 Bruce J. Barclay

	 	 Manuel A. Villafana, John L. Babitt
	

	 	

	 Printed Name

	 	 Printed Name
	 
	 	 
	 President & COO

	 	 Chairman/CEO, President
	

	 	

	 Title

	 	 Title

6<PAGE>
                                                                    EXHIBIT 10.1

                    GENERAL RELEASE AND SEVERANCE AGREEMENT
                                 ("AGREEMENT")

     For good and valuable consideration, receipt of which is hereby
acknowledged, and in order to resolve and settle finally, fully and completely
all matters or disputes that now or may exist between them, as set forth below,
the parties agree as follows:

     1.  PARTIES. The parties to this Agreement are Kathleen B. Oher, her heirs,
spouse, representatives, successors and assigns (hereinafter referred to
collectively as "Employee"), and Craftmade International, Inc., a Delaware
corporation, and any of its parents, predecessors, successors, subsidiaries,
affiliates or related companies, organizations, officers, directors,
stockholders, employees, attorneys and/or representatives (hereinafter referred
to collectively as the "Company").

     2.  TERMINATION FROM EMPLOYMENT WITH THE COMPANY AND TERMINATION OF
DIRECTORSHIP. The parties agree that Employee's last day of employment with the
Company was November 9, 2004, and that she was no longer employed by the Company
after that date. The parties further agree that as of November 17, 2004,
Employee voluntarily resigns her position as a director of Company in full
compliance with the provisions set forth in Paragraph 10 of this Agreement.
Employee further agrees that she will not stand for election as a director at
the Company's annual meeting of stockholders to be held on November 30, 2004,
or any adjournments thereof. Employee shall sign a letter for public disclosure
memorializing her resignation as an employee and director of Company.

     3.  CONSIDERATION. In consideration of Employee's release of claims
against the Company, as described in Paragraph 4, the Company shall pay
Employee the following consideration:

<PAGE>

          (a)  Company shall pay Employee One Hundred Seventy Three Thousand
     Nine Hundred Eighty-One and 22/100 Dollars ($173,981.22) ("Funds"), minus
     normal withholding and taxes required by law, and;

          (b)  Pursuant to the terms of this Paragraph, if Employee elects to
     continue her group health insurance coverage pursuant to COBRA, Employee
     must continue to pay that portion of the premium for her group health
     insurance that she was required to pay as an active Employee before the
     termination of her employment, but the Company agrees to pay for the
     remaining portion of COBRA coverage (excluding Employee's portion),
     provided Employee timely elects and pays her portion for COBRA coverage.
     However, Company will make such payments only for the lesser period of: (i)
     up to 18 months from November 9, 2004, or (ii) until Employee (A) obtains
     employment with another employer that provides health insurance coverage
     and (B) Employee qualifies for health insurance coverage. No provision of
     this Paragraph shall permit Employee to elect COBRA coverage for a period
     of time longer than is allowed by federal law.

Employee recognizes and agrees that she is not otherwise entitled to any of the
above-described consideration, and will receive the consideration only as a
condition of signing this Agreement. Payment of the Funds shall be made to
Employee on December 17, 2004. These monies and benefits constitute full and
final settlement of all Employee's claims, whether known or unknown, as set
forth in Paragraph 4 below.

     4.   MUTUAL RELEASE OF CLAIMS.  In consideration of the payments and
promises described herein. Employee and Company release, discharge, and forever
hold the other harmless from any and all claims, demands or suits, whether
civil or criminal, at law or in equity, known or unknown, fixed or contingent,
liquidated or unliquidated, arising or existing on or at

                                       2

<PAGE>
any time prior to the execution of this Agreement. Such released claims
include, without limitation, claims relating to or arising out of (i)
Employee's employment with the Company, (ii) Employee's separation from
employment with the Company, and (iii) all claims known or unknown that have
been asserted, or that could be asserted, by Employee against the Company, or
by Company against Employee, including, but not limited to, claims under title
VII of the Civil Rights Act of 1964, as amended, ("Title VII"), the Americans
with Disabilities Act ("ADA"), the Texas Commission on Human Rights Act
("TCHRA"), the Employee Retirement Income Security Act ("ERISA"), the Fair
Labor Standards Act ("FLSA"), the Family and Medical Leave Act ("FMLA"), the
Age Discrimination in Employment Act ("ADEA"), and any claim for sex
discrimination, sexual harassment, age discrimination or for violation of
common law, breach of contract, retaliation or for wrongful discharge or
interference with contract.

     5.   NO ADMISSION OF LIABILITY. This Agreement shall not in any way be
construed as an admission by the Company of any acts of wrongdoing or violation
of any statute, law, or legal right. Rather, the Company specifically denies
and disclaims that it has any liability to Employee, but is willing to pay the
sum described above at this time to definitively resolve once and forever this
matter and to avoid the costs, expense, and delay of litigation.

     6.   UNEMPLOYMENT BENEFITS. Company agrees that it will not contest any
application by Employee for unemployment benefits with the Texas workforce
Commission.

     7.   INDEMNIFICATION. The Company agrees that it shall indemnify, defend
and hold Employee harmless for her actions as the Chief Financial Officer and
as a Director of Company, but only as required pursuant to the certificate of
incorporation or by-laws of the company for lawful actions in the proper scope
and course of her employment.

                                       3
<PAGE>
     8.   NON-DISCLOSURE, CONFIDENTIALITY AND NON-DISPARAGEMENT. The Company
and Employee agree to the following non-disclosure and confidentiality terms:

          (a)  EMPLOYEE NON-DISCLOSURE AND CONFIDENTIALITY. Employee agrees that
     she will not discuss the facts or terms of this Agreement, other than to
     say that any dispute she had with Company has been resolved. She may,
     however, disclose the terms of this Agreement to her CPA or tax advisor,
     attorney, spouse, or as required by law. Furthermore, Employee may refer
     people to the public filing of this Agreement with the Securities and
     Exchange Commission.

          (b)  NON-DISPARAGEMENT. Employee agrees that she shall make no adverse
     comments about or otherwise disparage the Company. Employee agrees not to
     discuss, disclose, or otherwise communicate to any third party in any
     malicious, disparaging, defamatory or derogatory manner any information
     concerning the Company. Further, Employee agrees not to make or authorize
     any written or oral statement that may disparage the Company.

     9.   NEUTRAL REFERENCE. If contacted by third-parties, the Company will
provide a neutral reference regarding Employee's former employment with the
Company. All requests for a neutral reference should be directed to the
Company's Director of Human Resources.

     10.  NO DISAGREEMENT WITH THE COMPANY'S OPERATIONS, POLICIES OR PRACTICES.
The Employee, effective on the date of this Agreement, has resigned as a
Director of the Company. For and in further consideration of the benefits
provided to Employee by the Company, Employee acknowledges that she has, in her
capacity as a director, no disagreement with the Company on any matter relating
to the Company's operations, policies or practices. Furthermore, Employee will
not furnish the Company with a letter, or any other written

                                       4

<PAGE>
correspondence, describing such disagreement or the circumstances surrounding
her resignation from employment with the Company in accordance with Item
5.02(a)(2) and Item 5.02(a)(3)(iii) of Form 8-K.

     11. RETURN OF CONFIDENTIAL INFORMATION. Employer agrees to return to
Company all of the Company's Confidential Items in the Employee's possession or
subject to the Employee's control, and that Employee shall not retain any
copies, abstracts, sketches, or other physical embodiment of any of the
Company's Confidential Items. For purpose of this Paragraph, "Confidential
Information" shall mean all information that is used in Company's business and
(a) is proprietary to, about or created by Company; (b) gives Company some
competitive advantage, the opportunity of obtaining such advantage or the
disclosure of which could be detrimental to the interests of Company; (c) is not
typically disclosed to non-employees by Company, or otherwise is treated as
confidential by Company; or (d) is designated as Confidential Information by
Company or from all the relevant circumstances should be reasonably be assumed
by Employee to be confidential to Company. Confidential Information shall not
include information publicly known (other than as a result of a direct or
indirect disclosure by the Employee). The phrase "publicly known" shall mean
readily accessible to the public in a written publication.

     12. RIGHT TO CONSULT ATTORNEY AND VOLUNTARY NATURE OF AGREEMENT. Employee
represents and agrees that she has had a reasonable time to review the Agreement
and has been advised to consult with an attorney if she chooses, that she fully
understands all the provisions of the Agreement, and that she is voluntarily
entering into this Agreement.

     13. NO ASSIGNMENT OF CLAIMS. Employee and Company represent and agree that
they have not transferred or assigned, to any person or entity, any claim
involving the Company or Employee, or any portion thereof, or interest therein.

                                       5

<PAGE>
     14.  BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon the
Company and upon Employee and her heirs, administrators, representatives,
executors, successors and assigns.

     15.  CONTROLLING LAW. This Agreement shall in all respects be interpreted,
enforced, and governed under the laws of the State of Texas.

     16.  SEVERABILITY.  Should any provision of this Agreement be declared or
determined to be illegal or invalid by any government agency or court of
competent jurisdiction, the validity of the remaining parts, terms or
provisions of this Agreement shall not be affected and such provisions shall
remain in full force and effect.

     17.  ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties, and fully supersedes any and all prior agreements,
understandings, or representations between the parties pertaining to Employee's
job with the Company, the subject matter of this Agreement or any other term or
condition of the relationship between the Company and Employee. Employee
represents and acknowledges that in executing this Agreement, she does not
rely, and has not relied, upon any representation(s) by the Company or its
agents except as expressly contained in this Agreement.

     18.  RIGHT TO CONSIDER AGREEMENT. The Company and Employee agree and
acknowledge that Employee has twenty-one (21) days to consider this Agreement
prior to signing. Employee is not required, however, to wait 21 days to execute
this Agreement and may execute this Agreement at any time.

     19.  RIGHT OF REVOCATION. The Company and Employee agree that Employee may
revoke this Agreement at any time up to seven (7) days after signing.

                                       6
<PAGE>

     PLEASE READ CAREFULLY - THIS AGREEMENT INCLUDES A RELEASE OF CLAIMS

     MY SIGNATURE BELOW MEANS THAT I HAVE READ THIS RELEASE AND SEVERANCE
     AGREEMENT AND AGREE AND CONSENT TO ALL THE TERMS AND CONDITIONS CONTAINED
     IN THE AGREEMENT.

                                             EMPLOYEE

Dated: 11-18-04                               /s/ Kathleen B. Oher
       _____________________________          __________________________________
                                              Kathleen B. Oher

STATE OF TEXAS              SECTION
                            SECTION
COUNTY OF Dallas            SECTION

     Before me, a Notary Public, on this day personally appeared Kathleen B.
Oher, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that she executed the same for the purposes
and consideration therein expressed.

     Given under my hand and seal this 18th day of Nov., 2004.

        [SEAL]                                  /s/ Barb Nicholas
     BARB NICHOLAS                              ____________________________
      Notary Public
     State of Texas                             Notary Public in and for the
 My Comm. Expires 06-27-08]                     State of Texas

                                       7
<PAGE>
                              CRAFTMADE INTERNATIONAL, INC.

Dated:  11-23-04              By:    /s/ James R. Ridings
       ---------------               ------------------------------

                              Name:  James R. Ridings

                              Title: President, Chief Executive Officer and
                                     Chairman of the Board of Directors

STATE OF TEXAS            |
                          |
COUNTY OF DALLAS          |

     Before me, a Notary Public, on this day personally appeared James R.
Ridings, known to me to be the person and officer whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was the act of
the Craftmade International, Inc., and that he has executed the same on behalf
of said corporation for the purposes and consideration therein expressed, and
in the capacity therein stated.

     Given under my hand and seal of office this 23rd day of Nov., 2004,

(SEAL)                               /s/ Susan B Peresh
                                     -------------------------------------------
                                     Notary Public in and for the State of Texas

(NOTARY SEAL)

                                       8

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