NOTE PURCHASE AGREEMENT

Exhibit 10.1

EXECUTION VERSION

NOTE PURCHASE AGREEMENT

dated as of July 6, 2008

among

A NGIOTECH P HARMACEUTICAL I NTERVENTIONS , I NC .,

A RES C ORPORATE O PPORTUNITIES F UND III, L.P.,

N EW L EAF V ENTURES I, L.P.

N EW L EAF V ENTURES II, L.P.

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

A NGIOTECH P HARMACEUTICALS , I NC .,

and

THE S UBSIDIARY G UARANTORS PARTY HERETO

TABLE OF CONTENTS

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INDEX OF DEFINED TERMS

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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

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, 21 ^st 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.

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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.

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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.

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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.

Signature Page to Note Purchase Agreement

Signature Page to Note Purchase Agreement

Signature Page to Note Purchase Agreement

Signature Page to Note Purchase Agreement

Signature Page to Note Purchase Agreement

Signature Page to Note Purchase Agreement

Signature Page to Note Purchase Agreement

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

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).

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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.

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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.

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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.]

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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).

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

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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.

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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.

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

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.

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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.]

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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.

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

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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

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