Exhibit 10.1

EXECUTION VERSION

 

 

NOTE PURCHASE AGREEMENT

dated as of July 6, 2008

among

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC.,

ARES CORPORATE OPPORTUNITIES FUND III, L.P.,

NEW LEAF VENTURES I, L.P.

NEW LEAF VENTURES II, L.P.

and, solely with respect to Article II, III, IV and V,

ANGIOTECH PHARMACEUTICALS, INC.,

and

THE SUBSIDIARY GUARANTORS PARTY HERETO

 

 

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TABLE OF CONTENTS

 

ARTICLE I PURCHASE; CLOSING    2 1.1    Purchase    2 1.2    Closing    2
ARTICLE II REPRESENTATIONS AND WARRANTIES    8 2.1    Representations and
Warranties of the Parent Group    8 2.2    Representations and Warranties of
Purchasers    22 ARTICLE III COVENANTS    24 3.1    Implementation Steps by
Parent    24 3.2    Interim Operations    25 3.3    Public Announcements    29
3.4    Legend    29 3.5    Antitrust Clearances    30 3.6    Use of Proceeds   
30 3.7    Waiver of Usury    30 3.8    Further Assurances    31 3.9    Access to
Information    31 3.10    Intercompany Debt    31 3.11    Exclusivity    32 3.12
   Guarantees    32 3.13    Parent Obligations    33 3.14    Intellectual
Property Licensing    33 ARTICLE IV TERMINATION    35 4.1    Termination    35
4.2    Effects of Termination    36 ARTICLE V MISCELLANEOUS    37 5.1   
Survival; Limitation on Liability of Parent    37 5.2    Expenses    37 5.3   
Amendment; Waiver    38 5.4    Counterparts and Facsimile    38 5.5    Governing
Law    38 5.6    WAIVER OF JURY TRIAL    38 5.7    Notices    38 5.8   
Extension of Confidentiality Obligations    40 5.9    Entire Agreement, Etc   
40 5.10    Interpretation; Other Definitions    41 5.11    Captions    45 5.12
   Severability    45 5.13    No Third Party Beneficiaries    45 5.14    Time of
Essence    45

 

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5.15    Certain Adjustments    45 5.16    Specific Performance    46

 

Exhibit A:      Form of Convertible Note    Exhibit B:      Form of Registration
Rights Agreement    Exhibit C:      Form of Governance Agreement    Exhibit D:
     Restructuring Note    Exhibit E:      Form of Opinion of Sullivan &
Cromwell LLP    Exhibit F:      Form of Opinion of Borden Ladner Gervais LLP   
Exhibit G:      Form of Amended and Restated Certificate of Incorporation   
Exhibit H:      Form of Amended and Restated Bylaws    Exhibit I:      Form of
Director Indemnification Agreement    Exhibit J:      Option Plan Term Sheet   
Exhibit K:      Knowledge List    Exhibit R:      Summary of Restructuring   

 

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INDEX OF DEFINED TERMS

 

Affiliate    5.10 Agreement    Preamble agreement    5.10 Alternate Transaction
   4.2(c) Alternate Transaction Fee    4.2(a) Amended Certificate    1.2(c) Ares
   Preamble business day    5.10 Charter Documents    1.2(c) Circular    5.10
Closing    1.2(a) Closing Cash Adjustment Receivable    3.10(b) Closing Cash
Balance    3.10(b) Closing Date    1.2(a) Code    2.1(q) Commitment Fee   
4.2(a) Common Stock    Recitals Company    Preamble Company Disclosure Letter   
2.1 Company Group    5.10 Company Guarantees    Recitals Company Intellectual
Property    2.1(j) Company Material Adverse Change    5.10 Company Patent Rights
   2.1(j) Company Registered Intellectual Property    2.1(j) Confidentiality
Agreement    5.8 Consent    2.1(d) contract    5.10 Convertible Note Guarantees
   3.12 Convertible Notes    Recitals Employee Benefit Plan    5.10
Environmental Laws    2.1(k) ERISA    5.10 ERISA Affiliate    5.10 Excluded
Assets    Exhibit R Excluded Liabilities    5.10 Existing Agreement    3.14(c)
Existing Licenses    3.14(a) Financial Statements    2.1(p) Foreign Plan    5.10
GAAP    5.10 Governance Agreement    Recitals Governmental Entity    1.2(c)

 

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HSR Act

   2.1(d)

Intellectual Property Rights

   5.10

knowledge of the Company

   5.10

Labor Disputes

   2.1(i)

Law

   2.1(k)

liability

   5.10

Licensor

   3.14(b)

Lien

   2.1(a)

Losses

   5.10

Mailing Date

   5.10

Maximum Amount

   Recitals

Minimum Amount

   5.10

New Leaf

   Preamble

New Leaf I

   Preamble

New Leaf II

   Preamble

Noticed Items

   3.2(b)

Option Plans

   2.1(b)

Order

   5.10

ordinary course of business

   5.10

Owned Real Property

   2.1(g)

Parent

   Preamble

Parent/Company Agreements

   Recitals

Parent Documents

   2.1(w)

Parent Financial Statements

   2.1(p)

Parent Group

   5.10

Parent Material Adverse Change

   5.10

Parent Meeting

   5.10

Parent Notes

   Recitals

Patent Family

   3.14(b)

Pending License

   3.14(b)

person

   5.10

proceeding

   5.10

Purchase Price

   1.2(b)

Purchaser

   Preamble

Purchasers

   Preamble

Registration Rights Agreement

   Recitals

Restructuring

   5.10

Restructuring Agreements

   5.10

Restructuring Note

   Recitals

Rights

   5.10

Rights Plan

   5.10

Securities

   Recitals

Securities Act

   2.1(d)

Senior Notes

   Recitals

Solicitation Documents

   3.1(b)

Solvent

   1.2(b)

 

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Special Resolution    1.2(c) Subordinated Notes    Recitals Subsidiary    2.1(a)
Subsidiary Guarantors    Preamble Tax(es)    5.10 Tax Act    2.1(q) Tax Return
   5.10 Tender Offers    Recitals Title Document    5.10 Transaction Documents
   2.1(d) Transactions    2.1(d) Transferred Assets    5.10 WARN Act    2.1(i)

 

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NOTE PURCHASE AGREEMENT, dated as of July 6, 2008 (this “Agreement”), among
Angiotech Pharmaceutical Interventions, Inc., a Delaware corporation (the
“Company”), and, solely with respect to Articles II, III, IV and V hereof,
Angiotech Pharmaceuticals, Inc., a corporation organized under the laws of
British Columbia, Canada (“Parent”), each party identified on the signature
pages hereto under the heading “Subsidiary Guarantors” (the “Subsidiary
Guarantors”) and Ares Corporate Opportunities Fund III, L.P., a Delaware limited
partnership (“Ares”) and New Leaf Ventures I, L.P. (“New Leaf I”) and New Leaf
Ventures II, L.P. (“New Leaf II” and, together with New Leaf I, “New Leaf”)
(Ares and New Leaf, each a “Purchaser” and together, “Purchasers”).

RECITALS:

A. The Investment. The Company intends to authorize and sell to Purchasers, and
Purchasers intend to purchase from the Company, convertible promissory notes in
the aggregate original principal amount of up to $300 million (the “Maximum
Amount”) but no less than $200 million (the “Convertible Notes” and together
with the shares of common stock of the Company, par value $0.01 per share (the
“Common Stock”) issuable upon conversion of the Convertible Notes, the
“Securities”), which shall have the rights and preferences set forth in the form
of Convertible Note attached hereto as Exhibit A.

B. The Registration Rights Agreement. In connection with the Transactions,
Purchasers and the Company shall enter into a registration rights agreement (the
“Registration Rights Agreement”) in the form attached hereto as Exhibit B.

C. The Governance Agreement. In connection with the Transactions, Purchasers,
Parent and the Company shall enter into a governance agreement (the “Governance
Agreement”) in the form attached hereto as Exhibit C.

D. The Restructuring. Prior to the Closing, Parent and the Company shall
consummate the Restructuring. Assuming the Company issues the Maximum Amount,
immediately prior to the Closing Parent will hold (i) 16,250,000 shares of
Common Stock and (ii) a subordinated promissory note of the Company in the
amount of $300,000,000 less all fees and expenses paid by the Company in
connection with the Transactions, including reimbursement of expenses pursuant
to Section 5.2 (the “Restructuring Note”) in the form attached as Exhibit D. To
the extent the Company issues less than the Maximum Amount, (a) the
Restructuring Note will be reduced by $1 for each dollar of aggregate principal
amount less than the Maximum Amount actually issued and (b) the shares of Common
Stock will be increased by 50 shares of Common Stock for each $1,000 of
aggregate principal amount less than the Maximum Amount actually issued.

E. The Guarantees. At or before the consummation of the Restructuring, the
Company shall execute supplemental indentures pursuant to which the Company will
guarantee (the “Company Guarantees,” together with the Restructuring Agreements
and the Convertible Note Guarantees, the “Parent/Company Agreements”) Parent’s

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obligations under its Senior Floating Rate Notes due 2013 (the “Senior Notes”)
and 7.75% Senior Subordinated Notes due 2014 (the “Subordinated Notes” and,
together with the Senior Notes, the “Parent Notes”), to the extent that such
guarantees are required under the indentures governing the Parent Notes.

F. Repayment of the Restructuring Note. The Company shall use the proceeds from
the sale of the Convertible Notes to repay the obligations under the
Restructuring Note.

G. The Tender Offers. At the Closing, the Parent Group will use the net proceeds
(after the payment of all fees, expenses and commissions) received by the
Company pursuant to this Agreement to repurchase its Senior Notes and, solely to
the extent of the proceeds of the sale of up to 35% of the Convertible Notes
being sold to the Purchasers, the Subordinated Notes; provided that if Parent
determines to purchase additional Subordinated Notes, it may use the proceeds of
up to 100% of the Convertible Notes being sold to New Leaf to purchase the
Subordinated Notes, each as tendered by holders in response to tender offers
commenced by the Parent Group prior to the Closing (the “Tender Offers”).

NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, the parties agree as
follows:

ARTICLE I

PURCHASE; CLOSING

1.1 Purchase. On the terms and subject to the conditions set forth herein, each
Purchaser will severally purchase from the Company, and the Company will sell to
each Purchaser, the Convertible Notes set forth in Section 1.2(b)(1)(A) below.

1.2 Closing.

(a) Subject to the satisfaction or waiver of the conditions set forth in this
Agreement, (i) the closing of the purchase of the Convertible Notes referred to
in Section 1.1 by Purchasers pursuant hereto (the “Closing”) shall occur at 9:30
a.m., Los Angeles time, on the second business day after the satisfaction or
waiver (by the parties entitled to grant such waiver) of the conditions to the
Closing set forth in this Agreement (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to satisfaction or waiver
of those conditions), at the offices of Sullivan & Cromwell LLP located at 1888
Century Park East, 21st Floor, Los Angeles, California 90067 or such other date
or location as agreed by the parties. The date of the Closing is referred to as
the “Closing Date”.

(b) Subject to the satisfaction or waiver on the Closing Date of the applicable
conditions to the Closing in Section 1.2(c), at the Closing,

 

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(1) the Company will deliver to each Purchaser:

(A) a Convertible Note, executed by the Company, dated the Closing Date and
(i) in the case of Ares, registered in the name of Ares or its designee, in the
original aggregate principal amount of $260 million and (ii) in the case of New
Leaf, in the original aggregate principal amount of $40 million (registered in
the name of New Leaf I and New Leaf II in such amounts as directed by New Leaf
no later than 2 business days prior to the Closing); provided that to the extent
a portion of the proceeds of the Convertible Notes are ultimately used to
repurchase Subordinated Notes in the Tender Offers in accordance with
Section 3.6, if required by the indentures for the Parent Notes, such portion of
the foregoing Convertible Notes will bear interest at the “subordinated rate”
set forth in, and be subordinated to the extent provided in, the form of
Convertible Notes attached hereto; provided further, that the Company may elect,
by written notice delivered to each Purchaser on or prior to 5:00 p.m. pacific
time on August 22, 2008, to reduce the Maximum Amount by up to $100 million
aggregate principal amount, to be allocated among the Purchasers
proportionately. If the Company elects to issue a reduced amount of Convertible
Notes, the Purchase Price will be proportionately adjusted to take into account
the reduced aggregate principal amount of Convertible Notes;

(B) a copy of the Registration Rights Agreement executed by the Company;

(C) a copy of the Governance Agreement executed by the Company and Parent; and

(D) a certificate signed on behalf of the Company by the Chief Executive Officer
or Chief Financial Officer certifying to the effect that the conditions set
forth in Section 1.2(c)(2)(A) and (B) have been satisfied.

(E) a certificate signed on behalf of the Company and Parent by the Chief
Financial Officer in form, scope and substance reasonably satisfactory to
Purchasers certifying that, immediately before and after the Closing, each of
the Company and Parent is Solvent. For purposes of this Agreement, “Solvent”
means, with respect to any person as of any date of determination, (i) the
amount of the “present fair saleable value” of the assets of such person will,
as of such date, exceed the amount of all “liabilities of such person,
contingent or otherwise,” as of such date, as such quoted terms are generally
determined in accordance with applicable federal Laws governing determinations
of the

 

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insolvency of debtors, (ii) the present fair saleable value of the assets of
such person will, as of such date, be greater than the amount that will be
required to pay the liability of such person on its debts as such debts become
absolute and matured, (iii) such person will not have, as of such date, an
unreasonably small amount of capital with which to conduct its business or the
business and transactions in which it is about to engage and (iv) such person
will be able to pay its debts as they mature.

(2) Each Purchaser will severally deliver to the Company:

(A) Subject to proportionate reduction if the Company issues less than the
Maximum Amount, $260 million (in the case of Ares) and $40 million in the case
of New Leaf (together, the “Purchase Price”) by wire transfer of same day funds
pursuant to instructions delivered to such Purchaser by the Company no later
than two business days prior to the Closing (provided that in case Ares and New
Leaf agree to a disproportionate purchase of Convertible Notes that are
subordinated, they may vary the foregoing amounts pursuant to their Agreement
with the Company as referred to in Section 1.2(b)(1)(A), so long as the
aggregate amount being paid is not affected thereby);

(B) copies of the Registration Rights Agreement and the Governance Agreement
executed by such Purchaser; and

(C) a certificate signed on behalf of such Purchaser by a senior executive
officer certifying to the effect that the conditions set forth in
Section 1.2(c)(3)(A) and (B) have been satisfied.

(c) Closing Conditions. (1) The obligation of each party hereto to effect the
Closing is subject to the fulfillment or written waiver by such other parties
prior to the Closing of the following conditions:

(A) no provision of any applicable Law and no judgment, injunction, Order or
decree shall prohibit the Closing and no lawsuit shall have been commenced in or
before any court, administrative agency or commission or other governmental
authority or instrumentality, whether federal, state, local or foreign, or any
applicable self-regulatory organization (each, a “Governmental Entity”) seeking
to effect the foregoing;

(B) the Restructuring and the sale of the Convertible Notes to Purchasers by the
Company shall have been approved by special resolution of the shareholders of
Parent (the “Special Resolution”) as required by Section 301(b) of the Business
Corporations Act (British Columbia), and the number of shares of

 

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Parent in respect of which properly delivered notices of dissent are received
with respect to the action taken at the shareholder meeting of Parent shall not
exceed 2.5% of the outstanding Parent shares;

(C) the Tender Offers shall have been consummated on their respective terms,
subject only to the Closing hereunder and payment by Parent to the tendering
holders of the purchase price for the Parent Notes being accepted in such
offers;

(D) each of the Transaction Documents shall have been duly executed and
delivered by each of the parties thereto (other than such party) and be in full
force and effect; and

(E) any waiting period (and any extension thereof) applicable to the
consummation of the Transactions under the HSR Act shall have expired or been
terminated, and all required approvals with the foreign or multinational
antitrust or competition legislation shall have been obtained.

(2) The obligation of each Purchaser to consummate the purchase of the
Convertible Note to be purchased by it at Closing is subject to the fulfillment
or written waiver by such Purchaser prior to the Closing of each of the
following conditions:

(A) the Parent Group shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions in this
Agreement and each of the other Transaction Documents required to be performed,
satisfied or complied with by it at or before the Closing; and no member of the
Company Group shall have, or shall have agreed, authorized or committed to, do
any of the Noticed Items;

(B) the representations and warranties of the Company and Parent set forth in
this Agreement shall have been true and correct as of the date hereof and,
except for representations and warranties that speak as of a specific date other
than the Closing Date, which need only be true and correct as of such specific
date, shall be true and correct in all material respects as of the Closing Date
(other than representations and warranties that are qualified by materiality,
Company Material Adverse Change or Parent Material Adverse Change, which shall
be true and correct in all respects as of the Closing Date);

(C) such Purchaser shall have received an opinion of Sullivan & Cromwell LLP
substantially in the form attached hereto as Exhibit E, and an opinion of Borden
Ladner Gervais LLP substantially in the form attached hereto as Exhibit F;

 

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(D) Parent and the Company shall have obtained all Consents required to
consummate the Transactions, including the Consents specified in Section 2.1(f)
of the Company Disclosure Letter;

(E) Purchasers shall have received a written opinion from a nationally
recognized investment bank or valuation firm reasonably acceptable to the
Purchasers, in form and substance reasonably satisfactory to Purchasers, opining
that immediately before and immediately after giving effect to the issuance of
the Convertible Notes and the execution, delivery and performance of the
Transaction Documents and any instrument governing indebtedness of the Company
Group incurred as of the Closing Date, each of the Company and Parent is
Solvent;

(F) the Secretary of State of the State of Delaware shall have accepted the
amended and restated certificate of incorporation of the Company for filing in
the form attached hereto as Exhibit G (the “Amended Certificate”), the Company
shall have caused the amendment and restatement of the bylaws of the Company in
the form attached hereto as Exhibit H (together with the Amended Certificate,
the “Charter Documents”), and the Charter Documents shall not have been amended
or modified, and a copy of the Charter Documents (including the certificate of
incorporation certified by the Secretary of State of the State of Delaware)
shall have been delivered to Purchasers;

(G) the Board of Directors of the Company shall be comprised of three directors
appointed by Parent, three directors appointed by the Purchasers and one
independent director appointed by Parent and reasonably acceptable to the
Purchasers, in each case consistent with the terms of the Governance Agreement,
and the Company shall have entered into an indemnification agreement in the form
attached hereto as Exhibit I with each member of the Board of Directors of the
Company that is designated by the Purchasers;

(H) the employment agreements of William L. Hunter, MD, Kenneth Thomas Bailey,
Rui Avelar, Jonathan Chen, Chris J.W. Dennis, Jay Dent, Victor Diaz, David
McMasters, Tammy Neske and Jeffrey Walker, in the form such agreements existed
as of the date of this Agreement, shall have been assigned to the Company or one
of its Subsidiaries and shall have been amended to substitute the Company for
Parent;

(I) the Restructuring shall have been completed on terms and conditions
reasonably acceptable to the Purchasers and

 

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following the Restructuring the members of the Company Group will have no
liabilities other than Assumed Liabilities (as defined in Exhibit R);

(J) Subject to the provisions of Section 3.10 hereof, immediately following the
Closing (after giving effect to the cancellation or repayment of all
intercompany accounts with the Parent Group, the repayment of the Restructuring
Note and the payment of all expenses in connection with the Transactions), the
Company Group, taken as a whole, shall have an amount of unrestricted cash and
cash equivalents not less than the Minimum Amount; and

(K) the Company (or one of its Affiliates) shall have a directors’ and officers’
liability insurance policy in place covering all directors and officers of the
Company and its Subsidiaries in such amounts and on such terms as are reasonably
acceptable to the Purchasers; provided that Parent’s current directors’ and
officers’ liability insurance policy shall be deemed to be reasonably acceptable
to Purchasers if such policy covers all directors and officers of the Company
and its Subsidiaries immediately following the Closing.

(3) The obligation of the Company to effect the Closing is subject to the
fulfillment or written waiver by the Company prior to the Closing of each of the
following conditions:

(A) Each Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions in this Agreement
required to be performed, satisfied or complied with by it at or before the
Closing; and

(B) the representations and warranties of each Purchaser set forth in this
Agreement shall have been true and correct as of the date hereof and, except for
representations and warranties that speak as of a specific date other than the
Closing Date, which need only be true and correct as of such specific date,
shall be true and correct in all material respects as of the Closing Date.

(C) Each Purchaser shall have purchased and paid for the Securities being
purchased by it hereunder.

(4) Notwithstanding any other provision hereof, if New Leaf defaults in its
obligation to purchase Convertible Notes hereunder or otherwise breaches this
Agreement such that there is a failure of one of the closing conditions in this
Section 1.2(c), Ares may (but shall not be obligated to) purchase the
Convertible Notes that were to be purchased by

 

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New Leaf or otherwise make arrangements for the purchase of such Convertible
Notes by other persons reasonably satisfactory to the Company.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1 Representations and Warranties of the Parent Group. Except as set forth in
the corresponding sections or subsections of a disclosure letter of the Company
delivered to and accepted by Purchaser prior to entering into this Agreement
(provided, however, that information set forth in one section or subsection of
such letter shall be deemed to apply to each other section or subsection thereof
to which its relevance is reasonably apparent) (the “Company Disclosure
Letter”), and after giving effect to the Restructuring, each of Parent and the
Company represents and warrants to each Purchaser (i) at and as of the date
hereof and (ii) at the Closing Date, except to the extent any representation or
warranty made as of a specified date, in which case such representation or
warranty is only made as of such date, that:

(a) Organization, Good Standing and Qualification. Each member of the Parent
Group has been duly incorporated or organized and is an existing corporation or
organization, as applicable, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization, in each case with
power and authority (corporate and other) to own, lease or operate its
respective properties and assets and conduct its businesses as now being
conducted or as proposed to be conducted; and each member of the Parent Group is
duly qualified to do business as a foreign corporation or organization, as
applicable, in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of the businesses of the Company Group
requires such qualification, except for any failures to obtain or maintain any
such qualifications as would not reasonably be expected to, individually or in
the aggregate, result in a Company Material Adverse Change; all of the issued
and outstanding capital stock of each member of the Parent Group has been duly
authorized and validly issued and is fully paid and non-assessable; all the
capital stock of each member of the Company Group (other than the Company) is
owned by the Company directly or through other Subsidiaries, beneficially and of
record, and is owned free from any lien, charge, pledge, security interest,
claim, restriction or other encumbrance (each, a “Lien”), except for any such
Liens as would not individually or in the aggregate reasonably be expected to
result in a Company Material Adverse Change. The entities listed in
Section 2.1(a) of the Company Disclosure Letter are the only Subsidiaries,
direct or indirect, of the Company and Parent, as indicated, and each of the
Company and Parent has no other investment in any other person except as
described in Section 2.1(a) of the Company Disclosure Letter. Section 2.1(a)(1)
of the Company Disclosure Letter identifies all joint venture or partnership
arrangements of the Company Group, which together with all contracts with
respect thereto, makes or commits the members of the Company Group to aggregate
cash payments (or contributions of

 

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property with a fair market value) in excess of $20 million. “Subsidiary” means
with respect to any person, any other person of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions is directly or indirectly owned or controlled by such person and/or by
one or more of its Subsidiaries.

(b) Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of 100 shares of Common Stock, all of which are issued and
outstanding and owned by Parent beneficially and of record, free from any Lien.
As of the Closing Date, and after giving effect to the Restructuring and related
matters, the authorized capital stock of the Company will consist of 100,000,000
shares of Common Stock, of which (i) 16,250,000 shares will be issued and
outstanding and owned by Parent beneficially and of record, free from any Lien,
assuming the Company issues the Maximum Amount and increased by 50 shares per
$1,000 aggregate principal amount by which the Maximum Amount exceeds the
aggregate principal amount of Convertible Notes actually issued, (ii) 15,000,000
shares will be initially issuable upon conversion of the Convertible Notes,
assuming the Company issues the Maximum Amount and reduced by 50 shares per
$1,000 aggregate principal amount by which the Maximum Amount exceeds the
aggregate principal amount actually issued and (iii) 4,981,884 shares will be
reserved for issuance under the Company’s option or other plans in form and
substance reasonably acceptable to the Purchasers and Parent implementing the
terms set forth on Exhibit J (the “Option Plans”) to be adopted prior to the
Closing Date. All of the outstanding shares of Common Stock have been duly
authorized and shall be validly issued, fully paid and non-assessable, and not
issued in violation of any preemptive rights or Law. As of the Closing Date,
other than shares to be reserved for issuance under the Convertible Note or the
Company’s option or other plans to be adopted prior to the Closing Date, the
Company shall have no shares of capital stock reserved for issuance. Except as
set forth above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements, calls, commitments or rights of any
kind that obligate any member of the Parent Group to issue or sell any shares of
capital stock or other equity securities of any member of the Company Group or
any securities or obligations convertible or exchangeable into or exercisable
for, or giving any person a right to subscribe for or acquire, any capital stock
or other equity securities of any member of the Company Group, and no securities
or obligations evidencing such rights are authorized, issued or outstanding.
Except as set forth above, the Company does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter. Neither the approval,
execution, delivery or performance of the Transaction Documents, the
announcement of the Transactions nor the consummation of the Transactions will
(i) cause the Rights to become exercisable, (ii) cause the Purchasers or any of
their Affiliates or Associates (as each such term is defined in the Rights Plan)
to become an

 

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Acquiring Person (as such term is defined in the Rights Plan) or (iii) give rise
to a Stock Acquisition Date, a Separation Time, or a Flip-in Event, (as each
such term is defined in the Rights Plan).

(c) Authorization, Execution and Delivery.

(1) The Convertible Notes (and the Convertible Note Guarantees) have been duly
authorized and when issued, delivered and paid for pursuant to this Agreement
will have been duly executed, issued and delivered and will constitute valid and
legally binding obligations of the applicable members of the Parent Group
signatory thereto, enforceable against such persons in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors’ rights and to general equity principles and public policy
considerations. The shares of Common Stock of the Company issuable upon the
conversion of the Convertible Notes will be, when issued and delivered as
contemplated by the Convertible Notes, duly authorized, validly issued, fully
paid and non-assessable free and clear of all Liens and will not be subject to,
or issued in violation of, any preemptive rights.

(2) The directors of Parent have determined that the Restructuring and related
transactions are advisable and in the best interests of Parent and have approved
the Transactions, and determined to recommend approval of the Special Resolution
to shareholders of Parent.

(d) Governmental Consents. Other than under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), the Securities Exchange
Act of 1934, as amended, and pursuant to Regulation D of the Securities Act of
1933, as amended (the “Securities Act”) and pursuant to the requirements of the
Competition Act (Canada), the Investment Canada Act, Canadian securities Laws
and the Toronto Stock Exchange, no approval, consent, qualification,
ratification, variance, exemption, grant, easement, certificate, license,
franchise, permission, registration, permit, waiver or other authorization
(“Consent”), notice to, or Order of, or filing with, any Governmental Entity is
required for the execution or delivery of this Agreement, the Convertible Notes
(and the Convertible Note Guarantees), the Registration Rights Agreement, the
Parent/Company Agreements, the Governance Agreement, the Purchase Agreement, the
Confidentiality Agreement and the other agreements and instruments contemplated
hereby or thereby (collectively, the “Transaction Documents”), or the
consummation of the transactions contemplated by the Transaction Documents (the
“Transactions”), including the issuance and sale of the Convertible Notes by the
Company, or the issuance of shares of Common Stock of the Company upon the
conversion thereof, and the Restructuring.

(e) Enforceability. The Transaction Documents have been duly authorized by each
member of the Parent Group party thereto and constitute

 

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(assuming their due authorization, execution and delivery by the other parties
thereto) valid and legally binding obligations of each such person, enforceable
against each such person in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other Laws of general applicability relating to or affecting creditors’ rights
and to general equity principles and public policy considerations, and except as
the enforcement of indemnification and/or contribution provisions thereof may be
limited by applicable Law.

(f) No Violations. The execution, delivery and performance of the Transaction
Documents and the consummation of the Transactions, including the issuance and
sale of the Convertible Notes and the issuance of shares of Common Stock
issuable upon the conversion thereof, and compliance with the terms and
provisions thereof by the Company, will not conflict with, permit the
termination of, result in the creation or imposition of any Lien, result in a
breach, acceleration or violation of any of the terms and provisions of, or
constitute a default or require notice to or the Consent of any third party
under, (1) any Law applicable to the Parent Group or any of their properties, or
(2) any agreement or instrument to which any member of the Parent Group is a
party or by which any member of the Parent Group is bound or to which any of the
properties of the Parent Group is subject, or (3) the charter, articles or
by-laws (or similar organizational documents) of any member of the Parent Group,
except for any such conflicts, terminations, Liens, breaches, accelerations,
violations or defaults with respect to clause (2) above as would not
individually or in the aggregate reasonably be expected to result in a Company
Material Adverse Change. The Company has, in the case of the Convertible Notes,
full power and authority to authorize, issue and sell the Convertible Notes and
will have, in the case of shares of Common Stock issuable upon the conversion
thereof, full power and authority to authorize and issue the shares of Common
Stock of the Company issuable upon conversion of the Convertible Notes.

(g) Title to Properties; etc.

(1) Each member of the Company Group has good and marketable title in fee simple
to all real properties (together with all plants, buildings, fixtures and
improvements thereon, the “Owned Real Property”) and all other properties and
assets purported to be owned by them, in each case free from Liens,
imperfections of title, encroachments and other defects that would affect the
value thereof or interfere with the use made or to be made thereof by them,
except for any Liens and defects as would not reasonably be expected to result
in a Company Material Adverse Change. None of the Owned Real Property is subject
to a lease or is in violation of the terms of any restrictive covenant. No
breach, default or event of default, and no event that, with the giving of
notice or lapse of time or both, would constitute a breach, default or event of
default, under any Title Document, has occurred and is continuing.

 

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(2) Each member of the Company Group holds all of its leased real property and
leased personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made thereof by the Company Group.

(3) As of the Closing Date, each member of the Company Group will have all
right, title and interest to, or, in the case of property held under lease or
any other contract, a valid and enforceable right to use, all of the Transferred
Assets, which include all of the assets that are material to the conduct of the
businesses of the Company Group. The Transferred Assets are in good working
order, operating condition and state of repair, ordinary wear and tear excepted,
and are adequate for the uses to which they are being put, and are sufficient
for the conduct of the businesses of the Company Group as currently conducted
and as proposed to be conducted after the consummation of the Transactions.

(4) No single customer (or group of affiliated customers) accounts for more than
5% of the total sales of the Company Group.

(h) Government Permits. The Company Group possesses all Orders and Consents,
issued by any appropriate Governmental Entity, necessary to conduct the
businesses of the Company Group as currently operated by it (or as previously
operated by Parent) and has not received any notice of proceedings relating to
the revocation or modification of any such Order or Consent that, if determined
adversely to the Company Group, would individually or in the aggregate
reasonably be expected to result in a Company Material Adverse Change.

(i) Employment Matters.

(1) There are no collective bargaining agreements binding on any member of the
Company Group. None of the employees of the Company Group are represented by a
labor union, and, to the knowledge of the Company, no petition has been filed,
nor has any proceeding been instituted by any employee or group of employees
with any labor relations board or commission seeking recognition of a collective
bargaining representative. To the knowledge of the Company, (a) there is no
organizational effort currently being made or threatened by or on behalf of any
labor organization or trade union to organize any employees of the Company
Group, and (b) no demand for recognition of any employees of the Company Group
has been made by or on behalf of any labor organization or trade union.

(2) There is no pending or, to the knowledge of the Company, threatened employee
strike, work stoppage, slowdown, picketing or material labor dispute
(collectively, “Labor Disputes”) with respect to any employees of the Company
Group, and there have been no such Labor

 

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Disputes since June 30, 2006. The Company Group has paid or made provision for
payment of all salaries, wages, and vacation pay accrued through the Closing
Date. No member of the Company Group is engaged in any unfair employment
practice.

(3) Since June 30, 2006, (i) no member of the Company Group has (x) effectuated
a “plant closing” or “mass layoff” (each, as defined in the Worker Adjustment
and Retraining Notification Act (the “WARN Act”)) or (y) been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar Law and (ii) no employees of the
Company Group have suffered an “employment loss” (as defined in the WARN Act).

(j) Intellectual Property.

(1) The Company Group owns or possesses the right to use all Intellectual
Property Rights that are owned, used or held for use in the conduct of the
businesses of the Company Group as conducted and as currently contemplated to be
conducted (“Company Intellectual Property”). Immediately following the Closing,
no member of the Parent Group or any of its employees, directors, Affiliates or,
to the knowledge of the Company, stockholders (other than the Company Group)
will own or have a right to use any of the Company Intellectual Property. All
registrations, issuances, filings and applications for Intellectual Property
owned by the Company Group and which is issued by, registered with, renewed by
or the subject of a pending application before any Governmental Entity or
Internet domain name registrar (“Company Registered Intellectual Property”) are
valid, subsisting, enforceable, in full force and effect, and have not been or
are not, as applicable, cancelled, revoked, expired, abandoned or otherwise
terminated except as would not individually or in the aggregate reasonably be
expected to result in a Company Material Adverse Change.

(2) None of the trademarks, service marks, applications for trademarks or
applications for service marks included in the Company Registered Intellectual
Property is currently the subject of an opposition or cancellation procedure.
None of the patents and patent applications included in the Company Registered
Intellectual Property (“Company Patent Rights”) is currently the subject of any
(i) litigation, invalidity, nullity, or opposition proceeding or (ii) other
third party proceeding that would limit or prevent enforcement of the Company
Patent Rights. The Company Group has complied with all the requirements of all
applicable Governmental Entities to maintain the Registrations for the Company
Patent Rights in full force and effect, including payment of all required fees
when due except as would not individually or in the aggregate reasonably be
expected to result in a Company Material Adverse Change. Other than prior art
references cited in the applicable patent office file

 

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history of any Company Patent Rights, there are, to the knowledge of the
Company, no prior art references or prior public uses, sales, offers for sale or
disclosures that would invalidate any of the Company Patent Rights or any claim
thereof except as would not individually or in the aggregate reasonably be
expected to result in a Company Material Adverse Change. To the knowledge of the
Company, there are no written claims received by the Company Group that any of
the claims in the Company Intellectual Property is invalid or unenforceable.
There are currently no inventorship challenges, opposition, reexamination or
nullity proceedings, nor any interferences pending, and, to the knowledge of the
Company, the Company Group has not received any threats of such matters, in each
instance with respect to any Company Patent Rights.

(3) There is no material infringement by others of any Company Intellectual
Property. The Company Group has secured valid and binding assignments for all
rights from employees, consultants, contractors and other parties who
contributed to the creation or development of any Company Intellectual Property
by or on behalf of the Company, and all material patent assignments have been
filed and recorded in all relevant jurisdictions with the appropriate
Governmental Entities. Except as set forth in Section 2.1(j)(3) of the Company
Disclosure Letter, (i) with respect to Company Intellectual Property in which
the Company has an ownership interest, such interest is exclusive; and (ii) no
member of the Company Group has exclusively licensed any patent, copyright,
trademark or trade secret included in the Company Intellectual Property to any
third party other than rights granted to distribute or sell exclusively in a
particular territory.

(4) To the knowledge of the Company, the Company Group is not infringing,
misappropriating or otherwise violating any Intellectual Property Rights of any
other person and neither the Company Group nor the Company has received notice
from any person claiming otherwise. To the knowledge of the Company, there are
no facts or circumstances that would reasonably be anticipated to result in any
such claim.

(5) Since January 1, 2005, no member of the Company Group has received written
notice that it is in material breach of or default under any license or other
agreement relating to any Company Intellectual Property. The consummation of the
Transactions will not result in any loss or impairment of the Company Group’s
rights to own or use any Company Intellectual Property. Except as set forth in
the written agreements the Company made available to the Purchasers by posting
to the virtual datasite or otherwise provided to the Purchasers, no member of
the Company Group is obligated to pay any amount, whether as a royalty, license
fee or other payment, to any person in order to use any of the Company
Intellectual Property.

 

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(6) The Company Group takes commercially reasonable efforts to protect its trade
secrets.

(k) Environmental. No member of the Company Group (i) is or has been in
violation of any federal, state, local or foreign law, statute or ordinance,
common law, or any rule, regulation, standard, judgment, Order, writ,
injunction, decree, arbitration award, agency requirement, license or permit of
any Governmental Entity (each, a “Law”), relating to the use, disposal or
release of hazardous or toxic substances or relating to the pollution,
protection or restoration of the environment, or human exposure to hazardous,
toxic or other regulated substances (collectively, the “Environmental Laws”),
(ii) owns or operates (or has owned or operated) any real property contaminated
with any substance that would create liability under or be subject to
remediation or any other response or action under any Environmental Laws,
(iii) is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or (iv) is subject to or to the Company’s knowledge
threatened with any claim relating to any Environmental Laws, which violation,
contamination, liability or claim would individually or in the aggregate
reasonably be expected to result in a Company Material Adverse Change; and the
Company Group has no knowledge of any pending investigation which would
reasonably lead to such a claim.

(l) Litigation, etc.

(1) There are no pending actions, suits or proceedings against or affecting the
Parent Group or any of its properties that, if determined adversely to the
Parent Group, would individually or in the aggregate reasonably be expected to
result in a Company Material Adverse Change, or would materially and adversely
affect the ability of the Company to perform its obligations under the
Transaction Documents; and no such actions, suits or proceedings have been
threatened in writing or, to the knowledge of the Company, are contemplated or
have been threatened verbally.

(2) Each member of the Parent Group (i) is, and has been since any date for
which an applicable statute of limitations has not expired, in compliance in all
material respects with each material Law applicable to it or the operation,
conduct or ownership of the businesses of the Company Group or the properties
used therein, and (ii) has no liability under any such Law, other than (A) any
such liability to the extent a member of the Company Group is entitled to
recover the amount thereof from an existing escrow and (B) any such liability
that, individually or in the aggregate, would not reasonably be expected to
result in a Company Material Adverse Change. No member of the Company Group is
in violation or default under its organizational documents.

(3) No member of the Parent Group, nor, to the knowledge of the Company, any
other person acting on behalf of the Parent Group has,

 

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directly or indirectly, given or agreed to give any money, gift or similar
benefit to (A) any official or employee of any Governmental Entity or (B) any
other person who was, is, or may be in of a position to help or hinder the
business of any of them (or assist in connection with any actual or proposed
transaction), in the case of this clause (B) other than payments in compliance
with applicable Law made in the ordinary course of business.

(4) No member of the Parent Group is subject to regulation under the Investment
Company Act of 1940, the Federal Power Act, the Interstate Commerce Act, the
Commodity Exchange Act or to any other Law limiting its ability to incur
indebtedness for borrowed money or consummate the Transactions.

(m) Absence of Certain Changes. Since May 31, 2008, there has been no Company
Material Adverse Change or Parent Material Adverse Change.

(n) Material Contracts. There is no violation or default by any member of the
Company Group and, to the knowledge of the Company, any other person under any
contract to which any member of the Parent Group is a party other than
violations or defaults that would not reasonably be expected to, individually or
in the aggregate, have a Company Material Adverse Change.

(o) Ordinary Course. Except as otherwise contemplated by the Transaction
Documents, since January 1, 2008, (i) the businesses of the Company Group have
been conducted in the ordinary course of business and (ii) without limiting the
foregoing, there has not been any action (with respect to any member of the
Company Group) that, if it had been taken after the date hereof, would have
required the consent of Purchasers under Section 3.2.

(p) Financial Statements.

(1) The Company has furnished to Purchasers its audited combined consolidated
balance sheets as of December 31, 2007 and 2006 and its audited combined
consolidated statements of operations, invested equity and cash flows for the
fiscal years ended December 31, 2007, 2006 and 2005, together with the notes
thereto, and the unaudited combined consolidated balance sheet as of May 31,
2008 and its unaudited combined consolidated statements of operations, invested
equity and cash flows for the five months ended May 31, 2008 (the “Financial
Statements”). The Financial Statements disclose all liabilities of the Company
Group required to be disclosed thereon (or in the Notes thereto) in accordance
with GAAP, except for liabilities that have arisen after May 31, 2008 in the
ordinary course of business (none of which liabilities results from, arises out
of, relates to, is in the nature of or was caused by any breach of contract,
accelerated payment, breach of warranty, tort infringement or violation of any
applicable Law). The Financial Statements: (1) have been prepared in good faith
by the Company in accordance with GAAP on a

 

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basis consistent with the audited financial statements of Parent for such
periods; (2) were prepared using reasonable estimates and assumptions that
provide a reasonable basis for presenting the historical basis of assets and
liabilities of the Company Group; (3) give appropriate effect to such
assumptions; and (4) present fairly in all material respects the financial
condition and results of operations and cash flows of the Company Group as of
such dates and for such periods on the basis of such assumptions.

(2) Parent has furnished to Purchasers (i) its audited consolidated balance
sheets as of December 31, 2007 and 2006 and its audited consolidated statements
of operations, stockholder’s equity and cash flows for the fiscal years ended
December 31, 2007, 2006 and 2005, together with the notes thereto, and (ii) the
unaudited consolidated balance sheets of Parent and its Subsidiaries dated as of
May 31, 2008 and the related statements of operations, stockholder’s equity and
cash flows for the five months ended May 31, 2008 (the “Parent Financial
Statements”). The Parent Financial Statements disclose all liabilities of Parent
and its Subsidiaries required to be disclosed thereon (or in the Notes thereto)
in accordance with GAAP, except for liabilities that have arisen after May 31,
2008 in the ordinary course of business (none of which liabilities results from,
arises out of, relates to, is in the nature of or was caused by any breach of
contract, accelerated payment, breach of warranty, tort infringement or
violation of any applicable Law). The Parent Financial Statements (1) have been
prepared in good faith by Parent in accordance with GAAP; and (2) present fairly
in all material respects the financial condition and results of operations and
cash flows of Parent and its Subsidiaries as of such dates and for such periods.

(q) Taxes.

(1) The Parent Group has filed or has had filed on its behalf all Tax Returns
required to be filed under applicable Laws. All such Tax Returns were accurate
and complete in all material respects and prepared in substantial compliance
with all applicable Laws, and disclose all positions therein that could
reasonably be expected to give rise to a substantial understatement of Tax
within the meaning of Section 6662 of the Code (or any similar Law). All Taxes
owed by the Parent Group have been paid or have adequate reserves with respect
thereto maintained on its books in accordance with GAAP. The Parent Group is not
the beneficiary of any extension of time within which to file any Tax Return. No
written claim has been made by a Governmental Entity in a jurisdiction where the
Parent Group does not file Tax Returns that any member of the Parent Group is or
may be subject to taxation by that jurisdiction. There are no Liens for Taxes
(other than for Taxes not yet due and payable, or that are being contested in
good faith by appropriate proceedings if adequate reserves with respect thereto
are maintained on its books in accordance with GAAP) upon any assets of the
Parent Group. The Parent Group has

 

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(i) withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other person, and all Forms W-2 and 1099 (or any other
form) required with respect thereto have been properly completed and timely
filed, and (ii) collected all sales, use and value added taxes required to be
collected, and has remitted such amounts to the appropriate Governmental Entity
and has furnished properly completed exemption certificates for all exempt
transactions.

(2) To the knowledge of the Company, there is no dispute or claim concerning any
liability for Taxes of the Parent Group claimed, raised, or threatened by any
Governmental Entity. Section 2.1(q) of the Company Disclosure Letter lists all
Tax Returns that currently are the subject of audit. The Company has made
available to the Purchasers by posting to the virtual datasite, physical
dataroom or delivered accurate and complete copies of all Tax Returns,
examination reports, notices of proposed adjustments, and statements of
deficiencies assessed against or agreed to by the Parent Group for taxable
periods ending on or after December 31, 2003.

(3) No member of the Parent Group (i) has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, (ii) is a party to or bound by any Tax allocation or
sharing agreement, and is not otherwise required to indemnify any other person,
(iii) has, for taxable periods ending on or after December 31, 2004, been a
member of an affiliated group (within the meaning of Section 1504(a) of the
Internal Revenue Code (the “Code”) or any similar group defined under a similar
Law) other than a group of which Angiotech Pharmaceuticals (US), Inc. or
American Medical Instruments Holdings, Inc. were the parent filing a
consolidated Tax Return, or (iv) has any liability for the Taxes of any person
(other than in the case of the Company, itself and any of its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar Law), as a transferee
or successor, by contract, or otherwise.

(4) No member of the Company Group (i) has been subject to a Governmental Entity
initiating or proposing any adjustment or change in accounting method (including
any method for determining reserves for bad debts) that could reasonably be
expected to affect income or deductions in a post-Closing Tax period, (ii) will
be required to include, in post-Closing Tax periods, any income amount resulting
from a change in accounting method, installment sale, inter-company transaction,
open transaction or excess loss account or similar type of adjustment, in each
case, entered into, elected or adopted prior to the Closing, (iii) has been a
United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code, (iv) has engaged in a reportable

 

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transaction described in Treasury Regulation Section 1.6011-4 (or any similar
Law), (v) has distributed stock of another person, or has had its stock
distributed by another person, in a transaction that was purported to be or
intended to be governed in whole or in part by Section 355 or Section 361 of the
Code (or any similar Law), (vi) has a contractual obligation to pay the amount
of Tax benefits or Tax refunds realized or received by the Parent Group (or an
amount in reference to any such Tax benefits or Tax refunds realized or received
by the Parent Group) to any other person(s), or (vii) is or has ever been a
party to a transaction or agreement that is in conflict with the Tax rules on
transfer pricing in any relevant jurisdiction.

(5) The unpaid taxes of the Company Group (i) did not, as of December 31, 2007,
exceed the reserve for liabilities for unpaid Taxes (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) and (ii) do not exceed such reserve as adjusted for the passage of time
through the Closing Date in accordance with past custom and practice of the
Parent Group in filing their Tax Returns. Since December 31, 2007, no member of
the Parent Group has incurred any liability for Taxes arising from extraordinary
gains or losses, as that term is used in GAAP.

(6) There are no circumstances existing which could result in the application of
section 17, section 78, section 79, or sections 80 to 80.04 of the Income Tax
Act (Canada) (the “Tax Act”) (or any similar Law) to any member of the Parent
Group.

(7) No member of the Parent Group has acquired property or services from, or
disposed of property or provided services to, a person with whom it does not
deal at arm’s length (within the meaning of the Tax Act or any similar Law) for
an amount that is other than the fair market value of such property or services,
nor has any member of the Parent Group been deemed to have done so for the
purposes of the Tax Act (or any similar Law). For all transactions between any
member of the Parent Group and any non-resident person where such parties do not
deal at arm’s length, for the purposes of the Tax Act (or any similar Law),
during a taxation year commencing after 1998 and ending on or before the Closing
Date, any such member of the Parent Group has made or obtained records or
documents that satisfy the requirements of paragraphs 247(4)(a) to (c) of the
Tax Act. No member of the Parent Group has entered into an agreement
contemplated by section 191.3 of the Tax Act.

(r) Employee Benefit Plans. The Company has made available to the Purchasers
each (1) Employee Benefit Plan and (2) Foreign Plan. No Employee Benefit Plan is
subject to Title IV of ERISA or is a multiemployer welfare plan. No member of
the Parent Group maintains or has any obligation to contribute to

 

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an Employee Benefit Plan or Foreign Plan that provides retiree medical or
retiree life benefits, except to the extent that any such obligations would not
reasonably be expected to, individually or in the aggregate, result in a Company
Material Adverse Change. Each Employee Benefit Plan is in compliance with its
terms and all applicable Laws, except to the extent that any such noncompliance
would not reasonably be expected to, individually or in the aggregate, result in
a Company Material Adverse Change. Except as otherwise disclosed in
Section 2.1(r) of the Company Disclosure Letter, the consummation of the
Transactions will not, either alone or in combination with another event,
(i) entitle any person to severance pay, unemployment compensation or any other
payment, (ii) accelerate the time of payment or vesting, or trigger any payment
or funding, through a grantor trust or otherwise, or increase the amount of,
compensation or benefits due to any person or trigger any other material
obligation pursuant to, any Employee Benefit Plan or Foreign Plan, (iii) result
in any breach or violation of, or a default under, any Employee Benefit Plan or
Foreign Plan, or (iv) result in any payment to any person that would be an
“excess parachute payment” to a “disqualified individual” as those terms are
defined in Section 280G of the Code, without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future.

(s) Brokers and Finders. Except for fees payable by the Parent in an aggregate
amount not to exceed $18,000,000 to be paid to Goldman, Sachs & Co. pursuant to
the letter agreements between Parent and Goldman, Sachs & Co., dated March 18,
2008 and March 5, 2008 and between Parent and Merrill Lynch Canada Inc., dated
as of May 14, 2008, true and correct copies of which have been delivered to the
Purchasers, no member of the Parent Group nor any of their respective officers,
directors, employees or agents has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder’s fees, and no broker or finder has acted directly or indirectly for the
Parent Group, in connection with the Transaction Documents or the Transactions.
Parent shall indemnify the Company and the Purchasers and hold them harmless
from and against any Losses suffered or incurred by any of them directly or
indirectly as a result of the representations and warranties in this clause
(s) being untrue in any respect.

(t) Private Offering. No registration under the Securities Act (or qualification
under Canadian securities Laws) of the Securities is required for the sale of
the Securities contemplated hereby, assuming the accuracy of Purchaser’s
representations, and compliance by Purchaser with the covenants set forth, in
the Transaction Documents.

(u) Conflicts of Interest and Related Party Transactions.

(1) After giving effect to the Restructuring, no member of the Parent Group nor
any of their respective Affiliates (excluding members of the Company Group)
directly or indirectly (x) is a supplier of, creditor of, or has an existing
contractual relationship (except in their capacity as a

 

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stockholder, director, officer or key employee pursuant to the Transaction
Documents) with any member of the Company Group or (y) has any interest in any
asset of the Company Group.

(2) After giving effect to the Restructuring, no member of the Company Group is
a party to any contract with any member of the Parent Group or its Affiliates
(excluding members of the Company Group) other than the Transaction Documents.

(3) After giving effect to the Restructuring, no member of the Parent Group or
any of their Affiliates (other than the Company Group) shall own or have any
right to any asset necessary to the conduct of the businesses of the Company
Group.

(v) Insurance. The Company has delivered to Purchasers accurate and complete
copies of all policies of insurance to which any member of the Parent Group is a
party or under which the businesses of the Company Group are or have been
covered at any time since March 23, 2006. Each insurance policy currently in
effect and covering the property, business or employees of the Company Group is
legal, valid, binding and enforceable in accordance with its terms and is in
full force and effect, and no member of the Company Group is in breach or
default (including any such breach or default with respect to the payment of
premiums or the giving of notice), and no event has occurred that, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination or modification, of any such insurance policy.

(w) Full Disclosure. Since December 31, 2005, Parent has timely filed all forms,
reports, schedules, statements and other documents required to be filed with
(i) Canadian securities regulatory authorities, and (ii) the Securities and
Exchange Commission (all such forms, reports, schedules, statements and other
documents are collectively referred to as the “Parent Documents”). Except to the
extent corrected in any amendment thereto filed after the date thereof and prior
to June 30, 2008 (which corrections would not, in the aggregate, reasonably be
expected to have a Company Material Adverse Change), no Parent Document at the
time filed (x) contained any misrepresentation, or (y) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not misleading in light of the circumstances under which they were made; and
each Parent Document complied in all material respects with the requirements of
applicable Laws. Parent has not filed any confidential material change report
with any Canadian securities authority or regulator or any stock exchange that
at the date of this Agreement remains confidential.

(x) No Liabilities. Immediately following the Closing, the Company Group will
have no liabilities other than (i) liabilities under the Transaction Documents,
(ii) the liabilities reflected on the as adjusted balance sheet of Spinco
included in Annex I to Exhibit R hereto that are unpaid and not delinquent; and

 

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(iii) other liabilities that could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Change. Parent shall
indemnify the Company and the Purchasers and hold them harmless from and against
any Losses suffered or incurred by any of them directly or indirectly as a
result of the representations and warranties in this Section 2.1(x) being untrue
in any respect.

For purposes of the foregoing representations and warranties in this Section 2.1
(and related definitions), in the case of any reference to the Company Group, or
the businesses of the Company Group, such representations and warranties shall
be deemed to include a reference to such applicable businesses and other
activities as conducted under the ownership of Parent, as predecessor to the
Company, prior to completion of the Restructuring and any reference to
Subsidiaries of the Company shall include all Subsidiaries of Parent prior to
the Restructuring that will be Subsidiaries of the Company after completion of
the Restructuring (i.e., pro forma as if such Restructuring had already
occurred).

2.2 Representations and Warranties of Purchasers. Each Purchaser, severally and
not jointly, hereby represents and warrants to the Company that:

(a) Organization and Authority. Such Purchaser is duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and where failure to be so qualified
would be reasonably expected to materially and adversely affect such Purchaser’s
ability to perform its obligations under this Agreement or consummate the
Transactions on a timely basis, and Purchaser has the corporate or other power
and authority to own its properties and assets and to carry on its business as
it is now being conducted.

(b) Authorization.

(1) Such Purchaser has the corporate or other power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by such Purchaser and the
consummation of the Transactions have been duly authorized by Purchaser’s board
of directors, general partner or managing members, as the case may be, and no
further approval or authorization by any of its partners or other equity owners,
as the case may be, is required. This Agreement has been duly and validly
executed and delivered by such Purchaser and assuming due authorization,
execution and delivery by each party hereto other than such Purchaser, is a
valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles.

 

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(2) The execution, delivery and performance of the Transaction Documents,
purchase of the Convertible Note and the receipt of shares of Common Stock
issuable upon the conversion thereof, and compliance with the terms and
provisions thereof by such Purchaser, will not conflict with, permit the
termination of, result in a breach, acceleration or violation (whether with or
without the passage of time) of any of the terms and provisions of, (1) any Law
applicable to Purchaser or any of its properties, or (2) any agreement or
instrument to which such Purchaser is a party or by which Purchaser is bound or
to which any of the properties of such Purchaser is subject, or (3) the charter
or by-laws (or similar organizational documents) of such Purchaser; and such
Purchaser has, in the case of the Convertible Note, full power and authority to
purchase the Convertible Note and will have, in the case of shares of Common
Stock issuable upon the conversion thereof, full power and authority to receive
the shares of Common Stock of the Company issuable upon conversion of the
Convertible Note.

(3) Other than under the HSR Act, and pursuant to Regulation D of the Securities
Act and pursuant to the requirements of the Competition Act (Canada), the
Investment Canada Act, Canadian securities Laws and the Toronto Stock Exchange,
no Consent, notice to, or Order of, or filing with, any Governmental Entity is
required for execution, delivery and performance of, or the consummation by such
Purchaser of the Transactions.

(c) Purchase for Investment. Such Purchaser acknowledges that the Convertible
Note has not, and the securities issuable upon conversion of the Convertible
Note will not, at the time of issuance, have been, registered under the
Securities Act or under any state securities Laws or qualified for distribution
pursuant to Canadian securities Laws. Such Purchaser (1) is acquiring the
Securities solely for investment with no present intention to distribute any of
the Securities to any person in violation of applicable Law, (2) will not sell
or otherwise dispose of any of the Securities, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities Laws, (3) has such knowledge and experience in
financial and business matters and in investments of this type that it is
capable of evaluating the merits and risks of its investment in the Securities
and of making an informed investment decision, (4) is an “accredited investor”
(as that term is defined by Rule 501 of the Securities Act), and (5) is
purchasing the Securities as “principal” and is an “accredited investor” for
purposes of National Instrument 45-106 of the Canadian Securities
Administrators.

(d) Access to Information. Such Purchaser acknowledges that documents, records
and books pertaining to an investment in the Securities have been made available
for inspection by Purchaser and Purchaser’s attorneys, accountants and financial
advisors. Such Purchaser also represents that it has had an opportunity to ask
questions of and receive answers from the Company

 

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regarding the Company and the terms and conditions of the sale of the
Securities. Such Purchaser has not relied on any oral representation, warranty
or other information (other than any representation or warranty expressly set
forth in this Agreement) by the Company or Parent or any officer, employee or
agent of the Company or Parent in connection with the sale of the Securities.

(e) Financial Capability. At Closing such Purchaser will have available funds
necessary to consummate the Closing on the terms and conditions contemplated by
this Agreement.

(f) Brokers and Finders. Except pursuant to the letter agreement between
Affiliates of Ares and UBS Securities LLC, a true and correct copy of which has
been delivered to the Company, no Purchaser nor its Affiliates, any of their
respective officers, directors, employees or agents has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder’s fees, and no broker or finder has acted directly
or indirectly for Purchaser, in connection with the Transaction Documents or the
Transactions, in each case, whose fees the Company would be required to pay.

ARTICLE III

COVENANTS

3.1 Implementation Steps by Parent.

(a) Parent shall lawfully convene and hold the Parent Meeting for the purpose of
considering the Special Resolution as soon as reasonably practicable, and in any
event, on or before October 31, 2008.

(b) As promptly as reasonably practicable Parent shall prepare the Circular
together with all other documents required by applicable Laws in connection with
the approval of the Special Resolution by the shareholders of Parent at the
Parent Meeting (together with the Circular, the “Solicitation Documents”).
Parent shall give the Purchasers no less than 5 business days to review and
comment on each of the Solicitation Documents (including all preliminary forms
thereof to be filed with any Governmental Entity), which shall be reasonably
satisfactory to the Purchasers before they are filed or distributed to
shareholders of Parent; provided that Purchasers shall provide comments to
Parent as promptly as reasonably practicable.

(c) Parent shall cause the Solicitation Documents to be sent to each shareholder
of Parent and filed as required by applicable Laws on or before the Mailing
Date.

(d) Parent shall cause the Circular to contain the recommendation of the
Directors of Parent to the effect that the shareholders of Parent vote in favor
of the Special Resolution. Such Board may withdraw or make a change or
modification of this recommendation if and only if (i) Parent and the Company

 

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have complied with the obligations contained in Section 3.11, (ii) Parent or the
Company receives a proposal relating to an Alternate Transaction that such Board
determines in good faith is reasonably likely to be materially more favorable to
Parent and its stockholders than the Transactions, and (iii) such Board receives
a written opinion from a Canadian law firm of national recognized reputation
that the failure to make such withdrawal, modification or change would be
inconsistent with its fiduciary duties to its stockholders under applicable Law.

(e) Parent shall ensure that (i) the Solicitation Documents materially comply
with all applicable Laws and (ii) without limiting the generality of the
foregoing, (x) no Solicitation Document contains any misrepresentation or any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which they are made (other than with
respect to any information relating to and provided by the Purchasers in writing
specifically for inclusion therein) and (y) the Circular materially complies
with the applicable requirements of Canadian securities laws and provides the
shareholders of Parent with information in sufficient detail to permit them to
form a reasoned judgment concerning the matters to be placed before them at the
Parent Meeting.

(f) Parent shall promptly notify the Purchasers if at any time before or after
the Closing it becomes aware that any Solicitation Document contains any
misrepresentation or any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading in light of the circumstances in which they are
made, or that otherwise requires an amendment or supplement to any Solicitation
Document or such application or registration statement. In any such event, the
Purchasers and Parent shall cooperate in the preparation of any required
supplement or amendment to the Solicitation Documents and, if required by
applicable Law, shall cause the same to be distributed to the shareholders of
Parent or filed with the applicable Governmental Entity.

(g) Parent shall diligently do all such acts and things as may be necessary to
comply with National Instrument 54-101 of the Canadian Securities Administrators
in relation to the Parent Meeting and, without limiting the generality of the
foregoing, shall, in consultation with the Purchasers, use all reasonable
efforts to benefit from the accelerated timing contemplated by such policy.

3.2 Interim Operations.

(a) Each of Parent and the Company covenants and agrees as to itself and its
Subsidiaries that, on and after the date of this Agreement and prior to the
Closing (unless Purchaser shall otherwise approve in writing, and except as
otherwise expressly contemplated by this Agreement), other than any action
expressly set forth in the Restructuring Agreements, the businesses of the

 

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Company Group shall be conducted in the ordinary and usual course and, to the
extent consistent therewith, it and its Subsidiaries shall use their respective
reasonable efforts to maintain the value of its business as a going concern,
preserve their business organizations intact and maintain existing relations and
goodwill with Governmental Entities, customers, vendors, creditors, lessors,
employees and business associates and keep available the services of its and its
Subsidiaries’ present employees and agents. Without limiting the generality of,
and in furtherance of, the foregoing, from the date of this Agreement until the
Closing, except (A) as otherwise expressly required by this Agreement,
(B) actions expressly set forth in the Restructuring Agreements, (C) as the
Purchasers may approve in writing, or (D) as set forth on Section 3.2 of the
Company Disclosure Letter, each of Parent and the Company shall not and shall
not permit any member of the Parent Group to directly or indirectly:

(1) adopt or propose any change in its certificate of incorporation or bylaws or
other applicable governing instruments;

(2) merge or consolidate any member of the Company Group with any other person,
except for any such transactions among wholly owned Subsidiaries of the Company,
or restructure, reorganize or completely or partially liquidate or otherwise
enter into any agreements or arrangements imposing material changes or
restrictions on its assets, operations or businesses;

(3) acquire assets outside of the ordinary course of business from any other
person with a value or purchase price in the aggregate in excess of $10,000,000
in any transaction or series of related transactions;

(4) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the
issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee
or encumbrance of, any shares of capital stock of (i) any member of the Parent
Group (other than (x) the issuance of shares by a wholly owned Subsidiary of the
Company to the Company or another wholly owned Subsidiary of the Company and
(y) in the case of Parent, the issuance and sale of common stock of Parent with
an aggregate value of $40 million or less after the final record date for the
meeting to consider the Special Resolution and for which Parent uses its
reasonable best efforts to limit to existing stockholders of Parent), or
(ii) securities convertible or exchangeable into or exercisable for any shares
of such capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock or such convertible or exchangeable
securities;

(5) create or incur any Lien material to the Company or any of its Subsidiaries
not incurred in the ordinary course of business consistent with past practice;

 

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(6) make any loans, advances, guarantees or capital contributions to or
investments in any person (other than, with respect to the Company, between or
among the Company and any of its direct or indirect wholly owned Subsidiaries
or, with respect to Parent, between or among Parent and any of its direct or
indirect wholly owned Subsidiaries other than the Company Group) in excess of
$5,000,000 in the aggregate;

(7) declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its capital stock
(except, with respect to the Company, for dividends paid by any direct or
indirect wholly owned Subsidiary of the Company to the Company or to any other
direct or indirect wholly owned Subsidiary or, with respect to Parent, for
dividends paid by any direct or indirect wholly owned Subsidiary of Parent
(other than the Company Group) to Parent or to any other direct or indirect
wholly owned Subsidiary) or enter into any agreement with respect to the voting
of its capital stock;

(8) reclassify, split, combine, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or securities
convertible or exchangeable into or exercisable for any shares of its capital
stock, except, with respect to the Company, for transactions that are solely
among the Company Group or, with respect to Parent, for transactions that are
solely among Parent and its Subsidiaries other than the Company Group;

(9) incur any indebtedness for borrowed money or guarantee or assume such
indebtedness of another person (other than the incurrence of indebtedness or
guarantee of such indebtedness, with respect to the Company, between or among
the Company and a wholly owned Subsidiary of the Company or between or among
wholly owned Subsidiaries of the Company, or, with respect to Parent, between or
among Parent and a wholly owned Subsidiary of Parent other than the Company
Group, or between or among wholly owned Subsidiaries of Parent other than the
Company Group), or issue or sell any debt securities or warrants or other rights
to acquire any debt security of the Company Group, except for indebtedness for
borrowed money incurred in the ordinary course of business consistent with past
practices (A) not to exceed $5,000,000 in the aggregate, or (B) guarantees
incurred in compliance with this Section 3.2 by the Company of indebtedness of
wholly owned Subsidiaries of the Company;

(10) amend, modify or terminate any agreement relating to indebtedness for
borrowed money, other than indebtedness permitted under this Section 3.2, except
for transactions, with respect to the Company, that are solely among the Company
Group or, with respect to Parent, that are solely among the Parent Group other
than the Company Group;

 

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(11) make any material changes with respect to accounting policies or
procedures, except as required by changes in applicable generally accepted
accounting principles;

(12) settle any litigation or other proceedings before a Governmental Entity for
an amount in excess of $2,000,000 in the aggregate or any obligation or
liability of the Company Group in excess of such amount in the aggregate;

(13) materially amend, modify or terminate any contract, or cancel, modify or
waive any debts or claims held by it or waive any rights having in each case a
value of the change in excess of $5,000,000;

(14) sell, transfer, lease, license, pledge, mortgage, assign, abandon or allow
to lapse or expire or otherwise dispose of, or encumber any rights, licenses,
assets or properties, real, personal or mixed, in excess of $1,000,000
individually or $3,000,000 in the aggregate, except sales of inventory in the
ordinary course of business and dispositions of obsolete or unnecessary assets;

(15) take any action or omit to take any action that is reasonably likely to
result in any of the conditions to Closing not being satisfied;

(16) make or change any Tax election, change an annual accounting period, adopt
or change any accounting method, file any amended Tax Return, enter into any
closing agreement, settle any Tax claim or assessment, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment, or take any other similar
action relating to the filing of any Tax Return or the payment of any Tax, if
such action would have the effect of increasing the overall Tax liability of any
member of the Company Group;

(17) take any action that could cause the acceleration of contingent payments
(including earnouts or milestone payments, other than earnouts or milestone
payments resulting solely from superior performance) under any license
agreement, merger, acquisition or other similar agreements, make any
discretionary change of control payments or enter into any agreement to
transfer, settle or extinguish, or any transaction that would have the effect of
transferring, settling or extinguishing, any indebtedness owed by Angiotech
Investment Partnership (or any successor thereof) to Parent or any of its
Subsidiaries; or

(18) agree, authorize or commit to do any of the foregoing or voluntarily take
any action that would make any of the representations and warranties contained
in this Agreement untrue or incorrect at Closing.

 

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(b) Notwithstanding the foregoing, the Company and its Subsidiaries may take any
of the actions identified in subsections (4), (6), (7), (8), (10), or (14) above
(the “Noticed Items”) to the extent that the prohibition thereof contravenes
Section 4.08 of the indentures governing the Parent Notes by constituting a
consensual encumbrance or restriction on dividends or distributions, loans or
advances or transfers (including sales or leases) of assets; provided, that the
Company provides written notice to the Purchasers at least 5 business days
notice prior to taking such action.

3.3 Public Announcements. Subject to each party’s disclosure obligations imposed
by applicable Law, each of the parties hereto will cooperate with each other in
the development and distribution of all news releases and other public
information disclosures with respect to this Agreement and any of the
Transactions, and none of Parent, the Company nor either Purchaser will make any
such news release or public disclosure without first consulting with the others,
and, in each case, also receiving the other’s consent (which shall not be
unreasonably withheld or delayed) and each party shall coordinate with the party
whose consent is required with respect to any such news release or public
disclosure.

3.4 Legend.

(a) Each Purchaser agrees that all certificates or other instruments
representing the Convertible Notes subject to this Agreement will bear a legend
substantially to the following effect:

THE NOTES EVIDENCED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.

SUCH NOTES AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO ANGIOTECH
PHARMACEUTICAL INTERVENTIONS, INC. (UPON EXCHANGE, REDEMPTION OR OTHERWISE),
(B) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR OTHER EXEMPTIONS THEN AVAILABLE UNDER THE
SECURITIES ACT (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

 

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UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION IN CANADA, THE HOLDER
OF THIS NOTE MUST NOT TRADE THIS NOTE IN CANADA BEFORE THE DATE THAT IS 4 MONTHS
AND A DAY AFTER THE LATER OF: (1) [INSERT CLOSING DATE]; AND (2) THE DATE THE
ISSUER BECOMES A REPORTING ISSUER IN ANY CANADIAN PROVINCE OR TERRITORY.

(b) Purchasers agree that certificates representing the Common Stock into which
the Convertible Notes are convertible may bear a legend substantially similar to
the legend contained in Section 3.4(a).

(c) Upon request of a Purchaser, upon receipt by the Company of an opinion of
counsel reasonably satisfactory to the Company to the effect that such legend is
no longer required under the Securities Act and other applicable Laws, the
Company shall promptly cause the legend contained in Section 3.4(a) to be
removed from any certificate for any Securities to be Transferred in accordance
with the terms of the Transaction Documents. Each Purchaser acknowledges that
the Securities have not been registered under the Securities Act or under any
state securities Laws and agrees that it will not sell or otherwise dispose of
any of the Securities, except in compliance with the registration requirements
or exemption provisions of the Securities Act and any other applicable
securities Laws.

3.5 Antitrust Clearances. The parties recognize that prior to conversion of the
Convertible Note into Common Stock of the Company, filings and/or notices may be
required under the HSR Act, the Competition Act (Canada), the Investment Canada
Act and under other applicable foreign antitrust and competition Laws; for this
purpose the parties agree to use their commercially reasonable efforts to take
or cause to be taken all actions and to make all such filings/notices on a
timely basis in order that any conversion into Common Stock of the Convertible
Notes shall not be delayed beyond the date at which such conversion would
otherwise occur.

3.6 Use of Proceeds. Upon receipt by Parent from the Company of the net proceeds
from the sale of the Convertible Notes contemplated by this Agreement, the
Parent Group shall use all such net proceeds to consummate the Tender Offers.

3.7 Waiver of Usury. Each of the Company and Parent covenants and agrees that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, and will use its reasonable best efforts to
resist any attempts to claim or take the benefit of, any stay, extension or
usury Law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of its obligations under this Agreement
or the Convertible Notes; and each of the Company and Parent hereby expressly
waives all benefit or advantage of any such Law, and covenants that it shall
not, by resort to any such Law, hinder, delay or impede the execution of any
power herein granted to Purchasers, but will suffer and permit the execution of
every such power as though no such Law has been enacted.

 

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3.8 Further Assurances. Whether before or after Closing, each party hereto, at
the reasonable request of another party hereto, shall execute and deliver, or
cause to be delivered, such further certificates, instruments and other
documents, and to take, or cause to be taken, such further actions as may be
necessary or advisable to carry out the intent and purpose of this Agreement. In
addition, in connection with the Closing the Company shall enter into a
management rights letter in form and substance reasonably acceptable to the
Purchasers and Parent with each Purchaser, including New Leaf, who reasonably
requires such a document.

3.9 Access to Information.

(a) Prior to Closing and subject to the provisions of the Confidentiality
Agreement, Parent and the Company agree to (i) give or cause to be given to
Purchasers and their employees, advisors and other representatives reasonable
access, during normal business hours, to the offices, officers, employees,
properties, books and records of the Company Group and request access to
accountants, lenders and material customers and suppliers of the Company Group,
as Purchasers may from time to time reasonably request and (ii) furnish or cause
to be furnished to Purchasers such financial and operating data and other
information with respect to the Company Group as Purchasers may from time to
time reasonably request. No investigation made by Purchasers and their
employees, advisors and other representatives shall affect the representations,
warranties and agreements made by the Company and Parent pursuant to this
Agreement, and each such representation, warranty and agreement shall survive
any such investigation in accordance with the terms of this Agreement. Any
request for access to be provided pursuant to this Section 3.9(a) shall be
submitted to and subject to the reasonable approval of the Chief Executive
Officer or Chief Financial Officer of Parent.

(b) The Company shall notify each Purchaser prior to the Closing if any officer
or key employee or group of employees of the Company expresses to any member of
senior management of the Company any intention of terminating his or her
employment.

(c) Parent shall provide the Company with (i) access to Parent’s current and
former insurers for claims arising out of events relating to the businesses of
the Company Group occurring before the Closing and (ii) current and updated loss
information for pre-Closing claims for five years from the Closing Date.

3.10 Intercompany Debt.

(a) Immediately prior to, or concurrent with, Closing, Parent and the Company
will, and will cause their respective Subsidiaries to, cancel or repay, as
applicable, all intercompany amounts owed to or by the Parent Group or any of
them (other than the Company Group) on the one hand, and the Company Group, on
the other, in each case other than (i) the Convertible Note Guarantees, (ii) the

 

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Company Guarantees and guarantees of the same indebtedness by other members of
the Company Group and (c) as provided in Section 3.10(b).

(b) Parent shall use its best efforts to ensure that immediately following the
Closing (after giving effect to the cancellation or repayment of all
intercompany accounts with the Parent Group, the repayment of the Restructuring
Note and the payment of all expenses in connection with the Transactions), the
Company Group, taken as a whole, shall have an amount of unrestricted cash and
cash equivalents not less than the Minimum Amount. If at Closing the amount of
such cash and cash equivalents (the “Closing Cash Balance”) is less than the
Minimum Amount, Parent shall owe to the Company an intercompany receivable
bearing interest on the amount thereof at an annual rate of 7.75% (the “Closing
Cash Adjustment Receivable”), represented by a note in form and substance
reasonably satisfactory to the Purchasers, in an amount equal to the Minimum
Amount less than the Closing Cash Balance. Notwithstanding any other provision
hereof, the Closing Cash Balance shall not be less than $60 million and the
amount of the Closing Cash Adjustment Receivable shall not exceed $15 million.
Parent shall pay the Closing Cash Adjustment Receivable as soon as practical
taking into account its interest obligations for Parent Notes but in no event
later than 12 months from incurrence.

3.11 Exclusivity. Prior to the Closing Date, Parent and the Company will not,
and will not cause or permit any of their Subsidiaries or any of their
respective directors, officers, employees, representatives or agents to,
(i) solicit, initiate, or encourage the submission of any proposal or offer from
any person relating to the acquisition of any capital stock, or any substantial
portion of the assets, of the Parent Group (including any acquisition structured
as a merger, consolidation, or share exchange) or (ii) participate in any
discussion or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. Notwithstanding the
foregoing sentence if Parent’s Board of Directors receives a written opinion
from a Canadian law firm of national recognized reputation that complying with
the previous sentence would be inconsistent with such Board’s fiduciary duties
to its stockholders under applicable Law, Parent’s Board of Directors may elect
not to comply with the previous sentence to the extent necessary to satisfy such
fiduciary duties. Prior to the Closing Date, Parent and the Company will notify
each Purchaser in writing as promptly as practicable (but in no event later than
one (1) business day after) if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing and shall identify the person
making such proposal, offer, inquiry, or contact and terms, conditions and
circumstances of such proposal.

3.12 Guarantees. The Company shall cause the obligations of the Company under
the Convertible Notes to be fully and unconditionally guaranteed by (i) the
Subsidiary Guarantors and members of the Parent Group who guarantee the Parent
Notes pursuant to guarantees in the form attached as Exhibit B-2 to the
Convertible Note and (ii) Parent pursuant to a guarantee in the form attached
hereto as Exhibit B-1 to the Convertible Note (collectively, the “Convertible
Note Guarantees”).

 

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3.13 Parent Obligations. Parent shall timely perform all of its obligations
under the indentures governing the Parent Notes, including the payment, when
due, of all interest and principal relating thereto and shall indemnify and
reimburse Company for any and all Losses that any member of the Company Group
may directly or indirectly incur in connection with any guarantees of Parent’s
indebtedness by any member of the Company Group. Parent shall not transfer any
of the Excluded Liabilities to the Company Group and shall indemnify and hold
harmless the Purchasers for any and all Losses, directly or indirectly, arising
out of or resulting from the Excluded Liabilities. Prior to Closing, Parent
shall comply with all covenants contained in the Convertible Note Guarantee
applicable to Parent following the Closing.

Parent and the Company shall, and shall cause their Subsidiaries to (i) finalize
and enter into each of the Restructuring Agreements as promptly as practical in
form and substance reasonably satisfactory to the Purchasers and (ii) consummate
the Restructuring as promptly as practical following receipt of a vote of
Parent’s shareholders in favor of the Special Resolution. Without limiting the
foregoing, each of Parent and the Company shall, and shall cause each of its
Subsidiaries to, use its reasonable best efforts to do all such other acts and
things as may be necessary or desirable to consummate and make effective, as
soon as reasonably practicable, the Transactions.

From and after the Closing Date none of Parent nor any of its Affiliates shall
retroactively allocate any fees, costs, expenses, deductibles, uninsured losses
or other amounts directly or indirectly incurred or relating to periods prior to
the Closing Date to any member of the Company Group.

3.14 Intellectual Property Licensing.

(a) It is acknowledged and agreed that Parent shall remain as licensee of the
Intellectual Property licenses set forth on Section 3.14(a) of the Company
Disclosure Letter (the “Existing Licenses”).

(1) Parent shall endeavor to sublicense the Existing Licenses to the Company as
provided in this Section 3.14, and to license the Patent Family as defined in
Section 3.14(a) of the Company Disclosure Letter. Notwithstanding the foregoing,
if obtaining any such sublicense will result in Parent incurring out-of-pocket
license fees in excess of $100,000 in granting any sub-license, Parent shall not
be required to grant such sublicense unless and until the Company agrees to
reimburse Parent for such excess.

(b) Parent shall use commercially reasonable efforts to, as promptly as
practical, (i) amend the Existing Licenses in form and substance reasonably
acceptable to Purchasers, and (ii) cause all rights held by Parent or its
Affiliates in such amended Existing Licenses to be sublicensed to the Company,
subject only to sublicenses granted under the Existing Licenses prior to the
date hereof, all of which are set forth in Section 3.14(b) of the Company
Disclosure Letter. Each sublicense shall be without cost to the Company,
pursuant to a written exclusive

 

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sublicense in form and substance reasonably satisfactory to the Purchasers
(each, a “Pending License”). Without limiting the foregoing, Parent shall use
commercially reasonable efforts to (i) obtain a waiver by the licensor under
each Existing License (the “Licensor”) of all rights of or claims by such
Licensor to any portion of the value attributed to the grant of the Pending
License and (ii) obtain the Consent of each such Licensor to allow the Company
to grant further sublicenses under each Pending License without cost except as
set forth in an Existing License with respect to sublicenses.

(c) To the extent reasonably possible, (i) each Pending License shall require
the Company to pay to Parent only those royalty and other payments based on
milestones or performance that Parent is actually required to pay to the
applicable Licensor under the Existing License based on activities of Company,
and (ii) the scope of the field of use licensed to the Company under each
Pending License shall include all fields of use under the corresponding Existing
License that are not already licensed to a third party under an agreement
existing as of the date hereof (“Existing Agreement”). A list of all such
Existing Agreements, and the Existing Licenses to which they relate, are set
forth in subsections (b) and (a), respectively, of Section 3.14 of the Company
Disclosure Letter.

(d) Each Pending License will be constructed to give the Company the maximum
rights to exercise the Consent, notification and all other rights granted to
Parent under the corresponding Existing License, subject only to any rights
granted as of the date hereof to a third party under an Existing Agreement.

(e) Parent shall not sell, lend, pledge, license or otherwise dispose of, incur
or permit any Lien on, or amend (without the Company’s prior written consent)
any Existing License or any of Parent’s rights in Patent Family subject only to
rights granted prior to the date hereof under the Existing Licenses.

(f) Without limiting the foregoing, excluding consideration received from
current licensees of the Existing Licenses (and their successors and assigns),
if Parent receives any consideration or other amounts under an Existing License
or the Patent Family or for the grant of any right thereunder, Parent shall
promptly pay all such amounts to Company.

(g) As promptly as practical following the closing, Parent shall grant to the
Company an exclusive (including to the exclusion of Parent and its Affiliates
other than the Company Group), worldwide, perpetual, royalty-free and fully paid
up license, with the right to sublicense and (to the extent consistent with the
UBC License (as defined in Section 3.14(a) of the Company Disclosure Letter))
transfer the foregoing, under Parent’s rights in and to the Patent Family, such
license to be exclusive in all fields (other than the rights granted in the
Existing Agreements).

The foregoing license grant shall, to the extent permitted by applicable Law,
include rights to make, have made, use (including operate and maintain), import,
sell,

 

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offer to sell, distribute and otherwise dispose of, in any manner and to any
person, products and perform or have performed services that incorporate or
otherwise use the patents included in the Patent Family, including to practice
any method or process for use in the manufacture of any such products or provide
or have provided such services.

ARTICLE IV

TERMINATION

4.1 Termination. This Agreement may be terminated prior to the Closing:

(a) by written agreement of the Company and Purchasers;

(b) by the Company or the Purchasers, upon written notice to the other party, in
the event that the Closing does not occur on or before December 31, 2008;
provided, however, that the right to terminate this Agreement pursuant to this
Section 4.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement or whose breach of any representation or
warranty by it set forth herein, shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to such date;

(c) by Parent or Company, on the one hand, or the Purchasers, on the other hand,
by written notice to the other party if:

(1) the other party has (and the terminating party shall not have) failed to
perform and comply with, in all material respects, any material agreement,
covenant and condition hereby required to have been performed or complied with
by such party prior to the time of such termination, and such failure shall not
have been cured within 10 business days following notice of such failure; or

(2) any event shall occur after the date hereof that shall have made it
impossible to satisfy a condition precedent to the terminating party’s
obligations to consummate the Transactions, unless the occurrence of such event
shall be due to the failure of the terminating party to perform or comply with
any of the agreements, covenants or conditions hereof to be performed or
complied with by such party prior to the Closing;

(d) by the Company or the Purchasers, upon written notice to the other party, in
the event that any Order shall restrain, enjoin or prohibit any of the
Transactions, and such Order or other action shall have become final and
nonappealable;

(e) by the Company or the Purchasers, if Parent shareholders do not pass the
Special Resolution at the meeting at which it is proposed or if the number of
common shares of Parent in respect of which notices of dissent are received
exceeds the limitation set forth in Section 1.2(c)(1)(B); or

 

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(f) by the Purchasers, if Parent’s Board of Directors has withdrawn, changed or
modified its recommendation pursuant to Section 3.1(d).

4.2 Effects of Termination.

(a) In the event of any termination of this Agreement as provided in
Section 4.1, this Agreement (other than Section 3.3, Section 4.2 and Article V,
which shall remain in full force and effect) shall forthwith become wholly void
and of no further force and effect; provided that (i) nothing herein shall
relieve any party from liability for breach of this Agreement and (ii) without
limiting the foregoing, in the event of any termination of this Agreement other
than as a result of a Purchaser’s breach, then Parent shall pay to ACOF
Operating Manager III, LLC and New Leaf their proportionate shares (based on the
aggregate principal amount of the Convertible Notes each of Ares and New Leaf
are entitled to purchase hereunder, respectively) of (A) a non-refundable fee
equal to $3.0 million (such amount, the “Commitment Fee” ) plus up to $3.0
million of expenses paid to Purchasers pursuant to Section 5.2 at or prior to
the time of termination in the case of such termination by the Company or within
two (2) business days after termination in the case of such termination by
Purchasers and (B) if on or prior to the date that is 12 months following such
termination, any member of the Parent Group enters into an agreement related to
an Alternate Transaction, a non-refundable fee equal to $10 million (such amount
the “Alternate Transaction Fee”) plus up to $4.0 million of expenses paid to
Purchasers pursuant to Section 5.2 less any Commitment Fee and expenses already
paid at or prior to the time of entering into any agreement related to such
Alternate Transaction. Except to the extent required by applicable Law, the
Company shall not withhold any withholding taxes from any payment under this
Section 4.2.

(b) Parent and the Company shall indemnify and hold harmless Purchasers for all
Losses directly or indirectly arising from or relating to any failure or delay
by Parent to promptly pay the Commitment Fee, the Alternate Commitment Fee or
the expenses as and when due under Sections 4.2 and 5.2, including the cost of
enforcement of Purchasers’ rights hereunder (including the fees and expenses of
counsel and all other professional advisers), in addition to the amount of any
expenses, Alternate Transaction Fee, or Commitment Fee, together with interest
on the amount thereof at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made from the date such payment was required to
be made through the date of payment.

(c) “Alternate Transaction” means any direct or indirect (i) equity or equity
linked (including convertible debt) transaction relating to any member of the
Parent Group (other than pursuant to bona fide employment benefit plans),
(ii) sale of all or any material part of the business or assets of any member of
the Parent Group, including through any asset sale, exclusive license, merger,
reorganization or other form of business combination, or (iii) to the extent an
agreement with respect thereto was entered into before this Agreement is

 

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terminated, any other transaction that would otherwise be inconsistent in any
material respect with the Transactions, excluding in the case of clause (i) or
(ii), above (x) a broadly syndicated public offering of Parent’s common stock
with gross proceeds of $200 million or less commenced after the termination of
this Agreement and (y) any sale, license or other transfer of the Excluded
Assets.

ARTICLE V

MISCELLANEOUS

5.1 Survival; Limitation on Liability of Parent.

(a) Each of the representations and warranties of the Company and Parent set
forth in this Agreement shall survive the Closing under this Agreement but only
for a period of two years following the Closing Date (or until final resolution
of any proceeding, claim or action arising from the breach of any such
representation and warranty, if notice of such breach was provided prior to the
end of such period) and thereafter shall expire and have no further force and
effect. Notwithstanding the foregoing, the representations and warranties set
forth in Sections 2.1(q) (Taxes), (r) (Employee Benefit Plans), (s) (Brokers and
Finders), and (t) (Private Offering), shall survive from the Closing Date
through the 30th day following expiration of the applicable statute of
limitations, and Sections 2.1(a) (Organization, Good Standing and
Qualification), (b) (Capitalization), (c) (Authorization, Execution and
Delivery), (e) (Enforceability) and (u) (Conflicts of Interest and Related Party
Transactions) shall survive indefinitely.

(b) Notwithstanding anything herein to the contrary, Parent shall have no
liability following the Closing (except in the case of fraud, knowing or willful
misrepresentation) for any inaccuracy in or breach of any representation and
warranty made by Parent in Section 2.1 except with respect to representations
and warranties contained in Sections 2.1(a) (Organization, Good Standing and
Qualification), (b) (Capitalization), (c) (Authorization, Execution and
Delivery), (j) (Intellectual Property), (g) Title to Properties, (p) (Financial
Statements), (q) (Taxes), (s) (Brokers and Finders), (u) (Conflicts of Interest
and Related Party Transactions), (w) (Full Disclosure) and (x) No Liabilities.

5.2 Expenses. Whether or not the Transactions are consummated, Parent shall pay
fees and expenses of each Purchaser hereto, but in the aggregate not to exceed
$5,000,000 (subject to reduction as set forth in Section 4.02 in connection with
the payment of a Commitment Fee or an Alternate Transaction Fee), incident to
the due diligence investigation of the Parent Group, and the negotiation,
preparation and execution of the Transaction Documents and the consummation of
the Transactions, including attorneys’, accountants’ and other advisors’ fees
and the fees and expenses of any broker, finder or agent retained by such party
in connection with such Transactions unless the failure of the Closing to occur
was the result of the Purchasers’ breach of this Agreement.

 

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5.3 Amendment; Waiver. No modification, amendment or waiver of any provision of
this Agreement will be effective against the Company, Parent or the Purchasers
unless made in writing and signed by an officer of a duly authorized
representative of the Company and Parent and Purchasers entitled to purchase at
least a majority in aggregate principal amount of the Convertible Notes;
provided, that no modification, amendment or waiver may adversely affect a
Purchaser with respect to a term differently than another Purchaser without the
consent of each affected Purchaser. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The conditions to each party’s obligation to consummate the Closing are for the
sole benefit of such party and may be waived by such party in whole or in part
to the extent permitted by applicable Law. No waiver of any party to this
Agreement, as the case may be, will be effective unless it is in a writing
signed by a duly authorized officer of the waiving party that makes express
reference to the provision or provisions subject to such waiver. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.

5.4 Counterparts and Facsimile. For the convenience of the parties hereto, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
will together constitute the same agreement. Executed signature pages to this
Agreement may be delivered by facsimile and such facsimiles will be deemed as
sufficient as if actual signature pages had been delivered.

5.5 Governing Law. This Agreement will be governed by and construed in
accordance with the Laws of the State of New York. Each of the parties hereto
hereby irrevocably submits to the exclusive jurisdiction of the Courts of the
State of New York located in the County of New York and the Federal courts of
the United States of America located in the County of New York for the purpose
of any action or proceeding arising out of or relating to this Agreement and
hereby irrevocably agrees that all claims in respect to such action or
proceeding shall be heard and determined exclusively in such New York or Federal
court. Each of the parties hereto agrees that a final judgment in any action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by Law.

5.6 WAIVER OF JURY TRIAL. Each of the parties hereto hereby irrevocably waives
any and all right to trial by jury in any legal proceeding arising out of or
related to this Agreement or the Transactions.

5.7 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other will be in writing and will be deemed to
have been duly given (a) on the date of delivery if delivered personally or by
telecopy or facsimile, upon confirmation of receipt, (b) on the first business
day following the date of dispatch if delivered by a recognized next-day courier
service, or (c) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or

 

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pursuant to such other instructions as may be designated in writing by the party
to receive such notice.

 

(a)    If to Ares to it at:    Ares Corporate Opportunities Fund III, L.P.   
2000 Avenue of the Stars, 12th Floor    Los Angeles, California 90067    Attn:
Bennett Rosenthal    Telephone: (310) 201-4100    Fax: (310) 201-4170    with a
copy to (which copy alone shall not constitute notice):    Proskauer Rose LLP   
2049 Century Park East, Suite 3200    Los Angeles, California 90067    Attn:
Michael A. Woronoff, Esq.    Telephone: (310) 557-2900    Fax: (310) 557-2193
(b)    If to New Leaf to it at:    New Leaf Venture Partners, L.L.C.    7 Times
Square, Suite 1603    New York, New York 10036    Attn: Chief Financial Officer
   Telephone: (646) 871-6400    Fax: (646) 871-6450    with a copy to (which
copy alone shall not constitute notice):    Latham & Watkins LLP    140 Scott
Drive    Menlo Park, CA 94025    Attn: Nicholas S. O’Keefe, Esq.    Telephone:
(650) 463-3018    Fax: (650) 463-2600 (c)    If to the Company to it at:   
Angiotech Pharmaceutical Interventions, Inc.    1618 Station Street   
Vancouver, BC Canada V6A 1B6    Attn: General Counsel    Telephone: (604)
221-7676    Fax: (604) 221-2330

 

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   with a copy to (which copy alone shall not constitute notice):    Sullivan &
Cromwell LLP    1888 Century Park East, 21st    Los Angeles, California 90067   
Attn: Alison S. Ressler, Esq.    Telephone: (310) 712-6600    Fax: (310)
712-8800 (d)    If to Parent to it at:    Angiotech Pharmaceuticals, Inc.   
1618 Station Street    Vancouver, BC Canada V6A 1B6    Attn: General Counsel   
Telephone: (604) 221-7676    Fax: (604) 221-2330    with a copy to (which copy
alone shall not constitute notice):    Sullivan & Cromwell LLP    1888 Century
Park East, 21st    Los Angeles, California, 90067    Attn: Alison S. Ressler,
Esq.    Telephone: (310) 712-6600    Fax: (310) 712-8800

5.8 Extension of Confidentiality Obligations. The Confidentiality Agreements,
dated as of April 15, 2008 and March 26, 2008, between Parent and Ares and New
Leaf, respectively (the “Confidentiality Agreement” ) shall terminate upon the
Closing and be of no further force and effect as of the Closing. The parties
agree that this Section 5.8 shall operate as an amendment to the Confidentiality
Agreement, and references to the Confidentiality Agreement in this Agreement and
the other Transaction Documents shall refer to the Confidentiality Agreement as
so amended.

5.9 Entire Agreement, Etc. (a) This Agreement (including the Exhibits, Schedules
and Company Disclosure Letter hereto) and the other Transaction Documents
constitute the entire agreement of the parties with respect to the subject
matter hereof, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter hereof; and (b) neither the Company nor Parent may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Purchasers and no Purchaser may assign its rights under
this Agreement without the prior written consent of the Company, such consent
not to be unreasonably withheld, (any attempted assignment in contravention
hereof being null and void), provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof and
of the applicable Transaction Documents that apply to the “Purchasers” and
thereafter shall be

 

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deemed a Purchaser for all purposes hereunder and under the other Transaction
Documents. In addition, prior to a Qualified Transaction, New Leaf may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of Ares.

5.10 Interpretation; Other Definitions. Wherever required by the context of this
Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time. All article, section, paragraph or clause references not
attributed to a particular document shall be references to such parts of this
Agreement, and all exhibit, annex and schedule references not attributed to a
particular document shall be references to such exhibits, annexes and schedules
to this Agreement. In addition, the following terms are ascribed the following
meanings:

(a) “Affiliate” means, with respect to any person, any person directly or
indirectly controlling, controlled by or under common control with, such other
person. For purposes of this definition, “control” (including, with correlative
meanings, the terms “controlled by” and “under common control with”) when used
with respect to any person, means the possession, directly or indirectly, of the
power to cause the direction of management or policies of such person, whether
through the ownership of voting securities by contract or otherwise.

(b) the word “or” is not exclusive.

(c) the words “including,” “includes,” “included” and “include” are deemed to be
followed by the words “without limitation”.

(d) the terms “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision.

(e) “business day” means any day except Saturday, Sunday and any day which shall
be a legal holiday or a day on which banking institutions in the State of New
York generally are authorized or required by Law or other governmental action to
close.

(f) “Circular” means the notice of the Parent Meeting and accompanying
management proxy statement, including all schedules and exhibits thereto, to be
sent by Parent to the shareholders of Parent in connection with the Parent
Meeting.

(g) “Company Group” means the Company and its Subsidiaries (including entities
that will be Subsidiaries immediately following consummation of the
Restructuring).

 

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(h) “Company Material Adverse Change” means any material adverse change in, or
effect on, (A) the business, results of operations, properties, prospects or
condition (financial or otherwise) of the Company Group, taken as a whole or
(B) the ability of any member of the Parent Group to consummate the
Transactions. Without limiting the foregoing, any changes or effects that,
individually or in the aggregate would reasonably be expected to result in
Losses to the Company Group of $20 million or more in the aggregate will be
deemed a Company Material Adverse Change. Where a number of Losses under
different covenants, representations and warranties are each individually less
than $20 million, but in the aggregate exceed $20 million, all such Losses shall
be aggregated for the purpose of determining a Company Material Adverse Change.

(i) “contract” or “agreement” means any agreement, contract, lease, mortgage,
power of attorney, evidence of indebtedness, letter of credit, undertaking,
covenant not to compete, license, instrument, obligation, commitment,
understanding, policy, purchase or sales order, quotation or other commitment,
whether oral or written, express or implied.

(j) “Employee Benefit Plan” means any (i) employee benefit plan within the
meaning of Section 3(3) of ERISA, (ii) profit sharing, bonus, compensation,
stock purchase, stock option, employment, termination, severance, retention or
other similar plan, agreement or arrangement, and (iii) hospitalization,
medical, life, or supplemental unemployment benefits plan, program, agreement or
arrangement, which is or has been sponsored, maintained or contributed to or
required to be contributed to by the Parent Group or any ERISA Affiliate for the
benefit of any former or current consultant, employee, officer or director of
the Parent Group or an ERISA Affiliate working in the United States, whether
formal or informal.

(k) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

(l) “ERISA Affiliate” means any trade or business, whether or not incorporated,
that together with the Parent Group would be deemed a “single employer” within
the meaning of Section 4001(b)(1) of ERISA.

(m) “Excluded Liabilities” shall have the meaning given thereto in Exhibit R
hereto.

(n) “Foreign Plan” means any employee benefit and welfare plan or similar plan,
policy or arrangement and (ii) bonus, compensation, stock purchase, stock
option, employment, termination, severance, retention or other similar plan,
agreement or arrangement that is maintained by the Parent Group outside of the
United States for the benefit of their employees or consultants.

(o) “GAAP” means generally accepted accounting principles in the United States
as in effect from time to time, consistently applied.

 

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(p) “Intellectual Property Rights” means all (i) patents, patent applications,
patent disclosures, and all related continuations, continuations-in-part,
divisionals, provisionals, reissues, re-examinations, and extensions thereof,
(ii) trademarks, trade names, service marks, brand names, and domain names, and
all applications and registrations therefor, (iii) copyrights and all
applications and registrations therefor, (iv) technology, inventions, processes,
know-how, and trade secrets, and (v) all other intellectual property rights.

(q) “knowledge of the Company” means the actual knowledge, after reasonable
inquiry, of the persons listed on Exhibit K hereto.

(r) “liability” means any liability or obligation of any kind whatsoever
(whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether or not reflected or required by GAAP to be reflected on the financial
statements of Parent or the Company.

(s) “Losses” means any and all damages, fines, penalties, deficiencies,
liabilities, claims, losses (including diminution in or loss of value),
judgments, awards, settlements, Taxes, actions, obligations and costs and
expenses in connection therewith (including interest, court costs and fees and
expenses of attorneys, accountants and other experts, and any other expenses of
proceedings (including costs of investigation, preparation and travel) or of any
default or assessment).

(t) “Mailing Date” means the date by which the Circular must be mailed in order
to have the Parent Meeting on or before October 31, 2008 in accordance with the
constituent documents of Parent and applicable Laws.

(u) “Minimum Amount” means $75 million.

(v) “Order” means any award, writ, stipulation, determination, decision,
injunction, judgment, order, decree, ruling, subpoena or verdict entered,
issued, made or rendered by, or any contract with, any Governmental Entity.

(w) “ordinary course of business” means the ordinary course of the businesses of
the Company Group.

(x) “Parent Group” means Parent and all of its Subsidiaries including the
members of the Company Group.

(y) “Parent Material Adverse Change” means any material adverse change in, or
effect on, (A) the business, results of operations, properties, prospects or
condition (financial or otherwise) of the Parent Group, taken as a whole or
(B) the ability of any member of the Parent Group to consummate the
Transactions. Without limiting the foregoing, any changes or effects that,
individually or in the aggregate would reasonably be expected to result in
Losses to the Parent Group of $20 million or more in the aggregate will be
deemed a

 

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Parent Material Adverse Change. Where a number of Losses under different
covenants, representations and warranties are each individually less than $20
million, but in the aggregate exceed $20 million, all such Losses shall be
aggregated for the purpose of determining a Parent Material Adverse Change.

(z) “Parent Meeting” means the meeting of shareholders of Parent, including any
adjournments or postponements, to be called and held to consider the Special
Resolution.

(aa) “person” means any individual, corporation, limited liability company,
partnership, trust, joint stock company, business trust, unincorporated
association, joint venture, Governmental Entity or other legal entity of any
nature whatsoever.

(bb) “proceeding” means any action, charge, claim, demand, suit, arbitration,
inquiry, notice of violation, investigation, litigation, audit or other
proceeding (including a partial proceeding, such as a deposition), whether
civil, criminal, administrative, investigative or informal.

(cc) “Restructuring” means the Restructuring described in Exhibit R hereto,
which shall be consummated in form and substance reasonably satisfactory to the
Investors; provided, that any terms of the Restructuring or Restructuring
Agreements not specifically described in such Exhibit that in the aggregate
could reasonably be expected to be material shall be satisfactory to the
Purchasers in their sole discretion.

(dd) “Restructuring Agreements” shall have the meaning given thereto in Exhibit
R hereto.

(ee) “Rights” means the Rights defined in the Rights Plan.

(ff) “Rights Plan” means the Shareholder Rights Plan Agreement amended and
restated as of June 9, 2005, between Parent and Computershare Trust Company of
Canada as Rights Agent.

(gg) “Tax” and, with correlative meaning, “Taxes” means with respect to any
person (i) all federal, state, local, county, foreign and other taxes,
assessments or other government charges, including, without limitation, any
income, alternative or add-on minimum tax, estimated gross income, gross
receipts, sales, use, ad valorem, value added, transfer, capital stock
franchise, profits, license, registration, recording, documentary, intangibles,
conveyancing, gains, withholding, payroll, employment, social security (or
similar), unemployment, disability, excise, severance, stamp, occupation,
premium, property (real and personal), environmental or windfall profit tax,
Pension Benefit Guaranty Corporation premiums, custom duty or other tax,
governmental fee or other like assessment, charge, or tax of any kind
whatsoever, together with any interest, penalty, addition to tax or additional
amount imposed by any

 

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Governmental Entity responsible for the imposition of any such tax (domestic or
foreign).

(hh) “Tax Return” means any report, return, declaration, claim for refund or
other information or statement supplied or required to be supplied by any member
of the Parent Group or any member of the Company Group, relating to Taxes,
including any schedules or attachments thereto and any amendments thereof.

(ii) “Title Document” means any deed, title insurance policy, survey, mortgage,
certificate of occupancy, building permit, inspection certificate or other
agreement or other document granting a member of the Company Group title to or
otherwise affecting or evidencing the state of title with respect to any Owned
Real Property, together with all amendments, modifications and supplements
thereto.

(jj) “Transferred Assets” shall have the meaning given thereto in Exhibit R
hereto.

5.11 Captions. The article, section, paragraph and clause captions herein are
for convenience of reference only, do not constitute part of this Agreement and
will not be deemed to limit or otherwise affect any of the provisions hereof.

5.12 Severability. If any provision of this Agreement or the application thereof
to any person or circumstance is determined by a court of competent jurisdiction
to be invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, will remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the Transactions is not affected in any
manner materially adverse to any party. Upon such determination, the parties
shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties.

5.13 No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any person other than the
parties hereto, any benefits, rights or remedies other than in the case of
Section 4.2, ACOF Operating Manager III, LLC.

5.14 Time of Essence. Time is of the essence in the performance of each and
every term of this Agreement.

5.15 Certain Adjustments. If the representations and warranties set forth in
Section 2.1(b) shall not be true and correct as of the Closing Date, the number
of shares of Common Stock issuable upon conversion of the Convertible Notes
shall be, at each Purchasers’ option and sole discretion, proportionately
adjusted to provide such Purchaser the same percentage ownership in the Company
as contemplated by this Agreement in the absence of such failure to be true and
correct.

 

45

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5.16 Specific Performance. The rights and remedies set forth in this Agreement
are not intended to be exhaustive and the exercise by either party of any right
of any right or remedy (including demand of the Commitment Fee or Alternate
Transaction Fee) does not preclude the exercise of any other rights or remedies.
Without limiting the foregoing, the parties agree that irreparable damage will
occur if any of the provisions of this Agreement is not performed in accordance
with their specific terms. It is accordingly agreed that the parties shall be
entitled to specific performance of the terms hereof (without the need to post
any bond), this being in addition to any other rights and remedies to which they
are entitled at Law, in equity, under this Agreement or otherwise.

[remainder of page intentionally left blank]

 

46

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first herein above
written.

 

COMPANY: ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC. By:  

/s/ K. Thomas Bailey

  Name:   K. Thomas Bailey   Title:   Chief Financial Officer PARENT: ANGIOTECH
PHARMACEUTICALS, INC. By:  

/s/ K. Thomas Bailey

  Name:   K. Thomas Bailey   Title:   Chief Financial Officer

Signature Page to Note Purchase Agreement

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PURCHASERS: ARES CORPORATE OPPORTUNITIES FUND III, L.P. By: ACOF Operating
Manager III, LLC, its manager By: Ares Management, Inc., its general partner By:
 

/s/ Bennett Rosenthal

  Name: Bennett Rosenthal   Title: Authorized Signatory New Leaf Ventures I,
L.P. By: New Leaf Venture Management I, L.P. Its: General Partner By: New Leaf
Venture Management I, L.L.C. Its: General Partner By:  

/s/ Ronald M. Hunt

  Ronald M. Hunt   Managing Director New Leaf Ventures II, L.P. By:   New Leaf
Venture Associates II, L.P. Its:   General Partner By:   New Leaf Venture
Associates II, L.L.C. Its:   General Partner By:  

/s/ Ronald M. Hunt

  Ronald M. Hunt   Managing Director

Signature Page to Note Purchase Agreement

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SUBSIDIARY GUARANTORS: AFMEDICA, INC. By:   /s/ K. Thomas Bailey   Name: K.
Thomas Bailey   Title: VP, Business Development AMERICAN MEDICAL INSTRUMENTS
HOLDINGS, INC. By:   /s/ K. Thomas Bailey   Name: K. Thomas Bailey   Title:
President & Treasurer ANGIOTECH BIOCOATINGS CORP. By:   /s/ K. Thomas Bailey  
Name: K. Thomas Bailey   Title: VP, Business Development ANGIOTECH CAPITAL, LLC
By:   /s/ David D. McMasters   Name: David D. McMasters   Title: Manager
ANGIOTECH DELAWARE, INC. By:   /s/ K. Thomas Bailey   Name: K. Thomas Bailey  
Title: President & Treasurer ANGIOTECH INTERNATIONAL HOLDINGS, CORP. By:   /s/
William Stanger   Name: William Stanger   Title: Secretary

Signature Page to Note Purchase Agreement

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ANGIOTECH INVESTMENT PARTNERSHIP By:   Angiotech Pharmaceuticals, Inc. By:   /s/
K. Thomas Bailey   Name: K. Thomas Bailey   Title: Chief Financial Officer By:  
3091796 Nova Scotia Company By:   /s/ William Stanger   Name: William Stanger  
Title: Secretary ANGIOTECH PHARMACEUTICALS (US), INC. By:   /s/ David D.
McMasters   Name: David D. McMasters   Title: Sr. Vice President, Legal &
General Counsel API CANADA HOLDINGS, INC. By:   /s/ K. Thomas Bailey   Name: K.
Thomas Bailey   Title: Chief Financial Officer B.G. SULZLE, INC. By:   /s/ K.
Thomas Bailey   Name: K. Thomas Bailey   Title: President & Secretary CRIMSON
CARDINAL CAPITAL, LLC By:   /s/ David D. McMasters   Name: David D. McMasters  
Title: Manager MANAN MEDICAL PRODUCTS, INC. By:   /s/ K. Thomas Bailey   Name:
K. Thomas Bailey   Title: President & Treasurer

Signature Page to Note Purchase Agreement

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MEDICAL DEVICE TECHNOLOGIES, INC. By:   /s/ K. Thomas Bailey   Name: K. Thomas
Bailey   Title: President & Treasurer NEUCOLL, INC. By:   /s/ David D. McMasters
  Name: David D. McMasters   Title: President & CEO QUILL MEDICAL, INC. By:  
/s/ David D. McMasters   Name: David D. McMasters   Title: President & CEO
SURGICAL SPECIALTIES CORPORATION By:   /s/ K. Thomas Bailey   Name: K. Thomas
Bailey   Title: President & Treasurer SURGICAL SPECIALTIES PUERTO RICO, INC. By:
  /s/ K. Thomas Bailey   Name: K. Thomas Bailey   Title: President & Treasurer
SURGICAL SPECIALTIES UK HOLDINGS LIMITED By:   /s/ K. Thomas Bailey   Name: K.
Thomas Bailey   Title: President & Treasurer By:   /s/ David D. Phinney   Name:
David D. Phinney   Title: Secretary TERCENTENARY HOLDINGS, CORP. By:   /s/
William Stanger   Name: William Stanger   Title: Secretary

Signature Page to Note Purchase Agreement

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0741693 B.C. LTD. By:   /s/ William Stanger   Name: William Stanger   Title:
Secretary 0761717 B.C. LTD. By:   /s/ David M. Hall   Name: David M. Hall  
Title: President 3091796 NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name:
William Stanger   Title: Secretary 3091797 NOVA SCOTIA COMPANY By:   /s/ David
D. McMasters   Name: David D. McMasters   Title: President 3091798 NOVA SCOTIA
COMPANY By:   /s/ William Stanger   Name: William Stanger   Title: Secretary
3091799 NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name: William Stanger  
Title: Secretary 3129537 NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name:
William Stanger   Title: Secretary 3129538 NOVA SCOTIA COMPANY By:   /s/ William
Stanger   Name: William Stanger   Title: Secretary

Signature Page to Note Purchase Agreement

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3129539 NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name: William Stanger  
Title: Secretary 3129540 NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name:
William Stanger   Title: Secretary 3129541 NOVA SCOTIA COMPANY By:   /s/ William
Stanger   Name: William Stanger   Title: Secretary 3132933 NOVA SCOTIA COMPANY
By:   /s/ William Stanger   Name: William Stanger   Title: Secretary 3132934
NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name: William Stanger   Title:
Secretary 3132935 NOVA SCOTIA COMPANY By:   /s/ William Stanger   Name: William
Stanger   Title: Secretary 3132936 NOVA SCOTIA COMPANY By:   /s/ William Stanger
  Name: William Stanger   Title: Secretary

Signature Page to Note Purchase Agreement

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Exhibit A

THE NOTE EVIDENCED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THE NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO ANGIOTECH
PHARMACEUTICAL INTERVENTIONS, INC. (UPON EXCHANGE, REDEMPTION OR OTHERWISE),
(B) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR OTHER EXEMPTIONS THEN AVAILABLE UNDER THE
SECURITIES ACT (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION IN CANADA, THE HOLDER
OF THIS NOTE MUST NOT TRADE THIS NOTE IN CANADA BEFORE THE DATE THAT IS 4 MONTHS
AND A DAY AFTER THE LATER OF: (1) [INSERT CLOSING DATE]; AND (2) THE DATE THE
ISSUER BECOMES A REPORTING ISSUER IN ANY CANADIAN PROVINCE OR TERRITORY.

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR U.S. FEDERAL INCOME
TAX PURPOSES. FOR THE ISSUE PRICE, AMOUNT OF OID, AND YIELD TO MATURITY FOR SUCH
PURPOSES, PLEASE CONTACT THE OFFICE OF THE [TAX DIRECTOR/ CHIEF FINANCIAL
OFFICER, etc.] AT Angiotech Pharmaceutical Interventions, Inc., 1618 station
street, Vancouver, BC Canada V6A 1B6 [INSERT PHONE NUMBER].

[SENIOR/SUBORDINATED] CONVERTIBLE NOTE

 

Principal Amount: US$[—]

   [—], 2008

FOR VALUE RECEIVED, the undersigned, Angiotech Pharmaceutical Interventions,
Inc., a Delaware corporation (the “Borrower”), HEREBY PROMISES TO PAY to the
order of [        ], a [—] [—] , or its successors and assigns (the “Holder”),
the principal

--------------------------------------------------------------------------------

amount of [—] Dollars (US$[—]) on the Maturity Date (as hereinafter defined),
and to pay interest on the unpaid principal amount of this Note at the Interest
Rate (as hereinafter defined).

 

Section 1. Certain Definitions. For the purposes of this Note:

 

  (a) “Acquired Debt” means, with respect to any specified Person:

 

  (i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Restricted Subsidiary of,
such specified Person; and

 

  (ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.

 

  (b) “Affiliate” means, with respect to any Person, a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the specified Person. “Control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any Person, means the possession, directly or
indirectly, of the power to cause the direction of management or policies of
such Person, whether through the ownership of Voting Stock, by contract or
otherwise.

 

  (c) “Ares” means Ares Corporate Opportunities Fund III, L.P. and its Permitted
Transferees (as defined in the Governance Agreement).

 

  (d) “Attributable Debt” in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction, including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP; provided,
however, that if such sale and leaseback transaction results in a Capital Lease
Obligation, the amount of Indebtedness represented thereby will be determined in
accordance with the definition of “Capital Lease Obligation.”

 

  (e) “Bankruptcy Code” means Title 11, U.S. Code or any similar federal or
state Law for the relief of debtors, the Bankruptcy and Insolvency Act (Canada),
the UC-Companies’ Creditors Arrangement Act (Canada), the Winding Up and
Restructuring Act (Canada) or any other federal, provincial, state or foreign
bankruptcy, insolvency, receivership or similar Law.

 

  (f)

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in Section 13(d)(3)
of

 

2

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the Exchange Act), such “person” will be deemed to have beneficial ownership of
all securities that such “person” has the right to acquire by conversion or
exercise of securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning.

 

  (g) “Business Day” means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions located in the City of New York, New York or
the City of Vancouver, Province of British Columbia, Canada are permitted or
required by Law, executive order or governmental decree to remain closed.

 

  (h) “Capital Lease Obligation” means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet prepared in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be prepaid by the lessee without payment of a
penalty.

 

  (i) “Capital Stock” means:

 

  (i) in the case of a corporation, any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
including without limitation all common stock and preferred stock;

 

  (ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock;

 

  (iii) in the case of a partnership or limited liability company, partnership
interests (whether general or limited) or membership interests; and

 

  (iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person, but excluding from all of the foregoing any debt securities
convertible into Capital Stock, whether or not debt securities include any right
of participation with Capital Stock.

 

  (j) “Common Stock” means the common stock, par value $0.01 per share, of the
Borrower.

 

  (k) “Designated Event” means:

 

  (i)

the direct or indirect sale, lease, transfer, conveyance or other disposition
(other than by way of amalgamation, merger or consolidation), in one or a series
of related transactions, of all or

 

3

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substantially all of the properties or assets of the Borrower and its
Subsidiaries taken as a whole to any “person” (as that term is used in
Section 13(d)(3) of the Exchange Act);

 

  (ii) the adoption of a plan relating to the liquidation or dissolution of the
Borrower;

 

  (iii) the consummation of any transaction (including, without limitation, any
amalgamation, merger or consolidation), the result of which is that any “person”
or “group” (as such terms are used in Section 13(d)(3) of the Exchange Act)
other than Parent or the Holders and their controlled Affiliates becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock
of the Borrower, measured by voting power rather than number of shares; or

 

  (iv) the Borrower amalgamates or consolidates with, or merges with or into,
any Person (other than a Subsidiary of the Borrower) or any Person (other than a
Subsidiary of the Borrower) amalgamates or consolidates with, or merges with or
into, the Borrower, in either case in a transaction in which any of the
outstanding Voting Stock of the Borrower or such other Person is converted into
or exchanged for cash, securities or other property, other than any such
transaction where the Persons that Beneficially Own a majority of the
outstanding Voting Stock of the Borrower immediately prior to such transaction
Beneficially Own at least a majority of the outstanding Voting Stock of such
surviving or transferee Person immediately after giving effect to such issuance.

 

  (l) “Disqualified Stock” means any Capital Stock that, by its terms (or by
terms of any security into which it is convertible, or for which it is
exchangeable, in each case, at the option of the holder of the Capital Stock),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder of the Capital Stock, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.

 

  (m) “Equity Interests” means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

 

  (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

  (o)

“Excluded Taxes” means, with respect to any Holder, (i) Taxes imposed on or
measured by its overall net income or capital, however denominated, franchise
Taxes imposed in lieu of overall net income or capital taxes, and branch profits
Taxes imposed, in each case, by a jurisdiction (or any political subdivision

 

4

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thereof) as a result of the recipient being organized or having its principal
office or, in the case of any Holder, its applicable lending office in such
jurisdiction (or any political subdivision thereof), (ii) in the case of a
Foreign Holder, any U.S. federal withholding tax imposed on any interest payment
pursuant to a law in effect at the time such Foreign Holder acquires an interest
in this Note (or designates a new lending office), except to the extent that
such Foreign Holder (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts with respect to such withholding tax pursuant to Section 2(c)(i) and
(iii) Taxes resulting from a Foreign Holder’s failure to comply with
Section 2(c)(v) (i.e., failure to deliver a form that the Foreign Holder is
legally entitled to deliver).

 

  (p) “Fair Market Value” means the value that would be paid by a willing buyer
to an unaffiliated willing seller in a transaction not involving distress or
necessity of either party, without taking into account any liquidity or other
discount, restrictions on transfer or differences in voting rights.

 

  (q) “Foreign Holder” means any Holder who or that is not, for United States
federal income tax purposes, (i) an individual who is a citizen or resident of
the United States, (ii) a corporation, partnership or other entity treated as a
corporation or partnership created or organized in or under the laws of the
United States, any State or the District of Columbia, (iii) an estate whose
income is subject to U.S. federal income taxation regardless of its source or
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such trust,
or such trust has in effect a valid election to be treated as a “United States
person” for U.S. federal income tax purposes.

 

  (r) “GAAP” means generally accepted accounting principles in the United States
as in effect from time to time, consistently applied.

 

  (s) “Governance Agreement” means the Governance Agreement, dated
                    , among the Borrower, the Parent and the Holders.

 

  (t) “Governmental Entity” means any court, tribunal, judicial or arbitral
body, administrative agency or commission or other governmental authority or
instrumentality, and any political or other subdivision, department or branch of
any of the foregoing, whether federal, state, local or foreign, or any
applicable self-regulatory organization.

 

  (u) “Guarantee” means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take or pay or to maintain financial statement
conditions or otherwise).

 

5

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  (v) “Guarantor” means any Person that executes a Guarantee pursuant to Section
13(a) of this Note.

 

  (w) “Hedging Obligation” means any (i) obligation with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies, fuel or
other commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk
or value or any similar transaction or any combination of these transactions,
(ii) other agreement or arrangement designed to manage interest rates or
interest rate risk or (iii) other agreement or arrangement designed to protect
against fluctuations in currency exchange rates or commodity prices; provided,
however, that no phantom stock or similar plan providing for payments on account
of services provided by current or former directors, officers, employees or
consultants of the Borrower, Parent or any Subsidiary of the Borrower shall be a
Hedging Obligation.

 

  (x) “Holders” means Ares, New Leaf Ventures I, L.P. and New Leaf Ventures II,
L.P. and their permitted transferees.

 

  (y) “Indebtedness” means, with respect to any specified Person, any
indebtedness of such Person (excluding accrued expenses and trade payables),
whether or not contingent:

 

  (i) in respect of borrowed money;

 

  (ii) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);

 

  (iii) in respect of banker’s acceptances or similar instruments;

 

  (iv) representing Capital Lease Obligations or Attributable Debt in respect of
sale and leaseback transactions;

 

  (v) representing the balance deferred and unpaid of the purchase price of any
property or services due more than six months after such property is acquired or
such services are completed other than any such balance that constitutes a trade
payable or similar obligation to a trade creditor in each case accrued in the
ordinary course of business, or

 

  (vi) representing any Hedging Obligations.

In addition, the term “Indebtedness” includes all Indebtedness of others secured
by a Lien on any asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person) and, to the extent not otherwise included,
the Guarantee by the specified Person of any Indebtedness of any other Person.

 

  (z) “Indemnified Taxes” shall mean all Taxes other than Excluded Taxes.

 

6

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  (aa) “Investments” means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Borrower
or any Subsidiary of the Borrower sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Borrower such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Borrower, the Borrower will be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Borrower’s Investments in such Subsidiary that were not sold or
disposed of. The acquisition by the Company or any Subsidiary of the Company of
a Person that holds an Investment in a third Person will be deemed to be an
Investment by the Borrower or such Subsidiary in such third Person in an amount
equal to the Fair Market Value of the Investments held by the acquired Person in
such third Person. Except as otherwise provided in this Note, the amount of an
Investment will be determined at the time the Investment is made and without
giving effect to subsequent changes in value.

 

  (bb) “Law” means any federal, state, local, or foreign law, statute or
ordinance, code, rule or regulation, or any Order by any Governmental Entity or
any award, writ, stipulation, determination, decision, injunction, judgment,
order, decree, ruling, subpoena or verdict entered, issued, made or rendered by,
or any contract with, any Governmental Entity.

 

  (cc) “Lien” means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable Law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes of any jurisdiction).

 

  (dd) “Note Purchase Agreement” means the Note Purchase Agreement, dated as of
July [    ], 2008, among the Borrower, the Parent, the Holders and the
guarantors party thereto.

 

  (ee) “Notes” means all convertible notes of the Borrower sold pursuant to the
Note Purchase Agreement. For the avoidance of doubt, all references in this Note
to actions that may be taken by Holders holding a certain principal amount of
Notes means such principal amount of Senior Convertible Notes and Subordinated
Convertible Notes, collectively, then outstanding.

 

  (ff) “Note Guarantee” means the Guarantee by each Guarantor of the Notes.

 

7

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  (gg) “Obligation” means any principal, interest, penalty, fee,
indemnification, reimbursement, damage and other liability payable under the
documentation governing any Indebtedness.

 

  (hh) “Officer” of a Person means its Chairman of the Board, Chief Executive
Officer, President, Chief Financial Officer, Treasurer, any Vice President,
Secretary or any Assistant Secretary.

 

  (ii) “Officers’ Certificate” means a certificate signed by any two Officers,
one of whom must be the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, the Treasurer or a Vice President of the
Company and reasonably satisfactory in form and substance to the intended
recipient thereof.

 

  (jj) “Order” means any award, writ, stipulation, determination, decision,
injunction, judgment, order, decree, ruling, subpoena or verdict entered,
issued, made or rendered by, or any contract with, any Governmental Entity.

 

  (kk) “Other Taxes” means all present or future stamp, court or documentary
Taxes and any other excise, property, intangible, mortgage recording or similar
Taxes, charges or levies which arise from any payment made under, from the
execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a security interest under, or otherwise with respect
to, this Note.

 

  (ll) “Parent” means Angiotech Pharmaceuticals, Inc.

 

  (mm) “Parent Designated Event” means:

 

  (i) any “Change of Control”, as such term is defined in the indentures
governing the Parent Notes for so long as either such indenture remains in
effect, or thereafter there occurs any transaction, including any amalgamation,
merger or consolidation, the result of which is that any “person” or “group” (as
such terms are used in Section 13(d)(3) of the Exchange Act) other than the
Holders becomes the Beneficial Owner of more than 50% of the Voting Stock of
Parent;

 

  (ii) an “Extraordinary Event” or a “Bankruptcy Event” of Parent, Angiotech
Pharmaceuticals (US), Inc. or Quill Medical, Inc., in each case as defined in
the Quill Merger Agreement;

 

  (iii) Parent ceases to own at least 50% of the Common Stock owned by it as of
the date of this Note;

 

  (iv)

any of the Parent Notes become due or subject to mandatory repurchase; provided
that if the Parent Notes are repurchased or repaid by Parent or a third party
without the direct or indirect receipt by Parent of any proceeds or use of funds
or other assets of

 

8

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the Borrower or any of its Subsidiaries, such event shall not be deemed to be a
“Parent Designated Event; or

 

  (v) there is a default under the Parent Guarantee.

 

  (nn) “Parent Guarantee” means the Guarantee of the Notes of even date herewith
by Parent for the benefit of the Holders.

 

  (oo) “Parent Group” means Parent and its the Subsidiaries other than the
Borrower and the Subsidiaries of the Borrower

 

  (pp) “Parent Notes” means, collectively, the 2013 Notes and the 2014 Notes.

 

  (qq) “Person” means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, limited
liability company or government or other entity.

 

  (rr) “Qualified Transaction” means :

 

  (i) a bona fide underwritten public offering pursuant to an effective
registration statement under the Securities Act of shares of the Common Stock
following which such shares are listed on the New York Stock Exchange or the
Nasdaq Global or Global Select Market, and in which the gross proceeds are at
least $100 million at a price per share (1) before the first anniversary of the
date of this Note, of at least $26.00; and (2) thereafter, of at least $28.00;
or

 

  (ii) a series of transactions in which (1) all of the shares of Common Stock
owned by Parent are distributed to the shareholders of Parent, (2) the Borrower
has a class of securities registered in the United States under Section 12 of
the Exchange Act, (3) the Common Stock is listed in the United States on the New
York Stock Exchange or the Nasdaq Global or Global Select Market and (4) the
closing price per share of the Common Stock is equal to or greater than $28.00
for twenty (20) consecutive trading days; provided that in the event that upon
the closing of the transactions described in this clause (ii), the shares of
Common Stock into which this Note is convertible are subject to a lock-up or
other agreement restricting sales of Common Stock (other than the Registration
Rights Agreement), then the transactions contemplated by this clause (ii) shall
not be deemed a Qualified Transaction until the expiration of such sales
restrictions.

In case there is any adjustment of the conversion rate applicable to this Note
as provided in Section 8 (a), (b), (c) or (d) hereof, the minimum prices per
share in clauses (i) and (ii) above shall be subject to an equivalent
adjustment.

 

9

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  (ss) “Quill Merger Agreement” means that Agreement and Plan of Merger, dated
as of May 25, 2006, by and among Parent, Angiotech Pharmaceuticals (US), Inc.,
Quaich Acquisition, Inc. and Quill Medical, Inc.

 

  (tt) “Registration Rights Agreement” means the Registration Rights Agreement
of even date herewith among the Borrower and the Holders.

 

  (uu) “Restructuring Agreement” has the meaning assigned thereto in the Note
Purchase Agreement.

 

  (vv) “Senior Convertible Notes” means those Notes that do not contain the
subordination provisions in Section 9 and such other related provisions.

 

  (ww) 1[“Senior Debt” means (i) all Indebtedness outstanding under the 2013
Notes; (ii) so long as there is any Indebtedness outstanding under the 2013
Notes, the Senior Convertible Notes; and (iii) all Obligations with respect to
the items listed in the preceding clauses (i) and (ii).

Notwithstanding anything to the contrary in the preceding, Senior Debt will not
include any other Indebtedness including, (i) any liability for federal, state,
provincial, territorial, local or other taxes owed or owing by the Borrower or
its Subsidiaries; (ii) any intercompany Indebtedness of the Borrower or any of
its Subsidiaries to the Borrower or any of its Subsidiaries or any of their
Affiliates; (iii) any trade payables; (iv) the portion of any Indebtedness that
is incurred in violation of this Note or the Governance Agreement;
(v) Indebtedness that is classified as non-recourse in accordance with GAAP or
any unsecured claim arising in respect thereof by reason of the application of
Section 1111(b)(1) of the Bankruptcy Code or (vi) other than the Senior
Convertible Notes, any Indebtedness the proceeds of which are used to retire,
redeem or otherwise refinance the 2013 Notes.]

 

  (xx) “Stated Maturity” means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness as of the date of this Note, and will not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.

 

  (yy) “Subordinated Convertible Notes” means those Notes that contain the
subordination provisions in Section 9 and such other related provisions.

 

  (zz) “Subsidiary” means, with respect to any Person, any other Person of which
at least a majority of the securities or ownership interests having by their
terms ordinary voting power to elect a majority of the board of directors or
other

 

1

To be included only in Subordinated Convertible Notes.

 

10

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Persons performing similar functions is directly or indirectly owned or
otherwise controlled by such Person and/or by one or more of its Subsidiaries.

 

  (aaa) “Taxes” means all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Entity, including any interest, additions to tax or penalties
applicable thereto.

 

  (bbb) “2013 Notes” means the Parent’s Senior Floating Rate Notes due 2013.

 

  (ccc) “2014 Notes” means the Parent’s 7.75% Senior Subordinated Notes due
2014.

 

  (ddd) “Voting Stock” of any specified Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
board of directors (or body performing similar function) of such Person.

 

Section 2. Interest.

 

 

(a)

This Note shall bear interest at a rate per annum (the “Interest Rate”) of
[                 percent (    %)]2 , computed on the basis of a year consisting
of twelve 30-day months. Interest at the Interest Rate shall accrue and be added
to the principal amount daily and be compounded, semiannually in arrears on
June 30 and December 31 of each year, beginning on December 31, 2008 and
continuing through and including the Initial Maturity Date (as defined in
Section 3). For all purposes, the principal amount of the Note shall include
accrued but unpaid interest.

 

 

(b)

Upon the occurrence of an Event of Default (as defined in Section 11) and while
such Event of Default is continuing, the Interest Rate shall be [     percent
(    %)]3 per annum.

 

  (c) Taxes.

 

  (i) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower under this Note (including pursuant to a Note
Guarantee) shall be made free and clear of and without reduction or withholding
for any Taxes; provided, that if any applicable Law requires the deduction or
withholding of any

 

2

The rate applicable to Senior Convertible Notes will generally be 150 bps lower
than the rate applicable to Subordinated Convertible Notes[; provided that in no
event will the rate on the Subordinated Convertible Notes equal or exceed the
“applicable federal rate,” within the meaning of Section 1275(d) of the Internal
Revenue Code and Treasury Regulations thereunder, applicable to the Subordinated
Convertible Notes for the month the Senior Subordinated Notes are issued, plus
500 bps]. The weighted average rate applicable to the Convertible Notes at
original issuance will be 7.75%.

 

3

Initial rate plus 225 bps.

 

11

--------------------------------------------------------------------------------

 

Indemnified Taxes (including any Other Taxes) from any such payments, then
(A) the sum payable by the Borrower shall be increased as necessary so that
after all required deductions or withholdings (including deductions or
withholdings applicable to additional sums payable under this Section 2(c)(i))
have been made, each Holder receives an amount equal to the sum it would have
received had no such deductions or withholdings been made, (B) the applicable
withholding agent shall make such deductions or withholdings and (C) the
applicable withholding agent shall timely pay the full amount deducted or the
cash equivalent thereof to the relevant Governmental Entity in accordance with
applicable Law.

 

  (ii) Payment of Other Taxes by Borrower. Without limiting the provisions of
Section 2(c)(i) above, the Borrower shall timely pay any Other Taxes to the
relevant Governmental Entity in accordance with applicable Law.

 

  (iii) Indemnification by Borrower. Borrower shall indemnify each Holder,
within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this
Section 2(c)), without duplication, payable by each Holder, and reasonable
out-of-pocket expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Entity, provided that the Borrower shall
not be required to so indemnify any Holder pursuant to this Section 2(c)(iii)
for any such amounts and expenses in any fiscal year of such Holder if such
Holder does not deliver such written demand within one (1) year from the end of
such fiscal year; provided further, that if the Law giving rise to such demand
has a retroactive effect, then such one (1) year period shall be extended to
include such period of retroactive effect. Such written demand shall show in
reasonable detail the amount payable and the calculations used to determine such
amount and shall include reasonable supporting documentation authenticating the
claim. A certificate as to the amount of such payment or liability delivered to
the Borrower by a Holder, shall be conclusive absent manifest error.

 

  (iv) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Entity, the
Borrower shall deliver to the applicable Holder(s) the original or a certified
copy of a receipt issued by such Governmental Entity evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the applicable Holder(s).

 

12

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  (v) Status of Holders. Any Foreign Holder that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which
the Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments under this Note shall deliver
to the Borrower, at the time or times reasonably requested by Borrower, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate of
withholding. In addition, any Holder, if requested by the Borrower, shall
deliver such other documentation prescribed by applicable law or reasonably
requested by the Borrower as will enable the Borrower to determine whether or
not such Holder is subject to backup withholding or information reporting
requirements.

 

  (vi) Treatment of Certain Refunds. If the Holder determines, in its sole
discretion, that it has received a refund of any Indemnified Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with respect to
which the Borrower has paid additional amounts pursuant to this Section 2(c), it
shall pay to the Borrower an amount equal to such refund (but only to the extent
of indemnity payments made, or additional amounts paid, by the Borrower under
this Section 2(c) with respect to the Indemnified Taxes or Other Taxes giving
rise to such refund), net of all out-of-pocket expenses of the Holder and
without interest (other than any interest paid by the relevant governmental
authority with respect to such refund), provided that the Borrower, upon the
request of the Holder, agrees to repay the amount paid over to the Borrower
(plus any interest imposed by the relevant governmental authority) to the Holder
in the event the Holder is required to repay such refund to such governmental
authority. This paragraph shall not be construed to require the Holder to make
available its tax returns (or any other information relating to its taxes that
it deems confidential) to the Borrower or any other person.

 

Section 3. Maturity.

 

  (a) The entire unpaid principal amount of this Note and all accrued and unpaid
interest thereon shall be due and payable on the earliest of the following dates
to the extent applicable (the “Maturity Date”), unless this Note shall be
converted prior to the Maturity Date pursuant to any provision hereof.

 

13

--------------------------------------------------------------------------------

 

(i)

4[December 2, 2013, unless all of the aggregate outstanding principal amounts
and accrued and unpaid interest, if any, due under the 2013 Notes and the 2014
Notes have been repaid;]

 

  (ii) April 2, 2014, unless all of the aggregate outstanding principal amounts
and accrued and unpaid interest, if any, due under the 2014 Notes have been
repaid; or

 

  (iii) [Insert date 7 years from closing date].

 

 

(b)

For purposes of this Section 3, the references in subsections 3(a)(i) 5[and
3(a)(ii) to December 2, 2013 and] April 2, 2014, respectively, shall be modified
to a date, if any, that is the maturity date (or, if earlier, the weighted
average life to maturity) of Indebtedness incurred by Parent to fully refinance
or retire [either the 2013 Notes or] the 2014 Notes[, as the case may be].

 

Section 4. Payments. The principal of and all other amounts payable under this
Note shall be payable in immediately available funds in lawful money of the
United States that shall be legal tender for public and private debts at the
time of payment. Any payment by other than immediately available funds which the
Holder, at its option, elects to accept shall be subject to collection, and
interest shall continue to accrue until the funds by which payment is made are
available to the Holder for its use.

All payments under this Note shall be payable to the order of the Holder at such
place as shall be designated in writing from time to time by the Holder
(including, without limitation, any bank account that the Holder designates for
receipt of funds by wire transfer).

 

Section 5. Sinking Fund. No sinking fund is provided for this Note.

 

Section 6. Redemption. This Note may not be redeemed by the Borrower prior to
the Maturity Date.

 

Section 7. Conversion.

 

  (a) The Holder at its option may convert this Note at any time on or after
September 30, 2009 into the number of shares of Common Stock equal to the
quotient of (i) the principal amount of this Note (including accrued but unpaid
interest) divided by (ii) $         (as adjusted in accordance with the terms
hereof, the “Conversion Price”). For the avoidance of doubt, at the time of
issuance, the Notes (in the aggregate) shall be convertible into at least
        % of the outstanding shares of

 

4

Include only in Senior Convertible Notes.

 

5

Include only in Senior Convertible Notes.

 

14

--------------------------------------------------------------------------------

Common Stock calculated on a fully diluted basis (without giving effect to any
dilutive effect of a stock option or similar plan).

 

  (b) Unless the conversion of this Note would violate Section 4.10 of the
indentures governing the Parent Notes, this Note will convert automatically into
shares of Common Stock at the Conversion Price upon the consummation of a
Qualified Transaction.

 

  (c) If on any date prior to a Qualified Transaction the conversion of the Note
would result in (i) a “Change of Control Offer” as defined in the indenture
governing the 2014 Notes (so long as any Parent Notes are then outstanding) or
(ii) an “Extraordinary Transaction” as defined in the Quill Merger Agreement,
the Notes shall be convertible on such date into (1) one share less than the
number of fully paid and non-assessable shares of Common Stock that would result
in such Change of Control or Extraordinary Transaction plus (2) an additional
number of shares of non-voting Common Stock (in all respects other than voting,
identical to the Common Stock) that would have been issuable in voting Common
Stock but for this limitation (the “Conversion Limitation”).

 

  (d) The Conversion Limitation shall be applied only (i) to the Holder that
would cause the Change of Control or (ii) if a “group” (as such term is used in
Section 13(d)(3) of the Exchange Act), on a pro rata basis among the Holders in
such group, such that each Holder shall be entitled to that portion of the
maximum number of shares of voting Common Stock that may be issued pursuant to
the preceding paragraph.

 

  (e) Notwithstanding anything in this Section 7 to the contrary:

 

  (i)

The Borrower shall, by written notice to the Holder within 2 Business Days after
this Note is presented for conversion, refuse to convert this Note into shares
of Common Stock if (A) any Parent Notes are then outstanding and (B) such
conversion would, after giving effect to the use of proceeds associated with the
closing of any concurrent Qualified Transaction (e.g., using the proceeds of an
initial public offering to retire Parent Notes), violate Section 4.10 (Asset
Sales) of the indentures governing the Parent Notes. If at any time after the
earliest to occur of (i) a Qualified Transaction, (ii) the consummation of any
other public offering of any Capital Stock of the Borrower, (iii) the Borrower’s
entering into an agreement to effect a Designated Event and (iv) the
consummation of a Designated Event, a Holder is not permitted to convert this
Note into Common Stock, such Holder may sell all or any portion of this Note and
the Borrower shall pay to such Holder in cash, within 5 Business Days, the
excess of (x) the Fair Market Value (determined in the same manner as
contemplated by Section 10(d) hereof) of the Common Stock issuable upon
conversion of the transferred portion of the Note but for this limitation (the
“Note

 

15

--------------------------------------------------------------------------------

 

FMV”) over (y) the net cash proceeds (or Fair Market Value of any non-cash
proceeds (determined in the same manner as contemplated by Section 10(d)
hereof)) received by such Holder pursuant to such sale; provided, that the
Holder shall first offer to sell such portion of this Note to the Borrower at
the Note FMV, and the Borrower may purchase such portion at such price, in cash,
within 5 Business Days of receipt of such offer from the Holder.

 

  (ii) At any time when this Note may be converted, the Holder may elect to
convert (or in the case of automatic conversion, may elect to have converted)
all or any portion of this Note into shares of non-voting Common Stock, which
will be automatically convertible into Common Stock, upon the occurrence of such
conditions as such Holder may specify, subject to Section 7(d).

 

  (f) Mechanics of Conversion.

 

  (i) The Holder may exercise its conversion right by delivering to Borrower the
written notice substantially in the form set forth in Annex A, which conversion
may be conditioned as set forth in such notice.

 

  (ii) As promptly as practicable thereafter (or, in the case of a conversion
subject to conditions, upon the satisfaction thereof or waiver thereof by such
Holder), the Borrower shall issue and deliver to or upon the written order of
such Holder a certificate or certificates for the number of full shares of
Common Stock to which such Holder is entitled and a check or cash with respect
to any fractional interest in a share of Common Stock.

 

Section 8. Anti-Dilution Adjustments. The number of shares of Common Stock
issuable pursuant to Section 7 of this Note shall be adjusted from time to time
as hereinafter provided in this Section 8:

 

  (a) Adjustments Upon Stock Splits, Dividends, Distributions and Combinations.
In case the Borrower shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares or issue a stock dividend or make a
distribution in shares of Common Stock with respect to outstanding shares of
Common Stock or in case the outstanding shares of Common Stock shall be combined
into a smaller number of shares, then in each such case the Conversion Price
shall be adjusted so that the Holder shall thereafter be entitled to receive
upon conversion of this Note the aggregate number of shares of Common Stock and
other shares of stock or other property that the Holder would have received if
this Note had been converted immediately prior to such event. Successive
adjustments shall be made whenever any event specified above shall occur.

 

16

--------------------------------------------------------------------------------

  (b) Adjustments for Recapitalization by the Borrower. If at any time or from
time to time prior to the full satisfaction of this Note there shall be a
recapitalization of the Capital Stock of the Borrower, the Conversion Price
shall be adjusted so that the Holder shall thereafter be entitled to receive
upon conversion of this Note the aggregate number of shares of Common Stock and
other shares of stock or other property that the Holder would have received if
this Note had been converted immediately prior to such recapitalization. In any
such case, appropriate adjustment shall be made in the application of the
provisions set forth in this Section 8 with respect to the rights and interests
thereafter of the Holder, to the end that the provisions set forth in this
Section 8 shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock or property thereafter deliverable upon conversion of this
Note.

 

  (c) Adjustments for Reorganizations, Mergers, etc. In the event of any
reorganization, consolidation or merger of the Borrower with or into another
Person, the sale, lease, conveyance, transfer or other disposition of all or
substantially all of the assets of the Borrower to another Person, or any
reclassification of the Capital Stock of the Borrower, this Note shall
thereafter be convertible into the kind and amount of shares of Common Stock and
other shares of stock or other property that the Holder would have received if
this Note had been converted immediately prior to such reorganization,
consolidation, merger, sale, lease, conveyance, transfer, disposition, or
reclassification. In such case, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 8 with respect to the
rights and interests thereafter of the Holder, to the end that the provisions
set forth in this Section 8 shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or property thereafter
deliverable upon conversion of this Note.

 

  (d) Adjustments for Dividends, Loans or Sale, Lease or Transfer of Assets.
Upon any (1) dividend or distribution by or loan from, or sale, transfer or
lease of assets from the Borrower or any of its Subsidiaries to any member of
the Parent Group (or in the case of any dividend or distribution, any other
holder of Common Stock of the Company) or (2) any payment by the Borrower or any
of its Subsidiaries on behalf of any member of the Parent Group pursuant to a
Guarantee or otherwise, each Holder will have the option, exercisable by notice
to the Borrower, to concurrently receive (i) an increase in aggregate principal
amount of such Holder’s Note or (ii) a cash payment (or at the Holder’s option,
a distribution of assets of the same kind as so sold, transferred or leased), in
either case equal to (x) the Fair Market Value (if other than cash, determined
and paid in the same manner as contemplated in Section 10(d)) of the dividend or
distribution, amount being loaned, or assets being sold, transferred or leased
multiplied by (y) a fraction, the numerator of which is the number of shares of
Common Stock issuable upon conversion of such Holder’s Note (without giving
effect to any restriction on such conversion) and the denominator of which is
the number of shares of Common Stock owned by Parent (and any other holder of
Common Stock receiving such dividend or distribution). In lieu of the foregoing,
a Holder may elect to reduce the Conversion Price to the price equal to (1) the
Conversion

 

17

--------------------------------------------------------------------------------

 

Price in effect immediately prior to such adjustment less (2) (A) the amount of
the cash payment to which the Holder would otherwise be entitled pursuant to
Section 8(d) divided by (B) the number of shares of Common Stock issuable upon
conversion of such Holder’s Note immediately prior to such adjustment.

To the extent that any such loan from the Borrower or any of its Subsidiaries is
to be repaid by any member of the Parent Group, and Ares is provided at least 10
Business Days advance notice (in accordance with the notice provisions contained
in the Governance Agreement) of such repayment, Ares shall elect, by notice to
the Borrower within 9 Business Days after receipt of such notice, to (x) have
such loan (or applicable portion thereof) forgiven by the Borrower or (y) allow
the Borrower to require the Holders to repay the amounts received by them in
connection with such loan or have an appropriate adjustment made to reverse, or
partially reverse, the foregoing increase in principal amount of Notes or
reduction in Conversion Price so that each Holder shall participate only in the
net benefit received by the Parent Group as a result of such loan and subsequent
repayment by the Parent Group.

 

  (e) Computation of Adjustments. Upon each computation of an adjustment in the
number of shares Common Stock issuable upon conversion of this Note, the number
of shares of Common Stock shall be calculated to the nearest whole share (i.e.,
fractions of less than one half of a share shall be disregarded and fractions of
one half of a share, or greater, shall be treated as being a whole share).

 

  (f) Notice of Additional Adjustments. Upon any event requiring an adjustment
in the number of shares of Common Stock pursuant to this Section 8, then and in
each such case the Borrower promptly shall give written notice thereof to the
Holder, which notice shall state the number of shares of Common Stock and other
shares of stock or other property, if any, issuable upon conversion of this Note
after giving effect to such adjustment and shall set forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.

 

  (g) Closing of Books. The Borrower will not close its books against the
issuance or transfer of any shares of Common Stock issuable pursuant to this
Section 8.

 

  (h) Treasury Stock. The sale or other disposition of any Common Stock
theretofore held in the Borrower’s treasury shall be deemed to be an issuance
thereof.

 

  (i) Costs. The Borrower shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of Common
Stock upon conversion.

 

  (j) Shares to be Fully Paid. The Borrower will take all action necessary to
assure that all shares of Common Stock issued upon the conversion will be duly
and validly issued, fully paid and nonassessable, free and clear of all
encumbrances and shall not be subject to preemptive rights or similar rights of
stockholders.

 

18

--------------------------------------------------------------------------------

  (k) Reservation of Shares. At all times as long as the Note remains
outstanding, the Borrower will take all action necessary to assure that it has
authorized, and reserved for the purpose of issue upon conversion of the Note, a
sufficient number of shares of Common Stock to provide for conversion of the
Note in full.

 

  (l) Approvals. The Borrower will take all action necessary to assure that
shares of Common Stock may be validly and legally issued upon conversion of the
Note and in compliance with the requirements of all Laws and any securities
exchange upon which the Common Stock may be listed. The Borrower will not take
any action that could result in any adjustment hereunder if the total number of
shares of Common Stock issuable after such action upon conversion of the Note in
full, together with all shares of Common Stock then outstanding and all shares
of Common Stock then issuable upon exercise of all options or warrants and upon
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Common Stock then authorized by the Certificate of
Incorporation of the Borrower.

 

Section 9.

Ranking.6 [The provisions of this Section 9 shall apply only for so long as the
2013 Notes require that this Note be subordinated thereto. Upon repayment of the
2013 Notes (or after such 2013 Notes otherwise no longer require this Note to be
subordinated thereto), this Section 9 shall terminate and be of no further force
or effect, without otherwise affecting any other provision of this Note.

 

  (a) Agreement to Subordinate. The Borrower agrees, and the Holder by accepting
this Note agrees, that the Indebtedness evidenced by this Note is subordinated
in right of payment, to the extent and in the manner provided in this Section 9,
to the prior payment in full of all Senior Debt, and that the subordination is
for the benefit of the holders of Senior Debt.

 

  (b) Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors
of the Borrower in a liquidation or dissolution of the Borrower or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Borrower or its property, in an assignment for the benefit of
creditors or any marshaling of the Borrower’s assets and liabilities:

 

  (i) holders of Senior Debt will be entitled to receive payment in full of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) before the Holder of this Note will be entitled to
receive any payment with respect to this Note (except that the Holder of this
Note may receive and retain the interest in kind and shares of Common Stock
issuable upon conversion of this Note); and

 

6

To be included only in Subordinated Convertible Notes.

 

19

--------------------------------------------------------------------------------

  (ii) until all Obligations with respect to Senior Debt (as provided in clause
(i) above) are paid in full, any distribution to which the Holder would be
entitled but for this Section 9 will be made to holders of Senior Debt (except
that the Holder of this Note may receive and retain the interest in kind and
shares of Common Stock issuable upon conversion of this Note), as their
interests may appear.

 

  (c) Default on Senior Debt.

 

  (i) The Borrower may not make any payment or distribution to the Holder in
respect of Obligations with respect to this Note and may not acquire all or any
portion of this Note from any Holder for cash or property (other than the
payment of interest in kind and the issuance of shares of Common Stock in
connection with the conversion of this Note) until all principal and other
Obligations with respect to the Senior Debt have been paid in full if:

 

  (1) payment default on Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document governing
such Senior Debt; or

 

  (2) any other default occurs and is continuing on any series of Senior Debt
that permits holders of that series of Senior Debt to accelerate its maturity
and the Holder receives a notice of such default (a “Payment Blockage Notice”)
from the Borrower or the holders of any Senior Debt. If the Holder receives any
such Payment Blockage Notice, no subsequent Payment Blockage Notice will be
effective for purposes of this Section 9(c) unless and until (A) at least 360
days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal and interest on this
Note that have come due have been paid in full in cash or in kind, as
applicable.

No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Holder may be, or may be made, the basis for
a subsequent Payment Blockage Notice unless such default has been cured or shall
have been waived for a period of not less than 90 days.

 

  (ii) The Borrower may and will resume payments on and distributions in respect
of this Note, and may acquire all or any portion of this Note in accordance with
the terms of this Note, upon the earlier of:

 

20

--------------------------------------------------------------------------------

  (1) in the case of a payment default, upon the date upon which such default is
cured or waived, or

 

  (2) in the case of a nonpayment default, upon the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Senior Debt has been accelerated,

if this Section 9 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition .

 

  (d) Subrogation. After all Senior Debt is paid in full and until this Note is
paid in full, the Holder will be subrogated (equally and ratably with all other
Indebtedness pari passu with this Note) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holder of this Note have been applied to
the payment of Senior Debt. A distribution made under this Section 9 to holders
of Senior Debt that otherwise would have been made to the Holder of this Note is
not, as between the Borrower and the Holder, a payment by the Borrower on this
Note.

 

  (e) Relative Rights. This Section 9 defines the relative rights of the Holder
of this Note and holders of Senior Debt. Nothing in this Note will:

 

  (i) impair, as between the Borrower and the Holder of this Note, the
obligation of the Borrower, which is absolute and unconditional, to pay
principal of and interest on this Note in accordance with its terms;

 

  (ii) affect the relative rights of the Holder of this Note and creditors of
the Borrower other than the Holder’s rights in relation to holders of Senior
Debt; or

 

  (iii) prevent the Holder of this Note from exercising its available remedies
upon an Event of Default, subject to the rights of holders and owners of Senior
Debt to receive distributions and payments otherwise payable to the Holder of
this Note.

If the Company fails because of this Section 9 to pay the principal of or
interest on this Note on the due date, the failure is still an Event of Default.

 

  (f) Subordination May Not Be Impaired by the Borrower or the Holder. No right
of any holder of Senior Debt to enforce the subordination of the Indebtedness
evidenced by this Note may be impaired by any act or failure to act by the
Borrower or the Holder of this Note or by the failure of the Borrower or the
Holder of this Note to comply with the terms of this Note.

 

21

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  (g) Ranking Relative to 2014 Notes. To the extent required by Section 4.16 of
the indenture governing the 2014 Notes, the Indebtedness represented by this
Note shall be pari passu in right of payment to the 2014 Notes until the
termination of this Section 9 in accordance with its terms (and thereafter this
Note shall constitute Senior Debt as defined in and for purposes of such
indenture).]

7[The obligations of the Borrower under this Note will rank senior in right of
payment to all subordinated Indebtedness of the Borrower and equal in right of
payment to all other senior obligations of the Borrower.]

 

Section 10. Holder’s Option to Require Repurchase.

 

  (a) Upon the occurrence of a Designated Event, the Holder shall have the right
to require the Borrower to repurchase all or any portion of this Note pursuant
to the offer described in this Section 10 (the “Designated Event Offer”) for an
amount in cash equal to 100% of the principal amount of this Note to be
purchased. In connection with any repurchase pursuant to this Section 10, the
repurchase price shall be paid in cash.

 

  (b) Upon the occurrence of a Parent Designated Event, the Holder shall have
the right to require the Borrower to repurchase all or any portion of this Note
pursuant to the Designated Event Offer for an amount equal to the greater of
(a) 100% of the principal amount of this Note to be purchased, and (b) the Fair
Market Value of the Common Stock issuable upon conversion of the Note determined
in accordance with paragraph (d) below.

 

  (c) Within 5 Business Days following the date on which a Designated Event or a
Parent Designated Event occurred, or at the Borrower’s option, prior to any
Designated Event, the Borrower shall send, by first class mail, a notice to the
Holder, which notice will govern the terms of the Designated Event Offer and in
the case of a Parent Designated Event, shall disclose Borrower’s estimate of the
Fair Market Value of the Common Stock issuable upon conversion of the Note. Such
notice will state, among other things, a detailed description of the Designated
Event or the Parent Designated Event and the repurchase date, which must be no
earlier than 10 Business Days nor later than 15 Business Days from the date such
notice is mailed, other than as may be required by applicable Law (the
“Designated Event Payment Date”). Interest shall accrue on the Note through and
including the later of (x) Designated Event Payment Date and (y) the date of
final payment in accordance with this Section 10. The notice, if mailed prior to
the date of consummation of the Designated Event or the Parent Designated Event,
shall state that the Designated Event Offer is conditioned on the Designated
Event or Parent Designated Event being consummated on or prior to the Designated
Event Payment Date. The Holder will be required to surrender this Note to the
Borrower prior to the close of business on the second Business

 

7

Include only in Senior Convertible Notes.

 

22

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Day prior to the Designated Event Payment Date with a notice indicating the
portion of this Note the Holder is electing to have repurchased. The Borrower
will promptly mail to the Holder of properly tendered Notes a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered.

The Borrower shall not be required to make a Designated Event Offer if a third
party makes such an offer in the manner, at the times and otherwise in
compliance with the requirements for such an offer made by the Borrower and such
third party purchases the portion of this Note properly tendered.

 

  (d) If the Holder and the Borrower cannot agree on the Fair Market Value of
the Common Stock issuable upon conversion of the Note within 30 days after the
Borrower has notified the Holder of the Parent Designated Event, the parties
shall submit their final calculations of such value to an arbitrator (the
“Arbitrator”) who shall be an independent valuation firm and be appointed by
agreement of the Holder and the Borrower or, failing such agreement, by the
American Arbitration Association (the “AAA”) in accordance with the Commercial
Arbitration Rules of the AAA. The Arbitrator shall review such final
calculations and make a selection as to which of the final calculations
presented to it is, in the aggregate, more accurate. To clarify, the Arbitrator
will be required to select one of the two calculations in its entirety. The
decision of the Arbitrator shall be made within 30 days after being engaged, or
as soon thereafter as reasonably practicable, and shall be final and binding on
the parties. The costs and expenses of the Arbitrator shall be paid by the party
whose final calculation is not selected by the Arbitrator as being more
accurate. The Holder and the Borrower shall make available to the Arbitrator all
relevant books and records relating to the calculations submitted and all other
information reasonably requested by the Arbitrator.

 

  (e) Pending determination of the Fair Market Value of the Common Stock
issuable upon conversion of the Note, the Borrower shall pay to the Holder,
within 5 Business Days of the Holder’s request, but not earlier than the
Designated Event Payment Date, an amount in cash equal to the greater of
(x) 100% of the principal amount of the Note to be purchased, (y) the agreed
upon Fair Market Value of the Common Stock issuable upon conversion of the Note
and (z) the lower of the two Fair Market Values of the Common Stock issuable
upon conversion of the Note reflected in the two final calculations referred to
above; provided, that if the Arbitrator thereafter selects the higher of such
Fair Market Values as being more accurate, the Borrower shall, within 2 Business
Days of notice of such selection, pay an additional amount in cash to the Holder
equal to the excess of such higher Fair Market Value over the amount previously
paid in accordance with this Section 10(e), together with accrued interest
thereon at the interest rate of this Note.

 

23

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Section 11. Default. (a) Each of the following events shall be an “Event of
Default” hereunder:

 

  (i) the Borrower (a) fails to pay timely any amount due under this Note on the
date the same becomes due and payable at maturity, upon acceleration, upon
redemption or otherwise (whether or not prohibited by the subordination
provisions hereunder) or (b) fails to comply with its obligations under
Section 8(d), Section 10 or Section 12(a) of this Note;

 

  (ii) the Borrower or any of its Subsidiaries pursuant to or within the meaning
of the Bankruptcy Code:

 

  (1) commences a voluntary case,

 

  (2) consents or fails to timely object to the entry of an order for relief
against it in an involuntary case,

 

  (3) consents or fails to timely object to the appointment of a custodian of it
or for all or substantially all of its property,

 

  (4) makes a general assignment for the benefit of its creditors, or

 

  (5) generally is not paying its debts as they become due;

 

  (iii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Code that:

 

  (1) is for relief against the Borrower or any of its Subsidiaries in an
involuntary case;

 

  (2) appoints a custodian of the Borrower or any of its Subsidiaries or for all
or substantially all of the property of the Borrower or any of its Subsidiaries;
or

 

  (3) orders the liquidation of the Borrower or any of its Subsidiaries;

and the order or decree remains unstayed and in effect for 60 consecutive days;

 

  (iv) Parent, the Borrower or any of their respective Subsidiaries fails to
comply with any of its obligations under this Note or any Guarantee of this Note
(other than as contemplated in clause (i) above), or under the Governance
Agreement, the Registration Rights Agreement or the Note Purchase Agreement, and
such failure is not cured within 30 days;

 

24

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  (v) the Borrower or any of its Subsidiaries makes any payment pursuant to any
Guarantee of the Parent Notes;

 

  (vi) any payment of, or vote by the Board of Directors of Parent to pay, any
discretionary change of control payments, including the “Company Holders
Protection Payment” set forth in the Quill Merger Agreement;

 

  (vii) except as permitted by the Notes, any Guarantee in favor of the Notes is
held in any judicial proceeding to be unenforceable or invalid or ceases for any
reason to be in full force and effect, or any guarantor of the Notes, or any
Person acting on behalf of any guarantor, denies or disaffirms its obligations
under its Guarantee of the Notes;

 

  (viii) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed Parent, the Borrower or any of their respective Subsidiaries (or
the payment of which is guaranteed by Parent, the Borrower or any of their
respective Subsidiaries), whether such Indebtedness or Guarantee now exists, or
is created after the date of this Note, if that default:

 

  (1) is caused by a failure to pay principal of, or interest or premium, if
any, on, such Indebtedness prior to the expiration of the grace period provided
in such Indebtedness on the date of such default (a “Payment Default”); or

 

  (2) results in the acceleration of such Indebtedness prior to its express
maturity,

and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$20.0 million or more; or

 

  (ix) failure by Parent, the Borrower or any of their respective Subsidiaries
to pay final judgments entered by a court or courts of competent jurisdiction
aggregating in excess of $10.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days.

 

  (b)

If an Event of Default (other than an Event of Default with respect to the
Borrower specified in clause (ii) or (iii) of Section 11(a)) occurs and is
continuing, the Holders of at least a majority in aggregate principal amount of
the then outstanding Notes, by notice to the Borrower, may declare the unpaid

 

25

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principal of and any accrued interest on all the Notes to be due and payable,
and immediately upon such declaration, the principal, premium, if any, and
interest shall be due and payable. If an Event of Default with respect to the
Borrower specified in clause (ii) or (iii) of Section 11(a) occurs, such an
amount shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of any Holder. Upon any such acceleration,
the Holder will be entitled to receive the maximum amount it would be entitled
to receive pursuant to Section 10 as if such acceleration were a Parent
Designated Event.

 

Section 12. Covenants. Prior to the conversion of this Note, to the extent any
covenants contained in Sections 12(c), 12(d) or 12(e) would contravene
Section 4.08 of the indentures governing the Parent Notes, for so long as such
indentures remain in effect (by constituting a consensual encumbrance or
restriction on dividends or distributions, loans or advances or transfers
(including sales or leases) of assets for the benefit of Parent or its
Subsidiaries), then such covenant or covenants shall not be applicable, and need
not be complied with, and shall not be the basis for any Event of Default
hereunder, to only such extent and during only such time as shall be necessary
to ensure the non-contravention thereof:

 

  (a) Restriction on Incurrence of Indebtedness. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, incur, create,
issue, assume, Guarantee or otherwise become liable, contingently or otherwise,
for any Indebtedness that is senior in right of payment to (contractually,
structurally or otherwise), or pari passu with, this Note (including Acquired
Debt), and the Borrower will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of preferred stock, other
than Indebtedness incurred on or prior to the date hereof, and other
Indebtedness in an aggregate principal amount outstanding at any time not to
exceed $20,000,000 in the form of a revolving credit line. Without limiting the
foregoing, the Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, Guarantee or otherwise become liable, contingently
or otherwise, for any Indebtedness the proceeds of which directly or indirectly
refinance any Parent Notes.

 

  (b) Limitations on Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind on any asset
now owned or hereafter acquired, except:

 

  (i) Liens created or existing on or prior to the date of this Note;

 

  (ii)

Liens incurred in the ordinary course of business (including but not limited to
Capital Lease Obligations, mortgage financings or purchase money obligations, in
each case, incurred for the purpose of financing all or any part of the purchase
price or cost of design, construction, installation or improvement of property,
plant or equipment used in the business of the Borrower or any of its

 

26

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Subsidiaries) with respect to obligations that do not exceed $10.0 million at
any one time outstanding;

 

  (iii) Liens imposed by Law, such as carriers’, warehousemen’s, landlord’s and
mechanics’ Liens, in each case, incurred in the ordinary course of business;

 

  (iv) survey exceptions, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real property that were not incurred in connection with Indebtedness and that do
not in the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person;

 

  (v) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently pursued; provided that any
reserve or other appropriate provision as is required in conformity with GAAP
has been made therefor;

 

  (vi) Liens in favor of the Borrower or its Subsidiaries;

 

  (vii) Liens on property of a Person existing at the time such Person is merged
with or into or consolidated or amalgamated with the Borrower or any Subsidiary
of the Borrower; provided that such Liens were in existence prior to the
contemplation of such merger, amalgamation or consolidation and do not extend to
any assets other than those of the Person merged into or amalgamated or
consolidated with the Borrower or the Subsidiary;

 

  (viii) Liens on property (including Capital Stock) existing at the time of
acquisition of the property by the Borrower or any Subsidiary of the Borrower;
provided that such Liens were in existence prior to, and not incurred in
contemplation of, such acquisition; and

 

  (ix) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business.

 

  (c)

Transactions with Affiliates. Except for (i) transactions or agreements between
the Borrower and its Subsidiaries or among Subsidiaries of the Borrower;
(ii) transactions or agreements between Parent and the Borrower entered into on
or prior to the date hereof as expressly contemplated by the Restructuring
Agreement; and (iii) any employment agreement, employee benefit plan, officer or
director indemnification agreement, consulting agreement, severance agreement,
insurance policy or any similar arrangement entered into by the

 

27

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Borrower or any of its Subsidiaries in the ordinary course of business and
payments pursuant thereto, and the terms of which have been approved by the
Board of Directors of the Borrower, the Borrower will not and will not permit
any of its Subsidiaries, directly or indirectly, to enter into any transaction
or agreement (including the purchase, sale, lease or exchange of any property or
the rendering of any management, consulting, advisory or other similar services)
with, or for the benefit of, any Affiliate of Parent, the Borrower or any
Subsidiary of either (each of the foregoing, an “Affiliate Transaction”), except
for such transactions and agreements (1) that are not less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate and (2) as to which the
Borrower delivers to the Holder (A) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $10,000,000, a resolution of the
Board of Directors of the Borrower set forth in an Officers’ Certificate
certifying that such Affiliate Transaction complies with clause (1) above and
that such Affiliate Transaction has been approved by the majority of the
disinterested Board of Directors of the Borrower and that in their reasonable
good faith judgment, that (i) the transaction is in the best interest of the
Company or such Subsidiary based on full disclosure of all relevant facts and
circumstances and (ii) such transaction is on fair and reasonable terms
competitive with those that could be obtained from an unrelated third party
(such approval and determination to be evidenced by a resolution of such
disinterested directors) and (B) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving in excess of $25,000,000, in
addition to satisfying the requirements of (A) above, an opinion as to the
fairness of such Affiliate Transaction to the Borrower or such Subsidiary from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing.

 

  (d) Limitation on Dividends. The Borrower shall not, and shall cause its
Subsidiaries not to, pay dividends or make any other distributions on its
Capital Stock other than dividends or distributions by a wholly owned Subsidiary
of the Borrower paid or made to the Borrower or to another wholly owned
Subsidiary of the Borrower.

 

  (e) Limitation on Investments. The Borrower shall not, and shall not allow any
of its Subsidiaries to, make any Investment other than:

 

  (i) any Investment in the Borrower or a wholly-owned Subsidiary of the
Borrower that is a Guarantor;

 

  (ii) any Investment in Cash Equivalents;

 

  (iii) any Investment in a Person, if as a result of such Investment:

 

  (1) such Person becomes a Subsidiary of the Borrower and a Guarantor; or

 

28

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  (2) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Borrower or a Subsidiary of the Borrower that is a Guarantor;

 

  (iv) any acquisition of assets or Capital Stock solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Borrower;

 

  (v) any Investments received in compromise or resolution of (i) obligations of
trade creditors or customers that were incurred in the ordinary course of
business of the Borrower or any of its Subsidiaries, including pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of any trade creditor or customer; or (ii) litigation, arbitration or other
disputes with Persons who are not Affiliates;

 

  (vi) Investments represented by Hedging Obligations;

 

  (vii) loans or advances to employees made in the ordinary course of business
of the Borrower or any Subsidiary of the Borrower in an aggregate principal
amount not to exceed $7.5 million at any one time outstanding;

 

  (viii) repurchases of the Notes; and

 

  (ix) other Investments made after the date of the Notes in any Person having
an aggregate Fair Market Value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (9) that are at
the time outstanding not to exceed $50.0 million, provided that any such
Investment will not be deemed to be outstanding pursuant to this clause (9) if
such Investment subsequently constitutes a Permitted Investment pursuant to
clause (3) hereof.

 

  (f) Issue Price. The Borrower shall treat the issue price as the face amount
of the Notes for purposes of Section 1273 of the Internal Revenue Code, and the
Treasury Regulations thereunder.

 

  (g) Tax Treatment of the Notes. The Borrower shall not treat the Notes as a
“contingent payment debt instrument” within the meaning of Treasury Regulation
Section 1.1275-4.

 

  (h) Information. The Borrower shall

 

  (i)

upon request of the Holder, make information available in a manner necessary to
permit sales of the Notes or the Common

 

29

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Stock issuable upon conversion of the Notes pursuant to Rule 144 and Rule 144A
promulgated under the Securities Act of 1933, as amended (the “Securities Act”);
and

 

  (ii) take such further action as the Holder may reasonably request from time
to time to enable such Holder to sell the Notes and Common Stock without
registration under the Securities Act pursuant to the exemptions provided by
Rule 144 and Rule 144A promulgated thereunder.

 

 

(i)

[No Layering. The Borrower will not, and will not allow any of its Subsidiaries
to, incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is contractually subordinate or junior in right of payment to
any Senior Debt and senior in right of payment to the Subordinated Convertible
Notes (in the case of the Borrower) or such Subsidiary’s Guarantee of the
Subordinated Convertible Notes.]8

 

Section 13. Guarantee.

 

  (a) Execution of Guarantee. Parent shall execute a Guarantee in the form
attached hereto as Exhibit B-1. Parent and the Borrower shall cause each Person
that Guarantees the Parent Notes, whether on, before or after the Closing Date
to execute a Guarantee in the form attached hereto as Exhibit B-2.

 

  (b) Releases.

 

  (i) In the event of any sale or other disposition of all or substantially all
of the assets of any Guarantor (other than Parent), by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of any Guarantor (other than Parent), in each case to a Person that is not
(either before or after giving effect to such transactions) the Borrower or a
Subsidiary of the Borrower, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the Capital
Stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of all obligations under its Note
Guarantee, provided that such Guarantor has also been released and relieved of
all obligations under its Guarantee of the Parent Notes. Upon delivery by the
Borrower to the Holders of written notice of the satisfaction of the conditions
described in the foregoing sentence, the Holders will execute any documents
reasonably required in order to evidence the release of such Guarantor from its
obligations under its Note Guarantee.

 

8 To be included only in Subordinated Convertible Notes.

 

30

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(ii)

On the 91st day following the repayment, retirement or redemption of all of the
Parent Notes, and provided that Borrower and all of its Subsidiaries have been
released and relieved of all obligations under all Guarantees of Indebtedness of
any member of the Parent Group, the Parent shall be released and relieved of any
obligations under its Note Guarantee.

 

Section 14. Voting. Pursuant to Section [    ] of the Borrower’s Certificate of
Incorporation, the Holders shall be entitled to vote upon all matters upon which
holders of the Common Stock have the right to vote, and shall be entitled to the
number of votes equal to the largest number of full shares of voting Common
Stock into which such Holder’s Notes could be converted pursuant to Section 7
hereof at the record date for the determination of the stockholders entitled to
vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of capital stock having
general voting powers and not separately as a class.

 

Section 15. Miscellaneous.

 

  (a) Replacement. Upon receipt of evidence reasonably satisfactory to the
Borrower of the loss, theft, destruction or mutilation of this Note, and
provision of such indemnity as the Borrower may reasonably require, the Borrower
will issue a new note, of like tenor and amount in lieu of such lost, stolen,
destroyed or mutilated Note.

 

  (b) Usury. In no event shall the amount of interest due or payable hereunder
exceed the maximum amount of interest allowed by applicable Law or otherwise
violate applicable Law, and in the event any payment is made which exceeds such
maximum lawful amount, then the amount of such excess sum shall be credited as a
payment of principal. It is the express intent hereof that the Borrower shall
not pay and the Holder shall not receive, directly or indirectly, interest in
excess of what may lawfully be paid by the Borrower under applicable Law.

 

  (c) Restrictions on Transfers.

 

  (i)

Except as permitted in the Registration Rights Agreement or the Governance
Agreement, this Note and the shares of Common Stock issuable upon the conversion
hereof may not be sold, assigned, pledged, hypothecated or otherwise
transferred, in whole or in part, directly or indirectly, by operation of Law or
otherwise (a “Transfer ”), without the prior written consent of the Borrower,
which consent shall not be unreasonably withheld, provided that withholding
consent for any Transfer to a material competitor of the Borrower shall be
deemed to be reasonable. The restriction on transferability of this Note shall
terminate at the fourth anniversary of the date of this Note. Transfers of any
shares of Common Stock

 

31

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shall be governed by the Registration Rights Agreement and the Governance
Agreement. Borrower may not assign this Note or any of its rights or obligations
hereunder.

 

  (ii) The Borrower shall maintain at one of its offices a register for the
recordation of the names and addresses of the Holders, and principal amount of
this Note owing to, each Holder pursuant to the terms of this Note from time to
time (the “Register”). The Register shall be available for inspection by any
Holder (with respect to its own interest only), at any reasonable time and from
time to time upon reasonable prior notice.

 

  (d) Successors and Assigns. As used herein and subject to the other transfer
restrictions contained in this Note, the terms “Borrower” and “Holder” shall be
deemed to include their respective heirs, successors, legal representatives and
permitted assigns, whether voluntary by action of the parties or involuntary by
operation of Law.

 

  (e) Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other will be in writing and will be deemed to
have been duly given (a) on the date of delivery if delivered personally or by
telecopy or facsimile, upon confirmation of receipt, (b) on the first Business
Day following the date of dispatch if delivered by a recognized next-day courier
service, or (c) on the third Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.

 

  (i) If to the Holder to it at:

[Holder]

[Address]

Attn: [            ]

Telephone: [(        )            ]

Fax: [(        )            ]

with a copy to (which copy alone shall not constitute notice):

Proskauer Rose LLP

2049 Century Park East, 32nd Floor

Los Angeles, CA 90067-3206

Attn: Michael A Woronoff, Esq.

Telephone: (310)557-2900

Fax: (310) 557-2193

 

  (ii) If to the Borrower:

 

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Angiotech Pharmaceutical Interventions, Inc.

1618 Station Street

Vancouver, BC Canada V6A 1B6

Attn: General Counsel

Telephone: (604) 221-7676

Fax: (604) 221-2330

with a copy to (which copy alone shall not constitute notice):

Sullivan & Cromwell LLP

1888 Century Park East, 21st Floor

Los Angeles, California, 90067

Attn: Alison S. Ressler

Telephone: (310) 712-6600

Fax: (310) 712-8800

 

  (f) Severability. Should any provision of this Note for any reason be declared
invalid or unenforceable, (i) such decision shall not affect the validity or
enforceability of any of the other provisions of this Note, which remaining
provisions shall remain in full force and effect, and (ii) the application of
such invalid or unenforceable provision to Persons or circumstances other than
those as to which it is held invalid or unenforceable shall be valid and
enforced to the fullest extent permitted by Law, but only to the extent that
such enforceability or application is in accordance with the intent of the
parties as evidenced by this Note.

 

  (g) Headings. The captions herein are for convenience and reference only and
in no way define or limit the scope or content of this Note or in any way affect
its provision.

 

  (h) Amendment; Waiver. No modification, amendment or waiver of any provision
of this Note will be effective against the Borrower, Parent or the Holders
unless made in writing and signed by an officer of a duly authorized
representative of the Borrower, Parent and Holders holding at least a majority
in aggregate principal amount of the Notes; provided, that no modification,
amendment or waiver may adversely affect a Holder with respect to a provision
differently from another Holder without the consent of each affected Holder No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. No waiver of any party will be effective
unless it is in a writing signed by a duly authorized officer of the waiving
party that makes express reference to the provision or provisions subject to
such waiver. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.

 

33

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  (i) Presentments and Demand. The Borrower hereby waives presentment, demand,
notice of nonpayment, protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement of this Note.

 

  (j) Governing Law. This Note will be governed by and construed in accordance
with the Laws of the State of New York. The Borrower hereby irrevocably submits
to the exclusive jurisdiction of the Courts of the State of New York located in
the County of New York and the Federal courts of the United States of America
located in the County of New York for the purpose of any proceeding arising out
of or relating to this Note and hereby irrevocably agrees that all claims in
respect to such proceeding shall be heard and determined exclusively in such New
York or Federal court. The Borrower agrees that a final judgment in any
Proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by Law.

 

  (k) Waiver Of Jury Trial. Each Of The Parties Hereto Hereby Irrevocably Waives
Any And All Right To Trial By Jury In Any Legal Proceeding Arising Out Of Or
Related To This Note Or The Transactions Contemplated Hereby.

[signature page follows]

 

34

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IN WITNESS WHEREOF, the undersigned has caused this Note to be executed and
delivered on the date and year first written above.

 

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC. By:  

 

  Name:  

K. Thomas Bailey

  Title:  

Chief Financial Officer

 

S-1

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EXHIBIT A

NOTICE TO EXERCISE CONVERSION RIGHT

The undersigned, being a holder of the convertible notes of Angiotech
Pharmaceutical Interventions, Inc. (the “Company”) exercises the right to
convert                      outstanding aggregate principal amount of
Convertible Notes on                     ,         , into shares of Common Stock
of the Company, [upon the occurrence of [                        ] on or prior
to [insert date]] in accordance with the terms of the Convertible Notes, and
directs that the shares issuable and deliverable upon the conversion be issued
and delivered in the denominations indicated below to the registered holder
hereof unless a different name has been indicated below.

Dated: [At least one Business Day prior to the date fixed for conversion]

 

Fill in for registration of shares of Common Stock if to be issued otherwise
than to the registered holder:      

 

      Name      

 

      Address      

 

   

 

  Please print name and address, including postal code number     (Signature)  

 

A-1

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EXHIBIT B-1

PARENT GUARANTEE

Reference is made to the Convertible Notes dated of even date herewith (the
“Notes”) issued by Angiotech Pharmaceutical Interventions, Inc. (the “Borrower”)
pursuant to the Note Purchase Agreement (the “Purchase Agreement”), dated July
6, 2008, among Borrower, Ares Corporate Opportunities Fund III, L.P. (“Ares”),
New Leaf Ventures I, L.P. (“Leaf I”), and New Leaf Ventures II, L.P. (“Leaf II”,
and together with Ares and Leaf I and their respective transferees, successors
and assigns, the “Holders”). Capitalized terms used but not defined herein have
the meanings given to them in the Notes.

 

1. Guarantee. For value received, Angiotech Pharmaceuticals, Inc., a corporation
organized under the laws of British Columbia, Canada (the “Guarantor”), hereby
irrevocably and unconditionally guarantees (a) the due and punctual payment of
the principal of, interest on, and all other amounts under, the Notes, whether
at maturity or otherwise (including by acceleration), the due and punctual
payment of interest on overdue principal of, interest on, and all other amounts
under, the Notes, if any, and the due and punctual performance of all other
obligations of the Borrower to the Holders, in each case in accordance with the
terms of the Purchase Agreement and the Notes, and (b) in case of any extension
of time of payment or renewal of the Notes or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity or
otherwise.

This is a continuing Guarantee and shall remain in full force and effect and
shall be binding upon the Guarantor and its successors and permitted assigns
until full and final payment of all of the Borrower’s obligations under the
Notes and the Purchase Agreement, or until otherwise released in accordance with
Section 13(b) of the Notes. If any Holder is required by any court or otherwise
to return to the Borrower, the Guarantor, or any custodian, trustee, liquidator
or other similar official acting in relation to either the Borrower or the
Guarantor, any amount paid by either to such Holder, this Guarantee, to the
extent theretofore discharged, will be reinstated in full force and effect.

This Guarantee shall inure to the benefit of the successors and assigns of the
Holders, and, in the event of any transfer or assignment of rights by any
Holder, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.

The Guarantor agrees that this Guarantee is a guarantee of payment and not a
guarantee of collection.

The Guarantor hereby agrees that its obligations hereunder are unconditional,
irrespective of the validity, regularity or enforceability of the Notes or the
Purchase Agreement, the absence of any action to enforce the same, any waiver or
consent by any Holder with respect to any provisions hereof or thereof, the
recovery of any judgment against the Borrower, any action to enforce the same or
any other circumstance that might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or

 

B1-1

--------------------------------------------------------------------------------

bankruptcy of the Borrower, any right to require a proceeding first against the
Borrower, protest, notice and all demands whatsoever and covenants that this
Guarantee will not be discharged except by complete performance of the
obligations contained in the Notes and the Purchase Agreement.

 

2. Taxes. All payments to the Holders by the Guarantor under the Notes shall be
made free and clear of, and without deduction or withholding for, any and all
Taxes imposed by Canada (or any political subdivision or taxing authority of
it), unless such Taxes are required by applicable law to be deducted or
withheld. If the Guarantor shall be required by applicable law to deduct or
withhold any such Taxes from or in respect of any amount payable under this
Guarantee except, as provided in the next sentence, (i) the amount payable shall
be increased as may be necessary so that after making all required deductions or
withholdings (including deductions or withholdings applicable to any additional
amounts paid under this paragraph), the Holders receives an amount equal to the
amount they would have received if no such deduction or withholding had been
made, (ii) the Guarantor shall make such deductions or withholdings, and
(iii) the Guarantor shall immediately pay the full amount deducted or withheld
to the relevant Governmental Entity in accordance with applicable Law.

 

3.

Ranking. 9[The obligations of the Guarantor hereunder will be junior and
subordinated in right of payment to the Senior Debt of such Guarantor on the
same basis as the Notes are junior and subordinated to Senior Debt of the
Borrower. For the purposes of the foregoing sentence, the Holders will have the
right to receive and/or retain payments by the Guarantor only at such times as
they may receive and/or retain payments in respect of the Notes pursuant to the
Notes and this Guarantee. To the extent required by Section 4.16 of the
indenture governing the 2014 Notes, the Indebtedness represented by this
Guarantee shall be pari passu in right of payment to the 2014 Notes until the
termination of Section 9 of the Subordinated Convertible Notes in accordance
with its terms (and thereafter the Indebtedness represented by this Guarantee
shall constitute Senior Debt as defined in and for purposes of such indenture.)]

10[The obligations of the Guarantor hereunder will rank senior in right of
payment to all subordinated Indebtedness of the Guarantor and equal in right of
payment with all other senior obligations of the Guarantor.]

 

4. Covenants.

 

  a. If the Guarantor or any of its Subsidiaries (other than Borrower and the
other guarantors of the Notes (the “Other Guarantors”)) receives any
distribution or asset from the Borrower or any of its Subsidiaries (whether
pursuant to a dividend, distribution, loan, transfer or sale of assets or
otherwise) or receives net proceeds from the sale of any assets or the
incurrence of any Indebtedness, the Guarantor will

 

9

To be included only in the guarantee of Subordinated Convertible Notes.

 

10

To be included only in the guarantee of Senior Convertible Notes.

 

B1-2

--------------------------------------------------------------------------------

use, and will cause such Subsidiaries to use, all such amounts (or, in the case
of non-cash property, the Fair Market Value thereof), within 30 days of receipt
thereof, solely to repurchase, redeem, repay, retire or otherwise reduce
(i) first, the outstanding principal amount of Indebtedness represented by the
2013 Notes until they are repaid in full, and (ii) thereafter, the outstanding
principal amount of Indebtedness represented by the 2014 Notes, and not for any
other purpose.

 

  b. The Guarantor will not, and will not permit any of its Subsidiaries (other
than the Borrower and its Subsidiaries) to, directly or indirectly, (i) engage
in any business other than the business conducted by the Guarantor on the date
hereof after giving effect to the Restructuring (as defined in the Purchase
Agreement) or (ii) incur any Indebtedness other than Indebtedness the net
proceeds of which are used solely to repurchase, repay, retire or otherwise
reduce (x) the outstanding principal and other amounts due under the 2013 Notes
until they are repaid in full, and (y) thereafter, the outstanding principal and
other amounts due under the 2014 Notes, and not for any other purpose.

 

  c. The Guarantor will not, and will not permit any of its Subsidiaries to,
directly or indirectly, take any action that could (i) cause the default (or
that upon notice, lapse of any applicable cure period or both could, unless
cured or waived, cause a default) under any Indebtedness of the Borrower or any
of the Other Guarantors (or the payment of which is guaranteed by the Borrower
or any of the Other Guarantors), (ii) cause the acceleration (or that upon
notice, lapse of any applicable cure period or both could, unless cured or
waived, cause the acceleration) of contingent payments (including earnouts or
milestone payments, other than earnouts or milestone payments resulting solely
from superior performance) owed by Borrower, the Guarantor or any of their
respective Subsidiaries under any license agreement, merger, acquisition or
purchase agreement, collaboration or research agreement, or other similar
agreements, (iii) result in an Extraordinary Transaction under the Quill Merger
Agreement, (iv) pay any discretionary change of control payments, including the
“Company Holders Protection Payment” set forth in the Quill Merger Agreement, or
(v) otherwise trigger an acceleration (or that upon notice, lapse of any
applicable cure period or both could, unless cured or waived, trigger an
acceleration) of any of the liabilities or obligations of the Guarantor, the
Borrower or any of their respective Subsidiaries under any similar agreements.

 

  d. The Guarantor will not, directly or indirectly:

 

  i. declare or pay any dividend or make any other payment or distribution on
account of the Guarantor’s Capital Stock (including, without limitation, any
payment in connection with any merger, amalgamation or consolidation) or to the
direct or indirect holders of the Guarantor’s Capital Stock in their capacity as
such; or

 

  ii.

purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger, amalgamation or consolidation)

 

B1-3

--------------------------------------------------------------------------------

 

any Capital Stock of the Guarantor or any direct or indirect parent of the
Guarantor or any of its Subsidiaries.

 

  e. The Guarantor will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into any agreement to transfer, settle or
extinguish, or any transaction that would have the effect of transferring,
settling or extinguishing, any Indebtedness owed by Angiotech Investment
Partnership (or any successor thereof) to the Guarantor or any of its
Subsidiaries.

 

  f. The Guarantor will not, and will not permit any of its Subsidiaries (other
than the Borrower and its Subsidiaries) to, directly or indirectly, enter into
any agreement to, or the effect of which would be to, (i) restrict the
activities of the Borrower or its Subsidiaries (ii) or create, incur, assume or
otherwise cause or suffer to exist or become effective any Lien on any asset of
the Guarantor or any of its Subsidiaries.

 

5. No Subrogation. The Guarantor hereby agrees that (a) it will not be entitled
to any right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby and (b) as between the Guarantor, on the one hand, and the
Holders, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in the Notes for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (ii) in
the event of any declaration of acceleration of such obligations as provided in
the Notes, such obligations (whether or not due and payable) will forthwith
become due and payable by the Guarantor for the purpose of this Guarantee.

 

6. Limitation on Liability. The Guarantor, and by its acceptance of Notes, each
Holder, hereby confirms that it is the intention of all such parties that this
Guarantee not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal, state, provincial or other applicable Law
to the extent applicable to this Guarantee. To effectuate the foregoing
intention, the Holders and the Guarantor hereby irrevocably agree that the
obligations of the Guarantor will be limited to the maximum amount that will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of Guarantor that are relevant under such laws, and after giving
effect to any collections from, rights to receive contribution from or payments
made by or on behalf of any Other Guarantor in respect of the obligations of
such Other Guarantor, result in the obligations of the Guarantor under this
Guarantee not constituting a fraudulent transfer or conveyance.

 

ANGIOTECH PHARMACEUTICALS, INC. By  

 

        Name:           Title:  

 

B1-4

--------------------------------------------------------------------------------

EXHIBIT B-2

GUARANTEE

Reference is made to the Convertible Notes (the “Notes”) issued by Angiotech
Pharmaceutical Interventions, Inc. (the “Borrower”) pursuant to the Note
Purchase Agreement (the “Purchase Agreement”), dated July 6, 2008, among
Borrower, Ares Corporate Opportunities Fund III, L.P. (“Ares”), New Leaf
Ventures I, L.P. (“Leaf I”), and New Leaf Ventures II, L.P. (“Leaf II”, and
together with Ares and Leaf I and their respective transferees, successors and
assigns, the “Holders”). Capitalized terms used but not defined herein have the
meanings given to them in the Notes.

 

1. Guarantee. For value received,                     , a corporation organized
under the laws of                      (the “Guarantor”), hereby irrevocably and
unconditionally guarantees (a) the due and punctual payment of the principal of,
interest on, and all other amounts under, the Notes, whether at maturity or
otherwise (including by acceleration), the due and punctual payment of interest
on overdue principal of, interest on, and all other amounts under, the Notes, if
any, and the due and punctual performance of all other obligations of the
Borrower to the Holders, in each case in accordance with the terms of the
Purchase Agreement and the Notes, and (b) in case of any extension of time of
payment or renewal of the Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity or otherwise.

This is a continuing Guarantee and shall remain in full force and effect and
shall be binding upon the Guarantor and its successors and permitted assigns
until full and final payment of all of the Borrower’s obligations under the
Notes and the Purchase Agreement, or until otherwise released in accordance with
Section 13(b) of the Notes. If any Holder is required by any court or otherwise
to return to the Borrower, the Guarantor, or any custodian, trustee, liquidator
or other similar official acting in relation to either the Borrower or the
Guarantor, any amount paid by either to such Holder, this Guarantee, to the
extent theretofore discharged, will be reinstated in full force and effect.

This Guarantee shall inure to the benefit of the successors and assigns of the
Holders, and, in the event of any transfer or assignment of rights by any
Holder, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.

The Guarantor agrees that this Guarantee is a guarantee of payment and not a
guarantee of collection.

The Guarantor hereby agrees that its obligations hereunder are unconditional,
irrespective of the validity, regularity or enforceability of the Notes or the
Purchase Agreement, the absence of any action to enforce the same, any waiver or
consent by any Holder with respect to any provisions hereof or thereof, the
recovery of any judgment against the Borrower, any action to enforce the same or
any other circumstance that might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Guarantor hereby waives diligence,

 

B2-1

--------------------------------------------------------------------------------

 

presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Borrower, any right to require a proceeding
first against the Borrower, protest, notice and all demands whatsoever and
covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes and the Purchase
Agreement.

 

2. Taxes. All payments to the Holders by the Guarantor under the Notes shall be
made free and clear of and without deduction or withholding for any and all
Taxes imposed by any jurisdiction in which the Guarantor is formed, incorporated
or otherwise doing business (or any political subdivision or taxing authority of
it), unless such Taxes are required by applicable law to be deducted or
withheld. If the Guarantor shall be required by applicable law to deduct or
withhold any such Taxes from or in respect of any amount payable under this
Guarantee except, as provided in the next sentence, 1) the amount payable shall
be increased as may be necessary so that after making all required deductions or
withholdings (including deductions or withholdings applicable to any additional
amounts paid under this Section 2, the Holders receive an amount equal to the
amount they would have received if no such deduction or withholding had been
made, 2) the Guarantor shall make such deductions or withholdings, and 3) the
Guarantor shall immediately pay the full amount deducted or withheld to the
relevant governmental entity in accordance with applicable law.

 

3.

Ranking. 11[The obligations of the Guarantor hereunder will be junior and
subordinated in right of payment to the Senior Debt (as defined in the Notes) of
such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Borrower. For the purposes of the foregoing sentence, the
Holders will have the right to receive and/or retain payments by the Guarantor
only at such times as they may receive and/or retain payments in respect of the
Notes pursuant to the Notes and this Guarantee. To the extent required by
Section 4.16 of the indenture governing the 2014 Notes, the Indebtedness
represented by this Guarantee shall be pari passu in right of payment to the
Guarantor’s guarantee of the 2014 Notes until the termination of Section 9 of
the Subordinated Convertible Notes in accordance with its terms (and thereafter
the Indebtedness represented by this Guarantee shall constitute Senior Debt as
defined in and for purposes of such indenture.)]

12[The obligations of the Guarantor hereunder will rank senior in right of
payment to all subordinated Indebtedness of the Guarantor and equal in right of
payment with all other senior obligations of the Guarantor.]

 

4. No Subrogation. The Guarantor hereby agrees that (a) it will not be entitled
to any right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby and (b) as between the Guarantor, on the one hand, and the
Holders, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in the Notes for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in

 

11 To be included only in the guarantees of Subordinated Convertible Notes.

 

12 To be included only in the guarantees of senior convertible notes.

 

B2-2

--------------------------------------------------------------------------------

 

respect of the obligations guaranteed hereby, and (ii) in the event of any
declaration of acceleration of such obligations as provided in the Notes, such
obligations (whether or not due and payable) will forthwith become due and
payable by the Guarantor for the purpose of this Guarantee.

 

5. Limitation on Liability. The Guarantor, and by its acceptance of Notes, each
Holder, hereby confirms that it is the intention of all such parties that this
Guarantee not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal, state, provincial or other applicable Law
to the extent applicable to this Guarantee. To effectuate the foregoing
intention, the Holders and the Guarantor hereby irrevocably agree that the
obligations of the Guarantor will be limited to the maximum amount that will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of Guarantor that are relevant under such laws, and after giving
effect to any collections from, rights to receive contribution from or payments
made by or on behalf of any Other Guarantor in respect of the obligations of
such Other Guarantor result in the obligations of the Guarantor under this
Guarantee not constituting a fraudulent transfer or conveyance.

 

[NAME OF SUBSIDIARY]

By:

 

 

Name:

 

Title:

 

 

B2-3

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EXHIBIT B

REGISTRATION RIGHTS AGREEMENT1

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement ”) is entered into as of [—],
2008, among Ares Corporate Opportunities Fund III, L.P., a Delaware limited
partnership (“Ares”) and New Leaf Ventures I, L.P. (“New Leaf I”) and New Leaf
Ventures II, L.P. (“New Leaf II” and, together with New Leaf I, “New Leaf” and,
together with Ares, “Investors”), and Angiotech Pharmaceutical Interventions,
Inc., a Delaware corporation (“API”) .

RECITALS

WHEREAS, pursuant to that certain Note Purchase Agreement (the “Note Purchase
Agreement”) among Investors, Angiotech Pharmaceutical Interventions, Inc.
(“Parent”), and API, dated as of July [    ], 2008, API issued to Investors
Convertible Promissory Notes (the “ Convertible Notes”) in the aggregate amount
of $[            ] convertible into shares of Common Stock; and

WHEREAS, in connection with, and pursuant to the terms of, the Note Purchase
Agreement, API and Investors wish to enter into this Agreement to grant to
Investors certain resale and registration rights relating to any and all shares
of Common Stock held by Investor.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

Section 1. Certain Definitions.

Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Note Purchase Agreement. In addition, as used in this
Agreement, the following capitalized terms shall have the following respective
meanings:

“Agreement” has the meaning ascribed to it in the Preamble of this Agreement.

“API” has the meaning ascribed to it in the Preamble of this Agreement.

“Ares” has the meaning ascribed to it in the Preamble of this Agreement.

“Commission” means the Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act.

“Common Stock” means the Common Stock, par value $0.01 per share, of API.

“Convertible Notes” has the meaning ascribed to it in the Recitals of this
Agreement.

“ Exchange Act” means the Securities Exchange Act of 1934, as amended, and any
similar federal statute successor thereto, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.

 

1 Parent’s proposed registration agreement with API will be modified to reflect
cutbacks and to change right to force registration of its shares in an IPO to 4
years.

--------------------------------------------------------------------------------

“Exchange Notes” has the meaning ascribed to it in Section 28.

“FINRA” means the Financial Industry Regulatory Authority.

“Holder” means any holder, from time to time, of Registrable Securities.

“Holder Indemnified Parties” has the meaning ascribed to it in Section 9.

“Indemnified Party” has the meaning ascribed to it in Section 9.

“Indemnifying Party” has meaning ascribed to it in Section 9.

“Investors” has the meaning ascribed to it in the Preamble of this Agreement.

“IPO” means the initial public offering on Form S-1 of the Common Stock.

“IPO Demand Holder” has the meaning ascribed to it in Section 4.

“IPO Demand Request” has the meaning ascribed to it in Section 4.

“IPO Volume Limitation” means 20% of the Registrable Securities held by a
particular Holder.

“Lock-Up Period” has the meaning ascribed to it in Section 11.

“Majority Holders” means a majority in interest of the Holders of Registrable
Securities (calculated on an as converted basis).

“New Leaf” has the meaning ascribed to it in the Preamble of this Agreement.

“New Leaf I” has the meaning ascribed to it in the Preamble of this Agreement.

“New Leaf II” has the meaning ascribed to it in the Preamble of this Agreement.

“Note Purchase Agreement” has the meaning ascribed to it in the Recitals of this
Agreement.

“Parent” has the meaning ascribed to it in the Recitals of this Agreement.

“Parent Registrable Securities” means the Common Stock owned by Parent
benefiting from the registration rights set forth in the Parent Registration
Rights Agreement.

“Parent Registration Rights Agreement” means the Registration Rights Agreement
between API and Angiotech Pharmaceuticals, Inc., dated as of
[                    ], 2008.

“Registrable Securities” means the Convertible Notes (or Exchange Notes) and any
Common Stock (including Common Stock issuable upon conversion of the Convertible
Notes (or Exchange Notes)) issued or issuable to the Investors pursuant to the
Transaction Documents,

 

-2-

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together with any securities issued or issuable upon any stock split, stock
dividend or other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or similar event with respect to the
foregoing.

“Registration Expenses” has the meaning ascribed to it in Section 8.

“Registration Request” has the meaning ascribed to it in Section 5(a).

“Registration Statement” means a registration statement filed by API with the
Commission for a public offering and sale of securities of API (other than a
registration statement on Form S-8 or Form S-4, or their successors, or any
other form for a limited purpose, or any registration statement covering only
securities proposed to be issued in exchange for securities or assets of another
corporation).

“Securities Act” means the Securities Act of 1933, as amended, and any similar
federal statute successor thereto, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.

“Suspension Event” has the meaning ascribed to it in Section 5(d).

Section 2. Sale or Transfer of Shares. No Investor shall sell or transfer any
shares of the Common Stock unless any applicable Lock-Up Period has expired and
such sale or transfer is (a) either pursuant to a registration statement under
the Securities Act, or (b) if pursuant to an exemption from registration
provided under the Securities Act, such Investor first shall have complied with
the requirements of Section 3 of this Agreement.

Section 3. Resale of the Common Stock. If any shares of Common Stock are to be
sold or transferred by an Investor other than pursuant to a registration
statement under the Securities Act, prior to the consummation of any such sale
such Investor shall give API notice of such proposed sale and, at API’s request,
furnish API with an opinion of legal counsel (which may be in house legal
counsel), reasonably satisfactory to API, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act.

Section 4. Initial Registration.

(a) In connection with an IPO of Common Stock by API, API shall, prior to the
filing of any Registration Statement relating thereto, give written notice to
Holders of its intention to do so and, upon the written request of Holders given
within five (5) business days after API provides such notice, API shall use its
reasonable efforts to include all shares of the Common Stock that API has been
so requested by Holders to include in such Registration Statement; provided that
a Holder shall not have the right under an IPO registration (other than pursuant
to Section 4(b)) to include more than the IPO Volume Limitation, in such
Registration Statement; and provided further that API shall have the right to
postpone or withdraw the filing of any such Registration Statement (other than a
Registration pursuant to Section 4(b)).

(b) If API has not yet consummated a Qualified Transaction (as such term is
defined in the Convertible Notes), at any time after the four year anniversary
of the date hereof

 

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upon the written request (an “IPO Demand Request”) of the Majority Holders (the
“IPO Demand Holder”) requesting that API effect an IPO following which API’s
shares of Common Stock are listed on the New York Stock Exchange or the Nasdaq
Global or Global Select Market, by registering under the Securities Act of all
or part of the Holders’ Registrable Securities and specifying the amount and
intended method of disposition thereof, file a registration statement to effect
the registration under the Securities Act of:

(i) such Registrable Securities that the Company has been so requested to
register by the IPO Demand Holder; and

(ii) the number of Parent Registrable Securities that Parent requests API to
include,

in each case subject to subsection (c) below, and all to the extent necessary to
permit the disposition (in accordance with the intended method thereof as
aforesaid) of the Registrable Securities.

(c) Notwithstanding any other provision of this Section 4, if the managing
underwriter advises API that marketing factors require a limitation of the
number of shares to be underwritten, then API shall so advise all Holders of
Registrable Securities that would otherwise be included in the registration
statement, and the number of shares of Registrable Securities and Parent
Registrable Securities that may be included in the underwriting shall be
allocated as follows: (i) to the extent Parent’s Existing Notes remain
outstanding, first, to Parent to the extent the net proceeds from the sale of
such shares are used to repay Parent’s Existing Notes; (ii) next, to Holders pro
rata among the Holders thereof on the basis of the Registrable Securities owned
by each such Holder until they have been permitted to sell as much as Parent;
(iii) next, to Holders pro rata among the Holders thereof on the basis of the
Registrable Securities owned by each such Holder and Parent in proportion (as
nearly as practicable) to the aggregate amount of Registrable Securities held by
the Holders and the amount of Parent Registrable Securities held by Parent,
until such Holders have included in the underwriting all shares requested by
such Holders to be included, but only to the extent, Parent elects to
participate in such underwritten offering pursuant to the Parent Registration
Rights Agreement, and (iv) thereafter, among all other holders of Common Stock,
if any, that have the right and have elected to participate in such underwritten
offering, in proportion (as nearly as practicable) to the amount of shares of
Common Stock owned by such holders. Without the consent of a majority in
interest of the Holders of Registrable Securities participating in a
registration referred to in Section 4(a), no securities other than Registrable
Securities and Parent Registrable Securities shall be covered by such
registration if the inclusion of such other securities would result in a
reduction of the number of Registrable Securities covered by such registration
or included in any underwriting or if, in the opinion of the managing
underwriter, the inclusion of such other securities would adversely impact the
marketing of such offering.

Section 5. Demand Registrations.

(a) Commencing on the date on which API becomes eligible to file a Registration
Statement on Form S-3 (or any successor “short form” of registration relating to

 

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secondary offerings), a Majority Holder may request, in writing (a “Registration
Request”), that API effect, through an underwritten offering, the registration
of all or a portion of such Holder’s Registrable Securities. Thereupon, API
shall, prior to the filing of any Registration Statement relating thereto, give
written notice to Holders of its intention to do so, and as expeditiously as
practicable, use its reasonable efforts to effect the registration on Form S-3
of all Registrable Securities which API has been requested to so register.

(b) Notwithstanding any other provision of this Section 5, if the underwriter
advises a Holder that marketing factors require a limitation of the number of
shares to be underwritten, then such Holder shall so advise API and API shall so
advise all Holders of Registrable Securities that would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated as follows: (i) to
Holders pro rata among the Holders thereof on the basis of the Registrable
Securities owned by each such Holder and Parent in proportion (as nearly as
practicable) to the aggregate amount of Registrable Securities held by the
Holders and the amount of Parent Registrable Securities held by Parent, until
such Holders and Parent have included in the underwriting all shares requested
by such Holders and Parent to be included, but only to the extent, Parent elects
to participate in such underwritten offering pursuant to the Parent Registration
Rights Agreement and (ii) thereafter, among all other holders of Common Stock,
if any, that have the right and have elected to participate in such underwritten
offering, in proportion (as nearly as practicable) to the amount of shares of
Common Stock owned by such holders. Without the consent of a majority in
interest of the Holders of Registrable Securities participating in a
registration referred to in Section 5(a), no securities other than Registrable
Securities and the Parent Registrable Securities shall be covered by such
registration if the inclusion of such other securities would result in a
reduction of the number of Registrable Securities covered by such registration
or included in any underwriting or if, in the opinion of the managing
underwriter, the inclusion of such other securities would adversely impact the
marketing of such offering.

(c) API shall not be required to accept (i) a Registration Request for less than
the total amount of Registrable Securities then held by the Majority Holders if
(based on the then current market prices) such securities to be included in the
Registration Statement would not either (A) yield gross proceeds of at least $50
million or (B) constitute at least 20% of the Registrable Securities held by the
Majority Holders immediately following API’s IPO and (ii) more than two
Registration Requests pursuant to Section 5(a) hereof in any 365 calendar-day
period; provided however, a Registration Request shall not count as one of the
two permitted Registration Requests until the Registration Statement on which
the Registrable Securities are registered has become effective and unless the
holders of Registrable Securities are able to register and sell at least 75% of
the Registrable Securities requested to be included in such registration;
provided that in any event API shall pay all Registration Expenses in connection
with any registration initiated as an Registration Request whether or not it has
become effective and whether or not such registration counts as one of the
permitted Registration Requests hereunder. All Registration Requests shall be
underwritten registrations, unless otherwise agreed to by API and the holders of
a majority of the Registrable Securities initially requesting such registration.

 

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(d) If, at the time of any Registration Request provided to API pursuant to this
Section 5 or at any time during which a Registration Statement is effective,
(i) API is engaged or plans to engage within ninety (90) calendar days of the
time of the request in a registered public offering as to which Investor may
include at least 90% of its shares of Registrable Securities subject to any such
Registration Request pursuant to this Section 5; (ii) API is engaged in any
other activity which, in the good faith determination of a majority of API’s
Board of Directors, would be materially adversely affected by the requested
registration (provided that API’s engagement or plan to engage at the time of
such Registration Request in a registered public offering shall be deemed not to
be such an activity); or (iii) there exist pending negotiations relating to, or
consummation of, a transaction or the occurrence of an event (other than in the
ordinary course of business), in each case that would require additional
disclosure of material information by API in the Registration Statement (such
circumstances being hereinafter referred to as a “Suspension Event”) or other
filing with any state securities commission that would materially adversely
affect the Company’s ability to cause the Registration Statement or such filing
to be made or to become effective or to amend or supplement the Registration
Statement; then API may at its option, exercised upon written notice to Holders,
direct that such request be delayed for a period not in excess of ninety
(90) calendar days from the date of the Registration Request or the date of
commencement of such other material activity, as the case may be, such right to
delay a request to be exercised by API not more than one (1) time in any 365
calendar-day period. Upon receipt of such written notice from API of a
Suspension Event, the holders of Registrable Securities initially making a
Registration Request will be entitled to withdraw such request and, if such
request is withdrawn, such Registration Request shall be treated as if it had
never been made in the first instance, and API will pay any Registration
Expenses incurred by Holders in connection therewith.

(e) Except for this Agreement and the Parent Registration Rights Agreement,
neither API nor any of its Subsidiaries has previously entered into any contract
granting any registration rights with respect to any of its securities to any
person. API will not grant to any persons the right to request that API register
any equity securities of API, or any securities convertible into or exchangeable
or exercisable for any such securities, without the prior written consent of the
Majority Holders.

Section 6. “Piggyback” Registration.

(a) If at any time API proposes to file a Registration Statement whether or not
for sale for its own account, other than pursuant to Section 4 or Section 5
hereof, or if it proposes to effect a “shelf takedown” from an already effective
Form S-3, it will, prior to such filing or prior to the time when any offering
is commenced pursuant to a “shelf takedown”, as the case may be, give prompt
written notice to Holders of its intention to do so and, upon the written
request of Holders given within ten (10) days after API provides such notice,
API shall use its reasonable efforts to include all Registrable Securities which
API has been so requested by Holders to include in such Registration Statement;
provided that API shall have the right to postpone or withdraw any registration
(or offering pursuant to a shelf takedown, it being understood that for purposes
of this Section 6, the terms “register”, “registration” and “registration
statement” shall include a shelf takedown from an existing shelf) effected
pursuant

 

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to this Section 6 without obligation to the holders of Registrable Securities,
other than payment of the Registration Expenses of such Holders.

(b) In connection with any offering under this Section 6 involving an
underwriting, API shall not be required to include any shares of the Common
Stock in such underwriting unless Investor enters into an underwriting agreement
pursuant to Section 7(c) hereof. Notwithstanding any other provision of this
Section 6, if the underwriter advises a Holder that marketing factors require a
limitation of the number of shares to be underwritten, then such Holder shall so
advise API and API shall so advise all Holders of Registrable Securities that
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated as follows: (i) to Holders pro rata among the Holders thereof on the
basis of the Registrable Securities owned by each such Holder and Parent in
proportion (as nearly as practicable) to the aggregate amount of Registrable
Securities held by the Holders and the amount of Parent Registrable Securities
held by Parent, until such Holders and Parent have included in the underwriting
all shares requested by such Holders and Parent to be included, but only to the
extent, Parent elects to participate in such underwritten offering pursuant to
the Parent Registration Rights Agreement and (ii) thereafter, among all other
holders of Common Stock, if any, that have the right and have elected to
participate in such underwritten offering, in proportion (as nearly as
practicable) to the amount of shares of Common Stock owned by such holders.
Without the consent of the Majority Holders participating in a registration
referred to in Section 6(a), no securities other than Registrable Securities and
the Parent Registrable Securities shall be covered by such registration if the
inclusion of such other securities would result in a reduction of the number of
Registrable Securities covered by such registration or included in any
underwriting or if, in the opinion of the managing underwriter, the inclusion of
such other securities would adversely impact the marketing of such offering.

(c) If API has previously filed a Registration Statement with respect to
Registrable Securities pursuant to Sections 4 or 5 or pursuant to this
Section 6, and if such previous registration has not been withdrawn or
abandoned, API will not file or cause to be effected any other registration of
any of its equity securities or securities convertible into or exchangeable or
exercisable for its equity securities under the Securities Act (except on Form S
4 or S 8 or any successor form), whether on its own behalf or at the request of
any holder or holders of such securities other than the Majority Holders, until
a period of at least six months has elapsed from the effective date of such
previous registration.

Section 7. Registration Procedures.

(a) If and whenever API is required by the provisions of this Agreement to use
its reasonable efforts to effect the registration of any of Registrable
Securities under the Securities Act, API shall as expeditiously as practicable:

(i) select the managing underwriters and approve the inclusion of any other
underwriters (except with respect to an IPO Demand or another demand
registration where the Majority Holders initially requesting such registration
shall select and approve the managing underwriters and other underwriters, who
must be reasonably acceptable to API);

 

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(ii) prepare and file with the Commission a Registration Statement (including,
except if otherwise directed by the Majority Holders, the “Plan of Distribution”
attached hereto as Annex A) with respect to such Registrable Securities as soon
as practicable and in any event within sixty (60) calendar days after it is
initially requested to do so pursuant to this Agreement (other than an IPO
Demand Request)), or within one hundred twenty (120) calendar days after it is
initially requested to do so pursuant to Section 4, unless, under applicable
rules and regulations of the Commission, it is required to delay in doing so,
and use its reasonable efforts to cause that Registration Statement to
(x) become effective as promptly as reasonably practicable but in any event
within ninety (90) calendar days (one hundred twenty (120) calendar days in the
case of an IPO Demand Request) after it is initially filed and (y) remain
effective in accordance with paragraph (iii) below; provided, however, that,
before filing a Registration Statement or prospectus or any amendments or
supplements thereto, API will furnish to the counsel selected by the holders of
a majority of the Registrable Securities covered by such Registration Statement
copies of all such documents proposed to be filed, which documents will be
subject to review of such counsel; and, provided, further, to the extent API
omits information from a form of prospectus that is part of an effective
registration statement in reliance on paragraph (a) or (b) of Rule 430B under
the Securities Act (or any successor provision) and chooses to include such
information subsequently in the prospectus by including such information in
API’s periodic or current reports filed pursuant to Section 13 or 15(d) of the
Exchange Act, which periodic or current report is required to be identified in a
form of prospectus filed with the Commission under paragraph (h) of Rule 430B,
API will furnish to such underwriters, if any, sales or placement agent, if any,
Holders and counsel selected by the holders of a majority of the Registrable
Securities covered by such prospectus, copies of such periodic or current report
prior to its being filed with the Commission;

(iii) prepare and file with the Commission any amendments and supplements to the
Registration Statement and the prospectus included in the Registration Statement
as may be necessary to keep the Registration Statement effective during the
period required for distribution of the shares, but not more than six (6) months
from the effective date of such Registration Statement or, if shorter, until the
disposition of all of the shares of the Common Stock covered by such
Registration Statement is completed (but, in any event, not before the
expiration of any longer period required under the Securities Act); provided,
however, that in the event API satisfies its obligations hereunder through a
shelf takedown from an existing shelf, API shall be obligated to maintain the
effectiveness of such Registration Statement for a period of six (6) months
after the date of such shelf takedown or, if shorter, until the disposition of
all of the shares of the Common Stock covered by such shelf takedown is
completed (but, in any event, not before the expiration of any longer period
required under the Securities Act);

(iv) furnish to each seller of Registrable Securities such number of copies of
such Registration Statement, each amendment and supplement thereto, the
prospectus included in such Registration Statement (including each preliminary
prospectus), and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;

 

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(v) use its reasonable efforts to register or qualify the Registrable Securities
covered by the Registration Statement under the securities or blue sky laws of
such states as any Holder shall reasonably request, and do any and all other
acts and things that may be necessary or desirable to enable such Holder to
consummate the public sale or other disposition in such jurisdictions of the
Registrable Securities owned by such Holder; provided, however, that API shall
not be required in connection with this paragraph (v) to qualify as a foreign
corporation in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, execute a general consent to service of process
or subject itself to taxation in any jurisdiction;

(vi) enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering
(including but not limited to participating in investor presentations or other
marketing activities as requested by the managing underwriter);

(vii) cause all such shares of the Common Stock registered pursuant to this
Section 7 to be listed on each securities exchange and trading system on which
shares of API’s Common Stock are then listed, if not so listed, to be listed on
the New York Stock Exchange or the Nasdaq Global or Global Select Market;

(viii) provide a transfer agent and registrar for all Registrable Securities
registered pursuant to this Agreement and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;

(ix) make available for inspection by any seller of Registrable Securities, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant, or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate and
business documents and properties of API as shall be necessary to enable them to
exercise their due diligence responsibility, and cause API’s officers,
directors, employees, agents, representatives, and independent accountants to
supply all such information reasonably requested by any such seller,
underwriter, attorney, accountant, or agent in connection with such Registration
Statement;

(x) otherwise use its reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve (12) months, beginning with the first day of API’s first full
calendar quarter after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;

(xi) permit any Holder who, in its sole and exclusive judgment, might be deemed
to be an underwriter or a controlling person of API to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to API in writing, which in the
reasonable judgment of such Holder should be included;

 

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(xii) promptly notify sellers of Registrable Securities of, and confirm in
writing, the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose. API shall use reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement as soon as
practicable;

(xiii) use its reasonable efforts to cause such Registrable Securities covered
by such Registration Statement to be registered with or approved by such
Governmental Entities as may be necessary to enable the Holders to consummate
the disposition of such Registrable Securities;

(xiv) use reasonable efforts to obtain a cold comfort letter from API’s
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters, which letter shall be
addressed to the underwriters, and API shall use its reasonable efforts to cause
such cold comfort letter to also be addressed to the Holders of such Registrable
Securities;

(xv) use reasonable efforts to obtain an opinion from API’s outside counsel in
customary form and covering such matters of the type customarily covered by such
opinions, which opinion shall be addressed to the underwriters, and API shall
use its reasonable efforts to cause such opinion to also be addressed to the
Holders of such Registrable Securities;

(xvi) cooperate with the Holders of Registrable Securities covered by the
Registration Statement and the managing underwriter or agent, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing securities to be sold under the Registration
Statement, and enable such securities to be in such denominations and registered
in such names as the managing underwriter, or agent, if any, or such holders may
request;

(xvii) cooperate with each Holder of Registrable Securities covered by the
Registration Statement and each underwriter or agent participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD; and

(xviii) use its reasonable efforts to make available the executive officers of
API to participate with the holders of Registrable Securities and any
underwriters in any “road shows” or other selling efforts that may be reasonably
requested by the Holders in connection with the methods of distribution for the
Registrable Securities.

(b) If API has delivered preliminary or final prospectuses to sellers of
Registrable Securities and after having done so the prospectus is amended (or
must be amended) to comply with the requirements of the Securities Act, API
shall promptly notify such sellers and, if requested, Holders shall immediately
cease making offers of shares of the Common Stock and return all prospectuses to
API. API shall promptly provide Holders with revised prospectuses and, following
receipt of the revised prospectuses, Holders shall be free to resume making
offers of the shares of the Common Stock.

 

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(c) All Holders distributing their securities through an underwriting pursuant
to this Agreement shall, together with API as provided in Section 7(a), enter
into an underwriting agreement in customary form with the underwriter or
underwriters; provided, that no Holder shall be required to make any
representations, warranties or indemnities except as they relate to such
Holder’s ownership of shares and authority to enter into the underwriting
agreement and to such Holder’s intended method of distribution, and the
liability of such Holder shall be limited to an amount equal to the net proceeds
from the offering received by such Holder.

Section 8. Allocation of Expenses.

API will pay all customary issuer’s Registration Expenses in connection with all
registrations under this Agreement. For purposes of this Section 8, the term
“Registration Expenses” shall mean all fees and expenses incident to the
performance of or compliance with this Agreement by API, including all
registration and filing fees, exchange listing fees, printing expenses,
accounting fees, fees and disbursements of counsel for API, fees and
disbursements of the Holders (including one counsel chosen by the holders of a
majority of the Registrable Securities included in the registration), but
excluding underwriting discounts and selling commissions relating to the shares
of the Common Stock, which will be borne by the party selling such shares.

Section 9. Indemnification.

(a) In the event of any registration of any shares of the Common Stock under the
Securities Act pursuant to this Agreement, API will indemnify and hold harmless
Holders, their directors, officers, members, agents, partners, shareholders, and
employees and each underwriter of such shares of the Common Stock, and each
other person, if any, who controls Holder or underwriter (within the meaning of
the Securities Act or the Exchange Act) (collectively, the “Holder Indemnified
Parties”) against (in addition to any indemnification or contribution provisions
required by an underwriter in a customary underwriting agreement) any Losses to
which such Holder Indemnified Party may become subject under the Securities Act,
the Exchange Act, state securities laws or otherwise, insofar as such Losses
arise out of, are based upon, are caused by, or result from, any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to such
Registration Statement, or arise out of, are based upon, are caused by or result
from the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
API will reimburse such Holder Indemnified Party for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss as such expenses are incurred; provided, however, that
API will not be liable in any such case to the extent that any such Loss arises
out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to API, in writing, by or on behalf of such Holder or such underwriter
or controlling person, as applicable, specifically for use in the preparation
thereof.

 

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(b) In the event of any registration of any of the shares of the Common Stock
under the Securities Act pursuant to this Agreement, each Holder will indemnify
and hold harmless API, each of its directors and officers, each underwriter and
each person, if any, who controls API or any such underwriter within the meaning
of the Securities Act or the Exchange Act, against any Losses, to which API,
such directors and officers, underwriter or controlling person may become
subject under the Securities Act, Exchange Act, state securities laws or
otherwise, insofar as such Losses arise out of, are based upon, are caused by or
result from any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of, are based upon are
caused by or result from any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, if the statement or omission was made in reliance upon and in
conformity with information furnished in writing to API by or on behalf of such
Holder, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided, however,
that the obligations of each Holder hereunder shall be limited to an amount
equal to the net proceeds received by such Holder from the sale of Registrable
Securities sold pursuant to the Registration Statement as contemplated herein.

(c) Each party entitled to indemnification under this Section 9 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 9, except to the extent of any prejudice to the
Indemnifying Party due to such failure to give notice. The Indemnified Party may
participate in such defense at such party’s expense; provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding; and provided
further that under no circumstances will the Indemnifying Party be required
under this Section 9 to pay the expenses of more than one counsel for the
Indemnified Parties unless in the reasonable judgment of any Indemnified Party a
conflict of interest may exist between such Indemnified Party and any other of
such Indemnified Parties with respect to such claim. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying

 

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Party. Any consent required pursuant to this Section 9 shall not be unreasonably
withheld or delayed.

(d) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an Indemnified Party under this Section 9 in
respect of any Losses referred to herein, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses (i) in such proportion as is appropriate to reflect the relative
benefits received by API on the one hand and the sellers of Registrable
Securities and any other sellers participating in the Registration Statement on
the other hand from the sale of Registrable Securities pursuant to the
registered offering of securities as to which indemnity is sought, or (ii) if
the allocation provided by clause (i) above is not permitted by Law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of API on the one hand and of
the sellers of Registrable Securities and any other sellers participating in the
Registration Statement on the other hand in connection with the Registration
Statement on the other in connection with the statement or omissions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative benefits received by API on the one hand and the sellers of
Registrable Securities and any other sellers participating in the Registration
Statement on the other hand shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) to API bear to
the total net proceeds from the offering (before deducting expenses) to the
sellers of Registrable Securities and any other sellers participating in the
Registration Statement. The relative fault of API on the one hand and of the
sellers of Registrable Securities and any other sellers participating in the
Registration Statement on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged omission to state a material
fact relates to information supplied by API or by the sellers of Registrable
Securities or other sellers participating in the Registration Statement and the
parties’ relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.

(e) API and the sellers of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation (even if the sellers of Registrable Securities were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the Losses shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no seller of Registrable
Securities shall be required to contribute any amount in excess of the net
proceeds received by such seller from the sale of Registrable Securities covered
by the Registration Statement filed pursuant hereto.

(f) The indemnification and contribution by any such party provided for under
this Agreement shall be in addition to any other rights to indemnification or
contribution which any Indemnified Party may have pursuant to law or contract
and will remain in full force and effect regardless of (i) any investigation
made or omitted by or on behalf of the Indemnified Party or any officer,
director, employee or controlling person of such Indemnified Party and will

 

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survive the transfer of securities, (ii) the completion of any offering of
Registrable Securities in a Registration Statement and (iii) the termination of
this Agreement. No person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation.

Section 10. Information by Holders. Each Holder shall furnish to API such
information regarding such Holder and the distribution proposed by such Holder
as API may reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to in Section 7.

Section 11. “Lock -Up” Agreements.

(a) If required by an underwriter of Common Stock or other equity securities of
API, each Holder shall agree not to sell or otherwise transfer or dispose of any
Registrable Securities held by such Holder for the period of time (the “Lock-Up
Period”) requested by such underwriter to the extent API, Parent and all
executive officers and directors of API and Parent enter into substantially
similar (or more restrictive) agreements; provided, that, in any event, such
period of time shall be:

(i) not more than one hundred eighty (180) calendar days following the effective
date of API’s Registration Statement filed in connection with the IPO) covering
the Common Stock to be sold on its or such Holder’s behalf to the public in an
underwritten offering; or

(ii) not more than ninety (90) calendar days in connection with any Registration
Statement covering the Common Stock to be sold on its or such Holder’s behalf to
the public in an underwritten offering after the IPO.

(b) API agrees (i) not to effect any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, for a period specified by the representatives of the
underwriters in an underwritten public offering (not to exceed a period ending
on the one hundred and eightieth (180th) day following the effective date of any
such underwritten public offering of API’s equity securities) (except as part of
such underwritten registration or pursuant to registrations on Form S 4 or S 8
or any successor form), and (ii) to use its reasonable efforts to cause each
holder of its Common Stock, or any securities convertible into or exchangeable
or exercisable for Common Stock, purchased or otherwise acquired from API at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during any such period
(except as part of such underwritten registration, if otherwise permitted),
unless the underwriters managing the public underwritten offering otherwise
agree.

(c) Such agreement shall be in writing in a form reasonably satisfactory to API,
the Holders and such underwriter. The periods referred to in this Section 11 may
be extended on account of FINRA Rule 2711(f) as reasonably requested by the lead
managing underwriter. API may impose stop-transfer instructions with respect to
the shares of the

 

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Common Stock or other securities subject to the foregoing restriction until the
end of the Lock-Up Period.

Section 12. Black-Out Period. Following the effectiveness of the Registration
Statement and the filings with any state securities commissions, each Holder
agrees that it will not effect any sales of shares of the Common Stock pursuant
to the Registration Statement or any such filings at any time after they have
received notice from API to suspend sales (a) as a result of the occurrence or
existence of a Suspension Event, or (b) so that API may correct or update the
Registration Statement or such filing, which correction shall be promptly made.
Holders may recommence effecting sales of the shares of the Common Stock
pursuant to the Registration Statement or such filings following further notice
to such effect from API, which notice shall be given by API not later than two
(2) business days after the conclusion or completion of any such Suspension
Event, correction or update.

Section 13. Rule 144 Requirements. After the earliest of (a) the closing of the
sale of securities of API pursuant to a Registration Statement, (b) the
registration by API of a class of securities under Section 12 of the Exchange
Act, or (c) the completion by API of an offering of its securities (other than
pursuant to an employee benefit plan) in accordance with the provisions of
Regulation A under the Securities Act, API agrees to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act;

(b) use its reasonable efforts to file with the Commission in a timely manner
all reports and other documents required of API under the Exchange Act (at any
time after it has become subject to such reporting requirements); and

(c) furnish to each Holder upon request a written statement by API as to its
compliance with the information requirements of said Rule 144 (at any time after
ninety (90) calendar days after the closing of the IPO), and of the reporting
requirements of the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of API, and such other reports and documents of API as Holders may
reasonably request to avail itself of any similar rule or regulation of the
Commission allowing it to sell any such securities without registration.

Section 14. Termination. This Agreement shall terminate and be of no further
force or effect with respect to any Holder at such time as Rule 144 under the
Securities Act is available for the immediate sale of all shares of the Common
Stock (or Notes) held by such Holder. Notwithstanding any other provision
hereof, Sections 8 (Allocation of Expenses), 9 (Indemnification), 13 (Rule 144
Requirements), 15 (Notices), 22 (Captions), 24 (Governing Law and Jurisdiction)
and 26 (Remedies) shall survive any termination of this Agreement.

Section 15. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other will be in writing and will be deemed
to have been duly given (a) on the date of delivery if delivered personally or
by telecopy or facsimile, upon confirmation of receipt, (b) on the first
business day following the date of dispatch if delivered

 

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by a recognized next-day courier service, or (c) on the third business day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.

if to API, to:

Angiotech Pharmaceutical Interventions, Inc.

1618 Station Street

Vancouver, BC Canada V6A 1B6

Attention: General Counsel

Facsimile: (604) 221-2330

with a copy to (which copy alone shall not constitute notice):

Sullivan & Cromwell LLP

1888 Century Park East, Suite 2100

Los Angeles, California 90067

Attention: Alison S. Ressler, Esq.

Facsimile: (310) 712-8800

if to Ares, to:

Ares Corporate Opportunities Fund III, L.P.

2000 Avenue of the Stars, 12th Floor

Los Angeles, California 90067

Attention: Bennett Rosenthal

Facsimile: (310) 201-4170

with a copy to (which copy alone shall not constitute notice):

Proskauer Rose LLP

2049 Century Park East, Suite 3200

Los Angeles, California 90067

Attention: Michael A. Woronoff, Esq.

Facsimile: (310) 557-2193

If to New Leaf to it at:

New Leaf Venture Partners, L.L.C.

7 Times Square, Suite 1603

New York, New York 10036

Attention: Chief Financial Officer

Facsimile: (646) 871-6450

with a copy to (which copy alone shall not constitute notice):

 

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Latham & Watkins LLP

140 Scott Drive

Menlo Park, California 94025

Attention: Nicholas S. O’Keefe, Esq.

Facsimile: (650) 463.2600

Section 16. Entire Agreement. This Agreement, the Convertible Note and the
Governance Agreement among Parent, Investors and API, dated as of
[            ], 2008 constitute the entire agreement of the parties with respect
to the subject matter hereof, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, among the
parties, with respect to the subject matter hereof.

Section 17. No Inconsistent Agreements. API will not hereafter enter into any
agreement with respect to API’s securities that is inconsistent with or violates
the rights granted to the holders of Registrable Securities in this Agreement.

Section 18. Adjustments Affecting Registrable Securities. API will not take any
action, or permit any change to occur, with respect to API’s securities that
would materially and adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in a registration undertaken
pursuant to this Agreement or that would adversely affect the marketability of
such Registrable Securities in any such registration (including effecting a
stock split, combination of shares, or other recapitalization).

Section 19. Amendments and Waivers. No modification, amendment or waiver of any
provision of this Agreement will be effective against the parties hereto unless
made in writing and signed by an officer of a duly authorized representative of
API and the Majority Holders provided, that no modification, amendment or waiver
may adversely affect a Holder with respect to a term differently than the
Majority Holders without the consent of each affected Holder. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. No waiver of any party to this Agreement, as the case
may be, will be effective unless it is in a writing signed by a duly authorized
officer of the waiving party that makes express reference to the provision or
provisions subject to such waiver. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.

Section 20. Successors and Assigns. API may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Majority Holders. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective heirs,
executors, successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the Holders (or any portion thereof) as such shall be for the
benefit of, and enforceable by, any subsequent Holder (or of such portion
thereof); provided, however, that in each case (i) the assignor shall, within
ten (10) days after such assignment, furnish to API written notice of the name
and address of such assignee and the securities with respect to which such
registration rights are being assigned and (ii) such assignee shall agree in a
written agreement delivered to

 

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API to be subject to all the terms and provisions set forth in this Agreement to
the same extent as the assignor.

Section 21. Counterparts and Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement. Executed signature
pages to this Agreement may be delivered by facsimile and such facsimiles will
be deemed as sufficient as if actual signature pages had been delivered.

Section 22. Captions. The article, section, paragraph and clause captions herein
are for convenience of reference only, do not constitute part of this Agreement
and will not be deemed to limit or otherwise affect any of the provisions
hereof.

Section 23. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, will remain in
full force and effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the Transactions is not
affected in any manner materially adverse to any party. Upon such determination,
the parties shall negotiate in good faith in an effort to agree upon a suitable
and equitable substitute provision to effect the original intent of the parties.

Section 24. Governing Law and Jurisdiction. This Agreement will be governed by
and construed in accordance with the Laws of the State of New York. Each of the
parties hereto hereby irrevocably submits to the exclusive jurisdiction of the
Courts of the State of New York located in the County of New York and the
Federal courts of the United States of America located in the County of New York
for the purpose of any proceeding arising out of or relating to this Agreement
and hereby irrevocably agrees that all claims in respect to such proceeding
shall be heard and determined exclusively in such New York or Federal court.
Each of the parties hereto agrees that a final judgment in any proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by Law.

Section 25. No Limitation on Convertible Securities. Nothing in this Agreement
shall operate to limit the right of any Holder to request the registration of
Registrable Securities issuable upon conversion, exchange or exercise of
securities held by such Holder notwithstanding the fact that at the time of
request such Holder does not hold the Registrable Securities underlying such
securities.

Section 26. Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce their rights under this Agreement
specifically to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights existing in their favor; provided,
however the parties hereto stipulate that the remedies at law of any party
hereto in the event of any default or threatened default by any other party
hereto in the performance of or compliance with the terms hereof are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced (without

 

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posting a bond or other security) by a decree for the specific performance
thereof, whether by an injunction against violation thereof or otherwise.

Section 27. Interpretation; Other Definitions. Wherever required by the context
of this Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time. All article, section, paragraph or clause references not
attributed to a particular document shall be references to such parts of this
Agreement, and all exhibit, annex and schedule references not attributed to a
particular document shall be references to such exhibits, annexes and schedules
to this Agreement.

Section 28. Further Assurances. API shall execute and deliver, or cause to be
delivered, such further certificates, instruments and other documents, and to
take, or cause to be taken, such further actions as may be necessary or
advisable to carry out the intent and purpose of this Agreement. Without
limiting the foregoing, if a Holder elects to register Convertible Notes, the
Company shall, and shall cause each of the Guarantors, to (i) enter into an
indenture in form and substance reasonably satisfactory to the Holders, with a
Trustee reasonably acceptable to the Holders, which indenture shall provide for
the issuance of Convertible Notes (“Exchange Notes”) containing terms
substantially identical to the Convertible Notes, (ii) exchange Exchange Notes
for Convertible Notes, (iii) qualify such indenture under the Trust Indenture
Act of 1939, and (iv) take such other actions reasonably requested by the
Holders to permit the public sale of the Exchange Notes in accordance with the
terms of this Agreement.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
date first above written.

 

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC. By:  

 

  Name:   Title:

ARES CORPORATE OPPORTUNITIES FUND

III, L.P.

By:   ACOF Operating Manager III, LLC Its:   Manager By:   Ares Management, Inc.
Its:   General Partner By:  

 

  Name:   Title: NEW LEAF VENTURES I, L.P. By:   New Leaf Venture Management I,
L.P. Its:   General Partner By:   New Leaf Venture Management I, L.L.C. Its:  
General Partner By:  

 

  Ronald M. Hunt   Managing Director

Signature Page to Registration Rights Agreement

--------------------------------------------------------------------------------

NEW LEAF VENTURES II, L.P. By:   New Leaf Venture Associates II, L.P. Its:  
General Partner By:   New Leaf Venture Management II, L.L.C. Its:   General
Partner By:  

 

  Ronald M. Hunt   Managing Director

Signature Page to Registration Rights Agreement

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Annex A

Plan of Distribution

The selling stockholders, including their pledgees, donees, transferees,
beneficiaries or other successors in interest, may from time to time offer some
or all of the shares of common stock covered by this prospectus. To the extent
required, this prospectus may be amended and supplemented from time to time to
describe a specific plan of distribution.

The selling stockholders will not pay any of the costs, expenses and fees in
connection with the registration and sale of the shares covered by this
prospectus, but they will pay all discounts, commissions or brokers’ fees or
fees of similar securities industry professionals and transfer taxes, if any,
attributable to sales of the shares. We will not receive any proceeds from the
sale of the shares of our common stock covered hereby.

The selling stockholders may sell the shares of common stock covered by this
prospectus from time to time, and may also decide not to sell all or any of the
shares that they are allowed to sell under this prospectus. The selling
stockholders will act independently of us in making decisions regarding the
timing, manner and size of each sale. The selling stockholders may sell shares
at fixed prices, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at varying prices determined at the
time of sale, or at privately negotiated prices. Sales may be made by the
selling stockholders in one or more types of transactions, which may include:

 

  •  

purchases by underwriters, dealers and agents who may receive compensation in
the form of underwriting discounts, concessions or commissions from the selling
stockholders and/or the purchasers of the shares for whom they may act as agent;

 

  •  

one or more block transactions, including transactions in which the broker or
dealer so engaged will attempt to sell the shares of common stock as agent but
may position and resell a portion of the block as principal to facilitate the
transaction, or in crosses, in which the same broker acts as an agent on both
sides of the trade;

 

  •  

ordinary brokerage transactions or transactions in which a broker solicits
purchases;

 

  •  

purchases by a broker-dealer, as principal, and resale by the broker-dealer for
its account;

 

  •  

the pledge of shares as security for any loan or obligation, including pledges
to brokers or dealers who may from time to time effect distributions of the
shares or other interests in the shares;

 

  •  

short sales or transactions to cover short sales relating to the shares;

 

  •  

one or more exchanges or over the counter market transactions;

 

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  •  

through distribution by a selling stockholder or its successor in interest to
its members, partners or shareholders;

 

  •  

privately negotiated transactions;

 

  •  

the writing of options, whether the options are listed on an options exchange or
otherwise;

 

  •  

distributions to creditors and equity holders of the selling stockholders; and

 

  •  

any combination of the foregoing, or any other available means allowable under
applicable law.

A selling stockholder may also resell all or a portion of its securities in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
as amended provided it meets the criteria and conforms to the requirements of
Rule 144.

The selling stockholders may enter into sale, forward sale and derivative
transactions with third parties, or may sell shares not covered by this
prospectus to third parties in privately negotiated transactions. If the
applicable prospectus supplement indicates, in connection with those sale,
forward sale or derivative transactions, the third parties may sell shares
covered by this prospectus and the applicable prospectus supplement, including
in short sale transactions and by issuing securities that are not covered by
this prospectus but are exchangeable for or represent beneficial interests in
the common stock. The third parties also may use shares received under those
sale, forward sale or derivative arrangements or shares pledged by the selling
stockholder or borrowed from the selling stockholders or others to settle such
third-party sales or to close out any related open borrowings of common stock.
The third parties may deliver this prospectus in connection with any such
transactions. Any third party in such sale transactions will be an underwriter
and will be identified in the applicable prospectus supplement (or a
post-effective amendment to the registration statement of which this prospectus
is a part).

In addition, the selling stockholders may engage in hedging transactions with
broker-dealers in connection with distributions of shares or otherwise. In those
transactions, broker-dealers may engage in short sales of shares in the course
of hedging the positions they assume with selling stockholders. The selling
stockholders may also sell shares short and redeliver shares to close out such
short positions. The selling stockholders may also enter into option or other
transactions with broker-dealers which require the delivery of shares to the
broker-dealer. The broker-dealer may then resell or otherwise transfer such
shares pursuant to this prospectus. The selling stockholders also may loan or
pledge shares, and the borrower or pledgee may sell or otherwise transfer the
shares so loaned or pledged pursuant to this prospectus. Such borrower or
pledgee also may transfer those shares to investors in our securities or the
selling stockholders’ securities or in connection with the offering of other
securities not covered by this prospectus.

To the extent necessary, we may amend or supplement this prospectus from time to
time to describe a specific plan of distribution. We will file a supplement to
this prospectus, if required, upon being notified by the selling stockholders
that any material arrangement has been entered into with a broker-dealer for the
sale of shares through a block trade, offering or a purchase by a broker or
dealer. The applicable prospectus supplement will set forth the specific terms
of the offering of securities, including:

 

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  •  

the number of shares of common stock offered;

 

  •  

the price of such shares of common stock;

 

  •  

the proceeds to the selling stockholders from the sale of such shares;

 

  •  

the names of the underwriters or agents, if any;

 

  •  

any underwriting discounts, agency fees or other compensation to underwriters or
agents; and

 

  •  

any discounts or concessions allowed or paid to dealers.

The selling stockholders may, or may authorize underwriters, dealers and agents
to, solicit offers from specified institutions to purchase shares of common
stock from the selling stockholders at the public offering price listed in the
applicable prospectus supplement. These sales may be made under “delayed
delivery contracts” or other purchase contracts that provide for payment and
delivery on a specified future date. Any contracts like this will be described
in and be subject to the conditions listed in the applicable prospectus
supplement.

Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from the selling stockholders. Broker-dealers or agents
may also receive compensation from the purchasers of shares for whom they act as
agents or to whom they sell as principals, or both. Compensation as to a
particular broker-dealer might be in excess of customary commissions and will be
in amounts to be negotiated in connection with transactions involving shares. In
effecting sales, broker-dealers engaged by the selling stockholders may arrange
for other broker-dealers to participate in the resales.

In connection with sales of our common stock covered hereby, the selling
stockholders and any underwriter, broker-dealer or agent and any other
participating broker-dealer that executes sales for the selling stockholders may
be deemed to be an “underwriter” within the meaning of the Securities Act.
Accordingly, any profits realized by the selling stockholders and any
compensation earned by such underwriter, broker-dealer or agent may be deemed to
be underwriting discounts and commissions. Because the selling stockholders may
be deemed to be “underwriters” under the Securities Act, the selling
stockholders must deliver this prospectus and any prospectus supplement in the
manner required by the Securities Act. [This prospectus delivery requirement may
be satisfied through the facilities of the New York Stock Exchange in accordance
with Rule 153 under the Securities Act.]

We and the selling stockholders have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. In
addition, we or the selling stockholders may agree to indemnify any
underwriters, broker-dealers and agents against or contribute to any payments
the underwriters, broker-dealers or agents may be required to make with respect
to, civil liabilities, including liabilities under the Securities Act.
Underwriters, broker-dealers and agents and their affiliates are permitted to be
customers of, engage in transactions with, or perform services for us and our
affiliates or the selling stockholders or their affiliates in the ordinary
course of business.

The selling stockholders will be subject to applicable provisions of Regulation
M of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, which

 

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provisions may limit the timing of purchases and sales of any of the shares of
our common stock by the selling stockholders. Regulation M may also restrict the
ability of any person engaged in the distribution of the shares of common stock
to engage in market-making activities with respect to the shares of common
stock. These restrictions may affect the marketability of such shares.

In order to comply with applicable securities laws of some states, the shares
may be sold in those jurisdictions only through registered or licensed brokers
or dealers. In addition, in certain states the shares may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirements is available. In
addition, any shares of a selling stockholder covered by this prospectus that
qualify for sale pursuant to Rule 144 under the Securities Act may be sold in
open market transactions under Rule 144 rather than pursuant to this prospectus.

In connection with an offering of common stock under this prospectus, the
underwriters may purchase and sell securities in the open market. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of securities than they are required to
purchase in an offering. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of the securities while an offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the underwriters have repurchased securities sold by or
for the account of that underwriter in stabilizing or short-covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of the common stock offered under this prospectus. As a result,
the price of the common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. These transactions may be effected
on the New York Stock Exchange or another securities exchange or automated
quotation system, or in the over-the-counter market or otherwise.

 

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EXHIBIT C

GOVERNANCE AGREEMENT

by and among

ANGIOTECH PHARMACEUTICALS, INC.,

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC.,

ARES CORPORATE OPPORTUNITIES FUND III, L.P.,

NEW LEAF VENTURES I, L.P.

and

NEW LEAF VENTURES II, L.P.

 

 

Dated as of [            ], 2008

 

 

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TABLE OF CONTENTS

 

            Page ARTICLE I. DEFINITIONS; RULES OF CONSTRUCTION

SECTION 1.01.

     Definitions    1

SECTION 1.02.

     Rules of Construction    7 ARTICLE II.    REPRESENTATIONS AND WARRANTIES   

SECTION 2.01.

     Representations and Warranties    8 ARTICLE III.    SHARE TRANSFERS   

SECTION 3.01.

     Restrictions on Transfer    9

SECTION 3.02.

     Improper Transfer    9

SECTION 3.03.

     Permitted Transfers    9 ARTICLE IV.    RIGHTS OF CERTAIN STOCKHOLDERS   

SECTION 4.01.

     Tag-Along Rights.    10

SECTION 4.02.

     Drag-Along Rights    12

SECTION 4.03.

     Financial Statements and Other Information    13

SECTION 4.04.

     Preemptive Notice    14

SECTION 4.05.

     Board of Directors and Investor Director Veto Rights.    15

SECTION 4.06.

     Call Right.    20

SECTION 4.07.

     Voting of Shares; Action by the Company.    20 ARTICLE V. RIGHTS OF EXIT

SECTION 5.01.

     Exit after Fourth Anniversary    21 ARTICLE VI. Additional agreement

SECTION 6.01.

     Approvals.    23

SECTION 6.02.

     Insurance    24 ARTICLE VII. MISCELLANEOUS

SECTION 7.01.

     Confidentiality.    24

 

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SECTION 7.02.

     Expenses    25

SECTION 7.03.

     Notices    25

SECTION 7.04.

     Amendment; Waiver    26

SECTION 7.05.

     Counterparts and Facsimile    27

SECTION 7.06.

     Governing Law    27

SECTION 7.07.

     WAIVER OF JURY TRIAL    27

SECTION 7.08.

     Entire Agreement, Etc    27

SECTION 7.09.

     Captions    28

SECTION 7.10.

     Severability    28

SECTION 7.11.

     No Third Party Beneficiaries    28

SECTION 7.12.

     Specific Performance    28

SECTION 7.13.

     Additional Stock Subject to Agreement    28

SECTION 7.14.

     Termination of Certain Provisions    28

 

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EXHIBIT C

GOVERNANCE AGREEMENT

THIS GOVERNANCE AGREEMENT (the “Agreement”), dated as of [            ], 2008,
by and among Angiotech Pharmaceutical Interventions, Inc., a Delaware
corporation (the “Company”), Ares Corporate Opportunities Fund III, L.P., a
Delaware limited partnership (together with its Permitted Transferees, “Ares”),
New Leaf Ventures I, L.P. (“New Leaf I”) and New Leaf Ventures II, L.P. (“New
Leaf II” ), and Angiotech Pharmaceuticals, Inc., a corporation organized under
the laws of the Province of British Columbia, Canada (“Parent”).

WHEREAS, on [            ], 2008, each Investor, Parent and the Company entered
into that certain Note Purchase Agreement (the “Note Purchase Agreement”)
providing, among other things, for the purchase by the Investors of convertible
promissory notes in the aggregate original principal amount of $[            ]
(the “Convertible Notes”); and

WHEREAS, in connection with the transactions contemplated by the Note Purchase
Agreement and as a condition to the issuance of the Convertible Notes, the
parties hereto desire to enter into this Agreement.

NOW, THEREFORE, the parties mutually agree as follows:

ARTICLE I.

DEFINITIONS; RULES OF CONSTRUCTION

SECTION 1.01. Definitions. Capitalized terms used herein but not otherwise
defined have the meanings set forth in the Note Purchase Agreement. The
following terms, as used herein, have the following meanings:

“Additional Stock” has the meaning set forth in Section 4.04(a).

“Affiliate Transaction” means any direct or indirect Transfer of the properties
or assets of the Company or any of its Subsidiaries to, or purchase of any
property or assets by any such Person from, or any such Person entering into or
suffering to exist any contract with, or for the benefit of, any of such
Person’s Affiliates (other than the Company and its Subsidiaries).

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Antitrust Division” has the meaning set forth in Section 5.01(a).

“Ares” has the meaning set forth in the preamble to this Agreement.

“Board” means the Board of Directors of the Company.

“Business Day” means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the State of New York
generally are authorized or required by Law or other governmental action to
close.

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“By-laws” means the By-laws of the Company, as amended or amended and restated
from time to time.

“Call Event” shall be deemed to occur if on any date (1) (a) either (i) for the
most recently ended four full fiscal quarters ending on or prior to such date,
the EBITDA Ratio is less than 1.25x or (ii) for the most recently ended two full
fiscal quarters ending on or prior to such date, the EBITDA Ratio is less than
1.0x and (b) Parent has less than $10.0 million in unrestricted cash and cash
equivalents on such date or (2) the Company or any of its Subsidiaries makes any
payment pursuant to the Company Guarantees.

“Call Share Price” means, at any date of determination, an amount equal to the
lower of

(a) (i) the sum of (A) 2.5 times the consolidated revenues of the Company for
the most recent twelve calendar month period, determined in accordance with
GAAP, less (B) consolidated total Indebtedness of the Company on such date, plus
(C) the unrestricted consolidated cash and cash equivalents of the Company on
such date divided by (ii) the total number of shares of Common Stock outstanding
on such date, calculated on a fully diluted basis after giving effect to the
exercise, conversion or exchange of all options, warrants, rights and other
convertible or exchangeable securities (without regard to voting requirements or
any restrictions on exercise, conversion or exchange) and

(b) the Fair Market Value of a share of the Common Stock as of such date.

“Capital Stock” means, with respect to any Person any and all shares, interests,
participations, rights in or other equivalents (however designated) of such
Person’s capital stock, and any rights, warrants or options (including
convertible debt) exercisable or exchangeable for or convertible into such
capital stock.

“Common Stock” means, collectively, the Voting Common Stock, par value $0.01 per
share, of the Company and, except as otherwise expressly noted, the Non-Voting
Common Stock.

“Company” has the meaning set forth in the preamble to this Agreement.

“Company Guarantees” shall mean the guarantees provided by the Company or any of
its Subsidiaries with respect to the Existing Debt.

“Conditions” means, with respect to any transaction, (a) the expiration of all
waiting periods and receipt of all required consents from any (i) Governmental
Entity or (ii) any other Person, if in the case of this clause (ii), the failure
to obtain a consent would reasonably be expected to cause a material adverse
effect to the Company, (b) compliance with all Laws applicable to such
transaction and (c) the absence of any Order preventing such transaction.

“Confidential Information” means any confidential information that concerns the
Company and Persons that are or will become its Subsidiaries or the financial
condition, business, operations or prospects of any of them furnished by or on
behalf of the Company to any Stockholder (including, by virtue of its present or
former right to designate a Director);

 

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provided, that the term “Confidential Information” does not include information
that (i) is or becomes generally available to the public other than as a result
of a disclosure by a Stockholder or its Representatives in violation of this
Agreement, or (ii) was or becomes available to such Stockholder on a non
confidential basis from a source other than the Company, provided that such
source is or was (at the time of receipt of the relevant information) not, to
such Stockholder’s knowledge, bound by a confidentiality agreement with respect
to such information with (or other confidentiality obligation to) the Company or
another Person.

“consent” means any approval, consent, qualification, ratification, variance,
exemption, grant, easement, certificate, license, franchise, permission,
registration, permit, waiver or other authorization.

“Convertible Notes” has the meaning set forth in the preamble to this Agreement.

“Designated Event” has the meaning set forth in the Convertible Notes.

“EBITDA” means for any period, (a) the consolidated net income of Parent and its
Subsidiaries (other than the members of the Company Group) determined in
accordance with GAAP, plus (b) to the extent deducted in calculating such
consolidated net income, without duplication: (1) income tax expense;
(2) consolidated interest expense; (3) depreciation expense; (4) amortization
expense; (5) any non-recurring restructuring and extraordinary charges (as
determined in accordance with GAAP); and (6) all other non-cash charges reducing
consolidated net income for such period, excluding (A) non-cash charges that
require an accrual of, or a reserve for, cash charges for any future periods and
(B) normally occurring accruals (such as reserves for accounts receivable), and
less (c)(1) any extraordinary, unusual or non-recurring gains, (2) the effect of
any write-up of assets, unrealized gains or similar non-cash items of income,
and (3) all cash payments made by Parent or any of its Subsidiaries (other than
the members of the Company Group) during such period to the extent such payments
relate to non-cash charges that were added back in determining EBITDA for such
period or any prior period.

“EBITDA Ratio” means for any period, the ratio of EBITDA for such period to the
consolidated cash interest expense of Parent and its Subsidiaries (other than
the members of the Company Group) for such period, determined in accordance with
GAAP. In the event that Parent or any of its Subsidiaries incurs, assumes,
guarantees, repays, repurchases, redeems, defeases or otherwise discharges any
Indebtedness (other than ordinary working capital borrowings) subsequent to the
commencement of the period for which the EBITDA Ratio is being calculated and on
or prior to the date on which the event for which the calculation of the EBITDA
Ratio is made, then the EBITDA Ratio will be calculated giving pro forma effect
to such incurrence, assumption, guarantee, repayment, repurchase, redemption,
defeasance or other discharge of indebtedness, and the use of the proceeds
therefrom, as if the same had occurred at the beginning of the applicable
period.

“Electing Stockholder” has the meaning set forth in Section 4.04(b).

“Eligible Offering” means an offer by the Company or any of its Subsidiaries
after the date hereof to Transfer or issue to any Person or Persons (including
any of the Stockholders), any Capital Stock of the Company, other than:

 

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(i) in a bona fide underwritten public offering registered under the 1933 Act;

(ii) any offer subsequent to an Initial Public Offering that meets the test of a
Qualified Transaction;

(iii) pursuant to the Option Plans and approved by the Board to employees,
officers, independent directors, consultants and/or advisors to the Company or
its Subsidiaries;

(iv) as consideration to any third party seller in connection with the bona fide
acquisition by the Company or any Subsidiary of the Company of the assets or
securities of any Person in any transaction approved by the Board and a majority
of the Investor Directors; and

(v) as an inducement to a third party investor (in its capacity as a lender) in
connection with any bona fide debt financing, subject to terms and conditions
approved by the Board and a majority of the Investor Directors.

“Existing Debt” means Parent’s Senior Floating Rate Notes due 2013 and 7.75%
Senior Subordinated Notes due 2014.

“Exit” shall mean an Initial Public Offering or a Liquidation of the Company.

“Exit Investors” has the meaning set forth in Section 5.01.

“Fair Market Value” means the value that would be paid by a willing buyer to an
unaffiliated willing seller in a transaction not involving distress or necessity
of either party, without taking into account any liquidity or other discount,
restrictions on transfer or differences in voting rights. When determining Fair
Market Value, if the applicable parties hereto cannot agree on the Fair Market
Value within 10 days, such parties shall submit their final calculations of such
value to an arbitrator (the “Arbitrator”) who shall be an independent valuation
firm and be appointed by agreement of the parties or, failing such agreement, by
the American Arbitration Association (the “AAA”) in accordance with the
Commercial Arbitration Rules of the AAA. The Arbitrator shall review each
party’s determination of Fair Market Value and make a selection as to which of
the determinations presented to it is, in the aggregate, more accurate. To
clarify, the Arbitrator will be required to select one of the two determinations
in its entirety. The decision of the Arbitrator shall be made within 30 days
after being engaged, or as soon thereafter as reasonably practicable, and shall
be final and binding on the parties. The costs and expenses of the Arbitrator
shall be paid by the party whose final determination is not selected by the
Arbitrator as being more accurate. Each party shall make available to the
Arbitrator all relevant books, records and calculations relating to such party’s
determination submitted and all other information reasonably requested by the
Arbitrator.

“GAAP” means generally accepted accounting principles consistently applied in
the United States.

 

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“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Indebtedness” shall have the meaning given thereto in the Convertible Notes.

“Independent Director” means (a) if nominated by Parent, a Person who has no
prior or existing business or material professional or personal relationship
with Parent, the Company or senior management (including members of the Board)
of Parent or the Company; (b) if nominated by the Investors, a Person who has no
prior or existing business or material professional or personal relationship
with the Investors (in each case, other than in such Person’s capacity as a
member of the Company’s Board of Directors or any committee thereof).

“Initial Public Offering” means a bona fide a underwritten initial public
offering of the Common Stock pursuant to an effective registration statement
filed under the 1933 Act (excluding registration statements filed on Form S-8,
any similar successor form or another form used for a purpose similar to the
intended use for such forms).

“Insurance Programs” has the meaning set forth in Section 6.02.

“Investor” means Ares, New Leaf I, New Leaf II, each of their respective
Permitted Transferees, and any other successor to an Investor’s rights and
obligations under this Agreement.

“Investor Call Notice” has the meaning set forth in Section 4.06(a).

“Investor Directors” has the meaning set forth in Section 4.05(a).

“Investor Registration Rights Agreement” means that certain registration rights
agreement among the Investors and the Company, dated of even date herewith.

“Law” means any federal, state, local or foreign law, statute or ordinance
common law, or any rule, regulation, standard, judgment, order, writ,
injunction, decree, arbitration award, agency requirement, license or permit of
any Governmental Entity.

“Liquidation” means any liquidation, dissolution, winding up or sale of the
Company or Subsidiary of the Company (whether by merger, reorganization, stock
sale or sale of all or substantially all of the assets, or otherwise, but
excluding a reorganization effected solely to change the Company’s state of
incorporation).

“Material Competitor” on any date means a material competitor to the Company and
its Subsidiaries as of such date.

“New Leaf” means New Leaf I and New Leaf II.

“New Leaf I” has the meaning set forth in the preamble to this Agreement.

“New Leaf II” has the meaning set forth in the preamble to this Agreement.

 

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“Non-Voting Common Stock” means the Non Voting Common Stock par value $0.01 per
share, of the Company.

“Note Purchase Agreement” has the meaning set forth in the preamble to this
Agreement.

“Other Consideration” has the meaning set forth in Section 4.01(a).

“Parent” has the meaning set forth in the preamble to this Agreement.

“Parent Directors” has the meaning set forth in Section 4.05(a).

“Parent Registration Rights Agreement” means that certain registration rights
agreement between Parent and the Company, dated as of [            ].

“Parent Shares” has the meaning set forth in Section 4.06(a).

“Permitted Transferee” means , in the case of any Investor, (a) any Affiliate
(other than an individual) of such Investor and (b) any other investment fund,
investment partnership, investment account or other investment Person whose
investment manager, investment advisor, managing member or general partner is
such Investor or an Affiliate of such Investor.

“Person” means an individual, a corporation, a general or limited partnership, a
limited liability company, a joint stock company, an association, a trust or any
other entity or organization, including a government, a political subdivision or
an agency or instrumentality thereof.

“pre-Closing Claim” has the meaning set forth in Section 6.02.

“Preemptive Notice” has the meaning set forth in Section 4.04(a).

“Pro Rata Portion” means on any date (a) with respect to any Tag-Along
Stockholder, the percentage of such Tag-Along Stockholder’s Common Stock equal
to the ratio of (i) the number of Tag-Along Offered Shares to (ii) the total
number of shares of Common Stock held by Parent, in each case on such date, and
(b) in any other case, a fraction, the numerator of which is the number of
shares of Capital Stock owned by such Stockholder and the denominator of which
is the number of shares of Capital Stock owned by all Stockholders, in each case
on such date.

“Purchaser” has the meaning set forth in Section 4.01(a).

“Qualified Transaction” has the meaning set forth in the Convertible Notes.

“Quill Merger Agreement” means that certain Agreement and Plan of Merger by and
among Angiotech Pharmaceuticals, Inc., Angiotech Pharmaceuticals (US), Inc.,
Quaich Acquisition, Inc. and Quill Medical, Inc., dated as of May 25, 2006.

“Remaining Securities” has the meaning set forth in Section 4.04(b).

 

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“Representatives” means, with respect to any Person, its partners, managing
members, directors, officers, employees, agents, counsel, investment advisors or
representatives.

“Securities” means the Common Stock and Convertible Notes.

“Stockholder” means Parent and each Investor.

“Stockholder’s Representations” has the meaning set forth in Section 4.01(c).

“Tag-Along Notice” has the meaning set forth in Section 4.01(a).

“Tag-Along Offered Shares” has the meaning set forth in Section 4.01(a).

“Tag-Along Sale” has the meaning set forth in Section 4.01(a).

“Tag-Along Stockholder” means a Stockholder that elects to participate in a
Tag-Along Sale pursuant to Section 4.01 hereof.

“Tagging Stockholders” has the meaning set forth in Section 4.01(a).

“Third Party” means any Person who is not a Stockholder at the time of
determination.

“Transaction” has the meaning set forth in the recitals to this Agreement.

“Transfer” means the direct or indirect offer, sale, lease, donation, assignment
(as collateral or otherwise), license, mortgage, pledge, grant, hypothecation,
encumbrance, gift, bequest or transfer or disposition of any interest (legal or
beneficial) in any security (including transfer by reorganization, merger, sale
of substantially all of the assets or by operation of law), provided that no
Transfer shall be deemed to have occurred solely as a result of the entering
into of any bona fide agreement, covenant, restriction, negative pledge or other
similar encumbrance relating to, or otherwise affecting, the ability to pledge
or otherwise Transfer any security or interest therein.

“Triggered IPO” has the meaning set forth in Section 5.01(b).

“Triggered Sale” has the meaning set forth in Section 5.01(a).

“Voting Common Stock” means the Voting Common Stock, par value $0.01 per share,
of the Company.

“Wholly Owned Subsidiary” means any Subsidiary of the Company all of the Capital
Stock of which is owned by the Company and/or one or more Wholly Owned
Subsidiaries.

SECTION 1.02. Rules of Construction.

(a) Solely for purposes of this Agreement (including the definition of “Pro Rata
Portion”) (i) whenever a threshold for ownership of shares of Common Stock, the
amount

 

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invested in equity interests of the Company, the percentage of ownership of the
outstanding shares of Common Stock of the Company, or any similar matter is to
be determined, all shares of Common Stock issuable to the Investors upon
conversion of the Convertible Notes (as if such conversion were then permissible
without restriction) shall be treated as owned by the Investors and
(ii) whenever a right or obligation to consent, vote, sell or purchase, or
otherwise take any action with respect to, shares of Common Stock is applicable
hereunder, such right or obligation shall apply with respect to the Convertible
Notes and all references to shares of Common Stock under the related provisions
shall be deemed to include the Convertible Notes, in each case as if they were
the number of shares of Common Stock receivable with respect thereto, determined
on an as-converted basis (as if such conversion were then permissible without
restriction); provided, that for purposes of Section 4.05 any shares of
Non-Voting Common Stock shall be disregarded as provided therein.

(b) Any provision of this Agreement which refers to the words “include,”
“includes” or “including” shall be deemed to be followed by the words “without
limitation.”

(c) In the event that any claim is made by any Person relating to any conflict,
omission or ambiguity in this Agreement, no presumption or burden of proof or
persuasion shall be implied by virtue of the fact that this Agreement was
prepared by or at the request of a particular Person or its counsel.

(d) References to numbered or letter articles, sections and subsections refer to
articles, sections and subsections, respectively, of this Agreement unless
expressly stated otherwise. All references to this Agreement include, whether or
not expressly referenced, the exhibits and schedules attached hereto.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

SECTION 2.01. Representations and Warranties. Each of the parties hereby
severally represents and warrants to each of the other parties as follows:

(a) Authority; Enforceability. Such party (i) has the legal capacity or
organizational power and authority to execute, deliver and perform its
obligations under this Agreement and (ii) (in the case of parties that are not
natural persons) is duly organized and validly existing and in good standing
under the Laws of its jurisdiction of organization. This Agreement has been duly
executed and delivered by such party and constitutes a legal, valid and binding
obligation of such party, enforceable against it in accordance with the terms of
this Agreement, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and to the
exercise of judicial discretion in accordance with general principles of equity
(whether applied by a court of law or of equity).

(b) Consent. No consent is required to be made or obtained, other than those
that have been made or obtained on or prior to the date hereof, in connection
with the execution, delivery or performance of this Agreement by such party.

 

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ARTICLE III.

SHARE TRANSFERS

SECTION 3.01. Restrictions on Transfer. Except as provided in Section 3.03, of
this Agreement, (i) no Stockholder shall Transfer any Securities without the
prior written consent of the Company (which consent shall not be unreasonably
withheld), to be given, in the case of a proposed Transfer by Parent, by the
Investor Directors, and in the case of a proposed Transfer by any Investor, by
the Parent Directors, and (ii) New Leaf shall not transfer any Securities
without the prior written consent of Ares. Each Stockholder hereby acknowledges
and agrees that it shall not be unreasonable for the Company to withhold its
consent with respect to any proposed Transfer to any Material Competitor.

SECTION 3.02. Improper Transfer. Any attempt to Transfer any Securities in
violation of the terms of this Agreement shall be null and void, and no right,
title or interest in or to such Securities shall be Transferred to the purported
Transferee. The Company will not give, and will not permit the Company’s
transfer agent to give, any effect to such attempted Transfer on its stock or
other records.

SECTION 3.03. Permitted Transfers. Notwithstanding anything to the contrary
contained in, and without complying with any provision of, Section 3.01 or 3.02
hereof, to the extent permitted under applicable Law:

(a) So long as the Existing Debt remains outstanding, Parent may, from time to
time, Transfer (without regard to or compliance with Section 4.01 of this
Agreement) to any Person other than a Material Competitor, for cash, up to a
number of shares of the Common Stock equal in value (based on the net cash
proceeds to be received by Parent in connection with any such Transfer) to the
then outstanding aggregate principal amount of Existing Debt (plus all accrued
interest thereon and the amount of all fees and expenses that would be incurred
to repay, retire, redeem or otherwise repurchase such Existing Debt); provided
that (i) all net proceeds received in such Transfer shall be applied to repay,
retire, redeem or otherwise repurchase Existing Debt; (ii) the number of shares
of Common Stock that Parent shall be permitted to Transfer pursuant to this
Section 3.03(a) shall not in the aggregate exceed 49% of the total number of
shares of Common Stock held by Parent as of the date of this Agreement; and
(iii) prior to or concurrently with each Transfer pursuant to this
Section 3.03(a), the Transferee duly executes and delivers an agreement in form
and substance reasonably satisfactory to the Company and the Investors pursuant
to which such Transferee (x) agrees to be bound by all obligations of Parent
contained in this Agreement and (y) acknowledges that such Transferee shall not
be entitled to any rights under this Agreement (other than as may be consented
to in writing by Ares and the Company).

(b) Each Stockholder may Transfer any or all of the Securities held by it after
the earlier of (i) the fourth anniversary of the date of this Agreement and
(ii) a Qualified Transaction; provided, that New Leaf shall not Transfer the
Securities prior to a Qualified Transaction without the prior written consent of
Ares (after the fourth anniversary of the date of this Agreement, such consent
not to be unreasonably withheld).

 

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(c) Each Investor may Transfer any or all of the Securities held by it to any
Permitted Transferee of such Investor who duly executes and delivers an
agreement in form and substance reasonably satisfactory to the Company and the
Investors pursuant to which such Permitted Transferee agrees to be bound by the
terms and conditions of this Agreement.

(d) Tagging Stockholders may Transfer Securities pursuant to Section 4.01.

(e) Dragged Stockholders may Transfer Securities pursuant to Section 4.02.

(f) The parties may Transfer Securities pursuant to Section 4.06 and
Section 5.01.

ARTICLE IV.

RIGHTS OF CERTAIN STOCKHOLDERS

SECTION 4.01. Tag-Along Rights.

(a) If Parent at any time proposes to Transfer any shares of Common Stock (a
“Tag-Along Sale”) to a Third Party (the “Purchaser”), other than in a registered
public offering pursuant to the terms of the Parent Registration Rights
Agreement or in connection with an Initial Public Offering, Parent shall give
written notice (a “Tag-Along Notice”) of such proposed Tag-Along Sale to each of
the Investors at least twenty (20) calendar days prior to the consummation of
such proposed Tag-Along Sale setting forth:

(i) Angiotech Holding’s bona fide intention to Transfer such shares;

(ii) the total number of shares of Common Stock proposed to be Transferred (the
“Tag-Along Offered Shares”), the purchase price per share of Common Stock, and
if all or any portion of the proposed consideration is payable other than in
cash, (x) a description of all such non-cash consideration (“Other
Consideration”) and (y) the estimated Fair Market Value of such Other
Consideration as of such date;

(iii) the identity of the Purchaser;

(iv) any other material terms and conditions of the proposed Tag-Along Sale;

(v) the expected date of the proposed Tag-Along Sale; and

(vi) an undertaking that each Investor shall have the right to elect to sell up
to its Pro Rata Portion (which, for the avoidance of doubt, shall include
Convertible Notes counted on an as-converted basis) of such Tag-Along Offered
Shares in accordance with this Section 4.01.

(b) Upon delivery of a Tag-Along Notice, each Investor shall have the right, but
not the obligation, to sell up to its Pro Rata Portion of the Tag-Along Offered
Shares

 

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pursuant to the terms and conditions of this Section 4.01, to the Purchaser by
sending written notice to Parent no later than fifteen (15) calendar days after
the date of the Tag-Along Notice, indicating its election to sell up to its Pro
Rata Portion of such Tag-Along Offered Shares. Such notice shall set forth the
number of shares of Common Stock that such Investor elects to include in the
Tag-Along Sale, which number shall not exceed its Pro Rata Portion of the
Tag-Along Offered Shares. Parent shall not consummate the Tag-Along Sale unless
the Purchaser purchases all of the shares of Common Stock requested to be
included in the Tag-Along Sale by the Tag-Along Stockholders on the same terms
and conditions applicable to Parent; provided, that (i) each Tagging Stockholder
may elect to receive in lieu of all or any portion of Other Consideration, cash
in an amount equal to the Fair Market Value thereof and (ii) if the number of
shares of Common Stock which Parent and the Tag-Along Stockholders elect to sell
in the Tag-Along Sale exceeds the Tag-Along Offered Shares, to the extent that
the Purchaser does not elect to purchase such excess, the number of shares of
Common Stock to be sold by Parent and each Tag-Along Stockholder shall be
reduced on a pro rata basis according to the proportion which the number of
shares of Common Stock which each such party elects to have included in the
Tag-Along Sale bears to the total number of shares of Common Stock elected by
all such parties to have included in the Tag-Along Sale. Neither Parent nor any
of its Affiliates shall receive any direct or indirect consideration in
connection with the proposed Tag-Along Sale (including by way of fees,
consulting arrangements or a non-compete payment) other than the consideration
received in exchange for its shares of Common Stock. The closings of a sale by
Parent and any Tagging Stockholders shall occur simultaneously and be
conditioned upon each other.

(c) To exercise its right to sell pursuant to this Section 4.01, each Tagging
Stockholder may be required to agree to make customary representations and
warranties to the Purchaser with respect to (i) such Tagging Stockholder’s due
organization, power and authority, (ii) such Tagging Stockholder’s ownership of,
and ability to freely convey, such shares without liens or encumbrances (other
than those that arise under federal or state securities laws or by virtue of
this Agreement), (iii) customary representations regarding non-contravention of
such Stockholder’s charter, bylaws or other organizational documents or material
agreements of such Stockholder and (iv) the enforceable nature of such
Stockholder’s obligations under the documents for such sale to which it is a
party (collectively, “Stockholder’s Representations”), in each case in the form
made by Parent. No Tagging Stockholder shall be required to make any
representations or warranties in connection with the proposed Tag-Along Sale
other than the Stockholder’s Representations.

(d) No Tagging Stockholder shall be (i) liable in respect of any indemnification
provided in connection with a proposed Tag-Along Sale (w) in excess of its Pro
Rata Portion of the consideration received, (x) in excess of the consideration
received by such Tagging Stockholder in such sale, (y) for the breach of any
representations or warranties made by any other Stockholder or (z) other than on
a several (and not joint) basis with other Stockholders or (ii) required to
participate in any escrow relating to such proposed Tag-Along Sale in excess of
such Tagging Stockholder’s pro rata participation in the proposed Tag-Along Sale
(based on proceeds to be received).

(e) Parent shall have the right for a period of seventy-five (75) calendar days
after the expiration of the 15-calendar day period referred to in
Section 4.01(b) to Transfer the shares of Capital Stock subject to the Tag-Along
Notice (not otherwise sold by the Tagging

 

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Stockholders) to the Purchaser at a price not greater than the price contained
in, and otherwise on terms and conditions not materially more favorable to
Parent than those set forth in, the Tag-Along Notice. After the end of the 75
calendar-day period referred to in this Section 4.01(d), Parent will not effect
the Transfer of any shares of Capital Stock without commencing de novo the
procedures set forth in this Section 4.01.

(f) The Tag-Along Sellers will deliver or cause to be delivered to each Tagging
Stockholder copies of all transaction documents relating to the proposed
Tag-Along Sale (and all drafts thereof) as the same become available.

SECTION 4.02. Drag-Along Rights.

(a) If, at any time after the date hereof, the Company proposes, in any
transaction or series of related transactions, to consummate a transaction that
is, or would result in, a Designated Event approved by a majority of the Board
in compliance with Section 4.05 hereof, then the Company shall have the right
(but not the obligation) to require the Stockholders to (in each case, to the
extent applicable):

(1) sell all of their Securities to any applicable purchaser at the same price
per share and on the same terms and conditions (including, without limitation,
time of payment and form of consideration) as to be paid to the other
Stockholders;

(2) vote all of their Securities in favor of the transactions constituting such
Designated Event;

(3) waive their appraisal or dissenters’ rights with respect to such Designated
Event;

(4) make the Stockholder’s Representations, in each case in the form made by the
other Stockholders (it being understood, that no Stockholder shall be required
to make any representations or warranties in connection with the Designated
Event other than the Stockholder’s Representations);

(5) deliver at the closing of such Designated Event, certificates evidencing the
Securities owned by such Stockholder, duly endorsed in blank or accompanied by
written instruments of transfer in form and substance reasonably satisfactory to
the Company; and

(6) subject to the other provisions hereof, execute such other documents as the
Company may reasonably request in order to consummate the Designated Event at
the time specified by the Company.

(b) The Company shall exercise its rights pursuant to this Section 4.02 by
delivering to the Stockholders written notice specifying (i) the material terms
of the Designated Event (including, without limitation, to the extent
applicable, the identity of any applicable purchaser, the price per share to be
paid, and the expected closing date of the proposed Designated Event) and
(ii) any actions the Company desires the Stockholder to take pursuant to
Section 4.02(a).

 

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(c) No Stockholder shall (x) be liable in respect of any indemnification in
connection with any Designated Event contemplated by this Section 4.02 (i) in
excess of its Pro Rata Portion of the consideration received, (ii) in excess of
the consideration received by such Stockholder therefrom, (iii) for the breach
of any representations or warranties made by any other Stockholder or (iv) other
than on a several (and not a joint and several) basis with other Stockholders or
(y) be required to participate in any hold-back, escrow, contingent
consideration or other similar items relating to such Designated Event in excess
of such Stockholder’s pro rata participation therein (based on proceeds to be
received).

(d) Notwithstanding anything herein to the contrary, neither the Board nor the
Company shall have any obligation to any Stockholder as a result of any decision
by the Board or the Company to accept or consummate, or not to accept or
consummate, any Designated Event (it being understood that any and all such
decisions shall be made by the Company upon receiving the requisite Board
Approval in its sole discretion).

SECTION 4.03. Financial Statements and Other Information.

(a) General. For so long as the Investors own in the aggregate at least 5% of
the shares of Common Stock outstanding, the Company shall furnish to each
Investor that requests:

(1) Monthly Statements. As soon as available, but no later than 30 calendar days
after the end of each monthly accounting period, unaudited monthly summary
financial information prepared in the ordinary course of business by the
Company’s senior management.

(2) Quarterly Reports. As soon as available, but not later than 60 calendar days
after the end of each quarterly accounting period (other than the last quarterly
period of each fiscal year), unaudited consolidated financial statements of the
Company and its consolidated Subsidiaries, which shall include a statement of
cash flows and statement of operations for such quarterly accounting period and
a balance sheet as of the last day thereof, prepared in accordance with GAAP
consistently applied in all material respects (except as noted therein), except
that such financial statements shall not include footnotes and shall be subject
to normal year-end audit adjustments.

(3) Annual Reports. As soon as available, but not later than 120 calendar days
after the end of each fiscal year of the Company ending after the date of this
Agreement, audited consolidated financial statements of the Company and its
consolidated Subsidiaries, which shall include a statement of cash flows and
statement of operations for such fiscal year and a balance sheet as at the last
day thereof, each prepared in accordance with GAAP, consistently applied in all
material respects (except as noted therein), and accompanied by the report of a
firm of independent certified public accountants of recognized standing selected
by the Board.

(4) Budget. Prior to December 15 in each fiscal year of the Company, an annual
updated consolidated business and strategic budget and plan, including cash flow
and other financial projections (setting forth in detail the assumptions
therefor) on a

 

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quarterly basis for the Company and its consolidated Subsidiaries for the
immediately following fiscal year of the Company.

(5) Other Reports. Any written reports that are presented by Parent, the Company
or any of their Subsidiaries to any investor, potential investor or any lending
or financing source that are not otherwise presented to the Board of Directors
(excluding non-recurring informal correspondence) and any internal management
reports prepared by management of the Company.

(6) Miscellaneous. Promptly, from time to time, such other information regarding
the assets and properties and operations, business affairs and financial
condition of the Company and its Subsidiaries as any Investor entitled to
information under this Section 4.03 may reasonably request that is available to
the Company without the incurrence of unreasonable effort or expense or
unreasonable interference with the operations of the Company and its
Subsidiaries.

(b) For so long as the Investors are entitled to designate Investor Directors or
Board observers pursuant to paragraph (c) below, the Company will permit
Representatives of the Investors to visit and inspect any of its properties, to
examine and make abstracts or copies from documents and information in the
possession of the Company, and to discuss its affairs, finances and accounts
with its officers, employees and, upon reasonable advance notice to the Board,
independent public accountants, all at such reasonable times without material
interruption of the Business.

(c) Board Observer. Investors holding a majority of the Common Stock held by all
Investors shall have the right, from time to time, to designate up to two
non-voting board observers who will be entitled to attend all meetings of the
Board and receive all notices and copies of all materials provided to the Board,
provided that (i) such observer shall have no voting rights with respect to
actions taken or elected not to be taken by the Board, (ii) that at the
Company’s request such observer shall enter into a confidentiality agreement in
form and substance reasonably satisfactory to the Company and (iii) the Company
shall be entitled to exclude any such observer from such portions of a Board
meeting to the extent such observer’s presence would be reasonably likely to
result in the waiver of attorney-client privilege. Notwithstanding anything to
the contrary, for so long as New Leaf and its Affiliates own at least 50% of the
Common Stock New Leaf owns as of the date of this Agreement, unless a
representative of New Leaf is one of the Investor Directors, one such observer
shall be designated by New Leaf.

SECTION 4.04. Preemptive Notice.

(a) The Company shall deliver a written notice (a “Preemptive Notice”) to each
Stockholder at least twenty (20) calendar days prior to the consummation of each
Eligible Offering. The Preemptive Notice shall:

(1) state the number and class of shares of such Capital Stock of the Company
(“Additional Stock”) to be offered;

(2) state the price and terms upon which the Additional Stock will be offered

 

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(including the proposed date of issuance and the identity of the proposed
purchasers); and

(3) contain an offer to sell to such Stockholder, on the same terms and at the
same price to be paid by purchasers in the Eligible Offering (provided, that if
the purchasers will pay non-cash consideration, the Stockholder shall be
entitled, in lieu thereof, to pay cash in an amount equal to the Fair Market
Value of such non-cash consideration), an amount of Additional Stock sufficient
for such Stockholder to maintain its Pro Rata Portion of the Company’s Capital
Stock prior to the Eligible Offering.

(b) For a period of fifteen (15) calendar days following the delivery of such
Preemptive Notice, each Stockholder shall be entitled, by written notice to the
Company, to elect to purchase all or part of the Additional Stock described
therein. Upon the expiration of the above-mentioned 15-calendar day period, the
Company shall notify each Stockholder that has elected to purchase securities
pursuant to this Section 4.04 (each such Stockholder, an “Electing Stockholder”)
of any securities for which a Stockholder has elected not to purchase pursuant
to such Eligible Offering (the “Remaining Securities”). Upon receipt of such
notification, each Electing Stockholder shall have five (5) business days to
notify the Company of its intention to purchase such Electing Stockholder’s Pro
Rata Portion of the Remaining Securities. To the extent that elections pursuant
to this Section 4.04 shall not be made with respect to any offered securities
within such 15-calendar day period, then the Company shall not be obligated to
issue to such Stockholder such securities for which such Stockholder has elected
not to purchase. If any such offer is accepted by any Stockholder, the Company
shall sell to such Stockholder, and such Stockholder shall purchase from the
Company for the consideration and on the terms set forth in the Preemptive
Notice, the Additional Stock that such Stockholder has elected to purchase, at
the same time as the consummation of the Eligible Offering.

(c) If a Stockholder does not exercise its preemptive rights, then the Company
shall be permitted to proceed with the proposed issuance of Capital Stock
specified in the Preemptive Notice to the extent not purchased by another
Stockholder. The Company shall have 30 days after the expiration of the deadline
to respond to the Preemptive Notice to consummate such proposed issuance, at a
price not less than the price specified in the Preemptive Notice and on other
terms not less favorable to the Company than those terms set forth in the
Preemptive Notice, before the provisions of this section shall again be in
effect with respect to any such issuance.

(d) The Company shall comply with all applicable securities Laws before issuing
any securities pursuant to this Section 4.04 and shall not be in violation of
the provisions hereof by reason of such compliance.

SECTION 4.05. Board of Directors and Investor Director Veto Rights.

(a) Board of Directors. At each annual or special stockholders’ meeting called
for the election of directors, and whenever the stockholders of the Company act
by written consent with respect to the election of directors (in the case of
clause (ii), (iii), and (iv) below, on or prior to the closing date of a
Qualified Transaction) each Stockholder shall vote or otherwise give such
Stockholder’s consent in respect of all shares of the Capital Stock of the
Company

 

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(whether now owned or hereafter acquired) owned by such Stockholder, and take
all other appropriate action (and the Company shall take all necessary and
desirable actions), to cause:

(i) the By-laws of the Company to provide that the authorized number of
directors on the Board shall be seven (7);

(ii) the election to the Board of:

(A) three (3) directors designated by Parent (the “Parent Directors”), which
directors shall initially be William Hunter, Hank McKinnell and Edward M. Brown;

(B) three (3) directors designated by Investors holding a majority of the shares
of Common Stock held by all Investors (the “Investor Directors”); and

(C) one (1) Independent Director designated by Parent, subject to the approval
of the Investors (which approval shall not be unreasonably withheld); provided
that if at any time the Investors acquire or otherwise beneficially own a number
of shares of Common Stock (excluding any shares of Non-Voting Common Stock)
greater than the number of shares of Common Stock (excluding any shares of
Non-Voting Common Stock) beneficially owned by Parent, then Investors holding a
majority of the shares of Common Stock held by all Investors shall designate the
Independent Director, subject to the approval of Parent (which approval shall
not be unreasonably withheld);

all of which persons shall hold office subject to their earlier removal in
accordance with clause (iv) below, until their respective successors shall have
been elected and qualified;

(iii) the removal from the Board of any director elected in accordance with
clause (ii) above, with or without cause:

(A) in the case of any Parent Director, upon the written request of Parent;

(B) in the case of any Investor Director, upon the written request of holders of
a majority of the shares of Common Stock held by all Investors; and

(C) in the case of the Independent Director, upon the written request of the
Person then entitled to appoint such Independent Director pursuant to clause
(a)(ii)(C) above;

(iv) upon any vacancy in the Board as a result of any individual designated as
provided in clause (ii) above ceasing to be a member of the Board,

 

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whether by resignation or otherwise, the election to the Board as promptly as
possible:

(A) in the case of a vacancy by any Parent Director, an individual designated by
Parent;

(B) in the case of a vacancy by any Investor Director, an individual designated
holders of a majority of the shares of Common Stock held by all Investors; and

(C) in the case of a vacancy by the Independent Director, an individual
nominated by the Person that would at the time of such vacancy be entitled to
appoint such Independent Director pursuant to clause (a)(ii)(C), above.

(b) Investor Directors Subsequent to Qualified Transaction. After the closing of
a Qualified Transaction, Investors then holding a majority of the shares of
Common Stock held by all Investors shall have the right to appoint (i) two
(2) directors to the Board so long as the shares of Common Stock held by all
Investors is equal to or exceeds 17.5% of the then issued and outstanding shares
of Common Stock; and (ii) one (1) director to the Board if the shares of Common
Stock then held by all Investors on a combined basis falls below 17.5%, but is
equal to or exceeds 7.5%, of the then issued and outstanding shares of Common
Stock. Removal of any director appointed by Investors, and the appointment of
any director upon any vacancy created by the resignation or removal of such
director, pursuant to this Section 4.05 shall be governed by
Section 4.05(a)(iii) and Section 4.04(a)(iv) of this Agreement as if such
directors were “Investor Directors” under such Sections.

(c) Chairman of the Board. The Chairman of the Board shall initially be
appointed by Parent, subject to the approval of the Investors (which approval
shall not be unreasonably withheld). If at any time the Investors acquire or
otherwise own beneficially a number of shares of Common Stock (specifically
excluding any shares of Non-Voting Common Stock) greater than the number of
shares of Common Stock (specifically excluding any shares of Non-Voting Common
Stock) beneficially owned by Parent, then Investors holding a majority of the
shares of Common Stock held by all Investors shall appoint the Chairman of the
Board, subject to the approval of Parent (which approval shall not be
unreasonably withheld).

(d) Board Committees. Committees of the Board shall consist of one director
designated by Parent and one director designated by Ares, so long as each has
the right to designate at least one director to the Board pursuant to this
Agreement, provided that there is no applicable legal or regulatory restriction
preventing such designee from becoming a member of such committee.

(e) Transfer of Board and Committee Designation Rights. An Investor’s Board and
committee designation rights will be transferable only in accordance with a
valid transfer of Securities pursuant to this Agreement.

(f) Director Expenses. The Company will pay all reasonable out-of-pocket
expenses incurred by the directors in connection with their participation in
meetings of the Board

 

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(and committees thereof) and the boards of directors (and committees thereof) of
the Subsidiaries of the Company. Each director designated by the Investors will
receive the same compensation, if any, for serving on the Board (and committees
thereof) or on the boards of directors (and committees thereof) of the
Subsidiaries of the Company as any other director receives.

(g) Investor Director Approval Rights. From the date hereof through and
including the last date that the Investors have the right to designate at least
one (1) member of the Board, each of the following actions by, or involving, the
Company or any of its Subsidiaries will require the approval of a majority of
the Investor Directors; provided that (A) the approval rights set forth in
(vii) through (xi) will expire upon the closing date of a Qualified Transaction
and (B) the Company and its Subsidiaries may take any of the actions identified
in subsections (ii), (iii), (iv), (vi) or (xiv) below without the approval of a
majority of the Investor Directors to the extent that requiring such approval
explicitly violates Section 4.08 of the indentures governing the Parent Notes by
constituting a consensual encumbrance or restriction on dividends or
distributions, loans or advances or transfers (including sales or leases) of
assets:

(i) consummation of any transaction or series of transactions that is or would
result in a Designated Event;

(ii) any acquisition or Transfer (in each case, including by merger,
consolidation, business combination or similar transaction) of any assets,
properties, businesses or entities in a transaction or series of related
transactions with an aggregate Fair Market Value (including the value of any
debt assumed or to be assumed in such transaction) in excess of $35 million;

(iii) any loan, advance or capital contribution to any Person (other than the
Company or any Wholly Owned Subsidiary that, while the Convertible Notes are
outstanding, guarantees the Convertible Notes);

(iv) any incurrence, optional repayment or material modification of the terms of
any Indebtedness in an aggregate principal amount in excess of $25 million;

(v) any issuance, redemption or repurchase of Capital Stock, except for
issuances contemplated under the Convertible Notes or upon exercise of options
granted under the Option Plans;

(vi) any declaration or payment of cash or other dividends or distributions of
any kind on or with respect to Capital Stock of the Company or any of its
Subsidiaries, other than dividends or other distributions by a Wholly Owned
Subsidiary to the Company or any other Wholly Owned Subsidiaries that, while the
Convertible Notes are outstanding, guarantees the Convertible Notes;

(vii) capital expenditures (other than up to $10 million in the aggregate to
fund a coating facility located in Vancouver for the primary purpose of coating
or impregnating medical devices with 5-Fluorouracil-coating) in the aggregate in
any fiscal year (A) in excess of 10% of the consolidated revenues of the Company
and its Subsidiaries for such fiscal year or (B) that would result in net
negative

 

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consolidated cash flow for the Company and its Subsidiaries for the fiscal year
in which such expenditures are made;

(viii) research and development expenses in the aggregate in any fiscal year
(A) in excess of 15% of the consolidated revenues of the Company and its
Subsidiaries for such fiscal year or (B) that would result in net negative
consolidated cash flow for the Company and its Subsidiaries for the fiscal year
in which such expenses are incurred;

(ix) any appointment, termination or change (including a change in
responsibilities) of either the chief executive officer or the chief financial
officer of the Company;

(x) any engagement of financial advisors or investment bankers;

(xi) any action that would cause a default under the Existing Debt or an
acceleration or increase of the amounts paid or payable under the Quill Merger
Agreement (including any Earnout Payment, as such term is defined under the
Quill Merger Agreement);

(xii) the creation, termination or modification of any joint venture or similar
business alliance if the Company and its Subsidiaries make, or are committed to
make, cash payments in excess of $20 million in the aggregate with respect
thereto, other than transactions solely between or among the Company and any
Wholly Owned Subsidiary that, while the Convertible Notes are outstanding,
guarantees the Convertible Notes;

(xiii) commencement of a voluntary case under the U.S. bankruptcy code or any
applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect; consent to the entry of an order for relief in an involuntary case, or
the conversion of an involuntary case to a voluntary case, under any such Law;
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; or the making of
a general assignment for the benefit of creditors; and

(xiv) any Affiliate Transaction other than as required by the Restructuring
Agreements.

(h) Notwithstanding any other provision of this Agreement or otherwise, the
exercise of, and the initiation and conduct of all proceedings (as defined in
the Note Purchase Agreement) in respect of, the rights of the Company or any of
its Subsidiaries on the one hand against the rights of the Parent and its
Subsidiaries (excluding the Company and its Subsidiaries) on the other hand,
under the Transaction Documents (including the Restructuring Agreements),
including the Company’s right to terminate or amend any such agreement, shall be
approved (and controlled) solely by the Investor Directors without requiring the
affirmative vote of any other Person. With respect to the Management Services
Agreement, dated as of             , 2008, the foregoing sentence will not apply
to decisions regarding the day-to-day operation or

 

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performance under, or the renewal, continuation, termination, or cancellation
of, the Management Services Agreement.

SECTION 4.06. Call Right.

(a) If a Call Event occurs prior to the earlier of (i) the consummation of a
Qualified Transaction and (ii) the date on which the Company Guarantees have
been fully and unconditionally released, Investors holding a majority of the
shares of Common Stock held by all Investors may thereafter, by written notice
to Parent (an “Investor Call Notice”), elect to purchase (or cause one or more
of its designees to purchase), for cash, up to a number of shares of Common
Stock owned by Parent, the proceeds of which would pay off the remaining amounts
due under the Existing Debt (the “Parent Shares”) at a price per share equal to
the Call Share Price. The Investors delivering the Investor Call Notice shall
permit any other requesting Investor the opportunity to purchase its pro rata
share of the Parent Shares pursuant to this Section. The Investor Call Notice
shall set forth (x) the proposed date of purchase of the Parent Shares which
shall be no later than 15 days after the date of the Investor Call Notice
(subject to the receipt of all governmental approvals (or the lapse of all
governmental waiting periods)); and (y) the place or places where certificates
for the Parent Shares are to be surrendered for payment.

(b) Parent shall cooperate fully in the sale of shares contemplated by this
Section 4.06, and shall take all actions reasonably requested by the Investors
in connection therewith, including, (i) selling each Parent Share at the Call
Share Price and otherwise on the terms and conditions contemplated by this
Agreement, (ii) to the extent applicable, voting all of the Parent Shares in
favor of such sale, (iii) cooperating with the Investors in obtaining all
consents required for consummation of such sale and (iv) waiving any appraisal
or dissenters rights applicable to such sale.

(c) Notwithstanding anything in this Agreement or the Parent Registration Rights
Agreement, to the contrary, after delivery of an Investor Call Notice, Parent
shall not Transfer any Parent Shares other than pursuant to this Section 4.06.

(d) In connection with any sale consummated pursuant to the Investor Call Right,
the seller shall pay its own legal fees and shall not be obligated to make any
representations or warranties to the applicable purchaser other than with
respect to such sellers’ existence, authority to enter into such a sale
transaction, receipt of all necessary consents with respect such sale
transaction and ownership and valid transfer of the Parent Shares, free and
clear of all Liens. At the closing of any such sale, Parent shall deliver
certificates evidencing the Capital Stock to be sold or cancelled in connection
with such sale, duly endorsed for transfer or accompanied by stock powers
executed in blank, against payment of the Call Share Price therefore by wire
transfer to the account or accounts specified by such holder.

SECTION 4.07. Voting of Shares; Action by the Company.

(a) At each annual or special meeting of stockholders of the Company or in any
written consent executed in lieu of such a meeting of stockholders, each
Stockholder shall take all action , including by way of voting the Securities,
to give effect to the agreements

 

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contained in this Agreement. To effectuate the provisions of this Article IV,
each Stockholder hereby agrees that when any action or vote is required to be
taken by such Stockholder, such Stockholder shall use his or its reasonable best
efforts to call, or cause the appropriate officers and directors of the Company
to call, a special or annual meeting of stockholders of the Company, as the case
may be, or execute or cause to be executed a consent in writing in lieu of any
such meetings pursuant to applicable provisions of the Delaware General
Corporation Law.

(b) Each Stockholder affirms that its agreement under this Section 4.07 (and any
other agreements in this Agreement to vote any Securities) is given as a
condition of this Agreement and as such is coupled with an interest and is
irrevocable. This voting agreement shall remain in full force and effect
throughout the time that this Agreement is in effect. The Company shall use its
reasonable best efforts to take all actions to give effect to the agreements
contained in this Agreement.

ARTICLE V.

RIGHTS OF EXIT

SECTION 5.01. Exit after Fourth Anniversary. If a Qualified Transaction has not
been effected prior to the fourth anniversary of the Closing, Investors then
holding a majority of shares of Common Stock held by all Investors on a combined
basis (the “Exit Investors”) shall have the right to initiate and effect an Exit
by giving written notice to the Board. If the Company and the Exit Investors
have not agreed within 30 days of such notice on the plan for effectuating an
Exit:

(a) Triggered Sale.

(i) The Exit Investors shall have the right, acting together, to cause a sale of
the Company (by merger, reorganization, sale of stock or assets, or otherwise)
(a “Triggered Sale”). The Company shall obtain the agreement of all other
existing and future stockholders of the Company, and each Stockholder agrees to
take all actions necessary or reasonably requested by the Exit Investors to
consummate any Triggered Sale, including (A) selling all of their shares to the
acquiror on the same terms and conditions as the Exit Investors, (B) voting for,
consenting to and/or not raising objections against such Triggered Sale,
(C) waiving (to the extent applicable) any dissenters, appraisal rights or
similar rights in connection with a merger or consolidation and (D) taking all
necessary and desirable actions in connection with the consummation of the
Triggered Sale as reasonably requested by the Exit Investors, including
exercising any warrants or conversion privileges.

(ii) If any Stockholder fails to deliver certificates representing its shares of
capital stock as required by this Section 5.01 or fails to vote in favor of such
Triggered Sale and the Triggered Sale in question is consummated, then, to the
extent permitted by Law, such stockholder (A) shall not be entitled to the
consideration it is to receive under this Section 5.01 until it cures such
failure, (B) shall for all purposes be deemed no longer to be a

 

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stockholder of the Company and have no voting rights with respect to its shares
of capital stock of the Company from and after the date of required delivery,
(C) shall not be entitled to any dividends or other distributions with respect
to the shares held by it from and after the date of required delivery, (D) shall
have no other rights or privileges granted to a stockholder under this or any
other agreement from and after the date of required delivery and (E) in the
event of Liquidation, shall have rights subordinate to the rights of any equity
holder with respect to any consideration it would have received if it had
complied with this Section 5.01, if any, until it cures such failure. If any
party so fails to deliver such certificates as so required it shall execute,
acknowledge and deliver all such further agreements and take all such further
actions as may be necessary or desirable to give effect to the provisions of
this Section 5.01. This Section 5.01(a)(ii) shall not be the exclusive remedy
for breach of a Stockholder’s obligations hereunder. Such Stockholder may be
liable for damages upon such breach and the Exit Investors or the Company may
exercise their rights relating to any other remedy available at law or equity.

(iii) The Company shall take all actions necessary or reasonably requested to
consummate any such Triggered Sale and shall use its best efforts to assure the
success thereof, including (a) securing the services of an investment bank,
selected by the Exit Investors and reasonably acceptable to the Company, to
assist in procuring a purchaser; (b) preparing or assisting in the preparation
of due diligence materials; (c) making such due diligence materials available to
prospective purchasers; (d) making its directors, officers and employees
available to prospective purchasers for presentations and due diligence
interviews, and (e) entering into customary agreements with respect to the
Triggered Sale.

(b) Triggered IPO.

(i) The Exit Investors shall have the right, acting together, to cause the
Company to register, issue and sell additional shares of its Common Stock to the
public in an underwritten public offering led by an investment bank selected by
such Investors and reasonably acceptable to the Company (a “Triggered IPO”).

(ii) The Company shall take all actions necessary or reasonably requested to
consummate any such Triggered IPO and shall use its best efforts to assure the
success thereof, including (A) preparing or assisting in the preparation of the
registration statement and prospectus and taking such other action relating to
registration that is contemplated by this Section 5.01 and (B) making its
directors and officers available for customary road show.

 

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ARTICLE VI.

ADDITIONAL AGREEMENT

SECTION 6.01. Approvals.

(a) Upon the proposed Transfer or issuance of Securities by or to any
Stockholder pursuant to this Agreement, the Company shall promptly (i) make all
filings (if any) which it is required to make under the HSR Act or any similar
Law, and (ii) furnish any Stockholder with such necessary information and
reasonable assistance as such Stockholder may reasonably request in connection
with the preparation of any necessary filings or submissions. The Company shall,
at its own expense, use reasonable best efforts to respond to any request for
additional information, or other formal or informal request for information,
witnesses or documents which may be made by any Governmental Entity pertaining
to the Company with respect to the proposed Transfer.

(b) Each Stockholder shall promptly (i) make any and all filings which it is
required to make under the HSR Act and any similar Law with respect to the
proposed Transfer and (ii) furnish the Company with such necessary information
and reasonable assistance as it may request in connection with its preparation
of any necessary filings or submissions. Each Stockholder will use its
reasonable best efforts to respond promptly to any request for additional
information, or other formal or informal request for information, witnesses or
documents which may be made by any Governmental Entity pertaining to such
Stockholders, as the case may be, with respect to the proposed Transfer.

(c) Each of the parties hereto shall use its reasonable best efforts to give
such notices and obtain all other consents or Orders of all Governmental
Entities and other third parties that may be or become necessary to effect the
Transfer of Securities contemplated by this Agreement and will cooperate fully
with the other parties hereto in promptly seeking to obtain all such Consents or
Orders.

(d) The Company shall pay all expenses and fees payable to all Governmental
Entities in connection with the filings made by it pursuant to this Article VI.

 

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SECTION 6.02. Insurance. For so long as the Company is a Subsidiary of Parent,
Parent will cause the Company and its Subsidiaries to be covered under insurance
programs maintained by Parent and its Affiliates (the “Insurance Programs”) with
financially sound and reputable insurers in such forms and amounts and against
such risks as are customary for corporations of established reputation engaged
in the same or a similar business and owning and operating similar properties.
At the request of Investors then holding a majority of the shares of Common
Stock held by all Investors on a combined basis, the Company may implement its
own insurance programs. If the Company is no longer a Subsidiary of Parent and
coverage under the Insurance Programs ceases to apply, Parent (i) agrees that
the Company and its Subsidiaries will continue to be covered by, and will be
permitted to make claims under the Insurance Programs with respect to claims
incurred prior to any such date that the Company is no longer covered by its
Insurance Programs (each, a “pre-Closing Claim”) and (ii) shall cooperate with
the Company and its Subsidiaries in the processing of pre-Closing Claims.

ARTICLE VII.

MISCELLANEOUS

SECTION 7.01. Confidentiality.

(a) Each Stockholder acknowledges and agrees that it will not disclose, and it
will use its reasonable best efforts to cause its Representatives not to
disclose, any Confidential Information to any Person; provided, that
Confidential Information may be disclosed:

(i) to such Stockholder’s Representatives in the normal course of the
performance of their duties or to any financial institution providing credit to
such Stockholder;

(ii) to the extent required by applicable Law to which a Stockholder is subject;

(iii) if such Person determines in good faith that such disclosure is required
in order to comply with such Person’s obligations under the federal or state
securities laws, rules or regulations, the rules of the Financial Industry
Regulatory Authority or the New York Stock Exchange, the Nasdaq Stock Market or
any other similar body;

(iv) to any Person to whom such Stockholder is contemplating a Transfer of its
Securities and such Person’s Representatives (provided that such Transfer would
not be in violation of the provisions of this Agreement and as long as such
potential Transferee is advised of the confidential nature of such information
and agrees to be bound by a confidentiality agreement substantially similar to
the provisions hereof); or

(v) if the prior written consent of the Board shall have been obtained.

 

24

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(b) Nothing contained herein shall prevent the use (subject, to the extent
possible, to a protective order) of Confidential Information in connection with
the assertion or defense of any claim by or against the Company or any
Stockholder.

SECTION 7.02. Expenses. The Company shall reimburse each Investor for all
out-of-pocket costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred by such Investor and its Affiliates
(a) on behalf of the Company or any of its Subsidiaries or in connection with
the provision of services to any of them or (b) in any way relating to, or
arising out of, the investment in the Company; provided that such Investor shall
consult with the Company in advance prior to engaging any financial advisor.

SECTION 7.03. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to any other party will be in writing and will be
deemed to have been duly given (a) on the date of delivery if delivered
personally or by telecopy or facsimile, upon confirmation of receipt, (b) on the
first Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.

 

  (a) If to Ares:

Ares Corporate Opportunities Fund III, L.P.

2000 Avenue of the Stars, 12th Floor

Los Angeles, California 90067

Attn: Bennett Rosenthal

Telephone: (310) 201-4100

Fax: (310) 201-4170

with a copy to (which copy alone shall not constitute notice):

Proskauer Rose LLP

2049 Century Park East, Suite 3200

Los Angeles, California 90067

Attn: Michael A. Woronoff, Esq.

Telephone: (310) 557-2900

Fax: (310) 557-2193

 

  (b) If to New Leaf:

New Leaf Venture Partners, L.L.C.

7 Times Square, Suite 1603

New York, New York 10036

Attn: Chief Financial Officer

Telephone: (646) 871-6400

Fax: (646) 871-6450

with a copy to (which copy alone shall not constitute notice):

 

25

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Latham & Watkins LLP

140 Scott Drive

Menlo Park, California 94025

Attn: Nicholas S. O’Keefe, Esq.

Telephone: (650) 463-3018

Fax: (650) 463.2600

 

  (c) If to the Company:

Angiotech Pharmaceutical Interventions, Inc.

1618 Station Street

Vancouver, BC Canada V6A 1B6

Telephone: (604) 221-7676

Fax: (604) 221-2330

Attn: General Counsel

with a copy to (which copy alone shall not constitute notice):

Sullivan & Cromwell LLP

1888 Century Park East, 21st Floor

Los Angeles, California 90067

Attn: Alison S. Ressler, Esq.

Telephone: (310) 712-6600

Fax: (310) 712-8800

 

  (d) If to Parent:

Angiotech Pharmaceuticals, Inc.

1618 Station Street

Vancouver, BC Canada V6A 1B6

Telephone: (604) 221-7676

Fax: (604) 221-2330

Attn: General Counsel

with a copy to (which copy alone shall not constitute notice):

Sullivan & Cromwell LLP

1888 Century Park East, 21st Floor

Los Angeles, California, 90067

Attn: Alison S. Ressler, Esq.

Telephone: (310) 712-6600

Fax: (310) 712-8800

SECTION 7.04. Amendment; Waiver. No modification, amendment or waiver of any
provision of this Agreement will be effective against the Company, Parent or the
Investors unless made in writing and signed by an officer of a duly authorized
representative of the Company and Parent and Investors holding a majority of
shares of Common Stock held by all Investors on a combined basis provided, that
no modification, amendment or waiver may

 

26

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adversely affect an Investor with respect to a term differently than the
Investors holding a majority of shares of Common Stock held by all Investors on
a combined basis without the consent of each affected Investor. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. No waiver of any party to this Agreement, as the case
may be, will be effective unless it is in a writing signed by a duly authorized
officer of the waiving party that makes express reference to the provision or
provisions subject to such waiver. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by Law.

SECTION 7.05. Counterparts and Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement. Executed signature
pages to this Agreement may be delivered by facsimile and such facsimiles will
be deemed as sufficient as if actual signature pages had been delivered.

SECTION 7.06. Governing Law. This Agreement will be governed by and construed in
accordance with the Laws of the State of New York (except to the extent that
mandatory provisions of Delaware Law are applicable). Each of the parties hereto
hereby irrevocably submits to the exclusive jurisdiction of the Courts of the
State of New York located in the County of New York and the Federal courts of
the United States of America located in the County of New York for the purpose
of any action or proceeding arising out of or relating to this Agreement and
hereby irrevocably agrees that all claims in respect to such action or
proceeding shall be heard and determined exclusively in such New York or Federal
court. Each of the parties hereto agrees that a final judgment in any action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by Law.

SECTION 7.07. WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.

SECTION 7.08. Entire Agreement, Etc. (a) This Agreement (including the Exhibits
hereto) and the other Transaction Documents constitute the entire agreement of
the parties with respect to the subject matter hereof, and supersede all other
prior agreements, understandings, representations and warranties, both written
and oral, among the parties, with respect to the subject matter hereof; and
(b) neither the Company or Parent may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investors holding
a majority shares of Common Stock held by all Investors on a combined basis and
an Investor may only assign its rights under this Agreement in connection with a
Transfer otherwise permitted by this Agreement, provided any such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions hereof and of the applicable Transaction Documents that apply to
the “Investors” and thereafter shall be deemed an Investor for all purposes
hereunder and under the other Transaction Documents. In addition, New Leaf may
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of Ares other

 

27

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than in connection with a Transfer in accordance with Article III. This
Agreement will inure to the benefit of and be binding on the parties hereto and
their respective successors and permitted assigns.

SECTION 7.09. Captions. The article, section, paragraph and clause captions
herein are for convenience of reference only, do not constitute part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.

SECTION 7.10. Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination, the parties shall negotiate in good faith
in an effort to agree upon a suitable and equitable substitute provision to
effect the original intent of the parties.

SECTION 7.11. No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
parties hereto, any benefits, rights or remedies.

SECTION 7.12. Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms and that monetary damages
alone could not adequately compensate for such damage. It is accordingly
unconditionally and irrevocably agreed that the parties shall be entitled to
seek protective orders, injunctive relief and other remedies available at law or
in equity (including, without limitation, seeking specific performance or the
rescission of Transfers not made in compliance with this Agreement), in addition
to any other remedies to which they are entitled at law or equity.

SECTION 7.13. Additional Stock Subject to Agreement. All shares of Capital Stock
of the Company that any Stockholder hereafter acquires by means of a stock
split, stock dividend, distribution, exercise of options or warrants or
otherwise whether by merger, consolidation or otherwise (including shares of a
surviving corporation into which the shares of Capital Stock of the Company are
exchanged in such transaction) will be subject to the provisions of this
Agreement to the same extent as if held on the date hereof.

SECTION 7.14. Termination of Certain Provisions. Other than the provisions set
forth in Sections 4.05(f) and this Article VII, all rights and obligations under
this Agreement will terminate and be of no force and effect upon the date on
which the Investors no longer own any shares of Common Stock.

[Signature Pages Follow]

 

28

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IN WITNESS WHEREOF, the Company and each Stockholder has executed this Agreement
as of the day and year first above written.

 

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC. By:  

 

  Name:   Title: ANGIOTECH PHARMACEUTICALS, INC. By:  

 

  Name:   Title: ARES CORPORATE OPPORTUNITIES FUND III, L.P. By:   ACOF
Operating Manager III, LLC, its manager By:   Ares Management, Inc., its general
partner By:  

 

  Name:   Title: NEW LEAF VENTURES I, L.P. By:   New Leaf Venture Management I,
L.P. Its:   General Partner By:   New Leaf Venture Management I, L.L.C. Its:  
General Partner By:  

 

  Ronald M. Hunt   Managing Director

 

29

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NEW LEAF VENTURES II, L.P. By:   New Leaf Venture Associates II, L.P. Its:  
General Partner By:   New Leaf Venture Management II, L.L.C. Its:   General
Partner By:  

 

  Ronald M. Hunt   Managing Director

 

30

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Exhibit D

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER MAY
NOT OFFER, SELL, TRANSFER, ASSIGN, PLEDGE, HYPOTHECATE, OR OTHERWISE DISPOSE OF
OR ENCUMBER THE SECURITIES REPRESENTED BY THIS CERTIFICATE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC.

[—], 2008

SUBORDINATED INTERCOMPANY NOTE

U.S. $[—]

FOR VALUE RECEIVED, Angiotech Pharmaceutical Interventions, Inc., a Delaware
corporation (the “Borrower”) HEREBY PROMISES TO PAY to Angiotech
Pharmaceuticals, Inc. (the “Parent”), or its permitted assigns, on demand by
Parent, the principal amount of $[—], without interest, payable in cash. If
there has occurred and is continuing any Event of Default (as defined below),
then the principal amount of this Note shall become immediately due and payable
without further action on the part of either the Borrower or Parent.

The Borrower shall treat the Person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
The principal among of this Note is payable in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.

 

  1. Subordination

This Note is subordinated to any and all Indebtedness (as defined in the
indentures, dated as of March 23, 2006 and December 11, 2006, among the Parent,
each of the guarantors party thereto and Wells Fargo Bank, N.A., related to the
Parent’s Senior Floating Rate Notes due 2013 (the “Floating Rate Notes”) and
7.75% Senior Subordinated Notes due 2014 (the “Subordinated Notes”),
respectively) of the Borrower. [For the avoidance of doubt, this Note is
expressly subordinated to the guarantees issued by the Borrower in respect of
the obligations of the Parent under the Floating Rate Notes and the Subordinated
Notes.]

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  2. Prepayments

This Note may be prepaid, in whole or in part, at any time or from time to time,
at the option of the Borrower, without prepayment penalty.

 

  3. Events of Default

Each of the following events shall constitute an event of default (each, an
“Event of Default”):

(1) The failure of the Borrower to pay the principal amount of this Note upon
demand from Parent;

(2) the entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of the Borrower in an involuntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar law
or (B) a decree or order adjudging the Borrower a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Borrower under any applicable
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Borrower or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive days; and

(3) the commencement by the Borrower of a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of the
Borrower in an involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Borrower or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate action by the
Borrower in furtherance of any such action.

 

  4. Governing Law

This Note shall be construed in accordance with and governed by the laws of the
State of New York.

 

  5. Successors and Assigns

All of the covenants, promises and agreements in this Note shall bind the
Company’s successors and assigns, whether so expressed or not.

 

  6. Headings

The headings of the sections and paragraphs of this Note are inserted for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

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[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name
by a duly authorized officer and to be dated as of the day and year first above
written.

 

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC. By:  

 

  Name:   Title:

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EXHIBIT E

FORM OF LEGAL OPINION

[List of Purchasers]

Ladies and Gentlemen:

In connection with the purchase today by you pursuant to the Note Purchase
Agreement dated as of [July     ], 2008 (the “Agreement”) by and among Angiotech
Pharmaceutical Interventions, Inc., a Delaware corporation (the “Company”),
Angiotech Pharmaceuticals, Inc. (“Angiotech”), a corporation organized under the
laws of British Columbia, Canada, Ares Corporate Opportunities Fund III, L.P.
(“Ares”), a Delaware limited partnership, New Leaf Ventures I, L.P. and New Leaf
Ventures II, L.P. and the other subsidiaries of Angiotech party thereto, of
$                 principal amount of Senior Convertible Notes (the “Senior
Notes”) and $                 principal amount of Subordinated Convertible Notes
(the “Subordinated Notes and, together with the Senior Notes, the “Securities”)
we, as special counsel for the Company and special U.S. counsel for Angiotech,
have examined such corporate records, certificates and other documents, and such
questions of law, as we have considered necessary or appropriate for the
purposes of this opinion. Certain officers’ certificates that we have relied on
for purposes of this opinion are identified in Schedule 1 hereto (the “Officers’
Certificates”). Capitalized terms not otherwise defined herein are defined as
set forth in the Agreement. Upon the basis of such examination, it is our
opinion that:

1. Each of the Company and its Subsidiaries identified on Annex I hereto [for
subsidiaries other than in New York, California and Delaware, local counsel
opinions will be obtained] (the “U.S. Subsidiaries”) has been duly incorporated
or organized and is an existing corporation or organization, as applicable,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, in each case with corporate or company power and
authority to own, lease or operate its respective properties and assets and
conduct its businesses as now being conducted and as proposed to be conducted
(as described in the Officers’ Certificates). Based on certificates from
officials of the respective states concerned, each of the Company and the U.S.
Subsidiaries is duly qualified to do business as a foreign corporation or
organization, as applicable, in good standing in the jurisdictions identified on
Annex II hereto.

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2. The authorized capital stock of the Company consists of                     
shares of non-voting common stock, par value $                     per share
(the “Non-Voting Common Stock”) and                      shares of voting common
stock, par value $                     per share (the “Voting Common Stock”),
par value $                     per share. Prior to the Closing, there were
issued and outstanding                      shares of Voting Common Stock. All
such issued and outstanding shares have been duly authorized and validly issued
and are fully paid and nonassessable. The Company has reserved an aggregate of
                     shares of Common Stock for employee stock issuances,
including pursuant to stock options or stock appreciation rights (“SARs”) of
which, as of the date hereof, no options and SARs in respect of
                     shares are outstanding and                      shares
remain available for future grant. To our knowledge and based on the Officers’
Certificates, except as set forth in the preceding sentence or under the Notes,
there are no other options, warrants, conversion privileges or other rights to
purchase or otherwise acquire any shares of capital stock or other securities of
the Company, or any other agreements, arrangements or understandings to issue
any such securities or rights. All shares of capital stock issued by the Company
have been issued in compliance with the registration and qualification
provisions of all applicable state and federal securities laws.

3. Each of the Company and the U.S. Subsidiaries has all requisite power and
authority to execute, deliver and perform its obligations under each of the
Transaction Documents to which it is a party and to consummate the Transactions.
Each Transaction Document has been duly authorized by the Company and each U.S.
Subsidiary that is a party thereto and constitutes (assuming their due
authorization, execution and delivery by the parties thereto other than the
Company and the U.S. Subsidiaries) a valid and legally binding obligation of
each member of the Parent Group party thereto, enforceable against each such
person in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other Laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles and public policy considerations, and except as the enforcement of
indemnification and/or contribution provisions thereof may be limited by
applicable Law.

4. The issuance and delivery of the shares of Common Stock issuable upon
conversion of the Notes (the “Conversion Shares”) have been duly authorized, and
the Conversion Shares have been duly reserved for issuance upon such conversion
and, when so issued, each of the Conversion Shares will be duly and validly
issued, fully paid and nonassessable. Neither the issuance, sale and delivery of
the Notes, nor the issuance and delivery of the Conversion Shares is subject to
any preemptive rights of shareholders of the Company or, to our knowledge, to
any right of first refusal or other similar right in favor of any person.

5. Other than as previously obtained or made, and other than under the HSR Act
or as referred to in Section 2.1(d) of the Agreement, no notice to, Consent or
Order of any Applicable Governmental Entity is required in connection with the
execution, delivery or performance of the Transaction Documents or the
consummation of the Transactions, including, without limitation, the
Restructuring, the offer, sale, issuance or delivery of the Notes and the
issuance and delivery of the Conversion Shares.

 

2

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6. To our knowledge and based on the Officers’ Certificates, in the period from
July 1, 2007 to the date of this opinion, Parent has filed all reports (the “SEC
Documents”) required to be filed by it under Sections 13(a) and 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of their
respective filing dates, the SEC Documents complied in all material respects as
to form with the requirements of the Exchange Act, and the rules and regulations
of the SEC promulgated thereunder (provided that we express no opinion as to the
financial statements and other financial disclosures included or required to be
included therein). The statements in the Company’s Definitive Proxy Statement,
dated [—], 2008, under the captions [Description of the Securities]1, [The Note
Purchase Agreement], [The Governance Agreement], [The Restructuring] and [The
Registration Rights Agreement], insofar as such statements purport to summarize
certain provisions of the Securities or the Transaction Documents, fairly
summarize such provisions in all material respects.

7. Subject to the accuracy of the factual matters contained in the Investors’
representations in Section 2.2 of the Agreement, and after giving effect to the
notices and other matters referred to in paragraph 5 of this opinion, the offer,
sale and issuance of the Notes and the Conversion Shares in conformity with the
terms of the Transaction Documents constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the “Securities Act”), and from the qualification requirements of the
California Corporate Securities Law of 1968.

8. Neither the execution, delivery and performance of the Transaction Documents,
nor the consummation of the Transactions will conflict with, violate, constitute
a breach of or a default (with the passage of time or otherwise) under, require
the consent of any Person (other than consents already obtained) under, or
result in the imposition of a Lien on any properties of any member of the Parent
Group or an acceleration of Indebtedness pursuant to (i) the organization
documents of the Company or any U.S. Subsidiary, (ii) any agreement identified
on Annex III or (iii) any Applicable Law of the type that based on our
experience is customarily considered to be applicable to transactions of this
nature.

9. To our knowledge and based on the Officers’ Certificates, there is no action,
suit, proceeding or investigation pending, or threatened in writing, against or
affecting Parent or any of its Subsidiaries nor any of their respective
properties that either (i) except for                     , would be required to
be disclosed in the Exchange Act reports of Angiotech and is not so disclosed or
(ii) seeks to restrain, enjoin, prevent the consummation of or otherwise
questions the validity of the Restructuring Documents, any of the Transactions
or any actions taken or to be taken by any member of the Parent Group in
connection therewith.

10. The Company is not an Investment Company within the meaning of the
Investment Company Act of 1940, as amended.

11. [Additional opinions re: Restructuring, Tender Offer and/or Consent
Solicitation to the extent necessary; any such to be in form and substance as
may be mutually agreeable.]

 

 

1

And/or under different captions if different captions are used to describe the
material terms of the Securities or the Transaction Documents.

 

3

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As contemplated by the qualifications set forth in paragraphs (3) and (8) above,
in rendering the foregoing opinion, we are expressing no opinion as to Federal
or state laws relating to fraudulent transfers or antitrust matters.

In connection with our opinion set forth in paragraph (7) above, we have relied
upon the representations, warranties and agreements of the Company and you in
the Agreement as to the absence of general solicitation in connection with the
offering of the Securities and certain other related matters.

The foregoing opinion is limited to the Federal laws of the United States, and
the laws of the States of New York and California and the General Corporation
Law of the State of Delaware, and we are expressing no opinion as to the effect
of the laws of any other jurisdiction.

With respect to all matters of Canadian law, we understand that you have been
provided with and are relying upon the opinions, dated the date hereof, of
Borden Ladner Gervais LLP, British Columbia counsel for the Company and [Stewart
McKelvey Stirling Scales LLP, Nova Scotia counsel for the Company], delivered to
you pursuant to the Agreement.

We have also relied as to certain matters upon information obtained from public
officials, officers of Angiotech and the Company and other sources believed by
us to be responsible, and we have assumed that the Transaction Documents have
been duly authorized, executed and delivered by the other parties thereto other
than the Company and the U.S. Subsidiaries, and that the signatures on all
documents examined by us are genuine, assumptions which we have not
independently verified.

This opinion is furnished by us, as counsel to the Company, to you, as
purchasers of the Securities, solely in your capacity as such, and may not be
relied upon by any other person other than (i) your Permitted Transferees (as
defined in the Governance Agreement) and (ii) any other transferee of the
initial Purchasers that is an institutional Accredited Investor or Qualified
Institutional Buyer (as such terms are defined in Rule 144 and Rule 144A under
the Securities Act). This opinion may not be quoted, referred to or furnished to
any other person and may not be used in furtherance of any other transaction.

Very truly yours,

SULLIVAN & CROMWELL LLP

 

4

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Annex I

[List of all U.S. Subsidiaries of the Company]

Delaware

Afmedica, Inc.

American Medical Instruments Holdings, Inc.

Angiotech Delaware, Inc.

B.G. Sulzle, Inc.

Quill Medical, Inc.

Manan Medical Products, Inc.

Medical Device Technologies, Inc.

NeuColl, Inc.

Surgical Specialties Corporation

New York

Angiotech BioCoatings Corp.

 

5

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Annex II

[All jurisdictions the Company has informed us that the ownership or lease of
property or the conduct of the Transferred Businesses requires such
qualification, except for any failures to obtain or maintain any such
qualifications as would not reasonably be expected to, individually or in the
aggregate, result in a Company Material Adverse Change. This annex will name
each entity concerned and list the states where it is qualified.]

 

6

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Annex III

[A specific list of U.S. law agreements but intended to pick up any material
agreements of a type that would impact the Transactions, with materiality based
on the Officer’s Certificates referred to in Schedule 1, whether or not filed,
including the indentures for the Parent Notes.]

 

7

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Schedule 1

[Identifies Officers’ Certificates relied upon.]

 

8

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EXHIBIT F

EXHIBIT F FORM OF LEGAL OPINION

[LETTERHEAD OF BORDEN LADNER GERVAIS LLP]

                                        
                                                     , 2008

Ares Corporate Opportunities Fund III, L.P.

New Leaf Ventures I, L.P.

New Leaf Ventures II, L.P.

Dear Sirs:

We have acted as Canadian counsel to Angiotech Pharmaceuticals, Inc. (the
“Parent”) in connection with:

 

  (a) the sale of a portion of its existing businesses (the “Transferred
Businesses”) to its subsidiary, Angiotech Pharmaceutical Interventions, Inc.
(the “Company”) pursuant to the Restructuring Documents (as defined below);

 

  (b) the sale by the Company of the Convertible Notes to Ares Corporate
Opportunities Fund III, L.P. and New Leaf Ventures I, L.P. and New Leaf Ventures
II, L.P. pursuant to a note purchase agreement dated July     , 2008 (the “Note
Purchase Agreement”);

 

  (c) the repurchase by the Parent of Senior Notes and Subordinated Notes
pursuant to the Tender Offers.

In this opinion, “BCBCA” means “ the Business Corporations Act (British
Columbia) and “charter” has the meaning ascribed to it in the BCBCA. Capitalized
terms used in this opinion that we do not define have the meanings given to them
in the Note Purchase Agreement.

This opinion is being provided to you pursuant to Section 1.2(c)(2)(C) of the
Note Purchase Agreement.

Scope of Review, Reliances and Assumptions

We have examined executed copies of the following documents:

[List all restructuring documents, once settled]

(collectively, the “Restructuring Documents”)

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We have also examined originals or copies, certified or otherwise identified to
our satisfaction, of the charter of the Parent, certain resolutions of the
Parent’s directors and shareholders relating to the Restructuring Documents and
a certificate of good standing provided by the British Columbia Registrar of
Companies in respect of the Parent. We have relied exclusively upon these
documents without independent investigation for the purpose of providing our
opinions expressed below in paragraphs 1 and 2. We have relied upon these
documents without independent investigation, although not exclusively, for the
purpose of providing our other opinions.

As to certain questions of fact material to such opinion, we have also examined
and relied upon certificates of representatives of the Parent, duplicate copies
of which are attached to this opinion (the “Officers’ Certificates”).

Assumptions

In examining all documents we have assumed that:

 

  (a) all individuals had the requisite legal capacity;

 

  (b) all signatures are genuine;

 

  (c) all documents submitted to us as originals are complete and authentic and
all photostatic, certified, telecopied, electronic, notarial or other copies
conform to the originals;

 

  (d) all facts set forth in the official public records, certificates and
documents supplied by public officials or otherwise conveyed to us by public
officials are complete, true and accurate;

 

  (e) the certificate of incorporation is conclusive evidence that the Parent is
incorporated under the British Columbia Business Corporations Act;

 

  (f) all facts set forth in the certificates supplied by the respective
officers and directors of the Parent including, without limitation, the
Officers’ Certificates are complete, true and accurate;

 

  (g) each of the Restructuring Documents has been duly authorized, executed and
delivered by and are enforceable in accordance with their terms against each
party to it other than the Parent; and

 

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  (h) performance of the obligations of the Parent under the Restructuring
Documents would not be illegal under the law of the place of performance if that
is a place other than British Columbia.

Jurisdiction

The opinions set out below are restricted to the laws of the Provinces of
British Columbia and Ontario (together, the “Provinces”) and the federal laws of
Canada applicable therein which are in effect as of the date hereof and we
assume no obligation to update the opinions to take into account any changes in
such laws after the date hereof. We express no opinion as to any other laws or
matters governed by any other laws.

[NTD: add any additional Canadian jurisdictions in which noteholders reside]

To Our Knowledge

Where used herein, the phrase “to our knowledge” means the current actual
knowledge of those lawyers in our firm who were involved in the preparation of
this opinion and the Restructuring Documents and it is intended to indicate that
during the course of our representation of the Parent, no information has come
to the attention of such lawyers which would give them actual knowledge or
notice that such opinion or any other matter is not accurate. However, we have
not undertaken any special or independent investigation to determine the
existence or absence of such facts or circumstances. No inference as to the
existence or absence of such facts may be drawn merely from the fact of our
representation of the Parent.

We understand that the reliances, limitations and assumptions expressed in the
preceding paragraphs are satisfactory to you.

Opinions

Based on the above, and subject to the qualifications below, we are of the
opinion that:

 

1. the Parent (a) is a corporation incorporated and existing under the laws of
British Columbia, and (b) has the corporate power to carry on the Transferred
Businesses as now being conducted by it and to enter into and perform its
obligations under the Restructuring Documents.

 

2.

The execution and delivery of and performance by the Parent of the Restructuring
Documents to which it is a party and the consummation of

 

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the Transactions has been authorized by all necessary action on the part of the
Parent and its shareholders, including the approval of the Special Resolution by
the shareholders of the Parent.

 

3. The execution and delivery of and performance by the Parent of the
Restructuring Documents does not constitute or result in a violation or breach
of or a default under:

 

  (a) its charter; or

 

  (b) any law, rule or regulation having the force of law in the Provinces or
the federal laws of Canada.

 

4. Except as have already been made or obtained, no authorization, consent or
approval of, or filing, registration, qualification or recording with any
Governmental Entity having jurisdiction in the Provinces is required in
connection with the execution and delivery of, or performance by the Parent of,
the Restructuring Documents in accordance with their terms, except for approvals
required under the Investment Canada Act and the Competition Act (Canada).

 

5. The Restructuring Documents have been duly executed and delivered by the
Parent as a matter of corporate law in compliance with the laws of the Province
of British Columbia and with the provisions of the Parent’s charter.

 

6. The Tender Offers are exempt from the issuer bid rules of the securities laws
of the Provinces.

 

7. All necessary documents have been filed, all requisite proceedings have been
taken and all other legal requirements have been fulfilled by Parent under the
securities laws of the Provinces to enable the Parent to complete the Tender
Offers.

 

8. In any proceeding brought before a court of competent jurisdiction in the
Province of British Columbia (a “Court”) to interpret and enforce the
Restructuring Documents the Court would apply the law of New York, in accordance
with the choice of the law of New York as the governing law of the Restructuring
Documents, to all issues that under the conflict of laws rules of the Province
of British Columbia are to be determined in accordance with the proper law of a
contract, provided that:

 

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  (a) the choice of the law of New York is bona fide and legal and there is no
reason for avoiding the choice of law on the grounds of public policy, as these
criteria are interpreted under conflict of laws rules of the Province of British
Columbia; and

 

  (b) in any such proceeding the Court:

 

  (i) will not take judicial notice of the provisions of the law of New York and
will only apply them to the extent that they are proven to its satisfaction by
expert testimony;

 

  (ii) will apply the laws of the Province of British Columbia (“Provincial
law”) that under Provincial law would be characterized as procedural and will
not apply any law of New York that under Provincial law would be characterized
as procedural;

 

  (iii) will apply Provincial laws that have overriding effect, as interpreted
under Provincial law; and

 

  (iv) will not apply (directly or indirectly) any laws of New York that under
Provincial law would be characterized as a foreign revenue, penal, expropriatory
or other public law.

 

9. The laws of the Province of British Columbia would permit a common law action
to be brought in a Court on a subsisting, final, monetary (or, in appropriate
circumstances, non-monetary), in personam judgment by a court in a civil
proceeding in New York, which was not under appeal and for which the time
limited for appeals had expired, within 10 years of the date of the judgment and
provided the time for enforcing it in New York had not expired if the judgment
was for the payment of money or the return of personal property, and otherwise
within six years of the date of the judgment. Provided that the judgment
creditor proved on a balance of probabilities that:

 

  (a) the New York court had jurisdiction under New York law to deal with the
New York proceeding and to require the judgment debtor to appear before it;

 

  (b) either there was a real and substantial connection between the parties,
the cause of action and New York or the judgment debtor had attorned to the
jurisdiction of the New York court, and

 

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  (c) the New York court had in fact granted the New York judgment in the
judgment creditor’s favour,

the Court would grant judgment enforcing the New York judgment unless the
judgment debtor proved on a balance of probabilities that:

 

  (a) the judgment creditor had committed a fraud on the New York court leading
to the New York court concluding it had jurisdiction under New York law when it
did not;

 

  (b) there were new facts, which the judgment debtor could not previously have
discovered exercising due diligence, suggesting the judgment creditor had
obtained the New York judgment by fraud going to its merits;

 

  (c) the New York court’s procedure was contrary to British Columbian
principles of natural or fundamental justice;

 

  (d) the New York judgment was contrary to British Columbian’s public policy,
that is to its essential concept of justice or its basic morality, for example
because it enforced foreign revenue, tax, expropriatory or penal laws or was
contrary to an order under the Foreign Extraterritorial Measures Act or the
Competition Act; or

 

  (e) there was a manifest error on the face of the New York judgment.

The Court would apply Provincial law with respect to the procedures for the
enforcement of the New York judgment. The Court’s judgment would be in Canadian
dollars, converted from the currency of the New York judgment at the rate of
exchange applicable on a conversion date which would be in the discretion of the
Court, unless the Court considered that the judgment creditor would be most
truly and exactly compensated if all or part of the money payable under the
judgment were measured in the currency of the New York judgment, in which case
the Court would give judgment for the amount of Canadian dollars necessary to
purchase the equivalent amount of the currency of the New York judgment at a
British Columbia chartered bank on the last banking day before the judgment
debtor paid the amount of the judgment to the judgment creditor.

If the New York judgment included an interest component, it would be included in
the principal amount of the British Columbia judgment, with interest accruing on
the total from the date of the British Columbia

 

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judgment at the British Columbia post-judgment interest rate, unless the Court
considered that the judgment creditor would be most truly and exactly
compensated if all or part of the money payable under the judgment were measured
in the currency of the New York judgment, in which case interest would accrue at
New York’s interest rate most closely analogous to the British Columbia prime
lending rate of banks to governments.

 

10. To our knowledge, there is no action, suit, proceeding or investigation
pending, or threatened, against or affecting the Parent, any of its Subsidiaries
nor any of their respective properties that either (i) could cause a Parent
Material Adverse Change or (ii) seeks to restrain, enjoin, prevent the
consummation of or otherwise questions the validity of the Restructuring
Documents, any of the Transactions or any actions taken or to be taken by the
Parent in connection therewith.

 

11. The statements in the Parent’s information circular dated —, 2008 under the
headings “—” [insert any sections describing Canadian law or events governed by
Canadian law (such as shareholder consent)] are accurate in all material
respects.

 

12. [Additional opinions relating to any other documents governed by Canadian
law, in form and substance acceptable to BLG and the addressees].

This opinion is solely for the benefit of the addressees (and any transferees of
the Convertible Notes) and not for the benefit of any other person. It is
rendered solely in connection with the Restructuring Documents. It may not be
quoted, in whole or in part, or otherwise referred to or used for any purpose
without our prior written consent.

 

Yours truly, BORDEN LADNER GERVAIS LLP

 

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EXHIBIT G

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC.

a Delaware Corporation

Angiotech Pharmaceutical Interventions, Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Corporation”), HEREBY
CERTIFIES AS FOLLOWS:

1. The date of the filing of its original Certificate of Incorporation with the
Secretary of State of Delaware was February 5, 2008.

2. This Amended and Restated Certificate of Incorporation has been duly adopted
in accordance with Section 103, 242 and 245 of the General Corporation Law of
the State of Delaware (the “DGCL”). The Corporation has received payment for its
stock.

3. The text of the Certificate of Incorporation of this Corporation, as amended
to the date hereof, is hereby amended and restated in its entirety as follows:

First: The name of the corporation is Angiotech Pharmaceutical Interventions,
Inc. (the “Corporation”).

Second: Its registered office in the State of Delaware is to be located at the
Corporation Services Company, 2711 Centerville Road, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is the
Corporation Services Company.

Third: The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the DGCL.

Fourth:

A. Authorized Shares. The total number of shares of capital stock which the
Corporation shall have the authority to issue is              shares of voting
common stock, par value per share of $0.01 (the “Voting Common Stock”) and
             shares of non-voting common stock, par value per share of $0.01
(the “Non-Voting Common Stock,” together with the Voting Common Stock, the
“Common Stock”). The Corporation shall not have the authority to authorize any
class of preferred stock in the Corporation.

B. Common Stock. Except as set forth below, all shares of Common Stock shall be
identical and shall entitle the holders thereof to the same rights and
privileges. Without limiting the foregoing, the holders of Common Stock shall be
entitled to share equally, on a per share basis, in such dividends or other
distributions (including liquidating distributions) per share, whether in cash,
in kind, in stock (including a stock split) or by any other means, when and as
may be declared by the board of directors of the Corporation (the “Board of
Directors”) out of assets or funds of the Corporation legally available
therefor. Except as otherwise required by law, (a) each holder of Voting Common
Stock shall be entitled to one (1) vote for each share of

 

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Voting Common Stock standing in his, her or its name on the transfer books of
the Corporation in connection with all matters submitted to a vote of
stockholders and (b) holders of Non-Voting Common Stock shall not be entitled to
any voting rights with respect to any matters submitted to a vote of
stockholders.

C. Convertible Notes. Reference is made to the Convertible Notes of the
Corporation (as amended from time to time, the “Convertible Notes”) issued
pursuant to the Note Purchase Agreement by and among the Corporation, Angiotech
Pharmaceuticals, Inc., the subsidiary guarantors party thereto, and the
purchasers of the Convertible Notes. Pursuant to Section 221 of the DGCL, except
as otherwise required by law, each holder of Convertible Notes shall be entitled
to vote on all matters submitted to the stockholders of the Corporation for a
vote, and shall be entitled to that number of votes equal to the number of
shares of Voting Common Stock into which such holder’s then outstanding
Convertible Notes, and all or any portion of accrued and unpaid interest, is
convertible pursuant to the terms thereof on the record date for the
determination of stockholders entitled to vote on such matter or, if no such
record date is established, on the date such vote is taken or any written
consent of stockholders is solicited. Without limiting the foregoing, the
holders of Convertible Notes shall be deemed to be holders of such Voting Common
Stock, and their Convertible Notes shall be deemed to be shares of such Voting
Common Stock, for the purpose of all applicable provisions of the DGCL, this
Certificate, or the bylaws of the Corporation (the “Bylaws”). Except as
expressly otherwise required by law, the holders of Convertible Notes shall vote
together with the holders of shares of the Corporation’s Voting Common Stock as
a single class on all matters and shall be entitled to notice of all
stockholders’ meetings in accordance with the Bylaws and the DGCL.

D. Conversion of Non-Voting Stock to Voting Common Stock.

1. Upon the occurrence of a Qualified Transaction (as defined in the Convertible
Notes), each share of Non-Voting Common Stock then outstanding shall
automatically convert into one share of Voting Common Stock.

2. Following the first date on which no Parent Notes (as defined in the
Convertible Notes) are outstanding, each outstanding share of Non-Voting Common
Stock shall be convertible into one share of Voting Common Stock upon no less
than 61 days notice from the holder thereof to the Corporation requesting such
conversion.

3. Any holder of a share of Non-Voting Common Stock may immediately convert such
share into one share of Voting Common Stock by notice to the Corporation at any
time if such conversion would not cause a change of control under the indentures
relating to the Parent Notes or an “Extraordinary Event” as defined in that
Agreement and Plan of Merger, dated as of May 25, 2006, by and among Angiotech
Pharmaceuticals, Inc., Angiotech Pharmaceuticals (US), Inc., Quaich Acquisition,
Inc. and Quill Medical, Inc.

Fifth:

 

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1. The business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors. The directors need not be elected by ballot
unless the Bylaws shall so require.

2. The number of directors of the Corporation shall be fixed by, or determined
in the manner provided in, the Bylaws.

3. In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to adopt, alter, amend or repeal the
Bylaws. The Bylaws may also be adopted, altered, amended or repealed by the
stockholders of the Corporation.

Sixth:

1. To the fullest extent permitted by the law of the State of Delaware:

(a) The Corporation shall indemnify any person (and such person’s heirs,
executors or administrators) who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(brought in the right of the Corporation or otherwise), whether civil, criminal,
administrative or investigative, and whether formal or informal, including
appeals, by reason of the fact that such person is or was a director of the
Corporation or, while a director of the Corporation, is or was serving at the
request of the Corporation as a director of another corporation, partnership,
joint venture, trust, limited liability company or other enterprise, for and
against all expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person or such
heirs, executors or administrators in connection with such action, suit or
proceeding, including appeals. Notwithstanding the preceding sentence, the
Corporation shall be required to indemnify a person pursuant to this subsection
(a) in connection with any action, suit or proceeding (or part thereof)
commenced by such person only if the commencement of such action, suit or
proceeding (or part thereof) by such person was authorized by the Board of
Directors. The Corporation may indemnify any person (and such person’s heirs,
executors or administrators) who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(brought in the right of the Corporation or otherwise), whether civil, criminal,
administrative or investigative, and whether formal or informal, including
appeals, by reason of the fact that such person is or was an officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as an officer, employee or agent of another corporation,
partnership, joint venture, trust, limited liability company or other
enterprise, for and against all expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person or such heirs, executors or administrators in connection with such
action, suit or proceeding, including appeals.

(b) The Corporation may purchase and maintain insurance on behalf of any person
described in subsection (a) of this Article SIXTH, Section 1 against any
liability asserted against such person, whether or not the Corporation would
have the power to indemnify such person against such liability under the
provisions of this Article SIXTH, Section 1 or otherwise.

 

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(c) The provisions of this Article SIXTH, Section 1 shall be applicable to all
actions, claims, suits or proceedings made or commenced after the adoption
hereof, whether arising from acts or omissions to act occurring before or after
its adoption. The provisions of this Article SIXTH, Section 1 shall be deemed to
be a contract between the Corporation and each director who serves in such
capacity at any time while this Article SIXTH, Section 1 and the relevant
provisions of the laws of the State of Delaware and other applicable law, if
any, are in effect, and any repeal or modification hereof shall not affect any
rights or obligations then existing with respect to any state of facts or any
action, suit or proceeding then or theretofore existing, or any action, suit or
proceeding thereafter brought or threatened based in whole or in part on any
such state of facts. If any provision of this Article SIXTH, Section 1 shall be
found to be invalid or limited in application by reason of any law or
regulation, it shall not affect the validity of the remaining provisions hereof.
The rights of indemnification provided in this Article SIXTH, Section 1 shall
neither be exclusive of, nor be deemed in limitation of, any rights to which a
director, officer, employee or agent may otherwise be entitled or permitted by
contract, this Certificate of Incorporation, vote of stockholders or directors
or otherwise, or as a matter of law, both as to actions in such person’s
official capacity and actions in any other capacity while holding such office,
it being the policy of the Corporation that indemnification of any person whom
the Corporation is obligated to indemnify pursuant to the first sentence of
subsection (a) of this Article SIXTH, Section 1 shall be made to the fullest
extent permitted by law.

(d) For purposes of this Article SIXTH, references to “other enterprises” shall
include employee benefit plans; references to “fines” shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to “serving at the request of the Corporation” shall include any service as a
director of the Corporation that imposes duties on, or involves services by,
such director with respect to an employee benefit plan, its participants or
beneficiaries; and, in the case of directors, references to any “person” shall
include any stockholder (and any affiliate, director, office, employee or agent
of such stockholder) who designates or designated an Investor Director (as
defined in the Governance Agreement, by and among the Corporation, Angiotech
Pharmaceuticals, Inc., and certain stockholders of the Corporation party
thereto, as amended, modified or supplemented).

Seventh: Except as otherwise required by law, any holder of Convertible Notes
(or shares of Common Stock received upon conversion thereof) and any affiliate
of any such holder may engage in or possess an interest in other investments,
business ventures or entities of any nature or description, independently or
with others, similar or dissimilar to, or that compete with, the investments or
business of the Corporation, and may provide advice and other assistance to any
investment, business venture or entity, and the Corporation and the stockholders
shall have no rights by virtue of this Certificate of Incorporation or otherwise
in and to investments, business ventures or entities or the income or profits
derived therefrom, and the pursuit of any investment or venture, even if
competitive with the business of the Corporation, shall not be deemed wrongful
or improper. No holder of Convertible Notes (or shares of Common Stock received
upon conversion thereof) nor any affiliate thereof shall be obligated to present
any particular investment or business opportunity to the Corporation even if
such opportunity is of a character that, if presented to the Corporation, could
be taken by the Corporation, and any holder of Convertible Notes (or shares of
Common Stock received upon conversion thereof) or any affiliate thereof shall
have the right to take for its own account (individually or as a partner or

 

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fiduciary) or to recommend to others any such particular investment opportunity.
Without limiting the foregoing, no Investor Director shall have any liability to
the Corporation or its stockholders in connection with any of the foregoing.

Eighth: Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated by
the Board of Directors or in the Bylaws.

Ninth: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director’s
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is amended hereafter to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the Corporation,
in addition the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the DGCL, as so amended from time to
time. The provisions of this Article NINTH shall not be deemed to limit or
preclude indemnification of a director by the Corporation for any liability of a
director that has not been eliminated by the provisions of this Article. No
amendment to or repeal of this Article NINTH shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.

 

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IN WITNESS HEREOF, this Amended and Restated Certificate of Incorporation has
been executed by the Corporation this [    ] day of [                    ],
2008.

 

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC. By:  

 

  Name:   Title:

 

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EXHIBIT H

AMENDED AND RESTATED BYLAWS

of

ANGIOTECH PHARMACEUTICAL INTERVENTIONS, INC.

(the “Corporation”)

ARTICLE I

Offices

Section 1.1. Registered Office. The registered office of the Corporation shall
be in the City of Wilmington, County of New Castle, State of Delaware.

Section 1.2. Other Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
of the Corporation (the “Board of Directors”) may from time to time determine.

ARTICLE II

Stockholders

Section 2.1. Annual Meetings. An annual meeting of stockholders shall be held
for the election of directors at such date, time and place either within or
without the State of Delaware as may be designated by the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.

Section 2.2. Special Meetings. Special meetings of stockholders may be called at
any time by the Chairman of the Board of Directors, if any, the Vice Chairman of
the Board of Directors, if any, the President or the Board of Directors, to be
held at such date, time and place either within or without the State of Delaware
as may be stated in the notice of the meeting. A special meeting of stockholders
shall be called by the Secretary upon the written request, stating the purpose
of the meeting, of stockholders who together own of record 30% of the
outstanding shares of each class of stock entitled to vote at such meeting.

Section 2.3. Notice of Meetings. Whenever stockholders are required or permitted
to take any action at a meeting, a written notice of the meeting shall be given
which shall state the date, time and place of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by law, the written notice of any meeting shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at such stockholder’s address as it appears on the
records of the Corporation.

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Section 2.4. Adjournments. Any meeting of stockholders, annual or special, may
be adjourned from time to time, to reconvene at the same or some other place,
and notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

Section 2.5. Quorum. At each meeting of stockholders, except where otherwise
provided by law or the certificate of incorporation or these bylaws, the holders
of a [majority] of the outstanding shares of stock entitled to vote on a matter
at the meeting, present in person or represented by proxy, shall constitute a
quorum. In the absence of a quorum of the holders of any class of stock entitled
to vote on a matter, the holders of such class so present or represented may, by
[majority] vote, adjourn the meeting of such class from time to time in the
manner provided by Section 1.4 of these bylaws until a quorum of such class
shall be so present or represented. Shares of its own capital stock belonging on
the record date for the meeting to the Corporation or to another corporation, if
a [majority] of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the Corporation, shall
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.

Section 2.6. Organization. Meetings of stockholders shall be presided over by
the Chairman of the Board of Directors, if any, or in the absence of the
Chairman of the Board of Directors by the Vice Chairman of the Board of
Directors, if any, or in the absence of the Vice Chairman of the Board of
Directors by the President, or in the absence of the President by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary, or in the absence of the Secretary an
Assistant Secretary, shall act as secretary of the meeting, but in the absence
of the Secretary and any Assistant Secretary the chairman of the meeting may
appoint any person to act as secretary of the meeting.

The order of business at each such meeting shall be as determined by the
chairman of the meeting. The chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for the
maintenance of order and safety, limitations on the time allotted to questions
or comments on the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof and the opening
and closing of the voting polls.

Section 2.7. Voting; Proxies. Unless otherwise provided in the certificate of
incorporation or the Governance Agreement, by and among the Corporation,

 

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Angiotech Pharmaceuticals, Inc., and certain stockholders of the Corporation
party thereto (as amended, modified or supplemented, the “Governance
Agreement”), each stockholder entitled to vote at any meeting of stockholders
shall be entitled to one vote for each share of stock held by such stockholder
which has voting power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for such stockholder by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power, regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. A stockholder may revoke any proxy which
is not irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot unless the holders of a majority of
the outstanding shares of all classes of stock entitled to vote thereon present
in person or represented by proxy at such meeting shall so determine. Directors
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. In all other matters, unless otherwise provided by law or by the
certificate of incorporation or these bylaws, the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the meeting and entitled to vote on the subject matter shall be the act of the
stockholders. Where a separate vote by class or classes is required, the
affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes, except as otherwise provided by law or by the
certificate of incorporation or these bylaws.

Section 2.8. Fixing Date for Determination of Stockholders of Record. In order
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more

 

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than ten days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation’s registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.

In order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.

Section 2.9. List of Stockholders Entitled to Vote. The Secretary shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.

Section 2.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the certificate of incorporation or these bylaws, any action
required by law to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the Corporation by delivery to
(a) its registered office in the State of Delaware by hand or by certified mail
or registered

 

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mail, return receipt requested, (b) its principal place of business, or (c) an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Every written consent
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered in the
manner required by this bylaw to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation by
delivery to (a) its registered office in the State of Delaware by hand or by
certified or registered mail, return receipt requested, (b) its principal place
of business, or (c) an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting if the record date for such meeting
had been the date that written consents signed by a sufficient number of
stockholders to take the action were delivered to the Corporation as provided in
this Section 2.10.

Section 2.11. Convertible Notes. Pursuant to Section 221 of the General
Corporation Law of the State of Delaware (the “DGCL”) and to the extent provided
in the certificate of incorporation, the holders of the Convertible Notes of the
Corporation (the “Noteholders”) issued pursuant to the Note Purchase Agreement
among the Corporation, Angiotech Pharmaceuticals, Inc., the subsidiary
guarantors party thereto, and the purchasers of the Convertible Notes shall be
deemed to be stockholders, and their Convertible Notes shall be deemed to be
outstanding shares of stock on an as-converted basis, for the purpose of all
provisions of these bylaws.

ARTICLE III

Board of Directors

Section 3.1. Powers; Number; Qualifications. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law, the Governance Agreement
or in the certificate of incorporation. The Board of Directors shall consist of
seven members. Directors need not be stockholders.

Section 3.2. Election; Term of Office; Resignation; Removal; Vacancies. Each
director shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal. Any director may resign at
any time upon written notice to the Board of Directors or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. Except as required by the
Governance Agreement, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. Unless otherwise provided in the
certificate of incorporation, the Governance Agreement or these bylaws,
vacancies

 

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and newly created directorships resulting from any increase in the authorized
number of directors elected by all of the stockholders having the right to vote
as a single class or from any other cause may be filled by a majority of the
directors then in office, although less than a quorum, or by the sole remaining
director. Any director elected or appointed to fill a vacancy shall hold office
until the next annual meeting of the stockholders and his or her successor is
elected and qualified or until his or her earlier resignation or removal.

Section 3.3. Regular Meetings. Regular meetings of the Board of Directors may be
held at such places within or without the State of Delaware and at such times as
the Board of Directors may from time to time determine, and if so determined
notice thereof need not be given.

Section 3.4. Special Meetings. Special meetings of the Board of Directors may be
held at any time or place within or without the State of Delaware whenever
called by the Chairman of the Board of Directors, if any, by the Vice Chairman
of the Board of Directors, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.

Section 3.5. Participation in Meetings by Conference Telephone Permitted. Unless
otherwise restricted by the certificate of incorporation or these bylaws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or of such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
bylaw shall constitute presence in person at such meeting.

Section 3.6. Quorum; Vote Required for Action. At all meetings of the Board of
Directors, five members of the entire Board of Directors, including at least two
Investor Directors (as defined in the Governance Agreement) so long as the
Investors (as defined in the Governance Agreement) are entitled to designate two
directors under the Governance Agreement (and one Investor Director so long as
the Investors are entitled to designate one but less than two directors under
the Governance Agreement), shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors unless the
certificate of incorporation or these bylaws shall require a vote of a greater
number. In case at any meeting of the Board of Directors a quorum shall not be
present, the members of the Board of Directors present may adjourn the meeting
from time to time until a quorum shall be present.

Section 3.7. Organization. Meetings of the Board of Directors shall be presided
over by the Chairman of the Board of Directors, if any, or in the absence of the
Chairman of the Board of Directors by the Vice Chairman of the Board of
Directors, if any, or in the absence of the Vice Chairman of the Board of
Directors by the President, or in the absence of the foregoing persons by a
chairman chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, shall act as secretary

 

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of the meeting, but in the absence of the Secretary and any Assistant Secretary
the chairman of the meeting may appoint any person to act as secretary of the
meeting.

Section 3.8. Action by Directors Without a Meeting. Unless otherwise restricted
by the certificate of incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or of such committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.

Section 3.9. Compensation of Directors. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall have
the authority to fix the compensation of directors.

ARTICLE IV

Committees

Section 4.1. Committees. Unless otherwise required by the Governance Agreement,
the Board of Directors may designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Unless otherwise required by the Governance Agreement, in the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the committee to act at the meeting in the place of any such absent or
disqualified member. Unless otherwise required by the Governance Agreement, any
such committee, to the extent provided in the resolution of the Board of
Directors or in these bylaws, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to the following matters: (a) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by law to be submitted to stockholders for approval, (b) adopting,
amending or repealing these bylaws or (c) removing or indemnifying directors.

Section 4.2. Committee Rules. Unless the Board of Directors otherwise provides,
each committee designated by the Board of Directors may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in

 

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other respects each committee shall conduct its business in the same manner as
the Board of Directors conducts its business pursuant to Article III of these
bylaws.

ARTICLE V

Officers

Section 5.1. Officers; Election. As soon as practicable after the annual meeting
of stockholders in each year, the Board of Directors shall elect a President and
a Secretary, and it may, if it so determines, elect from among its members a
Chairman of the Board and a Vice Chairman of the Board. The Board of Directors
may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board of Directors may deem
desirable or appropriate and may give any of them such further designations or
alternate titles as it considers desirable. Any number of offices may be held by
the same person unless the certificate of incorporation or these bylaws
otherwise provide.

Section 5.2. Term of Office; Resignation; Removal; Vacancies. Unless otherwise
provided in the resolution of the Board of Directors electing any officer, each
officer shall hold office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. Any officer may resign at any
time upon written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board of Directors may
remove any officer with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled by the Board of Directors
at any regular or special meeting.

Section 5.3. Powers and Duties. The officers of the Corporation shall have such
powers and duties in the management of the Corporation as shall be stated in
these bylaws or in a resolution of the Board of Directors which is not
inconsistent with these bylaws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the Board of
Directors. The Secretary shall have the duty to record the proceedings of the
meetings of the stockholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board of Directors may require any
officer, agent or employee to give security for the faithful performance of his
or her duties.

 

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ARTICLE VI

Stock

Section 6.1. Certificates. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation, representing the
number of shares of stock in the Corporation owned by such holder. If such
certificate is manually signed by one officer or manually countersigned by a
transfer agent or by a registrar, any other signature on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.

Except as otherwise expressly provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.

Section 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner’s legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.

ARTICLE VII

Indemnification

Section 7.1. Power to Indemnify Directors. In the event a person was, is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director of
the Corporation, or is or was a director of the Corporation serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, the
Corporation shall indemnify such person to the fullest extent permitted by law
against any and all expenses (including attorney’s fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order,

 

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settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person’s conduct was unlawful.

Section 7.2. Procedure for Indemnification of Directors. Any indemnification of
a director of the Corporation under Section 7.1 of this Article VII or advance
of expenses under Section 7.3 of this Article VII shall be made promptly, and in
any event within 30 days, upon the written request of the director. If a
determination by the Corporation that the director is entitled to
indemnification pursuant to this Article VII is required, and the Corporation
fails to respond within 60 days to a written request for indemnity, the
Corporation shall be deemed to have approved the request. If the Corporation
denies a written request for indemnification or advancing of expenses, in whole
or in part, or if payment in full pursuant to such request is not made within 30
days, the right to indemnification or advances as granted by this Article VII
shall be enforceable by the director in any court of competent jurisdiction.
Such person’s costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the DGCL for the Corporation to indemnify the claimant for the amount claimed,
but the burden of such defense shall be on the Corporation. Neither the failure
of the Corporation (including its board of directors, independent legal counsel
or its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

Section 7.3. Expenses Payable in Advance. Expenses (including attorneys’ fees)
incurred by a director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall, to the extent permitted by law,
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article VII. Such expenses (including attorneys’ fees) incurred by former
directors may be so paid upon such terms and conditions, if any, as the
Corporation deems appropriate.

Section 7.4. Nonexclusivity of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VII shall not be deemed exclusive of any other rights to which

 

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those seeking indemnification or advancement of expenses may be entitled under
the certificate of incorporation, these bylaws, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in such person’s
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Section 7.1 of this Article VII shall be made to the
fullest extent permitted by law. The provisions of this Article VII shall not be
deemed to preclude the indemnification of any person who is not specified in
Section 7.1 of this Article VII but whom the Corporation has the power or
obligation to indemnify under the provisions of the DGCL, or otherwise.

Section 7.5. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation, or
is or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person’s status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against such
liability under the provisions of this Article VII.

Section 7.6. Certain Definitions. For purposes of this Article VII, references
to “the Corporation” shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors, so
that any person who is or was a director of such constituent corporation, or is
or was a director of such constituent corporation serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VII with respect to
the resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. The term
“another enterprise” as used in this Article VII shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which such director is or was serving at the request of the
Corporation as a director, officer, employee or agent. For purposes of this
Article VII, references to “fines” shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to “serving at
the request of the Corporation” shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner “not oppossed to the best interests of the Corporation” as referred to in
this Article VII. In the case of directors, for purposes of this Article VII,
references to any “person” shall include any stockholder who designates or
designated a director pursuant to Section 4.05 of the Governance Agreement.

 

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Section 7.7. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director and shall inure to the
benefit of the heirs, executors and administrators of such a person.

Section 7.8. Indemnification of Officers, Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
officers, employees and agents of the Corporation similar to those conferred in
this Article VII to directors of the Corporation.

Section 7.9. Contract Rights. The provisions of this Article VII shall be deemed
to be a contract right between the Corporation and each director who serves in
any such capacity at any time while this Article VIII and the relevant
provisions of the DGCL or other applicable law are in effect, and any repeal or
modification of this Article VIII or any such law shall not affect any rights or
obligations then existing with respect to any state of facts or proceeding then
existing.

ARTICLE VIII

Miscellaneous

Section 8.1. Fiscal Year. The fiscal year of the Corporation shall be determined
by the Board of Directors.

Section 8.2. Seal. The Corporation may have a corporate seal which shall have
the name of the Corporation inscribed thereon and shall be in such form as may
be approved from time to time by the Board of Directors. The corporate seal may
be used by causing it or a facsimile thereof to be impressed or affixed or in
any other manner reproduced.

Section 8.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these bylaws.

Section 8.4. Interested Directors; Quorum. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in

 

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which one or more of its directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or her or their votes are counted
for such purpose, if: (a) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (b) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (c) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.

Section 8.5. Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account and
minute books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.

Section 8.6. Amendment of Bylaws. These bylaws may be amended or repealed, and
new bylaws adopted, by the Board of Directors, but the stockholders entitled to
vote may adopt additional bylaws and may amend or repeal any bylaw whether or
not adopted by them.

Section 8.7. Governance Agreement. To the extent there is a conflict between
these bylaws and the Governance Agreement, the Governance Agreement shall
control.

 

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Exhibit I

FORM OF INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of             , 2008
between Angiotech Pharmaceutical Interventions, Inc., a Delaware corporation
(the “Company”) and                      (this person and each Related Person,
defined collectively as “Indemnitee”) .

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve as
directors or in other capacities unless they are provided with adequate
protection through insurance and/or adequate indemnification against inordinate
risks of claims and actions against them arising out of their service to and
activities on behalf of the corporation;

WHEREAS, the Company has determined that the increased difficulty in attracting
and retaining such persons is detrimental to the best interests of the Company
and that the Company should act to assure such persons that there will be
increased certainty of such protection in the future;

WHEREAS, the General Corporation Law of the State of Delaware, as amended (the
“DGCL”), expressly provides that the indemnification provisions set forth
therein are not exclusive, and thereby contemplates that contracts may be
entered into between a corporation and members of its board of directors,
officers and others with respect to indemnification;

WHEREAS, it is reasonable, prudent and necessary for the Company to
contractually obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from the concern that they will
not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and
Charter of the Company and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefore, nor to diminish or abrogate any rights of
Indemnitee thereunder; and

WHEREAS, Indemnitee may not be willing to serve as a director without the
additional protection provided for under this Agreement, and the Company desires
Indemnitee to serve in such capacity and Indemnitee is willing to serve and
continue to serve on the condition that Indemnitee and each Related Person (as
defined below) be so indemnified.

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a
director from and after the date hereof, the Company and Indemnitee do hereby
agree as follows:

1. DEFINITIONS. As used in this Agreement:

(a) “Action” means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, investigation, inquiry,
administrative hearing or any other actual, threatened or completed proceeding,
whether brought in the right of the Company or otherwise, and whether of a
civil, criminal, administrative or investigative nature.

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(b) “Affiliate” means as to specified Person, each Person directly or indirectly
controlling or controlled by or under common control with such specified Person.

(c) “Board” means the Board of Directors of the Company.

(d) “Bylaws” means the bylaws of the Company, as amended.

(e) A “Change in Control” shall be deemed to occur upon the earliest to occur
after the date of this Agreement of any of the following events:

(i) Change in Board of Directors. During any period of two consecutive years
(starting after the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a Person who has entered into an agreement with the
Company to effect a transaction described in Sections 1(e)(ii) or 1(e)(iii))
whose election by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least 2/3 of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board.

(ii) Corporate Transactions. The effective date of a merger or consolidation of
the Company with any other entity unless the voting securities of the Company
outstanding immediately prior to such transaction continue to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 51% of the combined voting power of the voting
securities of the surviving entity outstanding immediately after such
transaction that have the power to elect at least a majority of the board of
directors or other governing body of such surviving entity.

(iii) Liquidation. The approval by the stockholders of the Company of a complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets.

(iv) Other Events. There occurs any other event of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or a response to any similar item on any similar schedule or form)
promulgated under the Exchange Act, whether or not the Company is then subject
to such reporting requirement.

(f) “Charter” the Amended and Restated Certificate of Incorporation of the
Company, as amended.

(g) “Corporate Status” describes a Person who is or was serving as a director,
officer, employee or agent of the Company or, at the request of the Company, as
a director, officer, employee or agent of any other Person. References to
“serving at the request of the Company” shall include, without limitation, any
service as a director, officer, employee or agent of the Company that imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or beneficiaries.

 

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(h) “Disinterested Director” means a director of the Company who is not, and was
not, a party to (or a Related Person of a party to) the Proceeding in respect of
which indemnification is sought by an Indemnitee.

(i) “Enterprise” means the Company and any other corporation, limited liability
company, partnership, joint venture, association, Governmental Entity, trust,
employee benefit plan or other enterprise.

(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

(k) “Expenses” means all costs, disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness in, or
otherwise participating in a Proceeding, including (without limitation)
attorneys’ fees and expenses, retainers, court costs, transcript costs, fees of
experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, and delivery service fees, other
out-of-pocket costs, and reasonable compensation for time spent by the
Indemnitee for which such Indemnitee is not otherwise compensated by the
Company. Expenses also include disbursements and expenses incurred in connection
with any appeal resulting from any Proceeding, including without limitation, the
premium, security for, and other costs relating to any cost bond, supersedeas
bond, or other appeal bond or its equivalent.

(l) “Governmental Entity” means any court, administrative agency or commission
or other governmental authority or instrumentality, whether federal, state,
local or foreign, or any applicable self-regulatory organization.

(m) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither is, nor in the past five
years has been, retained to represent: (i) the Company or the Indemnitee in any
matter material to either such party (other than with respect to matters
concerning such Indemnitee under this Agreement, or of other indemnitees under
similar indemnification agreements), or (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder. “Independent Counsel”
shall not include any Person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or such Indemnitee in an action to determine such
Indemnitee’s rights under this Agreement. The Company agrees to pay the
reasonable fees and expenses of the Independent Counsel and to fully indemnify
such counsel against any and all Expenses, claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.

(n) “Person” means any individual or Enterprise.

(o) “Proceeding” means any Action in which any Indemnitee was, is or will be
involved (as a party or otherwise) directly or indirectly by reason of (i)
Indemnitee’s Corporate Status, (ii) any action alleged to be taken by him or
omitted or of any action alleged on his part while acting in his Corporate
Status, or (iii) establishing or enforcing a right to indemnification under this
Agreement or Section 145 of the DGCL or otherwise, in each case

 

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whether or not serving in such capacity at the time any liability or Expense is
incurred for which indemnification, reimbursement, or advancement of Expenses
can be provided under this Agreement.

(p) “Related Person” means, with respect to any Person (i) any Affiliate of such
Person, (ii) any investment fund, investment account or investment Person whose
investment manager, investment advisor or general partner, is such Person or any
Affiliate of such Person or any member, partner, officer or employee of such
Person or any Affiliate of such Person, (iii) any member or partner of any
Person specified in clause (i) or (ii) above, and (iv) any officer, director or
employee of any Person specified in clause (i), (ii) or (iii) above.

(q) For purposes of this Agreement:

(i) references to “fines” shall include any excise tax assesed with respect to
any employee benefit plan.

(ii) a Person who acted in good faith and in a manner he reasonably believed to
be in the best interests of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in manner “not opposed to the best
interests of the Company.”

(iii) references “to the fullest extent permitted by applicable law” shall
include, but not be limited to:

(A) to the fullest extent permitted by the provision of the DGCL that authorizes
or contemplates additional indemnification by agreement, or the corresponding
provision of any amendment to or replacement of the DGCL; and

(B) to the fullest extent authorized or permitted by any amendments to or
replacements of the DGCL adopted after the date of this Agreement that increase
the extent to which a corporation may indemnify its directors.

2. SERVICES TO THE COMPANY. Indemnitee will serve, or continue to serve in
accordance with the Charter and the Bylaws, as a director of the Company for so
long as Indemnitee is duly elected or appointed or until Indemnitee tenders his
resignation.

3. THIRD-PARTY PROCEEDINGS. If an Indemnitee is, or is threatened to be made, a
party to or a participant in any Proceeding, other than a Proceeding by or in
the right of the Company to procure a judgment in its favor against such
Indemnitee, the Company shall indemnify such Indemnitee to the fullest extent
permitted by applicable law against all Expenses, judgments, fines and amounts
paid in settlement directly or indirectly incurred by or behalf of such
Indemnitee in connection with such Proceeding or any claim, issue or matter
therein, if Indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and, in
the case of a criminal proceeding, had no reasonable cause to believe that his
conduct was unlawful.

 

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4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. If an Indemnitee is, or is
threatened to be made, a party to or a participant in any Proceeding by or in
the right of the Company to procure a judgment in its favor, the Company shall
indemnify such Indemnitee to the fullest extent permitted by applicable law
against all Expenses directly or indirectly incurred by or on behalf of such
Indemnitee in connection with such Proceeding or any claim, issue or matter
therein, if Indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company. No
indemnification for Expenses shall be made under this Section 4 in respect of
any claim, issue or matter as to which such Indemnitee shall have been finally
adjudged by a court to be liable to the Company unless the Chancery Court of the
State of Delaware or any court in which the Proceeding was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such Indemnitee is fairly and
reasonably entitled to indemnification.

5. PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL.

(a) Notwithstanding any other provisions of this Agreement, to the fullest
extent permitted by applicable law:

(i) To the extent that an Indemnitee is a party to (or a participant in) and is
successful, on the merits or otherwise, in any Proceeding or in defense of any
claim, issue or matter therein, in whole or in part, the Company shall indemnify
such Indemnitee against all Expenses directly or indirectly incurred by or on
behalf of such Indemnitee in connection therewith.

(ii) If an Indemnitee is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify such Indemnitee against all Expenses directly or indirectly
incurred by or on behalf of such Indemnitee in connection with (x) each
successfully resolved claim, issue or matter and (y) each claim, issue, or
matter related to any claim, issue or matter on which such Indemnitee was
successful.

(b) For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.

6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other
provision of this Agreement, to the fullest extent permitted by applicable law,
the Company shall indemnify each Indemnitee against all Expenses directly or
indirectly incurred by or on behalf of such Indemnitee if, by reason of the
Corporate Status of Indemnitee, such Indemnitee is a witness in any Action to
which such Indemnitee is not a party.

7. ADDITIONAL INDEMNIFICATION. Notwithstanding any limitation in Sections 3, 4,
5 or 6, the Company shall indemnify any Indemnitee to the fullest extent
permitted by applicable law if such Indemnitee is a party to or threatened to be
made a party to any Proceeding (including a Proceeding by or in the right of the
Company to procure a judgment in its favor) against all Expenses, judgments,
fines and amounts paid in settlement in connection

 

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with the Proceeding; provided, that the Company shall have the right to consent
to any settlement, which consent shall not be unreasonably withheld.

8. EXCLUSIONS. The Company shall not be obligated under this Agreement to make
any indemnity in connection with any claim made against any Indemnitee:

(a) for an accounting of profits made from the purchase and sale (or sale and
purchase) by such Indemnitee of securities of the Company within the meaning of
Section 16(b) of the Exchange Act, or similar provisions of other federal or
state statutory law or common law; or

(b) in connection with any Proceeding (or any part of any Proceeding) initiated
by such Indemnitee, unless (i) such indemnification is expressly required to be
made by applicable law; or (ii) a majority of the Disinterested Directors
authorized the Proceeding (or any part of any Proceeding) prior to its
initiation.

9. ADVANCES OF EXPENSES. Notwithstanding any provision of this Agreement, to the
fullest extent permitted by applicable law, the Company shall advance the
Expenses incurred by or on behalf of each Indemnitee in connection with any
Proceeding within 10 days after the receipt by the Company of a statement or
statements requesting such advances from time to time, whether prior to or after
final disposition of any Proceeding. Advances shall be unsecured and interest
free, and made without regard to the ability of such Indemnitee to repay the
expenses or ultimate entitlement to indemnification under the other provisions
of this Agreement. Advances shall include all reasonable Expenses incurred
pursuing an Action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. Such Indemnitee shall qualify for advances solely upon the
execution and delivery to the Company of an undertaking to repay the advance to
the extent that it is ultimately determined that such Indemnitee is not entitled
to be indemnified by the Company. This Section 9 shall not apply to any claim
made by any Indemnitee for which indemnity is excluded pursuant to Section 8.

10. PROCEDURE FOR NOTIFICATION AND DEFENSE OF CLAIM.

(a) Within 30 days after an Indemnitee is served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder, such Indemnitee shall submit to the Company a
written request, including such documentation and information as is reasonably
available to such Indemnitee and is reasonably necessary to determine whether
and to what extent such Indemnitee is entitled to indemnification. The failure
to notify the Company within such period will not relieve the Company from any
liability that it may have to such Indemnitee (i) under this Agreement except to
the extent the failure adversely affects the Company’s rights, legal position,
ability to defend or ability to obtain insurance coverage with respect to such
Proceeding or (ii) otherwise than under this Agreement. The Secretary of the
Company shall advise the Board in writing promptly upon receipt of such a
request for indemnification.

 

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(b) If the Company shall be obligated to pay the Expenses in connection with any
Proceeding against an Indemnitee, the Company shall be entitled to assume and
control the defense of such Proceeding (with counsel consented to by such
Indemnitee, which consent shall not be unreasonably withheld), upon the delivery
to such Indemnitee of written notice of its election so to do. After delivery of
such notice, consent to such counsel by such Indemnitee and the retention of
such counsel by the Company, the Company will not be liable to such Indemnitee
under this Agreement for any fees of separate counsel subsequently incurred by
such Indemnitee with respect to the same Proceeding, provided that the
reasonable fees and expenses of such Indemnitee’s counsel shall be at the
expense of the Company if:

(i) the employment of separate counsel by such Indemnitee has been previously
authorized by the Company;

(ii) such Indemnitee or counsel selected by the Company shall have concluded
that there may be a conflict of interest between the Company and such Indemnitee
or among another indemnified Person jointly represented in the conduct of any
such defense; or

(iii) the Company shall not, in fact, have employed counsel, to which such
Indemnitee has consented as aforesaid, to assume the defense of such Proceeding.

(c) The Company may participate in the Proceeding at its own expense. The
Company will not, without prior written consent of an Indemnitee, effect any
settlement of a claim in any threatened or pending Proceeding unless such
settlement solely involves the payment of money and includes an unconditional
release of such Indemnitee from all liability on any claims that are or were
threatened to be made against such Indemnitee in the Proceeding.

11. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.

(a) Upon written request by an Indemnitee for indemnification pursuant to the
first sentence of Section 10(a), a determination, if required by applicable law,
with respect to Indemnitee’s entitlement thereto shall be made in the specific
case:

(i) if a Change in Control has occurred, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to such Indemnitee; or

(ii) if a Change in Control has not occurred,

(A) by a majority vote of the Disinterested Directors, even though less than a
quorum of the Board,

(B) by a committee of Disinterested Directors designated by a majority vote of
the Disinterested Directors, even though less than a quorum of the Board,

(C) if there are no such Disinterested Directors or, if such Disinterested
Directors so direct, by Independent Counsel in a written opinion to the Board, a
copy of which shall be delivered to such Indemnitee, or

 

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(D) if so directed by the Board, by the stockholders of the Company.

If it is so determined that an Indemnitee is entitled to indemnification,
payment to such Indemnitee shall be made within 10 days after such
determination.

Each Indemnitee shall cooperate with the Person or Persons making such
determination with respect to such Indemnitee’s entitlement to indemnification,
including providing to such Person or Persons upon reasonable advance request
any documentation or information that is not privileged or otherwise protected
from disclosure and reasonably available to such Indemnitee and reasonably
necessary to such determination. Any Expenses incurred by such Indemnitee in so
cooperating with the Person or Persons making such determination shall be borne
by the Company (irrespective of the determination as to such Indemnitee’s
entitlement to indemnification) and the Company hereby indemnifies and agrees to
hold such Indemnitee harmless therefrom.

(b) If the determination of entitlement to indemnification is to be made by
Independent Counsel, the Independent Counsel shall be selected as follows:

(i) If a Change in Control shall not have occurred, the Independent Counsel
shall be selected by the Board, and the Company shall give written notice to the
Indemnitee advising him of the identity of the Independent Counsel so selected.

(ii) If a Change in Control shall have occurred, the Independent Counsel shall
be selected by the Indemnitee (unless he shall request that such selection be
made by the Board, in which event the preceding sentence shall apply), and such
Indemnitee shall give written notice to the Company advising it of the identity
of the Independent Counsel so selected.

In either event, the Indemnitee or the Company, as the case may be, may, within
10 days after such written notice of selection shall have been given, deliver to
the Company or to such Indemnitee, as the case may be, a written objection to
such selection; provided, that such objection may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirements of
“Independent Counsel” as defined in Section 2 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the Person so selected shall
act as Independent Counsel. If such written objection is so made and
substantiated, the Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a court has determined
that such objection is without merit. If, within 20 days after submission by
such Indemnitee of a written request for indemnification pursuant to
Section 10(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or such Indemnitee may petition a court of
competent jurisdiction for resolution of any objection which shall have been
made by the Company or such Indemnitee to the other’s selection of Independent
Counsel and/or for the appointment as Independent Counsel of a Person selected
by the Court or by such other Person as the Court shall designate, and the
Person with respect to whom all objections are so resolved or the Person so
appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the
due commencement of any judicial proceeding or arbitration pursuant to
Section 13(a) of this Agreement, Independent Counsel shall be discharged and
relieved of any further

 

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responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).

12. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.

(a) In making a determination with respect to entitlement to indemnification
hereunder, the Person or Persons making such determination shall presume that an
Indemnitee is entitled to indemnification under this Agreement if such
Indemnitee has submitted a request for indemnification in accordance with
Section 10(a) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption by clear and convincing evidence in connection with
the making by any Person or Persons of any determination contrary to that
presumption.

(b) Neither the failure of the Company (including by its Board or one of its
committees, its stockholders or independent legal counsel) to have made a
determination prior to the commencement of any action pursuant to this Agreement
that indemnification is proper in the circumstances because Indemnitee has met
the applicable standard of conduct, nor an actual determination by the Company
(including by its directors or independent legal counsel) that Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that Indemnitee has not met the applicable standard of
conduct.

(c) If the Person or Persons empowered or selected to determine whether an
Indemnitee is entitled to indemnification shall not have made a determination
within 60 days after receipt by the Company of the request therefor, the
requisite determination of entitlement to indemnification shall be deemed to
have been made and such Indemnitee shall be entitled to such indemnification,
absent a prohibition of such indemnification under applicable law; provided,
that

(i) such 60-day period may be extended for a reasonable time, not to exceed an
additional 30 days, if the Person or Persons making the determination with
respect to entitlement to indemnification in good faith requires such additional
time for the obtaining or evaluating of documentation and/or information
relating thereto; and

(ii) the provisions of this Section 12(c) shall not apply (1) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 11(a) of this Agreement and if (A) within 15
days after receipt by the Company of the request for such determination the
Board has resolved to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within 75 days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat, or (2) if
the determination of entitlement to indemnification is made by Independent
Counsel pursuant to Section 11(a) of this Agreement.

(d) The termination of a Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not of itself adversely affect the right of any Indemnitee
to indemnification or create a

 

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presumption that Indemnitee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal Proceeding, that Indemnitee had reasonable
cause to believe that his conduct was unlawful.

(e) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s
action is based on the records or books of account of the Enterprise, including
financial statements, or on information supplied to Indemnitee by the officers
of the Enterprise in the course of their duties, or on the advice of legal
counsel for the Enterprise or on information or records given or reports made to
the Enterprise by an independent certified public accountant or by an appraiser
or other expert selected with the reasonable care by the Enterprise. The
provisions of this Section 12(e) shall not be deemed to be exclusive or to limit
in any way the other circumstances in which Indemnitee may be deemed to have met
the applicable standard of conduct set forth in this Agreement.

(f) The knowledge and/or actions, or failure to act, of any director, officer,
agent or employee of any Person shall not be imputed to any Indemnitee for
purposes of determining the right to indemnification under this Agreement.

13. REMEDIES OF INDEMNITEE.

(a) If:

(i) a determination is made pursuant to Section 11 of this Agreement that an
Indemnitee is not entitled to indemnification under this Agreement,

(ii) advancement of Expenses is not timely made pursuant to Section 9 of this
Agreement,

(iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 11(a) of this Agreement within 45 days after receipt by the
Company of the request for indemnification,

(iv) payment of indemnification is not made pursuant to Section 5 or 6 or the
last sentence of Section 11(a) of this Agreement within 10 days after receipt by
the Company of a written request therefor, or

(v) payment of indemnification pursuant to Section 3, 4 or 7 of this Agreement
is not made within 10 days after a determination has been made that an
Indemnitee is entitled to indemnification,

then an Indemnitee shall be entitled to an adjudication by a court of such
Indemnitee’s entitlement to such indemnification or advancement of Expenses.
Alternatively, an Indemnitee, at such Indemnitee’s option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The Company shall not
oppose such Indemnitee’s right to seek any such adjudication or award in
arbitration.

 

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(b) If a determination shall have been made pursuant to Section 11(a) of this
Agreement that an Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Section 13 shall be
conducted in all respects as a de novo trial, or arbitration, on the merits and
such Indemnitee shall not be prejudiced by reason of that adverse determination.
In any judicial proceeding or arbitration commenced pursuant to this Section 13,
the Company shall have the burden of proving such Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 11(a) of this
Agreement that an Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 13, absent a prohibition of such
indemnification under applicable law.

(d) The Company shall be precluded from asserting in any judicial proceeding or
arbitration commenced pursuant to this Section 13 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court or before any such arbitrator that the Company is
bound by all the provisions of this Agreement. The Company shall indemnify any
Indemnitee against any and all Expenses and, if requested by an Indemnitee,
shall (within 10 days after receipt by the Company of a written request
therefor) advance, to the extent not prohibited by applicable law, such Expenses
to such Indemnitee, which are incurred by such Indemnitee in connection with any
Action brought by such Indemnitee for indemnification or advance of Expenses
from the Company under this Agreement or under any directors’ and officers’
liability insurance policies maintained by the Company, regardless of whether
such Indemnitee ultimately is determined to be entitled to such indemnification,
advancement of Expenses or insurance recovery.

(e) Notwithstanding anything in this Agreement to the contrary, no determination
as to entitlement to indemnification under this Agreement shall be required to
be made prior to the final disposition of the Proceeding.

14. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; SUBROGATION.

(a) The rights provided by this Agreement shall not be deemed exclusive of any
other rights to which an Indemnitee may at any time be entitled under applicable
law, the Charter, the Bylaws, any agreement, a vote of stockholders or a
resolution of directors, or otherwise. No amendment, alteration or repeal of
this Agreement or of any provision hereof shall limit or restrict any right of
an Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee prior to such amendment, alteration or repeal. To the extent
that a change in Delaware law, whether by statute or judicial decision, permits
greater indemnification or advancement of Expenses than would be afforded
currently under the Charter, the Bylaws and this Agreement, it is the intent of
the parties hereto that each Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change. No right or remedy herein conferred
is intended to be exclusive of any other right or remedy, and every other right
and remedy shall be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other right or
remedy.

 

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(b) To the extent that the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, or agents of
the Company or of any other Person that Indemnitee serves at the request of the
Company, Indemnitee shall be an insured under such policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies. The Company agrees to promptly notify Indemnitee of any material
change in any such policy. The Company may, but will not be required to, create
a trust fund, grant a security interest or use other means, including, without
limitation, a letter of credit, to ensure the payment of such amounts as may be
necessary to satisfy the obligations to indemnify and advance Expenses pursuant
to this Agreement. If, at the time of the receipt of a notice of a claim
pursuant to the terms hereof, the Company has director and officer liability
insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the respective policies. The Company and Indemnitee shall mutually cooperate and
take all reasonable actions to cause such insurers to pay on behalf of the
insureds, all amounts payable as a result of such proceeding in accordance with
the terms of all applicable policies.

(c) The Company shall be subrogated to the extent of any payment under this
Agreement to all of the rights of recovery of Indemnitee, who shall execute all
papers required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Company to bring suit
to enforce such rights. The Corporation shall pay or reimburse all Expenses
actually and reasonably incurred by any Indemnitee in connection with such
subrogation.

(d) The Company shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable (or for which advancement is provided hereunder)
hereunder if and to the extent that the Indemnitee has otherwise actually
received such payment under any insurance policy, the Charter, the Bylaws,
contract, agreement or otherwise.

(e) The Company’s obligation to indemnify or advance Expenses hereunder to
Indemnitee who is or was serving at the request of the Company as a director,
officer, employee or agent of any Person shall be reduced by any amount
Indemnitee has actually received as indemnification or advancement of expenses
from such other Person.

15. DURATION OF AGREEMENT, SUCCESSORS AND ASSIGNS. This Agreement shall continue
until and terminate upon the later of: (a) ten years after Indemnitee has ceased
to occupy any positions or have any relationships described in Section 2 of this
Agreement; and (b) the final termination of all Proceedings pending or
threatened during such period to which any Indemnitee may be subject. This
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of and be enforceable by each Indemnitee and his
personal and legal representatives, heirs, executors, administrators,
distributees, legatees and other successors.

16. SECURITY. To the extent requested by an Indemnitee and approved by the Board
of Directors of the Company, the Company may at any time and from time to time
provide security to such Indemnitee for the Company’s obligations hereunder
through an irrevocable bank line of credit, funded trust or other collateral.
Any such security, once provided to an

 

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Indemnitee, may not be revoked or released without the prior written consent of
such Indemnitee.

17. SEVERABILITY. If any provision or provisions of this Agreement or any
application of any provision hereof shall be held to be invalid, illegal or
unenforceable for any reason whatsoever:

(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law;

(b) such provision or provisions shall be deemed reformed to the extent
necessary to conform to applicable law and to give the maximum effect to the
intent of the parties hereto; and

(c) to the fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.

18. ENFORCEMENT.

(a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereby to induce Indemnitee
to serve as a director of the Company, and the Company acknowledges that
Indemnitee is relying upon this Agreement in serving as a director of the
Company.

(b) This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral, written and implied, between the parties hereto with
respect to the subject matter hereof; provided, that this Agreement is a
supplement to and in furtherance of the Charter, the Bylaws and applicable law,
and shall not be deemed a substitute therefor, nor to diminish or abrogate any
rights of any Indemnitee thereunder.

19. MODIFICATION AND WAIVER. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the parties thereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions of this Agreement nor shall any
waiver constitute a continuing waiver.

20. NOTICES. Any notices or other communications required or permitted under, or
otherwise in connection with this Agreement, shall be in writing and shall be
deemed to have been duly given when delivered in person or upon confirmation of
receipt when transmitted by facsimile transmission (but only if followed by
transmittal by national overnight courier or hand for delivery on the next
business day) or on receipt after dispatch by registered or certified mail,
postage prepaid, addressed, or on the next business day if transmitted by
national overnight courier, in each case as follows:

 

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(a) if to the Company, directed to the Chief Executive Officer and General
Counsel at its principal place of business; and

(b) if to an Indemnitee, to such address as set forth below Indemnitee’s name on
the signature page to this Agreement; or such other Persons or addresses as
shall be furnished in writing by such Indemnitee to the Company.

21. CONTRIBUTION. To the fullest extent permissible by applicable law, if the
indemnification provided for in this Agreement is unavailable to an Indemnitee
for any reason whatsoever, the Company, in lieu of indemnifying such Indemnitee,
shall contribute to the amount incurred by such Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving cause to such Proceeding;
and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s). The relative fault of a Person shall be determined by reference
to, among other things, the degree to which such Person’s: (i) actions were
motivated by intent to gain personal profit or advantage; (ii) liability is
primary or secondary; and (iii) conduct is active or passive.

22. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and the legal
relations among the parties shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to its
conflict of laws rules that would cause the applicability of the laws of another
jurisdiction. Except with respect to any arbitration commenced by an Indemnitee
pursuant to Section 13 of this Agreement, the parties hereby irrevocably and
unconditionally:

(a) agree that any action or proceeding arising out of or in connection with
this Agreement shall be brought only in the Chancery Court of the State of
Delaware, and not in any other state or federal court in the United States of
America or any court in any other country;

(b) consent to submit to the exclusive jurisdiction of the Chancery Court of the
State of Delaware for purposes of any action or proceeding arising out of or in
connection with this Agreement;

(c) appoint, to the extent such party is not otherwise subject to service of
process in the State of Delaware, irrevocably Corporation Service Company, 2711
Centreville Road, Suite 400, Wilmington, Delaware 19808 as its agent in the
State of Delaware as such party’s agent for acceptance of legal process in
connection with any such action or proceeding against such party with the same
legal force and validity as if served upon such party personally within the
State of Delaware;

(d) waive any objection to the laying of venue of any such action or proceeding
in the Chancery Court of the State of Delaware, and

 

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(e) waive, and agree not to plead or to make, any claim that any such action or
proceeding brought in the Chancery Court of the State of Delaware has been
brought in an improper or inconvenient forum.

23. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original but all of
which together shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.

24. THIRD PARTY BENEFICIARIES. Except as otherwise set forth herein, nothing in
this Agreement is intended or shall be construed to entitle any Person, other
than the parties hereto and each other Indemnitee, and their respective
transferees and assigns permitted hereby, to any claim, cause of action, remedy
or right of any kind in respect of this Agreement.

25. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to include usage
of the feminine pronoun where appropriate. The headings of the paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.

 

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

 

ANGIOTECH PHARMACEUTICAL     INDEMNITEE INTERVENTIONS, INC.    

 

   

 

By:       Its:     Name:  

 

    Address:  

 

     

 

 

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Exhibit K

Tom Bailey

David McMasters

Tammy Neske

Victor Diaz

Jeff Walker

Rui Avelar

Bill Hunter

Jay Dent

David Hall

Jon Chen

Chris Dennis

David Phinney

Bill Stanger