10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-30334

Angiotech Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)

British Columbia, Canada	98-0226269
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1618 Station Street, Vancouver, BC, Canada	V6A 1B6
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (604) 221-7676

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common shares, without par value	The NASDAQ Global Select Market
Class I preference shares, without par value	The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o        No  þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o        No  þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes  þ        No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.    

                 Large accelerated filer  ¨    

Accelerated filer  x

                 Non-accelerated filer  ¨  (Do not check if a smaller reporting company)

Smaller reporting company ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No  þ

The aggregate market value of the common shares held by non-affiliates as of June 30, 2008 of the registrant (based on the last reported sale price of the common shares of U.S. $2.98, as reported on The NASDAQ Global Select Market) was approximately U.S. $253,663,509.

As of March 12, 2009 the registrant had 85,121,983 outstanding common shares.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates by reference information from the definitive Proxy Statement for the registrant’s 2009 annual general meeting of shareholders.

ANGIOTECH PHARMACEUTICALS INC.

TABLE OF CONTENTS

ANNUAL REPORT ON FORM 10K FOR THE YEAR ENDED DECEMBER 31, 2008

PART I
Item 1.	BUSINESS	4
Item 1A.	RISK FACTORS	14
Item 1B.	UNRESOLVED STAFF COMMENTS	29
Item 2	PROPERTIES	30
Item 3.	LEGAL PROCEEDINGS	31
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	32
PART II
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
	MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	33
Item 6.	SELECTED FINANCIAL DATA	35
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
	RESULTS OF OPERATIONS	38
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	58
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	59
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
	FINANCIAL DISCLOSURE	59
Item 9A.	CONTROLS AND PROCEDURES	59
Item 9B.	OTHER INFORMATION	60
PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	61
Item 11.	EXECUTIVE COMPENSATION	61
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
	RELATED STOCKHOLDER MATTERS	61
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
	INDEPENDENCE	61
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	61
PART IV
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	62
SIGNATURES		63

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In this Annual Report on Form 10-K, references to “the Company”, “Angiotech”, “us” or “we” are to Angiotech Pharmaceuticals, Inc. and all of its subsidiaries as a whole, except where it is clear that these terms only refer to Angiotech Pharmaceuticals, Inc.

Accounting Standards

In this Annual Report on Form 10-K, all dollar amounts are in U.S. dollars, except where otherwise stated and financial reporting is made in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

Currency and Exchange Rates

We use the U.S. dollar as our reporting currency, while the Canadian dollar is the functional currency for Angiotech Pharmaceuticals, Inc. and its Canadian subsidiaries, the U.K pound is the functional currency of our U.K subsidiary, Pearsalls Limited, the Danish Kroner is the functional currency of our Danish subsidiary, PBN Medicals Denmark A/S, and the U.S. dollar is the functional currency for all other subsidiaries.

NOTICE REGARDING WEBSITE ACCESS TO COMPANY REPORTS

We file electronically with the Securities and Exchange Commission our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“the Exchange Act”). You may obtain a free copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports, on the day of filing with the SEC and on our website at: www.angiotech.com. Our website and the information on our website is not part of this Annual Report on Form 10-K.

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PART I

Item 1.

BUSINESS

Summary

We are a specialty pharmaceutical and medical device company that discovers, develops and markets innovative technologies primarily focused on acute and surgical applications. We generate our revenue through our sales of medical products and components, as well as from royalties derived from sales by our partners of products utilizing certain of our proprietary technologies. For the year ended December 31, 2008, we recorded $190.8 million in direct sales of our various medical products and $92.5 million in royalties and license fees received from our partners.

Our research and development efforts focus on understanding and characterizing biological conditions that often occur concurrent with medical device implantation, surgery or acute trauma, including scar formation and inflammation, cell proliferation, bleeding and coagulation, infection, and tumor tissue overgrowth. Our strategy is to utilize our various technologies in the areas of drugs, drug delivery, surface modification, biomaterials and medical devices to create and commercialize novel, proprietary medical products that reduce surgical procedure side effects, improve surgical outcomes, shorten hospital stays, or are easier or safer for a physician to use.

We develop our products using a proprietary and systematic discovery approach. We use our drug screening capabilities to identify new uses for known pharmaceutical compounds. We look for compounds that address the underlying biological causes of conditions that can occur with medical device implantation, surgery or acute trauma. Once appropriate drugs have been identified, we work to formulate the drug, or a combination of drugs, with our portfolio of drug, drug delivery and surface modification technologies and biomaterials to develop a novel surgical implant or medical device. We have patent protected, or have filed patent applications for, certain of our technology and many of our products and potential product candidates.

In March 2007, due to declines in the amount of royalties received from sales of TAXUS by Angiotech's partners, the high levels of cash interest payable on Angiotech's outstanding debt and the capital-intensive nature of Angiotech’s business, Angiotech determined that its balance sheet was not supported by its existing business model and that a restructuring was necessary.  Although Angiotech believes it has developed planned courses of action and identified other opportunities to mitigate these operating and liquidity risks, there can be no assurance that Angiotech will be able to achieve any or all of these plans.

In 2008, TAXUS royalties declined more significantly than anticipated and Angiotech’s stock price declined precipitously, such that the market value of the company became significantly less than the outstanding principal amount of its indebtedness.  During this time, Angiotech continued to unsuccessfully explore various financial and strategic alternatives.  In September 2008, Angiotech announced a restructuring effort to address its liquidity concerns, which included efforts to reduce operating costs through significant cuts to its operating budget and efforts to focus its business on its more promising Medical Devices product segment and away from its Pharmaceutical Technologies segment.  

In March 2009, we announced that it had entered into a new secured credit facility, which is intended to provide the company additional near-term liquidity and enable the company to continue the evaluation and exploration of various financial and strategic alternatives that may reduce our total outstanding debt obligations and provide the Company with greater financial flexibility.

Business Strategy

Our strategy is to apply our various technologies to develop and commercialize novel, proprietary medical device, surgical implant and pharmaceutical products that address the most frequent problems or complications observed in connection with medical device use or surgical procedures. Specific elements of our strategy include:

•

Identifying and Prioritizing Market Opportunities. We begin our product development process by identifying medical devices or surgical procedures where problems or complications arise soon after device implantation or the initial procedure, and where re-intervention is expensive, potentially harmful for patients or difficult to perform. We target areas where we have previously developed successful technologies, such as the treatment of scar formation and cell proliferation with paclitaxel and its analogues or derivatives, or where we have particular scientific focus or expertise. For example, numerous human trials have indicated that paclitaxel dramatically improves the clinical performance of stents used to treat patients with coronary artery disease, which has led to improved patient outcomes, premium pricing and growth of the stent market. We believe other medical devices and surgical implants could be similarly affected through the proprietary addition of locally-delivered therapeutics.

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•

Developing Novel, Proprietary Product Candidates. After prioritizing opportunities, we identify the biology that may contribute to complications or failures of a device or procedure. We then screen and select a potential drug or drugs to combine with our biomaterial or drug delivery technologies to create  proprietary, locally-delivered drug formulation or drug-device combination product candidates. We continually assess and study applications of our technology, including analyzing the biology pertaining to the failure of certain medical devices and surgical implants, and determining the therapeutic drug selection, concentration, total dose and drug release characteristics required to enhance medical device and surgical implant performance. We believe this approach may allow us to create additional novel drug-eluting medical devices and surgical implants that achieve better clinical results than drugs, medical devices or surgical implants may achieve independently.

•

Establishing and Developing Intellectual Property Portfolio. After identifying potentially useful technologies or developing novel product candidates, we incorporate these elements into new patent filings or our existing patent portfolio, and we attempt to develop and establish new intellectual property in jurisdictions throughout the world. We believe we are among the first companies to develop an extensive intellectual property portfolio of products combining approved pharmaceutical agents, such as paclitaxel, with medical devices and surgical implants. Recognizing the importance of intellectual property in our industry, we plan to continue to pursue patent protection in the United States, the European Union and other significant markets, as well as to protect trade secrets and know-how as our research and development activities uncover additional important medical product and therapeutic opportunities.

•

Selecting Commercialization Path. Once we reach a certain stage with a technology or product candidate, we select a development and commercialization path.  Where we have a distribution channel, we may elect to fully develop a product ourselves, or in selected cases where product opportunities may not fit our commercial capabilities, we will license certain of our products, technologies or product candidates to be developed, manufactured or commercialized by partners.

•

Pursuing Selective Strategic Acquisitions and Licenses. To support our product development and commercialization activities, we have pursued, and will continue to selectively pursue, acquisitions or licenses to obtain proprietary pharmaceutical compounds or compound classes, formulation technologies, medical device technologies and intellectual property or other commercial assets.

Business Overview

We currently operate in two segments: Pharmaceutical Technologies and Medical Products.

Pharmaceutical Technologies

Our Pharmaceutical Technologies segment focuses primarily on establishing product development and marketing partnerships with major medical device, pharmaceutical or biomaterials companies and to date has derived the majority of its revenue from royalties due from partners that develop, market and sell products incorporating our technologies. Currently our principal revenues in this segment are from royalties derived from sales by Boston Scientific Corporation (“BSC”) of TAXUS® coronary stent systems incorporating the drug paclitaxel.

TAXUS Drug-Eluting Stents

The most significant commercial products containing technology developed and licensed by our Pharmaceutical Technologies segment are the TAXUS Express and TAXUS Liberté coronary stent systems. These products are sold by BSC, our exclusive licensee in the coronary paclitaxel-eluting stent field.  We derive royalty revenue from sales by BSC of TAXUS coronary stent systems.  Royalty revenue received from BSC was $84.1 million for the year ended December 31, 2008.

BSC commenced sales of the TAXUS Express paclitaxel-eluting coronary stent system in January 2003 in the European Union and other countries outside of the United States, and in March 2004 in the United States.  BSC announced the completion of the initial launch of the TAXUS Liberté paclitaxel-eluting coronary stent system in 18 countries in January 2005 and in Europe in September 2005, and commenced sales of TAXUS Liberté in the United States in October of 2008.  The TAXUS Liberté stent system represents BSC’s next generation product incorporating our research, technology and intellectual property related to the use of paclitaxel to treat restenosis and other local inflammatory diseases. The TAXUS Liberté stent has been designed by BSC to further enhance coronary stent deliverability and blood vessel conformability, particularly in challenging coronary lesions.  In addition, in September 2008 BSC received approval to mark et and sell the Taxus Express2 Atom™ Paclitaxel-Eluting Coronary Stent System in the United States.  The TAXUS Express 2 Atom stent system is the only drug-eluting stent available that is specifically designed to treat lesions with diameters as small as 2.25 millimeters.  We are entitled to receive royalties based on the commercial sale of all of BSC’s various TAXUS products.

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BSC has concluded several clinical trials of paclitaxel-eluting coronary stents that have demonstrated positive results, including six separate clinical studies, with a total of over 31,000 patients studied over a five-year period, designed to evaluate the near and long-term safety and efficacy of both the slow and moderate drug release versions of the TAXUS Express coronary stent system.  These various studies have universally indicated that paclitaxel-eluting coronary stents significantly reduce the incidence of restenosis and the need for repeat surgical procedures at the treated lesion site in coronary artery disease patients.  

Certain clinicians have suggested that the use of drug-eluting stents may cause an increased rate of late thrombosis (the formation of blood clots in the stent long after the initial stent implantation) and in turn, potentially lead to an increased rate of myocardial infarctions (heart attacks) or deaths as compared to bare metal stents.  These suggestions led to a significant decrease in the use of drug-eluting stents, beginning in the second half of 2006 and continuing through 2008.  A meta-analysis of a majority of the previous clinical trials of TAXUS is comprised of five-year follow up data.  The overall thrombosis rate indicated by this analysis is no different between the drug-eluting stent arm of the studies and the bare metal stent arm of the studies.  Death rates and myocardial infarction rates also show no difference at the end of five years, while the target lesion revascularization rate continues to maintain a statistically sign ificant benefit for the patients receiving the drug-eluting paclitaxel stent as compared to those patients who received a bare metal stent (TLR 12.1% vs 21.0%, p<0.001).

CoSeal^TM Surgical Sealant

CoSeal surgical sealant is a commercially approved, surgical biomaterial product and was obtained as part of our acquisition of Angiotech BioMaterials Corp. (formerly known as Cohesion Technologies, Inc.) in 2003. CoSeal is the first fully synthetic vascular sealing agent approved by the United States Food and Drug Administration (“FDA”), and has been sold in the United States since February 2002.  CoSeal is approved for use in the United States and the European Union to achieve adjunctive hemostasis in vascular reconstruction by mechanically sealing areas of leakage. CoSeal is designed to rapidly seal tissue surfaces, suture lines and synthetic grafts during surgery. A premixed configuration of CoSeal received both FDA and European CE Mark approval in February 2003 and April 2003 respectively, and received Health Canada approval in October 2003. The premixed configuration of CoSeal is simpler to use, can be stored at room temperature and has a two-hour lifespan once activated.

On February 25, 2003, we entered into a strategic alliance with Baxter Healthcare Corporation (“Baxter”), which provides Baxter with worldwide (excluding Japan) sales, marketing and distribution rights of our CoSeal surgical sealant product. This alliance also gives Baxter an option for distribution rights in Japan. In April 2003, we broadened the strategic alliance to provide Baxter with worldwide manufacturing rights for CoSeal. As a result of these transactions, we receive royalties on the end-user sales of CoSeal by Baxter. We have retained all development and commercial rights for drug-loaded versions of CoSeal.

Medical Products

Our Medical Products segment manufactures and markets a wide range of single-use specialty medical products, primarily medical device products and medical device components. These products are sold directly to end users or other third party medical device manufacturers. This segment contains two specialized direct sales and distribution organizations as well as significant manufacturing capabilities. Many of our medical products are made using our proprietary manufacturing processes, or are protected by our intellectual property. Our Medical Products segment may apply certain of our proprietary technologies to its products to create novel, next generation medical products to market directly to end users or medical products distributors.

Interventional Radiology and Biopsy Products

We offer a variety of products targeted at the interventional radiology and biopsy markets. We currently sell the majority of these products in finished form, either directly to or through distributors. We also sell selected biopsy needles and related components to other third-party medical device suppliers that compete in various general surgery markets.  Some of our more significant commercial products in this area include:

·

SKATER^TM Drainage Catheters – the SKATER catheter line is used to facilitate drainage of fluid from wounds, infectious tissues or surgical sites, and features larger lumens and drainage holes, kink resistance, resistance to encrustation and high radiopacity.

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V+Pad^TMHemostatic Pad – the V+Pad product is a hydrophilic wound dressing that is intended for use in the local management of bleeding wounds such as vascular access sites (percutaneous catheters or tubes), surgical debridement and lacerations. The V+Pad promotes rapid control of bleeding in patients on anticoagulation therapy and in patients following hemodialysis.  We are the exclusive distributor of V+Pad in the United States.

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Soft Tissue Biopsy Needles – we offer a wide range of soft tissue biopsy needles, both disposable and re-usable for use in different types of breast, lung, spinal and bone marrow biopsies. Some key features of our biopsy needles include: an echogenic tip for placement under ultrasound guidance, numerically ordered centimeter markings to facilitate precise depth placement, and adjustable needle stops allowing the restriction of forward movement and localizing the needle to the biopsy site.

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BioPince^TM Full Core Biopsy Devices – BioPince is our biopsy instrument product line featuring a proprietary tri-axial “Cut and Trap” cannula system.  This system allows the device to deliver cylindrical, full-length biopsy specimens that are complete and largely undamaged, which we believe significantly improves the diagnostic value of the sample.

·

T-Lock^TM Bone Marrow Biopsy Device – our bone marrow biopsy device, the T-Lock, has an ergonomically designed twist-lock handle, which improves a clinician’s ability to penetrate hard bone to obtain the biopsy sample. An adjustable needle stop to control the depth of penetration allows the clinician to safely aspirate at the sternum of the patient.

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HemoStream^TM Dialysis Catheter – our HemoStream product is used for short-term vascular access for patients undergoing hemodialysis.  HemoStream has a novel triple outflow lumen that is designed to prevent the common complication of “sidewalling”, which occurs when the catheter is drawn next to the vessel wall during dialysis. This is a common problem with dialysis catheters. We are the exclusive distributor of the HemoStream dialysis catheter line.

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Bio-Seal™ Lung Biopsy Tract Plug System – Bio-Seal is our biopsy system containing a proprietary hydrogel plug designed to prevent air leaks in patients having lung biopsies. On contact with moist tissue, the hydrogel plug absorbs fluids and expands to fill the void created by the biopsy needle puncture. The plug is absorbed into the body after healing of the puncture site has occurred. We are the exclusive worldwide manufacturer and distributor of the Bio-Seal Lung Biopsy Tract Plug System, which has received CE Mark approval and is currently marketed and sold in the European Union.  BioSeal has undergone a human clinical trial in the United States. and is not yet commercially available in the United States or other markets outside of the European Union.

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Other Selected Products – other selected products for the interventional radiology and biopsy markets include fixation pins, tunneling stylets and surgical tunnelers and isotope seed spacers and needles for prostate cancer treatment.

General Surgery Products

We offer a variety of products targeted at various surgical disciplines for wound closure, wound healing and general surgery. We currently sell the majority of these products in finished form, either directly or through distributors. We also sell selected surgical needles, suture products and wound closure product components to other third-party medical device suppliers that compete in various general surgery markets. Our most significant commercial products in this market area include:

·

Quill^TM SRS – our Quill SRS product is a suture material that contains proprietary patterns of tiny barbs, which can eliminate the need for surgeons to tie knots when closing certain wound types. We believe that use of Quill SRS may lead to faster surgical times, improved wound cosmesis and lower wound infection and complication rates.

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Sharpoint^TM Specialty Microsurgical Products – our Sharpoint microsurgical sutures include specialized suture configurations and materials that are complex to manufacture, as well as needles that are manufactured from specialty stainless steel wire that has been tempered to a specific balance of hardness and tensile strength, which allows a fine edge that resists bending as the surgeon applies pressure.

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Silk and Polyester Braided and Monofilament Suture Materials – we manufacture a wide array of configurations of non-absorbable and absorbable sutures. Our suture configurations vary in diameter size, length, and material.

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Drilled End and Channel Needles – we manufacture a wide array of surgical needles for our own surgical product lines, as well as for other manufacturers of wound closure products.  Our product line includes drilled end suture needles, which have a precisely drilled butt end for maximum suture holding strength and are adequately tempered for securing strong attachment of the suture, and channel needles, which have a channel with an underlying receptacle for attachment of the suture.

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Lifespan™ ePTFE Vascular Grafts – we manufacture reinforced ePTFE synthetic vascular graft for use in bypass or reconstruction of diseased or occluded blood vessels or to provide arteriovenous shunts for blood access in hemodialysis patients. Our ePTFE product line has over 75 product iterations and includes vascular grafts of various sizes and lengths.

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Surgical Blades Used in Cataract Surgery – we have a wide range of surgical blades for cataract surgery, including clear corneal knives, standard implant knives, pilot tip implant knives, precision depth knives, sharptone crescent knives, spoon knives, stab knives, vitrectomy knives to create small, precise incisions, sub-2mm series knives, and a variety of slit and specialty knives.

Research and Product Development

We, or our partners, are evaluating several new product candidates that incorporate our proprietary technologies and capabilities, including a significant number of product candidates undergoing human clinical testing conducted both by us and by our partners.  We also maintain several pre-clinical, or research stage, programs, as well as conduct various product and process improvement initaitives with respect to our currently marketed products and within our manufacturing facilities.  The following discussion outlines our most advanced product candidates and their stage of development, and summarizes our most recently concluded or terminated clinical development programs.

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Ongoing Clinical Programs

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TAXUS Element™ Platinum Chromium Paclitaxel-Eluting Coronary Stent System.  The TAXUS Element paclitaxel-eluting coronary stent system is the third generation BSC coronary stent platform that incorporates our research, technology and intellectual property related to the use of paclitaxel.  The TAXUS Element stent features BSC’s proprietary platinum chromium alloy, which is designed to enable thinner stent struts, increased flexibility and a lower stent profile while improving radial strength, recoil and radiopacity.  In addition, the TAXUS Element stent platform incorporates new balloon technology intended to improve upon BSC’s market-leading Maverick® Balloon Catheter technology.

On October 10, 2008, we announced that BSC had completed enrollment in the PERSEUS clinical trial, designed to evaluate the third-generation TAXUS Element paclitaxel-eluting coronary stent. The PERSEUS clinical program has enrolled nearly 1,500 patients at 100 U.S. and international centers since July 2007, and will compare the TAXUS Element stent to the prior-generation TAXUS Express2 stent marketed in this United States since 2004.

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TAXUS Petal™ Bifurcation Paclitaxel-Eluting Coronary Stent System.  The TAXUS Petal bifurcation paclitaxel-eluting coronary stent system, which is under evaluation in clinical trials being conducted by BSC, represents a novel BSC coronary stent product candidate that incorporates our research, technology and intellectual property related to the use of paclitaxel.  Conventional coronary stents were designed to treat tubular arteries, and are considered less than optimal for the y-shaped anatomy of a bifurcated area of the coronary arteries. The TAXUS Petal is a specialized coronary stent designed to treat both the main branch and the side branch of a bifurcation by incorporating an innovative side structure (the Petal strut) in the middle of the stent that opens into a side branch.

On July 18, 2007, BSC initiated the TAXUS PETAL I First Human Use (FHU) trial, which is expected to enroll a total of 45 patients in New Zealand, France and Germany. The trial is a non-randomized study with an initial assessment of acute performance and safety (including rates of death, myocardial infarction and target vessel revascularization) at 30 days and six months, with continued annual follow-up to occur for five years. Upon successful completion of this study, BSC has indicated that it intends to begin a pivotal trial which if successful would provide a basis for United States and international approvals for the commercialization of the TAXUS Petal stent.

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ZILVER PTX Paclitaxel-Eluting Peripheral Vascular Stent System.  The ZILVER PTX paclitaxel-eluting peripheral vascular stent, which is under evaluation in clinical trials being conducted by our partner Cook Medical, Inc (“Cook”) is a specialized stent product incorporating our proprietary paclitaxel technology and is designed for placement in diseased arteries in the limbs to restore blood flow. Cook is a co-exclusive licensee, together with BSC, of our proprietary paclitaxel technology to reduce restenosis following stent placement in peripheral artery disease. The ZILVER PTX paclitaxel-eluting peripheral stent is designed to reduce restenosis following placement of a stent in PAD patients.

The ZILVER PTX is currently undergoing multiple human clinical trials in the United States, Japan, the European Union and selected other countries to assess product safety and efficacy. In January 2007, Cook released nine-month data from its EU clinical study. The preliminary data presented by Cook on the first 60 patients in the randomized trial, which is examining the safety of using Cook's ZILVER PTX paclitaxel-eluting stent to treat blockages, or lesions, of the superficial femoral artery (“SFA”) above the knee, indicated that the ZILVER PTX stent showed an equal adverse event rate to conventional angioplasty for treating SFA lesions. The ZILVER PTX stent also displayed a zero-percent fracture rate for 41 lesions at six months and 18 lesions at one year.  

On June 11, 2008, Cook reported positive interim results from the registry arm of a clinical study designed to measure the efficacy of the ZILVER PTX in treating PAD patients, specifically in the treatment of blockages in the femoropopliteal artery.  The results were reported by trial investigators at the 2008 SVS Vascular Annual Meeting, and revealed clinical improvement, excellent durability and fracture resistance, high rates of event-free survival (“EFS”) and freedom from target lesion revascularization (“TLR”).  Interim data was compiled at six and 12 months using 435 patients and 200 patients, respectively.  The corresponding EFS rates were 94 percent and 84 percent, and freedom from TLR was 96 percent and 88 percent.  Evaluation of stent x-rays is ongoing, and currently suggests stent fractures in approximately one percent of cases at six months and less than two percent of cases at 12 months.  In addition, the ZILVER PTX stent exhibited no safety concerns and results were better than expected for Trans-Atlantic Inter-Society Consensus class C and D lesions, occlusions, in-stent restenosis and lesions greater than seven centimeters.  Follow-up to the registry arm of the study will continue through two years.

On July 16, 2007 Cook announced that the first U.S. patients in a randomized pivotal human clinical trial of ZILVER PTX were treated at Tri-City Medical Center in Oceanside, CA.  The trial is designed to randomize patients to receive either the ZILVER PTX stent or balloon angioplasty.  Data from this clinical trial is intended to be used to support submission to the FDA for approval in the U.S. to market the device.  In addition, data collected on Japanese and United States patients is expected to be combined for the final evaluation of the device and used for regulatory submissions in both markets for approval.

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On September 10, 2008 Cook announced it had completed enrollment in its pivotal human clinical trial for the ZILVER PTX.  The 420 patients enrolled in Cook’s randomized trial include peripheral artery disease patients treated in Germany, the United States and Japan.  Based on a release by Cook on September 10, 2008, Cook had enrolled an additional 780 patients in the European Union, Canada and Korea in a clinical registry to evaluate the safety of the ZILVER PTX device.  The data from such trials have been used for submission in Europe for CE Mark approval to market the device there, with additional regulatory submissions pending in additional markets.

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Bio-Seal™ Lung Biopsy Tract Plug System.  Bio-Seal is a novel technology designed to prevent air leaks in patients having lung biopsies by plugging the biopsy track with an expanding hydrogel plug.  On contact with moist tissue, the hydrogel plug absorbs fluids and expands to fill the void created by the biopsy needle puncture.  The seal is airtight and the plug is absorbed into the body after healing of the puncture site has occurred.

Bio-Seal has undergone a human clinical trial in the United States which was designed to assess the safety and efficacy of Bio-Seal, with the primary endpoint being reduction in rates of pneumothorax in patients undergoing lung biopsy procedures. The clinical trial was a prospective randomized multi-centered safety and efficacy evaluation. The trial enrolled its first patient in October 2005 and completed enrolment in June 2008.  The study was designed to provide a basis for U.S. clearance for the commercialization of Bio-Seal.  Data from this clinical trial study has been submitted to the FDA.  The FDA has responded to our submission with additional questions about the study.  We have responded to the FDA, and upon further review by the FDA we may either receive 510(k) clearance to market Bio-Seal in the United States or be required to respond to additional questions or conduct additional clinical studies f or this product candidate.  Upon receiving such further information from the FDA, we will determine the timing of product launch or any further development work necessary to achieve approval should we choose to continue the development of this product candidate.  The complete data for the Bio-Seal study was presented at the 2009 Society of Interventional Radiology in San Diego, CA on March 9, 2009. The trial hit its primary end point with clinical success in 85% of the treatment patients compared to 69% for the control patients (p=0.002). The product has already received CE Mark approval.

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Option™ Vena Cava Filter.  The Option™ Vena Cava Filter, which we licensed in March 2008 from our partner Rex Medical L.P., is under evaluation in a pivotal human clinical trial.  We believe this vena cava filter may have a number of potential benefits, which include unique filter apex and retention anchors, insertion through either the femoral or jugular route, and non-thrombogenic material.  The purpose of the United States multi-center prospective clinical trial is to evaluate the device’s safety and efficacy in preventing pulmonary emboli, and to assess the ability to retrieve the device from the body up to 175 days following implantation.  Interim results of the pivotal trial were presented at the AIM/Veith Meeting in New York in November 2008. The complete results, representing a total of 100 patients, were presented at the the 2009 Society of Interventional Radiology in San Diego, CA.  The clinical data from this trial has been submitted to the FDA. The FDA has responded to our submission with additional questions about the study and we are preparing a response.

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Anti- Infective HemoStream^TM Dialysis Catheter.  We have an FDA-approved dialysis catheter, HemoStream, that we sell through our direct sales force.  A dialysis catheter is used for exchanging blood between a hemodialysis machine and a patient.  Some common malfunctions of dialysis catheters include clotting, infection, and kinking.  Through our proprietary drug identification strategy, we have identified 5-Fluorouracil (“5-FU”), a drug previously approved by the FDA for treatment of various types of cancer, as a compound that may help to prevent certain types of infection in patients receiving selected types of implantable devices, including certain dialysis catheters.  We are currently developing this 5-FU anti-infective technology for our HemoStream dialysis catheter line, and we currently anticipate f iling in 2009 for a 510(k) clearance to market this product candidate in the U.S.

·

MultiStem® Stem Cell Therapy.  The MultiStem stem cell therapy is under evaluation in clinical trials being conducted together with our partner Athersys, Inc. (“Athersys”) for the treatment of acute myocardial infarction. MultiStem stem cells are proprietary adult stem cells derived from bone marrow, which have demonstrated the ability in laboratory experiments to form a wide range of cell types. MultiStem may work through several mechanisms, but a primary mechanism appears to be the production of multiple therapeutic molecules produced in response to inflammation and tissue damage. We and Athersys believe that MultiStem may represent a unique “off the shelf” stem cell product candidate, based on its potential ability to be used without tissue matching or immunosupression, and its potential capacity for large scale production. We entered an agreement with Athersys in May 2006 to co-develo p and commercialize MultiStem for use in the indications of acute myocardial infarction and peripheral vascular disease. On December 20, 2007, we and Athersys announced we had received authorization from the FDA to commence a phase I human clinical trial to evaluate the safety of MultiStem in the treatment of acute myocardial infarction. Upon completion of a phase I human clinical trial currently being conducted by Athersys, we may assume lead responsibility for further clinical development. We currently own marketing and commercialization rights with respect to this product candidate.  On September 22, 2008, as part of certain cost reduction initiatives, we announced a potential amendment of, and reduction in, cash outlays related to our collaboration with Athersys.  The final terms of such amendment to our collaboration with Athersys may have an impact on our expected future expenditures for research and development of MultiStem, and the extent of our future financial and commercial commitments a nd rights relating to this product candidate.

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Completed or Suspended Clinical Programs

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Anti-infective Central Venous Catheter. Central venous catheters (“CVC”) are usually inserted into critically ill patients for extended periods of time to administer fluids, drugs, and nutrition, as well as facilitate frequent blood draws.  We have elected to evaluate 5-FU as a compound that may help to prevent certain types of infection in patients receiving a CVC.  We recently completed a human clinical trial in the United States designed to assess the safety and efficacy of our 5-FU-eluting CVC in preventing various types of catheter related infections.  The study was a randomized, single-blind, 960-patient, 25-center study and was designed to evaluate whether our 5-FU-eluting CVC prevents bacterial colonization at least as well as the market leading anti-infective CVC. On July 10, 2007, we announced that we had comp leted enrolment of the study, and on October 9, 2007 we announced this study had met its primary statistical endpoint of non-inferiority as compared to the market leading anti-infective CVC (a chlorhexidine / silver sulfadiazine (CH-SS) coated CVC) and indicated an excellent safety profile. In March 2008, we presented the clinical trial data at the 28th International Symposium on Intensive Care and Emergency Medicine (ISICEM) in Brussels, Belgium. Based on the clinical trial data, the investigators concluded that our 5-FU CVC met the primary endpoint of the study, specifically that our 5-FU CVC product candidate was non-inferior in its ability to prevent bacterial colonization of the catheter tip when compared to catheters coated with CH-SS.  There were no statistically significant differences in the rate of adverse events related to the study devices, or in the rates of catheter-related bloodstream infections.  Additionally, there was no evidence for acquired resistance to 5-FU in clinical isolate s exposed to the drug for a second time.  Based on the positive results achieved in the study, in December 2007 we filed a request for 510(k) clearance from the FDA to market and sell the CVC in the United States and on April 17, 2008, we announced that we had received 510(k) clearance from the FDA to market our 5-FU CVC in the United States but we have not commercially launched the product.  

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TAXUS Liberté™ paclitaxel-eluting coronary stent system.  The TAXUS Liberté paclitaxel-eluting coronary stent system is BSC’s second generation coronary stent system platform that incorporates our research, technology and intellectual property related to the use of paclitaxel to prevent restenosis. The TAXUS Liberté stent system has been designed to further enhance coronary stent deliverability and blood vessel conformability, particularly in challenging coronary lesions.  To date, BSC has only commenced sales of the TAXUS Liberté in countries outside of the United States.  On October 10, 2008, we announced that BSC had received approval from the FDA to market and sell the TAXUS Liberte in the United States.

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Vascular Wrap™ Our paclitaxel-eluting mesh surgical implant, or Vascular Wrap, is designed to treat complications, including graft stenosis or restenosis, that may occur in connection with vascular graft implants in hemodialysis patients or in patients that have peripheral artery disease. Vascular grafts are implanted in patients in order to bypass diseased blood vessels, or to provide access to the vascular system of kidney failure patients in order to facilitate the process of hemodialysis.  In many cases, these vascular grafts fail due to proliferation of cells or scar into the graft (graft stenosis or restenosis), which can negatively impact blood flow through the vascular graft.  

In April 2008, we elected to suspend enrollment in our U.S. and EU human clinical trials for our Vascular Wrap product candidate in patients undergoing surgery for hemodialysis access, pending a safety review to evaluate an imbalance of infections observed between the two study groups.  As a result of these observations, we elected to notify physicians to suspend further enrolment in the trials, pending a full review of the potential cause of the implant site infections.  There are currently no plans to resume enrollment in these clinical trials, and we are continuing to evaluate alternatives for this program, including potential collaborations, partnerships, divestitures or future clinical development initiatives.  

Patents, Proprietary Rights and Licenses

Patents and other proprietary rights are essential to our business. We file patent applications to protect technology, inventions and improvements to inventions that are considered important to our business. We also rely upon trade secrets, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. Furthermore, we endeavor to extend our intellectual property portfolio by exclusively licensing patents and patent applications from others and initiating research collaborations with outside sources.

Our patents and patent applications relate to, among other things:

•

the use of paclitaxel and other agents for the treatment of chronic inflammatory diseases, such as restenosis (including as a stent component);

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compositions of and use of pharmacologic agents as medical device coatings and drug-eluting biomaterials;

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hybrid polymer systems designed for localized delivery of bioactive agents and controlled elution of drugs from medical device surfaces;

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•

non-reactive hydrophilic/hydrophobic polymer matrix, which can be varied to optimize performance characteristics such as lubricity, flexibility and hydration;

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biocompatible surface treatments used in ultrasound imaging technology to cause medical devices to shine brightly in ultrasound images providing greater echogenicity, or visibility;

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hemostatic and sealant compositions, as well as broad intellectual property rights relating to collagen;

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drug delivery compositions, such as our proprietary systemic formulation, medical device coatings and other local drug delivery systems; and

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methods of administration.

As part of our patent strategy, we have filed a variety of patent applications internationally. Oppositions have been filed against various granted patents that we either own or license and which are related to certain of our technologies. See “― Legal Proceedings” elsewhere in this Annual Report on Form 10-K for a discussion of the proceedings related to certain of such oppositions. An adverse decision by an Opposition Division in any country, or subsequently, by a Board of Appeal, could result in revocation of our patent or a narrowing of the scope of protection afforded by the patent. The ultimate outcomes of the pending oppositions, including appeals, are uncertain at this time. We do not know whether the patents that we have received or licensed, or those we may be able to obtain or license in the future, would be held valid or enforceable by a court or whether our patents would be found to infringe a competitor’s patents related to its technology or product. Further, we have no assurance that third parties will not (whether pursuant to or in breach of the terms) modify or terminate any license they have granted to us.

Regulatory

The research and development, manufacture, labeling, advertising, sale and marketing of our drug and medical device products and those of our collaborators are subject to extensive regulation by the FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries. Because we focus on combining pharmaceutical compounds with medical devices and biomaterials, we are subject to both drug and device regulations depending upon the categorization of the commercial product or potential product candidate.

Drug and device licensing laws require registration of manufacturing facilities, carefully controlled research and testing of products, government review and approval or clearance of results prior to marketing of products, adherence to current Good Manufacturing Practices (“cGMPs”), during production and processing of products, and compliance with comprehensive post-marketing requirements including restrictions on advertising and promotion and requirements for reporting adverse events to the FDA in the United States and other regulatory authorities abroad. In the United States, these activities are subject to rigorous regulation by the FDA. Similar regulations apply in the European Union and other markets.

Our success is ultimately dependent upon our and our collaborators obtaining marketing approval or clearance for potential product candidates currently under development and will depend on our and our collaborators’ ability to comply with FDA and other market regulations governing the manufacturing, quality control, pre-clinical evaluation, and clinical testing of those candidates. If we or our present or future collaborators are not able to comply with the continuing FDA regulations that accompany FDA approval, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the new drug application for the relevant drug or the 510(k) or Premarket Approval for the relevant device. Depending on the circumstances surrounding the clinical evaluation of a product, we may sponsor clinical trials, contract clinical trial activities to contract research organizations (“CROs”) or rely upon our corporate collab orators to sponsor such clinical development. There can be no assurance that any of our and our collaborators’ clinical trials or product development activities will provide favorable data or that the data will be acceptable to any government regulatory agency to provide us with approval to market and sell our products or product candidates. Moreover, even if we and our collaborators believe the results of our product development activities are favorable, regulatory authorities may interpret the results differently than we do.

We have significant medical device component engineering and manufacturing, as well as finished goods and packaging manufacturing operations. The manufacturing processes used in the production of finished medical devices are subject to FDA regulatory inspection, and must comply with FDA regulations, including its Quality Systems Regulation, (“QSR”), which sets forth the cGMP requirements for medical devices. The QSR requires manufacturers of finished medical devices to follow elaborate design, testing, control, documentation and other quality assurance procedures during the finished device manufacturing process. Our FDA registered facilities are subject to FDA inspection at any time for compliance with the QSR and other FDA regulatory requirements. Failure to comply with these regulatory requirements and similar foreign requirements may result in civil and criminal enforcement actions, including financial penalties, seizures, injunctions or other meas ures. In some cases, failure to comply with the QSR could prevent us or our customers from marketing products or gaining clearance to market additional products. Our products must also comply with state and foreign regulatory requirements.

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Manufacturing and Distribution

We have significant manufacturing capabilities for our medical devices. Our medical device manufacturing capabilities include polymer handling and extrusion, metals, plastics, textiles and packaging and assembly.  Our suture manufacturing capabilities include the ability to make and handle various approved polymer materials in multiple lengths, diameters and configurations.  Our metal manufacturing capabilities include bending, grinding, drilling, polishing, chemical etching, thermal curing and wire winding. Our plastics manufacturing capabilities include injection molding, insert molding and wire coating.  Our textile manufacturing capabilities include braiding and embroidery of selected suture materials, including silk.  Our assembly and packaging capabilities include small lot assembly, suture attachment and kit assembly.  We also maintain manufacturing capabilities for certain of our biomaterials and coating technologies, including dedicated resources and te chnology to process and manufacture certain types of drug-eluting medical devices.

We devote resources to develop procedures and process controls for our products and product candidates to ensure successful technology transfer for commercial scale manufacturing.  We expect that process and assay development performed during pre-clinical and clinical stages of manufacturing will result in products with the desired use and stability.  These activities include scaling up production methods, developing quality control systems, optimizing batch-to-batch reproducibility, testing sterilization methods and establishing reliable sources of raw materials for synthesizing proprietary products.

Sales and Marketing

We market and sell various medical device products through two specialty direct sales organizations.  In order to augment these capabilities in certain areas and to allow our direct sales forces to focus on our most critical growth opportunities, we also sell certain of our medical devices and medical device components through a network of independent sales representatives and independent distributors.

Our direct sales teams comprised of about 120 individuals as of December 2008.  The majority of our direct sales teams are based in the United States and focus primarily on selling certain of our product lines to interventional radiologists, general surgeons, orthopaedic surgeons, aesthetic surgeons and ophthalmologists.  

These sales forces target hospital-based physician customers, as well as alternate site health care providers such as ambulatory surgery centers or urgent care centers.  The primary goal of our sales team is to increase market share of our highest margin products into markets that we believe are not as well served by our larger competitors.  These competitors often sell their products to larger hospitals or large group purchasing organizations based on contracts for a range of products and in some cases do not employ direct sales professionals targeting our key market segments.

Competition

We expect to face competition from companies utilizing and developing technologies that target the same diseases and clinical indications that our technologies target. Some of the companies developing these technologies have substantially greater product development capabilities and financial, scientific, manufacturing, sales and marketing resources and experience than we do.

The medical device, biotechnology and pharmaceutical industries are subject to rapid and substantial technological change. There can be no assurance that developments by others will not render obsolete our products or technologies or that we will be able to keep pace with technological developments. Some competitive products have an entirely different approach or means to accomplish the desired therapeutic effect than our product candidates.  These competitive products, including any enhancements or modifications made to such products in the future, could be more effective and/or less costly than our products, technologies or our product candidates.

There are a number of companies that are marketing or developing competing drug-eluting coronary stents or other treatments for restenosis that may be considered to be directly competitive with our technology.  Certain of our competitors have developed and commercialized coronary drug- eluting stents that compete with BSC’s TAXUS stents and which have been approved for use in the United States, European Union and certain other countries.  The launch of these competing products has had a significant impact on BSC’s sales of TAXUS, and has resulted in a decline in our royalty revenue received from BSC.  The continued successful commercialization of any of these or other technologies to treat restenosis following angioplasty or stent placement could have a material adverse impact on our business.  

We compete with a number of additional large companies across various of our product lines. These competitors have substantially greater business and financial resources than we do.  These competitors include the Ethicon division Johnson & Johnson and the U.S. Surgical division of Covidien, Inc. in surgical sutures and wound closure devices; C.R. Bard Inc., the Allegiance division of Cardinal Health, Inc. and the Sherwood, Davis & Geck division of Covidien, Inc. in biopsy needle devices; and Alcon, Inc., Allergan, Inc. and the Allegiance division of Cardinal Health, Inc. in ophthalmology products.

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Employees

As of December 31, 2008, on a worldwide basis, we have approximately 1,450 employees, including 900 in manufacturing, 100 in R&D, 200 in sales and marketing and 250 in administration.  In addition, we have contractual arrangements with scientists at various research and academic institutions.  All personnel or their management companies execute confidentiality agreements with us. While we will continue to seek to hire highly qualified employees, we believe that we have employed sufficiently qualified personnel.

Reimbursement

In the United States, health care providers generally rely on third-party payers, including both private health insurance plans and governmental payers, such as Medicare and Medicaid, to cover and reimburse all or part of the cost of a medical device and the procedures in medical devices that are used.  Our ability to commercialize human therapeutic products and product candidates successfully will depend in part on the extent to which coverage and reimbursement for such products and related treatments will be available from government health administration authorities, private health insurers and other third-party payers or supported by the market for these products.  Third-party payers are increasingly challenging the price of medical products and services and instituting cost containment measures to control or significantly influence the purchase of medical products and services. These cost containment measures, if instituted in a manner affecting the coverage for or paymen t of our products, could have a material adverse effect on our ability to operate profitably.

There can be no assurance that third-party payers’ coverage and reimbursement will be available or sufficient for our current products or the products we might develop.  We believe that recommendations and endorsements by physicians are essential for market acceptance of our products, and we do not know whether these recommendations or endorsements will be obtained. We also believe that surgeons will not use these products unless they determine, based on clinical data and other factors, that the clinical benefits to patients and cost savings achieved through use of these products outweigh their cost. Acceptance among physicians may also depend upon the ability to train surgeons and other potential users of our products and the willingness of such users to learn new techniques.

In the United States, there have been and we expect there will continue to be a number of legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our business. Efforts by governmental and third-party payers to reduce healthcare costs or the announcement of legislative proposals or reforms to implement government controls could cause a reduction in sales or in the selling price of our products, which could seriously harm our business. We cannot predict the impact on our business of any legislation or regulations related to the healthcare system that may be enacted or adopted in the future.

Environmental

Our business is subject to a broad range of government regulation and requirements, including federal, state, local and foreign environmental laws and regulations governing, among other matters, air emissions, wastewater discharges, workplace health and safety as well as the use, handling, storage and disposal of hazardous materials and remediation of contamination associated with the release of these materials at or from our facilities or off-site disposal locations.  Some of these laws can impose liability for remediation costs on a party regardless of fault or the lawfulness of its conduct. Many of our manufacturing processes involve the use and subsequent regulated disposal of hazardous materials.  To date, such matters have not had a material adverse impact on our business or financial condition.  We cannot assure you, however, that such matters will not have such an effect in the future.

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Item 1A.

RISK FACTORS

You should consider carefully the following information about these risks, together with all of the other information contained within this document. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may impair our business operations. If any of the following risks actually occur, our business, results of operations and financial condition could be harmed.

Risks Related to Our Business

We were not profitable for the quarter and the year ended December 31, 2008 and may not be able to regain and maintain profitability.

We began operations in 1992 and have incurred a loss from operations in each of the years of our existence except for fiscal years 2004 and 2006.  As of December 31, 2008, our accumulated deficit was $843.7 million.  Our ability to become profitable again will depend on, among other things, the amounts of royalty revenue we receive from our corporate partners; our ability to restructure our existing indebtedness; our ability to maintain and improve sales of our existing product lines; our ability to successfully market and sell certain new products and technologies; our ability to research, develop and successfully launch new products and technologies; our ability to improve our gross profit margins through realization of lower manufacturing costs and efficiencies or improved product sales mix; our ability to effectively control our various operating costs; and foreign currency fluctuations.

Our working capital and funding needs may vary significantly depending upon a number of factors including, but not limited to, the level of royalty revenue we receive from corporate partners; our levels of sales and gross profit; costs associated with our manufacturing operations, including capital expenditures, labour and raw materials costs, and our ability to realize manufacturing efficiencies from our various operations; fluctuations in certain working capital items, including inventory and accounts receivable, that may be necessary to support the growth of our business or new product introductions; progress of our research and development programs and costs associated with completing clinical studies and the regulatory process; collaborative and license arrangements with third parties; the cost of filing, prosecuting and enforcing our patent claims and other intellectual property rights; expenses associated with litigation; opportunities to in-license complementary te chnologies or potential acquisitions; potential milestone or other payments we may make to licensors or corporate partners; and technological and market developments that impact our royalty revenue, sales levels or competitive position in the marketplace.  

The sharp reduction in TAXUS royalty payments from BSC, the large amount of our outstanding indebtedness and the related cash interest payments due on such indebtedness, the current economic conditions affecting our and our partners’ financial stability, as well as the capital expenditures required to develop the medical products segment of our business, among other factors, have magnified our working capital needs and funding shortages.  As described below, on March 2, 2009, we announced that we had entered into a senior secured credit facility to provide enhanced liquidity in the near term and to provide us with the flexibility and time to explore longer-term options for our overall capital structure and working capital needs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—New Senior Secured Credit Facilities” in this Annual Report on Form 10-K. These longer-term options include one or more financ ial and strategic alternatives, including a capital influx from one or more new investors and the restructuring of our outstanding indebtedness, but such efforts have not been successful to date due to our significant debt burden. Due to numerous factors that may impact our future cash position, working capital and liquidity as discussed below and the significant cash that will be necessary to continue to service our current level of debt obligations, there can be no assurances that we will have adequate liquidity and capital resources to satisfy our financial obligations beyond 2009. If our cash flows are worse than expected, we may require additional funds in order to meet the funding requirements of our commercial operations for our research and development programs, to satisfy certain contractual obligations, for other operating and capital requirements, for potential acquisitions or in-licensing of technologies, to satisfy milestone or other payment obligations due to licensors or corporate partners, or to repay or refinance our indebtedness.  Financing in addition to our new credit facility may not be available, and even if available, may not be available on attractive or acceptable terms due to difficult credit markets and other factors.

Our obligation to pay cash interest on our existing debt has had, and we expect will continue to have, an adverse effect on our liquidity.

We currently have outstanding $325 million aggregate principal amount of Senior Floating Rate Notes due 2013 (the “Floating Rate Notes”) and $250 million aggregate principal amount of Senior Subordinated Notes due 2014 (the “Subordinated Notes”). We are obligated to make periodic cash interest payments on both the Floating Rate Notes and the Subordinated Notes. Using current interest rates, the annual combined cash interest cost of these notes is $43.1 million.

As a result of the cash interest payments we are obligated to make on our outstanding notes, we have had significant liquidity issues. If our cash flows are worse than expected, an inability to access additional sources of liquidity to fund our cash needs beyond 2009, or to refinance our outstanding notes, could further adversely affect our financial condition or results of operations and our ability to make payments on our debt, and could force us to seek the protection of the bankruptcy laws.

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During 2008, we commenced certain cost reductions with the goal of achieving positive consolidated free cash flow (after the incurrence of net interest expense).  These efforts may not be sufficient to achieve our goal.  If further cost reductions beyond those that are currently scheduled become necessary, our future prospects may be adversely impacted. 

In September 2008 we announced that we were pursuing various initiatives to reduce operating costs and focus our business efforts on our most promising near term product opportunities. We believe certain cost reduction measures, in addition to a potential financial or strategic transaction of significant magnitude, are concurrently necessary to address potential liquidity issues likely to arise in the near term relating to our current balance sheet structure.

We have implemented, and we expect to continue to implement, operating cost reductions across all functions in the company, including in research and development and general and administrative functions, with more limited reduction initiatives in sales and marketing. The cost reduction efforts are designed to reduce certain expenses while maintaining support for the sales our existing marketed product lines. Our remaining resources subsequent to these changes will be focused primarily on our existing Medical Products business, and on selected new products that have recently launched or are expected to be launched in the near future, including Quill SRS, the HemoStream™ Chronic Dialysis Catheter and the Bio-Seal™ Lung Biopsy System. Selected actions that have been taken, or that we expect to take, with respect to the reorganization include postponement of the scheduled launch of our 5-fluorouracil-eluting central venous catheter (5-FU CVC); closure of our resear ch and manufacturing facility in Rochester, New York; postponement of certain pre-clinical-stage research activities, pending the completion of partnering or other funding activities that would offset direct costs and personnel costs associated with such programs; reduction of certain financial and personnel contributions relating to our joint venture with Genzyme Corporation; potential amendment of and reduction in cash outlays related to our collaboration with Athersys, Inc.; rationalization or elimination of office and laboratory space in Vancouver, British Columbia, North Bend, Washington and Herndon, Virginia; rationalization of selected pending and issued intellectual property; elimination of certain expenses and reductions in personnel in all general and administrative and in research and development departments; selective reduction in certain sales and marketing investments personnel and in medical affairs; and postponement of selected planned capital expenditures.

Failure to achieve cost reductions through the above or other measures at the rate or levels we expect could adversely affect our ability to achieve our previously stated goal of achieving positive consolidated free cash flow (after the incurrence of net interest expense).  If we are required to make further reductions to our expense levels beyond those that are ongoing or currently contemplated, our future business prospects may be adversely impacted.

We depend on BSC for a significant amount of our future revenues and development of TAXUS.

Although the acquisition of our Medical Products segment has diversified our revenue, we anticipate that a significant amount of our revenue for the next few years will be derived from and dependent upon royalty revenues from BSC. We do not have control over the sales and marketing efforts, stent pricing, production volumes, distribution or regulatory environment related to BSC’s paclitaxel-eluting coronary stent program. Our involvement is limited to the terms of our 1997 License Agreement (as amended) with BSC and Cook, which provides for the receipt of royalty revenue based on the net sales of TAXUS and specifies the applicable royalty rates.

Royalty revenue from BSC for the quarter and year ended December 31, 2008 decreased by 46% and 24% respectively from the same periods in 2007, which BSC has attributed to a decline in the number of angioplasty procedures in the United States and is expected to decline further during the year ending December 31, 2009.  If BSC is impaired in its ability to market and distribute TAXUS, whether for this reason or due to a failure to comply with applicable regulatory requirements, discovery of a defect in the device, increased incidence of adverse events or identification of other safety issues, or previously-unknown problems with the manufacturing operations for TAXUS (any of which could, under certain circumstances, result in a manufacturing injunction), our revenues could be further significantly reduced. BSC’s failure to resolve these issues in a timely manner and to the satisfaction of the FDA and other regulatory authorities, or the occurrence of similar problem s in the future, could delay the launch of TAXUS Liberté in the United States and could have a significant impact on our royalty revenue from sales of TAXUS.

Additionally, BSC may terminate our 1997 License Agreement under certain circumstances, including, if BSC is unable to acquire a supply of paclitaxel at a commercially reasonable price, if BSC reasonably determines that the paclitaxel-eluting coronary stent is no longer commercially viable, or if our license agreement with the National Institutes of Health (“NIH”), certain rights under which are sublicensed to BSC, terminates. During the year ended December 31, 2008, revenue from BSC represented approximately 30% of our total revenue from continuing operations, compared to 37% in 2007.  

The amounts payable by BSC to us vary from 1% to 9% of net sales depending on various factors, including volume of sales from time to time and patent protection laws in the country of sale. From these amounts, we must pay certain royalties to our licensors, including the NIH and the University of British Columbia (“UBC”), under license agreements. For the year ended December 31, 2008, the average gross royalty rate earned was 7.1% for sales in the United States and 6.4% for sales in other countries. For the year ended December 31, 2007, the average gross royalty rate earned was 7.6% for sales in the United States and 5.6% for sales in other countries. There is no guarantee that royalty payments under our 1997 License Agreement will continue, and demand for BSC’s paclitaxel-eluting coronary stent products could continue to decline as a result of the factors stated above, as well as competition, technological change, reimbursement or other factors.  Also, the royalty rate payable by BSC could decline if and when patent protection expires, or no longer exists as defined by our 1997 License Agreement, in certain jurisdictions.

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Boston Scientific may be enjoined from the selling, or otherwise become subject to limitations applicable to its ability to sell, TAXUS in the United States.

Our royalty revenue derived from the sale of paclitaxel-eluting coronary stents depends on BSC’s ability to continue to sell its TAXUS Express 2 stent and to launch next generation paclitaxel-eluting stents, including the TAXUS Liberté stent, in the United States.  Historically, stent manufacture and sale is the subject of a substantial amount of U.S. patent litigation, and we anticipate that our licensees, including BSC and others, may be involved in material legal proceedings related to paclitaxel-eluting stents.  

Many of the products we are depending on to grow our business are not yet ready for sale or have only recently been introduced for sale.

Many of the products we are depending on to drive future growth are not yet ready for sale or have only recently been introduced for sale. For example, our Option IVC filter has not yet been approved for sale in the U.S, our 5-FU CVC has been approved for sale but has not yet been commercially launched, and our Quill SRS and HemoStream Chronic Dialysis Catheter products have only recently become available for sale. If any of these or our other products are not approved for sale or do not achieve market acceptance, our ability to generate revenues will be adversely affected.

If our products are alleged to be harmful, we may not be able to sell them, we may be subject to product liability claims not covered by insurance and our reputation could be damaged.

The nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of pharmaceutical products and medical devices. Using our drug candidates or devices in clinical trials may expose us to product liability claims. These risks will expand with respect to drugs or devices, if any, that receive regulatory approval for commercial sale. In addition, some of the products we manufacture and sell are designed to be implanted in the human body for varying periods of time. Even if a drug or device were approved for commercial use by an appropriate governmental agency, there can be no assurance that users will not claim that effects other than those intended may have resulted from our products. Component failures, manufacturing flaws, quality system failures, design defects, inadequate disclosure of product-related risks or product-related information or other safety issues with respect to these or other products we manufacture or sell could result in an unsafe condition or injury to, or death of, a patient. In addition, although many of our products are subject to review and approval by the FDA or other regulatory agencies, under the current state of law, any approval of our products by such agencies will not prohibit products liability lawsuits from being brought against us in the event that our products are alleged to be defective, even if such products have been used for their approved indications and appropriate labels have been included.

In the event that anyone alleges that any of our products are harmful, we may experience reduced consumer demand for our products or our products may be recalled from the market. In addition, we may be forced to defend individual or class action lawsuits and, if unsuccessful, to pay a substantial amount in damages. A recall of some of our products could result in exposure to additional product liability claims, lost sales and significant expense to perform the recall. The outcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, including not only actual damages, but also punitive damages. The magnitude of the potential loss relating to these types of lawsuits may remain unknown for substantial periods of time. In addition, the cost to defend against any future litigation may be significant.

We do not have insurance covering our costs and losses as a result of any recall of products or devices incorporating our technologies whether such recall is instituted by a device manufacturer or us as required by a regulatory agency.  Insurance to cover costs and losses associated with product recalls is expensive.  If we seek insurance covering product recalls in the future it may not be available on acceptable terms.  Even if obtained, insurance may not fully protect us against potential liability or cover our losses. Some manufacturers that suffered such claims in the past have been forced to cease operations or declare bankruptcy.

We do have insurance covering product liability.  However, our insurance may not fully protect us from potential product liability claims.  If a product liability claim or a series of claims is brought against us in excess of our insurance coverage, our business could suffer.  Some manufacturers that suffered such claims in the past have been forced to cease operations or even to declare bankruptcy.

Our success depends on the successful commercialization of our technology.

The successful commercialization of our technology is crucial for our success. Successful product development in the pharmaceutical industry is highly uncertain and very few research and development projects produce a commercial product. Medical devices, pharmaceutical applications and surgical implants utilizing our technology are in various stages of clinical and commercial development and face a variety of risks and uncertainties. Principally, these risks and uncertainties include the following:

o

Future clinical trial results may show that some or all of our technology, or the technology of our strategic collaborators that incorporate our technology, is not safe or effective.

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o

Even if our technology is shown to be safe and effective, we and our strategic collaborators may face significant or unforeseen difficulties in manufacturing our medical devices or the medical devices and surgical implants that use our technology. These difficulties may become apparent when we or our strategic collaborators manufacture the medical devices or surgical implants on a small scale for clinical trials and regulatory approval or may only become apparent when scaling-up the manufacturing to commercial scale.

o

Even if our technology-based products are successfully developed, receive all necessary regulatory approvals and are commercially produced, there is no guarantee that there will be market acceptance of them or that they will not cause unanticipated side effects in patients. For example, if drug-eluting stents are found to cause, or are perceived to be the cause of, blood clots in patients, then sales of our drug-eluting stent products may be adversely affected.  In addition, there is no guarantee that there will be market acceptance of our products. Our ability to achieve market acceptance for any of our products will depend on a number of factors, including whether or not competitors may develop technologies which are superior to or less costly than our technology-based products, and whether governmental and private third-party payers provide adequate coverage and reimbursement for our products, with the result that our technology-based products, e ven if they are successfully developed, manufactured and approved, may not generate significant revenues.

If we are unsuccessful in dealing with any of these risks, or if we are unable to successfully commercialize our technology for some other reason, it would likely seriously harm our ability to generate revenue.

We depend on our strategic collaborators for the development, regulatory approval, testing, manufacturing and the potential commercialization of our products.

Historically, our strategy has been to enter into various arrangements with corporate and academic collaborators, licensors, licensees and others for the research, development, clinical testing, regulatory approval, manufacturing, marketing and commercialization of our product candidates. For instance, we collaborate with BSC and Cook to develop and market paclitaxel-eluting coronary and peripheral stents, and with Baxter to manufacture and market our CoSeal^TM product for use as both a sealant and adhesion prevention product. Strategic collaborators, both existing (particularly BSC) and those that we may collaborate with in the future, are or may be essential to the development of our technology and potential revenue and we have little control over or access to information regarding our collaborators’ activities with respect to our products.

Our strategic collaborators may fail to successfully develop or commercialize our technology to which they have rights for a number of reasons, including:

o

failure of a strategic collaborator to continue, or delays in, its funding, research, development and commercialization activities;

o

the pursuit or development by a strategic collaborator of alternative technologies, either on its own or with others, including our competitors, as a means for developing treatments for the diseases targeted by our programs;

o

the preclusion of a strategic collaborator from developing or commercializing any product, through, for example, litigation or other legal action; and

o

the failure of a strategic collaborator to make required milestone payments, meet contractual milestone obligations or exercise options which may result in our terminating applicable licensing arrangements.

We have and we expect that we will continue to enter into licensing agreements with third parties to give us access to technologies that we may use to develop products through our strategic collaboration and partnership arrangements. The technologies governed by these license agreements may be critical to our ability to maintain our competitive advantage in our existing products and to develop future products. For example, through licenses with NIH and UBC, we have been granted access to technologies that have contributed to the development of the TAXUS paclitaxel-eluting coronary stent.

Pursuant to terms of existing license agreements, licensors have the ability to terminate their respective licenses upon the occurrence of certain specified circumstances. Events which may allow licensors to exercise these termination provisions include our bankruptcy, sub-licensing without the licensor’s consent, a transaction which results in a change of control of us, our failure to use the required level of diligence efforts to develop, market and sell products based on the licensed technology, our failure to maintain adequate levels of insurance with respect to the licensed technologies or other acts or omissions that may constitute a breach by us of our license agreement. In addition, any failure to continue to have access to these technologies may materially affect the benefits that we currently derive from the collaboration and partnership arrangements and may negatively impact our results and operations.

If our process related to product development does not result in an approved and commercially successful product, our business could be adversely affected.

We focus our research and development activities on areas in which we have particular strengths. The outcome of any development program is highly uncertain, notwithstanding how promising a particular program may seem. Success in pre-clinical and early-stage clinical trials may not necessarily translate into success in large scale clinical trials. Further, to be successful in clinical trials, increased investment will be necessary, which will adversely affect our short-term profitability.

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In addition, we will need to obtain and maintain regulatory approval in order to market new products. Notwithstanding the outcome of clinical trials for new products, regulatory approval may not be achieved. The results of clinical trials are susceptible to varying interpretations that may delay, limit or prevent approval or result in the need for post-marketing studies. In addition, changes in regulatory policy for product approval during the period of product development and review by regulators of a new application may cause delays or rejection. Even if we receive regulatory approval, this approval may include limitations on the indications for which we can market the product. There is no guarantee that we will be able to satisfy the applicable regulatory requirements, and we may suffer a significant variation from planned revenue as a result.

Our current and planned clinical trials may not begin on time, or at all, and may not be completed on schedule, or at all.

The commencement or completion of any of our clinical trials may be delayed or halted for numerous reasons, including, but not limited to, the following:

o

the FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;

o

the data and safety monitoring committee of a clinical trial recommends that a trial be placed on hold or suspended;

o

patients do not enroll in clinical trials at the rate we expect;

o

patients are not followed-up at the rate we expect;

o

patients experience adverse side effects or events related to our products;

o

patients die or suffer adverse medical effects during a clinical trial for a variety of reasons, including the advanced stage of their disease and medical problems, which may or may not be related to our product candidates;

o

regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials if investigators find us not to be in compliance with regulatory requirements;

o

the failure of our manufacturing process to produce finished products which conform to design and performance specifications;

o

changes in governmental regulations or administrative actions;

o

the interim results of the clinical trial are inconclusive or negative;

o

pre-clinical or clinical data is interpreted by third parties in different ways;

o

our clinical trial expenditures are constrained by our budgetary considerations; or

o

our trial design, although approved, is inadequate to demonstrate safety and/or efficacy.

Clinical trials may require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient follow-up in clinical trials depend on many factors, including the size of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites and the eligibility criteria for the study and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures to assess the safety and effectiveness of our products, or they may be persuaded to participate in contemporaneous trials of competitive products. Delays in patient enrollment or failure of patients to continue to participate in a study may cause an increase in costs and delays or may result in the failure of the trial.

Our clinical trial costs will increase if we have material delays in our clinical trials or if we need to perform more or larger clinical trials than planned. Adverse events during a clinical trial could cause us to repeat a trial, terminate a trial or cancel an entire program.

Pre-clinical development is a long, expensive and uncertain process, and we may terminate one or more of our pre-clinical development programs.

We may determine that certain pre-clinical product candidates or programs do not have sufficient potential to warrant the allocation of resources. Accordingly, we may elect to terminate our programs for such product candidates. If we terminate a pre-clinical program in which we have invested significant resources, our prospects will suffer, as we will have expended resources on a program that will not provide a return on our investment and we will have missed the opportunity to have allocated those resources to potentially more productive uses.

We may not be able to protect our intellectual property or obtain necessary intellectual property rights from third parties, which could adversely affect our business.

Our success depends, in part, on ensuring that our intellectual property rights are covered by valid and enforceable patents or effectively maintained as trade secrets and our ability to detect violations of our intellectual property rights and enforce such rights against others.

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The validity of our patent claims depends, in part, on whether prior art references described or rendered obvious our inventions as of the filing date of our patent applications. We may not have identified all prior art, such as U.S. and foreign patents, published applications or published scientific literature, that could adversely affect the validity of our issued patents or the patentability of our pending patent applications. For example, patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark Office, which we refer to as the U.S. Patent Office, for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in scientific or patent literature oft en lags behind actual discoveries. Therefore, we cannot be certain that we were the first to invent, or the first to file patent applications related to, our technology. In the event that a third party has also filed a U.S. patent application covering a similar invention, we may have to participate in an adversarial proceeding, known as an interference, declared by the U.S. Patent Office to determine priority of invention in the United States. It is possible that we may be unsuccessful in the interference, resulting in a loss of some portion or all of our U.S. patent positions. The laws in some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be s ubstantially harmed.

We frequently seek patents to protect our intellectual property. It should be recognized that we may not be able to obtain patent protection for key elements of our technology, as the patent positions of pharmaceutical, biotechnology and medical device companies are uncertain and involve complex legal and factual questions for which important legal issues are largely unresolved. For example, no consistent policy has emerged regarding the scope of health-related patent claims that are granted by the U.S. Patent Office or enforced by the U.S. federal courts. Rights under any of our issued patents may not provide us with commercially meaningful protection for our products or afford us a commercial advantage against our competitors or their competitive products or processes. In addition, even if a patent is issued, the coverage claimed in a patent application may be significantly reduced in the patent as granted.

There can be no assurance that:

o

patent applications will result in the issuance of patents;

o

additional proprietary products developed will be patentable;

o

licenses we have obtained from third parties that we use in connection with our technology will not be terminated;

o

patents issued will provide adequate protection or any competitive advantages;

o

patents will not be successfully challenged by any third parties; or

o

the patents of others will not impede our or our collaborators’ ability to commercialize our technology.

For example, the drug paclitaxel is itself not covered by composition of matter patents. Therefore, although we are developing an intellectual property portfolio around the use of paclitaxel for intended commercial applications, others may be able to engage in off-label use of paclitaxel for the same indications, causing us to lose potential revenue. Furthermore, others may independently develop similar products or technologies or, if patents are issued to us, design around any patented technology developed by us, which could affect our potential to generate revenues and harm our results of operations.

Patent protection for our technology may not be available based on prior art. The publication of discoveries in scientific or patent literature often lags behind actual discoveries. As a consequence, there may be uncertainty as to whether we or a third party were the first creator of inventions covered by issued patents or pending patent applications or that we or a third party were the first to file patent applications for such inventions. Moreover, we might have to participate in interference proceedings declared by the U.S. Patent Office, or other proceedings outside the United States, including oppositions, to determine priority of invention or patentability, which could result in substantial cost to us even if the outcome were favorable. An unfavorable outcome in an interference or opposition proceeding could preclude us, our collaborators and our licensees from making, using or selling products using the technology or require us to obtain license rights from prevaili ng third parties. We do not know whether any prevailing party would offer us a license on commercially acceptable terms, if at all. We may also be forced to pay damages or royalties for our past use of such intellectual property rights, as well as royalties for any continued usage.

As part of our patent strategy, we have filed a variety of patent applications internationally. Oppositions have been filed against various granted patents that we either own or license and which are related to certain of our technologies. See “Legal Proceedings” elsewhere in this Annual Report on Form 10-K for a discussion of the proceedings related to certain of such oppositions.

Our future success and competitive position depend in part on our ability to obtain and maintain certain proprietary intellectual property rights used in our approved products and principal product candidates. Any such success depends in part on effectively prosecuting claims against others who we believe are infringing our rights and by effectively defending claims of intellectual property infringement brought by our competitors and others. The stent-related markets have experienced rapid technological change and obsolescence in the recent past, and our competitors have strong incentives to attempt to stop or delay us from introducing new products and technologies. See “—We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.”

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We do not know whether the patents that we have obtained or licensed, or may be able to obtain or license in the future, would be held valid or enforceable by a court or whether a competitor’s technology or product would be found to infringe such patents. Further, we have no assurance that third parties will not properly or improperly modify or terminate any license they have granted to us.

We have obtained licenses from third parties with respect to their intellectual property that we use in connection with our technology. However, we may need to obtain additional licenses for the development of our current or future products. Licenses may not be available on satisfactory terms or at all. If available, these licenses may obligate us to exercise diligence in bringing our technology to market and may obligate us to make minimum guarantee or milestone payments. This diligence and these milestone payments may be costly and could adversely affect our business. We may also be obligated to make royalty payments on the sales, if any, of products resulting from licensed technology and may be responsible for the costs of filing and prosecuting patent applications. These costs could affect our results of operations and decrease our earnings.

Certain of our key technologies include trade secrets and know-how that may not be protected by patents. There can be no assurance that we will be able to protect our trade secrets. To help protect our rights, we undertake to require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that all employees, consultants, advisors and collaborators have signed such agreements, or that these agreements will adequately protect our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. Furthermore, we may not have adequate remedies for any such breach. Any disclosure of confidential data into the public domain or to third parties could allow our competitors to learn our trade secrets and use the information in competition against us.

If certain single-source suppliers fail to deliver key product components in a timely manner, our manufacturing ability would be impaired and our product sales could suffer.

We depend on certain single-source suppliers that supply components used in the manufacture of certain of our products, including our Quill SRS product. If we need alternative sources for key component parts for any reason, these component parts may not be immediately available to us. If alternative suppliers are not immediately available, we will have to identify and qualify alternative suppliers, and production of these components may be delayed. We may not be able to find an adequate alternative supplier in a reasonable time period or on commercially acceptable terms, if at all. Shipments of affected products have been limited or delayed as a result of such problems in the past, and similar problems could occur in the future. Our inability to obtain our key source supplies for the manufacture of our products may require us to delay shipments of products, harm customer relationships or force us to curtail or cease operations.

If physicians do not recommend and endorse our products or products that use our technology, or if our working relationships with physicians deteriorate, our products or products that use our technology may not be accepted in the marketplace, which could adversely affect our sales and royalty revenues.

In order for us to sell our products or continue to receive royalty revenues from the sale of products that use our technologies, physicians must recommend and endorse them. We believe that recommendations and endorsements by physicians will be essential for market acceptance of our products, and we do not know whether we will obtain the necessary recommendations or endorsements from physicians. Acceptance of our products or of products that use our technology depends on educating the medical community as to the distinctive characteristics, perceived benefits, safety, clinical efficacy and cost-effectiveness of these products compared to products of competitors, and on training physicians in the proper application of these products. If we are not successful in obtaining the recommendations or endorsements of physicians for our products or our collaborators are not successful in doing the same for their products that use our technology, our sales and royalty revenues may no t increase or may decline.

In addition, if we fail to maintain our working relationships with physicians, many of our products may not be developed and marketed in line with the needs and expectations of professionals who use and support our products. The research, development, marketing and sales of many of our new and improved products is dependent upon our maintaining working relationships with physicians. We rely on these professionals to provide us with considerable knowledge and experience regarding our products and the marketing of our products. Physicians assist us as researchers, marketing consultants, product consultants, inventors and as public speakers. If we are unable to maintain our strong relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could adversely affect the acceptance of our products in the marketplace and our sales.

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If we are unable to license new technologies to utilize in the development of products, or our existing license agreements are terminated, our ability to maintain our competitive advantage in our existing products and to develop future products may be adversely affected.

We have entered into, and we expect that we will continue to enter into, licensing agreements with third parties to give us access to technologies that we may use to develop products through our strategic collaboration and partnership arrangements. The technologies governed by these license agreements may be critical to our ability to maintain our competitive advantage in our existing products and to develop future products. For example, through licenses with the NIH and UBC, we have been granted access to technologies that have contributed to the developments of the Taxus Paclitaxel-Eluting Coronary Stent.

Pursuant to terms of our existing license agreements, licensors have the right under certain specified circumstances to terminate their respective licenses. Events that may allow licensors to exercise these termination provisions include:

o

our bankruptcy;

o

sub-licensing without the licensor’s consent;

o

a transaction which results in a change of control of us;

o

our failure to use the required level of diligence to develop, market and sell products based on the licensed technology;

o

our failure to maintain adequate levels of insurance with respect to the licensed technologies; or

o

other acts or omissions that may constitute a breach by us of our license agreement.

In addition, any failure to continue to have access to these technologies may materially adversely affect the benefits that we currently derive from our collaboration and partnership arrangements and may adversely affect our results and operations.

Compulsory licensing and/or generic competition may affect our business in certain countries.

In a number of countries, governmental authorities and other groups have suggested that companies which manufacture medical products (i.e., pharmaceuticals and medical devices) should make products available at a low cost. In some cases, governmental authorities have held that where a pharmaceutical or medical device company does not do so, their patents might not be enforceable to prevent generic competition. Alternatively, some governmental authorities could require that we grant compulsory licenses to allow competitors to manufacture and sell their own versions of our products, thereby reducing our sales or the sales of our licensee(s). In all of these situations, the results of our operations in these countries could be adversely affected.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

In connection with maintaining the value of our various intellectual property and exclusivity rights, we regularly evaluate the activities of others worldwide. Our success will depend, in part, on our ability to obtain patents, or licenses to patents, maintain trade secret protection and enforce our rights against others. Should it become necessary to protect those rights, we intend to pursue all cost-efficient strategies, including, when appropriate, negotiation or litigation in any relevant jurisdiction. For a summary of certain of our current legal proceedings, see “Legal Proceedings” elsewhere in this Annual Report on Form 10-K.

We intend to pursue and to defend vigorously any and all actions of third parties related to our material patents and pioneering technology. Any failure to obtain and protect intellectual property could adversely affect our business and our ability to operate could be hindered by the proprietary rights of others.

Our involvement in intellectual property litigation could result in significant expense, adversely affecting the development of product candidates or sales of the challenged product or intellectual property and diverting the efforts of our technical and management personnel, whether or not such litigation is resolved in our favor. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources and intellectual property litigation may be used against us as a means of gaining a competitive advantage. Competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. Uncertainties resulting from the initiation and continuation of any litigation could affect our ability to continue our operations. In the event of an adverse outcome as a defendant in any such liti gation, we may, among other things, be required to:

o

pay substantial damages or back royalties;

o

cease the development, manufacture, use or sale of product candidates or products that infringe upon the intellectual property of others;

o

expend significant resources to design around a patent or to develop or acquire non-infringing intellectual property;

o

discontinue processes incorporating infringing technology; or

o

obtain licenses to the infringed intellectual property.

We cannot be assured that we will be successful in developing or acquiring non-infringing intellectual property or that necessary licenses will be available upon reasonable terms, if at all. Any such development, acquisition or license could require the expenditure of substantial time and other resources and could adversely affect our business and financial results. If we cannot develop or acquire such intellectual property or obtain such licenses, we could encounter delays in any introduction of products or could find that the development, manufacture or sale of products requiring such licenses could be prohibited.

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If third parties file patent applications, or are issued patents claiming technology also claimed by us in pending applications, we may be required to participate in interference proceedings with the U.S. Patent Office, or other proceedings outside the United States, including oppositions, to determine priority of invention or patentability, which could result in substantial cost to us even if the eventual outcome were favorable.

Our ability to operate could be hindered by the proprietary rights of others.

A number of pharmaceutical, biotechnology and medical device companies as well as research and academic institutions have developed technologies, filed patent applications or received patents on various technologies that may be related to our business. Some of these technologies, applications or patents may conflict with or adversely affect our technologies or intellectual property rights, including those that we license from others. We are aware of other parties holding intellectual property rights that may represent prior art or other potentially conflicting intellectual property, including stents coated with agents intended to reduce restenosis. Any conflicts with the intellectual property of others could limit the scope of the patents, if any, that we may be able to obtain or result in the denial of our current or future patent applications altogether.

If patents that cover our activities are issued to other persons or companies, we could be charged with infringement. In the event that other parties’ patents cover any portion of our activities, we may be forced to develop alternatives or negotiate a license for such technology. We do not know whether we would be successful in either developing alternative technologies or acquiring licenses upon reasonable terms, if at all. Obtaining any such licenses could require the expenditure of substantial time and other resources and could harm our business and decrease our earnings. If we do not obtain such licenses, we could encounter delays in the introduction of our products or could find that the development, manufacture or sale of products requiring such licenses is prohibited.

Technological advances and evolving industry standards could reduce our future product sales, which could cause our revenues to grow more slowly or decline.

The markets for our products are characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent new product introductions and enhancements. The emergence of new industry standards in related fields may adversely affect the demand for our products. This could happen, for example, if new standards and technologies emerged that were incompatible with customer deployments of our applications. In addition, any compounds, products or processes that we develop may become obsolete or uneconomical before we recover any of the expenses incurred in connection with their development. We cannot assure you that we will succeed in developing and marketing product enhancements or new products that respond to technological change, new industry standards, changed customer requirements or competitive products on a timely and cost-effective basis. Additionally, even if we are able to develop new products and product enhancements, we cannot assu re you that they will achieve market acceptance.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no such claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain product candidates, which could severely harm our business.

We may incur significant costs complying with environmental laws and regulations.

Our research and development processes and manufacturing operations involve the use of hazardous materials. We are subject to federal, state, provincial, local and other laws and regulations in the countries in which we operate or sell our products, which govern the use, manufacture, storage, handling and disposal of such materials and certain waste products. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of an accident or the discovery of pre-existing contamination at one or more of our facilities, we could be held liable for any damages that result and any such liability could exceed our resources. We may not be specifically insured with respect to this liability, and we do not know whether we will be required to incur significant costs to comply with environmental laws and regulations in the future, or whether our operations, business or assets will be harmed by current or future environmental laws or re gulations.

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We face and will continue to face significant competition.

Competition from pharmaceutical companies, medical device companies, biotechnology companies and academic and research institutions is intense and is expected to increase. Many of our competitors and potential competitors have substantially greater product development capabilities, experience conducting clinical trials and financial, scientific, manufacturing, sales and marketing resources and experience than our company. Some of these competitors include JNJ, Guidant Corporation, Genzyme Corporation, Baxter, Abbott Laboratories, BSC, Medtronic, Inc., Wyeth, Inc., Novartis AG, C.R. Bard, the Allegiance division of Cardinal Health, Inc., Bausch & Lomb, and Covidien Ltd., among others. We also face competition from non-medical device companies, such as pharmaceutical companies, which may offer non-surgical alternative therapies for disease states which are currently or intended to be treated using our products. Other companies may:

o

develop and obtain patent protection for products earlier than us;

o

design around patented technology developed by us;

o

obtain regulatory approvals for such products more rapidly;

o

have greater manufacturing capabilities and other resources;

o

have larger or more experienced sales forces;

o

develop more effective or less expensive products; or

o

have greater success in obtaining adequate third-party payer coverage and reimbursement for their competing products.

While we intend to expand our technological capabilities in order to remain competitive, there is a risk that:

o

research and development by others will render our technology or product candidates obsolete or non-competitive;

o

treatments or cures developed by others will be superior to any therapy developed by us; and

o

any therapy developed by us will not be preferred to any existing or newly-developed technologies.

The commercial potential of our products and product candidates will be significantly limited if we are not able to obtain adequate levels of reimbursement or market acceptance for them.

Our ability to commercialize human therapeutic products and product candidates successfully will depend in part on the extent to which coverage and reimbursement for such products and related treatments will be available from government health administration authorities, private health insurers and other third-party payers or supported by the market for these products. There can be no assurance that third-party payers’ coverage and reimbursement will be available or sufficient for the products we might develop.

Third party payers are increasingly challenging the price of medical products and services and instituting cost containment measures to control or significantly influence the purchase of medical products and services. These cost containment measures, if instituted in a manner affecting the coverage of or payment for our products, could have a material adverse effect on our ability to operate profitably. In some countries in the European Union and in the United States, significant uncertainty exists as to the reimbursement status of newly-approved healthcare products, and we do not know whether adequate third-party coverage and reimbursement will be available for us to realize an appropriate return on our investment in product development, which could seriously harm our business. In the United States, while reimbursement amounts previously approved appear to have provided a reasonable rate of return, there can be no assurance that our products will continue to be reimbursed at current rates or that third-party payers will continue to consider our products cost-effective and provide coverage and reimbursement for our products, in whole or in part.

We cannot be certain that our products will gain commercial acceptance among physicians, patients and third party payers, even if necessary international and United States marketing approvals are maintained. We believe that recommendations and endorsements by physicians will be essential for market acceptance of our products, and we do not know whether these recommendations or endorsements will be obtained. We also believe that surgeons will not use these products unless they determine, based on clinical data and other factors, that the clinical benefits to patients and cost savings achieved through use of these products outweigh their cost. Acceptance among physicians may also depend upon the ability to train surgeons and other potential users of our products and the willingness of such users to learn these relatively new techniques.

Future legislation or regulatory changes to, or consolidation in, the healthcare system may affect our ability to sell our product profitably.

There have been, and we expect there will continue to be, a number of legislative and regulatory proposals to change the healthcare system, and some could involve changes that could significantly affect our business. Efforts by governmental and third-party payers to reduce health care costs or the announcement of legislative proposals or reforms to implement government controls could cause a reduction in sales or in the selling price of our products, which would seriously harm our business. Additionally, initiatives to reduce the cost of healthcare have resulted in a consolidation trend in the healthcare industry, including hospitals. This in turn has resulted in greater pricing pressures and the exclusion of certain suppliers from certain market segments as consolidated groups such as group purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions for some of our hospital customers. We expect that market demand, government regulation, and third-party reimbursement policies will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers and competitors, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, financial condition or results of operations.

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We must receive regulatory approval for each of our product candidates before they can be sold commercially in Canada, the United States or internationally, which can take significant time and be very costly.

The development, manufacture and sale of medical devices and human therapeutic products in Canada, the United States and internationally is governed by a variety of statutes and regulations. These laws require, among other things:

o

regulatory approval of manufacturing facilities and practices;

o

adequate and well-controlled research and testing of products in pre-clinical and clinical trials;

o

review and approval of submissions containing manufacturing, pre-clinical and clinical data in order to obtain marketing approval based on establishing the safety and efficacy of the product for each use sought, including adherence to cGMPs during production and storage; and

o

control of marketing activities, including advertising and labelling.

The product candidates currently under development by us or our collaborators will require significant research, development, pre-clinical and clinical testing, pre-market review and approval, and investment of significant funds prior to their commercialization. In many instances, we are dependent on our collaborators for regulatory approval and compliance, and have little or no control over these matters. The process of completing clinical testing and obtaining such approvals is likely to take many years and require the expenditure of substantial resources, and we do not know whether any clinical studies by us or our collaborators will be successful, that regulatory approvals will be received, or that regulatory approvals will be obtained in a timely manner. Despite the time and resources expended by us, regulatory approval is never guaranteed. Even if regulatory approval is obtained, regulatory agencies may limit the approval to certain diseases, conditions or categories of patients who can use them.

If any of our development programs are not successfully completed in a timely fashion, required regulatory approvals are not obtained in a timely fashion, or products for which approvals are obtained are not commercially successful, it could seriously harm our business.

Our products and manufacturing facilities that have, or may receive, regulatory approval, are or will be subject to ongoing regulation. In addition, we have little or no control over the manufacturing facilities of our collaborators in which certain of our products are manufactured.

Our products and manufacturing operations are subject to extensive regulation in the United States by the FDA and by similar regulatory agencies abroad. Ongoing regulation includes compliance with an array of manufacturing and design controls and testing, quality control, storage and documentation procedures. Regulatory agencies may also require expensive post-approval studies. Any adverse events associated with our products must also be reported to regulatory authorities. If deficiencies in our or our collaborators’ manufacturing and laboratory facilities are discovered, or we or our collaborators fail to comply with applicable post-market regulatory requirements, a regulatory agency may close the facility or suspend manufacturing.

With respect to products manufactured by third-party contractors, we are, and we expect to continue to be, dependent on our collaborators for continuing regulatory compliance and we may have little or no control over these matters. Our ability to control third-party compliance with FDA and other regulatory requirements will be limited to contractual remedies and rights of inspection. Our failure or the failure of third-party manufacturers to comply with regulatory requirements applicable to our products may result in legal or regulatory action by those regulatory authorities. There can be no assurance that our or our collaborators’ manufacturing processes will satisfy regulatory, cGMP or International Standards Organization (“ISO”) requirements.

In addition, there may be uncertainty as to whether or not we or others who are involved in the manufacturing process will be able to make the transition to commercial production of some of our newly developed products. A failure to achieve regulatory approval for manufacturing facilities or a failure to make the transition to commercial production for our products will adversely affect our prospects, business, financial condition and results of operations.

If we are unable to fully comply with federal and state “fraud and abuse laws”, we could face substantial penalties, which may adversely affect our business, financial condition and results of operations.

We are subject to various laws pertaining to health care fraud and abuse, including the federal Anti-Kickback Statute, physician self-referral laws, the federal False Claims Act, the federal Health Insurance Portability and Accountability Act of 1996, the federal False Statements Statute, and state law equivalents to these federal laws, which may not be limited to government-reimbursed items and may not contain identical exceptions. Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, civil and criminal penalties, damages, fines, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid, and the curtailment or restructuring of operations. Any action against us for violation of these laws could have a significant impact on our business.  In addition, we are subject to the U.S. Foreign Corrupt Practices Act.  We have a network of approximately 160 distributors.  Any action against us for violation by us or our distributors of this act could have a significant impact on our business.  

- 24 -

We may be unsuccessful in marketing, selling and distributing certain of our products.

We distribute a number of our products worldwide. In order to achieve commercial success for our approved products, we have previously expanded our sales and marketing force in the United States, Europe and other parts of the world.  If our distribution personnel or methods are not sufficient to ensure we have supply to meet demand for our products or if there is a quality control failure with our products, it could harm our prospects, business, financial condition and results of operations.

To the extent that we enter into co-promotion or other marketing and sales arrangements with other companies, any revenues received will be dependent on the efforts of others, and we do not know whether these efforts will be successful. Failure to develop a direct sales and marketing force or enter into appropriate arrangements with other companies to market and sell our products will reduce our ability to generate revenues.

We may encounter unanticipated costs or loss of business associated with terminating or relocating facilities and operations.

We have consolidated our Syracuse, New York and Puerto Rico manufacturing facilities into two facilities in Puerto Rico.  There is a risk that there may be further unanticipated costs associated with this consolidation.

Consolidation in the healthcare industry could have an adverse effect on our revenues and results of operations.

Many healthcare industry companies, including medical device companies, are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for medical devices that incorporate components produced by us. If we are forced to reduce our prices because of consolidation in the healthcare industry, our revenues would decrease and our consolidated earnings, financial condition or cash flows would suffer.

We may incur losses associated with foreign currency fluctuations.

We report our operating results and financial position in U.S. dollars in order to more accurately represent the currency of the economic environment in which we operate.

Our operations are in some instances conducted in currencies other than the U.S. dollar and fluctuations in the value of foreign currencies relative to the U.S. dollar could cause us to incur currency exchange losses. In addition to the U.S. dollar, we currently conduct operations in Canadian dollars, Euros, Swiss francs, Danish kroner, and U.K. pounds sterling. Exchange rate fluctuations may reduce our future operating results and comprehensive income. For the year ended December 31, 2008, we reported $0.5 million of net foreign exchange gains due to foreign currency fluctuations compared to $0.3 million of foreign exchange losses for the year ended December 31, 2007.

We have not entered into any forward currency contracts or other financial derivatives to hedge foreign exchange risk, and therefore we are subject to foreign currency transaction and translation gains and losses. We purchase goods and services in U.S. and Canadian dollars, Swiss francs, Danish krone, Euros, and U.K. pounds sterling, and earn a significant portion of our license and milestone revenues in U.S. dollars. Foreign exchange risk is managed primarily by satisfying foreign denominated expenditures with cash flows or assets denominated in the same currency.

Acquisition of companies or technologies may result in disruptions to our business.

As part of our business strategy, we may acquire additional assets and businesses principally relating to or complementary to our current operations. Any acquisitions or mergers by us will be accompanied by the risks commonly encountered in acquisitions of companies. These risks include, among other things, higher than anticipated acquisition costs and expenses, the difficulty and expense of integrating the operations and personnel of the companies and the loss of key employees and customers as a result of changes in management.

In addition, geographic distances may make integration of acquired businesses more difficult. We may not be successful in overcoming these risks or any other problems encountered in connection with any acquisitions.

If significant acquisitions are made for cash consideration, we may be required to use a substantial portion of our available cash, cash equivalents and short-term investments. Future acquisitions by us may cause large one-time expenses or create goodwill or other intangible assets that could result in significant asset impairment charges in the future. Acquisition financing may not be available on acceptable terms, if at all.

- 25 -

If we fail to hire and retain key management, scientific and technical personnel, we may be unable to successfully implement our business plan.

We are highly dependent on our senior management and scientific and technical personnel. The competition for qualified personnel in the healthcare field is intense, and we rely heavily on our ability to attract and retain qualified managerial, scientific and technical personnel. Our ability to manage growth effectively will require continued implementation and improvement of our management systems and the ability to recruit and train new employees. We may not be able to successfully attract and retain skilled and experienced personnel, which could harm our ability to develop our product candidates and generate revenues.

Risks Relating to our Indebtedness, Shares, and Organization and Structure

Our existing and future permitted debt could adversely affect our operations and we may need to restructure our existing debt to ensure that our cash flows are adequate to service our debt.

As of December 31, 2008, we had outstanding $575 million of indebtedness, excluding accrued interest. Excluding intercompany transactions, our subsidiaries that are not guarantors of the Floating Rate Notes or Subordinated Notes accounted for approximately $85.1 million or 30% of our total revenues for the year ended December 31, 2008 ($53.0 million or 18% respectively for the year ended December 31, 2007), and approximately $0.3 million of our total assets and $0.1 million of our total liabilities as of December 31, 2008 ($488 million and $116 million respectively for the year ended December 31, 2007).  The Floating Rate Notes and the Subordinated Notes are guaranteed by the same group of our subsidiaries.

The amount and terms of our indebtedness and other financial obligations have adversely affected our operations. For example, it:

o

increases our vulnerability to general adverse economic and industry conditions;

o

limits our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes;

o

requires us to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for operations and any future business opportunities, including acquisitions permitted by our Subordinated Notes and Floating Rate Notes;

o

limits our planning flexibility for, or ability to react to, changes in our business and the industry as discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Business Overview —Financial and Strategic Alternatives Process” in this Annual Report on Form 10-K; and

o

places us at a competitive disadvantage with competitors who may have less indebtedness and other obligations or greater access to financing.

The Floating Rate Notes bear interest at rates that fluctuate with changes in certain prevailing benchmarks. If interest rates increase, we may be unable to meet our debt service obligations under the Floating Rate Notes and Subordinated Notes and other indebtedness.

On March 2, 2009, we announced that we had completed a financing transaction with Wells Fargo Foothill, LLC, consisting of a delayed draw term loan facility of up to $10 million and a new secured revolving credit facility providing up to an additional $22.5 million in available credit. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources —New Senior Secured Credit Facilities” in this Annual Report on Form 10-K.  Although this new credit facility provides enhanced liquidity in the near term, if our cash flows are worse than expected, we may need to refinance or restructure all or a portion of our indebtedness on or before maturity.  We cannot assure you that we will be able to repay or refinance any of our debt on commercially reasonable terms or at all. If we are unable to refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as:

·

sales of certain assets to meet our debt service obligations;

·

sales of equity; and

·

negotiations with our lenders and the holders of our Floating Rate Notes and our Subordinated Notes to restructure the applicable debt.

We may not be able to implement one or more of these alternatives on terms acceptable to us or at all. Our financing arrangements and the indentures governing our Floating Rate Notes and Subordinated Notes may restrict, or market or business conditions may limit, our ability to do some of these things. Moreover, if we are unable to obtain sufficient financing when we need it or on terms satisfactory to us, our development activities could have to be delayed, curtailed or eliminated and our financial results could be adversely affected.

- 26 -

We and our subsidiaries are permitted to incur substantially more debt, which could further exacerbate the risks associated with our leverage.

The terms of the indentures governing the Floating Rate Notes and Subordinated Notes expressly permit the incurrence of additional amounts of debt for specified purposes. For example, on March 2, 2009, we announced that we had entered into a new revolving credit facility, and all borrowings under that facility rank senior to the Subordinated Notes and the related guarantees, to the extent of the value of the assets securing such borrowings.  Moreover, the indentures governing the Floating Rate Notes and Subordinated Notes do not impose any limitation on our incurrence of liabilities that are not defined as “Indebtedness” under such indentures (such as trade payables). If new debt or other liabilities are added to our and our subsidiaries’ current levels of debt, the related risks that we and they now face could be exacerbated.

If our cash flows prove inadequate to service our debt and provide for our other obligations, we may be required to refinance all or a portion of our existing debt or future debt at terms unfavorable to us.

Our ability to make payments on and refinance our debt, including the Floating Rate Notes, the Subordinated Notes and other financial obligations, and to fund our capital expenditures and acquisitions will depend on our ability to generate substantial operating cash flow. This will depend on our future performance, which will be subject to prevailing economic conditions and to financial, business and other factors beyond our control. Although we have recently entered into a new senior secured credit facility, if our cash flows are worse than expected, and the amounts we are able to draw on that facility prove inadequate to meet our debt service and other obligations in the future, we may be required to refinance all or a portion of our existing or future debt, including the Floating Rate Notes and Subordinated Notes, on or before maturity, to sell assets or to obtain additional financing. We cannot assure you that we will be able to refinance any of our indebtedness, inclu ding the Floating Rate Notes and Subordinated Notes, sell any such assets or obtain such additional financing on commercially reasonable terms or at all. Additionally, because the indentures governing the Floating Rate Notes and Subordinated Notes require that, upon the occurrence of a “change of control,” as defined in the indentures, we must make an offer to repurchase the Floating Rate Notes and Subordinated Notes, respectively, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase.  In the event that we were required to repurchase the Floating Rate Notes and Subordinated Notes pursuant to our offer, we would not have enough cash available to make such repurchase.

For additional risks related to the refinancing of our existing debt, see “—Our existing and future permitted debt could adversely affect our operations, and we need to restructure our existing debt to ensure that our cash flows are adequate to service our debt.”

The indentures governing the Floating Rate Notes and Subordinated Notes contain covenants that may limit our ability to take advantage of certain business opportunities advantageous to us that may arise.

The indentures governing the Floating Rate Notes and Subordinated Notes contain certain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to:

o

incur, assume or guarantee additional indebtedness or issue preferred stock;

o

pay dividends or make other equity distributions to our shareholders;

o

purchase or redeem our capital stock;

o

make certain investments;

o

create liens;

o

sell or otherwise dispose of assets;

o

engage in transactions with our affiliates; and

o

merge or consolidate with another entity or transfer all or substantially all of our assets.

These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand economic downturns in our business, industry or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise.

Although the indentures for the Floating Rate Notes and Subordinated Notes contain a fixed charge coverage test that limits our ability to incur indebtedness, this limitation is subject to a number of significant exceptions and qualifications. Moreover, the indentures do not impose any limitation on our incurrence of liabilities that are not considered “Indebtedness” under the indentures (such as operating leases), nor do they impose any limitation on the amount of liabilities incurred by subsidiaries, if any, that might be designated as “Unrestricted Subsidiaries” under the indentures. Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our leverage. Also, although the indentures limit our ability to make restricted payments, these restrictions are subject to significant exceptions and qualifications.

- 27 -

The current global credit and financial market conditions may exacerbate certain risks affecting our business.

Sales of our products are dependent, in large part, on reimbursement from government health administration authorities, private health insurers, distribution partners and other organizations. As a result of the current global credit and financial market conditions, these organizations may be unable to satisfy their reimbursement obligations or may delay payment. In addition, federal and state health authorities may reduce Medicare and Medicaid reimbursements, and private insurers may increase their scrutiny of claims. A reduction in the availability or extent of reimbursement could negatively affect our product sales and revenue.

Due to the recent tightening of global credit, there may be a disruption or delay in the performance of our third-party contractors, suppliers or collaborators. We rely on third parties for several important aspects of our business, including royalty revenue, portions of our product manufacturing, clinical development of future collaboration products, conduct of clinical trials and raw materials. If such third parties are unable to satisfy their commitments to us, our business would be adversely affected.

Certain of our products are used in elective medical procedures which are not covered by insurance.  Adverse changes in the economy or other conditions or events have had and may continue to have an adverse effect on consumer spending and may reduce the demand for these procedures.  Any such changes, conditions or events could have an adverse effect on our sales and results of operations.

The NASDAQ and/or the Toronto Stock Exchange may delist our common shares from quotation on its exchange, which could limit investors’ ability to make transactions in our common shares and subject us to additional trading restrictions.

The NASDAQ rules provide that the exchange can delist a company’s shares for failing to maintain a share price above a dollar. Our common shares are currently trading at less than a dollar on the NASDAQ. The NASDAQ has currently placed a moratorium on delistings for failing to maintain a share price above a dollar. We cannot assure you that the price of our common shares will rise above a dollar or that our common shares will continue to be traded on the NASDAQ in the future.

The Toronto Stock Exchange may delist a company’s shares if, in the opinion of the Toronto Stock Exchange, the financial condition and/or the operating results of the company appear to be unsatisfactory or appear not to warrant continuation of the securities on the trading list.  The Toronto Stock Exchange may consider a number of factors when determining whether to delist a company’s shares, including the company’s ability to meet its obligations as they become due, working capital position, quick asset position, total assets, capitalization, cash flow, earnings, annual revenues, public distribution of the listed shares, share price and trading activity. We cannot assure you that we will continue to meet the listing requirements of the Toronto Stock Exchange or that our common shares will continue to be traded on the Toronto Stock Exchange in the future.

The threat of delisting and/or a delisting of our common shares could have material adverse effects by, among other things:

·

reducing the liquidity and market price of our common shares;

·

reducing the number of investors willing to hold or acquire our commons shares, thereby further restricting our ability to obtain equity financing;

·

reducing the amount of news and analyst coverage of our company; and

·

reducing our ability to retain, attract and motivate our directors, officers and employees.

United States investors may not be able to obtain enforcement of civil liabilities against us.

We were formed under the laws of British Columbia, Canada. A substantial portion of our assets are located outside the United States. In addition, a majority of the members of our board of directors and our officers are residents of countries other than the United States. As a result, it may be impossible for United States investors to affect service of process within the United States upon us or these persons or to enforce against us or these persons any judgments in civil and commercial matters, including judgments under United States federal or state securities laws. In addition, a Canadian court may not permit United States investors to bring an original action in Canada or to enforce in Canada a judgment of a state or federal court in the United States.

Laws and provisions in our notice of articles, articles, shareholder rights plan and stock option plan could delay or deter a change in control.

Our notice of articles and articles allow for the issuance of Class I preference shares. The board of directors may set the rights and restrictions of any series of preference shares in its sole discretion without the approval of the holders of our common shares. The rights and restrictions of our preference shares may be superior to those of the common shares. Accordingly, the issuance of preference shares also could have the effect of delaying or preventing a change of control of our company. There are at present, no preference shares outstanding.

In addition, under the Business Corporations Act (British Columbia) and our articles, some business combinations, including the sale, lease or other disposition of all or substantially all of our undertaking, must be approved by at least three-quarters of the votes cast by our shareholders in aggregate or, in some cases, approved by at least three-quarters of the votes cast by holders of each class of shares.  In some cases, a business combination must be approved by a court. Shareholders may also have a right to dissent from the transaction, in which case, we would be required to pay dissenting shareholders the fair value of their common shares provided they have followed the required procedures.

- 28 -

In addition, our shareholders adopted a shareholder rights plan which provides for substantial dilution to an acquiror of 20% or more of our common shares, except in certain circumstances, including a) the acquiror makes a bid to all shareholders, which, among other things, is held open for at least 60 days and is accepted by independent shareholders holding at least 50% of the outstanding common shares, or b) the bid is otherwise approved by our board of directors.  The shareholder rights plan was amended and restated on October 30, 2008 and must be reconfirmed by the shareholders every three years.

Furthermore, all of our executive officers have contractual rights under employment agreements that provide for 12 to 24 months severance pay in the event of a change of control of our company.  Under our stock option plan, following a change of control, all outstanding stock options vest immediately.  In the event that an offer is made to our shareholders generally or to a class of our shareholders, that if accepted would result in the offeror becoming a control person (generally meaning a person holding 20% or more of a company’s voting shares), our board of directors has the discretion under our stock option plan to determine to accelerate the vesting and expiry date of all outstanding options.

Limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition to review any acquisition of a significant interest in our company. This legislation grants the Commissioner jurisdiction to challenge such an acquisition before the Competition Tribunal if the Commissioner believes that it would, or would be likely to, result in a substantial lessening or prevention of competition in any market in Canada. The Investment Canada Act (Canada) subjects an acquisition of control of a company by a non-Canadian to government review if the value of our assets as calculated pursuant to the legislation exceeds a threshold amount which, for an investor from a World Trade Organization member country, is CDN$312 million in 2009. A reviewable acquisition may not proceed unless the relevant minister is satisfied or is deemed to be satisfied that there is likely to be a net benefit to Ca nada from the transaction.

Each of these matters could delay or deter a change in control that would be attractive to, and provide liquidity for, shareholders, and could limit the price that investors are willing to pay in the future for our common shares.

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

- 29 -

Item 2.

PROPERTIES

We have 16 facilities located in six different countries, which include Canada, the United States, Puerto Rico, the United Kingdom, Denmark and Switzerland. Of the 16 facilities, 11 are primarily used to manufacture and distribute medical devices or materials for medical device products. Our other 5 facilities are primarily used for research, development and administrative activities. Collectively, these facilities have over 540,000 square feet of modern technical manufacturing, research and administrative operations. The following chart summarizes the facilities where our domestic and international operations occur:

Location1	Primary Purpose	Segment	Owned or Leased
Chicago, IL	Administration	Medical Products	Leased
Lausanne, Switzerland	Administration	Medical Products	Leased
Gainesville, FL	Manufacturing	Medical Products	Owned
Henrietta, NY	Manufacturing	Medical Products	Leased
Laguna Hills, CA	Manufacturing	Medical Products	Leased
North Bend, WA	Administration	Pharmaceutical	Leased
		Technologies
Reading, PA	Manufacturing	Medical Products	Owned
Aguadilla, Puerto Rico	Manufacturing	Medical Products	Leased
Rincon, Puerto Rico	Manufacturing	Medical Products	Leased
Stenlose, Denmark (3 facilities)	Manufacturing	Medical Products	2 Leased, 1 Owned
Taunton, United Kingdom	Manufacturing	Medical Products	Owned
Vancouver, B.C. (2 facilities).	Administration and Research	Pharmaceutical	Leased
		Technologies
Wheeling, IL	Manufacturing	Medical Products	Owned
1 Excluded from this list are our two properties that are vacant and are held for sale. One facility is in Syracuse, NY with 77,000 square feet and the other is in Rincon, Puerto Rico with 31,000 square feet.

We have several important, and in some cases proprietary, manufacturing capabilities and processes. These include specific capabilities in the areas of various metal bending, grinding and chemical etching, electroplating and electropolishing, plastic injection molding, wire coating, braiding and weaving of surgical textiles and kit assembly and packaging.

- 30 -

Item 3.

LEGAL PROCEEDINGS

i)

On April 4, 2005, the Company together with BSC commenced a legal action in the Netherlands against Sahajanand Medical Technologies Pvt. Ltd. for patent infringement.  On May 3, 2006, the Dutch trial court ruled in favor of Angiotech, finding that Angiotech’s EP (NL) 0 706 376 patent was valid, and that SMT’s Infinnium™ stent infringed the patent. On March 13, 2008, a Dutch Court of Appeal held a hearing to review the correctness of the trial court’s decision.  The Court of Appeal released its judgment on January 27, 2009, ruling against Sahajanand (finding the Angiotech patent novel, inventive, and sufficiently disclosed).  The Court of Appeal however requested amendment of claim 12 before rendering its decision on infringement.  This amendment is due to the court on April 7^th, 2009.  A date for the court’s decision on infringement has not yet been set.  The decisio n of the Court of Appeal is appealable to the Supreme Court of the Netherlands.

ii)

On March 23, 2006, RoundTable Healthcare Partners, LP as Seller Representative, Angiotech as Buyer, and LaSalle Bank as Escrow Agent, executed an Escrow Agreement for certain representations and warranties under which Angiotech deposited $20 million with LaSalle.  On April 4, 2007, LaSalle Bank received an Escrow Claim Notice issued by Angiotech, which directed LaSalle to remit the $20 million to Angiotech as Buyer. On or about Apri1 16, 2007, LaSalle received from RoundTable a Notice of Objection to Angiotech's Escrow Claim Notice. On July 3, 2007, LaSalle filed an action in the Circuit Court of Cook County, IL, asking the court to resolve this dispute. After various hearings and discussions, Angiotech executed a Joint Letter of Direction allowing the release of $6.5 million to RoundTable, thereby leaving the amount in dispute being approximately $13.5 million. On March 21, 2008, this action was moved to the US District Court S outhern District of New York.  We are now in the discovery phase of this litigation.

iii)

In July 2004, Dr. Gregory Baran initiated legal action, alleging infringement by our subsidiary, Medical Device Technologies Inc (“MDT”) of two U.S. patents owned by Dr. Baran. These patents allegedly cover MDT’s BioPince™ automated biopsy device. On September 25, 2007, the judge issued her decision pursuant to the Markman hearing of December 2005.  We have submitted a Motion for Summary Judgment to the court based upon the judges’ Markman decision.  No hearing date has yet been set by the court.

iv)

At the EPO, various patents either owned or licensed by or to the Company are in opposition proceedings including the following:

·

In EP0774964 (which is licensed from the Massachusetts Institute of Technology) the patent was revoked after a hearing held July 17, 2007. An appeal was filed on October 2, 2007. The parties have been summoned to attend Oral Proceedings at the EPO on March 19, 2009.

·

In EP0784490, the proceedings are ongoing and the parties are awaiting communication from the EPO.

·

In EP0809515 (which is licensed from (and to) BSC), the EPO held an oral hearing on January 30, 2008 and thereafter revoked this patent. An appeal was filed on April 22, 2008. The parties have been summoned to attend Oral Proceedings at the EPO on June 19, 2009.

·

In EP0830110 (which is licensed from Edwards LifeSciences Corporation) an amended form of this patent was found valid after an oral hearing on September 28, 2006; however, the opponent appealed the decision on December 21, 2006 and briefs are being exchanged.

·

In EP0876166 the EPO held an oral hearing on September 24, 2008, and thereafter revoked this patent. Our deadline to file an appeal is March 23, 2009 and we have determined that we will not file an appeal.

·

In EP0975340 (which is licensed from (and to) BSC), Oral Proceedings were held on December 4, 2008. The EPO issued an Interlocutory Decision on December 23, 2008 stating the patent was found to have met the requirements of the convention. The decision may be appealed, but no appeal has yet been filed.

·

In EP1118325 (which is licensed from the NIH), the EPO has set a hearing date of April 7, 2009.

·

In EP1155689, briefs are being exchanged.  

·

In EP1407786 (which is licensed from (and to) BSC), the patent was revoked in a decision from the EPO on December 9, 2008. An appeal was filed on January 30, 2009.

·

In EP1429664, briefs are being exchanged.  

·

In EP1159974, briefs are being exchanged.  

·

In EP1075843, a response to the Notice of Appeal was filed. We are awaiting further action from the EPO.  

·

In EP0991359, our response to the opposition is to be filed prior to the deadline.

·

In EP1322235, briefs have been filed and we are awaiting further action from the EPO.  

·

In EP1216042, an oral hearing has been scheduled for April 23, 2009.

·

In EP0876165, the parties have been summoned to attend an Oral Proceeding at the EPO on June 24, 2009.

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Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) On October 30, 2008, we held its 2008 annual and special general meeting of shareholders.

(b) Proxies were solicited by our management pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. Those directors nominated (Proposal 1) in the proxy statement are shown under (c) below. There was no solicitation opposing management’s nominees for directors and all such nominees were elected pursuant to the vote of the shareholders.

(c) Those matters voted upon and the results were as follows:

(1)

Fixing the size of the Board of Directors at seven and the election of directors (Proposal 1);

(2)

Appointment of auditors for the ensuing year and the authorization of the directors to fix the remuneration to be paid to the auditors (Proposal 2);

(3)

Reconfirmation of our Shareholder Rights Plan with minor technical amendments (Proposal 3); and

(4)

Amendment of our articles to increase the quorum for meetings of shareholders to comply with NASDAQ’s quorum requirements (Proposal 4).

Proposal	For	Against	Withheld	Abstentions	Broker Non-Votes
Proposal 1	53,939,257	1,105,027	-	-	1
William L. Hunter	53,893,391	-	1,150,892	-	2
David T. Howard	53,406,923	-	1,637,360	-	2
Hartley T. Richardson	33,196,622	-	21,822,518	-	2
Edward M. Brown	53,907,578	-	1,136,705	-	2
Arthur H. Willms	53,918,873	-	1,125,410	-	2
Laura Brege	53,880,741	-	1,163,542	-	2
Henry A. McKinnell Jr.	53,919,391	-	1,124,892	-	2
Proposal 2	54,920,220	-	124,064	-	1
Proposal 3	30,978,013	961,921	-	-	23,104,351
Proposal 4	53,775,536	1,268,748	-	-	1

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PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Trading Price and Volume

Our common shares are publicly traded on the Toronto Stock Exchange under the trading symbol “ANP” and on the NASDAQ Global Select Market under the trading symbol “ANPI”. The following table summarizes the high and low prices for our common shares during 2008 and 2007 on quarterly basis. The prices listed below are in Canadian dollars for trading on the Toronto Stock Exchange and in U.S dollars for trading on the NASDAQ Global Select Market.

Quarter	Canadian Dollars (TSX)		U.S. Dollars (NASDAQ)
2008:	High	Low	High	Low
Q1	$3.68	$1.50	$3.68	$1.50
Q2	3.55	2.07	3.49	2.10
Q3	3.10	0.55	3.10	0.53
Q4	0.88	0.11	0.79	0.10

Quarter	Canadian Dollars (TSX)		U.S. Dollars (NASDAQ)
2007:	High	Low	High	Low
Q1	$11.15	$6.16	$9.47	$5.33
Q2	8.00	6.02	7.40	5.28
Q3	7.89	5.75	7.56	5.40
Q4	7.69	3.05	7.90	3.10

Comparative Shareholder Return Performance Graph

The following graph compares cumulative total Shareholder return on $100 invested in Common shares of the Company on December 31, 2003 with the cumulative total return of the S&P/TSX Composite Index (“S&P/TSX”) and the NASDAQ Biotechnology Index, assuming the re-investment of dividends.  The Common shares began trading on the TSX on December 18, 1997.  

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Based on information provided by our transfer agent, as of March 5, 2009, we had 600 shareholders of record. We believe we have approximately 14,300 beneficial owners of our common shares in total. This belief is based on the preliminary search for beneficial holders conducted in order to estimate the number of proxy statements and annual reports required by intermediaries for our 2009 Annual General Meeting.

Dividend Policy

We have not declared or paid any dividends on its common shares since inception. The declaration of dividend payments is at the sole discretion of our Board of Directors. The Board of Directors may declare dividends in the future depending upon numerous factors that ordinarily affect dividend policy, including the results of our operations, our financial position and general business conditions.

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Item 6.

SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial information for each of our five most recently completed financial years. This data should be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of Operations, the audited consolidated financial statements, including the notes to the financial statements, and the risk factors set out in this Annual Report on Form 10-K.

CONSOLIDATED STATEMENTS OF INCOME

		Year ended			Year ended			Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,			December 31,			December 31,
(in thousands of U.S. $)		2008			2007			2006			2005			2004
REVENUE
Royalty revenue	$	91,546		$	116,659		$	175,254		$	189,203		$	100,638
Product sales, net (6)		190,816			170,193			138,590			5,334			8,281
License fees		910			842			1,231			5,111			17,312
		283,272			287,694			315,075			199,648			126,231
EXPENSES
License and royalty fees		14,258			18,652			25,986			28,345			18,072
Cost of products sold		101,052			94,949			69,543			5,653			5,632
Research and development		53,192			53,963			45,393			31,988			26,659
Selling, general and administration		98,483			99,315			78,933			37,837			21,180
Depreciation and amortization		33,998			33,429			36,014			9,540			9,235
In-process research and development		2,500			8,125			1,042			54,957			6,375
		303,483			308,433			256,911			168,320			87,153
Operating (loss) income		(20,211	)		(20,739	)		58,164			31,328			39,078
Other (expenses) income:
Foreign exchange (loss) gain		540			(341	)		515			1,092			2,050
Investment and other income		1,192			10,393			6,235			10,006			5,668
Interest expense on long-term debt		(44,490	)		(51,748	)		(35,502	)		-			-
Write-down and other deferred financing charges (1)		(16,544	)		-			(9,297	)		-			-
Write-down / loss on redemption of investments (2)		(23,587	)		(8,157	)		-			(5,967	)		-
Write-down of assets held for sale (3)		(1,283	)		-			-			-			-
Write-down of goodwill (4)		(649,685	)		-			-			-			-
Total other (expenses) income		(733,857	)		(49,853	)		(38,049	)		5,131			7,718
(Loss) income from continuing operations before
income taxes and cumulative effect of change in
accounting policy		(754,068	)		(70,592	)		20,115			36,459			46,796
Income tax (recovery) expense		(12,892	)		(14,545	)		2,092			28,055			(6,183	)
(Loss) income from continuing operations before
cumulative effect of change in accounting policy		(741,176	)		(56,047	)		18,023			8,404			52,979
Loss from discontinued operations, net of income		-			(9,893	)		(7,708	)		(9,591	)		(527	)
taxes (5)
Cumulative effect of change in accounting policy		-			-			399			-			-
Net (loss) income	$	(741,176	)	$	(65,940	)	$	10,714		$	(1,187	)	$	52,452
Basic net income (loss) per common share:
Continuing operations	$	(8.71	)	$	(0.66	)	$	0.21		$	0.10		$	0.63
Discontinued operations		-			(0.12	)		(0.09	)		(0.11	)		-
Total	$	(8.71	)	$	(0.78	)	$	0.12		$	(0.01	)	$	0.63
Diluted net income (loss) per common share:
Continuing operations	$	(8.71	)	$	(0.66	)	$	0.21		$	0.10		$	0.62
Discontinued operations		-			(0.12	)		(0.09	)		(0.11	)		(0.01	)
Total	$	(8.71	)	$	(0.78	)	$	0.12		$	(0.01	)	$	0.61

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Basic weighted average number of common
shares outstanding (in thousands)	85,118	85,015	84,752	84,121	83,678
Diluted weighted average number of common
shares outstanding (in thousands)	85,118	85,015	85,437	85,724	85,697

BALANCE SHEET INFORMATION

As at	December 31,
(in thousands of U.S.$)		2008			2007			2006			2005			2004
Cash, cash equivalents and short-term investments	$	39,800		$	91,326		$	108,617		$	195,442		$	271,484
Working capital		47,737			97,745			115,892			181,317			268,300
Total assets		385,197			1,150,108			1,224,624			494,694			479,077
Total long-term obligations		633,655			645,096			658,366			4,459			12,882
Deficit		(843,673	)		(102,497	)		(34,893	)		(45,607	)		(44,420	)
Total shareholders’ (deficit) equity		(299,873	)		442,072			498,692			462,680			441,826

QUARTERLY RESULTS

The following tables present our unaudited consolidated quarterly results of operations for each of our last eight quarters:

	Quarter ended
(in thousands of U.S.$, except per share data)		December 31,			September 30,			June 30,			March 31,
		2008			2008			2008			2008
Revenue
Royalty and license revenue	$	16,027		$	21,858		$	25,589		$	28,982
Product sales		46,054			46,502			50,533			47,727
Total revenues		62,081			68,360			76,122			76,709
Gross Margin:
Pharmaceutical Technologies		13,254			18,406			21,928			24,611
Medical Products		22,431			21,730			23,724			21,878
Total Gross Margin		35,685			40,136			45,652			46,489
Operating loss		(1,839	)		(2,452	)		(7,284	)		(8,636	)
Net loss	$	(76,964	)	$	(622,378	)	$	(26,071	)	$	(15,763	)
Basic loss per share	$	(0.90	)	$	(7.31	)	$	(0.31	)	$	(0.19	)
Diluted loss per share	$	(0.90	)	$	(7.31	)	$	(0.31	)	$	(0.19	)

	Quarter ended
(in thousands of U.S.$, except per share data)		December 31,			September 30,			June 30,			March 31,
		2007			2007			2007			2007
Revenue
Royalty and license revenue	$	27,423		$	26,674		$	29,932		$	33,472
Product sales		43,935			41,352			42,420			42,486
Total revenues		71,358			68,026			72,352			75,958
Gross Margin:
Pharmaceutical Technologies		23,007			22,148			25,663			28,031
Medical Products		20,247			17,967			17,336			19,694
Total Gross Margin		43,254			40,115			42,999			47,725
Operating (loss) income		(6,034	)		(5,907	)		(11,150	)		2,352
Net (loss) income from continuing operations		(23,498	)		(10,832	)		(15,045	)		(6,672	)
Net (loss) income		(26,444	)		(11,988	)		(15,215	)		(12,293	)
Basic loss per share:
Continuing operations	$	(0.28	)	$	(0.13	)	$	(0.18	)	$	(0.08	)
Discontinued operations		(0.03	)		(0.01	)		-			(0.07	)
Total	$	(0.31	)	$	(0.14	)	$	(0.18	)	$	(0.15	)
Diluted loss per share:
Continuing operations	$	(0.28	)	$	(0.13	)	$	(0.18	)	$	(0.08	)
Discontinued operations		(0.03	)		(0.01	)		-			(0.07	)
Total	$	(0.31	)	$	(0.14	)	$	(0.18	)	$	(0.15	)

1) We expensed the deferred financing charge of $13.5 million related to the suspension of the note purchase agreement in the third quarter of 2008 and a further $3.0 million in the fourth quarter of 2008. In 2006, we repaid a credit facility of $425 million and as a result, expensed the unamortized balance of the deferred financing charges related to this facility.

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2) In 2008, we wrote-down and realized a loss on investments of $10.7 million, $1.9 million and $11.0 million in the second, third and fourth quarters respectively. In 2007, we wrote down and realized a loss on investments of $8.2 million in the first quarter.

3) We recorded an impairment charge of $1.3 million in the fourth quarter of 2008 on the two properties we intend to sell and classified these properties and one other as available for sale.

4) We initially wrote-down our goodwill carrying value associated with our Medical Products segment by $599.4 million at the end of the third quarter of 2008 and wrote off the remaining balance of $26.8 million in the fourth quarter of 2008. We also determined that the goodwill associated with our Pharmaceuticals Technology segment was impaired as at December 31, 2008 and accordingly, wrote off the remaining balance of $23.5 million. As a result, our goodwill balance is nil for the Medical Products and Pharmaceutical Technology segments as at December 31, 2008.

5) We recorded an impairment charge of $7.7 million in the fourth quarter of December 2006 related to our decision to discontinue the following subsidiaries: American Medical Instruments Inc. (Dartmouth), Point Technologies, Inc and Point Technologies SA. In the first quarter of 2007, we recorded a further impairment of $8.9 million related to the discontinuance of these operations.

6) We recorded $2.6 million against our product sales revenue in the second quarter of 2007 related to our decision to accept returns of Contour Threads brand name as part of our consolidation and discontinuation of the Contour Threads brand name, coincident with our launch of our Quill SRS brand name.

On March 23, 2006, we completed the acquisition of 100% of the outstanding share of privately held AMI, a leading independant manufacturer of specialty, single use medical devices.

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Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ANGIOTECH PHARMACEUTICALS, INC.

For the year ended December 31, 2008

(All amounts following are expressed in U.S. dollars unless otherwise indicated.)

The following management’s discussion and analysis (“MD&A”), dated December 31, 2008, should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2008 prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) for the presentation of annual financial information. Additional information relating to our Company, including our 2007 Audited Annual Financial Statements and 2007 Annual Information Form (“AIF”), is available by accessing the SEDAR website at www.sedar.com or the SEC’s IDEA website at idea.sec.gov

Forward-Looking Statements and Cautionary Factors That May Affect Future Results

Statements contained in this Annual Report on Form 10-K that are not based on historical fact, including without limitation statements containing the words “believes,” “may,” “plans,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “expects” and similar expressions, constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and constitute “forward-looking information” within the meaning of applicable Canadian securities laws. All such statements are made pursuant to the “safe harbor” provisions of applicable securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2009 and beyond, our strategies or future actions, our targets, expectations for our financial condition and t he results of, or outlook for, our operations, research and development and product and drug development. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements.

Many such known risks, uncertainties and other factors are taken into account as part of our assumptions underlying these forward-looking statements and include, among others, the following: general economic and business conditions, both nationally and in the regions in which we operate; market demand; technological changes that could impact our existing products or our ability to develop and commercialize future products; competition; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; availability of financial reimbursement coverage from governmental and third-party payers for products and related treatments; adverse results or unexpected delays in pre-clinical and clinical product development processes; adverse findings related to the safety and/or efficacy of our products or products sold by our partners; decisions, and the timing of decisions, made by health regulatory agencies regarding app roval of our technology and products; the requirement for substantial funding to conduct research and development, to expand manufacturing and commercialization activities or to consummate acquisitions; and any other factors that may affect our performance.

In addition, our business is subject to certain operating risks that may cause any results expressed or implied by the forward-looking statements in this Annual Report on Form 10-K to differ materially from our actual results. These operating risks include: our ability to attract and retain qualified personnel; our ability to successfully complete pre-clinical and clinical development of our products; changes in our business strategy or development plans; our failure to obtain patent protection for discoveries; loss of patent protection resulting from third-party challenges to our patents; commercialization limitations imposed by patents owned or controlled by third parties; our ability to obtain rights to technology from licensors; liability for patent claims and other claims asserted against us; our ability to obtain and enforce timely patent and other intellectual property protection for our technology and products; the ability to enter into, and to maintain, corporate alliances relating to the development and commercialization of our technology and products; market acceptance of our technology and products; our ability to successfully manufacture, market and sell our products; the availability of capital to finance our activities; our ability to restructure and to service our debt obligations; and any other factors referenced in our other filings with the applicable Canadian securities regulatory authorities or the SEC.

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For a more thorough discussion of the risks associated with our business, see the section entitled “Risk Factors” in this Annual Report on Form 10-K.

Given these uncertainties, assumptions and risk factors, investors are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this Annual Report on Form 10-K to reflect future results, events or developments.

This Annual Report on Form 10-K contains forward-looking information that constitutes "financial outlooks" within the meaning of applicable Canadian securities laws.  We have provided this information to give shareholders general guidance on management's current expectations of certain factors affecting our business, including our financial results.  Given the uncertainties, assumptions and risk factors associated with this type of information, including those described above, investors are cautioned that the information may not be appropriate for other purposes.

Business Overview

We are a specialty pharmaceutical and medical device company that discovers, develops and markets innovative technologies primarily focused on acute and surgical applications. We generate our revenue through our sales of medical products and components, as well as from royalties derived from sales by our partners of products utilizing certain of our proprietary technologies. For the year ended December 31, 2008, we recorded $190.8 million in direct sales of our various medical products and $92.5 million in royalties and license fees received from our partners.

Our research and development efforts focus on understanding and characterizing biological conditions that often occur concurrent with medical device implantation, surgery or acute trauma, including scar formation and inflammation, cell proliferation, bleeding and coagulation, infection, and tumor tissue overgrowth. Our strategy is to utilize our various technologies in the areas of drugs, drug delivery, surface modification, biomaterials and medical devices to create and commercialize novel, proprietary medical products that reduce surgical procedure side effects, improve surgical outcomes, shorten hospital stays, or are easier or safer for a physician to use.

We develop our products using a proprietary and systematic discovery approach. We use our drug screening capabilities to identify new uses for known pharmaceutical compounds. We look for compounds that address the underlying biological causes of conditions that can occur with medical device implantation, surgery or acute trauma. Once appropriate drugs have been identified, we work to formulate the drug, or a combination of drugs, with our portfolio of drug, drug delivery and surface modification technologies and biomaterials to develop a novel surgical implant or medical device. We have patent protected, or have filed patent applications for, certain of our technology and many of our products and potential product candidates.  

We currently operate in two segments: Pharmaceutical Technologies and Medical Products.  

Pharmaceutical Technologies

Our Pharmaceutical Technologies segment focuses primarily on establishing product development and marketing partnerships with major medical device, pharmaceutical or biomaterials companies and to date has derived the majority of its revenue from royalties due from partners that develop, market and sell products incorporating our technologies. Currently, our principal revenues in this segment are from royalties derived from sales by Boston Scientific Corporation (“BSC”) of TAXUS® coronary stent systems incorporating the drug paclitaxel.

Medical Products

Our Medical Products segment manufactures and markets a wide range of single-use specialty medical products, primarily medical device products and medical device components. These products are sold directly to end users or other third party medical device manufacturers. This segment contains two specialized direct sales and distribution organizations as well as significant manufacturing capabilities. Many of our medical products are made using our proprietary manufacturing processes, or are protected by our intellectual property. Our Medical Products segment may apply certain of our proprietary technologies to its products to create novel, next generation medical products to market directly to end users or medical products distributors.  

Financial and Strategic Alternatives Process. During approximately the last eight calendar quarters, revenue in our Pharmaceutical Technologies segment has declined significantly, primarily due to lower than expected royalties derived from sales by BSC of TAXUS® coronary stent systems.  This decline in royalty revenue has significantly impacted our ability to fund our operations and service our debt obligations, and has materially impacted our liquidity position.  During 2008, our management and Board of Directors determined to explore and pursue various restructuring and cost reduction actions in order to conserve our liquidity, as well as various financial and strategic transactions that could potentially reduce or eliminate our existing debt obligations and improve our working capital position.

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Our management and Board of Directors continue to believe a transaction of significant size and scope is necessary to meaningfully address the working capital needs of our business initiatives, as well as to address liquidity issues related to our current balance sheet structure, likely to arise in the near term due to several factors that have impacted our business and cash flows from operations.  In particular, we continue to expect to receive lower revenues from BSC over the next several quarters, mainly due to the impact of new competitive entrants into the market for drug-eluting stents and other factors.  

On July 7, 2008, we announced that our Board of Directors had authorized a transaction to create a new subsidiary, Angiotech Pharmaceutical Interventions Inc. (“API”), and that we would contribute certain business assets and intellectual property to API, primarily consisting of business assets of Angiotech other than the intellectual property and royalty revenue related to TAXUS.  In connection with this transaction, we were to receive $200 to $300 million of new financing from new investors to establish API, which financing was targeted to reduce substantial amounts of our existing debt obligations with equivalent amounts of convertible debt bearing interest in additional equity of the newly created subsidiary in kind, as opposed to cash.  This transaction, if approved by our shareholders and completed, would have substantially reduced our annual cash pay interest obligations.

On September 22, 2008, we announced that we had postponed the planned shareholder vote regarding the proposed API transaction.  As of that date, given the time required for more extended discussions to address concerns of certain of our shareholders and bondholders, and given various other factors impacting our business and cash position (including lower expected revenues derived from BSC), we did not believe we would be able to satisfy the transaction condition with respect to the minimum level of cash and cash equivalents required to be held at the time of the transaction’s close.  

As a result of the uncertainty regarding our proposed transaction, we also announced on September 22, 2008 that management and the Board of Directors would continue to explore alternatives to our balance sheet and current capital structure, including but not limited to whether we could consummate the previously announced transaction or other similar transaction alternatives.

On November 12, 2008, the API transaction was terminated. On November 21, 2008, we announced that we had engaged The Blackstone Group to assist us in evaluating various alternatives for our business and capital structure, including, but not limited to, securing interim senior secured financing for working capital and liquidity purposes, evaluating various restructuring alternatives to pursue with the holders of our Senior Floating Rate Notes due 2013 (the “Floating Rate Notes”) and our 7.75% Senior Subordinated Notes due 2014 (the “Subordinated Notes”), and assisting us in evaluating proposals or potential proposals from various financial parties regarding a significant investment of capital. On March 2, 2009, we announced that we had completed a financing transaction with Wells Fargo Foothill, LLC, consisting of a delayed draw secured term loan facility of up to $10 million and a new secured revolving credit facility providing up to an additional $22.5 million in available credit. See “—Liquidity and Capital Resources—New Senior Secured Credit Facilities”.

Cost Reduction Initiatives.  On September 22, 2008, we announced that, in connection with the update to our financial and strategic alternatives process as described above, we would pursue various initiatives to further reduce operating costs and focus our business efforts, including:

·

Postponement of the scheduled launch of our 5-flourouracil-eluting central venous catheter (5-FU CVC);

·

Closure of our research and manufacturing facility in Rochester, NY, and rationalization or elimination of office and laboratory space in Vancouver, BC, North Bend, WA and Herndon, VA.;

·

Postponement of certain pre-clinical-stage research activities, pending the completion of partnering or other funding activities that would offset direct costs and personnel costs associated with such programs;

·

Reduction of certain financial and personnel contributions relating to our joint venture with Genzyme Corporation;

·

Potential amendment of and reduction in cash outlays related to our collaboration with Athersys, Inc.;

·

Rationalization of selected pending and issued intellectual property;

·

Elimination of certain expenses and reductions in personnel in all general and administrative departments;

·

Selective reduction in certain sales and marketing investments and in medical affairs; and

·

Postponement of selected planned capital expenditures.

Our remaining resources subsequent to these changes have been focused primarily on our existing medical device products business, with particular emphasis on our portfolio of Promoted Brands, and on selected new products that have recently launched including Quill™ SRS, and the HemoStream™ Chronic Dialysis Catheter.

FDA Approval Received by our Partner BSC for TAXUS Liberté® and TAXUS Express Atom™ Stents.  On October 10, 2008, we announced that BSC had received approval from the United States Food and Drug Administration (“FDA”) to market and sell the second-generation TAXUS Liberté® Paclitaxel-Eluting Coronary Stent System in the United States.  On September 25, 2008, we announced that BSC had received approval from the FDA to market and sell the TAXUS Express2 Atom™ Paclitaxel-Eluting Coronary Stent System in the United States.  We are entitled to receive royalties based on the commercial sale of these products by BSC.  

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Enrollment Completed for TAXUS PERSEUS Clinical Trial.  On October 8, 2008, we announced that BSC had completed enrollment in the PERSEUS clinical trial, designed to evaluate the third-generation TAXUS Element paclitaxel-eluting coronary stent.  The PERSEUS clinical program has enrolled nearly 1,500 patients at 100 U.S. and international centers since July 2007, and will compare the TAXUS Element stent to the prior-generation TAXUS Express2 stent marketed in the United States since 2004.

Clinical Trial Enrollment and CE Mark Filings Completed by our Partner Cook Medical Inc. for the ZILVER® PTX Paclitaxel-Eluting Peripheral Stent Product Candidate.  On September 10, 2008 we announced that Cook Medical Inc. (“Cook”), a multinational medical device manufacturer, had completed enrollment in the first international clinical trial of a drug-eluting stent designed to treat arterial blockages outside the coronary arteries.  The 420 patients enrolled in Cook’s randomized trial of its ZILVER PTX Drug-Eluting Peripheral Stent include peripheral artery disease (“PAD”) patients treated in Germany, the United States and Japan.  Cook also already has enrolled 780 patients in the European Union, Canada and Korea in a clinical registry to evaluate the safety of the ZILVER PTX device.  The data from such trials have been used for submission in Europe for CE Mark approval to market the device there, with additional regulatory submissions pending in additional markets.  We are entitled to receive royalties based on the commercial sale of this product by Cook.

CE Mark Approval Received of HemoStream^TM Chronic Dialysis Catheter.  On August 12, 2008, we announced that we had received CE Mark approval to market and sell our HemoStream™ chronic dialysis catheter in Europe.  We received FDA clearance to market and sell this product in the United States in August 2007, but have not yet commercially launched this product.

Ongoing Clinical Programs

The following discussion describes our product candidates, or certain of our partners’ product candidates, that are being evaluated in ongoing human clinical trials and their stage of development:

TAXUS Element™ Platinum Chromium Paclitaxel-Eluting Coronary Stent System.  The TAXUS Element paclitaxel-eluting coronary stent system is the third generation BSC coronary stent platform that incorporates our research, technology and intellectual property related to the use of paclitaxel.  The TAXUS Element stent features BSC’s proprietary platinum chromium alloy, which is designed to enable thinner stent struts, increased flexibility and a lower stent profile while improving radial strength, recoil and radiopacity.  In addition, the TAXUS Element stent platform incorporates new balloon technology intended to improve upon BSC’s market-leading Maverick® Balloon Catheter technology.

TAXUS Petal™ Bifurcation Paclitaxel-Eluting Coronary Stent System.  The TAXUS PETAL bifurcation paclitaxel-eluting coronary stent system, which is under evaluation in clinical trials being conducted by BSC, represents a novel BSC coronary stent product candidate that incorporates our research, technology and intellectual property related to the use of paclitaxel.  Conventional coronary stents were designed to treat tubular arteries, and are considered less than optimal for the y-shaped anatomy of a bifurcated area of the coronary arteries. The TAXUS PETAL is a specialized coronary stent designed to treat both the main branch and the side branch of a bifurcation by incorporating an innovative side structure (the Petal strut) in the middle of the stent that opens into a side branch.

On July 18, 2007, BSC initiated the TAXUS PETAL I First Human Use (FHU) trial, which is expected to enroll a total of 45 patients in New Zealand, France and Germany. The trial is a non-randomized study with an initial assessment of acute performance and safety (including rates of death, myocardial infarction and target vessel revascularization) at 30 days and six months, with continued annual follow-up to occur for five years. Upon successful completion of this study, BSC has indicated that it intends to begin a pivotal trial which if successful would provide a basis for U.S. and international approvals for the commercialization of the TAXUS Petal stent.

ZILVER PTX Paclitaxel-Eluting Peripheral Vascular Stent System.  The ZILVER PTX paclitaxel-eluting peripheral vascular stent, which is under evaluation in clinical trials being conducted by our partner Cook, is a specialized stent product incorporating our proprietary paclitaxel technology and is designed for placement in diseased arteries in the limbs to restore blood flow. Cook is a co-exclusive licensee, together with BSC, of our proprietary paclitaxel technology to reduce restenosis following stent placement in peripheral artery disease. The ZILVER PTX paclitaxel-eluting peripheral stent is designed to reduce restenosis following placement of a stent in PAD patients.

The ZILVER PTX is currently undergoing multiple human clinical trials in the United States, Japan, the European Union and selected other countries to assess product safety and efficacy. In January 2007, Cook released nine-month data from its EU clinical study. The preliminary data presented by Cook on the first 60 patients in the randomized trial, which is examining the safety of using Cook's ZILVER PTX paclitaxel-eluting stent to treat blockages, or lesions, of the superficial femoral artery (“SFA”) above the knee, indicated that the ZILVER PTX stent showed an equal adverse event rate to conventional angioplasty for treating SFA lesions. The ZILVER PTX stent also displayed a zero-percent fracture rate for 41 lesions at six months and 18 lesions at one year.  

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On June 11, 2008, Cook reported positive interim results from the registry arm of a clinical study designed to measure the efficacy of the Zilver PTX in treating PAD patients, specifically in the treatment of blockages in the femoropopliteal artery.  The results were reported by trial investigators at the 2008 SVS Vascular Annual Meeting, and revealed clinical improvement, excellent durability and fracture resistance, high rates of event-free survival (“EFS”) and freedom from target lesion revascularization (“TLR”).  Interim data was compiled at six and 12 months using 435 patients and 200 patients, respectively.  The corresponding EFS rates were 94 percent and 84 percent, and freedom from TLR was 96 percent and 88 percent.  Evaluation of stent x-rays is ongoing, and currently suggests stent fractures in approximately one percent of cases at six months and less than two percent of cases at 12 months.  In addition, the Zilver PTX stent exhibit ed no safety concerns and results were better than expected for Trans-Atlantic Inter-Society Consensus (“TASC”) class C and D lesions, occlusions, in-stent restenosis and lesions greater than seven centimeters.  Follow-up to the registry arm of the study will continue through two years.

On July 16, 2007 Cook announced that the first U.S. patients in a randomized pivotal human clinical trial of ZILVER PTX were treated at Tri-City Medical Center in Oceanside, CA.  The trial is designed to randomize patients to receive either the ZILVER PTX stent or balloon angioplasty.  Data from this clinical trial is intended to be used to support submission to the FDA for approval in the United States to market the device.  In addition, data collected on Japanese and U.S. patients is expected to be combined for the final evaluation of the device and used for regulatory submissions in both markets for approval.  

On September 10, 2008 Cook announced it had completed enrollment in its pivotal human clinical trial for the ZILVER PTX.  The 420 patients enrolled in Cook’s randomized trial include peripheral artery disease patients treated in Germany, the United States and Japan.  On the same date, Cook announced that it had enrolled an additional 780 patients in the European Union, Canada and Korea in a clinical registry to evaluate the safety of the ZILVER PTX device.  Those data have been used for submission in Europe for CE Mark approval to market the device there, with additional regulatory submissions pending in additional markets.

Bio-Seal™ Lung Biopsy Tract Plug System.  Bio-Seal™ is a novel technology designed to prevent air leaks in patients having lung biopsies by plugging the biopsy track with an expanding hydrogel plug.  On contact with moist tissue, the hydrogel plug absorbs fluids and expands to fill the void created by the biopsy needle puncture.  The seal is airtight and the plug is absorbed into the body after healing of the puncture site has occurred.

Bio-Seal has undergone a human clinical trial in the U.S. which was designed to assess the safety and efficacy of Bio-Seal, with the primary endpoint being reduction in rates of pneumothorax in patients undergoing lung biopsy procedures. The clinical trial was a prospective randomized multi-centered safety and efficacy evaluation. The trial enrolled its first patient in October 2005 and completed enrolment in June 2008.  The study was designed to provide a basis for U.S. clearance for the commercialization of Bio-Seal.  Data from this clinical trial study has been submitted to the FDA.  The FDA has responded to our submission with additional questions about the study.  We have responded to the FDA, and upon further review by the FDA we may either receive 510(k) clearance to market Bio-Seal in the United States or be required to respond to additional questions or conduct additional clinical studies for this product candidate.  Upon receiving such further informat ion from the FDA, we will determine the timing of product launch or any further development work necessary to achieve approval should we choose to continue the development of this product candidate.  The complete data for the Bio-Seal study was presented at the 2009 Society of Interventional Radiology in San Diego, CA on March 9, 2009. The trial hit its primary end point with clinical success in 85% of the treatment patients compared to 69% for the control patients (p=0.002). The product has already received CE Mark approval.

Option™ Vena Cava Filter. The Option™ Vena Cava Filter, which we licensed in March 2008 from our partner Rex Medical L.P., is under evaluation in a pivotal human clinical trial.  We believe this vena cava filter may have a number of potential benefits, which include unique filter apex and retention anchors, insertion through either the femoral or jugular route, and non-thrombogenic material.  The purpose of the U.S. multi-center prospective clinical trial is to evaluate the device’s safety and efficacy in preventing pulmonary emboli, and to assess the ability to retrieve the device from the body up to 175 days following implantation.  Interim results of the pivotal trial were presented at the AIM/Veith Meeting in New York in November 2008. The complete results, representing a total of 100 patients, were presented at the 2009 Society of Interventional Radiology in San Diego, CA on March 9, 2009.  The clinical data from this trial has been submi tted to the FDA. The FDA has responded to our submission with additional questions about the study and we are preparing a response.

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MultiStem® Stem Cell Therapy.  The MultiStem stem cell therapy is under evaluation in clinical trials being conducted together with our partner Athersys, Inc. (“Athersys”) for the treatment of acute myocardial infarction. MultiStem stem cells are proprietary adult stem cells derived from bone marrow, which have demonstrated the ability in laboratory experiments to form a wide range of cell types. MultiStem may work through several mechanisms, but a primary mechanism appears to be the production of multiple therapeutic molecules produced in response to inflammation and tissue damage. We and Athersys believe that MultiStem may represent a unique “off the shelf” stem cell product candidate, based on its potential ability to be used without tissue matching or immunosupression, and its potential capacity for large scale production. We entered into an agreement with Athersys in May 2006 to co-develop and commercialize MultiStem for use in the indications o f acute myocardial infarction and peripheral vascular disease. On December 20, 2007, we and Athersys announced we had received authorization from the FDA to commence a phase I human clinical trial to evaluate the safety of MultiStem in the treatment of acute myocardial infarction. Upon completion of a phase I human clinical trial currently being conducted by Athersys, we may assume lead responsibility for further clinical development. We currently own marketing and commercialization rights with respect to this product candidate.  On September 22, 2008, as part of certain cost reduction initiatives, we announced a potential amendment of, and reduction in, cash outlays related to our collaboration with Athersys.  The final terms of such amendment to our collaboration with Athersys may have an impact on our expected future expenditures for research and development of MultiStem, and the extent of our future financial and commercial commitments and rights relating to this product candidate.

Completed or Suspended Clinical Programs

5-FU-Eluting Central Venous Catheter. Central venous catheters (“CVC”) are usually inserted into critically ill patients for extended periods of time to administer fluids, drugs, and nutrition, as well as facilitate frequent blood draws. Through our proprietary drug identification strategy, we have elected to evaluate 5-Fluorouracil (“5-FU”), a drug previously approved by the FDA for treatment of various types of cancer, as a compound that may help to prevent certain types of infection in patients receiving a CVC.  We recently completed a human clinical trial in the United States designed to assess the safety and efficacy of our 5-FU-eluting CVC in preventing various types of catheter related infections.  The study was a randomized, single-blind, 960-patient, 25-center study and was designed to evaluate whether our 5-FU-eluting CVC prevents bacterial colonization at least as well as the market leading anti-infective CVC. On July 10, 2007, we announce d that we had completed enrollment of the study, and on October 9, 2007, we announced this study had met its primary statistical endpoint of non-inferiority as compared to the market leading anti-infective CVC (a chlorhexidine / silver sulfadiazine (CH-SS) coated CVC) and indicated an excellent safety profile. In March 2008, we presented the clinical trial data at the 28th International Symposium on Intensive Care and Emergency Medicine (ISICEM) in Brussels, Belgium Based on the clinical trial data, the investigators concluded that our 5-FU CVC met the primary endpoint of the study; specifically that our 5-FU CVC product candidate was non-inferior in its ability to prevent bacterial colonization of the catheter tip when compared to catheters coated with CH-SS.  There were no statistically significant differences in the rate of adverse events related to the study devices, or in the rates of catheter-related bloodstream infections.  Additionally, there was no evidence for acquired resistance to 5-FU in clinical isolates exposed to the drug for a second time.  Based on the positive results achieved in the study, in December 2007 we filed a request for 510(k) clearance from the FDA to market and sell the CVC in the United States and on April 17, 2008, we announced that we had received 510(k) clearance from the FDA to market our 5-FU CVC in the United States but have not yet commercially launched the product.

TAXUS Liberté™ paclitaxel-eluting coronary stent system.  The TAXUS Liberté paclitaxel-eluting coronary stent system is BSC’s second generation coronary stent system platform that incorporates our research, technology and intellectual property related to the use of paclitaxel to prevent restenosis. The TAXUS Liberté stent system has been designed to further enhance coronary stent deliverability and blood vessel conformability, particularly in challenging coronary lesions.  To date, BSC has only commenced sales of the TAXUS Liberté in countries outside of the United States.  On October 10, 2008, we announced that BSC had received approval from the FDA to market and sell the TAXUS Liberté in the United States.

Vascular Wrap™ Our paclitaxel-eluting mesh surgical implant, or Vascular Wrap, is designed to treat complications, including graft stenosis or restenosis, that may occur in connection with vascular graft implants in hemodialysis patients or in patients that have peripheral artery disease. Vascular grafts are implanted in patients in order to bypass diseased blood vessels, or to provide access to the vascular system of kidney failure patients in order to facilitate the process of hemodialysis.  In many cases, these vascular grafts fail due to proliferation of cells or scar into the graft (graft stenosis or restenosis), which can negatively impact blood flow through the vascular graft.  

In April 2008, we elected to suspend enrollment in our U.S. and EU human clinical trials for our Vascular Wrap product candidate in patients undergoing surgery for hemodialysis access, pending a safety review to evaluate an imbalance of infections observed between the two study groups.  As a result of these observations, we elected to notify physicians to suspend further enrollment in the trials, pending a full review of the potential cause of the implant site infections.  There are currently no plans to resume enrollment in these clinical trials, and we are continuing to evaluate alternatives for this program, including potential collaborations, partnerships, divestitures or future clinical development initiatives.  

Acquisitions

·

Quill Medical, Inc. (“Quill”). On June 26, 2006, we completed the acquisition of 100% of the equity of Quill for $40 million cash consideration.  Through this transaction, we acquired the rights, in all possible fields of use, to develop and market applications of Quill’s proprietary self-anchoring wound closure technology. Unlike conventional sutures which are smooth, the Quill products have tiny teeth-like barbs or cogs along the surface. This “self-anchoring” wound closure technology may be used to close certain wounds or surgical incisions without the need for suture knots. Eliminating knot-tying can save surgical time, may reduce the risk of infection, and may reduce wound leakage.

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We are currently working to develop a portfolio of next-generation products using the Quill technology.  In January 2007, we launched the first of these new products, the Quill SRS for various wound closure and tissue approximation applications in general and aesthetic surgery.  In 2007 and throughout 2008 we launched several new Quill SRS product lines.

The launch of the Quill SRS for various indications in January 2007 triggered a development milestone of $10.0 million that was paid to the former shareholders of Quill in August 2007. This milestone payment is creditable against any future contingent payments that we may be required to make based upon the achievement of significant incremental revenue growth of products incorporating the Quill technology over an approximately five-year period from the date of the acquisition.  This $10.0 million payment was recorded as an increase to goodwill during the first quarter of 2007.

·

American Medical Instruments Holdings, Inc. (“AMI”). On March 23, 2006, we completed the acquisition of 100% of the equity of AMI for $787.9 million cash consideration.  AMI provided us with the majority of the assets and products comprising our Medical Products business segment.  

Collaboration, License and Sales and Distribution Agreements

In connection with our research and development efforts, we have entered into various arrangements with corporate and academic collaborators, licensors, licensees and others for the research, development, clinical testing, regulatory approval, manufacturing, marketing and commercialization of our product candidates.  Terms of the various license agreements may require us, or our collaborators, to make milestone payments upon achievement of certain product development and commercialization objectives and pay royalties on future sales of commercial products, if any, resulting from the collaborations.  During 2008, we did not enter into any significant collaboration, license or sales and distribution agreements.

On September 22, 2008, we announced a reduction of certain financial and personnel contributions relating to our collaboration with Genzyme Corporation, and a potential amendment of, and reduction in, cash outlays related to our collaboration with Athersys, Inc.

Our most significant collaborations, licences, sales and distribution agreements are listed in the exhibits index to this Annual Report on Form 10-K and may be found at the locations specified therein.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP.  These accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.  We believe that the estimates and assumptions upon which we rely are reasonable and are based upon information available to us at the time the estimates and assumptions were made. Actual results could differ materially from our estimates.  

We believe the following policies to be critical to understanding our financial condition, results of operations, and expectations for 2009 because these policies require management to make significant estimates, assumptions and judgments about matters that are inherently uncertain.

Revenue Recognition

(i) Royalty revenue

We recognize royalty revenue when we have fulfilled the terms in accordance with the contractual agreement, have no future obligations, the amount of the royalty fee is determinable and collection is reasonably assured.  We record royalty revenue from BSC on a cash basis due to our inability to accurately estimate the BSC royalty before we receive the reports and payments from BSC.  This results in a one quarter lag between the time we record royalty revenue and the time the associated sales were recorded by BSC.

(ii) Product sales

We recognize revenue from product sales, including shipments to distributors, when the product is shipped from our facilities to the customer provided that we have not retained any significant risks of ownership or future obligations with respect to products shipped.  We recognize revenue from product sales net of provisions for future returns.  These provisions are established in the same period as the related product sales are recorded and are based on estimates derived from our historical experience.

We consider revenue to be realized or realizable and earned when all of the following criteria are met: persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. These criteria are generally met at the time of shipment when the risk of loss and title passes to the customer or distributor.

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We include amounts billed to customers for shipping and handling in revenue.  The corresponding costs for shipping and handling are included in cost of products sold.

(iii) License fees

License fees are comprised of initial fees and milestone payments derived from collaborative and other licensing arrangements. We recognize non-refundable milestone payments upon the achievement of specified milestones when the milestone payment is substantive in nature, the achievement of the milestone was not reasonably assured at the inception of the agreement and we have no further significant involvement or obligation to perform under the arrangement. Initial fees and non-refundable milestone payments received which require our ongoing involvement are deferred and amortized into income on a straight-line basis over the period of our ongoing involvement.

Income tax expense

Income taxes are accounted for under the liability method.  Deferred tax assets and liabilities are recognized for the differences between the financial statement and income tax bases of assets and liabilities, and for operating losses and tax credit carry forwards.  The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future taxable income in certain tax jurisdictions to realize the value of these assets.  Management evaluates the realizability of the deferred tax assets and assesses the need for any valuation allowance adjustment.  A valuation allowance is provided for the portion of deferred tax assets that is more likely than not to be unrealized.  Deferred tax assets and liabilities are measured using the enacted tax rates and laws.  

Significant estimates are required in determining our provision for income taxes including, but not limited to, accruals for tax contingencies and valuation allowances for deferred income tax assets. Some of these estimates are based on interpretations of existing tax laws or regulations.  Our effective tax rate may change from period to period based on the mix of income among the different foreign jurisdictions in which we operate, changes in tax laws in these jurisdictions, and changes in the amount of valuation allowance recorded.

Effective January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109 (“FIN 48”).  FIN 48 is designed to reduce diversity and provide consistent accounting practices and criteria for how companies should recognize, measure, present, and disclose in their financial statements all significant uncertain tax positions.

Stock-based compensation

We account for stock-based compensation in accordance with Statement of Financial Accounting Standards (“SFAS”) 123(R) Share-Based Payment, a revision to SFAS 123, Accounting for Stock-Based Compensation.  SFAS 123(R) requires us to recognize the grant date fair value of share-based compensation awards granted to employees over the requisite service period. We use the Black-Scholes option pricing model to calculate stock option values, which requires certain assumptions including the future stock price volatility and expected time to exercise. Changes to any of these assumptions, or the use of a different option pricing model (such as the binomial model), could produce a different fair value for stock-based compensation, which could have a material impact on our earnings.   

Cash equivalents, short and long-term investments

We invest our excess cash balances in short-term securities, principally investment grade commercial debt and government agency notes.  At December 31, 2008, we held one equity security which was classified as available-for-sale, and accordingly, was recorded at fair market value. The security has been trading below carrying value for an extended period of time and management does not intend to hold it for a sufficient period of time to reasonably expect a recovery to initial carrying value. As such, the unrealized loss on this security has been reported in other income and expenses.

As part of our strategic product development efforts, we also invest in equity securities of certain companies with which we have collaborative agreements. The equity securities of some of these companies are not publicly traded and so fair value is not readily available.  These investments are recorded using the cost method of accounting and are tested for impairment by reference to anticipated undiscounted cash flows expected to result from the investment, the results of operations and financial position of the investee, and other evidence supporting the net realizable value of the investment.  

Goodwill

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We test goodwill for possible impairment at least annually and whenever changes in circumstances occur that would indicate an impairment in the value of goodwill.  When the carrying value of a reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess.  Circumstances that could trigger an impairment include adverse changes or outcomes in legal or regulatory matters, technological advances, decreases in anticipated demand, unanticipated competition, and significant declines in our share price.   We estimate fair value based on a discounted projection of future cash flows which are subject to significant uncertainty and estimates. If future cash flows are less than those projected, an impairment charge may become necessary that could have a material impact on our financial position and results of operations. We tested our goodwill for impairment as at September 30, 2008 and determined that due to a significant and sustained decline in our public stock market capitalization our goodwill was impaired and as a consequence we recorded an impairment charge of $599.4 million during the three months ended September 30, 2008.

Given the continued decline in our market value in the fourth quarter of 2008 and the further negative indicators of the economy as a whole, we updated our impairment tests of goodwill and acquired intangible assets and concluded a further impairment had occurred in the carrying amounts of goodwill associated with our Medical Products segment as well as an impairment in the carrying amounts of goodwill associated with our Pharmaceuticals Technologies segment. Accordingly, we recorded a further impairment charge of $50.3 million in the fourth quarter of 2008 leaving no goodwill on our books as of December 31, 2008.

Intangible assets

Our identifiable intangible assets are primarily comprised of technologies acquired through our business combinations.  Intangible assets also include in-licensed proven medical technologies.  We amortize intangible assets on a straight-line basis over the estimated life of the technologies, which range from two to twelve years depending on the circumstances and the intended use of the technology.  We determine the estimated useful lives for intangible assets based on a number of factors such as legal, regulatory or contractual limitations; known technological advances; anticipated demand for our products; and the existence or absence of competition.  We review the carrying value of our intangible assets for impairment indicators at least annually and whenever there has been a significant change in any of these factors listed above.  A significant change in these factors may warrant a revision of the expected remaining useful life of the intangible asset, resulting in accelerated amortization or an impairment charge, which would impact earnings. We tested our intangible assets for impairment as at September 30, 2008 and determined that there was no impairment. Given the continued decline in our market value in the fourth quarter of 2008 and the further negative indicators of the economy as a whole, we updated our impairment tests of intangible assets as at December 31, 2008 and determined that there was no impairment.

Results of Operations

Overview

The following discussion and analysis of results from our operations excludes the financial results from our discontinued operations (see “Results of Operations - Discontinued Operations”) for the comparative periods, unless otherwise noted.

We completed our acquisition of AMI on March 23, 2006.  Accordingly, the results of AMI are not included in our results for the period from January 1, 2006 to the date of acquisition on March 23, 2006.

(in thousands of U.S.$, except per share data)	Years ended December 31,
		2008			2007			2006
Revenues
Pharmaceutical Technologies	$	92,456		$	117,501		$	176,485
Medical Products		190,816			170,193			138,590
Total revenues		283,272			287,694			315,075
Operating (loss) income		(20,211	)		(20,739	)		58,164
Other (expense) income		(733,857	)		(49,853	)		(38,049	)
(Loss) income from continuing operations before income
taxes and cumulative effect of change in accounting policy		(754,068	)		(70,592	)		20,115
Income tax (recovery) expense		(12,892	)		(14,545	)		2,092
Net (loss) income from continuing operations	$	(741,176	)	$	(56,047	)	$	18,023
Basic and diluted net (loss) income per common share,
continuing operations	$	(8.71	)	$	(0.66	)	$	0.21

For the year ended December 31, 2008, we recorded a net loss from continuing operations of $741.2 million ($8.71 basic net loss per share) compared to net loss from continuing operations of $56.0 million ($0.66 basic net loss per share) for the year ended December 31, 2007.

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The increase in the net loss of $685.2 million is due primarily to the write-down of an aggregate of $649.7 million of goodwill that we recorded in the third and fourth quarters of 2008.  Also increasing the net loss were (i) a reduction of $25.1 million in royalty revenue, as BSC’s sales of paclitaxel-eluting coronary stent systems declined substantially in 2008 as compared to prior comparable periods; (ii) $16.5 million of transaction costs accrued related to the abandoned proposed API transaction; (iii) an $18.6 million write-down or loss on redemption of two available-for-sale equity securities, one of which we disposed of, and the other of which was trading below cost for an extended period of time; (iv) a $5.0 million write-down of a long term investment for which we could not obtain sufficient assurance we would be able to recover our carrying value; and (v) a $2.5 million payment for in-process research and development expense made during the first quarter of 2008 (as compared to $8.0 million in 2007).  Partially offsetting the increase in the net loss were a $14.5 million increase in gross profit relating to higher medical products sales and a $7.2 million reduction in interest expense, as the interest rate applied to our Floating Rate Notes declined.

The $56.0 million we incurred in net loss for the year ended December 31, 2007 as compared to net income of $18.0 million for the year ended December 31, 2006 is primarily due to (i) a reduction of $49.0 million in royalty revenue derived from BSC’s sales of paclitaxel-eluting coronary stent systems; (ii) a decrease of $9.6 million in other royalty revenue due to a non-recurring sale to Orthovita, Inc. in 2006 of profit sharing rights for certain of their products for $9.0 million; (iii) a higher volume of lower margin Original Equipment Manufactured (“OEM”) product lines, reducing gross profit margins from 49.8% to 44.2%; (iv) an increase of $12.9 million in sales and marketing salaries as we invested significantly in our sales infrastructure with additions to our direct sales and marketing support personnel in the United States and the European Union; (v) an increase of $7.1 million for in-process research and development (“IPR&D”) expense, m ainly due to a $7.0 million payment we made to CombinatoRx for the extension of our collaboration agreement; (vi) non-recurring charges of $5.2 million for reorganization activities and personnel reductions relating to the announced plan to close and consolidate our Syracuse, NY manufacturing facility; and (vii) an additional $16.2 million in interest expense related to debt incurred to partially fund the AMI acquisition on March 23, 2006.  Partially offsetting these factors was an income tax recovery of $14.5 million in 2007 compared to an income tax expense of $2.1 million in 2006.

Revenues

(in thousands of U.S.$)	Years ended December 31,
		2008		2007		2006
Pharmaceutical Technologies:
Royalty revenue – paclitaxel-eluting stents	$	84,079	$	110,477	$	159,487
Royalty revenue – other		7,467		6,182		15,767
License fees		910		842		1,231
		92,456		117,501		176,485
Medical Products:
Product sales		190,816		170,193		138,590
Total revenues	$	283,272	$	287,694	$	315,075

We operate in two reportable segments:  

Pharmaceutical Technologies

Our Pharmaceutical Technologies segment includes royalty revenue generated from licensing our proprietary paclitaxel technology to various partners, as well as revenue derived from the licensing of certain of our biomaterials and other technologies.  

Royalty revenue derived from sales of paclitaxel-eluting coronary stent systems by BSC for the year ended December 31, 2008 decreased by 24% as compared to the year ended December 31, 2007.  The decrease in royalty revenues was primarily a result of lower sales of paclitaxel-eluting stents by BSC.  Royalty revenue for the year ended December 31, 2008 was based on BSC’s net sales for the period October 1, 2007 to September 30, 2008 of $1.2 billion, of which $637 million was in the United States, compared to net sales of $1.6 billion, of which $1.0 billion was in the United States, for the comparable period in the prior year. The average gross royalty rate earned in the year ended December 31, 2008 on BSC’s net sales was 7.1% for sales in the United States and 6.4% for sales in other countries, compared to an average rate of 7.6% for sales in the United States and 5.6% for sales in other countries for the year ended December 31, 2007.  

The average gross royalty rate for countries other than the United States improved in the year ended December 31, 2008 primarily due to the contribution of royalty revenue from BSC’s sales in Japan during the period, where the average gross royalty rate we receive is higher, as compared to minimal royalty revenue received relating to sales in Japan in the comparable period in the prior year.

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Royalty revenue derived from sales of paclitaxel-eluting coronary stent systems by BSC for the year ended December 31, 2007 decreased by 31% as compared to the year ended December 31, 2006.  The decrease in royalty revenues was primarily a result of lower sales of paclitaxel-eluting stents by BSC.  Royalty revenue for the year ended December 31, 2007 was based on BSC’s net sales for the period October 1, 2006 to September 30, 2007 of $1.6 billion, of which $1.0 billion was in the United States, compared to net sales of $2.2 billion, of which $1.5 billion was in the United States for the comparable periods in the prior year.  The average gross royalty rate earned in the year ended December 31, 2007 on BSC’s net sales was 7.6% for sales in the United States and 5.6% for sales in other countries compared to an average rate of 7.9% for sales in the United States and 6.0% for sales in other countries for the year ended December 31, 2006.

Other royalty revenue increased by $1.3 million for the year ended December 31, 2008 as compared to the year ended December 31, 2007. Other royalty revenue decreased by $9.6 million to $6.2 million for the year ended December 31, 2007 as compared to $15.8 million for the year ended December 31, 2006.  The majority of this decrease was due to the non-recurring $9.0 million payment received from Orthovita, Inc in December 2006, which was classified as royalty revenue in 2006, under an agreement whereby Orthovita purchased our profit-sharing royalty rights for certain of its products.

We expect revenues in our Pharmaceutical Technologies segment will decrease into 2009 as compared to 2008 and 2007, primarily as a result of new competitors entering into the drug-eluting coronary stent market in the United States in the second half of 2008 and other factors.  Our royalties derived from sales by BSC of TAXUS declined from $50.8 million in the first half of 2008 to $33.3 million in the second half of 2008.

Medical Products

Our Medical Products segment manufactures and markets a range of single use, specialty medical devices. The Medical Products segment also manufactures finished medical devices and medical device components for third party medical device manufacturers and marketers.

Revenue from our Medical Products segment for the year ended December 31, 2008 was $190.8 million, an increase of 12% compared to $170.2 million in the year ended December 31, 2007.  The increase was due to several factors, including increased sales of various of our Interventional product lines, increased sales of certain of our Surgical product lines, the impact of certain new product launches during the year and improvement of sales of medical devices and device components to other third party medical device manufacturers.  This increase also reflects the effect of the one-time $3.0 million charge against revenue in 2007 relating to the discontinuation of the Contour Threads brand and the accrual of a reserve against potential product that may be returned in that year.  Excluding the impact of the $3.0 million accrual in 2007 relating to the Contour Threads brand discontinuation, revenue growth as compared to 2007 was 10%.

Revenue from our Medical Products segment for the year ended December 31, 2007 was $170.2 million compared to $138.6 million in the year ended December 31, 2006.  Product revenue in our Medical Products segment for the year ended December 31, 2007 is not directly comparable to 2006, because the results for 2006 only include revenue in this segment from March 23, 2006 (the date we completed our acquisition of AMI).

We expect that revenues in our Medical Products segment will continue to increase during 2009 as compared to 2008 and 2007, reflecting the potential for growth of certain existing and newly launched product lines.  This expected growth may be offset partially by the impact of the difficult economic environment and increasingly difficult credit market and liquidity environment on our customer base, particularly relating to certain third party medical device company customers that purchase medical devices and components from our various manufacturing operations.

Expenditures

(in thousands of U.S.$)	Years ended December 31,
		2008		2007		2006
License and royalty fees	$	14,258	$	18,652	$	25,986
Cost of products sold		101,052		94,949		69,543
Research and development		53,192		53,963		45,393
Selling, general and administrative		98,483		99,315		78,933
Depreciation and amortization		33,998		33,429		36,014
In-process research and development		2,500		8,125		1,042
	$	303,483	$	308,433	$	256,911

License and royalty fees on royalty revenue

License and royalty fee expenses include license and royalty payments due to certain of our licensors, primarily relating to paclitaxel-eluting coronary stent system royalty revenue received from BSC. The decrease in this expense in 2008 and 2007 reflects the reduction in our royalty revenue. We expect license and royalty fee expense to continue to be a significant cost in 2009, commensurate with the amount of royalty revenue we earn.

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Cost of products sold

Cost of products sold is comprised of costs and expenses related to the production of our various medical device, device component and biomaterial products and technologies, including direct labor, raw materials, depreciation and certain fixed overhead costs related to our various manufacturing facilities and operations.  

Cost of products sold increased by $6.2 million to $101.1 million for the year ended December 31, 2008 compared to $94.9 million for the year ended December 31, 2007, primarily due to increased sales.  Gross margins for our product sales were 47.1% for the year ended December 31, 2008 compared to 44.2% for the year ended December 31, 2007. Gross margins in 2008 compared to 2007 were positively impacted by an increase in sales of higher margin product lines, the launch of certain new, higher margin product lines for which there were no material sales in the comparable prior year period, and the effect of higher sales volumes on the absorption of fixed overhead and labour costs.

Cost of products sold increased by $25.4 million to $94.9 million for the year ended December 31, 2007 compared to $69.5 million for the year ended December 31, 2006, primarily because the 2006 results did not include a full year of the results of the operations acquired through the AMI acquisition which occurred on March 23, 2006.

Gross margins in our Medical Products segment were 44.2% for the year ended December 31, 2007 compared to 49.8% for the year ended December 31, 2006.  Gross margins in 2007 were impacted by (i) the one-time charge against revenue of $3.0 million, with no corresponding reduction in cost of products sold, for actual and estimated potential returns of the Contour Threads brand product relating to a marketing incentive program offered to customers in support of the Quill SRS product launch and the concurrent discontinuation of the Contour Threads brand marketing and training support for certain indications of use; (ii) the overall product sales mix reflecting certain lower margin product lines; and (iii) certain non-recurring costs related to the closure and consolidation of our Syracuse, NY manufacturing facility.

We expect that cost of products sold will continue to be significant, and that gross margins may continue to improve in 2009, primarily as a result of improved sales mix, including potential increases in sales of selected product lines that provide higher relative contribution margins, the impact of anticipated higher levels of product sales on the absorption of fixed overhead costs and the reduction in fixed overhead and labor costs relative to certain product sales due to the completion of the consolidation of our Syracuse, NY operations, which will result in certain products being manufactured in a lower cost location in Puerto Rico as well as greater production volume concentrated over fixed overhead costs in our Puerto Rico location.  These improvements may be offset by the impact of certain sales and pricing initiatives for selected product lines designed to improve sales volume, market share and overall operating cash flow derived from ou r fixed assets.

Research and development

Our research and development expense is comprised of costs incurred in performing research and development activities, including salaries and benefits, clinical trial and related clinical manufacturing costs, contract research costs, patent procurement costs, materials and supplies, and operating and occupancy costs. Our research and development activities occur in two main areas:

(i) Discovery and pre-clinical research - Our discovery and pre-clinical research efforts are divided into several distinct areas of activity, including screening and pre-clinical evaluation of pharmaceuticals and various biomaterials and drug delivery technologies, evaluation of mechanism of action of pharmaceuticals, mechanical engineering and pursuing patent protection for our discoveries.

(ii) Clinical research and development - Clinical research and development refers to internal and external activities associated with clinical studies of product candidates in humans, and advancing clinical product candidates towards a goal of obtaining regulatory approval to manufacture and market these product candidates in various geographies.

Research and development expenses, organized by stage of development, for the periods indicated were as follows:

(in thousands of U.S.$)	Years ended December 31,
		2008			2007			2006
Discovery and pre-clinical research	$	25,808		$	22,744		$	23,066
Ongoing clinical programs		3,367			-			-
Completed or Suspended Clinical Programs:
Vascular WrapTM Paclitaxel-Eluting Mesh		13,552			11,743			9,399
Other clinical programs		3,337			7,249			7,835
		46,064			41,736			40,300
Medical Products		7,809			12,362			5,169
Stock-based compensation		795			2,056			2,340
Less: Depreciation, amortization and inter-
company charges allocated to projects above		(1,476	)		(2,191	)		(1,997	)
Total research and development		53,192			53,963			45,812
Less: Research and development relating to
discontinued operations		-			-			(419	)
Total research and development relating to
continuing operations	$	53,192		$	53,963		$	45,393

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Research and development program expenses include all direct costs, as well as certain indirect expenses based on time allocated by certain research, clinical and administrative staff to each program.

Research and development expenditures were $53.2 million in 2008 as compared to $54.0 million in 2007. Research and development expenditures were up in the first half of 2008, primarily relating to our Vascular Wrap clinical program, and due to severance costs of $1.9 million relating to a significant reduction in staffing within our clinical and research departments completed in the second quarter.  This was offset in the second half of 2008 by a $0.6 million decrease in clinical trial costs for our suspended Vascular Wrap clinical program and a $1.4 million reduction related to our completed 5-FU CVC clinical program (for which significant clinical trial activities have materially concluded).  Ongoing clinical programs added $0.7 million in costs as compared to 2007.  Also adding to research and development expenditures in the second half of 2008 were severance costs of $1.6 million due to a significant additional reduction in staffi ng within our clinical and research departments completed primarily during the third quarter.  

Research and development expenditures increased by $8.6 million to $54.0 million for the year ended December 31, 2007 as compared to $45.4 million for 2006.  The increase was due to a $3.1 million increase in clinical trial activity mainly associated with our Vascular Wrap and Bio-Seal programs, the addition of discovery and pre-clinical research personnel, an initial payment of $0.8 million for a new early-stage research collaboration, a one-time payment of $0.9 million to terminate a development agreement, and the incurrence of research and development expenses of our Medical Products segment for a full twelve month period in 2007.  

We currently expect our research and development expenditures may decrease through 2009 as compared to 2008 and 2007, reflecting the suspension of enrolment in our Vascular Wrap clinical trial and the reduction or elimination of staffing and other direct costs during 2008 relating to certain other research programs and activities.  Even after these expected declines, we anticipate we will continue to incur significant research and development expenditures in 2009.

Selling, general and administrative expenses

Our selling, general and administrative expenses are comprised of direct selling and marketing costs related to the sale of our various medical products, including salaries, benefits and sales commissions, and our various management and administrative support functions, including salaries, commissions, benefits and other operating and occupancy costs.

Selling, general and administrative expenditures were $98.5 million in 2008 as compared to $99.3 million in 2007. Higher expenditures in salaries, benefits and related costs, accounting and tax consulting fees and travel were offset by lower expenditures for other operating costs and lower litigation expenses in 2008 as compared to 2007.  Salaries, benefits and related costs increased by $6.5 million in 2008 primarily due to the increase in direct sales and marketing personnel implemented in the United States and Europe during the second half of 2007.  Litigation costs decreased $1.7 million as compared to the prior year period, due primarily to reaching agreement in the third quarter of 2007 with Conor MedSystems, Inc. (“Conor”) and its parent company Johnson & Johnson to settle all outstanding patent litigation with respect to Conor’s CoStar® paclitaxel-eluting stent.  Other operating costs decreased by $4.6 m illion in 2008 as compared to 2007 due to certain personnel and other cost reduction initiatives undertaken in our general and administrative areas, primarily during the third quarter.

Selling, general and administrative expenditures for the year ended December 31, 2007 increased by $20.4 million to $99.3 million compared to $78.9 million in the year ended December 31, 2006. The higher expenditures were primarily due to the fact that 2007 results included a full year of Medical Products selling, marketing, general and administrative costs, as compared to only approximately nine months in 2006.  Also contributing to the increase were additional salaries, benefits, recruiting, and travel costs relating to additions to our direct sales and marketing support personnel in the United States and the European Union, and $3.2 million for severance charges related to the announced plan to close and consolidate our Syracuse, NY manufacturing facility.  Partially offsetting the increase was a $5.5 million reduction in legal litigation expense, due primarily to reaching a favorable agreement with Conor and its parent company Johnson & amp; Johnson to settle all outstanding patent litigation with respect to Conor’s CoStar® paclitaxel-eluting stent.  

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During 2009, we expect that selling, general and administrative expenses may be lower than in 2008 and 2007 due to staff reductions implemented primarily in the third quarter of 2008.  Expenditures could materially increase or fluctuate depending on product sales levels, the timing of launch of certain new products and growth of new product sales, or as a result of litigation or other legal expenses that may be incurred to support and defend our intellectual property portfolio or other aspects of our business.  

Depreciation and amortization

Depreciation and amortization expense was $34.0 million for the year ended December 31, 2008, compared to $33.4 million for the year ended December 31, 2007, and is comprised of amortization of licensed technologies and identifiable intangible assets purchased through business combinations of $30.2 million and $29.9 million, respectively, and depreciation of property, plant and equipment of $3.8 million and $3.5 million, respectively.   

Depreciation and amortization expense was $33.4 million for the year ended December 31, 2007, compared to $36.0 million for the year ended December 31, 2006, and is comprised of amortization of licensed technologies and identifiable intangible assets purchased through business combinations of $29.9 million and $32.7 million, respectively, and depreciation of property, plant and equipment of $3.5 million and $3.3 million, respectively.   The decrease in amortization expense in 2007 is primarily due to a one-time expense of $2.9 million in 2006 for accelerated amortization of the intangible assets related to the monetization of the profit-sharing royalty stream from Orthovita, Inc.

We expect depreciation and amortization expense to remain consistent in 2009 as compared to 2008.

In-process research and development (“IPR&D”)

We record IPR&D expense relating to acquired or in-licensed technologies that are at an early stage of development and have no alternative future use.

For the year ended December 31, 2008, we recorded IPR&D expense of $2.5 million for an initial license payment made to Rex Medical L.P. to obtain the marketing rights for the Option inferior vena cava filter. For the year ended December 31, 2007, we recorded IPR&D expense of $8.1 million, of which $7.0 million relates to the extension of our collaboration with CombinatoRx Inc. and $1.0 million relates to a collaboration agreement with Rex Medical L.P.  For the year ended December 31, 2006, we recorded IPR&D expense of $1.0 million as a result of license milestone payments made to Poly-Med, Inc. in accordance with a license agreement.   

We may incur further IPR&D expenditures in future periods in the event we in-license or acquire additional early stage technologies.

Other Income (Expense)

(in thousands of U.S.$)	Years ended December 31,
		2008			2007			2006
Foreign exchange (loss) gain	$	540		$	(341	)	$	515
Investment and other income		1,192			10,393			6,235
Interest expense on long term-debt		(44,490	)		(51,748	)		(35,502	)
Write-down and other deferred financing charges		(16,544	)		-			(9,297	)
Write-down of assets held for sale		(1,283	)		-			-
Write-down or net loss on redemption of investments		(23,587	)		(8,157	)		-
Write-down of goodwill		(649,685	)		-			-
	$	(733,857	)	$	(49,853	)	$	(38,049	)

Net foreign exchange gains and losses were primarily the result of changes in the relationship of the U.S. to Canadian dollar and other foreign currency exchange rates when translating our foreign currency denominated cash, cash equivalents and short-term investments to U.S. dollars for reporting purposes at period end.  We continue to hold foreign currency denominated cash and cash equivalents to meet our anticipated operating and capital expenditure needs in future periods in jurisdictions outside of the United States.  We do not use derivatives to hedge against exposures to foreign currency arising from our balance sheet financial instruments and therefore are exposed to future fluctuations in the U.S. dollar to foreign currency exchange rates.

Investment and other income for the year ended December 31, 2008 decreased by $9.2 million when compared to 2007, primarily due to the fact that the 2007 comparative period included a gain of $7.5 million realized on the recovery of investments owned by Cohesion Technologies, Inc. which we acquired in 2003. In addition, we earned lower interest income in 2008 due primarily to lower cash balances available to invest and lower interest rates.

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Investment and other income for the year ended December 31, 2007 increased by $4.2 million when compared to 2006, primarily due to a gain in the first quarter of 2007 of $7.5 million realized on the recovery of investments owned by Cohesion Technologies, Inc. which we acquired in 2003, offset partially by a reduction in investment income due to a lower cash balance available to invest because of the use of cash resources for the acquisitions of AMI and Quill and the write-off of certain capitalized tax assets totalling $1.9 million related to the AMI acquisition.

During the year ended December 31, 2008, we incurred interest expense of $44.5 million on our outstanding long-term debt obligations, as compared to $51.7 million for 2007. The decrease of $7.1 million has resulted from a decline, during 2008, in the interest rate applicable on our Floating Rate Notes due to a decline in the LIBOR rates.  The interest rate decline resulted in an average interest rate of 7.7% for 2008 as compared to 9.0% in 2007.  Interest expense in 2008 also includes $2.3 million for amortization of deferred financing costs.

During the year ended December 31, 2007, we incurred interest expense of $51.7 million on our outstanding long-term debt obligations, as compared to $35.5 million for 2006.  The increase is primarily because our debt obligations that were issued in connection with our acquisition of AMI on March 23, 2006 were not outstanding for the full twelve month comparative period of 2006.  Also contributing to the increase, the interest rate on our Floating Rate Notes is higher than the rate on the credit facility that they replaced.  Interest expense for 2007 also includes $2.2 million for amortization of deferred financing costs.  

During the year ended December 31, 2006, we incurred interest expense of $35.5 million on our outstanding long-term debt obligations.  The senior secured term loan was extinguished in December 2006 and replaced with the Floating Rate Notes. During March 2006 to December 2006, the period, the senior secured term loan was in place, interest rates ranged between 6.3% and 8.8% and the interest rate on the Subordinated Notes remained fixed at 7.75%.  Interest expense in 2006 also includes $2.0 million for amortization of deferred financing costs.

In 2008, we recognized costs of $16.5 million related to our exploration of proposed financing and strategic alternatives.

During the year ended December 31, 2006, we recognized a write-down of $9.3 million of deferred financing costs related to the extinguishment of the senior secured term loan.

In connection with our plans for capacity rationalization and consolidation in the Medical Products segment, we reclassified two of its long-lived assets as current assets held for sale in accordance with guidance in SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. These properties have a carrying value of approximately $3.1 million, which represents the lower of cost and fair value less cost to sell. An impairment charge of $1.3 million has been recorded against income from continuing operations.

In addition, and also in connection with our capacity rationalization in the Pharmaceutical Technology segment, we reclassified a property that is no longer used and has a carrying value of approximately $5.3 million as held for sale.

The write-down or net loss on redemption of investments for the year ended December 31, 2008 of $23.6 million is comprised of a loss of $8.8 million realized on the sale of our common stock holdings in CombinatoRx, Inc., an unrealized loss of $9.7 million on an available-for-sale equity security that has been trading below carrying value for an extended period and for which management does not intend to hold for a sufficient period of time to reasonably expect a recovery to initial carrying value and an unrealized loss of $5.0 million on the write-down in carrying value of shares held in a private biotechnology company classified as long term investments.

The write-down or net loss on redemption of investments for the year ended December 31, 2007 of $8.2 million is comprised of a loss of $9.6 million realized on the sale of our common stock holdings in Orthovita, Inc., partially offset by a gain of $1.4 million realized on the sale of our common stock holdings in NuVasive, Inc.

As a result of the significant and sustained decline in our public market capitalization, we performed an interim impairment test of goodwill and acquired intangible assets.  Upon conclusion of such testing, we determined that the carrying amounts of goodwill associated with our Medical Products segment were impaired and we recorded an impairment charge of $599.4 million in the third quarter of 2008.  The goodwill impairment charge was determined by comparing the carrying value of goodwill assigned to our Medical Products segment with the implied fair value of the goodwill.  We utilized the income approach in determining the implied fair value of the goodwill, which requires estimates of future operating results and cash flows discounted using estimated discount rates.

Given the continued decline in our market value in the fourth quarter of 2008, we updated our impairment tests of goodwill and acquired intangible assets and concluded a further impairment had occurred in the carrying amounts of goodwill associated with our Medical Products segment as well as an impairment in the carrying amounts of goodwill associated with our Pharmaceutical Technologies segment.  Accordingly, we recorded an additional impairment charge of $50.3 million in the fourth quarter of 2008, leaving no goodwill on our balance sheet as of December 31, 2008.

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Income Tax

Income tax recovery for the year ended December 31, 2008 was $12.9 million compared to income tax recovery of $14.5 million for the year ended December 31, 2007. The income tax recovery for 2008 is primarily due to a net loss from operations, the amortization of identifiable intangible assets, tax deductions relating to international financing structures, and a recovery of taxes paid in prior years as a result of the carryback of current year losses.  The income tax recovery for 2008 also includes a recovery of $3.8 million relating to the settlement of an outstanding Quebec income tax reassessment and a charge of $6.1 million related to an accrual under FIN 48. 

The effective tax rate for 2008 was 1.7% compared to an effective tax rate of 20.6% for 2007.  The effective tax rate for 2008 is lower than the statutory Canadian tax rate of 31.0%, primarily due to valuation allowances on net operating losses, tax deductions related to international financing structures, provincial income tax credits, the net effect of lower tax rates on earnings in foreign jurisdictions, and goodwill impairment charges.

For the year ended December 31, 2008, income tax recovery of $12.9 million consisted of a current and deferred income tax recovery of $6.2 million on a net loss from Canadian operations and a current and deferred income tax recovery of $6.7 million on net losses from U.S. and foreign operations.

Discontinued Operations

In September 2006, we determined that certain operating subsidiaries acquired through the AMI acquisition were not aligned with our business strategy and we began actively looking to dispose of these subsidiaries. The operations were categorized as discontinued and the net loss for these operations has been shown separately on the statements of operations of these subsidiaries.  On July 31, 2007, we completed the sale of 100% of the issued and outstanding shares of Point Technologies, Inc. and its subsidiary Point Technologies S.A. for proceeds of $2.6 million.  On August 30, 2007, we sold all of the assets and liabilities of American Medical Instruments (Dartmouth), Inc. for proceeds of $2.2 million.

The operating results of discontinued operations are summarized as follows:

(in thousands of U.S.$)
	Years ended December 31,
		2007			2006
Revenue	$	7,580		$	10,092
Operating loss		(632	)		(4,045	)
Other income and expense		(1,991	)		4
Impairment charge		(8,879	)		(7,700	)
Loss before income taxes		(11,502	)		(11,741	)
Income tax recovery		(1,609	)		(4,033	)
Net loss from discontinued operations	($	9,893	)	($	7,708	)

Liquidity and Capital Resources

At December 31, 2008, we had working capital of $47.7 million and cash resources of $39.0 million, consisting of cash and cash equivalents.  In aggregate, our working capital decreased by $62.0 million as compared to December 31, 2007, primarily relating to the decline in our royalty revenues derived from sales of paclitaxel-eluting coronary stent systems by BSC (as described previously) and our loss on redemption and write-down of equity securities.  These cash resources, in addition to cash generated from operations, are used to support our continuing clinical studies, research and development initiatives, sales and marketing initiatives, working capital requirements, debt servicing requirements and for general corporate purposes.  We may also use our cash resources to fund acquisitions of, or investments in, businesses, products or technologies that expand, complement or are otherwise related to our business.  

On March 2, 2009 we announced we had completed a financing transaction with Wells Fargo Foothill, LLC. The financing includes a delayed draw secured term loan facility of up to $10 million and a secured revolving credit facility, with a borrowing base comprised of certain of our finished goods inventory and accounts receivable, providing up to an additional $22.5 million in available credit, subject to certain terms and conditions. At any time, the amount of financing available under the revolving credit facility may be significantly less than $22.5 million and is expected to fluctuate from month to month with changes in levels of finished goods and accounts receivable. As of February 23, 2009, the amount of financing available under the revolving credit facility was approximately (unaudited) $9.5 million. Any borrowings outstanding under the term loan and revolving credit facility bear interest ranging from LIBOR + 3.25% to LIBOR +3.75%, with a minimum Base LIBOR Rate of 2.25%. The term loan and revolving credit facility include certain covenants and restrictions with respect to our operations and require us to maintain certain levels of EBITDA and interest coverage ratios, among other terms and conditions. Repayment of any amounts drawn under the term loan and revolving credit facility can be made at certain points in time with ultimate maturity being February 27, 2013. Amounts repaid under the secured term loan, and prepayments made under the revolving credit facility in certain circumstances, cannot be re-borrowed by us. The purpose of this financing is to provide additional liquidity and capital resources for working capital and general corporate purposes.

As the minimum Base LIBOR Rate under the term loan and revolving credit facility is 2.25% and the LIBOR rate was 1.425% on December 31, 2008, a .5% increase or decrease in the LIBOR rate as of December 31, 2008 would have no impact on interest payable under the credit facilities.

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On March 23, 2006 we completed an offering of $250.0 million in aggregate principal amount of Subordinated Notes in a private placement transaction, and entered into a $425.0 million senior secured credit facility consisting of a $350.0 million senior term loan facility maturing in 2013 and a $75.0 million senior secured revolving credit facility maturing in 2011.  None of the $75.0 million revolving credit facility was drawn.  The net proceeds from the sale of the $250.0 million Senior Subordinated Notes and the $350.0 million term loan, as well as cash on hand, were used to finance the acquisition of AMI.  In December 2006, we repaid the term loan with the proceeds from the issuance of Senior Floating Rate Notes due 2013 in the aggregate principal amount of $325.0 million and cash on hand.  We also terminated the $75 million revolving credit facility.

The significant terms relating to our Subordinated Notes and Floating Rate Notes are described below (see “Senior Floating Rate Notes” and “Senior Subordinated Notes”).  

Due to numerous factors that may impact our future cash position, working capital and liquidity as discussed below and the significant cash that will be necessary to continue to service our current level of debt obligations, there can be no assurance that we will have adequate liquidity and capital resources to satisfy our financial obligations beyond 2009.

Our cash inflows and the amounts of expenditures that will be necessary to execute our business plan are subject to numerous uncertainties, including but not limited to changes in drug-eluting coronary stent markets, including the impact of new competitive entrants into such markets and research relating to the efficacy of drug-eluting stents, the sales achieved in such markets by our partner BSC, the timing and success of product sales and marketing initiatives and new product launches, the timing and success of our research, product development and clinical trial activities, the timing of completing certain operational initiatives including facility closures, our ability to effect reductions in certain aspects of our budgets in an efficient and timely manner, and changes in interest rates.  These and other uncertainties may adversely affect our liquidity and capital resources to a significant extent and may force us to further reduce our expen ditures on research and development or on our various new product and sales and marketing initiatives in order for us to continue to service our debt obligations.  Such further reductions in our budgeted expenditures may have an adverse effect on our new product development and sales growth initiatives and reduce our ability to achieve the revenue growth targets, product launch or new product development timelines in our current operating plan.  There can also be no assurance that such reductions in expenditures will be adequate to provide enough cash flow to continue to service our current level of debt obligations.

In particular, should our royalties received from BSC decline more significantly than we expect in future periods as a result of new competitive entrants into the U.S. drug-eluting stent market and due to negative research or publications relating to the efficacy of drug-eluting stents, our liquidity has been and may continue to be adversely affected, and we have been forced to explore alternative funding sources through debt, equity or other public or private securities offerings, or to pursue certain reorganization, restructuring or other strategic alternatives.  We may not be able to complete any restructuring, reorganization or strategic activities on terms that would be favourable for our shareholders.  Capital markets conditions deteriorated significantly during 2008 and early 2009, including a significant and material decline in the level of corporate lending activity, combined with a significant increase in the cost of any such lend ing.  Current market conditions may have a material impact on our ability to complete any of the activities as described on favourable terms, if at all.

As a result of uncertainty and volatility relating to the market and competitive environment for drug-eluting stents and to address our liquidity needs, we commenced the exploration of a broad range strategic and financial alternatives in the second half of 2007 See “Business Overview —Financial and Strategic Alternatives Process”.

Cash Flow Highlights

(in thousands of U.S.$)	Years ended December 31,
		2008			2007			2006
Cash and cash equivalents, beginning of year	$	91,326		$	99,332		$	62,163
Net (loss) income excluding non-cash items		(16,866	)		(14,697	)		58,662
Working capital requirements		(21,141	)		9,135			(2,791	)
Cash (used in) provided by operating activities		(38,007	)		(5,562	)		55,871
Cash (used in) provided by investing activities		(8,239	)		259			(575,208	)
Cash (used in) provided by financing activities		(4,378	)		(1,637	)		556,926
Effect of exchange rate changes on cash		(1,750	)		(1,066	)		(420	)
Net (decrease) increase in cash and cash equivalents		(52,374	)		(8,006	)		37,169
Cash and cash equivalents, end of year	$	38,952		$	91,326		$	99,332

Cash Flows from Operating Activities

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Cash used in operating activities for the year ended December 31, 2008 was $38.0 million compared to cash used of $5.6 million for 2007.  Net loss for the current year, excluding non-cash items, resulted in cash outflows of $16.9 million compared to cash outflows of $14.7 million for 2007.  The increase in cash used in operating activities was due to factors consistent with those that impacted net loss, as described above under “Results of Operations – Overview”.  Working capital requirements resulted in net cash outflows of $21.1 million during 2008 compared to net cash inflows of $9.1 for 2007. The net cash outflows in 2008 primarily resulted from a $5.5 million increase during the year in trade accounts receivable, consistent with the increase in medical product sales as compared to 2007, an increase of $5.1 million during the year of inventory balances built in order to meet production requirements for certain of our medical products in the United States and Europe and a decrease of $12.5 million in accounts payable and accrued liabilities due to lower spending.   

Cash used in operating activities for the year ended December 31, 2007 was $5.6 million compared to cash provided of $55.9 million for 2006. Net loss for the current year, excluding non-cash items, resulted in cash outflows of $14.7 million compared to cash inflows of $58.7 million for 2006. The decrease in cash provided by operating activities was due to factors consistent with those that impacted net loss, as described above under “Results of Operations – Overview”.  Working capital requirements resulted in cash inflows of $9.1 million during 2007 compared to cash outflows of $2.8 million for 2006. Cash inflows related to working capital for 2007 primarily resulted from a $10.6 million decrease in trade accounts receivable due to focused collection efforts and slightly higher trade and tax payables balances.  Partially offsetting these net inflows was a decrease in other accounts payable as a $5.0 million milestone payable accrued at December 31, 2006 was paid during 2007.  

Cash Flows from Investing Activities

Net cash used in investing activities for the year ended December 31, 2008 was $8.2 million compared to net cash provided of $0.3 million for 2007.  For 2008, the net cash used in investing activities was primarily related to capital expenditures of $7.7 million.  We also paid a $0.8 million licensing milestone to a partner upon our successful completion of enrollment in our Bio-Seal human clinical trial and invested $2.5 million in IPR&D for an initial license payment to Rex Medical L.P.  These cash outflows were offset by proceeds on sale of short-term investments of $2.8 million.

Net cash provided by investing activities for the year ended December 31, 2007 was $0.3 million compared to net cash used of $575.2 million for 2006.  For 2007, cash provided by investing activities was primarily from the proceeds on the sale of long term assets, and the funds were used for the acquisition of R&D assets including intangible assets, IPR&D and equipment.  For 2006, cash used in investing activities was primarily related to cash used to fund the acquisitions of AMI and Quill, partly offset by net redemptions of short-term investments.  

We invest our excess cash balances in short-term marketable securities, principally investment grade commercial debt and government agency notes. The primary objectives of our marketable securities portfolio are liquidity and safety of principal.  Investments are made with the objective of achieving the highest rate of return while meeting our two primary objectives. Our investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.  At December 31, 2008, we were not holding any short-term marketable securities.

At December 31, 2008 and December 31, 2007, we retained the following cash and cash equivalents denominated in foreign currencies in order to meet our anticipated foreign operating and capital expenditures in future periods.

		December 31,		December 31,
(in thousands of U.S.$)		2008		2007
Canadian dollars	$	3,942	$	15,488
Swiss franc		3,053		3,870
Euro		5,263		1,395
Danish krone		2,022		1,756
Other		2,806		-

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2008 was $4.4 million, primarily for expenditures related to the proposed API financing transaction as described above as well as expenditures related to the credit facility announced on March 2, 2009 (see “Liquidity and Capital Resources” above and “Subsequent Events” in note 27 to audited consolidated financial statements for year ended December 31, 2008).  The expenditures related to the proposed financing transaction had been capitalized as part of deferred financing costs related to the transaction, but were expensed in late 2008 based upon our September 22, 2008 announcement that we may not be able to satisfy certain closing conditions of the proposed transaction.  These cash outflows were offset with a small amount of cash received on the exercise of employee stock options.

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Net cash used in financing activities for the year ended December 31, 2007 of $1.6 million was related to long-term debt financing costs of $1.9 million, partially offset by proceeds from exercise of stock options of $0.2 million.  Net cash provided by financing activities for 2006 of $556.9 million was mainly due to the proceeds received from the senior secured credit facility and Subordinated Notes used to fund the AMI acquisition.

Senior Floating Rate Notes

On December 11, 2006, we issued Floating Rate Notes in the aggregate principal amount of $325 million.  The Floating Rate Notes bear interest at an annual rate of LIBOR (London Interbank Offered Rate) plus 3.75%, which is reset quarterly.  Interest is payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year through to maturity.  The Floating Rate Notes are unsecured senior obligations, are guaranteed by certain of our subsidiaries and rank equally in right of payment to all of our existing and future senior indebtedness.  At December 31, 2008, the interest rate on these notes was 5.97%.  We may redeem all or a part of the notes at specified redemption prices.  

Senior Subordinated Notes

On March 23, 2006, we issued Subordinated Notes in the aggregate principal amount of $250.0 million. These Subordinated Notes bear interest at an annual rate of 7.75% payable semi-annually in arrears on April 1 and October 1 of each year through to maturity. The Subordinated Notes are unsecured obligations. The Subordinated Notes and related note guarantees provided by us and certain of our subsidiaries are subordinated to Floating Rate Notes described above and our existing and future senior indebtedness.

Prior to April 1, 2009, we may redeem at a specified redemption price up to 35% of the aggregate principal amount of the notes using net proceeds from certain equity and convertible debt offerings or we may redeem all, or a portion, of the aggregate principal amount of the notes at any time by paying a make-whole redemption price. On or after April 1, 2009, we may redeem all or a part of the notes at specified redemption prices.

Debt Covenants

The terms of the indentures governing our Floating Rate Notes and our Subordinated Notes include various covenants that impose restrictions on the operation of our business and the business of our subsidiaries, including the incurrence of certain liens and other indebtedness.  As of December 31, 2008, we are in material compliance with all covenants and are not in breach of any provision of the indentures governing the Subordinated Notes and Floating Rate Notes that would cause an event of default to occur.

In addition, the terms of our senior secured credit facility that we announced on March 2, 2009, include customary financial covenants, including maintaining certain levels of EBITDA and interest coverage ratios, as well as covenants that limit our ability to, among other things, incur indebtedness, create liens, merge or consolidate, sell or dispose of assets, change the nature of their business, make distributions and make advances, loans or investments.

Contractual Obligations

Our significant contractual obligations for the next five years and thereafter include:

(in thousands of U.S.$)	Payments due by period
	Total	Less than 1 year	1 to 3 years	3 to 5 years	More than 5
					years
Long-term debt repayments	575,000	-	-	325,000	250,000
Long-term debt interest
obligations	185,955	36,851	72,854	71,406	4,844
Operating leases	24,708	3,271	5,605	4,996	10,836
License, research and technology
development agreements	1,563	1,563	-	-	-
Total obligations	787,226	41,685	78,459	401,402	265,680

Long-term debt includes $325.0 million of Floating Rate Notes and $250.0 million of Subordinated Notes. Repayments are based on contractual commitments as defined in the indentures governing the notes. Long-term debt interest obligations on variable (floating) rate debt are estimated using the current interest rates in effect at December 31, 2008. Long-term debt repayments and interest obligations assume no early repayment of principal.

We have entered into operating leases in the ordinary course of business for office and laboratory space with various third parties, which expire through July 2019.  

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Included in the above schedule are our commitments arising from our acquisition of Quill, to spend a further $1.6 million over the period of January 1, 2009 to June 30, 2009 in relation to the technology, including sales and marketing, research and development, and corporate support.  

The table above does not include any cost sharing or milestone payments in connection with research and development collaborations with third parties as these payments are contingent on the achievement of specific developmental, regulatory or commercial activities and milestones.  In addition, we may have to make royalty payments based on a percentage of future sales of certain products in the event regulatory approval for marketing is obtained.  We have a contingent obligation of $10.0 million to former Afmedica equity holders should we reach certain development and regulatory milestones with respect to any Afmedica product.  In addition, we may be required to make additional contingent payments of up to $150.0 million to the former shareholders of Quill should we achieve certain revenue and development milestones. These payments to the former Quill shareholders are primarily contingent upon the achievement of significant incremental revenue growth over a five year period from the close of the acquisition, subject to certain conditions. We may also have to make royalty payments based on a percentage of future sales of certain products associated with certain collaborators and licensors in the event regulatory approval for marketing is obtained.

Contingencies

We are party to various legal proceedings, including patent infringement litigation and other matters.  See Part I, Item 3 and Note 19(b) “Contingencies”, in the Notes to the Consolidated Financial Statements of Part II, Item 8 of this Annual Report on Form 10-K for more information.

Inflation

The effects of inflation or changing prices has not had a material impact on our net sales, revenues or income from continuing operations for the last three years.

Off-Balance Sheet Arrangements

As of December 31, 2008, we do not have any off-balance sheet arrangements, as defined by applicable securities regulators in Canada and the United States, that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations, or SFAS No. 141(R). SFAS No. 141(R) will change the accounting for business combinations. Under SFAS No. 141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, any business combinations we engage in will be recorded and disclosed following existing GAAP until December 31, 2008. We expect SFAS No. 141(R) will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51, or SFAS No. 160. SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. We do not expect the adoption of SFAS No. 160 to have a material impact on its consolidated balance sheets, results of operations or cash flows.

In November 2007, the Emerging Issues Task Force issued EITF Issue 07-01, Accounting for Collaborative Arrangements or EITF No. 07-01. EITF No. 07-01 requires collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further, EITF No. 07-01 clarified that the determination of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship subject to Issue 01-9, Accounting for Consideration Given by a Vendor to a Customer. EITF No. 07-01 is effective for fiscal years beginning December 15, 2008. We have not yet completed its evaluation of EITF 07-01, but does not believe that it wi ll have a material impact on its consolidated financial position, results of operations or cash flows.

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In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, or SFAS No. 161. SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. We are still assessing the impact of this pronouncement.

In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets, or FSP FAS 142-3. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of the position is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the intangible asset. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. We are assessing the potential impact that the adoption of FSP FAS 142-3 may have on its consolidated financial position, results of operations or cash flows.

In June 2008, the Emerging Issues Task Force issued EITF 08-3, Accounting for Lessees for Maintenance Deposits Under Lease Arrangements or EITF 08-3. EITF 08-3 provides guidance for accounting for nonrefundable maintenance deposits. It also provides revenue recognition accounting guidance for the lessor. EITF 08-3 is effective for fiscal years beginning after December 15, 2008. We have not yet completed its evaluation of EITF 8-03, but does not believe that it will have a material impact on its consolidated financial position, results of operations or cash flows.

In November 2008, the Emerging Issues Task Force issued EITF 08-6, Equity method Investment Accounting Considerations, or EITF 08-6. EITF 08-6 addresses a number of matters associated with the impact of SFAS No. 141(R) and SFAS No. 160 on the accounting for equity method investments including initial recognition and measurement and subsequent measurement issues. EITF 08-6 is effective, on a prospective basis, for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. We have not yet completed its evaluation of EITF 8-03, but does not believe that it will have a material impact on its consolidated financial position, results of operations or cash flows.

In November 2008, the Emerging Issues Task Force issued EITF 08-07, Accounting for Defensive Intangible Assets, or ETIF 08-7. EITF 08-7 provides guidance for accounting for defensive intangible assets subsequent to their acquisition in accordance with SFAS No. 141(R) and SFAS No. 157 including the estimated useful life that should be assigned to such assets. EITF 08-7 is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect EITF 08-7 will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time.

Outstanding Share Data

As of December 31, 2008, there were 85,121,983 common shares issued and outstanding for a total of $472.7 million in share capital.  At December 31, 2008, we had 7,644,632 CDN dollar stock options outstanding under the Angiotech Pharmaceuticals, Inc. stock option plan (of which 5,676,629 were exercisable) at a weighted average exercise price of CDN$12.82. We also had 1,790,968 U.S. dollar stock options outstanding under this plan at December 31, 2008, (of which 370,478 were exercisable) at a weighted average exercise price of US$3.19 per option. Each CDN dollar stock option and U.S. dollar stock option is exercisable for one common share of Angiotech Pharmaceuticals, Inc.

As of December 31, 2008, there were 94 stock options outstanding in the AMI stock option plan (of which 13 were exercisable). Each AMI stock option is exercisable for approximately 3,852 common shares of Angiotech Pharmaceuticals, Inc. upon exercise at a weighted average exercise price of US$15.44 per option.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve our capital to fund operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of securities of high credit quality. As of December 31, 2008 we had cash and cash equivalents of $39.0 million.

Interest Rate Risk

As the issuer of the Floating Rate Notes, we are exposed to interest rate risk. The interest rate on the Floating Rate Notes is reset quarterly to 3-month LIBOR plus 3.75%. The aggregate principal amount of the Floating Rate Notes is $325million and the notes bear interest at a rate of approximately 6.0% at December 31, 2008 (8.9% at December 31, 2007). Based upon the average floating rate debt levels of the Company during the year, a 100 basis point increase in interest rates would have impacted our interest expense by approximately $3.3 million for each of the years ended December 31, 2008 and 2007. We do not use derivatives to hedge against interest rate risk.

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Foreign Currency Risk

We operate internationally and enter into transactions denominated in foreign currencies. As such, our financial results are subject to the variability that arises from exchange rate movements in relation to the U.S. dollar. Our foreign currency exposures are primarily limited to the Canadian dollar, the Swiss franc, the Danish kroner, the Euro and the U.K. pound sterling. We incurred foreign exchange gain of $0.5 million for the year ended December 31, 2008 ($0.3 million foreign exchange loss for the year ended December 31, 2007) primarily as a result of changes in the relationship of the U.S. to Canadian dollar and other foreign currency exchange rates when translating our foreign currency-denominated cash, cash equivalents and short-term investments to U.S. dollars for reporting purposes at period end. We have not entered into any forward currency contracts or other financial derivatives to hedge foreign exchange risk, and therefore we are subject to foreig n currency transaction and translation gains and losses. We purchase goods and services in U.S. and Canadian dollars, Swiss francs, Danish kroner, Euros, and U.K. pounds sterling, and earn a significant portion of our license and milestone revenues in U.S. dollars. Foreign exchange risk is managed primarily by satisfying foreign denominated expenditures with cash flows or assets denominated in the same currency.

Since we operate internationally and approximately 13.4% of our net revenue for the year ended December 31, 2008 was generated in other than the U.S. dollar, foreign currency exchange rate fluctuations could significantly impact our financial position, results of operations, cash flows and competitive position.

For purposes of specific risk analysis, we used a sensitivity analysis to measure the potential impact to our consolidated financial statements for a hypothetical 10% strengthening of the U.S. dollar compared with the Canadian dollar, the Swiss franc, the Danish kroner, the Euro and the U.K. pounds sterling for the year ended December 31, 2008. Assuming a 10% strengthening of the U.S. dollar, our product net revenue would have been negatively impacted by approximately $3.5 million.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Report on Internal Control over Financial Reporting

See index to financial statements included under Item 15 in this Annual Report on Form 10-K.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that as of the end of the period covered by this Form 10-K our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, our CEO and CFO have concluded that our disclosure controls and procedures are effective under circumstances where our disclosure controls and procedures should reasonably be expected to operate effectively.

(b) Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2008.

The effectiveness of our internal control over financial reporting as at December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

(c) Changes in Internal Control over Financial Reporting

No change was made to our internal control over financial reporting during the fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

Item 9B.

OTHER INFORMATION

None

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PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The  information required by this Item is set forth under the captions “Election of Directors” and “Corporate Governance” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference.

Item 11.

EXECUTIVE COMPENSATION

The information required by this Item is set forth under the captions “Executive Compensation”, and “Corporate Governance” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is set forth under the captions “Certain Relationships and Related Transactions” and “Corporate Governance” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is set forth under the caption “Appointment of Auditors” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference.

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PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are included as part of this Annual Report on Form 10-K.

(1)

Financial Statements:

	Page†
Report of Independent Registerd Public Accounting Firm	13-1
Consolidated Balance Sheets as of December 31, 2008 and 2007	13-2
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006.	13-3
Consolidated Statements of Shareholders’ (Deficit) Equity as of December 31, 2008, 2007 and 2006	13-4
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	13-5
Notes to Consolidated Financial Statements	13-6
† Page numbers refer to Exhibit 13 of this Annual Report on Form 10-K.

(2)

Financial Statement Schedule:

	Page†
Report of Independent Registerd Public Accounting Firm	13-44
Schedule II – Valuation of Qualifying Accounts for the years ended December 31, 2008, 2007 and 2006	13-45
† Page numbers refer to Exhibit 13 of this Annual Report on Form 10-K.

All other schedules are omitted as the information required is inapplicable or the information is presented in the consolidated financial statements or related notes.

(3)

Exhibits:

The exhibits listed below are filed as part of this Annual Report on Form 10-K. References under the caption “Location” to exhibits or other filings indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit or other filing referred to are the same and that the exhibit or other filing referred to is incorporated by reference. Management contracts and compensatory plans or arrangements filed as exhibits to this Annual Report on Form 10-K are identified by an asterisk. The Commission file number for our Exchange Act filings referenced below is 000-30334.

Exhibit	Description	Location
3.1	Notice of Articles of Angiotech Pharmaceuticals, Inc.	Filed herewith
3.2	Articles of Angiotech Pharmaceuticals, Inc.	Exhibit 3, Form 6-K filed March 31, 2005
4.1	Indenture dated March 23, 2006 among Angiotech Pharmaceuticals, Inc., certain of its subsidiaries and Wells Fargo Bank N.A., for 7.75% Senior Subordinated Notes due 2014	Exhibit 99.2, Form 6-K filed April 3, 2006
4.2	Indenture dated December 11, 2006 among Angiotech Pharmaceuticals, Inc., certain of its subsidiaries and Wells Fargo Bank N.A., for Senior Floating Rate Notes due 2013	Exhibit 2, Form 6-K filed December 15, 2006
4.3	Shareholder Rights Plan Agreement between Angiotech Pharmaceuticals, Inc. and Computershare Trust Company of Canada as Rights Agent, Amended and Restated as of October 30, 2008	Filed herewith
10.1	Credit Agreement, dated as of February 27, 2009, by and among Angiotech Pharmaceuticals, Inc., as Parent, the subsidiaries of Parent listed as borrowers on the signature pages thereto, as Borrowers, the lenders signatory thereto, as Lenders, and Wells Fargo Foothill, LLC, as Arranger and Administrative Agent.	Exhibit 10.1, Form 8-K filed March 5, 2009
10.2	License Agreement by and among Angiotech Pharmaceuticals, Inc., Boston Scientific Corporation and Cook Incorporated, dated as of July 9, 1997	Exhibit, Form 20-FR filed October 5, 1999
10.3	September 24, 2004 Amendment Between Angiotech Pharmaceuticals, Inc. and Cook Incorporated Modifying July 9, 1997 License Agreement Among Angiotech Pharmaceuticals, Inc., Boston Scientific Corporation, and Cook Incorporated**	Filed herewith
10.4	Amendment Between Angiotech Pharmaceuticals, Inc. and Boston Scientific Corporation Modifying July 9, 1997 License Agreement Among Angiotech Pharmaceuticals, Inc., Boston Scientific Corporation, and Cook Incorporated	Exhibit 10.2, Form 6-K filed March 31, 2005
10.5	Distribution and License Agreement by and among Angiodevice International GmbH (as assignee of Angiotech Pharmaceuticals, Inc., Angiotech International, GmbH, and Cohesion Technologies, Inc.), Baxter Healthcare Corporation and Baxter Healthcare, S.A., dated April 1, 2003**	Filed herewith
10.6	Manufacturing and Supply Agreement, by and among Angiodevice International GmbH (as assignee of Angiotech Pharmaceuticals, Inc., Angiotech International, GmbH, and Cohesion Technologies, Inc.), Baxter Healthcare Corporation and Baxter Healthcare, S.A., dated April 1, 2003**	Filed herewith
10.7	Amendment No. 1 dated December 23, 2004 to Distribution and License Agreement, by and among Angiodevice International GmbH (as assignee of Angiotech Pharmaceuticals, Inc., Angiotech International, GmbH, and Cohesion Technologies, Inc.), Baxter Healthcare Corporation and Baxter Healthcare, S.A., dated April 1, 2003	Exhibit 1, Form 6-K filed March 28, 2008
10.8	Amendment No. 1 dated January 21, 2005 to Manufacturing and Supply Agreement, by and among Angiodevice International GmbH (as assignee of Angiotech Pharmaceuticals, Inc., Angiotech International, GmbH, and Cohesion Technologies, Inc.), Baxter Healthcare Corporation and Baxter Healthcare, S.A., dated April 1, 2003	Exhibit 2, Form 6-K filed March 28, 2008
10.9	Amendment No. 2 dated October 8, 2007 to Distribution and License Agreement, by and among Angiodevice International GmbH (as assignee of Angiotech Pharmaceuticals, Inc., Angiotech International, GmbH, and Cohesion Technologies, Inc.), Baxter Healthcare Corporation and Baxter Healthcare, S.A., dated April 1, 2003**	Filed herewith
10.10	Agreement and Plan of Merger among Angiotech Pharmaceuticals, Inc., Angiotech Pharmaceuticals (US), Inc., Quaich Acquisition, Inc. and Quill Medical, Inc. dated May 25, 2006 **	Filed herewith
10.11	License Agreement between Public Health Service (through the Office of Technology Transfer, National Institutes of Health) and Angiotech Pharmaceuticals, Inc., dated November 19, 1997**	Filed herewith
10.12	First Amendment between Public Health Service (through the Office of Technology Transfer, National Institutes of Health) and Angiotech Pharmaceuticals, Inc., dated March 28, 2002 modifying the License Agreement between Public Health Service (through the Office of Technology Transfer, National Institutes of Health) and Angiotech Pharmaceuticals, Inc., dated November 19, 1997**	Filed herewith
10.13	Second Amendment between Public Health Service (through the Office of Technology Transfer, National Institutes of Health) and Angiotech Pharmaceuticals, Inc., dated May 23, 2007 modifying the License Agreement between Public Health Service (through the Office of Technology Transfer, National Institutes of Health) and Angiotech Pharmaceuticals, Inc., dated November 19, 1997**	Filed herewith
10.14	License Agreement between Angiotech Pharmaceuticals, Inc. and The University of British Columbia, dated August 1, 1997**	Filed herewith
10.15	Amendment to Licence Agreement between Angiotech Pharmaceuticals, Inc. and The University of British Columbia, dated February 27, 2004, modifying the License Agreement between Angiotech Pharmaceuticals, Inc. and The University of British Columbia, dated August 1, 1997**	Filed herewith
10.16*	Form of Indemnification Agreement for Officers – US	Filed herewith
10.17*	Form of Indemnification Agreement for Officers – Canada	Filed herewith
10.18*	Form of Indemnification Agreement for Directors	Filed herewith
10.19*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and William L. Hunter, dated April 23, 2004	Filed herewith
10.20*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and K. Thomas Bailey, dated August 8, 2007 **	Filed herewith
10.21*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and David D. McMasters, dated October 30, 2007 **	Filed herewith
10.22*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and Rui Avelar, dated October 15, 2007	Filed herewith
10.23*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and Jeffrey Walker, dated October 15, 2007 **	Filed herewith
10.24*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and Chris J.W. Dennis, dated December 17, 2007 (as amended)**	Filed herewith
10.25*	Executive Employment Agreement between Angiotech Pharmaceuticals, Inc. and Gary Ingenito, dated November 26, 2007 **	Filed herewith
10.26*	Angiotech Pharmaceuticals, Inc. 2001 Stock Option Plan	Exhibit to Form S-8, filed September 27, 2001
10.27*	Angiotech Pharmaceuticals, Inc. 2004 Stock Option Plan	Filed herewith
10.28*	Angiotech Pharmaceuticals, Inc. 2006 Stock Option Plan	Filed herewith
10.29*	American Medical Instruments Holdings, Inc. 2003 Stock Option Plan	Filed herewith
13	Disclosure incorporated by reference into Part II of this Annual Report on Form 10-K.	Filed herewith
14.1	Code of Ethics for Chief Executive Officer	Filed herewith
14.2	Code of Ethics for Chief Financial Officer	Filed herewith
14.3	Code of Ethics for Directors and Officers	Filed herewith
14.4	Guide of Standards and Business Conduct	Exhibit 1, Form 6-K filed April 18, 2007
21	List of Worldwide Subsidiaries	Filed herewith
31.1	Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of CFO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

** portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Angiotech Pharmaceuticals, Inc.
Date: March 16, 2009	By:	/s/ K. Thomas Bailey
		K. Thomas Bailey Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitute and appoint William L. Hunter, Chief Executive Officer, and K. Thomas Bailey, Chief Financial Officer, and each of them, the lawful attorney and agent or attorneys and agents with power and authority to do any and all acts and things and to execute all instruments which said attorneys and agents, or either of them, determine may be necessary or advisable or required to enable Angiotech Pharmaceuticals, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Annual Report on Form 10-K. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Annual Report on Form 10-K or amendments or supplements thereto, and ea ch of the undersigned hereby ratifies and confirms all that said attorneys and agents or either of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ William L. Hunter William L. Hunter, M.D.	President, Chief Executive Officer and Director (Principal Executive Officer)	March 16, 2009
/s/ K. Thomas Bailey K. Thomas Bailey	Chief Financial Officer (Principal Financial Officer)	March 16, 2009
/s/ Jay Dent Jay Dent	Senior Vice President, Finance (Principal Accounting Officer)	March 16, 2009
/s/ David Howard David Howard	Chairman of the Board of Directors	March 16, 2009
/s/ Laura Brege Laura Brege	Director	March 16, 2009
/s/ Edward Brown Edward Brown	Director	March 16, 2009
/s/ Hartley T. Richardson Hartley T. Richardson	Director	March 16, 2009
/s/ Arthur H. Willms Arthur Willms	Director	March 16, 2009
/s/ Henry A, McKinnell Jr. Henry A, McKinnell Jr.	Director	March 16, 2009

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EX-3.1

Exhibit 3.1

Date and Time: February 3, 2009 02:15 PM Pacific Time

	Ministry of Finance BC Registry Services	Mailing Address: PO BOX 9431 Stn. Prov Govt. Victoria BC V8W 9V3 www.corporateonline.gov.bc.ca	Location: 2nd Floor – 940 Blanshard St. Victoria BC 250-356-8626

Notice of Articles

BUSINESS CORPORATIONS ACT

This Notice of Articles was issued by the Registrar on: May 15, 2008 09:31 AM Pacific Time

  Incorporation Number: BC0374228

Recognition Date: Incorporated on October 12, 1989

NOTICE OF ARTICLES

Name of Company:

ANGIOTECH PHARMACEUTICALS, INC.

REGISTERED OFFICE INFORMATION

Mailing Address: 1200 WATERFRONT CENTRE 200 BURRARD STREET P.O. BOX 48600 VANCOUVER BC V7X 1T2 CANADA Delivery Address: 1200 WATERFRONT CENTRE 200 BURRARD STREET VANCOUVER BC V7X 1T2 CANADA

RECORDS OFFICE INFORMATION

Mailing Address: 1200 WATERFRONT CENTRE 200 BURRARD STREET P.O. BOX 48600 VANCOUVER BC V7X 1T2 CANADA Delivery Address: 1200 WATERFRONT CENTRE 200 BURRARD STREET VANCOUVER BC V7X 1T2 CANADA

BC0374228 Page : 1 of 3

DIRECTOR INFORMATION

Last Name, First Name, Middle Name:

HOWARD, DAVID T.

Mailing Address: 3-215 EAST KEITH ROAD NORTH VANCOUVER BC V7L 1V4 CANADA Delivery Address: 3-215 EAST KEITH ROAD NORTH VANCOUVER BC V7L 1V4 CANADA

Last Name, First Name, Middle Name:

WILLMS, ARTHUR H.

Mailing Address: 1788 WEST 15TH AVENUE VANCOUVER BC V6A 1B6 CANADA Delivery Address: 1788 WEST 15TH AVENUE VANCOUVER BC V6A 1B6 CANADA

Last Name, First Name, Middle Name:

HUNTER, WILLIAM L.

Mailing Address: 1618 STATION STREET VANCOUVER BC V6A 1B6 CANADA Delivery Address: 1618 STATION STREET VANCOUVER BC V6A 1B6 CANADA

Last Name, First Name, Middle Name:

RICHARDSON, HARTLEY

Mailing Address: JAMES RICHARDSON & SONS LIMITED 30TH FLOOR, ONE LOMBARD PLACE WINNIPEG MB R3B 0Y1 CANADA Delivery Address: JAMES RICHARDSON & SONS LIMITED 30TH FLOOR, ONE LOMBARD PLACE WINNIPEG MB R3B 0Y1 CANADA

Last Name, First Name, Middle Name:

Brege, Laura A.

Mailing Address: 2100 POWELL STREET 12TH FLOOR EMERGYVILLE CA 94608 UNITED STATES Delivery Address: 2100 POWELL STREET 12TH FLOOR EMERGYVILLE CA 94608 UNITED STATES

Last Name, First Name, Middle Name:

BROWN, EDWARD MONTGOMERY

Mailing Address: 3365 CLAY STREET SAN FRANCISCO CA 94118 UNITED STATES Delivery Address: 3365 CLAY STREET SAN FRANCISCO CA 94118 UNITED STATES

BC0374228 Page : 2 of 3

Last Name, First Name, Middle Name:

McKinnell, Henry Alexander

Mailing Address: 2720 MARSH HAWK JACKSON WY 83001 UNITED STATES Delivery Address: 2720 MARSH HAWK JACKSON WY 83001 UNITED STATES

AUTHORIZED SHARE STRUCTURE

1.   200,000,000	COMMON Shares	Without Par Value With Special Rights or Restrictions attached
1.   50,000,000	CLASS I PREFERENCE Shares	Without Par Value With Special Rights or Restrictions attached

BC0374228 Page : 3 of 3

EX-4.3

Exhibit 4.3

SHAREHOLDER RIGHTS PLAN AGREEMENT

AMENDED AND RESTATED AS OF

October 30, 2008

BETWEEN

ANGIOTECH PHARMACEUTICALS, INC.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

AS RIGHTS AGENT

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION		2
1.1	Certain Definitions	2
1.2	Currency	15
1.3	Headings	15
1.4	Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting Shares	16
1.5	Acting Jointly or in Concert	16
1.6	Generally Accepted Accounting Principles	16
ARTICLE 2 THE RIGHTS		17
2.1	Legend on Common Share Certificates	17
2.2	Initial Exercise Price; Exercise of Rights; Detachment of Rights	17
2.3	Adjustments to Exercise Price; Number of Rights	20
2.4	Date on Which Exercise Is Effective	26
2.5	Execution, Authentication, Delivery and Dating of Rights Certificates	26
2.6	Registration, Transfer and Exchange	27
2.7	Mutilated, Destroyed, Lost and Stolen Rights Certificates	27
2.8	Persons Deemed Owners of Rights	28
2.9	Delivery and Cancellation of Certificates	28
2.10	Agreement of Rights Holders	28
2.11	Rights Certificate Holder Not Deemed a Shareholder	29
ARTICLE 3 ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS		30
3.1	Flip-in Event	30
ARTICLE 4 THE RIGHTS AGENT		33
4.1	General	33
4.2	Merger, Amalgamation or Consolidation or Change of Name of Rights Agent	33
4.3	Duties of Rights Agent	35
4.4	Change of Rights Agent	37
4.5	Compliance with Money Laundering Legislation	37
4.6	Privacy Provision	37
ARTICLE 5 MISCELLANEOUS		38
5.1	Redemption and Waiver	38
5.2	Expiration	39
5.3	Issuance of New Rights Certificates	40
5.4	Supplements and Amendments	40
5.5	Fractional Rights and Fractional Shares	41
5.6	Rights of Action	42
5.7	Regulatory Approvals	42
5.8	Declaration as to Non-Canadian Holders	42
5.9	Notices	42
5.10	Costs of Enforcement	43
5.11	Successors	43
5.12	Benefits of this Agreement	43

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5.13	Governing Law	44
5.14	Severability	44
5.15	Effective Date	44
5.16	Determinations and Actions by the Board of Directors	44
5.17	Time of the Essence	44
5.18	Execution in Counterparts	45

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SHAREHOLDER RIGHTS PLAN AGREEMENT

MEMORANDUM OF AGREEMENT dated as of October 30, 2008 between Angiotech Pharmaceuticals, Inc. (“Angiotech”), a company incorporated under the laws of British Columbia, and Computershare Trust Company of Canada, a trust company incorporated under the laws of Canada (the “Rights Agent”);

WHEREAS the board of directors of Angiotech has determined that it is in the best interests of Angiotech to adopt a shareholder rights plan to ensure, to the extent possible, that all shareholders of Angiotech are treated fairly in connection with any take-over bid for Angiotech;

AND WHEREAS in order to implement the adoption of a shareholder rights plan as established by this Agreement, the board of directors of Angiotech has:

(a)

authorized the issuance, effective one minute after the Effective Date (as hereinafter defined), of one Right (as hereinafter defined) in respect of each Voting Share (as hereinafter defined) of Angiotech in each case outstanding one minute after the Effective Date (the “Record Time”); and

(b)

authorized the issuance of one Right in respect of each Voting Share issued after the Record Time and prior to the earlier of the Separation Time (as hereinafter defined) and the Expiration Time (as hereinafter defined);

AND WHEREAS each Right entitles the holder thereof, after the Separation Time, to purchase securities of Angiotech pursuant to the terms and subject to the conditions set forth in this Agreement;

AND WHEREAS Angiotech desires to appoint the Rights Agent to act on behalf of Angiotech and the holders of Rights, and the Rights Agent is willing to so act, in connection with the issuance, transfer, exchange and replacement of Rights Certificates (as hereinafter defined), the exercise of Rights and other matters referred to in this Agreement;

AND WHEREAS the board of directors of Angiotech approved the adoption of a shareholder rights plan agreement on February 10, 1999 (the “1999 Agreement”), with such 1999 Agreement being confirmed by Angiotech’s shareholders on March 16, 1999, certain amendments to the 1999 Agreement were subsequently approved by Angiotech’s shareholders on March 5, 2002 (the “2002 Agreement”) and certain amendments to the 2002 Agreement were subsequently approved by Angiotech’s shareholders on June 9, 2005 (the “2005 Agreement”);

AND WHEREAS the board of directors of Angiotech approved certain additional amendments to the 2005 Agreement, which amendments shall only become effective as at the date that Angiotech’s shareholders confirm the Agreement (as hereinafter defined);

NOW THEREFORE, in consideration of the premises and the respective covenants and agreements set forth herein, and subject to such covenants and agreements, the parties hereby agree as follows:

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ARTICLE 1  
INTERPRETATION

1.1

Certain Definitions

For purposes of this Agreement, the following terms have the meanings indicated:

(a)

“Acquiring Person” means any Person who is the Beneficial owner of more than 20% of the outstanding Voting Shares; provided, however, that the term “Acquiring Person” shall not include:

(i)

Angiotech or any Subsidiary of Angiotech;

(ii)

any Person who becomes the Beneficial owner of more than 20% of the outstanding Voting Shares as a result of one or any combination of (A) an acquisition or redemption by Angiotech of Voting Shares which, by reducing the number of Voting Shares outstanding, increases the proportionate number of Voting Shares Beneficially owned by such Person to more than 20% of the Voting Shares then outstanding, (B) Permitted Bid Acquisitions, (C) Pro Rata Acquisitions, or (D) Exempt Acquisitions; provided, however, that if a Person becomes the Beneficial owner of more than 20% of the outstanding Voting Shares by reason of one or any combination of the operation of Paragraphs (A), (B), (C), or (D) above and such Person thereafter becomes the Beneficial owner of more than 1% of the number of outstanding Voting Shares (other than pursuant to one or more of any combination of Paragraphs (A), (B), (C) or (D) abo ve), as the case may be, then as of the date such Person becomes the Beneficial owner of such additional Voting Shares, as the case may be, such Person shall become an “Acquiring Person”;

(iii)

for a period of 10 calendar days after the Disqualification Date (as defined below), any Person who becomes the Beneficial owner of more than 20% of the outstanding Voting Shares as a result of such Person becoming disqualified from relying on Clause 1.1(i)(iii)(B) solely because such Person is making or has announced a current intention to make a Take-over Bid, either alone or by acting jointly or in concert with any other Person.  For the purposes of this definition, “Disqualification Date” means the first date of a public announcement of facts indicating that any Person is making or has announced a current intention to make a Take-over Bid; or

(iv)

an underwriter or member of a banking or selling group that becomes the Beneficial owner of more than 20% of the Voting Shares in connection with a distribution of securities of Angiotech; or

(v)

a Person (a “Grandfathered Person”) who is the Beneficial owner of more than 20% of the outstanding Voting Shares determined as at the Record Time, provided, however, that this exception shall not be, and shall cease to be, applicable to a Grandfathered Person in the event that such Grandfathered Person shall, after the Record Time: (1) cease to own more than 20% of the outstanding Voting Shares, or (2) become the Beneficial owner of any additional Voting Shares that increases its Beneficial ownership of Voting Shares, by more than 1% of the number of outstanding Voting Shares, other than through an acquisition pursuant to which a Person becomes a Beneficial owner of additional Voting Shares by reason of one or any combination of the operation of Paragraphs 1.1(a)(ii)(A), (B), (C) or (D);

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(b)

“Adjusted Exercise Price” means the price at which a holder may purchase the securities issuable upon exercise of Rights pursuant to the terms of Clause 3.1(a)(ii) which, until adjustment thereof in accordance with the terms hereof, shall be equal to the Exercise Price multiplied by a fraction in which:

(i)

the numerator is the number of Shares per Right that may be purchased pursuant to Clause 3.1(a)(ii); and

(ii)

the denominator is the number of Shares per Right that could have been purchased pursuant to Clause 3.1(a)(i) in the event that there had been sufficient authorized but unissued Common Shares to permit each holder of a Right (other than an Acquiring Person or a transferee of the kind described in Clause 3.1(b)(ii)) to purchase the number of Common Shares to which they would have been entitled under Clause 3.1(a)(i);

(c)

“Adjustment Factor” shall mean a fraction in which:

(i)

the numerator is equal to the number of Angiotech’s authorized Voting Shares less the number of Voting Shares that are issued or allotted or reserved for issue (other than upon the exercise of Rights);

(ii)

the denominator is equal to Angiotech’s issued and outstanding Voting Shares minus those Voting Shares that the Acquiring Person Beneficially owns;

(d)

“Affiliate”, when used to indicate a relationship with a specified company or corporation, shall mean a Person that directly, or indirectly through one or more controlled intermediaries, controls, or is a company or corporation controlled by, or is under common control with, such a specified company or corporation;

(e)

“Agreement” means this shareholder rights plan agreement amended and restated as of October 30, 2008 between Angiotech and the Rights Agent, as may be further amended and/or supplemented from time to time; “hereof”, “herein”, “hereto” and similar expressions mean and refer to this Agreement as a whole and not to any particular part of this Agreement;

(f)

“Angiotech” means Angiotech Pharmaceuticals, Inc., a company governed by the laws of British Columbia together where the context requires, with its subsidiaries;

(g)

“annual cash dividend” means cash dividends paid in any fiscal year of Angiotech, to the extent that such cash dividends do not exceed in the aggregate, the greatest of:

(i)

200% of the aggregate amount of cash dividends declared payable by Angiotech on its Common Shares in its immediately preceding fiscal year;

(ii)

300% of the arithmetic mean of the aggregate amounts of the annual cash dividends declared payable by Angiotech on its Common Shares in its three immediately preceding fiscal years; and

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(iii)

100% of the aggregate consolidated net income of Angiotech, before extraordinary items, for its immediately preceding fiscal year;

(h)

“Associate” means, when used to indicate a relationship with a specified Person, a spouse of that Person, any Person of the same or opposite sex with whom that Person is living in a conjugal relationship outside marriage, a child of that Person, or a relative of that Person who has the same residence as that Person;

(i)

A Person shall be deemed the “Beneficial owner” of, and to have “Beneficial ownership” of, and to “Beneficially own”,

(i)

any securities as to which such Person or any of such Person’s Affiliates or Associates is the owner at law or in equity;

(ii)

any securities as to which such Person or any of such Person’s Affiliates or Associates has the right to become the owner at law or in equity (where such right is exercisable within a period of 60 days, whether or not on condition or the happening of any contingency or the making of any payment) pursuant to any agreement, arrangement, pledge or understanding, whether or not in writing (other than customary agreements with and between underwriters and/or banking group members and/or selling group members with respect to a distribution of securities and other than pledges of securities in the ordinary course of business), or upon the exercise of any conversion right, exchange right, share purchase right (other than the Rights), warrant or option; and

(iii)

any securities which are Beneficially owned within the meaning of Clauses 1.1(i)(i) or (ii) by any other Person with whom such Person is acting jointly or in concert;

provided, however, that a Person shall not be deemed the “Beneficial owner” of, or to have “Beneficial ownership” of, or to “Beneficially own”, any security:

(A)

because such security has been deposited or tendered pursuant to any Take-over Bid made by such Person, made by any of such Person’s Affiliates or Associates or made by any other Person referred to in Clause 1.1(i)(iii), until the earlier of such deposited or tendered security being taken up or paid for;

(B)

because such Person, any of such Person’s Affiliates or Associates or any other Person referred to in Clause 1.1(i)(iii) holds such security provided that,

(1)

the ordinary business of any such Person (the “Investment Manager”) includes the management of investment funds for others (which others, for greater certainty, may include or be limited to one or more employee benefit plans or pension plans) and such security is held by the Investment Manager in the ordinary course of such business in the performance of such Investment Manager’s duties for the account of any other Person (a “Client”), including non-discretionary accounts held on behalf of a Client by a dealer or broker registered under applicable law;

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(2)

such Person is (i) the manager or trustee (the “Manager”) of a mutual fund (a “Mutual Fund”) that is registered or qualified to issue its securities to investors under the securities laws of any province of Canada or the laws of the United States and such security is held in the ordinary course of business in the performance of the Manager’s duties with respect to the Mutual Fund, or (ii) a Mutual Fund;

(3)

such Person (the “Trust Company”) is licensed to carry on the business of a trust company under applicable laws and, as such, acts as trustee or administrator or in a similar capacity in relation to the estates of deceased or incompetent Persons (each an “Estate Account”) or in relation to other accounts (each an “Other Account”) and holds such security in the ordinary course of such duties for such Estate Accounts or for such Other Accounts;

(4)

such Person is established by statute for purposes that include, and the ordinary business or activity of such Person (the “Statutory Body”) includes, the management of investment funds for employee benefit plans, pension plans, insurance plans or various public bodies;

(5)

such Person (the “Administrator”) is the administrator or trustee of one or more pension funds, plans or related trusts (a “Plan”) registered or qualified under the laws of Canada or any Province thereof or the laws of the United States of America or any state thereof or is a Plan; or

(6)

such Person is a Crown agent or agency;

provided, in any of the above cases, that the Investment Manager, the Manager, the Mutual Fund, the Trust Company, the Statutory Body, the Administrator, the Plan, or the Crown agent or agency, as the case may be, is not then making a Take-over Bid or has not then announced an intention to make a Take-over Bid other than an Offer to Acquire Voting Shares or other securities by means of a distribution by Angiotech or by means of ordinary market transactions (including pre-arranged trades entered into in the ordinary course of business of such Person) executed through the facilities of a stock exchange or organized over-the-counter market, alone or by acting jointly or in concert with any other Person;

(C)

because such security has been agreed to be deposited or tendered pursuant to a Lock-up Agreement, or is otherwise deposited or tendered, to any Take-over Bid made by such Person, made by any of such Person’s Affiliates or Associates or made by any other Person acting jointly or in concert with such Person until such deposited or tendered security has been taken up or paid for, whichever shall first occur;

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(D)

because such Person (1) is a Client of the same Investment Manager as another Person on whose account the Investment Manager holds such security, (2) has an Estate Account or an Other Account of the same Trust Company as another Person on whose account the Trust Company holds such security or (3) is a Plan with the same Administrator as another Plan on whose account the Administrator holds such security;

(E)

where such Person (1) is a Client of an Investment Manager and such security is owned at law or in equity by the Investment Manager, or (2) has an Estate Account or an Other Account of a Trust Company and such security is owned at law or in equity by the Trust Company or (3) is a Plan and such security is owned at law or in equity by the Administrator of the Plan; or

(F)

where such Person is a registered holder of such security as a result of carrying on the business of, or acting as a nominee of, a securities depositary;

(j)

“BCBCA” means the Business Corporations Act (British Columbia), R.S.B.C. 2002, c.57, as amended, and the regulations made thereunder and any comparable or successor laws or regulations thereto;

(k)

“Board of Directors” means the board of directors of Angiotech or any duly constituted and empowered committee thereof;

(l)

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in Vancouver are authorized or obligated by law to close;

(m)

“Canadian Dollar Equivalent” of any amount which is expressed in United States dollars means, on any date, the Canadian dollar equivalent of any such amount determined by multiplying such amount by the U.S. - Canadian Exchange Rate in effect on such date;

(n)

“Canadian - U.S. Exchange Rate” means, on any date, the inverse of the U.S. - Canadian Exchange Rate in effect on such date;

(o)

“close of business” on any given date means the time on such date (or, if such date is not a Business Day, the time on the next succeeding Business Day) at which the principal office in Vancouver of the transfer agent for the Shares of Angiotech (or, after the Separation Time, the principal transfer office in Vancouver of the Rights Agent) is closed to the public;

(p)

“Common Shares” means the common shares in the capital of Angiotech;

(q)

“Competing Permitted Bid” means a Take-over Bid that:

(i)

is made after a Permitted Bid has been made and prior to the expiry of that other Permitted Bid;

(ii)

satisfies all components of the definition of a Permitted Bid other than the requirements set out in clause (ii)(A) of the definition of a Permitted Bid; and

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(iii)

contains, and the take-up and payment for securities tendered or deposited is subject to, an irrevocable and unqualified provision that no Voting Shares will be taken up or paid for pursuant to the Take-over Bid prior to the close of business on a date that is no earlier than the later of: (a) 35 days after the date of the Take-over Bid; and (b) the 60th day after the earliest date on which any other Permitted Bid that is then in existence was made;

(r)

“controlled” - a company is “controlled” by another Person or two or more Persons acting jointly or in concert if:

(i)

securities entitled to vote in the election of directors carrying more than 50% of the votes for the election of directors are held, directly or indirectly, by or on behalf of the other Person or two or more Persons acting jointly or in concert; and

(ii)

the votes carried by such securities are entitled, if exercised, to elect a majority of the board of directors of such company;

and “controls”, “controlling” and “under common control with” shall be interpreted accordingly;

(s)

“Co-Rights Agents” has the meaning ascribed thereto in Subsection 4.1(a);

(t)

“Disposition Date” has the meaning ascribed thereto in Subsection 5.1(a);

(u)

“Dividend Reinvestment Acquisition” means an acquisition of Voting Shares of any class pursuant to a Dividend Reinvestment Plan;

(v)

“Dividend Reinvestment Plan” means a regular dividend reinvestment or other program plan of Angiotech made available by Angiotech to holders of its securities and/or to holders of securities of a Subsidiary of Angiotech, where such program or plan permits the holder to direct that some or all of:

(i)

dividends paid in respect of shares of any class of Angiotech or a Subsidiary;

(ii)

proceeds of redemption of shares of Angiotech or a Subsidiary;

(iii)

interest paid on evidences of indebtedness of Angiotech or a Subsidiary; or

(iv)

optional cash payments;

be applied to the purchase of Voting Shares;

(w)

“Effective Date” means the date that is the earlier of:

(i)

October 30, 2008;

(ii)

the date that an Acquiring Person has become an Acquiring Person; and

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(iii)

the date that an event occurs that would give rise to the subsequent separation of rights pursuant to the definition of “Separation Time” and section 2.2 of the 2005 Agreement and, for this purpose, disregarding the expiration time under the 2005 Agreement;

(x)

“Election to Exercise” has the meaning ascribed thereto in Subsection 2.2(d);

(y)

“Exempt Acquisition” means a share acquisition in respect of which the Board of Directors has waived the application of Section 3.1 pursuant to the provisions of Subsections 5.1(a), (b) or (e);

(z)

“Exercise Price” means, as of any date, the price at which a holder may purchase the securities issuable upon exercise of one whole Right which, until adjustment thereof in accordance with the terms hereof, shall be $160;

(aa)

“Expansion Factor” has the meaning ascribed thereto in Subsection 2.3(a);

(bb)

“Expiration Time” means the close of business on the date on which this Agreement terminates as provided in Section 5.15;

(cc)

“Flip-in Event” means a transaction in or pursuant to which any Person becomes an Acquiring Person;

(dd)

“holder” has the meaning ascribed thereto in Section 2.8;

(ee)

“Independent Shareholders” means holders of any Shares, other than (a) any Acquiring Person, (b) any Offeror (other than any Person who pursuant to Clause 1.1(i)(B) is not deemed to Beneficially own the Voting Shares held by such Person), (c) any Affiliate or Associate of any Acquiring Person or Offeror, (d) any Person acting jointly or in concert with any Acquiring Person or Offeror, and (e) any employee benefit plan, stock purchase plan, deferred profit sharing plan and any similar plan or trust for the benefit of employees of Angiotech or a Subsidiary of Angiotech, unless the beneficiaries of the plan or trust direct the manner in which the Voting Shares are to be voted or withheld from voting or direct whether the Voting Shares are to be tendered to a Take-over Bid;

(ff)

“Lock-up Agreement” means an agreement between a Person and one or more holders of Voting Shares (each a “Locked-up Person”) the terms of which are publicly disclosed and a copy of which agreement is made available to the public (including Angiotech) not later than (i) the date the Lock-up Bid (as defined below) is publicly announced or, (ii) if the Lock-up Bid has been made prior to the date on which such agreement is entered into then as soon as possible after it is entered into and in any event not later than the date following the date of such agreement, pursuant to which each Locked-up Person agrees to deposit or tender Voting Shares to a Take-over Bid (the “Lock-up Bid”) to be made or made by the Person or any of such Person’s Affiliates or Associates or any other Person referred to in clause (iii) of the definition of Beneficial Ow ner and which provides:

(i)

that any agreement to deposit or tender to, or to not withdraw Voting Shares from, the Lock-up Bid is terminable at the option of the Locked-up Person in order to tender or deposit such Voting Shares to another Take-over Bid or support another transaction:

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(A)

where the price or value per Voting Share offered under such other Take-over Bid or transaction is higher than the price or value per Voting Share offered under the Lock-up Agreement; or

(B)

if:

(1)

the price or value per Voting Share offered under the other Take-over Bid or transaction exceeds the price or value per Voting Share offered or proposed to be offered under the Lock-up Bid by as much or more than a specified amount (the “Specified Amount”) and the Specified Amount is not greater than 7% of the price or value per Voting Share that is offered or proposed to be offered under the Lock-up Bid; or

(2)

the number of Voting Shares to be purchased under the other Take-over Bid or transaction exceeds the number of Voting Shares offered to be purchased under the Lock-up Bid by as much or more than a specified number of Voting Shares (the “Specified Number of Shares”) and the Specified Number of Shares is not greater than 7% of the number of Voting Shares offered to be purchased under the Lock-up Bid, at a price or value per Voting Share, as applicable, that is not less than the price or value per Voting Share offered under the Lock-up Bid;

and the agreement may contain a right of first refusal or require a period of delay to give such Person an opportunity to match a higher price or value in another Take-over Bid or transaction or other similar limitation on a Locked-up Person’s right to withdraw Voting Shares from the agreement, so long as the limitation does not preclude the exercise by the Locked-up Person of the right to withdraw Voting Shares during the period of the other Take-over Bid or transaction; and

(ii)

no “break-up” fees, “top-up” fees, penalties, expenses or other amounts that exceed in the aggregate the greater of:

(A)

the cash equivalent of 2.5% of the price or value payable under the Lock-up Bid to a Locked-up Person; and

(B)

50% of the amount by which the price or value payable under another Take-over Bid or transaction to a Locked-up Person exceeds the price or value of the consideration that such Locked-up Person would have received under the Lock-up Bid,

shall be payable by a Locked-up Person pursuant to the agreement in the event a Locked-up Person fails to deposit or tender Voting Shares to the Lock-up Bid or withdraw Voting Shares previously tendered thereto in order to tender to another Take-over Bid or support another transaction;

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(gg)

“Market Price” per share of any securities on any date of determination means the average of the daily closing sale prices per share of such class of securities (determined as described below) on each of the 20 consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if an event of a type analogous to any of the events described in Section 2.3 hereof shall have caused the closing sale prices used to determine the Market Price on any Trading Days not to be fully comparable with the closing sale price on such date of determination or, if the date of determination is not a Trading Day, on the immediately preceding Trading Day, each such closing sale price so used shall be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 hereof in order to make it fully comparable wi th the closing sale price on such date of determination or, if the date of determination is not a Trading Day, on the immediately preceding Trading Day. The closing sale price per share of any securities on any date shall be:

(i)

the closing board lot sale price per share or, if such price is not available, the average of the closing bid and asked prices, for each of such securities as reported by the principal Canadian securities exchange (as determined by volume of trading) on which such securities are listed or admitted to trading, or if for any reason neither of such prices is available on such day or the securities are not listed or admitted to trading on a Canadian securities exchange, the closing board lot sale price per share or, if such price is not available, the average of the closing bid and asked prices, for each security as reported by the principal United States securities exchange (as determined by volume of trading) on which such securities are listed or admitted for trading;

(ii)

if for any reason none of such prices is available on such date or the securities are not listed or admitted to trading on a Canadian stock exchange or a United States securities exchange, the last sale price, or in case no sale takes place on such date, the average of the high bid and low asked prices for each of such securities in the over-the-counter market, as quoted by any reporting system then in use; or

(iii)

if for any reason none of such parties is available on such day or the securities are not listed or admitted to trading on a Canadian stock exchange or a United States securities exchange or quoted by any such reporting system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities;

provided, however, that if on any such date none of such prices is available, the closing sale price per share of such securities on such date shall mean the fair value per share of the securities on such date as determined by a nationally or internationally recognized investment dealer or investment banker and provided further that if an event of a type analogous to any of the events described in Section 2.3 hereof shall have caused any price used to determine the Market Price on any Trading Day not to be fully comparable with the price as so determined on the Trading Day immediately preceding such date of determination, each such price so used shall be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 hereof in order to make it fully comparable with the price on the Trading Day immediately preceding such date of determination. The Market Pr ice shall be expressed in Canadian dollars and, if initially determined in respect of any day forming part of the 20 consecutive Trading Day period in question in United States dollars, such amount shall be translated into Canadian dollars on such date at the Canadian Dollar Equivalent thereof;

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(hh)

“Nominee” has the meaning ascribed thereto in Subsection 2.2(c);

(ii)

“Offer to Acquire” includes:

(i)

an offer to purchase or a solicitation of an offer to sell Voting Shares of any class or classes, and

(ii)

an acceptance of an offer to sell Voting Shares of any class or classes, whether or not such offer to sell has been solicited,

or any combination thereof, and the Person accepting an offer to sell shall be deemed to be making an Offer to Acquire to the Person that made the offer to sell;

(jj)

“Offeror” means a Person who has announced, and has not withdrawn, an intention to make or who has made, and has not withdrawn, a Take-over Bid, other than a Person who has completed a Permitted Bid, a Competing Permitted Bid or an Exempt Acquisition;

(kk)

“Offeror’s Securities” means Voting Shares Beneficially owned by an Offeror on the date of the Offer to Acquire;

(ll)

“Permitted Bid” means a Take-over Bid made by an Offeror that is made by means of a Take-over Bid circular and which also complies with the following additional provisions:

(i)

the Take-over Bid is made to all holders of Voting Shares other than the Offeror;

(ii)

the Take-over Bid contains, and the take-up and payment for securities tendered or deposited is subject to, an irrevocable and unqualified provision that no Voting Shares will be taken up and paid for pursuant to the Take-over Bid (A) prior to the close of business on a date which is not less than 60 days following the date of the Take-over Bid and (B) unless at such date more than 50% of the Voting Shares held by Independent Shareholders shall have been deposited or tendered pursuant to the Take-over Bid and not withdrawn;

(iii)

unless the Take-over Bid is withdrawn, the Take-over Bid contains an irrevocable and unqualified provision that Voting Shares may be deposited pursuant to such Take-over Bid at any time during the period described in Clause 1.1(ll)(ii)(A) and that any Voting Shares deposited pursuant to the Take-over Bid may be withdrawn until taken up and paid for; and

(iv)

unless the Take-over Bid is withdrawn, the Take-over Bid contains an irrevocable and unqualified provision that in the event that the deposit condition set forth in Clause 1.1(ll)(ii)(B) is satisfied the Offeror will make a public announcement of that fact and the Take-over Bid will remain open for deposits and tenders of Voting Shares for not less than 10 Business Days from the date of such public announcement;

(mm)

“Permitted Bid Acquisition” means an acquisition of Voting Shares of any class made pursuant to a Permitted Bid or a Competing Permitted Bid;

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(nn)

“Person” includes an individual, firm, association, trustee, executor, administrator, legal personal representative, body corporate, company, trust, partnership, joint venture syndicate or other form of unincorporated association, a government and its agencies or instrumentalities, any entity or group whether or not having legal personality, any successor (by merger, statutory amalgamation or otherwise) and any of the foregoing acting in any derivative, representative or fiduciary capacity;

(oo)

“Pro Rata Acquisition” means an acquisition of Voting Shares by a Person pursuant to: (i) a Dividend Reinvestment Acquisition; (ii) a Dividend Reinvestment Plan; or (iii) the receipt and/or exercise of rights issued by Angiotech to all the holders of a class of Voting Shares to subscribe for or purchase Voting Shares, provided that such rights are acquired directly from Angiotech as part of a rights offering and not from any other Person and provided that the Person does not thereby acquire a greater percentage of Voting Shares than the Person’s percentage of Voting Shares Beneficially owned immediately prior to such receipt or exercise; or (iv) a distribution by Angiotech of Voting Shares, or securities convertible into or exchangeable for Voting Shares (and the conversion or exchange of such convertible or exchangeable securities) made pursuant to a prospectus or a dist ribution by way of private placement by Angiotech, provided that the Person does not thereby acquire a greater percentage of such Voting Shares, or securities convertible or exchangeable for Voting Shares of that class, than the Person’s percentage of Voting Shares Beneficially owned immediately prior to such acquisition;

(pp)

“Record Time” has the meaning set forth in the recitals to this Agreement;

(qq)

“Redemption Price” has the meaning set forth in Subsection 5.1(c) of this Agreement;

(rr)

“Right” means a right to purchase a number of Common Shares of Angiotech, upon the terms and subject to the conditions set forth in this Agreement;

(ss)

“Rights Agent” means Computershare Trust Company of Canada, a trust company incorporated under the laws of Canada or any successor Rights Agent appointed pursuant to Section 4.4;

(tt)

“Rights Certificate” means the certificates representing the Rights after the Separation Time, which shall be substantially in the form attached hereto as Attachment 1;

(uu)

“Rights Holders’ Special Meeting” means a meeting of the holders of Rights called by the Board of Directors for the purpose of approving a supplement or amendment to this Agreement pursuant to Subsection 5.4(c);

(vv)

“Rights Register” and “Rights Registrar” have the meanings ascribed thereto in Subsection 2.6(a);

(ww)

“Securities Act (British Columbia)” means the Securities Act, R.S.B.C. 1996, c.418, as amended, and the regulations and rules thereunder, and any comparable or successor laws or regulations or rules thereto;

(xx)

“Securities Act (Ontario)” means the Securities Act, R.S.O. 1990, c.S.5, as amended, and the regulations and rules thereunder, and any comparable or successor laws or regulations or rules thereto;

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(yy)

“Separation Time” means the close of business on the eighth Trading Day after the earlier of:

(i)

the Stock Acquisition Date;

(ii)

the date of the commencement of or first public announcement of the intent of any Person (other than Angiotech or any Subsidiary of Angiotech) to commence a Take-over Bid (other than a Permitted Bid or a Competing Permitted Bid, as the case may be); and

(iii)

the date upon which a Permitted Bid or Competing Permitted Bid ceases to be such,

or such later date as may be determined by the Board of Directors, provided that, if any such Take-over Bid expires, is cancelled, terminated or otherwise withdrawn prior to the Separation Time, such Take-over Bid shall be deemed, for the purposes of this definition, never to have been made;

(zz)

“Shares” means the Common Shares and “Share” shall mean a Common Share;

(aaa)

“Special Meeting” means a special meeting of the holders of Shares, called by the Board of Directors for the purpose of approving a supplement, amendment or variation to this Agreement pursuant to Subsection 5.4(b);

(bbb)

“Stock Acquisition Date” means the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids, section 102.1 of the Securities Act (Ontario) or Section 13(d) of the U.S. Exchange Act) by Angiotech or an Acquiring Person that an Acquiring Person has become such;

(ccc)

“Subsidiary” - a company is a Subsidiary of another company if:

(i)

it is controlled by:

(A)

that other, or

(B)

that other and one or more companies each of which is controlled by that other, or

(C)

two or more companies each of which is controlled by that other, or

(ii)

it is a Subsidiary of a company that is that other’s Subsidiary;

(ddd)

“Take-over Bid” means an Offer to Acquire Voting Shares, or securities convertible into Voting Shares if, assuming that the Voting Shares or convertible securities subject to the Offer to Acquire are acquired and are Beneficially Owned at the date of such Offer to Acquire by the Person making such Offer to Acquire, such Voting Shares (including Voting Shares that may be acquired upon conversion of securities convertible into Voting Shares) together with the Offeror’s Securities constitute in the aggregate 20% or more of the outstanding Voting Shares at the date of the Offer to Acquire;

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(eee)

“Trading Day”, when used with respect to any securities, means a day on which the principal Canadian securities exchange on which such securities are listed or admitted to trading is open for the transaction of business or, if the securities are not listed or admitted to trading on any Canadian securities exchange, a day on which the principal United States securities exchange on which such securities are listed or admitted to trading is open for the transaction of business or, if the securities are not listed or admitted to trading on any Canadian or United States securities exchange, a Business Day;

(fff)

“U.S. - Canadian Exchange Rate” means, on any date:

(i)

if on such date the Bank of Canada sets an average noon spot rate of exchange for the conversion of one United States dollar into Canadian dollars, such rate; and

(ii)

in any other case, the rate for such date for the conversion of one United States dollar into Canadian dollars calculated in such manner as may be determined by the Board of Directors from time to time acting in good faith;

(ggg)

“U.S. Dollar Equivalent” of any amount which is expressed in Canadian dollars means, on any date, the United States dollar equivalent of such amount determined by multiplying such amount by the Canadian - U.S. Exchange Rate in effect on such date;

(hhh)

“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder as now in effect or as the same may from time to time be amended, re-enacted or replaced;

(iii)

“U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations thereunder as now in effect or as the same may from time to time be amended, re-enacted or replaced; and

(jjj)

“Voting Shares” means the Common Shares and any other shares in the capital of Angiotech entitled to vote in the election of directors.

1.2

Currency

All sums of money which are referred to in this Agreement are expressed in lawful money of Canada, unless otherwise specified.

1.3

Headings

The division of this Agreement into Articles, Sections, Subsections, Clauses, Paragraphs, Subparagraphs or other portions hereof and the insertion of headings, subheadings and a table of contents are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

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1.4

Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting Shares

For purposes of this Agreement, the percentage of Voting Shares of any class Beneficially owned by any Person, shall be and be deemed to be the product (expressed as a percentage) determined by the formula:

100 x A/B

where:

A =

the number of votes for the election of all directors on the Board of Directors generally attaching to the Voting Shares of that class Beneficially owned by such Person; and

B =

the number of votes for the election of all directors on the Board of Directors generally attaching to all outstanding Voting Shares of such class.

Where any Person is deemed to Beneficially own unissued Voting Shares, such Voting Shares shall be deemed to be outstanding for the purpose of calculating the percentage of Voting Shares owned by such Person.

1.5

Acting Jointly or in Concert

For purposes of this Agreement, a Person is acting jointly or in concert with every Person who, as a result of any agreement, commitment or understanding whether formal or informal, with the first Person, acquires or offers to acquire Voting Shares (other than customary agreements with and between underwriters and/or banking group members and/or selling group members with respect to a public offering or private placement of securities or pledges of securities in the ordinary course of business).

1.6

Generally Accepted Accounting Principles

Wherever in this Agreement reference is made to generally accepted accounting principles, such reference shall be deemed to be the recommendations at the relevant time of the Canadian Institute of Chartered Accountants, or any successor institute, applicable on a consolidated basis (unless otherwise specifically provided herein to be applicable on an unconsolidated basis) as at the date on which a calculation is made or required to be made in accordance with generally accepted accounting principles. Where the character or amount of any asset or liability or item of revenue or expense is required to be determined, or any consolidation or other accounting computation is required to be made for the purpose of this Agreement or any document, such determination or calculation shall, to the extent applicable and except as otherwise specified herein or as otherwise agreed in writing by the parties, be made in accordanc e with generally accepted accounting principles applied on a consistent basis.

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ARTICLE 2  
THE RIGHTS

2.1

Legend on Common Share Certificates

(a)

Certificates for shares issued after the Record Time but prior to the earlier of the Separation Time and the Expiration Time, shall evidence, in addition to the Shares, one Right represented thereby and shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

Until the Separation Time (defined in the Shareholder Rights Plan Agreement referred to below), this certificate also evidences rights of the holder described in a Shareholder Rights Plan Agreement, dated as of October 30, 2008 (the “Shareholder Rights Plan Agreement”), between Angiotech Pharmaceuticals, Inc. (the “Company”) and Computershare Trust Company of Canada, the terms of which are incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances set out in the Shareholder Rights Plan Agreement, the rights may expire, may become null and void or may be evidenced by separate certificates and no longer evidenced by this certificate.  The Company will mail or arrange for the mailing of a copy of the Shareholder Rights Plan Agreement to the holder of this certificate w ithout charge as soon as practicable after the receipt of a written request therefor.

Share certificates that are issued and outstanding at the Record Time, which as at the Effective Date represent Common Shares, shall also evidence one Right for each Common Share evidenced thereby, notwithstanding the absence of the foregoing legend, until the close of business on the earlier of the Separation Time and the Expiration Time.

2.2

Initial Exercise Price; Exercise of Rights; Detachment of Rights

(a)

Subject to adjustment as herein set forth, each Right will entitle the holder thereof, from and after the Separation Time and prior to the Expiration Time, to purchase one Common Share for the Exercise Price (with the Exercise Price and number of Common Shares being subject to adjustment as set forth below). Notwithstanding any other provision of this Agreement, any Rights held by Angiotech or any of its Subsidiaries shall be void.

(b)

Until the Separation Time,

(i)

the Rights shall not be exercisable and no Right may be exercised; and

(ii)

each Right will be evidenced by the certificate for the associated Common Share of Angiotech registered in the name of the holder thereof (which certificate shall also be deemed to represent a Rights Certificate) and will be transferable only together with, and will be transferred by a transfer of, such associated Common Share of Angiotech.

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(c)

From and after the Separation Time and prior to the Expiration Time:

(i)

the Rights shall be exercisable; and

(ii)

the registration and transfer of Rights shall be separate from and independent of Common Shares of Angiotech.

Promptly following the Separation Time, Angiotech will prepare and the Rights Agent will mail to each holder of record of Shares as of the Separation Time (other than an Acquiring Person, any other Person whose Rights are or become void pursuant to the provisions of Subsection 3.1(b) hereof and, in respect of any Rights Beneficially owned by such Acquiring Person which are not held of record by such Acquiring Person, the holder of record of such Rights (a “Nominee”)), at such holder’s address as shown by the records of Angiotech (Angiotech hereby agreeing to furnish copies of such records to the Rights Agent for this purpose):

(x)

a Rights Certificate in substantially the form set out in Attachment 1 hereof appropriately completed, representing the number of Rights held by such holder at the Separation Time and having such marks of identification or designation and such legends, summaries or endorsements printed thereon as Angiotech may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law, rule or regulation or judicial or administrative order or with any rule or regulation of any self-regulatory organization, stock exchange or quotation system on which the Rights may from time to time be listed or traded, or to conform to usage; and

(y)

a description of the Rights,

provided that a Nominee shall be sent the materials provided for in (x) and (y) in respect of all Shares of Angiotech held of record by it which are not Beneficially owned by an Acquiring Person. In order for Angiotech to determine whether any Person is holding Shares which are Beneficially owned by another Person, Angiotech may require such first mentioned Person to furnish such information and documentation as Angiotech deems necessary or appropriate in order to make such determination.

(d)

Rights may be exercised, in whole or in part, on any Business Day after the Separation Time and prior to the Expiration Time by submitting to the Rights Agent in the manner specified in the Rights Certificate:

(i)

the Rights Certificate evidencing such Rights;

(ii)

an election to exercise such Rights (an “Election to Exercise”) substantially in the form attached to the Rights Certificate appropriately completed and executed by the holder or his executors or administrators or other personal representatives or his or their legal attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the Rights Agent; and

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(iii)

payment by certified cheque, banker’s draft or money order payable to the order of Angiotech, of a sum equal to the Exercise Price multiplied by the number of Rights being exercised and a sum sufficient to cover any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for Common Shares in a name other than that of the holder of the Rights being exercised.

(e)

Upon receipt of a Rights Certificate, together with a completed Election to Exercise executed in accordance with Clause 2.2(d)(ii), which does not indicate that such Right is null and void as provided by Subsection 3.1(b), and payment as set forth in Clause 2.2(d)(iii), the Rights Agent (unless otherwise instructed by Angiotech in the event that Angiotech is of the opinion that the Rights cannot be exercised in accordance with this Agreement) will thereupon promptly:

(i)

requisition from the transfer agent certificates representing the number of such Common Shares to be purchased (Angiotech hereby irrevocably authorizing its transfer agents to comply with all such requisitions);

(ii)

when appropriate, requisition from Angiotech the amount of cash to be paid in lieu of issuing fractional Common Shares;

(iii)

after receipt of the certificates referred to in Clause 2.2(e)(i), deliver the same to or upon the order of the registered holder of such Rights Certificates, registered in such name or names as may be designated by such holder;

(iv)

when appropriate, after receipt, deliver the cash referred to in Clause 2.2(e)(ii) to or to the order of the registered holder of such Rights Certificate; and

(v)

tender to Angiotech all payments received on the exercise of the Rights.

(f)

In case the holder of any Rights shall exercise less than all the Rights evidenced by such holder’s Rights Certificate, a new Rights Certificate evidencing the Rights remaining unexercised (subject to the provisions of Subsection 5.5(a)) will be issued by the Rights Agent to such holder or to such holder’s duly authorized assigns.

(g)

Angiotech covenants and agrees that it will:

(i)

take all such action as may be necessary and within its power to ensure that all Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Shares (subject to payment of the Exercise Price), be duly authorized, validly issued and fully paid and non-assessable;

(ii)

take all such action as may be necessary and within its power to comply with the requirements of the BCBCA, the Securities Act (British Columbia), the Securities Act (Ontario), the U.S. Securities Act, the U.S. Exchange Act and the securities laws or comparable legislation of each of the provinces of Canada and any other applicable law, rule or regulation, in connection with the issuance and delivery of the Rights Certificates and the issuance of any Shares upon exercise of Rights;

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(iii)

use reasonable efforts to cause all Shares issued upon exercise of Rights to be listed on the principal stock exchanges on which such Shares were traded immediately prior to the Stock Acquisition Date;

(iv)

pay when due and payable, if applicable, any and all Canadian and United States federal, provincial, state and municipal transfer taxes and charges (not including any income or capital taxes of the holder or exercising holder or any liability of Angiotech to withhold tax) which may be payable in respect of the original issuance or delivery of the Rights Certificates, or certificates for Shares to be issued upon exercise of any Rights, provided that Angiotech shall not be required to pay any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for Shares in a name other than that of the holder of the Rights being transferred or exercised; and

(v)

after the Separation Time, except as permitted by Section 5.1, not take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

(h)

If, after the Separation Time but before the occurrence of a Flip-in Event, the number of Shares that are authorized but not issued or allotted or reserved for issue (other than upon the exercise of Rights) is insufficient to permit the exercise in full of the Rights in accordance with this Section 2.2, then until such time as holders of Shares approve an increase in Angiotech’s authorized capital such that the number of Shares that are authorized but not issued or allotted or reserved for issue (other than upon the exercise of Rights) is sufficient to permit the exercise in full of the Rights in accordance with this Section 2.2, each whole Right shall constitute the right to purchase from Angiotech (subject to adjustment as set forth herein) at the Exercise Price, upon exercise thereof in accordance with the terms hereof, that number of Shares that is equal to one multiplied by a fractio n:

(i)

the numerator of which is equal to the number of Angiotech’s authorized Voting Shares less the number of Voting Shares that are issued and allotted or reserved for issue (other than upon the exercise of Rights); and

(ii)

the denominator of which is equal to the number of Rights then outstanding.

2.3

Adjustments to Exercise Price; Number of Rights

The Exercise Price, the number and kind of securities subject to purchase upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 2.3.

(a)

In the event Angiotech shall at any time after the date of the Record Time and prior to the Expiration Time:

(i)

declare or pay a dividend on the Shares payable in Shares (or other securities exchangeable for or convertible into or giving a right to acquire Shares or other securities of Angiotech) other than pursuant to any Dividend Reinvestment Plan;

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(ii)

subdivide or change the then outstanding Shares into a greater number of Shares;

(iii)

consolidate or change the then outstanding Shares into a smaller number of Shares; or

(iv)

issue any Shares (or other securities exchangeable for or convertible into or giving a right to acquire Shares or other securities of Angiotech) in respect of, in lieu of or in exchange for existing Shares except as otherwise provided in this Section 2.3,

the Exercise Price and the number of Rights outstanding, or, if the payment or effective date therefor shall occur after the Separation Time, the securities purchasable upon exercise of Rights, shall be adjusted as of the payment or effective date in the manner set forth below. If an event occurs which would require an adjustment under both this Section 2.3 and subsection 3.1(a), the adjustment provided for in this Section 2.3 shall be in addition to, and shall be made prior to, any adjustment required under subsection 3.1(a).

If the Exercise Price and number of Rights outstanding are to be adjusted:

(x)

the Exercise Price in effect after such adjustment will be equal to the Exercise Price in effect immediately prior to such adjustment divided by the number of Shares (or other capital stock) (the “Expansion Factor”) that a holder of one Share immediately prior to such dividend, subdivision, change, consolidation or issuance would hold thereafter as a result thereof and

(y)

each Right held prior to such adjustment will become that number of Rights equal to the Expansion Factor,

and the adjusted number of Rights will be deemed to be distributed among the Shares with respect to which the original Rights were associated (if they remain outstanding) and the shares issued in respect of such dividend, subdivision, change, consolidation or issuance, so that each such Share (or other capital stock) will have exactly one Right associated with it.

For greater certainty, if the securities purchasable upon exercise of Rights are to be adjusted, the securities purchasable upon exercise of each Right after such adjustment will be the securities that a holder of the securities purchasable upon exercise of one Right immediately prior to such dividend, subdivision, change, consolidation or issuance would hold thereafter as a result of such dividend, subdivision, change, consolidation or issuance.

If, after the Record Time and prior to the Expiration Time, Angiotech shall issue any shares of capital stock other than Shares in a transaction of a type described in Clause 2.3(a)(i) or (iv), shares of such capital stock shall be treated herein as nearly equivalent to Shares as may be practicable and appropriate under the circumstances and Angiotech and the Rights Agent agree to amend this Agreement in order to effect such treatment.

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In the event Angiotech shall at any time after the Record Time and prior to the Separation Time issue any Shares otherwise than in a transaction referred to in this Subsection 2.3(a), each such Share so issued shall automatically have one new Right associated with it, which Right shall be evidenced by the certificate representing such associated Share.

(b)

In the event Angiotech shall at any time after the Record Time and prior to the Separation Time fix a record date for the issuance of rights, options or warrants to all holders of Common Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for or carrying a right to purchase Common Shares) at a price per Common Share (or, if a security convertible into or exchangeable for or carrying a right to purchase or subscribe for Common Shares, having a conversion, exchange or exercise price, including the price required to be paid to purchase such convertible or exchangeable security or right per share) less than the Market Price per Common Share on such record date, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Pr ice in effect immediately prior to such record date by a fraction:

(i)

the numerator of which shall be the number of Common Shares outstanding on such record date, plus the number of Common Shares that the aggregate offering price of the total number of Common Shares so to be offered (and/or the aggregate initial conversion, exchange or exercise price of the convertible or exchangeable securities or rights so to be offered, including the price required to be paid to purchase such convertible or exchangeable securities or rights) would purchase at such Market Price per Common Share; and

(ii)

the denominator of which shall be the number of Common Shares outstanding on such record date, plus the number of additional Common Shares to be offered for subscription or purchase (or into which the convertible or exchangeable securities or rights so to be offered are initially convertible, exchangeable or exercisable).

In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of Rights. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, or if issued, are not exercised prior to the expiration thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed, or to the Exercise Price which would be in effect based upon the number of Common Shares (or securities convertible into, or exchangeable or exercisable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be.

For purposes of this Agreement, the granting of the right to purchase Common Shares (whether from treasury or otherwise) pursuant to a Dividend Reinvestment Plan or any employee benefit, stock option or similar plans shall be deemed not to constitute an issue of rights, options or warrants by Angiotech; provided, however, that, in all such cases, the right to purchase Common Shares is at a price per share of not less than 95% of the current market price per share (determined as provided in such plans) of the Common Shares.

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(c)

In the event Angiotech shall at any time after the Record Time and prior to the Separation Time fix a record date for the making of a distribution to all holders of Common Shares (including any such distribution made in connection with a merger or amalgamation) of evidences of indebtedness, cash (other than an annual cash dividend or a dividend referred to in Clause 2.3(a)(i), but including any dividend payable in securities other than Common Shares), assets or rights, options or warrants (excluding those referred to in Subsection 2.3(b) hereof), the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction:

(i)

the numerator of which shall be the Market Price per Common Share on such record date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of Rights), on a per share basis, of the portion of the cash, assets, evidences of indebtedness, rights, options or warrants so to be distributed; and

(ii)

the denominator of which shall be such Market Price per Common Share.

Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such a distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price which would have been in effect if such record date had not been fixed.

(d)

Notwithstanding anything herein to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided, however, that any adjustments which by reason of this Subsection 2.3(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under Section 2.3 shall be made to the nearest cent or to the nearest ten-thousandth of a share. Notwithstanding the first sentence of this Subsection 2.3(d), any adjustment required by Section 2.3 shall be made no later than the earlier of:

(i)

three years from the date of the transaction which gives rise to such adjustment; or

(ii)

the Expiration Date.

(e)

In the event Angiotech shall at any time after the Record Time and prior to the Separation Time issue any shares of capital stock (other than Shares), or rights, options or warrants to subscribe for or purchase any such capital stock, or securities convertible into or exchangeable for any such capital stock in a transaction referred to in Clauses 2.3(a)(i) or (iv) above, if the Board of Directors acting in good faith determines that the adjustments contemplated by Subsections 2.3(a), (b) and (c) above in connection with such transaction will not appropriately protect the interests of the holders of Rights, the Board of Directors may determine what other adjustments to the Exercise Price, number of Rights and/or securities purchasable upon exercise of Rights would be appropriate and, notwithstanding Subsections 2.3(a), (b) and (c) above, such adjustments, rather than the adjustments contemplate d by Subsections 2.3(a), (b) and (c) above, shall be made, subject to the prior consent of the holders of the Voting Shares or the Rights as set forth in Subsection 5.4(b) or (c), and Angiotech and the Rights Agent shall have authority upon receiving such consent to amend this Agreement as appropriate to provide for such adjustments.

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(f)

Each Right originally issued by Angiotech subsequent to any adjustment made to the Exercise Price hereunder shall evidence the right to purchase, at the adjusted Exercise Price, the number of Shares purchasable from time to time hereunder upon exercise of a Right immediately prior to such issue, all subject to further adjustment as provided for herein.

(g)

Irrespective of any adjustment or change in the Exercise Price or the number of Shares issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price per Share and the number of Shares which were expressed in the initial Rights Certificates issued hereunder.

(h)

In any case in which this Section 2.3 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, Angiotech may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of Shares and other securities of Angiotech, if any, issuable upon such exercise over and above the number of Shares and other securities of Angiotech, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that Angiotech shall deliver to such holder an appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or other securities upon the occurrence of the event requiring such adjustment.

(i)

Notwithstanding anything contained in this Section 2.3 to the contrary, Angiotech shall be entitled to make such reductions in the Exercise Price, in addition to those adjustments expressly required by this Section 2.3, as and to the extent that in their good faith judgment the Board of Directors shall determine to be advisable, in order that any:

(i)

consolidation or subdivision of Shares;

(ii)

issuance (wholly or in part for cash) of Shares or securities that by their terms are convertible into or exchangeable for Shares;

(iii)

stock dividends; or

(iv)

issuance of rights, options or warrants referred to in this Section 2.3,

hereafter made by Angiotech to holders of its Shares, shall not be taxable to such shareholders.

(j)

If, as a result of an adjustment made pursuant to Section 3.1, the holder of any Right thereafter exercised shall become entitled to receive any securities other than Shares, thereafter the number of such other securities so receivable upon exercise of any Right and the applicable Exercise Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as may be practicable to the provisions with respect to the Shares contained in the foregoing Subsections of this Section 2.3 and the provisions of this Agreement with respect to the Common Shares shall apply on like terms to any such other securities.

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(k)

Whenever an adjustment to the Exercise Price or a change in the securities purchasable upon the exercise of Rights is made pursuant to this Section 2.3, Angiotech shall promptly:

(i)

prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment;

(ii)

file with the Rights Agent and with each transfer agent for the Shares, a copy of such certificate; and

(iii)

cause notice of the particulars of such adjustment or change to be given to the holders of the Rights.

Failure to file such certificate or to cause such notice to be given as aforesaid, or any defect therein, shall not affect the validity of any such adjustment or change.

2.4

Date on Which Exercise Is Effective

Each Person in whose name any certificate for Shares or other securities, if applicable, is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Shares or other securities, if applicable, represented thereon, and such certificate shall be dated the date upon which the Rights Certificate evidencing such Rights was duly surrendered in accordance with Subsection 2.2(d) (together with a duly completed Election to Exercise) and payment of the Exercise Price for such Rights (and any applicable transfer taxes and other governmental charges payable by the exercising holder hereunder) was made; provided, however, that if the date of such surrender and payment is a date upon which the Share securities register of Angiotech is closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeed ing Business Day on which the Share securities register of Angiotech is open.

2.5

Execution, Authentication, Delivery and Dating of Rights Certificates

(a)

The Rights Certificates shall be executed on behalf of Angiotech by any two directors or officers of Angiotech under the corporate seal of Angiotech reproduced thereon. The signature of any of these officers or directors on the Rights Certificates may be manual or facsimile. Rights Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers or directors of Angiotech shall bind Angiotech, notwithstanding that such individuals or any of them have ceased to hold such offices either before or after the countersignature and delivery of such Rights Certificates.

(b)

Promptly after Angiotech learns of the Separation Time, Angiotech will notify the Rights Agent of such Separation Time and will deliver Rights Certificates executed by Angiotech to the Rights Agent for countersignature, and the Rights Agent shall countersign (in a manner satisfactory to Angiotech) and send such Rights Certificates to the holders of the Rights pursuant to Subsection 2.2(c) hereof. No Rights Certificate shall be valid for any purpose until countersigned by the Rights Agent as aforesaid.

(c)

Each Rights Certificate shall be dated the date of countersignature thereof.

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2.6

Registration, Transfer and Exchange

(a)

Angiotech will cause to be kept a register (the “Rights Register”) in which, subject to such reasonable regulations as it may prescribe, Angiotech will provide for the registration and transfer of Rights. The Rights Agent is hereby appointed registrar for the Rights (the “Rights Registrar”) for the purpose of maintaining the Rights Register for Angiotech and registering Rights and transfers of Rights as herein provided and the Rights Agent hereby accepts such appointment. In the event that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent will have the right to examine the Rights Register at all reasonable times.

After the Separation Time and prior to the Expiration Time, upon surrender for registration of transfer or exchange of any Rights Certificate, and subject to the provisions of Subsection 2.6(c), Angiotech will execute, and the Rights Agent will countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Rights Certificates evidencing the same aggregate number of Rights as did the Rights Certificates so surrendered.

(b)

All Rights issued upon any registration of transfer or exchange of Rights Certificates shall be the valid obligations of Angiotech, and such Rights shall be entitled to the same benefits under this Agreement as the Rights surrendered upon such registration of transfer or exchange.

(c)

Every Rights Certificate surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to Angiotech or the Rights Agent, as the case may be, duly executed by the holder thereof or such holder’s attorney duly authorized in writing. As a condition to the issuance of any new Rights Certificate under this Section 2.6, Angiotech may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the reasonable fees and expenses of the Rights Agent) connected therewith.

(d)

Angiotech shall not be required to register the transfer or exchange of any Rights after the Rights have been terminated pursuant to the provisions of this Agreement.

2.7

Mutilated, Destroyed, Lost and Stolen Rights Certificates

(a)

If any mutilated Rights Certificate is surrendered to the Rights Agent prior to the Expiration Time, Angiotech shall execute and the Rights Agent shall countersign and deliver in exchange therefor a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so surrendered.

(b)

If there shall be delivered to Angiotech and the Rights Agent prior to the Expiration Time:

(i)

evidence to their reasonable satisfaction of the destruction, loss or theft of any Rights Certificate; and

(ii)

such security or indemnity as may be reasonably required by them to save each of them and any of their agents harmless,

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then, in the absence of notice to Angiotech or the Rights Agent that such Rights Certificate has been acquired by a bona fide purchaser, Angiotech shall execute and upon Angiotech’s request the Rights Agent shall countersign and deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so destroyed, lost or stolen.

(c)

As a condition to the issuance of any new Rights Certificate under this Section 2.7, Angiotech may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the reasonable fees and expenses of the Rights Agent) connected therewith.

(d)

Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence the contractual obligation of Angiotech, whether or not the destroyed, lost or stolen Rights Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Rights duly issued hereunder.

2.8

Persons Deemed Owners of Rights

Angiotech, the Rights Agent and any agent of Angiotech or the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever and Angiotech and the Rights Agent shall not be affected by any notice or knowledge to the contrary except as required by statute or by order of a court of competent jurisdiction. As used in this Agreement, unless the context otherwise requires, the term “holder” of any Rights shall mean the registered holder of such Rights (or, prior to the Separation Time, of the associated Share).

2.9

Delivery and Cancellation of Certificates

All Rights Certificates surrendered upon exercise or for redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Rights Agent, be delivered to the Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent. Angiotech may at any time deliver to the Rights Agent for cancellation any Rights Certificates previously countersigned and delivered hereunder which Angiotech may have acquired in any manner whatsoever, and all Rights Certificates so delivered shall be promptly cancelled by the Rights Agent. No Rights Certificate shall be countersigned in lieu of or in exchange for any Rights Certificates cancelled as provided in this Section 2.9, except as expressly permitted by this Agreement. The Rights Agent shall, subject to applicable laws, destroy all cancelled Rights Certificates and deliver a certificate of destruction to Angiotech.

2.10

Agreement of Rights Holders

Every holder of Rights, by accepting the same, consents and agrees with Angiotech and the Rights Agent and with every other holder of Rights:

(a)

to be bound by and subject to the provisions of this Agreement, as amended from time to time in accordance with the terms hereof, in respect of all Rights held;

(b)

that prior to the Separation Time, each Right will be transferable only together with, and will be transferred by a transfer of, the associated Share certificate representing such Right;

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(c)

that after the Separation Time, the Rights Certificates will be transferable only on the Rights Register as provided herein;

(d)

that prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Share certificate) for registration of transfer, Angiotech, the Rights Agent and any agent of Angiotech or the Rights Agent may deem and treat the Person in whose name the Rights Certificate (or, prior to the Separation Time, the associated Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on such Rights Certificate or the associated Share certificate made by anyone other than Angiotech or the Rights Agent) for all purposes whatsoever, and neither Angiotech nor the Rights Agent shall be affected by any notice to the contrary;

(e)

that such holder of Rights has waived his right to receive any fractional Rights or any fractional shares or other securities upon exercise of a Right (except as provided herein);

(f)

that without the approval of any holder of Rights or Shares and upon the sole authority of the Board of Directors, this Agreement may be supplemented or amended from time to time pursuant to Subsection 5.4(a) and the last sentence of the penultimate paragraph of Subsection 2.3(a); and

(g)

that notwithstanding anything in this Agreement to the contrary, neither Angiotech nor the Rights Agent shall have any liability to any holder of a Right or to any other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a government, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation.

2.11

Rights Certificate Holder Not Deemed a Shareholder

No holder, as such, of any Rights or Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose whatsoever the holder of any Common Share or any other share or security of Angiotech which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed or deemed or confer upon the holder of any Right or Rights Certificate, as such, any right, title, benefit or privilege of a holder of Common Shares or any other shares or securities of Angiotech or any right to vote at any meeting of shareholders of Angiotech whether for the election of directors or otherwise or upon any matter submitted to holders of Common Shares or any other shares of Angiotech at any meeting thereof, or to give or withhold consent to any action of Angiotech, or to receive notice of any meeting or other action affecting any holder of Common Shares or any other shares of Angiotech except as expressly provided herein, or to receive dividends, distributions or subscription rights, or otherwise, until the Right or Rights evidenced by Rights Certificates shall have been duly exercised in accordance with the terms and provisions hereof.

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ARTICLE 3  
ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS

3.1

Flip-in Event

(a)

Subject to Subsection 3.1(b) and Section 5.1, in the event that prior to the Expiration Time a Flip-in Event shall occur, then:

(i)

each Right shall constitute, effective at the close of business on the eighth Trading Day after the Stock Acquisition Date, the right to purchase from Angiotech, upon exercise thereof in accordance with the terms hereof, that number of Common Shares having an aggregate Market Price on the date of consummation or occurrence of such Flip-in Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 in the event that after the consummation or occurrence or event, an event of a type analogous to any of the events described in Section 2.3 shall have occurred);

(ii)

in the event that the number of Shares that are authorized but not issued or allotted or reserved for issue (other than upon the exercise of Rights) is insufficient to permit each holder of a Right (other than an Acquiring Person or a transferee of the kind described in Clause 3.1(b)(ii)) to purchase from Angiotech that number of Shares per Right provided for in Clause 3.1(a)(i), then until such time as holders of Shares approve an increase in Angiotech’s authorized capital such that the number of Shares that are authorized but not issued or allotted or reserved for issue (other than upon the exercise of Rights) is sufficient to permit each holder of a Right (other than an Acquiring Person or a transferee of the kind described in Clause 3.1(b)(ii)) to purchase from Angiotech that number of Shares per Right provided for in Clause 3.1(a)(i), each whole Right shall constitute, effective at the close of business on the eighth Trading Day after the Stock Acquisition Date, the right to purchase from Angiotech, upon exercise thereof in accordance with the terms hereof, that number of Shares that is equal to one Share multiplied by the Adjustment Factor for an amount in cash equal to the Adjusted Exercise Price (such right to be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 in the event that after the consummation or occurrence or event, an event of a type analogous to any of the events described in Section 2.3 shall have occurred).

(b)

Notwithstanding anything in this Agreement to the contrary, upon the occurrence of any Flip-in Event, any Rights that are or were Beneficially owned on or after the earlier of the Separation Time or the Stock Acquisition Date by:

(i)

an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any Person acting jointly or in concert with an Acquiring Person or any Affiliate or Associate of an Acquiring Person); or

(ii)

a transferee of Rights, directly or indirectly, from an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any Person acting jointly or in concert with an Acquiring Person or any Affiliate or Associate of an Acquiring Person), where such transferee becomes a transferee concurrently with or subsequent to the Acquiring Person becoming such in a transfer that the Board of Directors has determined is part of a plan, arrangement or scheme of an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any Person acting jointly or in concert with an Acquiring Person or any Associate or Affiliate of an Acquiring Person), that has the purpose or effect of avoiding Clause 3.1(b)(i),

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shall become null and void without any further action, and any holder of such Rights (including transferees) shall thereafter have no right to exercise such Rights under any provision of this Agreement and further shall thereafter not have any other rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise.

(c)

From and after the Separation Time, Angiotech shall do all such acts and things as shall be necessary and within its power to ensure compliance with the provisions of Section 3.1, including without limitation, all such acts and things as may be required to satisfy the requirements of the BCBCA, the Securities Act (British Columbia) the Securities Act (Ontario), the U.S. Securities Act, the U.S. Exchange Act and the securities laws or comparable legislation in each of the provinces of Canada and each of the States of the United States in respect of the issue of Shares upon the exercise of Rights in accordance with this Agreement.

(d)

Any Rights Certificate that would represent Rights Beneficially owned by a Person described in either Clause 3.1(b)(i) or (ii) or transferred to any nominee of any such Person, and any Rights Certificate that would be issued upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall either not be issued upon the instruction of Angiotech in writing to the Rights Agent or contain the following legend:

The Rights represented by this Rights Certificate were issued to a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such terms are defined in the Shareholder Rights Plan Agreement) or a Person who was acting jointly or in concert with an Acquiring Person or an Affiliate or Associate of an Acquiring Person. This Rights Certificate and the Rights represented hereby are void or shall become void in the circumstances specified in Subsection 3.1(b) of the Shareholder Rights Plan Agreement.

Provided, however, that the Rights Agent shall not be under any responsibility to ascertain the existence of facts that would require the imposition of such legend but shall impose such legend only if instructed to do so by Angiotech in writing or if a holder fails to certify upon transfer or exchange in the space provided on the Rights Certificate that such holder is not a Person described in such legend. The issuance of a Rights Certificate without the legend referred to in this Subsection 3.1(d) shall be of no effect on the provisions of Subsection 3.1(b).

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ARTICLE 4  
THE RIGHTS AGENT

4.1

General

(a)

Angiotech hereby appoints the Rights Agent to act as agent for Angiotech and the holders of the Rights in accordance with the terms and conditions of this Agreement, and the Rights Agent hereby accepts such appointment. Angiotech may from time to time appoint one or more co-Rights Agents (“Co-Rights Agents”) as it may deem necessary or desirable, subject to the approval of the Rights Agent. In the event Angiotech appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and Co-Rights Agents shall be as Angiotech may determine with the approval of the Rights Agent and the Co-Rights Agents. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements reasonably incurred in the execution and admi nistration of this Agreement and the exercise and performance of its duties hereunder (including the reasonable fees and other disbursements of any expert retained by the Rights Agent with the approval of Angiotech, such approval not to be unreasonably withheld). Angiotech also agrees to indemnify the Rights Agent, its officers, directors and employees for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or wilful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including legal costs and expenses, which right to indemnification will survive the termination of this Agreement or the resignation or removal of the Rights Agent.

(b)

The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any certificate for Shares, Rights Certificate, certificate for other securities of Angiotech, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, opinion, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

Angiotech shall inform the Rights Agent in a reasonably timely manner of events which may materially affect the administration of this Agreement by the Rights Agent and, at any time upon request, shall provide to the Rights Agent an incumbency certificate certifying the then current officers of Angiotech.

4.2

Merger, Amalgamation or Consolidation or Change of Name of Rights Agent

(a)

Any company into which the Rights Agent may be merged or amalgamated or with which it may be consolidated, or any company resulting from any merger, amalgamation, statutory arrangement or consolidation to which the Rights Agent is a party, or any company succeeding to the securityholder services business of the Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such company would be eligible for appointment as a successor Rights Agent under the provisions of Section 4.4 hereof. In case at the time such successor Rights Agent succeeds to the agency created by this Agreement any of the Rights Certificates have been countersigned but not delivered, any successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights have not been countersigned, any successor Rights Agent may countersign such Rights Certificates in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates will have the full force provided in the Rights Certificates and in this Agreement.

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(b)

In case at any time the name of the Rights Agent is changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

4.3

Duties of Rights Agent

The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, all of which Angiotech and the holders of certificates for Shares and Rights Certificates, by their acceptance thereof, shall be bound:

(a)

the Rights Agent may retain and consult with legal counsel (who may be legal counsel for Angiotech) and the opinion of such counsel will be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion and the Rights Agent may also consult with such other experts as the Rights Agent shall consider necessary or appropriate to properly carry out the duties and obligations imposed under this Agreement (at Angiotech’s expense) and the Rights Agent shall be entitled to act and rely in good faith on the advice of any such expert;

(b)

whenever in the performance of its duties under this Agreement, the Rights Agent deems it necessary or desirable that any fact or matter be proved or established by Angiotech prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by Persons believed by the Rights Agent to be any two directors or officers of Angiotech and delivered to the Rights Agent; and such certificate will be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate;

(c)

the Rights Agent will be liable hereunder for its own gross negligence, bad faith or wilful misconduct;

(d)

the Rights Agent will not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the certificates for Shares or the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and will be deemed to have been made by Angiotech only;

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(e)

the Rights Agent will not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any certificate for a Share or Rights Certificate (except its countersignature thereof); nor will it be responsible for any breach by Angiotech of any covenant or condition contained in this Agreement or in any Rights Certificate; nor will it be responsible for any change in the exerciseability of the Rights (including the Rights becoming void pursuant to Subsection 3.1(b) hereof) or any adjustment required under the provisions of Section 2.3 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exer cise of Rights after receipt of the certificate contemplated by Section 2.3 describing any such adjustment); nor will it by any act hereunder be deemed to make any representation or warranty as to the authorization of any Shares to be issued pursuant to this Agreement or any Rights or as to whether any Shares will, when issued, be duly and validly authorized, executed, issued and delivered and fully paid and non-assessable;

(f)

Angiotech agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement;

(g)

the Rights Agent is hereby authorized and directed to accept instructions in writing with respect to the performance of its duties hereunder from any individuals believed by the Rights Agent to be any two officers or directors of Angiotech, and to apply to such individuals for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such individual;

(h)

the Rights Agent and any shareholder or stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in Shares, Rights or other securities of Angiotech or become pecuniarily interested in any transaction in which Angiotech may be interested, or contract with or lend money to Angiotech or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for Angiotech or for any other legal entity; and

(i)

the Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent will not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to Angiotech resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

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4.4

Change of Rights Agent

The Rights Agent may resign and be discharged from its duties under this Agreement upon 60 days’ notice (or such lesser notice as is acceptable to Angiotech) in writing mailed to Angiotech and to each transfer agent of Shares by registered or certified mail. Angiotech may remove the Rights Agent upon 60 days’ notice in writing, mailed to the Rights Agent and to each transfer agent of the Shares by registered or certified mail. If the Rights Agent should resign or be removed or otherwise become incapable of acting, Angiotech will appoint a successor to the Rights Agent. If Angiotech fails to make such appointment within a period of 60 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent, then by prior written notice to Angiotech the resigning Rights Agent (at Angiotech’s expense) or the holder of any Rights (which holder shall, with such notice, submit such holder’s Rights Certificate, if any, for inspection by Angiotech), may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by Angiotech or by such a court, shall be a company incorporated under the laws of Canada or a province thereof authorized to carry on the business of a trust company in the Province of British Columbia. After appointment, the successor Rights Agent will be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, Angiotech will file notice thereof in writing with the predecess or Rights Agent and each transfer agent of the Shares, and mail a notice thereof in writing to the holders of the Rights in accordance with Section 5.9. Failure to give any notice provided for in this Section 4.4, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of any successor Rights Agent, as the case may be.

4.5

Compliance with Money Laundering Legislation

The Rights Agent shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Rights Agent reasonably determines that such an act might cause it to be in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline.  Further, should the Rights Agent reasonably determine at any time that its acting under this Agreement has resulted in it being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days’ written notice to Angiotech, provided: (i) that the Rights Agent’s written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Rights Agent’s satisfaction within such 10-day period, t hen such resignation shall not be effective.

4.6

Privacy Provision

The parties acknowledge that federal and/or provincial legislation that addresses the protection of individual's personal information (collectively, “Privacy Laws”) applies to obligations and activities under this Agreement.  Despite any other provision of this Agreement, neither party will take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws.  Angiotech will, prior to transferring or causing to be transferred personal information to the Rights Agent, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or will have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws.  The Rights Agent will use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws.

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ARTICLE 5  
MISCELLANEOUS

5.1

Redemption and Waiver

(a)

The Board of Directors shall waive the application of Section 3.1 in respect of the occurrence of any Flip-in Event if the Board of Directors has determined, following a Stock Acquisition Date and prior to the Separation Time, that a Person became an Acquiring Person by inadvertence and without any intention to become, or knowledge that it would become, an Acquiring Person under this Agreement and, in the event that such a waiver is granted by the Board of Directors, such Stock Acquisition Date shall be deemed not to have occurred. Any such waiver pursuant to this Subsection 5.1(a) must be on the condition that such Person, within 14 days after the foregoing determination by the Board of Directors or such earlier or later date as the Board of Directors may determine (the “Disposition Date”), has reduced its Beneficial ownership of Voting Shares such that the Person is no longer an Ac quiring Person. If the Person remains an Acquiring Person at the close of business on the Disposition Date, the Disposition Date shall be deemed to be the date of occurrence of a further Stock Acquisition Date and Section 3.1 shall apply thereto.

(b)

The Board of Directors acting in good faith may, prior to a Flip-in Event having occurred, upon prior written notice delivered to the Rights Agent, determine to waive the application of Section 3.1 to a Flip-in Event that may occur by reason of a Take-over Bid made by means of take-over bid circular to all holders of record of Voting Shares (which for greater certainty shall not include the circumstances described in Subsection 5.1(a)), provided that if the Board of Directors waives the application of Section 3.1 to a particular Flip-in Event pursuant to this Subsection 5.1(b), the Board of Directors shall be deemed to have waived the application of Section 3.1 to any other Flip-in Event occurring by reason of any Take-over Bid which is made by means of a Take-over Bid circular to all holders of Voting Shares prior to the expiry of any Take-over Bid (as the same may be extended from time to ti me) in respect of which a waiver is, or is deemed to have been granted under this Subsection 5.1(b).

(c)

In the event that prior to the occurrence of a Flip-in Event a Person acquires, pursuant to a Permitted Bid, a Competing Permitted Bid or an Exempt Acquisition under Subsection 5.1(b), outstanding Voting Shares, then the Board of Directors shall, immediately upon the consummation of such acquisition without further formality be deemed to have elected to redeem the Rights at a redemption price of $0.0001 per Right appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 if an event of the type analogous to any of the events described in Section 2.3 shall have occurred (such redemption price being herein referred to as the “Redemption Price”).

(d)

The Board of Directors may, with the prior approval of the holders of Voting Shares or Rights given in accordance with the terms of Section 5.4, at any time prior to the occurrence of a Flip-in Event elect to redeem all but not less than all of the then outstanding Rights at the Redemption Price appropriately adjusted in a manner analogous to the applicable adjustments provided for in Section 2.3, which adjustments shall only be made in the event that an event of the type analogous to any of the events described in Section 2.3 shall have occurred.

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(e)

The Board of Directors may, prior to the close of business on the tenth Trading Day following a Stock Acquisition Date or such later Business Day as they may from time to time determine, upon prior written notice delivered to the Rights Agent, waive the application of Section 3.1 to the related Flip-in Event, provided that the Acquiring Person has reduced its beneficial ownership of Voting Shares (or has entered into a contractual arrangement with Angiotech, acceptable to the Board of Directors, to do so within 10 calendar days of the date on which such contractual arrangement is entered into or such other date as the Board of Directors may have determined) such that at the time the waiver becomes effective pursuant to this Subsection 5.1(e) such Person is no longer an Acquiring Person. In the event of such a waiver becoming effective prior to the Separation Time, for the purposes of this Agre ement, such Flip-in Event shall be deemed not to have occurred.

(f)

Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or otherwise terminated after the Separation Time has occurred and prior to the occurrence of a Flip-in Event, the Board of Directors may elect to redeem all the outstanding Rights at the Redemption Price. Upon the Rights being redeemed pursuant to this Subsection 5.1(f), all the provisions of this Agreement shall continue to apply as if the Separation Time had not occurred and Rights Certificates representing the number of Rights held by each holder of record of Shares as of the Separation Time had not been mailed to each such holder and for all purposes of this Agreement the Separation Time shall be deemed not to have occurred and Angiotech shall be deemed to have issued replacement Rights to the holders of its then outstanding Shares.

(g)

If the Board of Directors is deemed under Subsection 5.1(c) to have elected or elects under Subsections 5.1(d) or (f) to redeem the Rights, the right to exercise the Rights will thereupon, without further action and without notice, terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price.

(h)

Within 10 calendar days after the Board of Directors is deemed under Subsection 5.1(c) to have elected or elects under Subsection 5.1(d) or (f) to redeem the Rights, Angiotech shall give notice of redemption to the holders of the then outstanding Rights by mailing such notice to each such holder at his last address as it appears upon the applicable registry books of the Rights Agent or, prior to the Separation Time, on the registry books of the transfer agent for the Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.

(i)

Angiotech shall give prompt written notice to the Rights Agent of any waiver of the application of Section 3.1 pursuant to this Subsection 5.1.

5.2

Expiration

No Person shall have any rights whatsoever pursuant to this Agreement or in respect of any Right after the Expiration Time, except the Rights Agent as specified in Subsection 4.1(a) of this Agreement.

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5.3

Issuance of New Rights Certificates

Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, Angiotech may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board of Directors to reflect any adjustment or change in the number or kind or class of securities purchasable upon exercise of Rights made in accordance with the provisions of this Agreement.

5.4

Supplements and Amendments

(a)

Angiotech may make any amendments to this Agreement to correct any clerical or typographical error or which are required to maintain the validity of the Agreement as a result of any change in any applicable legislation, regulations or rules thereunder. Notwithstanding anything in this Section 5.4 to the contrary, no amendment shall be made to the provisions of Article 4 except with the written concurrence of the Rights Agent to such supplement or amendment.

(b)

Subject to Subsection 5.4(a), Angiotech may, with the prior consent of the holders of Shares obtained as set forth below, at any time before the Separation Time, amend, vary or rescind any of the provisions of this Agreement and the Rights (whether or not such action would materially adversely affect the interests of the holders of Rights generally). Such consent shall be deemed to have been given if provided by the holders of Shares at a Special Meeting, which Special Meeting shall be called and held in compliance with applicable laws and regulatory requirements and the requirements in the articles of Angiotech. Subject to compliance with any requirements imposed by the foregoing, consent shall be given if the proposed amendment, variation or rescission is approved by the affirmative vote of a majority of the votes cast by all holders of Shares (other than any holder who does not qualify as a n Independent Shareholder, with respect to all Shares Beneficially owned by such Person), represented in person or by proxy at the Special Meeting.

(c)

Angiotech may, with the prior consent of the holders of Rights obtained as set forth below, at any time after the Separation Time and before the Expiration Time, amend, vary or rescind any of the provisions of this Agreement and the Rights (whether or not such action would materially adversely affect the interests of the holders of Rights generally), provided that no such amendment, variation or rescission shall be made to the provisions of Article 4 except with the written concurrence of the Rights Agent thereto. Such consent shall be deemed to have been given if provided by the holders of Rights at a Rights Holders’ Special Meeting, which Rights Holders’ Special Meeting shall be called and held in compliance with applicable laws and regulatory requirements and, to the extent possible, with the requirements in the articles of Angiotech applicable to meetings of holders of Common Sha res, applied mutatis mutandis. Subject to compliance with any requirements imposed by the foregoing, consent shall be given if the proposed amendment, variation or rescission is approved by the affirmative vote of a majority of the votes cast by holders of Rights (other than holders of Rights whose Rights have become null and void pursuant to Subsection 3.1(b)), represented in person or by proxy at the Rights Holders’ Special Meeting.

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(d)

Any approval of the holders of Rights shall be deemed to have been given if the action requiring such approval is authorized by the affirmative votes of the holders of Rights present or represented at and entitled to be voted at a meeting of the holders of Rights and representing a majority of the votes cast in respect thereof. For the purposes hereof, each outstanding Right (other than Rights which are null and void pursuant to the provisions hereof) shall be entitled to one vote, and the procedures for the calling, holding and conduct of the meeting shall be those, as nearly as may be, which are provided in Angiotech’s articles and the BCBCA with respect to the meetings of holders of Common Shares.

(e)

Any amendments made by Angiotech to this Agreement pursuant to Subsection 5.4(a) which are required to maintain the validity of this Agreement as a result of any change in any applicable legislation, regulation or rule thereunder shall:

(i)

if made before the Separation Time, be submitted to the holders of Voting Shares at the next meeting of shareholders and the holders of Voting Shares may, by the majority referred to in Subsection 5.4(b) confirm or reject such amendment;

(ii)

if made after the Separation Time, be submitted to the holders of Rights at a meeting to be called for on a date not later than immediately following the next meeting of shareholders of Angiotech and the holders of Rights may, by resolution passed by the majority referred to in Subsection 5.4(d) confirm or reject such amendment.

Any such amendment shall be effective from the date of the resolution of the Board of Directors adopting such amendment, until it is confirmed or rejected or until it ceases to be effective (as described in the next sentence) and, where such amendment is confirmed, it continues in effect in the form so confirmed. If such amendment is rejected by the shareholders or the holders of Rights or is not submitted to the shareholders or holders of Rights as required, then such amendment shall cease to be effective from and after the termination of the meeting at which it was rejected or to which it should have been but was not submitted or from and after the date of the meeting of holders of Rights that should have been but was not held, and no subsequent resolution of the Board of Directors to amend this Agreement to substantially the same effect shall be effective until confirmed by the shareholders or holders of Rights as the case may be.

5.5

Fractional Rights and Fractional Shares

(a)

Angiotech shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights and Angiotech shall not be required to pay any amount to a holder of record of Rights Certificates in lieu of such fractional Rights.

(b)

Angiotech shall not be required to issue fractions of Shares upon exercise of Rights or to distribute certificates which evidence fractional Shares. In lieu of issuing fractional Shares, Angiotech shall be entitled to pay to the registered holders of Rights Certificates, at the time such Rights are exercised as herein provided, an amount in cash equal to the fraction of the Market Price of one Share that the fraction of a Share that would otherwise be issuable upon the exercise of such Right is of one whole Share at the date of such exercise.

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5.6

Rights of Action

Subject to the terms of this Agreement, all rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, are vested in the respective holders of the Rights. Any holder of Rights, without the consent of the Rights Agent or of the holder of any other Rights, may, on such holder’s own behalf and for such holder’s own benefit and the benefit of other holders of Rights, enforce, and may institute and maintain any suit, action or proceeding against Angiotech to enforce such holder’s right to exercise such holder’s Rights, or Rights to which such holder is entitled, in the manner provided in such holder’s Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holder of Rights would not have an adequate remedy at law for any breach of thi s Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.

5.7

Regulatory Approvals

Any obligation of Angiotech or action or event contemplated by this Agreement shall be subject to the receipt of any requisite approval or consent from any governmental or regulatory authority, and without limiting the generality of the foregoing, necessary approvals of any stock exchange shall be obtained, such as approvals relating to the issuance of Shares upon the exercise of Rights under Subsection 2.2(d).

5.8

Declaration as to Non-Canadian Holders

If in the opinion of the Board of Directors (who may rely upon the advice of counsel) any action or event contemplated by this Agreement would require compliance by Angiotech with the securities laws or comparable legislation of a jurisdiction outside Canada or the United States, the Board of Directors acting in good faith shall take such actions as it may deem appropriate to ensure such compliance. In no event shall Angiotech or the Rights Agent be required to issue or deliver Rights or securities issuable on exercise of Rights to persons who are citizens, residents or nationals of any jurisdiction other than Canada or the United States, in which such issue or delivery would be unlawful without registration of the relevant Persons or securities for such purposes.

5.9

Notices

(a)

Notices or demands authorized or required by this Agreement to be given or made by the Rights Agent or by the holder of any Rights to or on Angiotech shall be sufficiently given or made if delivered, sent by registered or certified mail, postage prepaid (until another address is filed in writing with the Rights Agent), or sent by facsimile or other form of recorded electronic communication, charges prepaid and confirmed in writing, as follows:

Angiotech Pharmaceuticals, Inc.

1618 Station St.

Vancouver, British Columbia V6A 1B6

Attention:  Corporate Secretary

Telecopy No.: (604) 221-2330

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(b)

Notices or demands authorized or required by this Agreement to be given or made by Angiotech or by the holder of any Rights to or on the Rights Agent shall be sufficiently given or made if delivered, sent by registered or certified mail, postage prepaid (until another address is filed in writing with Angiotech), or sent by facsimile or other form of recorded electronic communication, charges prepaid, and confirmed in writing, as follows:

Computershare Investor Services Inc.

510 Burrard St., 2^nd Floor

Vancouver, British Columbia V6C 3B9

Attention:  Manager, Client Services

Telecopy No.: (604) 661-9401

(c)

Notices or demands authorized or required by this Agreement to be given or made by Angiotech or the Rights Agent to or on the holder of any Rights shall be sufficiently given or made if delivered or sent by certified mail, postage prepaid, addressed to such holder at the address of such holder as it appears upon the register of the Rights Agent or, prior to the Separation Time, on the register of Angiotech for its Shares. Any notice which is mailed or sent in the manner herein provided shall be deemed given, whether or not the holder receives the notice.

(d)

Any notice given or made in accordance with this Section 5.9 shall be deemed to have been given and to have been received on the day of delivery, if delivered, on the third Business Day (excluding each day during which there exists any general interruption of postal service due to strike, lockout or other cause) following the mailing thereof, if mailed, and on the day of telegraphing, telecopying or sending of the same by other means of recorded electronic communication (provided such sending is during the normal business hours of the addressee on a Business Day and if not, on the first Business Day thereafter). Each of Angiotech and the Rights Agent may from time to time change its address for notice by notice to the other given in the manner aforesaid.

5.10

Costs of Enforcement

Angiotech agrees that if Angiotech fails to fulfil any of its obligations pursuant to this Agreement, then Angiotech will reimburse the holder of any Rights for the costs and expenses (including legal fees) incurred by such holder to enforce his rights pursuant to any Rights or this Agreement.

5.11

Successors

All the covenants and provisions of this Agreement by or for the benefit of Angiotech or the Rights Agent shall bind and enure to the benefit of their respective successors and assigns hereunder.

5.12

Benefits of this Agreement

Nothing in this Agreement shall be construed to give to any Person other than Angiotech, the Rights Agent and the holders of the Rights any legal or equitable right, remedy or claim under this Agreement; further, this Agreement shall be for the sole and exclusive benefit of Angiotech, the Rights Agent and the holders of the Rights.

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5.13

Governing Law

This Agreement and each Right issued hereunder shall be deemed to be a contract made under the laws of the Province of British Columbia and for all purposes shall be governed by and construed in accordance with the laws of such Province applicable to contracts to be made and performed entirely within such Province.

5.14

Severability

If any term or provision hereof or the application thereof to any circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be ineffective only as to such jurisdiction and to the extent of such invalidity or unenforceability in such jurisdiction without invalidating or rendering unenforceable or ineffective the remaining terms and provisions hereof in such jurisdiction or the application of such term or provision in any other jurisdiction or to circumstances other than those as to which it is specifically held invalid or unenforceable.

5.15

Effective Date

This Agreement is effective and in full force and effect in accordance with its terms from and after the Effective Date. In the event that this Agreement is not confirmed by a majority of the votes cast by holders of Voting Shares who vote in respect of confirmation of this Agreement (other than any holder who does not qualify as an Independent Shareholder, with respect to all Voting Shares Beneficially owned by such Person) at Angiotech’s annual and special meeting of shareholders in 2008, then this Agreement and all outstanding Rights shall terminate and shall be void and of no further force and effect from the date that such event occurs.

This Agreement must be reconfirmed by a resolution passed by a majority of the votes cast by all holders of Voting Shares who vote in respect of such reconfirmation (other than any holder who does not qualify as an Independent Shareholder, with respect to all Voting Shares Beneficially owned by such Person) at the third annual meeting following Angiotech’s annual and special meeting of shareholders in 2008 and at each third annual meeting thereafter. If this Agreement is not so reconfirmed or is not presented for reconfirmation at such annual meeting, this Agreement and all outstanding Rights shall terminate and be void and of no further force and effect on and from the date of termination of the relevant annual meeting; provided that termination shall not occur if a Flip-in Event has occurred (other than a Flip-in Event which has been waived pursuant to Subsection 5.1(a) or (b) hereof), prior to the date u pon which this Agreement would otherwise terminate pursuant to this Section 5.15.

5.16

Determinations and Actions by the Board of Directors

All actions, calculations and determinations (including all omissions with respect to the foregoing) which are done or made by the Board for the purposes of this Agreement, in good faith, shall not subject the Board or any director of Angiotech to any liability to the holders of the Rights.

5.17

Time of the Essence

Time shall be of the essence in this Agreement.

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5.18

Execution in Counterparts

This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

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

ANGIOTECH PHARMACEUTICALS, INC.

By: __/s/ Tom Bailey_________________________

Name: Tom Bailey

Title: Chief Financial Officer

COMPUTERSHARE TRUST COMPANY OF CANADA

By: __/s/ Chad Emnace_______________________

Name:

Title:

By: __/s/ Claire Brinkworth____________________

Name:

Title:

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ATTACHMENT I

ANGIOTECH PHARMACEUTICALS, INC.

SHAREHOLDER RIGHTS PLAN AGREEMENT

[Form of Rights Certificate]

Certificate No. ____________ Rights _______________

THE RIGHTS ARE SUBJECT TO TERMINATION ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS PLAN AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF THE SHAREHOLDER RIGHTS PLAN AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, OR TRANSFEREES OF AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, MAY BECOME VOID.

Rights Certificate

This certifies that _______________________________________, or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the registered holder thereof, subject to the terms, provisions and conditions of the Shareholder Rights Plan Agreement, dated as of October 30, 2008, as the same may be further amended or supplemented from time to time, (the “Shareholder Rights Plan Agreement”), between Angiotech Pharmaceuticals, Inc., a company duly incorporated under the laws of British Columbia, and Computershare Trust Company of Canada, a trust company incorporated under the laws of Canada (the “Rights Agent”) (which term shall include any successor Rights Agent under the Shareholder Rights Plan Agreement), to purchase from Angiotech Pharmaceuticals, Inc. at any time after the Separation Time (as such term is defined in the Shareholder Rights Plan Agr eement) and prior to the Expiration Time (as such term is defined in the Shareholder Rights Plan Agreement), one fully paid common share of Angiotech Pharmaceuticals, Inc. (a “Common Share”) at the Exercise Price referred to below, upon presentation and surrender of this Rights Certificate with the Form of Election to Exercise (in the form provided hereinafter) duly executed and submitted to the Rights Agent at its principal office in the city of Vancouver, British Columbia or any other cities as may be designated by the Company from time to time. The Exercise Price shall initially be $160 (Cdn.) per Right and shall be subject to adjustment in certain events as provided in the Shareholder Rights Plan Agreement.

This Rights Certificate is subject to all of the terms and provisions of the Shareholder Rights Plan Agreement, which terms and provisions are incorporated herein by reference and made a part hereof and to which Shareholder Rights Plan Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Rights Agent, Angiotech Pharmaceuticals, Inc. and the holders of the Rights Certificates. Copies of the Shareholder Rights Plan Agreement are on file at the registered office of Angiotech Pharmaceuticals, Inc.

This Rights Certificate, with or without other Rights Certificates, upon surrender at any of the offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

A-1

No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Common Shares or of any other securities which may at any time be issuable upon the exercise hereof, nor shall anything contained in the Shareholder Rights Plan Agreement or herein be construed to confer upon the holder hereof, as such, any of the Rights of a shareholder of Angiotech Pharmaceuticals, Inc. or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Shareholder Rights Plan Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by this Rights Certificate shall have been exercised a s provided in the Shareholder Rights Plan Agreement.

This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper officers of Angiotech Pharmaceuticals, Inc. and its corporate seal.

Date:

ANGIOTECH PHARMACEUTICALS, INC.

By:

By:

Countersigned:

COMPUTERSHARE TRUST COMPANY OF CANADA

By:

Authorized Signature

A-2

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED ____________________________________________ hereby sells, assigns

and transfers unto                                                                                                                                           

______________________________________________________________

(Please print name and address of transferee.)

the Rights represented by this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                                                                         , as attorney, to transfer the within Rights on the books of Angiotech Pharmaceuticals, Inc., with full power of substitution.

Dated:
	Signature
Signature Guaranteed:	(Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.)

Signature must be guaranteed by a Canadian Chartered Bank, a Canadian trust company, a member of a recognized stock exchange or a member of the Securities Transfer Association Medallion (STAMP) Program.

CERTIFICATE

(To be completed if true.)

The undersigned party transferring Rights hereunder, hereby represents, for the benefit of all holders of Rights and Shares, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially owned by an Acquiring Person or an Affiliate or Associate thereof or a Person acting jointly or in concert with an Acquiring Person or an Affiliate or Associate thereof. Capitalized terms shall have the meaning ascribed thereto in the Shareholder Rights Plan Agreement.

Signature

(To be attached to each Rights Certificate.)

FORM OF ELECTION TO EXERCISE

(To be exercised by the registered holder if such holder desires to exercise the Rights Certificate.)

TO:

Angiotech Pharmaceuticals, Inc. and Computershare Trust Company of Canada

The undersigned hereby irrevocably elects to exercise                                                                       whole Rights represented by the attached Rights Certificate to purchase the Common Shares or other securities, if applicable, issuable upon the exercise of such Rights and requests that certificates for such securities be issued in the name of:

(Name)

(Address)

(City and Province)

Social Insurance, Social Security or other taxpayer identification number.

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:

(Name)

(Address)

(City and Province)

Social Insurance, Social Security or other taxpayer identification number.

Dated:                                                                     

Signature

Signature Guaranteed: (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.)

Signature must be guaranteed by a Canadian Chartered Bank, a Canadian trust company, a member of a recognized stock exchange or a member of the Securities Transfer Association Medallion (STAMP) Program.

CERTIFICATE

(To be completed if true.)

The undersigned party exercising Rights hereunder, hereby represents, for the benefit of all holders of Rights and Shares, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially owned by an Acquiring Person or an Affiliate or Associate thereof or a Person acting jointly or in concert with an Acquiring Person or an Affiliate or Associate thereof. Capitalized terms shall have the meaning ascribed thereto in the Shareholder Rights Plan Agreement.

Signature

(To be attached to each Rights Certificate.)

NOTICE

In the event the certification set forth above in the Forms of Assignment and Election to Exercise is not completed, Angiotech Pharmaceuticals, Inc. will deem the Beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof. No Rights Certificates shall be issued in exchange for a Rights Certificate owned or deemed to have been owned by an Acquiring Person or an Affiliate or Associate thereof, or by a Person acting jointly or in concert with an Acquiring Person or an Affiliate or Associate thereof.

Signature Guaranteed: (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.)

Signature must be guaranteed by a Canadian Chartered Bank, a Canadian trust company, a member of a recognized stock exchange or a member of the Securities Transfer Association Medallion (STAMP) Program.

EX-10.3

Exhibit 10.3

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL.

SEPTEMBER 24, 2004 AMENDMENT BETWEEN

ANGIOTECH PHARMACEUTICALS, INC. AND

COOK INCORPORATED MODIFYING JULY 9, 1997 LICENSE AGREEMENT AMONG ANGIOTECH PHARMACEUTICALS, INC., BOSTON SCIENTIFIC CORPORATION, AND COOK INCORPORATED

This Amendment is made and entered into as of this 24th day of September, 2004 (the “Effective Date”), by and between Angiotech Pharmaceuticals, Inc., a corporation organized under the laws of the Province of British Columbia (“Angiotech”), and Cook Incorporated, an Indiana corporation (“Cook”).

WHEREAS, Angiotech, Cook, and Boston Scientific Corporation (“BSC”) entered into the “License Agreement Among Angiotech Pharmaceuticals, Inc., Boston Scientific Corporation and Cook Incorporated” dated July 9, 1997, under which Angiotech agreed to license on a co-exclusive basis to Cook and BSC certain patent rights, license rights, and technology relating to the use of paclitaxel or certain other agents as a coating for certain medical devices, and Cook and Angiotech have amended that agreement on September 8, 2001 and June 12, 2002 (collectively, the “Angiotech License Agreement”);

WHEREAS, the parties have differed in their respective interpretations of the rights and obligations arising under Section 9.1(e) of the Angiotech License Agreement (as amended June 12, 2002); and

WHEREAS, as provided herein, Angiotech and Cook desire to resolve those differences and further amend the Angiotech License Agreement to modify certain rights and licenses granted to Cook;

NOW THEREFORE, Angiotech and Cook hereby agree as follows:

1.

As of the Effective Date, the following portion of the worldwide rights and licenses granted to Cook and the associated obligations of Cook under the Angiotech License Agreement shall be terminated:

Cook’s worldwide right and license to use, manufacture, have manufactured, distribute and sell, and to grant sublicenses to its Affiliates to use, manufacture, have manufactured, distribute and sell, the Angiotech Technology in the Coronary Vascular Field of Use (as defined immediately below).  

As used herein, the “Coronary Vascular Field of Use” means endoluminal vascular Licensed Applications for the treatment and\or prevention of disease of the coronary arteries and their branches, or other vasculature providing blood flow to the heart.

It is acknowledged that under the Angiotech License Agreement, the Licensed Field of Use and Licensed Applications do not include vascular wrap applications or products for vascular anastomoses.

-1-

The foregoing termination and foregoing acknowledgment do not in any way terminate, expand, or diminish Cook’s Licensed Field of Use under the Angiotech License Agreement in Licensed Applications outside of the Coronary Vascular Field of Use.  

2.

As of the Effective Date, the following portion of the worldwide rights and licenses granted to Cook and the associated obligations of Cook under the Angiotech License Agreement shall be extended in time as set forth in Paragraph 3 below:

Cook’s worldwide right and license to use, manufacture, have manufactured, distribute and sell, and to grant sublicenses to its Affiliates to use, manufacture, have manufactured, distribute and sell, the Angiotech Technology in the Peripheral Vascular Field of Use and the GI Field of Use (as they are respectively defined immediately below).

As used herein, the “Peripheral Vascular Field of Use” means [***].  Notwithstanding the foregoing, “Peripheral Vascular Field of Use” excludes any application in the Coronary Vascular Field of Use.  “GI Field of Use” means [***].  For purpose of clarity, as a result of this Amendment, Cook’s remaining Licensed Fields of Use under the Angiotech License Agreement shall consist of Peripheral Vascular and GI.

3.

As between Angiotech and Cook, Section 9.1(e) of the Angiotech License Agreement, as amended June 12, 2002, is replaced in its entirety with the following, pursuant to which Angiotech hereby grants Cook an extension of time as to the Peripheral Vascular Field of Use and the GI Field of Use only:

9.1(e)  Termination for Failure to Commercialize Peripheral Vascular Field of Use.  Angiotech shall have the right, at its election, to terminate any or all of Cook’s rights and licenses under the Angiotech License Agreement in the Peripheral Vascular Field of Use (as defined in this Amendment), if by [***], none of Cook or its Affiliates has completed the enrollment of all patients for a pivotal clinical trial on an Eligible Peripheral Vascular Product in the United States subject to an Investigational Device Exemption, which trial is suitable for securing from the FDA final approval to market and sell such Eligible Peripheral Vascular Product in the United States.  Any such termination will not affect Cook’s rights and obligations in the GI Field of Use.

Furthermore, as between Angiotech and Cook, Section 9.1(g) of the Angiotech License Agreement, as amended June 12, 2002, is replaced in its entirety with the following:

9.1(g)  Unanticipated Regulatory Requirements in the Peripheral Vascular Field of Use.  Both parties acknowledge the necessity to meet all applicable regulatory requirements in the major markets of the world (U.S., Europe, and Japan).  Both parties also acknowledge the uncertain regulatory requirements for a combination drug device product.  If regulatory requirements create significantly longer timelines

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than currently anticipated for Cook or its Affiliates to receive regulatory approval for an Eligible Peripheral Vascular Product (for instance, due to the requirements of a separate and distinct dose finding trial in a major market of the world), Cook or its Affiliates will notify Angiotech no later than 30 days immediately following Cook’s or its Affiliates’ first knowledge of any event that may give rise to a longer than previously anticipated timeline for such regulatory approval.  Both parties shall then meet within 30 days of such notification to review the impact on timelines and to negotiate in good faith an extension to the deadline set forth in Section 9.1(e) above.

4.

As between Angiotech and Cook, Section 4.2(a) of the Angiotech License Agreement is replaced in its entirety with the following:

4.2(a)  Royalties on Eligible Peripheral Vascular Products.  “Eligible Peripheral Vascular Products” means any Licensed Application in the Peripheral Vascular Field of Use.  Within sixty (60) days after the end of each Contract Quarter during the term of the Cook License, Cook shall pay Angiotech an additional royalty (the “Cook Peripheral Vascular Royalty”) on Net Sales of Eligible Peripheral Vascular Products that are covered in the country of sale by one or more valid and enforceable claims included in the Patent Rights, by Cook and its Affiliates during such Contract Quarter in each of the Geographical Areas, calculated as the sum of the royalties set forth in the following Sections 4.2(a)(i-iii), subject to Sections 4.2(a)(v-vii) below:

(i) with respect to sales during a Contract Quarter of units of Eligible Peripheral Vascular Products covered in the country of sale by one or more valid and enforceable claims included in the Patent Rights from zero to the product of the Peripheral Vascular Base Unit Number (Section 4.2(a)(iv)) for such Eligible Peripheral Vascular Products for such Geographical Area multiplied by [***], the royalty shall be an amount equal to [***] of the Net Sales of such units of Eligible Peripheral Vascular Products;

(ii) with respect to sales during a Contract Quarter of units of Eligible Peripheral Vascular Products covered in the country of sale by one or more valid and enforceable claims included in the Patent Rights from (x) the product of the Peripheral Vascular Base Unit Number for such Eligible Peripheral Vascular Products for such Geographical Area multiplied by [***], to (y) the product of the Peripheral Vascular Base Unit Number of such Eligible Peripheral Vascular Products for such Geographical Area multiplied by [***], the royalty shall be an amount equal to [***] of the Net Sales of such units of Eligible Peripheral Vascular Products; and

(iii) with respect to sales during a Contract Quarter of units of Eligible Peripheral Vascular Products covered in the country of sale by one or more valid and enforceable claims included in the Patent Rights above the product of the Peripheral Vascular Base Unit Number for such Eligible Peripheral Vascular Products for such Geographical Area multiplied by [***], the royalty shall be an amount equal to [***] of the Net Sales of such units of Eligible

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Peripheral Vascular Products, provided, however, that from and after the date on which the aggregate amount of Cook Royalty Payments made by Cook pursuant to this Section 4.2(a) (iii) during the term of the Cook License exceed [***], any further royalties payable under this Section 4.2(a)(iii) shall be calculated as an amount equal to [***] of the Net Sales of such Eligible Peripheral Vascular Products.

(iv) “Peripheral Vascular Base Unit Number” shall be calculated for Cook and its respective Affiliates in each Geographical Area at such time as Cook or its Affiliates, as the case may be, makes its first commercial sale of an Eligible Peripheral Vascular Product in such Geographical Area (each a “Calculation Date”) and shall mean the number of units of the corresponding peripheral vascular product without the licensed Angiotech Technology sold by Cook to non-Affiliates in such Geographical Area during the last Contract Quarter ending prior to the applicable Calculation Date.

(v) should Cook receive from the United States Food and Drug Administration final approval to market and sell such Eligible Peripheral Vascular Products in the United States after [***] and before [***], each royalty rate set forth in Sections 4.2(a)(i-iii) shall be [***]; or

(vi) should Cook receive from the United States Food and Drug Administration final approval to market and sell such Eligible Peripheral Vascular Products in the United States after [***] and before [***], each royalty rate set forth in Sections 4.2(a)(i-iii) shall be [***]; or

(vii)  should Cook receive from the United States Food and Drug Administration final approval to market and sell such Eligible Peripheral Vascular Products in the United States after [***], each royalty rate set forth in Sections 4.2(e)(i-iii) shall be [***].

As between Angiotech and Cook, Section 4.2(c) of the Angiotech License Agreement is modified to add the following:

Section 4.2(c) does not apply to any Royalties on Eligible Peripheral Vascular Products, which are solely governed by Section 4.2(a).

5.

As licensor, Angiotech hereby newly grants to Cook, its licensee, the right for Cook to have third party Distributors (as immediately defined below) distribute Eligible Peripheral Vascular and/or GI Products.  “Distributor” is defined as a third party and its Affiliates whose business is to buy medical devices for resale, but shall in no instance include any third party that, by itself or through its Affiliates (1) in any way manufactures all or any part of Stent Products or stent-delivery systems for sale in the United States or

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Europe, or (2) manufactures or provides Cook or its Affiliates with all or any part of Eligible Peripheral Vascular Products or GI Products.  To the extent Cook elects to exercise its rights under this paragraph, the royalty obligations of Cook or its Affiliates under the Angiotech License Agreement (as modified by this Amendment), are further modified to include the sales of Eligible Peripheral Vascular and GI Products made by Cook or its Affiliates to any third party Distributor.  The royalty owed by Cook or its Affiliates for any sales of Eligible Peripheral Vascular or GI Products made by Cook or its Affiliates to any third party Distributor shall be calculated based on the sales price charged by Cook or its Affiliates to the third party Distributor for such products.  Notwithstanding the foregoing, in no event shall such royalty owed be less than [***] of the amount due if the royalty were calculated based on Cook’s then current list price for such Eligible Peripheral Vascular or GI Product.  Such sales price to Distributors shall include and is not limited to any cash, goods, services, intellectual property rights, encumbrances, licenses, cross-licenses, or other consideration tendered from such Distributors, Cook, Cook’s Affiliates, or any agents, successors, or assigns of such Distributor, Cook, or Cook’s Affiliates.  Cook agrees that Angiotech may grant to BSC distribution rights in BSC’s Licensed Field of Use.  Cook further agrees that any sales by Cook’s Distributors or BSC’s Distributors (if granted) will not decrease Cook’s royalty obligations by the action of any provision of the Angiotech License Agreement, including, but not limited to, Sections 4.3 and 8.11 of the Angiotech License Agreement.

6.

Cook and Angiotech agree that from the Effective Date until the expiration of the Angiotech License Agreement, all provisions, rights, and obligations of Sections 8.2 through and including 8.5, and Section 8.11 of the Angiotech License Agreement shall no longer apply to Cook regarding any actions brought by Angiotech and\or BSC for infringements of any rights contained within the Angiotech Technology in the Coronary Vascular Field of Use.  Cook’s obligations under Sections 8.1 and 8.6-8.10 of the Angiotech License Agreement shall continue to apply to Cook, including regarding any infringements of any rights of the Angiotech Technology in the Coronary Vascular Field of Use.  Notwithstanding the foregoing, (1) Angiotech shall provide Cook notice of Angiotech’s and\or BSC’s prosecution of actions for any infringements of any rights within the Angiotech Technolo gy in the Coronary Vascular Field of Use; and (2) Cook, pursuant to Section 8.5 of the Angiotech License Agreement, shall be entitled to require Angiotech and\or BSC to consult with Cook and obtain Cook’s consent (not to be unreasonably withheld) to enter into any settlement, consent judgment, or other voluntarily final disposition of any actions for any infringements of any rights within the Angiotech Technology in the Coronary Vascular Field of Use where such settlement, consent judgment, or other voluntarily final disposition would adversely affect the validity or enforceability of any of the Patent Rights included in the Angiotech Technology in the Peripheral Vascular Field of Use or in the GI Field of Use.

7.

As between Angiotech and Cook, Section 9.1 of the Angiotech License Agreement is amended to add the following provision:

9.1(h)  Termination in the Event Cook Elects to Challenge the Validity or Enforceability of the Intellectual Property Rights Underlying the Angiotech Technology.  Cook agrees that if it, any of its Affiliates, or agents maintain (whether directly or indirectly) any

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claim, contention, allegation, or defense in any proceeding in any jurisdiction that any patent claim or other intellectual property right within the Angiotech Technology is invalid or unenforceable, Angiotech shall have the right at Angiotech’s option to terminate any or all of Cook’s rights and licenses under the Angiotech License Agreement.  This Section 9.1(h) does not apply to Cook’s reliance upon a final judgment by a court or a finding by an administrative authority that all relevant patent claims and all other relevant intellectual property rights comprising the Angiotech Technology are invalid or unenforceable, which final judgment or finding is a result of a claim, contention, allegation, or defense brought by a third party other than Cook, its Affiliates, agents, or Distributors.

8.

Cook agrees that from the Effective Date until the expiration of the Angiotech License Agreement, BSC will have the option in accordance with Section 9.3 of the Angiotech License Agreement to cause to become exclusive (even as to Cook but subject to Cook’s rights under Paragraph 10 of this Amendment) BSC’s worldwide right and license within the Licensed Field of Use and Licensed Applications to use, manufacture, have manufactured, distribute and sell, and to grant sublicenses to its Affiliates to use, manufacture, have manufactured, distribute and sell, the Angiotech Technology in the Coronary Vascular Field of Use.

9.

Cook agrees that from the Effective Date until the expiration of the Angiotech License Agreement, Angiotech shall have the right to grant to BSC the right for BSC to grant sublicenses to any third party under any or all of BSC’s rights or licenses to use, manufacture, have manufactured, distribute and sell the Angiotech Technology in the Coronary Vascular Field of Use solely for use in the Licensed Applications.

10.

Cook and Angiotech agree that from the Effective Date until the expiration of the Angiotech License Agreement, Cook’s activities involving the use, manufacture, distribution, sale, and granting of sublicenses to its Affiliates of the Angiotech Technology must fall within and not exceed the scope of its license as expressly modified by this Amendment and that Cook must abide by its obligations under Section 9.4 of the Angiotech License Agreement regarding the completion and sale of any products containing the Angiotech Technology in the Coronary Vascular Field of Use.  Notwithstanding the foregoing, and for the sole purpose of completing contracts for sales outside of the U.S. that Cook entered into before the Effective Date and only in quantities as are necessary to fulfill these contracts, Angiotech agrees that for the limited period from the Effective Date to and until May 1, 2005, Cook may con tinue only to: (1) make the Logic^TM PTX^TM and\or V-Flex Plus PTX^TM drug eluting coronary stents in the U.S. for use in the Coronary Vascular Field of Use outside of the U.S., and (2) make sales of the Logic^TM PTX^TM and\or V-Flex Plus PTX^TM drug eluting coronary stents outside of the U.S. in the Coronary Vascular Field of Use.  Once such contracts expire, Cook, its Affiliates, and agents will cease to engage in any commercial activities utilizing the Angiotech Technology in the Coronary Vascular Field of Use.

11.

Section 11.7 of the Angiotech License Agreement is modified to the extent that neither Cook nor Angiotech need seek the other’s written consent to any effort either may make to

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assign the Angiotech License Agreement, including but not limited to this Amendment, and its rights and obligations thereunder, pursuant to a merger, consolidation, or sale of substantially all of the assets or stock, or to an entity that acquires substantially all of either’s assets used to carry out the business to which the Angiotech License Agreement and this Amendment pertain, provided that the potential assignee agrees in writing to be bound by the terms and conditions thereunder. Cook and Angiotech expressly acknowledge that the foregoing does not eliminate, amend, or otherwise limit any rights BSC may have as to the aforementioned transactions as described in Section 11.7 of the Angiotech License Agreement.

12.

In further consideration for Cook’s agreement to the provisions of this Amendment, Angiotech will hold in escrow for Cook $25,000,000.00 (U.S.).  Angiotech will promptly file the necessary regulatory filings with the Federal Trade Commission and U.S. Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act (“Act”) for review of Boston Scientific’s potential election to convert the Angiotech License Agreement to an exclusive license in the Coronary Vascular Field of Use.  Upon successful review and expiration of any waiting periods required under the Act, Angiotech will instruct the escrow agent to disperse to Cook the above escrow amount, along with any accrued interest.  In the event that the regulatory filing and/or review under the Act is unsuccessful, this Amendment will terminate, all provisions will become null and v oid, and no money or interest will be paid to Cook.  

13.

Angiotech and Cook agree that, except as expressly provided in this Amendment, the Angiotech License Agreement shall remain unmodified and shall continue in full force and effect.  Capitalized terms not otherwise defined in this Amendment will carry their meaning as set forth in the Angiotech License Agreement.

14.

Cook and Angiotech expressly acknowledge that this Amendment shall not in any way bind BSC, and similarly, that Cook shall not in any way be bound by any amendment to the Angiotech License Agreement between Angiotech and BSC.

IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as of the date first set forth above.

ANGIOTECH PHARMACEUTICALS, INC.	COOK INCORPORATED
By:   /s/ David D. McMasters	By:   /s/ M. Kem Hawkins
Name:  David D. McMasters	Name:  M. Kem Hawkins
Title:   General Counsel & Vice-President Legal Affairs	Title:   President

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EX-10.5

Exhibit 10.5

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL.

Confidential

Distribution and License Agreement

by and among

Angiotech Pharmaceuticals, Inc.

Angiotech International GmbH

Cohesion Technologies, Inc.

and

Baxter Healthcare Corporation

Baxter Healthcare, S. A.

Distribution and License Agreement

This Distribution and License Agreement (“Distribution and License Agreement”), dated as of April 1, 2003 (“Effective Date”), is entered into by and among:

Angiotech Pharmaceuticals, Inc. (“Angiotech”), a British Columbia corporation with principal offices at 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6;

Angiotech International GmbH ("Angiotech International"), which is organized and existing under the laws of Switzerland, and is a wholly-owned subsidiary (and an "Affiliate" as defined herein) of Angiotech;

Cohesion Technologies, Inc. (“Cohesion”), a Delaware corporation with principal offices at 2500 Faber Place, Palo Alto, California 94303, and a wholly-owned subsidiary (and an "Affiliate" as defined herein) of Angiotech (Angiotech, Angiotech International and Cohesion shall be collectively referred to herein as “AAC”);

Baxter Healthcare Corporation (“Baxter Healthcare”), a Delaware corporation with principal offices at One Baxter Parkway, Deerfield, Illinois 60015; and

Baxter Healthcare, S. A. (“BHSA”), which is organized and existing under the laws of Switzerland (Baxter Healthcare and BHSA shall be collectively referred to herein as “Baxter”).

RECITALS

WHEREAS, Angiotech has acquired Cohesion which Controls (defined below) certain biosurgical products, and particularly the CoSeal Sealant Unit, CoSeal Adhesion Prevention Unit (each as defined below) and their components, as well as certain CoSeal Accessory(ies);

WHEREAS, Angiotech and/or its subsidiaries, Cohesion and Angiotech International, have the right to grant certain rights and options pertaining to the CoSeal Sealant Unit and the CoSeal Adhesion Prevention Unit, components thereof, certain CoSeal Accessory(ies) and related information in the Territory, as set forth herein;

WHEREAS, Baxter has substantial expertise in distributing and commercializing medical products and devices worldwide, and wishes to obtain exclusive rights to exploit the CoSeal Sealant Unit in the Sealant Territory; exclusive rights to exploit the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory; exclusive rights to exploit certain CoSeal Accessory(ies) in the Territory for use with CoSeal Unit(s); and an option to obtain (a) exclusive rights to exploit the CoSeal Sealant Unit in Japan, and (b) exclusive rights to exploit the CoSeal Adhesion Prevention Unit in the United States; and

WHEREAS, AAC wishes to convey such exclusive rights and options to Baxter;

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Confidential

NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the sufficiency of which is hereby acknowledged, AAC and Baxter (individually referred to as “Party” and collectively as “Parties”) hereby agree as follows:

Article 1
Definitions

Any capitalized terms not defined in this Distribution and License Agreement shall have the meaning given such term(s) in the Manufacturing Agreement.  Any references in this Distribution and License Agreement to “Sections” shall refer to Sections of this Distribution and License Agreement, unless specified to be referring to Sections of the Manufacturing Agreement.  For purposes of this Distribution and License Agreement, the following capitalized terms in this Distribution and License Agreement, whether used in the singular or plural, shall have the following meanings:

1.1

“AAC” shall mean, collectively, Angiotech, Angiotech International and Cohesion.

1.2

“AAC Know-How” shall mean information, materials, formulations, trade secrets and data: (a) that are Controlled by AAC or its Affiliates during the term of this Distribution and License Agreement, and (b) that are transferred to Baxter and are necessary or used for the use, sale or distribution of CoSeal Ingredients, Product(s), CoSeal Devices, CoSeal Accessories or CoSeal Units, and shall expressly include AAC’s or its Affiliates’ communications with any Regulatory Authority regarding CoSeal Units or components thereof; provided, however, that such communications shall continue to be accorded the status of Confidential Information of AAC during the term of this Distribution and License Agreement.

1.3

“AAC Patents” shall mean (a) the Patents Controlled by AAC or its Affiliates as of the Effective Date and during the term of this Distribution and License Agreement having one or more valid and unexpired claims (i) that cover one or more CoSeal Units or components thereof or one or more CoSeal Accessories, or (ii) that cover processes directed to using one or more CoSeal Units or components thereof or one or more CoSeal Accessories, and (b) all Patent applications filed and Patents obtained for Improvements Controlled by AAC or its Affiliates directly relating to the CoSeal Sealant Unit, the CoSeal Adhesion Prevention Unit, any component of a CoSeal Unit, or any CoSeal Accessory that are discovered, conceived or reduced to practice by AAC and/or its Affiliates (or on their behalf) during the term of this Distribution and License Agreement, but excluding Joint Patents.  Fo r purposes of this Distribution and License Agreement, the phrase “valid and unexpired claim” shall mean a composition of matter, method or device claim (or equivalent thereof) of an issued and unexpired AAC Patent, or a composition of matter, method or device claim (or equivalent thereof) of a pending application within the AAC Patents in the Territory covering one or more CoSeal Units or components thereof or one or more CoSeal Accessories, which (y) has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal; and (z) has not been abandoned, disclaimed, denied or admitted to be

2

Confidential

invalid or unenforceable through reissue or disclaimer or otherwise.  AAC Patents shall expressly include the Patents Controlled by AAC that are set forth in Schedule 1.3, as it may be amended by the Parties from time to time.

1.4

“AAC Trademarks” shall mean the trademarks Controlled by AAC or its Affiliates as of the Effective Date and during the term of this Distribution and License Agreement that are used, or are intended to be used, in conjunction with distribution, promotion, marketing, sales, offers to sell, import, export or other exploitation of a CoSeal Unit(s) or CoSeal Accessory(ies).  The AAC Trademarks are identified in Schedule 1.4, as it may be amended by the Parties from time to time.

1.5

“Act” shall mean the Federal Food, Drug and Cosmetic Act, as it may be amended from time to time.

1.6

“Adhesion Prevention Territory” shall mean all countries of the world except the United States, prior to Baxter's exercise of the CoSeal Adhesion Prevention Option.  Upon Baxter's exercise of the CoSeal Adhesion Prevention Option, this term shall mean the world.

1.7

“Adverse Event” shall mean an event about which either Party receives or becomes aware of information from any source that reasonably suggests that one of the marketed CoSeal Units and/or CoSeal Accessories (a) may have caused or contributed to a death or serious injury, or serious deterioration in the state of health of a patient, or (b) may have malfunctioned in a manner that, if the malfunction were to recur, the CoSeal Unit, such CoSeal Accessory or a similar CoSeal Unit or CoSeal Accessory would be likely to cause or contribute to a death, serious injury, or serious deterioration in the state of health of a patient.  For purposes of this Section 1.7, any report pertaining to a component of a CoSeal Unit shall be incorporated into a report on the corresponding CoSeal Unit(s).

1.8

“Affiliate” of a Party shall mean any entity (a) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, that Party, but only for so long as the relationship exists; or (b) wherein more than fifty percent (50%) of the voting capital stock (or such lesser maximum percentage permitted by applicable law), or, in the case of a non-corporate entity, more than fifty percent (50%) of the equity interest, is beneficially owned or held by that Party or any of such Party’s subsidiaries or parents.  As used in this Section 1.8, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of an entity (other than a natural person), whether through the ownership of voting capital stock, by contract or otherwise.

1.9

“Baxter Know-How” shall mean any information, materials, formulations, trade secrets and data: (a) that are Controlled by Baxter or its Affiliates during the term of this Distribution and License Agreement, and (b) that are transferred to AAC and are necessary or used for the use, sale or distribution of one or more CoSeal Ingredients, Product(s), CoSeal Devices, CoSeal Accessories or CoSeal Units or components thereof, and shall expressly include Baxter’s or its Affiliates’ communications with any Regulatory Authority regarding CoSeal Accessories or CoSeal Units; provided, however, that such communications shall continue to be accorded the

3

Confidential

status of Confidential Information of Baxter during the term of this Distribution and License Agreement.

1.10

“Baxter Patents” shall mean Patent applications filed and Patents obtained for Improvements that are discovered, conceived or reduced to practice by Baxter and/or its Affiliates (or on their behalf) during the term of this Distribution and License Agreement, but excluding Joint Patents.

1.11

“Baxter Trademarks” shall mean the trademarks Controlled by Baxter or its Affiliates as of the Effective Date and during the term of this Distribution and License Agreement that are used, or are intended to be used, in conjunction with distribution, promotion, marketing, sales, offers to sell, import, export or other exploitation of a CoSeal Unit(s) or CoSeal Accessory(ies), excluding any trademarks or service marks (a) containing the word “Baxter” or (b) which are not used solely on CoSeal Units or CoSeal Accessories.

1.12

“Business Day” shall mean any day on which banking institutions in both Palo Alto, California, and Chicago, Illinois, are open for business.

1.13

“Commercially Reasonable Efforts” shall mean continuous and diligent efforts of a degree and kind, including the level of attention and care and providing of funding and manpower, as are consistent with industry custom and practice and with the then current stage of product life cycle, and such efforts will in no event be less than the efforts that a Party applies with respect to its other products of similar commercial potential to the maximum extent feasible, consistent with the exercise of good business judgment for the attainment of said goals and for the maximization of profits for both Parties.  Notwithstanding the foregoing, neither Party shall be required to institute litigation or arbitration as part of its Commercially Reasonable Efforts nor shall either Party be required to expend funds other than as expressly set forth herein on counsel, consultants or represe ntatives, nor incur any expense not justified in relation to the expected return.

1.14

“Controlled” or “Controls,” when used in reference to intellectual property or regulatory documentation, shall mean the (a) ownership of intellectual property rights or rights in regulatory documentation, or (b) legal authority or right of a Party hereto (or any of its Affiliates) (i) to transfer intellectual property rights or rights in regulatory documentation to another party, or (ii) to otherwise disclose proprietary or trade secret or regulatory information to such other party.

1.15

“CoSeal Accessory” shall mean any accessory item set forth in Schedule 1.15 that is sold for use with a CoSeal Unit.

1.16

“CoSeal Adhesion Prevention Device” shall mean a mechanical delivery device that is used in the application of the CoSeal Adhesion Prevention Product, when sold as a component of a CoSeal Adhesion Prevention Unit.

1.17

“CoSeal Adhesion Prevention Option” shall mean the option granted by AAC to Baxter to obtain certain exclusive rights pertaining to the CoSeal Adhesion Prevention Unit in the United States, as described in Section 2.2(b).

4

Confidential

1.18

“CoSeal Adhesion Prevention Product” shall mean a product containing the CoSeal Ingredients that (a) is the subject matter of a Regulatory Filing for use as an adhesion prevention barrier, (b) is approved by one or more Regulatory Authorities for use as an adhesion prevention barrier, or (c) is in development or sold for use as an adhesion prevention barrier.  The CoSeal Adhesion Prevention Product shall expressly include any Improvement(s) to the CoSeal Adhesion Prevention Product, but shall expressly exclude the CoSeal Sealant Product and any Drug-Loaded Product(s).

1.19

“CoSeal Adhesion Prevention Unit” shall mean a CoSeal Adhesion Prevention Product sold in combination with a CoSeal Adhesion Prevention Device.

1.20

“CoSeal Device(s)” shall mean, collectively, as the context requires, both or either of the CoSeal Adhesion Prevention Device(s) and/or the CoSeal Sealant Device(s).

1.21

“CoSeal Ingredients” shall mean the [***] ingredients, designated [***] and [***], as set forth in further detail in Schedule 1.21, including any Improvements thereto.  For purposes of this Distribution and License Agreement, Improvements to the CoSeal Ingredients are anticipated to include modifications of the [***] ingredients [***] or [***] in which: (a) [***] (b) [***] (c) [***] or (d) [***]

1.22

“CoSeal Sealant Device” shall mean a mechanical delivery device that is used in the application of the CoSeal Sealant Product, when sold as a component of a CoSeal Sealant Unit.

1.23

“CoSeal Sealant Option” shall mean the option granted by AAC to Baxter to obtain certain exclusive rights pertaining to the CoSeal Sealant Unit in Japan, as described in Section 2.1(c).

1.24

“CoSeal Sealant Product” shall mean a product containing the CoSeal Ingredients that (a) is the subject matter of a Regulatory Filing for use as a tissue sealant, adhesive or glue, (b) has been or is approved by one or more Regulatory Authorities for use as a tissue sealant, adhesive or glue, or (c) that is in development or sold for use as a tissue sealant, adhesive or glue.  The CoSeal Sealant Product shall expressly include both the formulation marketed as of the Effective Date and the “premix” formulation of the CoSeal Sealant Product, and any Improvement(s) to the CoSeal Sealant Product, but shall expressly exclude the CoSeal Adhesion Prevention Product(s) and any Drug-Loaded Product(s).

1.25

“CoSeal Sealant Unit” shall mean a CoSeal Sealant Product sold in combination with a CoSeal Sealant Device.

5

Confidential

1.26

“CoSeal Unit” shall mean, collectively, as the context requires, both or either of the CoSeal Sealant Unit and/or the CoSeal Adhesion Prevention Unit.

1.27

“Distribution and License Agreement” shall mean this Distribution and License Agreement together with all exhibits, schedules, and appendices attached to this Distribution and License Agreement, all as respectively amended, modified or supplemented by the Parties in accordance with the terms of this Distribution and License Agreement.

1.28

“Dollars” shall mean the lawful currency of the United States of America.

1.29

“Drug-Loaded Product” shall mean, in a product with the CoSeal Ingredients, the inclusion of at least one ingredient for the primary purpose of [***]  For example, but not by way of limitation, the addition to CoSeal Ingredients of [***] shall not result in a Drug-Loaded Product.  As a further example, but not by way of limitation, the addition to CoSeal Ingredients of (a) [***] and (b) [***] shall result in a Drug-Loaded Product.  The Parties agree that the addition to CoSeal Ingredients of [***] shall result in a Drug-Loaded Product, except as set forth in Section 1.33.  Notwithstanding any provision to the contrary herein, any Drug-Loaded CoSeal Adhesion Prevention Product may be marketed or sold for use as an adhesion prevention barrier.

1.30

“FDA” shall mean the United States Food and Drug Administration, or any successor entity thereto performing similar functions.

1.31

“Field” shall mean human therapeutic use for any and all tissue sealing, adhesive, glue or adhesion prevention barrier indications but shall specifically exclude any use: (i) [***]; (ii) [***]; (iii) [***]; (iv) [***]; or (v) [***].  In the event that Baxter does not exercise the Adhesion Prevention Option or Baxter’s rights to distribute, market and sale the CoSeal Adhesion Prevention Product are terminated, "Field" shall mean [***]

6

Confidential

1.32

“Hemostat” shall mean a product whose primary purpose is to stop bleeding through an activation of the coagulation cascade, and shall expressly include the CoStasis Surgical Hemostat product.

1.33

“Improvement” shall mean any enhancement, upgrade, addition or modification to: (a) the CoSeal Ingredients or the Product(s) that is designed (i) for the primary purpose of [***] in the CoSeal Sealant Product or CoSeal Sealant Unit, or (ii) for the primary purpose of [***] in the CoSeal Adhesion Prevention Product or CoSeal Adhesion Prevention Unit; or (b) the CoSeal Devices that is designed for the primary purpose of [***].  The foregoing definition shall apply to any enhancement, upgrade, addition or modification, whether patented, patentable or not, conceived or first reduced to practice prior to and during the term of this Distribution and License Agreement and any and all intellectual property rights therein and thereto.  If any such enhancement, upgrade, addition or modification is developed to achieve a [***], or a [***], then such enhancement, upgrade, addition or modification shall not result in an Improvement.  In addition to the foregoing, if Baxter’s right to exercise the CoSeal Adhesion Prevention Option expires or is terminated, Baxter shall have no further right to make Improvements to the CoSeal Adhesion Prevention Product or CoSeal Adhesion Prevention Unit.  The Parties hereby agree that the addition or incorporation of (x) [***] to or with the CoSeal Ingredients, or (y) [***], shall result in an Improvement.  The Parties further agree that a Drug-Loaded Product is not an Improvement.

1.34

“Joint Patents” shall mean Patent applications filed and Patents obtained for Improvements and inventions directly relating to the CoSeal Ingredients, Product(s), CoSeal Devices, CoSeal Accessories or CoSeal Units that are jointly discovered, conceived and/or reduced to practice by Baxter (or its Affiliates) and AAC (or its Affiliates) during the term of this Distribution and License Agreement.

1.35

“Manufacturing Agreement” shall mean the Manufacturing and Supply Agreement by and among the Parties, dated as of the same date as this Distribution and License Agreement.

1.36

“Milestone” shall mean the occurrence of a particular event, as defined in this Distribution and License Agreement, that will impose one or more obligations on a Party to this Distribution and License Agreement.

1.37

“Net Sales” shall mean the actual amounts invoiced by Baxter (or, if not invoiced, actual amounts paid to Baxter) that are attributable to sales of CoSeal Unit(s) and AAC Patented Accessory(ies) to a non-Affiliate Third Party by Baxter (or an Affiliate of Baxter), less (whether or

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not such costs are invoiced separately) the sum of the following items (to the extent such items have not been previously accounted for in the invoiced amount or paid amount):

(a)

amounts refunded or credits actually given to purchasers for CoSeal Units and AAC Patented Accessories which were rejected, spoiled, damaged or returned and not replaced;

(b)

unless separately charged to the purchaser, freight, shipment and insurance costs incurred in transporting CoSeal Units and AAC Patented Accessories to the purchaser;

(c)

quantity, trade and cash discounts, rebates (including pursuant to governmental regulation), charge-backs, retroactive price reductions, credits or allowances actually allowed or taken;

(d)

taxes, tariffs, customs duties and surcharges and other governmental charges incurred in connection with the sale, exportation, or importation of the CoSeal Units and AAC Patented Accessories; and

(e)

applicable fees paid to group purchasing organizations.

The transfer of a CoSeal Unit or AAC Patented Accessory by Baxter (or an Affiliate of Baxter) to an Affiliate of Baxter (or by an Affiliate of Baxter to Baxter) shall not be considered a sale for the purpose of this Section 1.37.

1.38

“Patents” shall mean all existing patents and patent applications and all patent applications hereafter filed, including any continuations, continuations-in-part, divisions, provisionals or any substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental patent certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing.

1.39

“Post-Licensure Marketing Study” shall mean human clinical trials of a CoSeal Unit conducted or continued after Regulatory Approval has been achieved (such trials may be designed to provide information that will optimize or expand use of the CoSeal Unit and provide additional safety and effectiveness data for a specific procedure for which the CoSeal Unit is currently indicated for use).

1.40

“Product(s)” shall mean, collectively, as the context requires, both or either of the CoSeal Sealant Product and/or the CoSeal Adhesion Prevention Product.

1.41

“Regulatory Approval” shall mean all authorizations by the appropriate governmental entity or entities necessary for commercial sale of a CoSeal Unit in a country in the Territory including, without limitation and where applicable, approval of labeling, price (including National Health Insurance price for Japan), reimbursement and manufacturing.

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1.42

“Regulatory Authority” shall mean, with respect to any particular country, territory or union, the governmental authority, body, commission, agency or other instrumentality of such country, territory or union with the primary responsibility for the evaluation or approval of medical products before such medical product can be tested, marketed, promoted, distributed or sold in such country, including such governmental bodies that have jurisdiction over the pricing of such medical product.  The term "Regulatory Authority" includes, but is not limited to the FDA, the European Agency for the Evaluation of Medicinal Products (EMEA), European Member State Competent Authorities and the Ministry of Health, Labour and Welfare (MHLW).

1.43

“Regulatory Filing” shall mean all activities relating to the filing for and procurement of Regulatory Approval for the marketing and sale of a CoSeal Unit from the relevant Regulatory Authorities.

1.44

“Sealant Territory” shall mean all countries of the world except Japan, prior to Baxter's exercise of the CoSeal Sealant Option or AAC's grant to Baxter of the rights thereunder in accordance with Section 9.2(b).  Upon Baxter’s exercise of the CoSeal Sealant Option or AAC's grant to Baxter of rights to the CoSeal Sealant Unit in Japan, this term shall mean the world.

1.45

“Territory” shall mean, collectively, as the context requires, both or either of the Sealant Territory and/or the Adhesion Prevention Territory.

1.46

“Third Party” shall mean any person or entity other than AAC, Baxter or their respective Affiliates.

1.47

“Third Party Rights” shall have the meaning ascribed to it in Section 2.1(b).

Article 2
Grant of Rights

2.1

CoSeal Sealant Unit(s) Exclusive Distribution, Sales and Marketing Rights.  

(a)

License Grants.

Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in the Sealant Territory; and

(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in the Sealant Territory during the term of this Distribution and License Agreement.  Upon expiration or

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termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.1(a)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.1(a) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.1(a).  Upon any termination of this Distribution and License Agreement, AAC hereby agrees not to sue, seek an injunction or initiate other legal action against Baxter for the practice of AAC Know-How transferred under this Section 2.1(a) that is only incidental to the use, marketing, distribution, sale, export or import of products and devices for use as a tissue sealant, adhesive or glue by Baxter and its Affiliates.

(b)

Third Party Rights.  Notwithstanding the foregoing, the Parties acknowledge that the Third Parties set forth in Schedule 2.1(b) have certain distribution and other rights in the Field regarding the CoSeal Sealant Unit or the CoSeal Sealant Product in portions of the Sealant Territory and Japan as of the Effective Date, as described in Schedule 2.1(b) (“Third Party Rights”).  The parties acknowledge that these Third Party Rights do not include research use only rights and limited non-commercial rights granted to Third Parties pursuant to material transfer agreements or feasibility study agreements.  To the extent permitted under such Third Party Rights, and without breaching any agreements governing such Third Party Rights, AAC shall use its Commercially Reasonable Efforts to exercise its termination rights under such Third Party Rights; provided that such Third Party Rights shall be terminated no later than seven (7) months after the Effective Date.  Baxter recognizes and agrees that AAC may need to conduct a “winding down” process with respect to such terminated Third Party Rights, which may include (for instance) the right to sell inventory on hand and the like; provided, however, that such “winding down” process shall be completed not later than twelve (12) months after the Effective Date.  In the event that such Third Party Rights are terminated, AAC shall promptly transfer the corresponding rights to Baxter. The Parties shall determine procedures and activities to be undertaken by the Parties to ensure a transition of such CoSeal Sealant Unit distribution, sales and marketing rights to Baxter with minimal detrimental effect to the supply of CoSeal Sealant Unit(s) in the market place.  If such Third Party Rights cannot be terminated as set forth herein, then Baxter, at its option, may require AAC to assign all rights and bene fits under such Third Party Rights to Baxter; provided, however, that Baxter will not assume, and AAC will retain, all duties and obligations owing under such Third Party Rights.

(c)

CoSeal Sealant Option.  Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates an option (the “CoSeal Sealant Option") to obtain for Baxter and its Affiliates:

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in Japan; and

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(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in Japan.  Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.1(c)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.1(c) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (exce pt AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.1(c).  Upon any termination of this Distribution and License Agreement, AAC hereby agrees not to sue, seek an injunction or initiate other legal action against Baxter for the practice of AAC Know-How transferred under this Section 2.1(c) that is only incidental to the use, marketing, distribution, sale, export or import of products and devices for use as a tissue sealant, adhesive or glue by Baxter and its Affiliates.

This CoSeal Sealant Option must be exercised by Baxter in writing within [***] following the last to occur of: (A) Baxter's receipt of written notice from AAC of [***] for the [***], or (B) the completed transfer [***] of [***] for the [***] that has been [***]

In the event that Baxter exercises its CoSeal Sealant Option pursuant to this Section 2.1(c), and upon delivery of the Japan Payment set forth in Section 9.2(b), the rights set forth in Section 2.1(c)(i) and (ii) shall automatically transfer to Baxter without necessity of further action by the Parties.

2.2

CoSeal Adhesion Prevention Unit(s) Exclusive Distribution, Sales and Marketing Rights.

(a)

Adhesion Prevention Territory.  Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the Adhesion Prevention Territory; and

(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the Adhesion Prevention Territory during the term of this Distribution and License Agreement.  

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Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.2(a)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.2(a) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.2(a).  Upon any termination of this Distribution and License Agreement, AAC hereby agrees not to sue, seek an injunction or initiate other legal ac tion against Baxter for the practice of AAC Know-How transferred under this Section 2.2(a) that is only incidental to the use, marketing, distribution, sale, export or import of products and devices for use as an adhesion prevention barrier by Baxter and its Affiliates.

In the event that Baxter declines to exercise the CoSeal Adhesion Prevention Option set forth in Section 2.2(b) below, then Baxter’s rights granted under this Section 2.2(a) shall terminate upon the earlier of: (A) Baxter’s written notice to AAC that it declines to exercise its CoSeal Adhesion Prevention Option, or (B) upon expiration of the CoSeal Adhesion Prevention Option exercise period set forth in Section 2.2(b).  Notwithstanding such termination, Baxter shall have the right to wind-up and sell-off any inventory of CoSeal Adhesion Prevention Units in accordance with Section 14.8.

(b)

CoSeal Adhesion Prevention Option.  Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates an option (the “CoSeal Adhesion Prevention Option”) to obtain for Baxter and its Affiliates:

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the United States; and

(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the United States.  Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.2(b)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.2(b) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license t o all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.2(b).  Upon any termination of this Distribution and License Agreement, AAC hereby agrees not to sue, seek an injunction or initiate other legal action against Baxter for the practice of AAC Know-How transferred under this Section 2.2(b) that is only incidental to the use, marketing,

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distribution, sale, export or import of products and devices for use as an adhesion prevention barrier by Baxter and its Affiliates.

This CoSeal Adhesion Prevention Option must be exercised in writing within [***] after the date that Baxter receives from AAC, in accordance with Section [***]  At Baxter’s request during this [***] period, AAC shall provide to Baxter appropriate AAC research program data and results that are directly related to AAC’s Drug-Loaded Product program for adhesion prevention barrier indications and that are in AAC’s possession at the time of such request.  This [***] period may be extended by mutual written agreement of the Parties.  In any event, Baxter must exercise the CoSeal Adhesion Prevention Option no later than [***].  If Baxter declines to exercise the CoSeal Adhesion Prevention Option, or if the [***] period expires without Baxter’s notice of exercise, all rights granted to Baxter with respect to the CoSeal Adhesion Prevention Unit(s) in the A dhesion Prevention Territory shall immediately terminate and revert to AAC without necessity of notice.

In the event that Baxter exercises its CoSeal Adhesion Prevention Option pursuant to this Section 2.2(b), and upon delivery of the option exercise payment set forth in Section 9.2(a), the rights set forth in Section 2.2(b)(i) and (ii) shall automatically transfer to Baxter without necessity of further action by the Parties.

2.3

CoSeal Accessories Exclusive Rights.

Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(a)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Accessories in the Field in the Territory; and

(b)

a non-exclusive license, with right to sublicense accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import the CoSeal Accessory(ies) in the Field in the Territory.  Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.3(b) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.3 during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AA C Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.3.  Upon any termination of this Distribution and License Agreement, AAC hereby agrees not to sue, seek an injunction or initiate other legal action against Baxter for the practice of AAC

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Know-How transferred under this Section 2.3 that is only incidental to the use, marketing, distribution, sale, export or import of products and devices in the Field by Baxter and its Affiliates.

Within twenty (20) Business Days after the Effective Date, AAC shall deliver to Baxter CoSeal Accessories in its possession that are not needed by AAC for its internal programs.  AAC shall invoice Baxter for such CoSeal Accessories as follows:  (i) [***] for the Air Enhanced Spray Accessory 5X (AES 500) and the Air Regulator System (ARS-530); and (ii) [***] for the CoSeal Extended Applicators 22 cm (FXP-060) and the CoSeal Replacement Applicators (FXP-069).  Thereafter, upon Baxter’s written request, AAC shall supply Baxter with a CoSeal Accessory(ies) under the same financial terms set forth above for a period of [***] from the Effective Date or until [***], whichever occurs later.  The Parties agree that Baxter shall have no obligation to pay to AAC a percentage of Net Sales on any CoSeal Accessory(ies) transferred to Baxter in accordance with the foregoing transfer prices.  If Baxter manufactures or obtains from a Third Party manufacturer [***] then Baxter shall pay to AAC a percentage of Net Sales of such AAC Patented Accessory(ies) as set forth in Section 9.4, and such Net Sales shall count toward Baxter’s Minimum Sales obligations.

Notwithstanding the foregoing, in the event that Baxter’s rights to distribute either one (but not both) of the CoSeal Units are terminated for any reason under this Distribution and License Agreement, then Baxter’s rights with respect to CoSeal Accessories under this Section 2.3 shall become non-exclusive and AAC and its Affiliates may use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import the CoSeal Accessories.

2.4

Sublicense; Subdistribution, Agent, Co Promotion Agreements.

(a)

Subject to Section 2.4(b), Baxter and its Affiliates shall have the right to grant a sublicense under the rights granted to Baxter and its Affiliates hereunder, or to appoint a subdistributor, agent or co-promoter, in connection with the performance of Baxter’s CoSeal Unit(s) distribution, sales and marketing obligations under this Distribution and License Agreement, upon fulfillment of the following conditions: (i) that Baxter shall not enter into any sublicense, subdistributor, agency or co-promotion agreement relating to distribution in the majority (as a percentage of Net Sales) of any of the following markets: United States, Australia, Canada, United Kingdom, Germany, France, Italy or Spain (“Major Markets”) without AAC’s prior written approval (which shall not be unreasonably withheld or delayed); (ii) that Baxter shall provide a copy of such agreement as set forth i n condition (i) to AAC within ten (10) Business Days after execution; and (iii) that the execution and delivery by Baxter of any such agreement as set forth in condition (i) shall not in any way diminish, reduce or eliminate any of Baxter's obligations under this Distribution and License Agreement, and Baxter shall remain liable for such obligations.  Baxter shall obtain contractual undertakings from every such sublicensee, subdistributor, agent or co-promoter that will provide that the rights of such sublicensee, subdistributor, agent or co-promoter shall terminate upon termination of this Distribution and

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License Agreement.  Any sublicense granted by Baxter under this Section 2.4 with respect to AAC Know-How shall be limited solely to AAC Know-How that allows a subdistributor, agent or co-promoter to market, distribute or sell CoSeal Units and CoSeal Accessories, and shall expressly exclude any other AAC Know-How.

(b)

If Baxter intends to enter into a sublicense, subdistributor, agency or co-promotion agreement in any countries that are not included within Major Markets that would decrease the payments to AAC by Baxter under Section 9.4 by more than [***] as compared to the amount paid to AAC in the preceding calendar year, then (i) Baxter shall obtain AAC’s written consent prior to executing such agreement and (ii) Baxter shall provide to AAC a copy of such sublicense, subdistributor, agency or co-promotion agreement within ten (10) Business Days after execution.  Should Baxter, without AAC’s consent, enter into a sublicense, subdistributor, agency or co-promotion agreement in any country that is not included within Major Markets and that decreases the payments to AAC by Baxter under Section 9.4 by more than [***] as compared to the amount paid to AAC in the preceding calendar year, then AAC shall have the right to review such agreement and shall further have thirty (30) days from the date it receives such agreement to determine whether it desires to terminate this Distribution and License Agreement as to the country(ies) covered under the sublicense, subdistributor, agency or co-promotion agreement at issue; provided, however, that such termination shall become effective only if Baxter shall fail to remedy or cure its breach of this Section 2.4(b) to AAC’s satisfaction within a thirty (30) day period following written notice from AAC of termination under this Section 2.4(b).  Where Baxter enters into multiple sublicense, subdistributor, agency or co-promotion agreements in countries that are not included within Major Markets within any single twenty-four (24) month period that in the aggregate decrease payments to AAC by Baxter under Section 9.4 by more than [***] of the amount paid to AAC in the preceding calendar year, this Section 2.4(b) shall also apply.

2.5

Ownership of Intellectual Property; Retention of Certain Rights.

AAC retains all rights to all AAC Know-How, AAC Patents and AAC Trademarks, to the extent such rights are not explicitly granted to Baxter under Sections 2.1, 2.2 or 2.3, above.  The Parties acknowledge that AAC retains the right to make, have made, use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Ingredients, Product(s), CoSeal Device(s) CoSeal Accessory(ies) and CoSeal Unit(s) for all purposes other than those granted to Baxter hereunder, including (without limitation) the right to exploit the CoSeal Ingredients and the Product(s) as a component of Drug-Loaded Products.

2.6

Baxter’s Election To Cease Distribution.

(a)

Adhesion Prevention Unit.  Baxter may, at its option, provide no less than one hundred eighty (180) days written notice to AAC of its desire to cease distribution of the CoSeal Adhesion Prevention Unit(s) in the Adhesion Prevention Territory.  Upon the date set forth in such notice by Baxter, all of Baxter’s rights under Section 2.2 shall terminate, subject only to Baxter’s inventory sell off rights as set forth in Section 14.8.  In the event of the exercise by Baxter of the preceding election not to distribute the CoSeal Adhesion Prevention Unit, Baxter’s rights

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relative to distribution of the CoSeal Sealant Unit(s) shall remain in full force and effect in accordance with the terms hereof.

(b)

CoSeal Sealant Unit.  If Baxter elects to cease distribution of the CoSeal Sealant Unit (by providing no less than one hundred eighty (180) days written notice to AAC), then upon the date set forth in such notice by Baxter, this Distribution and License Agreement shall terminate, subject to Baxter’s inventory sell off rights set forth in Section 14.8.

2.7

Excluded Rights.

There are no rights granted to Baxter to (by way of example, but not limitation): (a) sell or otherwise exploit a Product only or a CoSeal Device only (for instance, Baxter may not sell a Product or CoSeal Device that is not also a component of a CoSeal Unit); (b) research, develop, test, sell or otherwise exploit within one delivery device either Tisseel^® + Product,  FloSeal^® + Product, drug + Product; or any product sold or Controlled by Baxter + Product; or (c) sell or otherwise exploit any product containing the CoSeal Ingredients that is not a CoSeal Unit, or an Improvement to a CoSeal Unit, or a CoSeal Accessory.

Article 3
Role of Program Directors

3.1

Communications and Decision-Making Process.

(a)

Objectives.  The Program Directors (as defined below) shall: (i) assist in monitoring clinical/ regulatory activities in the Territory relating to the CoSeal Unit(s); (ii) if applicable, assist in coordinating the relationship between Baxter and Third Parties, where one or more Third Parties manufacture Product(s), CoSeal Device(s), CoSeal Accessory(ies) or CoSeal Unit(s) for Baxter; (iii) act as the primary liaisons in coordinating the activities of AAC and Baxter under this Distribution and License Agreement and the Manufacturing Agreement; (iv) if required, coordinate the transition of customers to Baxter after AAC’s termination of its Third Party Rights; (v) manage the proper amount of CoSeal Sealant Unit and CoSeal Accessory inventory prepared by AAC for Baxter as part of the transfer of manufacturing technology under the Manufacturing Agreement; (vi) following the Secon d Commercialization Date (as defined in the Manufacturing Agreement), shall assume responsibility for ensuring that all of the CoSeal Sealant Unit inventory prepared by AAC for Baxter in accordance with the plan to manage inventory (referenced in this Section 3.1(a)(v), above) is transferred to Baxter in accordance with prior transfers of inventory under the Manufacturing Agreement, and for ensuring that AAC receives the Net Sales sharing payment set forth in Section 9.4(a) for any CoSeal Sealant Unit and CoSeal Accessory inventory manufactured at or for Cohesion; (vii) recommend allocation of the Parties’ responsibilities associated with the activities set forth in this Section 3.1(a)(i) and (a)(ii); and (viii) identify, recommend and approve future indications for the CoSeal Units pursuant to Section 3.3.

(b)

Program Directors.  Within thirty (30) days after the Effective Date, AAC and Baxter shall each designate a Program Director.  AAC and Baxter each retain the right to change its Program Director from time to time, upon written notice to the other Party, or to appoint one or more substitutes to serve in the place of an absent Program Director(s).  The Program Directors may select other employees, consultants or Third Parties that agree to be bound by the

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terms of this Distribution and License Agreement to form one or more teams in order to fulfill the objectives of the Parties under this Distribution and License Agreement.

(c)

Communications.  The Program Directors shall communicate regularly, and with respect to the Products, CoSeal Units and/or CoSeal Accessories, as applicable, shall report to each other their respective Party’s progress with respect to its clinical/regulatory activities (including, without limitation, clinical timelines; the status of patient enrollment; any documents, minutes, and reports relating to communications between the reporting Party and the Regulatory Authorities; as well as other relevant clinical activities conducted by the reporting Party and any pertinent issues being dealt with by the reporting Party).  For each Party, annual written reports with respect to the Products, CoSeal Units and/or CoSeal Accessories, as applicable, shall include: (i) progress and results of that Party since the previous year; (ii) critical issues or problems encountered or anticip ated by that Party; and (iii) a statement of that Party’s goals for the scheduled activities.  

(d)

Decision-Making Process.  The Program Directors shall mutually agree upon decisions to be made under this Article 3.  In the event that the Program Directors are unable to reach consensus on a particular issue, then the matter shall be handled as further set forth in Sections 16.2 and 16.3 hereof.

3.2

Commercialization Plan.

Baxter will prepare a plan for the commercialization (“Commercialization Plan”) of the CoSeal Sealant Unit within six (6) months after the Effective Date, and the Program Directors shall review and, if acceptable, approve such CoSeal Sealant Unit Commercialization Plan.  If Baxter exercises the CoSeal Adhesion Prevention Option, a corresponding draft Commercialization Plan for the CoSeal Adhesion Prevention Unit shall be prepared by Baxter within six (6) months after the date that Baxter exercises the CoSeal Adhesion Prevention Option.  Within three (3) months after the date that Baxter receives notice from AAC of FDA approval of the CoSeal Adhesion Prevention Unit, Baxter shall prepare a final CoSeal Adhesion Prevention Unit Commercialization Plan, and the Program Directors shall review and, if acceptable, approve such CoSeal Adhesion Prevention Unit Commerci alization Plan.

3.3

Future Indications for CoSeal Unit(s).

Where a Party conceives of a future indication for a CoSeal Unit (excluding the [***] and [***] indications for the CoSeal Sealant Unit and the [***] indication for the CoSeal Adhesion Prevention Unit), it shall present such indication to the Program Directors for a recommendation as to whether such future indication should be developed.  Should the Program Directors recommend that such future indication be developed, then such recommendation must be approved by Baxter, who shall have the right to prioritize and execute clinical trials in accordance with its internal research and development guidelines.  Baxter shall bear sole responsibility (as set forth in Sections 6.1(b) and (d)), including financial responsibility (as set forth in Section 6.1(f)(ii)), for all clinical trials and Regulatory Filings relating to all future indications (excluding only the [***] and [***] indications for the CoSeal Sealant Unit and the [***] indication for the CoSeal Adhesion Prevention Unit, except as otherwise set forth in Sections 9.2 and 9.3).  Net Sales sharing for such future indications shall be in accordance with the provisions set forth in Section 9.4(a).

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Article 4
Employees

4.1

Hiring of Employees.

Baxter shall have the right, but not the obligation, to hire such Cohesion employees, including but not limited to sales and marketing employees, as are needed to facilitate the transfer of CoSeal Unit marketing knowledge and expertise to Baxter.  Any such hiring decisions, and the terms thereof, shall be solely at Baxter’s discretion.  AAC shall assist Baxter in making its hire/no hire decision regarding employees by providing Baxter with a list of key employees that have been designated by AAC as available for hiring by Baxter, including information regarding job titles, job descriptions, salary and benefit information, as well as access to such individuals for interviews and direct evaluations by Baxter.  Notwithstanding the foregoing, Baxter expressly agrees not to solicit for employment any AAC employees, other than those identified on such list of key employees, without AAC’s prior written consent; provided however, that nothing herein shall prohibit Baxter from hiring any AAC employees who respond to industry-wide or general employment solicitations, advertised employment opportunities, or other available employment opportunities at Baxter.

Article 5
Distribution Rights and Minimum Sales

5.1

Appointment.

Subject to the terms and conditions contained in this Distribution and License Agreement, AAC appoints Baxter and its Affiliates as its exclusive worldwide marketing, sales and distribution entity for the CoSeal Sealant Unit in the Sealant Territory, for the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory, and the related CoSeal Accessories in the Territory, and Baxter, on behalf of itself and its Affiliates, hereby accepts such appointment.  Subject to the terms and conditions contained in this Distribution and License Agreement, AAC shall not (itself or through or in connection with any of its Affiliates or any Third Party) market, sell or distribute CoSeal Units (or CoSeal Accessories in the Field) in any part of the Territory, so long as Baxter retains the exclusive distribution rights under any license granted to Baxter for that part of the Territory.

5.2

Minimum Sales.

Baxter shall meet the annual minimum sales commitments applicable to Baxter’s Net Sales for each CoSeal Unit, including AAC Patented Accessory(ies) (“Minimum Sales”).

(a)

CoSeal Sealant Unit.  Baxter shall meet the Minimum Sales for the CoSeal Sealant Unit, including AAC Patented Accessory(ies) (“CoSeal Sealant Unit Minimum Sales”), as set forth in Schedule 5.2(a).

(b)

CoSeal Adhesion Prevention Unit.  If Baxter exercises its CoSeal Adhesion Prevention Option, AAC and Baxter will establish a separate schedule of Minimum Sales for the CoSeal Adhesion Prevention Unit, including AAC Patented Accessory(ies) (“CoSeal Adhesion Prevention Unit Minimum Sales”), within [***] after receipt of written notice from AAC of [***].  When such CoSeal Adhesion Prevention Unit Minimum Sales have been agreed upon by the Parties in

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writing, this Distribution and License Agreement shall be amended to include such schedule of CoSeal Adhesion Prevention Unit Minimum Sales, and such schedule shall be attached hereto as Schedule 5.2(b).

5.3

Monetary Payment to Cure Deficiency in Minimum Sales.

In the event that Baxter fails to meet the Minimum Sales for a given CoSeal Unit in any calendar year, then within sixty (60) days after the end of such calendar year (and in Baxter’s sole discretion), Baxter may pay to Cohesion or its designee the appropriate percentage of Net Sales (as set forth in Section 9.4) that would have been paid to Cohesion or its designee on a Net Sales amount that equals the difference between (a) the Net Sales amount that Baxter received from [***] by Baxter; and (b) the Net Sales amount that Baxter [***], as applicable, in that calendar year. For example only, and not intended for definition, if in a given calendar year Baxter pays to Cohesion a percentage of Net Sales based on a [***] basis (as set forth in Section 9.4(c)), and if Baxter [***] Minimum Sales applicable to a CoSeal Unit in that calendar year, then Baxter may elect to pay [***] to Cohesion or its des ignee, as provided in this Section 5.3, and thereby fulfill its Minimum Sales obligations for that CoSeal Unit in that calendar year.

5.4

Adjustment of Minimum Sales Amounts.

(a)

Event Giving Rise To Adjustment.  If Baxter fails to meet Minimum Sales for a given CoSeal Unit(s) in a calendar year: (i) due to an event of Force Majeure (as defined in Section 16.5); (ii) in the event that an injunction issues against any Party or any of its respective Affiliates that prevents any Party or any of its respective Affiliates from manufacturing the Product(s), CoSeal Device(s) or the CoSeal Unit(s); (iii) in the event that an injunction issues against any Party or any of its respective Affiliates that prevents any Party or any of its respective Affiliates from selling, marketing, or distributing the CoSeal Unit(s); (iv) in the event that AAC fails to supply CoSeal Unit(s) in amounts equal to the forecast (as set forth in the Manufacturing Agreement); or (v) in the event that AAC has manufactured a defective CoSeal Unit(s), or that the CoSeal Unit(s) has been recall ed, then to the extent that such event was the primary cause of Baxter’s failure to meet one or more Minimum Sales for that calendar year, then the affected Minimum Sales commitment shall be appropriately reduced, as determined by the Parties  (“Adjusted Minimum Sales”), and Baxter shall be required only to meet the Adjusted Minimum Sales for so long as the event giving rise to the adjustment of Minimum Sales under this Section 5.4(a) continues to preclude Baxter from meeting the unadjusted Minimum Sales commitment.

(b)

Process for Adjustment of Minimums.  Within thirty (30) days of the fourth (4^th) anniversary of the Effective Date, the Program Directors shall meet to determine whether market or other conditions require that the CoSeal Sealant Unit Minimum Sales commitment(s) be increased or decreased for the remainder of the term of this Distribution and License Agreement.  If an adjustment to the CoSeal Sealant Unit Minimum Sales is necessary, but the Program Directors are unable to agree on an appropriate adjustment, the matter will be resolved in accordance with the procedures set forth in Section 16.2; provided, however, that if the Heads are unable to agree,

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the matter will not be submitted to arbitration in accordance with Section 16.3, but instead the matter will be submitted to a consulting firm with expertise in the field of market research (“Consulting Firm”) for a determination of such adjustment.  The Consulting Firm shall be selected by mutual agreement of the Parties.  In making its determination as to whether the CoSeal Sealant Unit Minimum Sales commitment(s) should be adjusted, the Consulting Firm shall take into account general market conditions, including but not limited to the following: (i) reimbursement factors and changes to the reimbursement environment; (ii) the competitive landscape of the CoSeal Sealant Unit(s), including pricing of competitive products and the presence of any new competitors in the marketplace; (iii) customer adoption rates with respect to the CoSeal Sealant Unit(s); (iv) level of growth of relevant proced ures where the CoSeal Sealant Unit may be used; and (v) the effect of new technologies on the market for the CoSeal Sealant Unit(s).  Following its evaluation, the Consulting Firm shall provide written notification to the Parties of its findings and determination regarding the adjustment, if any, to the CoSeal Sealant Unit Minimum Sales commitment(s).  The Parties shall then have thirty (30) days to review the results and offer any additional, relevant information to the Consulting Firm.  The Consulting Firm shall then issue a final written report by which the Parties hereby agree to be bound.  The mechanism set forth in this Section 5.4(b) shall be the sole and exclusive remedy of the Parties relating to any dispute arising out of this process for adjustment of CoSeal Sealant Unit Minimum Sales commitment(s).  The costs of the evaluation and determination attributable to the Consulting Firm’s activities under this Section 5.4(b) shall be shared equally by the Parties.

5.5

AAC’s Right to Terminate Baxter’s Distribution Rights For Failure To Cure Deficiency In Minimum Sales.

(a)

In the event that Baxter fails to meet the Minimum Sales for a given CoSeal Unit(s) in a given calendar year, and Baxter fails to cure such deficiency in accordance with Section 5.3, then pursuant to the following procedure, AAC has the right, but not the obligation, to terminate Baxter’s marketing, sales, and distribution rights with respect to that given CoSeal Unit in accordance with the provisions set forth in this Section 5.5.  Within sixty (60) days after the end of the calendar year in which Baxter fails to meet such Minimum Sales for that given CoSeal Unit, Baxter shall provide to AAC a written memorandum outlining the reasons for that CoSeal Unit sales shortfall.  Within fifteen (15) days after receipt of such memorandum, the Parties shall meet to discuss the contents of the memorandum.  After such meeting, AAC shall have an additional sixty (60) days within which to reasonably consider Baxter’s reasons for the sales shortfall.  Should AAC decide to terminate (or not terminate) Baxter’s marketing, sales and distribution rights with respect to that given CoSeal Unit, it must provide Baxter with written notice of such decision to terminate (or not terminate) within such additional sixty (60) day period.  Should AAC fail to notify Baxter within such additional sixty (60) day period, AAC’s right to terminate Baxter’s marketing, sales and distribution rights with respect to that given CoSeal Unit by reason of Baxter’s sales shortfall for the prior calendar year shall be deemed waived, but only with respect to that prior calendar year.  If AAC elects not to terminate Baxter’s marketing, sales, and distribution rights with respect to that given CoSeal Unit(s) (or if AAC fails to notify Baxter of its termination of such rights within such additional sixty (60) day period), the Parties shall meet within thirty (30) days after AAC&# 146;s notice to Baxter of such election not to terminate (or after expiration of such

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additional sixty (60) day period) and determine the extent (if any) to which future Minimum Sales commitment(s) should be reduced.

(b)

If Baxter fails to meet CoSeal Adhesion Prevention Unit Minimum Sales in a given calendar year, then, in accordance with the procedures set forth in Section 5.5(a), AAC may terminate Baxter’s marketing, sales, and distribution rights with respect to such CoSeal Adhesion Prevention Unit, but may not terminate Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit or this Distribution and License Agreement (assuming that Baxter met Minimum Sales for the CoSeal Sealant Unit for that same calendar year).  However, if Baxter fails to meet CoSeal Sealant Unit Minimum Sales in a given calendar year, and AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit in accordance with the procedures set forth in Section 5.5(a), it shall also have the right, at its option, to terminate this Distribution and License Agreement by providing notice of such termination within the additional sixty (60) day period set forth in Section 5.5(a).

(c)

Notwithstanding anything to the contrary contained herein, AAC shall have no right to terminate Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit in calendar years 2003 or 2004 for failure to meet CoSeal Sealant Unit Minimum Sales.  

(d)

The remedies set forth in this Section 5.5(b) shall be AAC’s sole remedies for Baxter’s failure to meet its Minimum Sales obligation, and such failure shall not constitute a separately actionable breach of this Distribution and License Agreement.

5.6

Payments to Baxter if AAC Distributes the CoSeal Sealant Unit After Terminating Baxter’s Rights Under Section 5.5

(a)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and such termination occurs in the year 2005, AAC may elect to distribute (itself or through or in connection with an Affiliate or Third Party) or not to distribute that CoSeal Sealant Unit.

(i)

If AAC elects not to distribute such CoSeal Sealant Unit, AAC is not obligated to pay Baxter any amount under this Section 5.6(a).

(ii)

If AAC elects to distribute (itself or through or in connection with an Affiliate or Third Party) such CoSeal Sealant Unit, AAC shall pay to Baxter, at Baxter’s election, either (A) [***] of all upfront payments and milestones paid or payable to AAC in cash by its Third Party distributor of that CoSeal Sealant Unit during the first year of AAC’s agreement with such Third Party distributor (the “2005 Milestone”); or (B) [***]

(b)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and such termination occurs in the

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year 2006, AAC may elect to distribute (itself or through or in connection with an Affiliate or Third Party) or not to distribute that CoSeal Sealant Unit.

(i)

If AAC elects not to distribute such CoSeal Sealant Unit, AAC is not obligated to pay Baxter any amount under this Section 5.6(b).

(ii)

If AAC elects to distribute (itself or through or in connection with an Affiliate or Third Party) such CoSeal Sealant Unit, AAC shall pay to Baxter, at Baxter’s election, either (A) [***] of all upfront payments and milestones paid or payable to AAC in cash by its Third Party distributor of that CoSeal Sealant Unit during the first year of AAC’s agreement with such Third Party distributor (the “2006 Milestone”); or (B) [***]

(c)

Notwithstanding the foregoing, if Baxter has paid to Cohesion or its designee the CoSeal Sealant Unit [***] Milestone payment set forth in Section 9.3, and if Baxter has not had an opportunity period equal to six (6) months or longer in the calendar year for which Baxter was terminated under Section 5.5 to achieve sales attributable to the CoSeal Sealant Unit for the [***] indication, then the payments to Baxter (set forth above) for a termination by AAC in year 2005 or in year 2006 shall be [***]

(d)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and AAC elects to distribute such CoSeal Sealant Unit using a Third Party distributor, then AAC shall provide to Baxter a reasonable disclosure of information about the first year's cash payment terms of such Third Party distributor agreement to enable Baxter to decide whether to request (i) a percentage of such cash payments made by such Third Party distributor to AAC, or (ii) a fixed cash payment, as set forth in this Section 5.6(a-c).  Within fifteen (15) Business Days after AAC notifies Baxter in writing that it has executed such Third Party distributor agreement (which notification includes the reasonable disclosure of cash payment terms referenced above in this Section 5.6(d)), Baxter must decide whether to request (i’) a percentage of t he first year's cash payments made by such Third Party distributor to AAC, or (ii’) a fixed cash payment.  Within fifteen (15) Business Days after receipt of written notice from Baxter of its election under this Section 5.6(d), AAC shall make the appropriate payment to Baxter.

(e)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and AAC elects to distribute such CoSeal Sealant Unit itself, within fifteen (15) days after AAC publicly announces that it will distribute such CoSeal Sealant Unit itself or within fifteen (15) days after AAC’s first sale of such CoSeal Sealant Unit (whichever date is earlier), AAC shall pay to Baxter the appropriate fixed cash payment set forth in this Section 5.6(a-c).

(f)

Notwithstanding the foregoing, AAC shall not be obligated to make a payment to Baxter if more than two (2) years have passed between the date of termination of Baxter’s CoSeal Sealant Unit distribution rights and the date that AAC elects to distribute (itself or

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through a Third Party) such CoSeal Sealant Unit.  By way of example only, if AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a) in year 2006, but does not distribute such CoSeal Sealant Unit itself and does not enter into a Third Party distribution agreement concerning such CoSeal Sealant Unit until 2010, then AAC shall not be obligated to make any payment to Baxter under this Section 5.6.

Article 6
Clinical and Regulatory Rights and Obligations

6.1

Regulatory Approvals.

Baxter shall use its Commercially Reasonable Efforts to conduct the activities set forth in each Commercialization Plan (described in Section 3.2), including all Post-Licensure Marketing Studies of the CoSeal Sealant Unit in the Sealant Territory, and of the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory.

(a)

[***] Indications for CoSeal Sealant Unit.  Baxter shall cooperate in AAC’s efforts to obtain Regulatory Approval for [***] indications for the CoSeal Sealant Unit in the Sealant Territory.  Prior to conducting any clinical studies, AAC shall obtain Baxter’s prior written approval of its clinical trial plan and clinical trial protocol pertaining to the clinical trial for the [***] indications.  If any clinical trial plan, clinical trial protocol or subsequent clinical trial, which has been approved by Baxter, does not achieve the anticipated clinical outcome, Baxter shall have no recourse against AAC for such failure to achieve a clinically significant result.  AAC shall prepare and draft regulatory documents and submit such documents, along with a written statement confirming the truth and accuracy of such documents, to Baxter for filing with the FDA. &nb sp;In the event that the Parties do not agree upon any aspect of the regulatory documents, except where a change would nullify such written statement confirming the truth and accuracy of such documents, the final decision with respect to such aspect shall be made by Baxter.  However, nothing in this Section 6.1(a) shall be interpreted to require payment by Baxter of the Milestone payment set forth in Section 9.3 prior to or in the absence of FDA approval for the [***] indication.  

(b)

Future Indications for CoSeal Sealant Unit.  AAC shall cooperate in Baxter’s efforts to obtain Regulatory Approval for all other appropriate future indications for the CoSeal Sealant Unit in the Sealant Territory.  Baxter shall prepare and approve all clinical plans and clinical protocols and shall conduct all clinical trials.  Baxter shall be responsible for preparing and filing all regulatory documents.

(c)

[***] Indications for CoSeal Adhesion Prevention Unit.  Baxter shall cooperate in AAC’s efforts to obtain Regulatory Approval for [***] indications for the CoSeal Adhesion Prevention Unit.  If any clinical trial plan, clinical trial protocol or subsequent clinical trial does not achieve the anticipated clinical outcome, Baxter shall have no recourse against AAC for such failure to achieve a clinically significant result.  Prior to filing the Pre-Market Approval Application with the FDA, the Program Directors of AAC and Baxter shall decide whether to file a new Pre-Market Approval Application or a supplement to the existing Pre-Market Approval Application.  After such decision, AAC shall prepare and draft regulatory documents and submit such documents, along with a written statement confirming the truth and

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accuracy of such documents, to Baxter for filing with the FDA.  In the event that the Parties do not agree upon any aspect of the regulatory documents, except where a change would nullify such written statement confirming the truth and accuracy of such documents, the final decision with respect to such aspect shall be made by Baxter.  However, nothing in this Section 6.1(c) shall be interpreted [***].

(d)

Future Indications for CoSeal Adhesion Prevention Unit.  AAC shall cooperate in Baxter’s efforts to obtain Regulatory Approval for all other appropriate future indications for the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory.  Baxter shall prepare and approve all clinical plans and clinical protocols and shall conduct all clinical trials.  Baxter shall be responsible for preparing and filing all regulatory documents.

(e)

Meeting Attendance.  Upon the request of Baxter and with AAC's prior agreement, such agreement not to be unreasonably withheld, and to the extent permitted by law, Baxter may elect to attend meetings between AAC and the applicable Regulatory Authorities concerning the [***] indication for the CoSeal Sealant Unit and the [***] indication for the CoSeal Adhesion Prevention Unit in a given country within the Territory.

(f)

Financial Responsibility.  

(i)  [***], [***] and [***] Indications.  AAC shall bear sole financial responsibility, including Regulatory Filing fees, and subject to Sections 6.1(a) and (c), shall be responsible for all development, clinical and regulatory activities relevant to the [***] indication for the CoSeal Sealant Unit, [***] indication for the CoSeal Adhesion Prevention Unit and [***] indications for the CoSeal Sealant Unit (whether related to the formulation marketed as of the Effective Date or “pre-mix” formulation of the CoSeal Sealant Product).  AAC shall be responsible for preparation of regulatory documents and any supplemental studies necessary to achieve Regulatory Approval for the [***], [***] and [***] indications in the Territory.  (Baxter’s only financial obligation regarding such approvals shall be the Milestone payment set forth in Section 9.3, and in the e vent Baxter exercises its CoSeal Adhesion Prevention Option, the option payment set forth in Section 9.2(a)).

(ii)  Future Indications.  Baxter shall bear sole financial responsibility, including Regulatory Filing fees, for obtaining Regulatory Approval for all future indications for each CoSeal Unit, except as set forth in subsection 6.1(f)(i) above, and shall be responsible for all development, clinical and regulatory activities relevant to these future indications, and for the preparation of regulatory documents and any supplemental studies necessary to achieve Regulatory Approvals for such future indications in the Territory.

(g)

Post-Licensure Marketing Studies and Regulatory Approvals.  Baxter will be solely responsible for all Post-Licensure Marketing Studies of CoSeal Units in the Territory.  Additionally, subject to Section 5.2(a) of the Manufacturing Agreement, Baxter shall own and control, and shall be responsible for maintaining, all Regulatory Approvals related to the CoSeal Units and CoSeal Accessories in the Territory.

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6.2

Clinical and Regulatory Information.

(a)

General.  AAC shall own all data, information and other documentation that AAC (or its Affiliates) generates or derives in the course of its performance under this Distribution and License Agreement.  Baxter shall own all data, information and other documentation that Baxter (or its Affiliates) generates or derives in the course of its performance under this Distribution and License Agreement.  Each Party will be entitled to (i) receive, keep and use for regulatory purposes all trial protocols, registration applications, and other substantive regulatory documents including, but not limited to, all toxicological and clinical data that have been validated in accordance with standard operating procedures of each Party for quality assurance and quality control, and (ii) access and reference all regulatory dossiers and filings produced by the other Party and its Affiliates pe rtaining to the CoSeal Accessory(ies) (if applicable) and the CoSeal Units.  All of the foregoing regulatory documents shall be forwarded to the requesting Party by the disclosing Party within no less than thirty (30) days after such written request by the requesting Party.  Such documents and information to be provided by AAC and Baxter shall be limited to those documents produced for the purpose of Regulatory Approval of CoSeal Accessory(ies) (if applicable) or CoSeal Units, as required by applicable regulatory requirements.  All summary clinical trial reports, Adverse Event reports and other safety data and information (as set forth in Section 6.3) shall be provided in English, and other documents requested by either Party, such as protocols and summary study reports, shall be provided to the requesting Party in the most recent form available at the time of the requesting Party’s request.  Each Party shall comply in all material respects with the requirements of the applicable Reg ulatory Authority that relate to each CoSeal Accessory(ies) (if applicable) and CoSeal Unit.

(b)

Disclosure of AAC Communications.  Within thirty (30) days after the Effective Date, and thereafter on an ongoing basis as is reasonably necessary to enable Baxter to exercise its rights and fulfill its obligations under this Distribution and License Agreement, AAC shall inform Baxter of AAC’s communications with all Regulatory Authorities pertaining to the CoSeal Accessory(ies) (if applicable) and the CoSeal Units (including, without limitation, providing Baxter with copies of documents, minutes, and reports constituting communications between AAC and the Regulatory Authority).

With respect to a copy of the complete original Pre-Market Approval Application documentation filed with the FDA that pertains to the CoSeal Adhesion Prevention Unit, AAC shall provide a copy of such complete original documentation within ten (10) days after submission of such documentation to the FDA.  Thereafter, to enable Baxter to determine whether it desires to exercise the CoSeal Adhesion Prevention Option, AAC shall make available to Baxter such personnel as are qualified to answer Baxter’s questions relating to the Pre-Market Approval Application, and shall provide such other documentation as Baxter may reasonably request.

(c)

Right to Reference.  AAC retains the right to reference any Regulatory Filing under this Distribution and License Agreement.

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6.3

Complaints and Adverse Events.

The Party responsible for all permits and licenses required by any Regulatory Authority with respect to a given CoSeal Accessory(ies) (if Regulatory Authority permits or licenses are applicable) or a given CoSeal Unit(s) under this Distribution and License Agreement, including any product licenses, applications and amendments in connection therewith, shall be responsible for evaluating and investigating complaints and for reporting all Adverse Events to Regulatory Authorities in the applicable Territory.  If the responsible Party becomes aware of any Adverse Events, it shall evaluate, investigate and determine the necessity of reporting all information in its possession regarding such Adverse Event as soon as practicable, in order to fulfill regulatory reporting obligations within the time frames required by Regulatory Authorities and law; provided, however, that AAC shall not be required to communicat e with customers of Baxter.  The Parties will comply with all applicable reporting laws, rules and regulations governing Adverse Events.  Baxter and AAC agree to supply all complaint information including, Adverse Event information, to the responsible Party within five (5) Business Days of learning of a complaint or Adverse Event; to cooperate with investigations and corrective actions; and to comply with all applicable reporting laws, rules and regulations governing Adverse Events.

6.4

Compliance.

The obligations of AAC and Baxter set forth in this Article 6 are intended to comply with the laws, rules and regulations of each country in the Territory in which the CoSeal Units or CoSeal Accessory(ies) are distributed or sold.  The requirements of this Article 6 shall therefore be construed and interpreted to comply with all such laws, rules and regulations.  To the extent provisions of this Article 6 do not adequately reflect any such law, rule or regulation, such provisions shall be revised to the extent reasonably necessary to make such provisions legal and valid in accordance with such laws, rules and regulations.

6.5

CoSeal Sealant Unit Regulatory Approval in Japan.

(a)

Communications.  Until Baxter's right to exercise the CoSeal Sealant Option expires or is exercised, Baxter shall cooperate in AAC's efforts to obtain Regulatory Approval in Japan for the CoSeal Sealant Unit Regulatory Filing and to successfully transfer the Shonin (Japanese regulatory license and Regulatory Filing) for the CoSeal Sealant Unit to Baxter, or to a Third Party caretaker chosen by Baxter after input from and consultation with AAC. The Parties agree that AAC or its delegatee shall be responsible for interacting with the Ministry of Health, Labour and Welfare (MHLW). Baxter shall (i) translate for AAC inquiries received from MHLW, (ii) work with AAC and/or its delegatee to gather and provide to MHLW responses (including data) to such inquiries, and (iii) translate such responses and data into Japanese.

(b)

Financial Responsibility.  Baxter shall bear sole financial responsibility for all costs and expenses associated with its obligations set forth in Section 6.5(a) above.  AAC shall bear sole financial responsibility for costs of [***] for any payments owing to [***], and for any outstanding regulatory filing fees in Japan related to obtaining the Shonin for the CoSeal Sealant Unit.  If any unanticipated costs and expenses arise, sharing of such costs and expenses will be negotiated in good faith between the Parties.

(c)

Transfer of Regulatory Filing if Baxter Does Not Obtain Rights to the CoSeal Sealant Unit in Japan.  In the event Baxter elects not to exercise the CoSeal Sealant Option,

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and AAC elects not to grant to Baxter the rights pertaining to the CoSeal Sealant Unit in Japan (with a demand for the Japan Payment) pursuant to Section 9.2(b), Baxter shall transfer to AAC, or to a caretaker of AAC’s choice, all CoSeal Sealant Unit Regulatory Filing documentation and the Shonin in Japan.  In the event that Baxter fails to make the Japan Payment set forth in Section 9.2(b) (either in conjunction with Baxter’s exercise of the CoSeal Sealant Option or in conjunction with AAC’s demand for the Japan Payment), then AAC: (i) may require Baxter to transfer to AAC, or to a caretaker of AAC’s choice, all CoSeal Sealant Unit Regulatory Filing documentation and the Shonin in Japan; or (ii) may terminate this Distribution and License Agreement pursuant to Section 14.3.

Article 7
Steering Committee

7.1

Members.  

Within thirty (30) days after the Effective Date, AAC and Baxter shall form a steering committee (“Steering Committee”) that shall consist of up to three (3) representatives from each Party, one of which shall be each Party's Program Director, for a total of up to six (6) Steering Committee members.  AAC and Baxter shall each retain the right to change its representative(s) to the Steering Committee and its Program Director from time to time, upon written notice to the other Party, or to appoint one or more substitutes to serve in the place of an absent member(s).  The Program Directors shall serve as co-chairs of the Steering Committee (each a “Co-Chair”).  The Steering Committee representatives of AAC and Baxter may be employees, consultants or other Third Parties that agree to be bound by the terms of confidentiality and other pertinent provisions of this Distribution a nd License Agreement, as set forth herein.  Each Steering Committee member, including the Program Directors, shall have expertise in a relevant discipline, such as business development, research and development, clinical and/or regulatory affairs, or marketing.

7.2

Meetings.  

The Steering Committee shall meet regularly (but in no event less than semi-annually) at such times and at such locations as shall be mutually agreed by the Co-Chairs.  At least ten (10) Business Days prior to each regularly scheduled meeting of the Steering Committee, each Party shall provide a written report to the Steering Committee concerning its progress with respect to its respective research and development activities, timelines, and action plans relating to Improvements (if applicable), and including any issues arising from such research and development that are being dealt with by the reporting Party.  The written reports shall include: (i) progress and results of that Party since the previous meeting (if applicable); (ii) critical issues or problems encountered or anticipated by that Party; and (iii) a statement of that Party’s goals for the scheduled activities.  The Co-Chairs shall alternate responsibility for providing minutes of each meeting to each Steering Committee member within two (2) weeks after each meeting.

7.3

Participation by Non-Members.  

At the invitation of either AAC or Baxter, employees, consultants and other Third Parties that agree in writing to be bound by the terms of confidentiality and other pertinent provisions of this Distribution and License Agreement, as set forth herein, may participate in Steering Committee meetings at the sole expense of the inviting Party, but such employees, consultants and other Third Parties shall not have a vote in any Steering Committee decisions.

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7.4

Notice of Meetings.  

No action may be taken by the Steering Committee unless each member receives at least three (3) Business Days prior written notice, or waives such notice in writing, or unless unanimous written consent to such action is obtained from the Steering Committee authorizing such action in advance.  Steering Committee meetings may be recessed as necessary to permit members to seek any required approvals prior to voting on any matter before the Steering Committee.  In the event that an urgent matter requires a decision by the Steering Committee, and so long as both AAC and Baxter are each represented by at least two members in the discussion, including at least one Program Director, the Steering Committee members may discuss such matter and work to reach consensus without convening a Steering Committee meeting (provided, however, that if a consensus decision cannot be reached, the final decision will be r eached in accordance with the procedures set forth in Section 7.5).

7.5

Decision-Making Process.  

All decisions of the Steering Committee shall be made by a consensus of the Steering Committee members.  However, in the event that the members of the Steering Committee are unable to reach consensus on a particular issue, then the Co-Chairs shall attempt to decide such issue.  If the Co-Chairs are unable to reach consensus, then the matter shall be referred to the Heads and resolved in accordance with Section 7.7, with respect to whether a Proposal shall be deemed an Improvement, or in accordance with 16.2, with respect to all other matters before the Steering Committee.

7.6

Process for Identifying Improvements.  

During the term of this Distribution and License Agreement, Baxter and AAC must approach the Steering Committee if either Party desires to develop a proposed Improvement arising from research and development efforts of that Party (or from such efforts performed on its behalf).  Additionally, the Steering Committee shall from time to time review the existing CoSeal Units (including CoSeal Devices and CoSeal Accessories) to determine whether and to what extent any Improvements may be desired or required (any such contemplated Improvement based on Steering Committee review and Improvement proposed by AAC or Baxter shall be referred to as a “Proposal”).  The Steering Committee shall consider the value of all Proposals (including, without limitation, an evaluation of market analysis, financial projections, costs, resources, responsibilities of Baxter and AAC, and timelines).  After due c onsideration, the Steering Committee shall accept or reject each such Proposal.  If the Proposal is rejected by the Steering Committee, then, as applicable, the Party making the Proposal may pursue such Proposal on its own and at its sole expense.  During the term of this Distribution and License Agreement, AAC has the right to independently develop enhancements, upgrades, additions or modifications to a CoSeal Unit or components thereof or to a CoSeal Accessory, and if any such enhancement, upgrade, addition or modification is useful within the Field, AAC may present such AAC-developed enhancement, upgrade, addition or modification (a Proposal) to the Steering Committee for consideration.

7.7

Final Decision Related to Improvements.

If a Proposal is accepted by the Steering Committee, such Proposal shall be deemed to be an Improvement.  If the Steering Committee does not reach agreement as to whether a Proposal should be deemed an Improvement, then the Heads, as defined in Section 16.2, shall make the final decision as to whether the Proposal should be deemed an Improvement, and/or whether the Proposal should be subject to a separate

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agreement between the Parties.  Any final decision of the Heads pursuant to this Section 7.7 shall be final and shall not be subject to the dispute resolution provisions of this Distribution and License Agreement set forth in Sections 16.2 and 16.3.

7.8

Economic Value.  

If a Proposal is deemed an Improvement pursuant to Section 7.7, and if such Improvement is deemed by the Steering Committee to be likely to affect the sales price of a CoSeal Unit by more than fifty percent (50%) as compared to the unimproved CoSeal Unit, then the Heads shall determine whether such Improvement justifies setting forth the Parties’ rights, responsibilities and Net Sales sharing with respect to such Improvement in a separate agreement between the Parties, or whether such Improvement shall be governed by this Distribution and License Agreement.

7.9

Funding.  

The Parties shall advance an Improvement by appropriate prioritizing and funding within their respective organizations; provided, however, that all Improvements must go through AAC’s and Baxter’s internal process for advancing proposed research and development projects, and nothing herein shall obligate either Party to fund any Improvement.  In the event that either Party declines to participate in the funding of an Improvement, the other Party may pursue the Improvement on its own.

Article 8
Commercialization

8.1

Marketing and Promotion.

(a)

Marketing, Sales and Distribution Efforts.  For each CoSeal Unit where Baxter has been granted exclusive marketing, sales and distribution rights hereunder, Baxter shall use Commercially Reasonable Efforts toward marketing, sales and distribution (itself or through its Affiliates or subdistributors) of that CoSeal Unit.  To that effect, Baxter shall maintain and utilize a competent and adequate staff, organization and facilities to satisfy its obligations under this Distribution and License Agreement.  Under no circumstances will Baxter, its Affiliates or its subdistributors, agents or co-promoters knowingly make any false or misleading statements concerning a CoSeal Unit, or knowingly adulterate or misbrand a CoSeal Unit for sale or distribution.

(b)

Marketing and Promotional Materials.  Within ten (10) days after the Effective Date, AAC shall transfer to Baxter advertising or promotional materials and training materials that were used in conjunction with the CoSeal Sealant Unit prior to the Effective Date, as well as reasonably available customer information.  Baxter shall have full responsibility for developing and producing any new advertising or promotional materials to be used in conjunction with each of the CoSeal Units distributed by Baxter in accordance with this Distribution and License Agreement.  Any such materials will be subject to AAC’s prior approval, which approval shall not be unreasonably withheld or delayed.  Baxter shall submit all proposed marketing and promotional materials to AAC’s Program Director, who shall review (or have an appropriate delegatee review) such materials and sha ll communicate AAC’s comments or approval to Baxter not later than five (5) Business Days after Baxter submits such materials to AAC.  Should AAC fail to communicate its comments or approval to Baxter within the time frame stated above, such

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materials shall be deemed approved.  In addition, Baxter shall have full responsibility for formulating and conducting all marketing plans and studies relating to the CoSeal Units.  If AAC requests that Baxter provide copies of any marketing and promotional materials, Baxter shall do its best to fulfill such request in an expeditious manner.

(c)

Personnel.  For six (6) months after the Effective Date (the “Transition Period”), and upon Baxter's written request, AAC shall make its personnel, including those designated as  clinical specialists, reasonably available for orientation and training of Baxter’s personnel with respect to selling, handling and storing the CoSeal Units in a manner to be determined by the Program Directors.  Each Party shall bear its own respective costs associated with such orientation and training.  During such Transition Period, AAC, at its own cost, shall make such personnel available to cooperate with and reasonably support Baxter's commercialization activities, product launches, marketing, and promotion relating to the CoSeal Units.  After the Transition Period, if Baxter requests continued personnel support, the Program Directors shall determine the personnel to be assigned and the reimbursement amounts to be paid by Baxter.  If Baxter agrees to continue use of such personnel based upon such reimbursement amounts, then it shall pay such reimbursement amounts to AAC within a reasonable time after the delivery of appropriate supporting documentation of such costs by AAC to Baxter.  Notwithstanding the foregoing, after the Transition Period, AAC will have the option, but not the obligation, at its sole expense, to provide for Baxter’s use its personnel designated as clinical specialists and having expertise with respect to the CoSeal Sealant Unit(s) and/or CoSeal Adhesion Prevention Unit(s).  These clinical specialists will support Baxter’s sales efforts regarding the CoSeal Sealant Unit(s), and the Parties agree that such activities to support Baxter’s sales efforts by these clinical specialists will not constitute a breach of the grant of exclusive distribution, sales and marketing rights to Baxter under Sections 2.1, 2.2 and 2.3.

(d)

CoSeal Unit Samples.  Prior to the Second Commercialization Date (as defined in the Manufacturing Agreement), AAC shall provide to Baxter [***] a commercially reasonable number of CoSeal Unit(s) to be used by Baxter as commercial samples, as more fully described in Schedule 8.1(d).  Baxter shall submit a Purchase Order (as defined and described in Section 4.1(a)(ii) the Manufacturing Agreement) for any such CoSeal Unit(s).

8.2

Product Markings.

(a)

Labeling, Packaging and Branding.  During the period that the Parties are transitioning marketing, sales and distribution of the CoSeal Sealant Unit and CoSeal Accessories, the Parties will cooperate to formulate a strategy for labeling, packaging and branding of the CoSeal Sealant Unit and CoSeal Accessories.  Within thirty (30) days after the Effective Date, representatives of the marketing and regulatory groups of each of the Parties shall conduct an initial strategy meeting to discuss such labeling, packaging and branding matters, including development of a jointly designed label, package insert and packaging for the CoSeal Sealant Unit and CoSeal Accessories.

(b)

Notice of License and Patents.  Within sixty (60) days after the Effective Date, each CoSeal Unit and CoSeal Accessory marketed and sold by Baxter or its Affiliates,

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subdistributors, agents or co-promoters under this Distribution and License Agreement shall be marked (to the extent not prohibited by law): (i) with a notice that such CoSeal Unit or CoSeal Accessory (as applicable) is sold by Baxter under a license from AAC; (ii) with all patent and other intellectual property notices relating to the relevant AAC Patents, and (iii) with AAC Trademark ANGIOTECHKNOWLEDGYÔ.

(c)

AAC’s Trademarks.  AAC shall be responsible for developing and registering AAC Trademarks for CoSeal Unit(s) and CoSeal Accessory(ies), and shall own all such AAC Trademarks.  Baxter acknowledges that, to facilitate worldwide brand recognition, Baxter shall, to the extent determined to be practicable by mutual agreement of the Parties, such agreement not to be unreasonably withheld or delayed, market and sell the CoSeal Unit(s) and CoSeal Accessory(ies) in the Territory under the same trademarks as AAC used in conjunction with sales of CoSeal Unit(s) and CoSeal Accessory(ies) prior to the Effective Date.  Baxter’s use of AAC Trademarks shall be in accordance with the quality control standards and other guidelines issued by AAC and delivered to Baxter hereunder.  Not more than once per calendar year, AAC shall have the right to review and evaluate the activ ities performed and the CoSeal Units and CoSeal Accessories distributed by Baxter using the AAC Trademarks for purposes of ensuring that AAC’s standards and guidelines are being adhered to and that the goodwill associated with the AAC Trademarks is not being adversely affected by Baxter.  If, as a result of such annual review, AAC determines that such activities, or such distributed CoSeal Units or CoSeal Accessories, do not comply with AAC’s standards or guidelines, or that such goodwill is being adversely affected, AAC may perform additional review and evaluation at its discretion.

(i)

Baxter’s Trademark Development.  If Baxter reasonably determines that one or more AAC Trademark is not optimal for use in any part of the Territory, then Baxter may market and sell the CoSeal Unit(s) or CoSeal Accessory(ies) in that part of the Territory under another Product-specific or Product family-specific trademark, which shall be selected by Baxter subject to the approval of AAC, such approval not to be unreasonably withheld or delayed.  Baxter shall endeavor to register such trademark, which shall be owned by and registered in Baxter’s name at Baxter’s expense, and any such trademark shall be a deemed Baxter Trademark.  AAC shall cooperate with Baxter during the Baxter Trademark registration process, including producing such declarations and documentation required by any trademark office to show intentional avoidance of confusion of marks in the ma rketplace.  Notwithstanding the foregoing, every CoSeal Unit and CoSeal Accessory marketed, sold and distributed by Baxter or its Affiliates, subdistributors, agents or co-promoters under this Distribution and License Agreement shall include the AAC Trademark ANGIOTECHKNOWLEDGYÔ.

(ii)

License.   During the term of this Distribution and License Agreement, Baxter shall grant to AAC a royalty-free, non-exclusive license to use Baxter Trademarks in conjunction with distribution, marketing and sales of Drug-Loaded Products.

(iii)

Use of Baxter Name.  Baxter may use and distribute the CoSeal Unit(s) and CoSeal Accessory(ies) utilizing the Baxter name and any Baxter Trademarks, including trademarks incorporating the term or designation Baxter, either alone or in combination with AAC Trademarks.  All use of the Baxter Trademarks, the Baxter name or trademarks

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incorporating the word “Baxter” shall inure solely to the benefit of Baxter, and no rights therein are granted hereunder to AAC (except as set forth in Section 8.2(c)(ii) and Section 14.7).

8.3

Marketing Efforts.

(a)

Market Launch.  For each CoSeal Unit under this Distribution and License Agreement that has not received Regulatory Approval in a country within the Territory as of the Effective Date, and wherein the corresponding Commercialization Plan sets forth Baxter’s intent to commercialize such CoSeal Unit in such country, Baxter shall use Commercially Reasonable Efforts to effect the first commercial sale of each such CoSeal Unit in such country as soon as reasonably practicable, but with the goal of making such sale no later than six (6) months after receiving Regulatory Approval for such CoSeal Unit in such country.  Notwithstanding the foregoing, if Baxter reasonably determines that there exists a reason(s) (for example, poor market conditions, regulatory change, safety concerns, or other events affecting commercial feasibility) to delay the market launch of such CoSeal Unit(s), Baxter shall submit such reason(s) to AAC for its consent to the delay, which consent shall not be unreasonably withheld or delayed.  Should AAC disagree with Baxter’s determination and reason(s), AAC shall submit its and Baxter’s findings to the Program Directors, who shall resolve the issue in compliance with Section 3.1.  Notwithstanding the foregoing, in the event that Baxter’s delay in making the first commercial sale is due to an event that would serve as a basis for a recall or field corrective action pursuant to Section 5.4 of the Manufacturing Agreement, then Baxter may unilaterally delay such market launch, and in such event only notice to AAC, and not AAC’s consent, shall be required.  The obligations under this Section 8.3(a) shall apply on a country-by-country basis as and when such country is specifically set forth in a Commercialization Plan.  Nothing in this Section 8.3(a) shall impose upon Baxter the obligation to conduc t a market launch in any country where it has received Regulatory Approval on a regional basis (for example, a European CE mark approval).

(b)

Availability to Public.  Following the first commercial sale of a CoSeal Unit hereunder, and for each CoSeal Unit sold by Baxter in any part of the Territory where Baxter maintains exclusive distribution rights, Baxter shall use Commercially Reasonable Efforts to keep CoSeal Unit(s) reasonably available to the public in all countries of the Territory where each CoSeal Unit has received Regulatory Approval.  Notwithstanding the foregoing, if Baxter reasonably determines that there exists a reason(s) (for example, poor market conditions, regulatory change, safety concerns, or other events affecting commercial feasibility) to cease distribution and sales of a CoSeal Unit within a particular country, Baxter shall submit such reason(s) to AAC for its consent to the cessation, which consent shall not be unreasonably withheld or delayed.  Should AAC disagree with Baxter’s determination and reason(s), AAC shall submit its and Baxter’s findings to the Program Directors, who shall resolve the issue in compliance with Section 3.1.  Notwithstanding the foregoing, in the event that Baxter’s decision to cease distribution in a particular country is due to an event that would serve as a basis for a recall or field corrective action pursuant to Section 5.4 of the Manufacturing Agreement, then Baxter may unilaterally cease distribution of such CoSeal Unit in such country, and in such event only notice to AAC, and not AAC’s consent, shall be required.

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(c)

Pricing.  Baxter shall set prices for CoSeal Units in the Territory, and shall obtain all governmental pricing approvals as may be required.

(d)

Marketing Plans and Marketing Materials.  Baxter shall provide to AAC a copy of Baxter’s marketing plans and materials for each CoSeal Unit.  For any CoSeal Unit that has not received Regulatory Approval as of the Effective Date, Baxter shall provide such marketing plans and materials no less than one (1) month prior to the date forecasted by Baxter for first commercial sale of such CoSeal Unit.  Upon AAC’s written request, Baxter shall (within thirty (30) days of such request) provide to AAC a copy of all current Baxter marketing plans and marketing materials for CoSeal Unit(s).  Also, upon the request of AAC, Baxter shall invite one or more of AAC’s representatives to observe significant meetings regarding CoSeal Unit(s) marketing, promotion and the like that are sponsored by Baxter (such as, by way of example and without limitation, national sales meetings, expert panels and focus groups).  Each Party shall bear its own costs of attending any such meetings.

8.4

Customer Feedback.

If either Party develops, surveys or otherwise receives feedback from customers, operators and others relative to the CoSeal Units or CoSeal Accessories, it will share the results and data obtained with the other Party.  The Parties may choose to jointly seek customer feedback or use similar data to agree upon changes or improvements to the CoSeal Units or CoSeal Accessories, to the delivery, installation and maintenance of CoSeal Units or CoSeal Accessories, to the training of operators or to the technical presentation of the CoSeal Units.

8.5

Customer Information.

For a minimum period of two (2) years beyond the expiration date of each CoSeal Unit or CoSeal Accessory, each Party shall maintain records sufficient to enable the Parties to respond to product warranty, product recall and product regulatory concerns, and to otherwise discharge each Party’s obligations to purchasers of CoSeal Units or CoSeal Accessories.  In the event that either Party must respond to such product warranty, product recall and/or product regulatory concerns, or must otherwise address its obligations to purchasers of CoSeal Units or CoSeal Accessories, the Parties shall be jointly responsible for the quick and effective communication of required information related to such concern or obligation.  Such information may include, without limitation, the nature of the complaint or inquiry; the product code, product serial number or manufacturing lot number; purchase order number; i nvoice number; invoice date; and shipping date.  Each Party shall be primarily responsible, at its own expense, for direct contact with customers to which it sold such CoSeal Unit or CoSeal Accessory.  Each Party shall provide any technical or other informational support requested by the other Party in order to accurately and timely respond to customers’ questions.

Article 9
Fees and Payments

9.1

Distribution and License Rights Fee.

On the next Business Day following execution of this Distribution and License Agreement, Baxter shall pay to Cohesion or its designee a Distribution and License Agreement rights fee in the amount of Eight Million Dollars ($8,000,000).

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9.2

Option Payments.

(a)

If Baxter exercises the CoSeal Adhesion Prevention Option, Baxter shall pay to Cohesion or its designee, within [***] after the date that Baxter receives from AAC written notification of FDA approval for the CoSeal Adhesion Prevention Unit for the [***] indication, the lesser of: (i) [***]; or (ii) the actual clinical and regulatory costs of the United States CoSeal Adhesion Prevention Unit clinical trial and FDA approval for the [***] indication, plus [***].

(b)

If Baxter exercises the CoSeal Sealant Option, Baxter shall pay to Cohesion or its designee the sum of [***] (the “Japan Payment”) within the [***] period set forth in Section 2.1(c).  In the event that Baxter fails to exercise the CoSeal Sealant Option as and when the conditions described in Section 2.1(c) are satisfied, then AAC shall have the right to grant the rights to the CoSeal Sealant Unit in Japan to Baxter, and to demand payment by Baxter of the Japan Payment, in which event Baxter shall make the Japan Payment within [***] of its receipt of such demand under this Section 9.2(b).

9.3

[***] Milestone Payment by Baxter.

Baxter shall make a [***] indication Milestone payment in the amount of [***] to Cohesion or its designee on or before the forty-fifth (45^th) day after AAC’s delivery to Baxter of written notice of FDA approval of the CoSeal Sealant Unit for [***] indications in accordance with the conditions described in Section 6.1(a).  The Parties may mutually agree to modify the timing of this Milestone payment in writing prior to its due date.  In the event that Baxter ceases distribution, marketing and sales of the CoSeal Units prior to AAC’s receipt of FDA approval for [***] indications, Baxter shall have no obligation to make this Milestone payment.

9.4

Sharing of Certain Percentages of Net Sales.

The Parties agree that AAC and Baxter shall share the Net Sales of the CoSeal Sealant Unit, the CoSeal Adhesion Prevention Unit and the AAC Patented Accessory(ies) as follows:

(a)

Baxter will receive [***] and Cohesion will receive [***] of the Net Sales of all CoSeal Sealant Units and all CoSeal Adhesion Prevention Units that are manufactured in AAC’s manufacturing facility, supplied to Baxter by AAC at no cost, and sold after April 1, 2003 by Baxter or its Affiliates.

(b)

Baxter will receive [***] and Cohesion will receive [***] of the Net Sales of all CoSeal Sealant Units, all CoSeal Adhesion Prevention Units and all AAC Patented Accessories that are manufactured in Baxter’s manufacturing facility or provided to Baxter by a Third Party and sold by Baxter or its Affiliates.

(c)

Upon FDA approval of the [***], Baxter will receive [***] and Cohesion will receive [***] of the Net Sales of all CoSeal Sealant Units, all CoSeal Adhesion Prevention Units and all AAC Patented Accessories

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that are manufactured in Baxter’s manufacturing facility or provided to Baxter by a Third Party and sold by Baxter or its Affiliates (irrespective of whether Baxter elects to exercise its CoSeal Adhesion Prevention Option under Section 2.2(b)).

(d)

Baxter shall pay to Cohesion or its designee the appropriate percentage of Net Sales payments set forth under this Section 9.4 within forty five (45) days after the end of each calendar quarter.

(e)

With any payment by Baxter under this Section 9.4, Baxter shall include a report certified by the most senior finance person in the business unit of Baxter responsible for exploitation of CoSeal Unit(s) that sets forth in reasonable detail the calculation of the percentage of Net Sales payments due to AAC for such quarterly payment period, including, without limitation:

(i)

the number of CoSeal Units and AAC Patented Accessories sold, transferred, leased or otherwise distributed to end users by Baxter or its Affiliates by sales region, as such region is determined internally by Baxter;

(ii)

the calculation of Net Sales for the applicable quarterly reporting period in each sales region, including a listing of any deductions permitted under Section 1.37 and a description of the nature of the deduction and the amount of each type of deduction; and

(iii)

the total percentage of Net Sales amount payable on total Net Sales in Dollars, together with the exchange rates used for conversion.

9.5

Reporting and Audit.

(a)

Record Maintenance and Retention.  Baxter and its Affiliates shall maintain complete and accurate books and records relating to the rights and obligations of the Parties under this Distribution and License Agreement, and to any amounts payable to AAC in relation to this Distribution and License Agreement, which books and records shall contain sufficient information to permit AAC to determine the accuracy of any reports delivered by Baxter to AAC.  Baxter and its Affiliates shall retain such books and records for at least two (2) years following the reporting period to which they pertain.

(b)

Audit of Records.  Within twelve (12) months after any calendar year and upon thirty (30) days prior written notice to Baxter, AAC, through its designated independent CPA firm, shall have the right (at the expense of AAC) to audit such books and records no more than once per calendar year during normal business hours for the sole purpose of verifying reports and payments made under this Distribution and License Agreement.  Baxter and its Affiliates shall provide the independent CPA firm any requested information as is necessary to conduct such audit.  Within thirty (30) days from the date that AAC receives a final written report of the audit conducted by the independent CPA firm, but in no event later than the date upon which AAC requests remittance of any underpayment under Section 9.5(c), AAC shall provide to Baxter a copy of such report.

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(c)

Effects of Underpayment.  If the independent CPA firm makes a determination of underpayment by Baxter, Baxter shall remit to AAC, within thirty (30) days of receiving notice from AAC, any underreported percentage of Net Sales amounts or other amounts due to AAC, together with interest from the original due date for payment, as provided in Section 9.7.  If Baxter contests such determination of underpayment, it may withhold only the disputed portion of the underreported percentage of Net Sales amount due to AAC.  Additionally, if an audit under this Section 9.5 has revealed an uncontested underreporting or underpayment in excess of five percent (5%) of the total amount due to AAC pursuant to Section 9.4 for the calendar year under audit, then Baxter shall pay to AAC within such thirty (30) day period the cost of such audit attributable to the independent CPA firm. &nb sp;If a contested amount is ultimately determined to be due to AAC, Baxter shall pay to AAC such contested amount due to AAC, together with interest from the original due date of any such contested amount due to AAC, promptly following resolution of any such dispute.  In addition, if such contested amount due to AAC combined with the uncontested amount due is an aggregate underpayment in excess of five percent (5%) of the total amount due to AAC under Section 9.4 for the calendar year under audit, Baxter shall bear the cost of such audit attributable to the independent CPA firm, plus interest from the date of Baxter’s receipt of an invoice from AAC setting forth the cost of the audit.

(d)

Effects of Overpayment.  If the independent CPA firm makes a determination of overpayment by Baxter, AAC shall remit to Baxter any overpaid amounts, within thirty (30) days of receiving written notice from Baxter of such overpayment.  In such instance, AAC shall not be required to pay interest to Baxter on any overpayment received by AAC from Baxter.  If AAC contests such determination of overpayment, it may withhold only the disputed portion of the overpaid percentage of Net Sales amount owed to Baxter.  If contested amounts are ultimately determined to be due to Baxter, AAC shall pay to Baxter such contested amounts due to Baxter, together with interest from the date  which is thirty (30) days after AAC received such written notice from Baxter of such overpayment, promptly following resolution of any such dispute.

9.6

Currency.

  Unless otherwise agreed by the Parties in writing, all amounts paid by Baxter under this Distribution and License Agreement shall be paid to Cohesion or its designee in Dollars by wire transfer to a financial institution to be designated by Cohesion.  Written or electronic notice of each such transaction shall be promptly provided to such financial employee or officer as is designated by AAC.  Conversion of foreign currency to Dollars shall be made at the quarterly average conversion rate determined by adding the conversion rates existing in the United States (as reported in The Wall Street Journal) on the last working day of each month in the quarter and dividing by three (3).  Subject to Section 9.8, such payments shall be without deduction of exchange, collection, wire trans fer or other charges, and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes, except only as permitted in the definition of Net Sales in Section 1.37.  Also subject to Section 9.8, any loss of exchange value, taxes, or other expenses incurred in the transfer or conversion to Dollars shall be paid entirely by Baxter.

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9.7

Interest Due.

  In case of any delay in payment by Baxter to Cohesion or its designee not occasioned by Force Majeure (as set forth in Section 16.5), interest on the overdue payment shall accrue at an annual interest rate equal to the lesser of: (a) the prime rate as reported in the Money Rates set forth in The Wall Street Journal, plus three (3) percentage points, as determined for each month on the last Business Day of the previous month, or (b) the maximum amount permitted by law, in either instance assessed from the date that payment was initially due.  The foregoing interest shall be due from Baxter without any special notice, and shall be in addition to any other remedies that AAC may have pursuant to this Distribution and License Agreement.

9.8

Taxes.

  The Parties agree that any taxes that either Party is required by law to withhold from amounts payable to the other Party under this Distribution and License Agreement (whether under this Article 9 or otherwise) shall be deducted by the paying Party from the amounts paid to the non-paying Party hereunder at the rate(s) required by applicable law, and shall be promptly paid to the appropriate governmental authority on behalf of the non-paying Party.  The paying Party shall promptly provide to the non-paying Party receipts from the government or taxing authority evidencing payment of such taxes, if available, or other written proof of payment if official receipts are not available, and shall provide reasonable assistance to the non-paying Party to obtain tax credits therefor.

9.9

Disputes.

  Any disputes regarding the actual accomplishment of any Milestone shall be reviewed by the Program Directors and resolved according to Section 3.1.

Article 10
Intellectual Property

10.1

Patentable Inventions and Know-How.

(a)

Improvements and Inventions.  Each Party shall keep the other Party fully advised of any Improvements, including any inventions and know-how directly relating to such Improvements, during the term of this Distribution and License Agreement.  Such notice shall be given at least semi-annually in a report to the Steering Committee.

(b)

Patent Prosecution.

(i)

Baxter Patents.  Baxter will consult with AAC and will keep AAC informed of all matters relating to the preparation, filing, prosecution and maintenance of all Baxter Patents relating to the subject matter of this Distribution and License Agreement.  Baxter shall be responsible, at its own expense, for preparation, filing, prosecution and maintenance of all Baxter Patents; provided, however, that each Party will bear its own internal costs and expenses related thereto.  All Patent applications for Baxter Patents that are solely invented by Baxter shall be filed in the name of Baxter or its Affiliates, and shall be owned by Baxter or its Affiliates.

(A)

Baxter shall endeavor in good faith to coordinate its efforts with those of AAC to minimize or avoid interference with the prosecution of AAC Patents.

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(B)

To the extent practicable, Baxter shall provide AAC with a copy of any Baxter Patent application relating to CoSeal Ingredients, Product(s), CoSeal Device(s), CoSeal Accessory(ies) and CoSeal Units prior to filing the first of such application in any jurisdiction, for review and comment by AAC or its designees.

(C)

Baxter shall provide, at AAC’s reasonable request, copies of all material correspondence with the relevant patent office(s).

(ii)

AAC Patents.  AAC will consult with Baxter and will keep Baxter informed of all matters relating to the preparation, filing, prosecution and maintenance of all AAC Patents relating to the subject matter of this Distribution and License Agreement.  AAC shall be responsible, at its own expense, for preparation, filing, prosecution and maintenance of all AAC Patents; provided, however, that each Party will bear its own internal costs and expenses related thereto.  All Patent applications for AAC Patents that are solely invented by AAC shall be filed in the name of AAC or its Affiliates, and shall be owned by AAC or its Affiliates.

(A)

AAC shall endeavor in good faith to coordinate its efforts with those of Baxter to minimize or avoid interference with the prosecution of Baxter Patents.

(B)

To the extent practicable, AAC shall provide Baxter with a copy of any AAC Patent application relating to CoSeal Ingredients, Product(s), CoSeal Device(s), CoSeal Accessory(ies) and CoSeal Units prior to filing the first of such application in any jurisdiction, for review and comment by Baxter or its designees.

(C)

AAC shall provide, at Baxter’s reasonable request, copies of all material correspondence with the relevant patent office(s).

(iii)

Joint Patents.  Baxter and AAC will consult each other and will keep each other informed of all matters relating to the preparation, filing, prosecution and maintenance of all Joint Patents relating to the subject matter of this Distribution and License Agreement.  AAC shall have sole responsibility for preparation, filing, prosecution and maintenance of all Joint Patents, and shall manage each family of Joint Patents in its sole discretion.  Each Party will bear its own internal costs and expenses related to the Joint Patents.  Both Parties will jointly share in the benefits of ownership of the Joint Patents in that: (A) Patent applications for Joint Patents shall be owned and assigned of record equally to both AAC and Baxter (or their designated Affiliates); or (B) if agreed to by the Parties in writing, one or more Patent applications may be filed in the name of and owned by one Party, while conveying the benefits of joint ownership to the other Party by contractual right.

(c)

Discontinuance by AAC.  If AAC, in its sole discretion, does not intend to file for Patent protection for an AAC invention or a joint invention hereunder, or if AAC files for Patent protection for an AAC invention or a joint invention and does not wish to continue

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preparation, prosecution, or maintenance of such AAC Patent or Joint Patent, then AAC shall give at least sixty (60) days advance notice (and in no event less than a reasonable period of time for Baxter to act in its stead) to Baxter of any decision to cease preparation, filing, prosecution and maintenance of that Patent in any jurisdiction (an “AAC Discontinued Patent”).  In such case, Baxter may elect at its sole discretion to continue preparation, filing, prosecution and/or maintenance of the AAC Discontinued Patent at its sole expense.  Discontinuance may be elected by AAC on a country-by-country basis, and on an individual Patent or a Patent family basis.  Notwithstanding the foregoing, AAC shall maintain Patent protection for the CoSeal Sealant Unit(s), CoSeal Adhesion Prevention Unit(s) and their respective components and the CoSeal Accessory(ies), and shall maintain any and all Patents necessary for AAC to fulfill its obligations under this Distribution and License Agreement, including maintaining any and all AAC Patents in any country in which a CoSeal Sealant Unit and/or CoSeal Adhesion Prevention Unit and/or CoSeal Accessory is actually being sold.  If Baxter elects to continue preparation, filing, prosecution and/or maintenance of such AAC Discontinued Patent, then AAC shall continue to have ownership of such AAC Discontinued Patent, and Baxter shall continue to have those rights to practice such AAC Discontinued Patent as are granted under this Distribution and License Agreement.

(d)

Discontinuance by Baxter.  If Baxter, in its sole discretion, decides to discontinue prosecution or maintenance of any Baxter Patent relating to the subject matter of this Distribution and License Agreement, then Baxter shall give at least sixty (60) days advance notice (and in no event less than a reasonable period of time for AAC to act in its stead) to AAC of any decision to cease preparation, filing, prosecution and maintenance of that Baxter Patent in any jurisdiction (a “Baxter Discontinued Patent”).  In such case, AAC may elect at its sole discretion to continue preparation, filing, prosecution and/or maintenance of the Baxter Discontinued Patent at its sole expense.  Discontinuance may be elected by Baxter on a country-by-country basis, and on an individual Patent or a Patent family basis.  If AAC elects to continue preparation, filing, prosecution and/or maintenance of such Baxter Discontinued Patent, then Baxter shall continue to have ownership of such Baxter Discontinued Patent, subject to AAC’s rights as set forth in Section 14.7.

10.2

Infringement Claims by Third Parties.

(a)

Third Party Claims.  If the use of a Product or a CoSeal Device, or the use or sale of a CoSeal Accessory or a CoSeal Unit, under the AAC Patents, AAC Know-How or AAC Trademarks results in a claim or a threatened claim by a Third Party against a Party hereto for patent or trademark infringement, or for inducing or contributing to patent or trademark infringement, in any part of the Territory (“Infringement Claim”), the Party first having notice of an Infringement Claim shall promptly notify the other Party in writing.  The notice shall set forth the facts of the Infringement Claim in reasonable detail.  Each Party shall have the right to retain independent counsel, direct its own defense, and settle all claims against itself; however, both Parties shall cooperate in their respective defense to the extent allowed by law, and shall notify the other Party as to th e particulars of any agreement settling an Infringement Claim to the extent permitted by any such settlement agreement.  Both Parties will share equally any costs of litigating

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an Infringement Claim, including all damages, fees and expenses, including reasonable attorneys’ fees and expenses.

(b)

Third Party Licenses.  In the event that practicing under the AAC Patents or the AAC Trademarks in connection with the use, sale, offer for sale or importation of a Product(s), CoSeal Device(s), CoSeal Accessory(ies) or CoSeal Unit(s) (but excluding an Infringement Claim attributable to a CoSeal Device that has been developed solely by Baxter) in the Territory is alleged to infringe a Third Party Patent or a Third Party trademark (collectively, "Third Party IP"), the Parties will cooperate to formulate a commercially reasonable strategy for resolving such issue.  If the Parties determine that obtaining a license under such Third Party IP is appropriate, and if a license to such Third Party IP is available, the Parties agree that AAC shall be solely responsible for obtaining a license to such Third Party IP (and such license shall include a right to sublicense to Bax ter).  The Parties shall [***] if the allegation of infringement of Third Party IP is made in the United States against the CoSeal Ingredients or Product(s) as they are configured in CoSeal Units as of the Effective Date.  For all other allegations of infringement of Third Party IP, the Parties shall [***] according to [***]

10.3

Infringement Claims Against Third Parties.

Each Party shall promptly inform the other Party of any suspected infringement that may arise in connection with this Distribution and License Agreement in any part of the Territory of any AAC Patent(s), AAC Trademark(s), Baxter Patent(s) or Baxter Trademarks by a Third Party.  If such infringement relates to Baxter Patent(s) or Baxter Trademarks, Baxter shall have the right (either solely or jointly with AAC) to institute an action for infringement in the Territory against such Third Party.  If such infringement relates to AAC Patent(s) or AAC Trademark(s), AAC shall have the right to institute an action (either solely or jointly with Baxter) for infringement in the Territory against such Third Party.

(a)

To the extent permitted by law, if AAC and Baxter agree to institute a Third Party infringement suit jointly, such suit shall be brought in the names of both AAC and Baxter, the out-of-pocket costs thereof shall be borne [***], and any recovery settlement shall be [***] to AAC and [***] to Baxter.  AAC and Baxter shall work together to manage such litigation, with AAC having the primary responsibility for controlling such suits relating to AAC Patents and AAC Trademarks, and Baxter having primary responsibility for controlling such suits relating to Baxter Patents and Baxter Trademarks.  Where such suits relate to AAC Patents or AAC Trademarks, Baxter may, if it so desires, also be represented by separate counsel of its own selection, and the fees for such counsel shall be paid by Baxter.  Likewise, where such suits relate to Baxter Patents or Baxter Trademarks, A AC may, if it so desires, also be represented by separate counsel of its own selection, and the fees for such counsel shall be paid by AAC.

(b)

In the absence of an agreement between AAC and Baxter to institute a Third Party infringement suit jointly, with respect to such suits relating to AAC Patents and AAC Trademarks, AAC shall have the right, but not the obligation, to institute such suit, and at its

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option, permit Baxter to join as a party plaintiff; provided that AAC shall bear the entire cost of such litigation, including attorneys’ fees, and shall be entitled to retain the entire amount of recovery or settlement; with respect to such suits relating to Baxter Patents and Baxter Trademarks, Baxter shall have the right, but not the obligation, to institute such suit, and at its option, permit AAC to join as a party plaintiff; provided that Baxter shall bear the entire cost of such litigation, including attorneys’ fees, and shall be entitled to retain the entire amount of recovery or settlement.

(c)

To the extent permitted by law, should either AAC or Baxter commence a Third Party infringement suit under the provisions of this Section 10.3, and thereafter that Party elects to abandon the same, it shall give timely notice to the other Party who may, if it so desires, at its own expense, continue prosecution of such suit; provided, however, that the sharing of expenses and any recovery in such suit shall be divided between such Parties based upon the percentage of total litigation costs borne by each such Party.  Total litigation costs shall be the sum of attorneys’ fees and related court costs and expenses incurred by each of the Parties.

(d)

In the event that AAC or Baxter jointly owns any valid patent in the Territory with a Third Party (including a Third Party manufacturer), that joint owner Party shall use its Commercially Reasonable Efforts to arrange for such Third Party to cooperate in any infringement actions in accordance with the terms of this Section 10.3, and to agree not to hinder or prevent any such suit initiated or prosecuted hereunder.

10.4

Patent Term Extensions.

The Parties shall cooperate in good faith with each other in gaining Patent term extensions wherever applicable to AAC Patents, Joint Patents and Baxter Patents covering CoSeal Ingredients, Product(s), CoSeal Device(s), CoSeal Accessory(ies) and CoSeal Unit(s).

(a)

AAC and Baxter shall determine by mutual agreement which of such AAC Patents, Joint Patents or Baxter Patents, if any, shall be subject to an application for Patent term extension.

(b)

All applications for a Patent term extension shall be made by the Party responsible for prosecution and maintenance of such Patent that has been selected for Patent term extension application; provided, however, that in the event that the Party who is responsible for prosecution and maintenance of such Patent elects not to apply for such extension, such Party shall: (i) inform the other Party of its intention not to apply, and (ii) grant the other Party the right to apply for such extension.  However, no actions taken by either Party under this Section 10.4(b) shall result in a change of ownership of the Patent that is the subject of the application for term extension.

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Article 11
Representations and Warranties

11.1

Representations and Warranties of AAC.

(a)

Authorization.  AAC, jointly and severally, represents, warrants and covenants that:

(i)

this Distribution and License Agreement has been duly executed and delivered by AAC and constitutes a valid and binding obligation of AAC, enforceable against AAC in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles;

(ii)

the execution, delivery and performance of this Distribution and License Agreement have been duly authorized by all necessary action on the part of AAC, its officers and directors and, except as set forth in Schedule 2.1(b), does not conflict with any agreement, instrument or understanding, oral or written, to which AAC or its Affiliates is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

(iii)

AAC has full power and authority to perform the obligations set forth herein, and that AAC is not subject to any order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Distribution and License Agreement;

(iv)

AAC is duly organized, validly existing and in good standing under the laws of the jurisdiction where it is organized; and

(v)

AAC Controls the AAC Patents and the AAC Trademarks set forth in Schedules 1.3 and 1.4, respectively.

(b)

AAC’s Rights (CoSeal Ingredients and Product(s)).  As of the Effective Date, AAC, jointly and severally, represents and warrants, with respect only to CoSeal Ingredients and Product(s) as they are configured in the CoSeal Sealant Unit (both the formulation marketed as of the Effective Date and the “premix” formulation) and the CoSeal Adhesion Prevention Unit as of the Effective Date, that:

(i)

Except for research use only rights and limited non-commercial rights granted to Third Parties pursuant to material transfer agreements or feasibility study agreements, Schedule 2.1(b) contains a complete and full description of all Third Party Rights granted by AAC concerning or relating to the AAC Patents, AAC Trademarks, and AAC Know-How, or otherwise concerning or relating to the Products; and

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(ii)

To its knowledge, upon reasonable inquiry, the granting of the licenses to Baxter hereunder does not conflict with any contractual obligation of AAC to any Third Party, except as set forth in Schedule 2.1(b).

(c)

AAC’s Rights (CoSeal Ingredients, CoSeal Accessories, Product(s), CoSeal Devices, and CoSeal Units).  As of the Effective Date, AAC, jointly and severally, represents and warrants, with respect only to CoSeal Ingredients, CoSeal Devices, and Product(s) as they are configured in CoSeal Units as of the Effective Date, and CoSeal Accessories and CoSeal Units as of the Effective Date, that:

(i)

Schedule 1.3 contains the full and complete list of all AAC Patents relating to CoSeal Accessory(ies), Products(s), CoSeal Device(s) and CoSeal Units Controlled by AAC as of the Effective Date, which Control by AAC as of the Effective Date is subject to those Third Party Rights granted prior to the Effective Date in those agreements set forth in Schedule 2.1(b) and to research use only rights and limited non-commercial rights granted to Third Parties pursuant to material transfer agreements or feasibility study agreements; and

(ii)

Schedule 1.4 contains the full and complete list of all AAC Trademarks relating to CoSeal Accessory(ies), Products(s), CoSeal Device(s) and CoSeal Unit(s) Controlled by AAC as of the Effective Date.

The sole remedy for inadvertent failure to include an AAC Patent on Schedule 1.3 or an AAC Trademark on Schedule 1.4 shall be amendment of such schedule to include the omitted AAC Patent or AAC Trademark, respectively, and such omission shall not be deemed a material breach by AAC of the representations and warranties set forth in this Section 11.1(c).

(d)

No Conflicting Agreements.  AAC, jointly and severally, represents, warrants and covenants that it has not to its knowledge granted, and during the term of this Distribution and License Agreement will not grant, any right to a Third Party in the Field in the Territory, except as set forth in Schedule 2.1(b), that would conflict with the licenses and rights granted to Baxter hereunder.

(e)

No Proceedings or Challenges; Non-Infringement.  As of the Effective Date, to AAC's actual knowledge, upon reasonable inquiry, there are no proceedings before any court, administrative tribunal or other authority commenced, pending or threatened which would challenge the validity of AAC Patents or assert a right or interest of a Third Party in AAC Patents or any portion thereof.  As of the Effective Date, to AAC’s actual knowledge, upon reasonable inquiry, AAC is not aware of, nor has any Third Party asserted, any claim, notice, or concern about the potential infringement of any Third Party proprietary rights as a result of the manufacture, use, offer to sell, sale, importation or distribution of Product(s).

(f)

No Dominant Patents.  As of the Effective Date, to AAC's actual knowledge and with respect only to CoSeal Ingredients, Product(s), CoSeal Devices and CoSeal Units as of the Effective Date, there are no Patents Controlled by AAC that are dominant to the AAC Patents licensed to Baxter hereunder.  With the exception of Patents covering [***] or any other

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component of an Improvement as a separate entity (for instance, apart from its use within such Improvement), should any such Patents that are Controlled by AAC become known to AAC, such Patents shall be deemed “AAC Patents” for the purposes of this Distribution and License Agreement, AAC shall notify Baxter in writing of such Patents and Schedule 1.3 shall be amended to include such Patents.

11.2

Representations and Warranties of Baxter.

(a)

Authorization.  Baxter, jointly and severally, represents, warrants and covenants that:

(i)

this Distribution and License Agreement has been duly executed and delivered by Baxter and constitutes a valid and binding obligation of Baxter, enforceable against Baxter in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles;

(ii)

the execution, delivery and performance of this Distribution and License Agreement have been duly authorized by all necessary action on the part of Baxter, its officers and directors and does not conflict with any agreement, instrument or understanding, oral or written, to which Baxter is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

(iii)

Baxter has full power and authority to perform the obligations set forth herein, and that Baxter is not subject to any order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Distribution and License Agreement; and

(iv)

Baxter is duly organized, validly existing and in good standing under the laws of the jurisdiction where it is organized.

(b)

No Impairing Agreements.  Baxter, jointly and severally, represents, warrants and covenants that, during the term of this Distribution and License Agreement, it will not knowingly enter into any agreements, oral or written, that would in any way impair its ability to fulfill its obligations under this Distribution and License Agreement.

(c)

No Dominant Patents.  If Baxter has any dominant Patent that was filed before the Effective Date or during the term of this Distribution and License Agreement that contains claims that would cover the CoSeal Ingredients for use in the Field, Product(s) for use in the Field, CoSeal Device(s) for use in the Field or CoSeal Unit(s) for use in the Field, then Baxter shall not assert such dominant Patent against AAC or its licensees during the term of this Distribution and License Agreement in any manner, and will make no claim under this Distribution and License Agreement for additional compensation.

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Article 12
Limitations on Representations and Warranties

12.1

Limitations on Representations and Warranties.

THE LIMITED WARRANTIES CONTAINED IN ARTICLE 11 ARE THE SOLE WARRANTIES GIVEN BY THE PARTIES HEREUNDER AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, PUNITIVE, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS AND LOSS OR INTERRUPTION OF BUSINESS.  THE FOREGOING PROVISION SHALL NOT BE CONSTRUED TO LIMIT A PARTY'S INDEMNIFICATION OBLIGATION UNDER THIS DISTRIBUTION AND LICENSE AGREEMENT FOR THIRD PARTY CLAIMS WHICH MAY INCLUDE CONSEQUENTIAL, PUNITIVE OR OTHER TYPES OF DAMAGES.

Article 13
Confidentiality

13.1

Confidentiality.

(a)

No Disclosure or Use.  During the term of this Distribution and License Agreement, and for a period of three (3) years thereafter, each Party shall keep confidential all information received from the other Party (the "Confidential Information”), and shall not disclose or use such Confidential Information without the other Party’s written consent, except to the extent contemplated by this Distribution and License Agreement.  This restriction shall not, however, prevent disclosure of such Confidential Information if and to the extent that disclosure is required by law; provided that the disclosing Party informs the other Party without delay of any such requirement, in order to allow such other Party to object to such disclosure and to seek an appropriate protective order or similar protection prior to disclosure.

(b)

No Misappropriation.  The Parties agree that the transfer of intellectual property rights and of rights in regulatory documentation by one Party to the other Party pursuant to this Distribution and License Agreement shall not, to the actual knowledge of the transferring Party, misappropriate the proprietary or trade secret information of a Third Party.

13.2

Exceptions.

The above obligations shall not apply, or shall cease to apply, to Confidential Information of the disclosing Party which:

(a)

is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available;

(b)

is known by the receiving Party at the time of receiving such Confidential Information, as evidenced by its written records;

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(c)

is hereafter furnished to the receiving Party by a Third Party, as a matter of right and without restriction on disclosure;

(d)

is independently developed by the receiving Party without resort to the Confidential Information of the disclosing Party or any breach of this Article 13;

(e)

is entered into evidence in a legal proceeding or submitted for use in a dispute resolution proceeding to enforce one or more rights of a Party under this Distribution and License Agreement; provided that the receiving Party shall give the disclosing Party prompt written notice and sufficient opportunity to object to such use or disclosure, or to request confidential treatment of the Confidential Information; or

(f)

is the subject of a written permission to disclose provided by the disclosing Party.

13.3

Permitted Disclosures.

(a)

Each Party may disclose Confidential Information (i) for the purpose of preparing, filing, prosecuting and maintaining Patents; (ii) for obtaining Regulatory Approvals; (iii) for the manufacture, marketing, distribution or sale of CoSeal Unit(s); or (iv) to any individuals that are required by law, contract or otherwise not to use or disclose such Confidential Information except as permitted by this Distribution and License Agreement.  Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that such individuals do not disclose or make any unauthorized use of the Confidential Information.

(b)

In order to exploit rights retained by or granted to the Parties under this Distribution and License Agreement, each Party may publish or publicly present any research or other data which may involve the disclosure of Confidential Information; provided that the publishing Party agrees to furnish the non-publishing Party with copies of any proposed oral, written, graphic or electronic public disclosure prior to submission for publication or presentation.  The non-publishing Party shall then have forty five (45) days to review such contemplated publication or presentation.  At the end of the forty five (45) day period, the publishing Party may proceed with the contemplated publication or presentation unless (i) the non-publishing Party reasonably requests additional time to fully protect its intellectual property rights, in which case any such contemplated publication or presentation containing the details of a patentable invention must be withheld by the publishing Party for an additional period of forty five (45) days or until a patent application is filed thereon by the non-publishing Party, whichever is earlier in time; or (ii) the non-publishing Party reasonably requests that trade secret information or other Confidential Information of the non-publishing Party be redacted from the contemplated publication or presentation, in which case any such request shall be honored by the publishing Party.

13.4

Disclosure of Distribution and License Agreement.

Except as required by law, neither AAC nor Baxter shall release to any Third Party or publish in any way any Confidential

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Information with respect to the terms of this Distribution and License Agreement or concerning their cooperation without the prior written consent of the other Party, which consent will not be unreasonably withheld or delayed; provided; however, that either Party may disclose the terms of this Distribution and License Agreement to the extent required to comply with applicable laws, including without limitation: (a) any instance where a Party must comply with the rules and regulations promulgated by the U.S. Securities and Exchange Commission, a stock reporting organization (i.e., the New York Stock Exchange) or similar authorities in other jurisdictions, and (b) any instance where a Party becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process).  Notwithstanding any other provision of this Distribution and License Agreement, each Party may disclose the terms of this Distribution and License Agreement (y) to its legal counsel or (z) to lenders, investment bankers, attorneys, financial advisors and other financial institutions of its choice solely for purposes of financing the business operations of such Party, or to a potential acquirer of all or substantially all of the assets or equity interests of such Party (A) upon the written consent of the other Party; or (B) if the Party disclosing such terms obtains a signed confidentiality agreement with such intended recipient with respect to such Confidential Information, upon terms substantially similar to those contained in this Article 13.

13.5

Press Release.

Within twenty (20) Business Days after execution of this Distribution and License Agreement or the exercise by Baxter of the CoSeal Sealant Option or the CoSeal Adhesion Prevention Option, either or both of the Parties may issue a press release pertaining to such event.  Any such press release will recite language that has been mutually agreed upon by the Parties.  Except as otherwise required by law or applicable government regulations or New York Stock Exchange rules, without the prior written agreement of the Parties, neither Party will issue any other press release concerning the terms or existence of this Distribution and License Agreement.

13.6

Confidential Information of Each Party.

The Parties agree that the material financial terms of this Distribution and License Agreement shall be considered the Confidential Information of both Parties.

13.7

Employee Obligations.

Each Party shall undertake to ensure that all of its employees who have access to Confidential Information are under obligations of confidentiality to such Party.

13.8

Prior Confidentiality Agreements.

The Parties and/or their Affiliates are parties to the following agreements which provide for confidentiality of certain information exchanged by the Parties and/or their Affiliates:

(a)

Mutual Confidentiality Agreement by and between Baxter Healthcare and Angiotech, dated as of October 15, 2002;

(b)

Letter Agreement by and between Baxter International, Inc. and Cohesion, dated as of September 6, 2002 (the "Letter Agreement");

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(c)

Amendment to the Letter Agreement by and between Baxter Healthcare, Cohesion, and Angiotech, dated as of January 31, 2003; and

(d)

CoSeal Units Distribution Agreement by and between Angiotech, Cohesion and Baxter Healthcare, dated February 25, 2003 (the above agreements set forth in this Section 13.8, collectively, the “Prior Confidentiality Agreements”).

The Prior Confidentiality Agreements shall govern disclosures made among the Parties and their Affiliates up to the Effective Date according to their respective terms, and this Distribution and License Agreement shall govern disclosures made on and after the Effective Date under this Distribution and License Agreement.

13.9

Confidential Information upon Expiration or Termination.  

Upon expiration or termination of this Distribution and License Agreement, each Party shall cease to use or disclose Confidential Information for any purpose, except for use or disclosure that is permitted under this Distribution and License Agreement after expiration or termination of this Distribution and License Agreement.

Article 14
Term and Termination

14.1

Term

(a)

Term.  The term of this Distribution and License Agreement shall be the longer of: (i) ten (10) years from the Effective Date, or (ii) the expiration date of the last to expire AAC Patent listed on Schedule 1.3, as it may be amended by the Parties from time to time; provided, however, that in no event shall the term of this Distribution and License Agreement exceed thirty (30) years.

(b)

Accrued Obligations.  Except where explicitly provided elsewhere herein, termination of this Distribution and License Agreement for any reason, or expiration of this Distribution and License Agreement, will not affect: (i) obligations of the Parties, including any payments which have accrued as of the date of termination or expiration, or (ii) rights and obligations of the Parties at law or in equity which, from the context thereof, are intended to survive termination or expiration of this Distribution and License Agreement; nor prejudice any Party's right to obtain performance of any obligation then due and owing.

14.2

Termination for Insolvency.

Either Party may terminate this Distribution and License Agreement immediately upon delivery of written notice to the other Party: (a) upon the institution by or against the other Party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of the other Party's debts; provided, however, with respect to involuntary proceedings, that such proceedings are not dismissed within thirty (30) days; (b) upon the other Party's making an assignment for the benefit of creditors; or (c) upon the other Party's dissolution or ceasing to do business.  All licenses granted hereunder, whether by Baxter or AAC, shall be deemed to be the grant of licenses of "Intellectual Property" under Section 365(n) of

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the United States Bankruptcy Code, as amended.  Should either Party elect to terminate this Distribution and License Agreement pursuant to this Section 14.2, Baxter’s sole obligation shall be to cease sales, distribution and marketing of the Product(s), subject to the inventory sell-off period provided in Section 14.8, and to facilitate the transfer of Regulatory Approvals to AAC (or a Third Party designated by AAC), if requested to do so by AAC or an officer of the bankruptcy court within thirty (30) days of receipt or delivery of the notice of termination.  Such transfer of Regulatory Approvals to AAC shall be at the sole expense of AAC.

14.3

Termination for Material Breach.

Either Party may terminate this Distribution and License Agreement upon thirty (30) days prior written notice to the other Party upon a material breach by the other Party of any of its obligations under this Distribution and License Agreement (and such obligations specifically include a failure by a Party to pay any amount owing hereunder); provided, however, that such termination shall become effective only if the breaching Party shall fail to: (a) remedy or cure the breach within such thirty (30) day period, or initiate a remedy or cure within such period if it is not practicable to complete the cure in such period; or (b) within thirty (30) days after the date of the non-breaching Party’s written notice of material breach, provide written notice of the breaching Party’s dispute of the alleged breach or failure to cure and its invocation of the dispute resolution provisions set forth in Article 16.  If the non-breaching Party elects not to terminate this Distribution and License Agreement pursuant to this Section 14.3, the non-breaching Party shall be entitled to seek, subject to Sections 16.2 and 16.3, any equitable remedies and damages permitted by law, except to the extent otherwise limited by this Distribution and License Agreement.

14.4

Termination of Baxter’s Distribution Rights.

If Baxter fails to meet the Minimum Sales (as defined in Section 5.2) for any CoSeal Unit in any given calendar year (as set forth in Schedule 5.2(a) or (b), as applicable), and Baxter fails to cure the deficiency in accordance with Section 5.3, then AAC may terminate Baxter's marketing, sales and distribution rights pursuant to Section 5.5(a).  Upon termination of Baxter’s sales, marketing and distribution rights concerning such CoSeal Unit Baxter shall have a period of one hundred eighty (180) days to sell any inventory of such CoSeal Unit and CoSeal Accessory(ies), that Baxter has on hand in accordance with Section 14.8, and to transition customers to AAC or an AAC-designated Third Party distributor of such CoSeal Unit, including related AAC Patented Accessory(ies).

14.5

Baxter’s Right to Terminate Distribution.  

Baxter may, at its option, terminate its marketing, sales, and distribution rights as follows:

(a)

CoSeal Sealant Unit.  Baxter may cease marketing, sales and distribution of the CoSeal Sealant Unit by providing no less than one hundred eighty (180) days written notice to AAC.  If Baxter terminates its marketing, sales and distribution rights pertaining to the CoSeal Sealant Unit, then on the date set forth in such notice, this Distribution and License Agreement (including all marketing, sales and distribution rights of Baxter, whether licensed or option rights, pertaining to the CoSeal Adhesion Prevention Unit) shall terminate concurrently with the termination of Baxter’s rights to the CoSeal Sealant Unit.  In the event of such termination, Baxter shall retain the right of inventory sell-off set forth in Section 14.8.

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(b)

CoSeal Adhesion Prevention Unit.  Baxter may cease marketing, sales and distribution of the CoSeal Adhesion Prevention Unit by providing no less than one hundred eighty (180) days written notice to AAC.  Baxter’s CoSeal Adhesion Prevention Unit marketing, sales and distribution rights shall terminate on the date set forth in such notice, subject to its right of inventory sell-off set forth in Section 14.8.  If Baxter ceases marketing, sales and distribution of the CoSeal Adhesion Prevention Unit, Baxter’s rights relative to the CoSeal Sealant Unit shall remain in full force and effect.

14.6

  Termination of Manufacturing Agreement.

If the Manufacturing Agreement is terminated, this Distribution and License Agreement shall also terminate in its entirety as of the effective termination date applicable to the Manufacturing Agreement, subject to Baxter’s inventory sell-off rights set forth in Section 14.8.

14.7

Effect of Expiration or Termination.

(a)

License of Rights to AAC As Applied to Marketed CoSeal Units, CoSeal Accessories and Components Thereof.

(i)

Expiration or Termination of Distribution and License Agreement.  Upon expiration or termination of this Distribution and License Agreement, Baxter shall grant to AAC a fully paid up, royalty free and irrevocable right and license under the Baxter Patents, Baxter Trademarks and Baxter Know-How existing as of the date of such expiration or termination, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Baxter Patents, Baxter Trademarks and Baxter Know-How to use, market, distribute, sell, offer for sale, export and import (itself or through contractually bound Third Party(ies) of AAC) Product(s), CoSeal Device(s) or CoSeal Unit(s) which are being sold or offered for sale in the Field under this Distribution and License Agreement for indications approved in the Field at the date of termination or expiration.

(ii)

Termination of CoSeal Adhesion Prevention Unit Rights.  After Baxter’s exercise of its CoSeal Adhesion Prevention Option, in the event that Baxter’s right to distribute, sell and market the CoSeal Adhesion Prevention Unit is terminated and if this Distribution and License Agreement otherwise continues in full force and effect, then Baxter shall grant to AAC a fully paid up, royalty free and irrevocable right and license under the Baxter Patents, Baxter Trademarks and Baxter Know-How existing as of the date of termination of Baxter’s rights to distribute, market and sell the CoSeal Adhesion Prevention Unit, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Baxter Patents, Baxter Trademarks and Baxter Know-How to use, market, distribute, sell, offer for sale, export and import (itself or through contractually bound T hird Party(ies) of AAC) the CoSeal Adhesion Prevention Product(s), CoSeal Adhesion Prevention Device(s) or CoSeal Adhesion Prevention Unit(s) which are being sold or offered for sale in the Field under this Distribution and License Agreement for indications approved in the Field at the date of termination of Baxter’s right to distribute, market and sell the CoSeal Adhesion Prevention Unit.

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(b)

Covenant by Baxter not to Sue AAC for Sale of Marketed CoSeal Units and CoSeal Accessories.

(i)

Expiration or Termination of Distribution and License Agreement.  Upon expiration or termination of this Distribution and License Agreement (other than termination by Baxter for breach hereof by AAC), Baxter and Affiliates (and their respective successors and assigns) covenant not to sue (either at the time of, or subsequent to expiration or termination of this Distribution and License Agreement):

(A) AAC,

(B) any contractually bound Third Party licensee of AAC or Affiliate licensee of AAC, or

(C) any Third Party(ies) that is/are a contractually bound sublicensee(s) of such Third Party licensee or Affiliate licensee,

under the Patents Controlled by Baxter existing as of the date of such expiration or termination, for any use, marketing, distribution, sale, offer for sale, export or import by AAC and Affiliates (and their respective successors and assigns) or by any such Third Party licensee or sublicensee of CoSeal Accessories, Product(s), CoSeal Device(s) or CoSeal Unit(s) which are being sold or offered for sale in the Field under this Distribution and License Agreement for indications approved in the Field at the date of expiration or termination (“CoSeal Covenant Subject Matter”).  For the avoidance of doubt, Baxter and its Affiliates (and their respective successors and assigns) shall not assert at any time after the date of such expiration or termination, and shall take no steps to assert after the date of such expiration or termination, any Patents Controlled by Baxter that cover the CoSeal Covenant Subject Matter against AACor any such Third Party licensee, Affiliate licensee or any of their sublicensees, for any use, marketing, distribution, sale, offer for sale, export or import of the CoSeal Covenant Subject Matter in accordance with this Section 14.7(b)(i).

(ii)

Termination of CoSeal Adhesion Prevention Unit Rights.  After Baxter’s exercise of its CoSeal Adhesion Prevention Option, in the event that Baxter’s right to distribute, sell and market the CoSeal Adhesion Prevention Unit is terminated and if this Distribution and License Agreement otherwise continues in full force and effect, then Baxter and Affiliates (and their respective successors and assigns) covenant not to sue (either at the time of, or subsequent to termination of Baxter’s right to distribute, market and sell the CoSeal Adhesion Prevention Unit):

(A) AAC,

(B) any contractually bound Third Party licensee of AAC or Affiliate licensee of AAC, or

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(C) any Third Party(ies) that is/are a contractually bound sublicensee(s) of such Third Party licensee or Affiliate licensee,

under the Patents Controlled by Baxter existing as of the date of such termination, for any use, marketing, distribution, sale, offer for sale, export or import by AAC and Affiliates (and their respective successors and assigns) or by any such Third Party licensee or sublicensee of CoSeal Accessories, CoSeal Adhesion Prevention Product(s), CoSeal Adhesion Prevention Device(s) or CoSeal Adhesion Prevention Unit(s) which are being sold or offered for sale in the Field under this Distribution and License Agreement for indications approved in the Field at the date of termination of Baxter’s right to distribute, market and sell the CoSeal Adhesion Prevention Unit (“CoSeal Adhesion Prevention Covenant Subject Matter”).  For the avoidance of doubt, Baxter and its Affiliates (and their respective successors and assigns) shall not assert at any time after the date of such expiration or termination, and shall take no steps to assert after the date of such expiration or termination, any Patents Controlled by Baxter that cover the CoSeal Adhesion Prevention Covenant Subject Matter against AAC or any such Third Party licensee or Affiliate sublicensee or any of their sublicensees, for any use, marketing, distribution, sale, offer for sale, export or import of the CoSeal Covenant Subject Matter in accordance with this Section 14.7(b)(ii).

(c)

License of Rights to AAC As Applied to Other Products, CoSeal Units for Additional Indications, Other Devices, and Processes.  With respect to rights and licenses not set forth in Section 14.7(a), upon expiration or termination of this Distribution and License Agreement, and subject to negotiation of a royalty (if applicable) and a license agreement acceptable to the Parties, Baxter shall grant to AAC:

(i)

one or more royalty-bearing, non-exclusive right(s) and license(s) (negotiated in good faith by the Parties for a period not to exceed ninety (90) days) under Patents Controlled by Baxter and Baxter Trademarks: (A) existing as of the date of such expiration or termination, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Patents Controlled by Baxter and Baxter Trademarks to research, develop, use, market, distribute, sell, offer for sale, export and import (itself or through contractually bound Third Party(ies)) such Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Unit(s) which are intended to be sold or offered for sale for indications approved subsequent to the date of termination or expiration, and (B) having one or more valid and unexpired claims or marks that cover one or more of such Products, devices or CoSeal Unit(s) or that cover processes directed to making or using one or more of such Products, devices or CoSeal Units, and

(ii)

a fully paid up, royalty-free, irrevocable, non-exclusive license (with a right to sublicense) under the Baxter Know-How existing as of the date of termination or expiration, to research, develop, use, market, distribute, sell, offer for sale, export and import (itself or through contractually bound Third Party(ies) of AAC) such Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Unit(s) which are intended to be sold or offered for sale for indications (as well as related processes) in development at the date of termination or expiration.

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(d)

License of Rights to AAC Upon Termination of CoSeal Adhesion Prevention Rights.  With respect to rights and licenses not set forth in Section 14.7(a), after Baxter’s exercise of its CoSeal Adhesion Prevention Option, in the event that Baxter’s right to distribute, sell and market the CoSeal Adhesion Prevention Unit is terminated and if this Distribution and License Agreement otherwise continues in full force and effect, subject to negotiation of a royalty (as applicable) and a license agreement acceptable to the Parties, Baxter shall grant to AAC:

(i)

one or more royalty-bearing, non-exclusive right(s) and license(s) (negotiated in good faith by the Parties for a period not to exceed ninety (90) days) under Patents Controlled by Baxter and Baxter Trademarks: (A) existing as of the date of such termination, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Patents Controlled by Baxter and Baxter Trademarks to research, develop, use, market, distribute, sell, offer for sale, export and import (itself or through contractually bound Third Party(ies)) such CoSeal Adhesion Prevention Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Adhesion Prevention Unit(s) which are intended to be sold or offered for sale for indications approved subsequent to the date of termination, and (B) having one or more valid and unexpired claims or m arks that cover one or more of such CoSeal Adhesion Prevention Products, devices or CoSeal Adhesion Prevention Unit(s) or that cover processes directed to making or using one or more of such CoSeal Adhesion Prevention Products, devices or CoSeal Adhesion Prevention Units.

(ii)

a fully paid up, royalty-free, irrevocable, non-exclusive license (with a right to sublicense) under the Baxter Know-How existing as of the date of termination of Baxter’s right to distribute, market and sell the CoSeal Adhesion Prevention Unit, to research, develop, use, market, distribute, sell, offer for sale, export and import (itself or through contractually bound Third Party(ies) of AAC) such CoSeal Adhesion Prevention Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Adhesion Prevention Unit(s) which are intended to be sold or offered for sale for indications (as well as related processes) in development at the date of termination of Baxter’s right to distribute, market and sell the CoSeal Adhesion Prevention Unit.

(e)

Information.  In the event of termination of this Distribution and License Agreement for any reason other than AAC’s uncured material breach of this Agreement, Baxter shall make customer information reasonably available to AAC that is comparable to the customer information provided by AAC to Baxter pursuant to Section 8.1(b).

(f)

Additional Obligations.  Upon expiration, or termination of this Distribution and License Agreement (or termination of a Party’s rights and obligations with respect to a given CoSeal Unit) by either Party, Baxter shall transfer to AAC (or to its designee, as permitted under the applicable law) all Regulatory Approvals (including all supporting data, quality system records and information) for such CoSeal Unit(s), including CoSeal Accessory(ies), in the Territory as of the date of the termination.  Except as set forth in Section 14.2, in the event of termination by Baxter or termination by AAC for material breach by Baxter, such transfer shall be

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at Baxter’s sole expense.  In the event of termination by AAC or termination by Baxter for material breach by AAC, such transfer shall be at AAC’s sole expense.

14.8

Inventory.

Notwithstanding the foregoing, upon termination or expiration of this Distribution and License Agreement (so long as this termination is not for reason of Baxter’s uncured material breach), and, at the terminating Party’s election, (a) Baxter shall be allowed to sell all remaining CoSeal Units, including related CoSeal Accessories, in its inventory within six (6) months after the date of termination, subject to Baxter’s payment(s) to Cohesion or its designee pursuant to Section 9.4; and thereafter Baxter shall destroy any remaining supply of CoSeal Units, including related CoSeal Accessories, at AAC’s request and direction; or (b) Baxter shall sell back to AAC at cost any remaining usable CoSeal Unit(s), including related CoSeal Accessory(ies).  Such post-termination activities of Baxter conducted pursuant to this Section 14.8 shall not give rise to an action for infringement under the AAC Patents, the AAC Trademarks, the Baxter Trademarks or the Baxter Patents (as applicable).

Article 15
Indemnification and Insurance

15.1

General Indemnification by AAC.

AAC, jointly and severally, shall defend, indemnify and hold harmless Baxter and its Affiliates and their employees, officers, agents and directors against any loss, damages, action, suit, claim, demand, liability, expense, bodily injury, death, or property damage (a “Loss”) that may be brought, instituted or arise against or be incurred by such persons to the extent such Loss is based on or arises out of the breach by AAC of any of its covenants, representations or warranties set forth in this Distribution and License Agreement or improper business practices; provided, however, that the foregoing indemnification shall not apply to any Loss to the extent such Loss is caused by the negligent or willful misconduct of Baxter or its Affiliates.

15.2

General Indemnification by Baxter.

Baxter, jointly and severally, shall defend, indemnify and hold harmless AAC and its Affiliates and their employees, officers, agents and directors against any Loss that may be brought, instituted or arise against or be incurred by such persons to the extent such Loss is based on or arises out of the breach by Baxter of any of its covenants, representations or warranties set forth in this Distribution and License Agreement or improper business practices; provided, however, that the foregoing indemnification shall not apply to any Loss to the extent such Loss is caused by the negligent or willful misconduct of AAC or its Affiliates.

15.3

Claims Procedures.

A Party entitled to be indemnified by the other Party (an “Indemnified Party”) pursuant to Section 15.1 or 15.2 hereof shall give written notice to the other Party (an “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any threatened or asserted claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided:

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(a)

that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (which approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense (unless (i) the employment of counsel by such Indemnified Party has been authorized by the Indemnifying Party; or (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in the defense of such action, in each of which cases the Indemnifying Party shall pay the reasonable fees and expenses of one law firm serving as counsel for the Indemnified Party, which law firm shall be subject to approval, not to be unreasonably withheld, by the Indemnifying Party);

(b)

the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Distribution and License Agreement to the extent that such failure to give notice did not result in prejudice to the Indemnifying Party or the Indemnifying Party’s insurer;

(c)

the Indemnifying Party, in the defense of any such claim or litigation, shall not, except with the approval of the Indemnified Party (which approval shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which (i) would result in injunctive or other relief being imposed against the Indemnified Party; or (ii) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation; and

(d)

the Indemnified Party shall furnish such information regarding itself or the claim in question as the Indemnifying Party may reasonably request in writing, and shall be reasonably required in connection with the defense of such claim or litigation resulting therefrom.

15.4

Compliance.

The Parties shall comply fully with all applicable laws and regulations in connection with their respective activities under this Distribution and License Agreement.

15.5

Insurance.

(a)

Baxter shall, until expiration of the last batch of CoSeal Unit sold hereunder, or of Product or CoSeal Unit manufactured pursuant to the Manufacturing Agreement, by Baxter, its Affiliates, and sublicensees, obtain and maintain at its own cost and expense, any combination of insurance or self-insurance, in Baxter’s sole discretion, for its commercial liability, including, but not limited to, product liability and contractual liability insurance, with respect to its activities hereunder.

(b)

AAC shall, until expiration of the last batch of Product or CoSeal Unit manufactured by AAC, its Affiliates, and sublicensees for Baxter under the Manufacturing Agreement, obtain and maintain at its own cost and expense, any combination of insurance or

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self-insurance, in AAC’s sole discretion, for its commercial liability, including, but not limited to, product liability and contractual liability insurance, with respect to its activities hereunder.

(c)

For each Party, such insurance or self-insurance shall be in such amounts and subject to such deductibles as Baxter and AAC may agree based upon standards prevailing in the industry at the time.  Such insurance or self-insurance shall be written to cover claims incurred, discovered, manifested, or made in connection with clinical development and commercial sale of Products in the Territory.  Upon written request, each of Baxter and AAC shall provide to the other Party copies of its Certificates of Insurance.

(d)

All insurance policies required of either Party under this Distribution and License Agreement shall, at each Parties’ discretion with respect to its insurance, be through self-insurance or a combination of self-insurance and commercially placed insurance.  Where the Party uses commercially placed insurance, such insurance shall (i) be issued by reputable, financially sound companies; (ii) provide that the insurance company will endeavor to provide at least thirty (30) days notice of cancellation, non-renewal or material change of coverage to both Baxter and AAC, but its failure to do so shall impose no penalty or additional obligations under this Distribution and License Agreement; and (iii) contain a severability of interest or separation of the insureds provision, affording defense and coverage for an insured in the event of a claim brought by another insured.

(e)

All of the foregoing liability policies shall be primary and non-contributory and contain a waiver of subrogation in favor of the other Party or the other Party’s designee.

15.6

Responsibility and Control.

Baxter and AAC shall each be solely responsible for the safety of its own employees, agents, Affiliates or independent contractors with respect to its performance under this Distribution and License Agreement, and each shall hold the other Party harmless with regard to any liability for damages or personal injuries resulting from acts of its respective employees, agents, Affiliates or independent contractors.

15.7

No Limitation.

Nothing in this Article 15 regarding insurance coverage amounts shall be deemed or interpreted as a limitation on the indemnities set forth in this Distribution and License Agreement.

Article 16
Miscellaneous Provisions

16.1

Governing Law.

This Distribution and License Agreement shall be governed, interpreted and construed in accordance with the substantive laws of New York, without regard to conflict of laws principles thereof.

16.2

Escalation of Dispute Resolution.

The Parties shall attempt to settle any dispute through good faith negotiations in the spirit of mutual cooperation between business executives with authority to resolve the dispute.  Prior to taking action as provided in Section 16.3 of this Distribution and License Agreement, the Parties shall first submit such dispute to the Steering

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Committee.  The Steering Committee shall attempt to resolve the dispute through good faith negotiations over a reasonable period, not to exceed fifteen (15) Business Days in the aggregate unless otherwise agreed upon by the Steering Committee.  Such fifteen (15) Business Day period shall be deemed to commence on the date of a notice from any Party describing the particular dispute.  If the Steering Committee is unable to resolve the dispute in the allotted time, the dispute shall be submitted to Angiotech’s Chief Executive Officer and to Baxter’s General Manager of the BioSurgery Business ("Heads") for resolution.  The Heads to whom any dispute is submitted shall attempt to resolve the dispute through good faith negotiations over a reasonable period, not to exceed fifteen (15) Business Days in the aggregate unless otherwise agreed upon by the Heads.  Such fifteen (15) Business Day period shall be deemed to commence on the date the dispute was submitted to the Heads.  All negotiations pursuant to this Section 16.2 shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

16.3

Arbitration.

Any dispute that is not resolved by negotiations pursuant to Section 16.2 shall, upon the submission of the written request of either Party to the Steering Committee and the other Party, be resolved by binding arbitration before a three person panel of Arbitrators (the “Panel”), conducted in accordance with the Rules of CPR Institute for Dispute Resolution, except to the extent that such rules are inconsistent with this Distribution and License Agreement.  Each Party shall select its own Arbitrator (a “Party Arbitrator”) and shall notify the other Party of its selection within fifteen (15) Business Days after receipt of the written request for binding arbitration.  However, neither Party may select as a Party Arbitrator any Third Party who is currently engaged to provide non-arbitration related legal services to such Party or that has derived more than ten percent (10%) of its revenues from non-arbitration related legal services provided to such Party within the past twelve (12) months. The Party Arbitrators shall then mutually select a third Arbitrator (a “Neutral Arbitrator”) in accordance with the Rules of the CPR Institute for Dispute Resolution.  Such Neutral Arbitrator may not be currently engaged by either Party and may not have derived more than ten percent (10%) of its revenues from services provided to either Party within the past twelve (12) months.  Each member of the Panel shall be free of any subject matter conflict and conflict with a Party.  The Panel shall resolve the dispute in accordance with this Distribution and License Agreement and the substantive rules of law (but not the rules of procedure) that would be applied by a federal court sitting at the site of the arbitration.  The arbitration shall take place in Chicago, Illinois if initiated by AAC, and in Seattle, Washington if initiated by Baxter.  The arbitration shall be g overned by the United States Arbitration Act, 9 U.S.C. §§ 1-16.  Except as set forth in this Distribution and License Agreement, the Panel is not empowered to award damages in excess of compensatory damages.  The Panel has no power or authority, under the CPR Rules for Non-Administered Arbitration or otherwise, to relieve the Parties from their agreement hereunder to arbitrate, or otherwise to amend or disregard any provision of this Distribution and License Agreement, including the provisions of this Section 16.3.  The award of the Panel shall be the sole and exclusive remedy of the Parties, and shall be enforceable in any court of competent jurisdiction, subject only to revocation on grounds of fraud or clear bias on the part of the any member of the Panel.  The statute of limitations of the State of New York, applicable to the commencement of a lawsuit, shall apply to the commencement of an arbitration under this Section 16.3, except that no defenses shall be available based upon the passage of time during any negotiation or mediation pursuant to Section 16.2.

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16.4

Waiver.

The failure on the part of AAC or Baxter to exercise or enforce any rights conferred upon it hereunder shall not be deemed to be a waiver of any such rights and shall not operate to bar the exercise or enforcement thereof at any time or times thereafter.  The observance of any term of this Distribution and License Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) by the Party entitled to enforce such term, but any such waiver shall be effective only if set forth in a writing signed by the Party against whom such waiver is to be asserted.

16.5

Force Majeure.

Neither Party shall be held liable or responsible to the other Party, nor be deemed to have defaulted under or breached this Distribution and License Agreement, including the obligation to meet Minimum Sales amounts, for failure or delay in fulfilling or performing any term of this Distribution and License Agreement, other than an obligation to make a payment, when such failure or delay is caused by or results from fire, floods, earthquakes, embargoes, prohibitions or interventions, war, acts of war (whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts, acts of God, or any other cause beyond the reasonable control of the affected Party (hereinafter a “Force Majeure”).  Nothing in this provision shall be interpreted to restrict either Party from exercising its rights to terminate this Distribution and License Agreement pursuant to its te rms during such periods of Force Majeure.

16.6

Severability.

It is the intention of the Parties to comply with all applicable laws, domestic or foreign, in connection with the performance of its obligations hereunder.  In the event that any provision of this Distribution and License Agreement, or any part hereof, is found invalid or unenforceable, the remainder of this Distribution and License Agreement will be binding on the Parties hereto, and will be construed as if the invalid or unenforceable provision or part thereof had been deleted, and this Distribution and License Agreement shall be deemed modified to the extent necessary to render the surviving provisions enforceable to the fullest extent permitted by law.

16.7

Survival.

The following Articles and Sections shall survive termination or expiration of this Distribution and License Agreement, with such limitations as are noted: Article 1, to the extent definitions are embodied in the following listed Articles and Sections of this Distribution and License Agreement; Sections 2.1(a)(ii), 2.1(c)(ii) (if the CoSeal Sealant Option is exercised or the Japan Payment is made), 2.2(a)(ii), 2.2(b)(ii) (if the CoSeal Adhesion Prevention Option is exercised), 2.3(b), 5.6, 6.2, 6.3, 8.1(a) (for a period not to exceed eighteen (18) months after expiration or termination of the Manufacturing Agreement), 8.5 and 9.4 (for the duration of the inventory sell-off period set forth in Section 14.8), 9.5 (for a period of twelve (12) months after the calendar year in which this Distribution and License Agreement is terminated or expires); Articles 10 (to the extent needed for AAC to exploit its post-t ermination or post-expiration rights), 12 & 13; Sections 14.1(b), 14.7, 14.8; and Articles 15 and 16 (excluding Section 16.8).  In addition, to the extent any Article of this Distribution and License Agreement contains definitions or other provisions that are necessary to give meaning to the Manufacturing Agreement, such Articles shall survive termination or expiration of this Distribution and License Agreement, but only to such extent.

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16.8

Government Acts.

In the event that any act, regulation, directive, or law of a government, including its departments, agencies or courts (a “Government Act”), should make impossible or prohibit, restrain, modify or limit any material act or obligation of AAC or Baxter under this Distribution and License Agreement, the Party not so affected shall have the right, at its option, to suspend or terminate this Distribution and License Agreement.  Such right of suspension or termination may be exercised as to the country which committed the Government Act only if after thirty (30) days of good faith negotiations between the Parties, the Parties cannot agree to make such modifications to this Distribution and License Agreement as may be necessary to fairly address the Government Act.

16.9

Government Approvals.

Each Party will use Commercially Reasonable Efforts to obtain any government approval required to enable this Distribution and License Agreement to become effective, or to enable any payment hereunder to be made, or enable any other obligation hereunder to be observed or performed.  Each Party will keep the other Party informed of its progress in obtaining any such governmental approvals.

16.10

Assignment.

This Distribution and License Agreement may not be assigned in part or in whole, or delegated in part or in whole, by either Party without the prior written consent of the other Party; provided, however, that either Party may assign this Distribution and License Agreement, without the consent of the other Party, (a) in part or in whole to any of its Affiliates, if the assigning Party remains liable for the full performance of its Affiliates’ obligations hereunder, or (b) in connection with the transfer or sale of all or substantially all of its assets or business to which this Distribution and License Agreement relates, or in the event of its merger or consolidation with, acquisition by, or sale to another company.  The Parties acknowledge that Baxter may elect to assign to one or more Third Parties, on a country-by-country or region-by-region basis, certain of its rights and to delegate certain o f its obligations under this Distribution and License Agreement; provided, however, that Baxter may not assign such rights or delegate such obligations in the United States, Europe or Japan to a Third Party without AAC’s prior written consent.  In all cases, (x) the assigning or delegating Party shall provide the other Party with prompt written notice of any such assignment or delegation; (y) the assignee or delegatee shall accept such assignment or delegation in writing and agree to the related obligations of such assignment or delegation; and (z) the assignment or delegation shall not in any way diminish, reduce or eliminate any of the assigning or delegating Party’s obligations under this Distribution and License Agreement, and such Party shall remain liable for all such obligations. Any purported assignment or delegation in contravention of this Section 16.10 shall, at the option of the non-assigning or non-delegating Party, be null and void and of no effect.  Unless the Parties other wise agree in writing, no assignment or delegation shall release either Party from responsibility for the performance of any accrued obligation of such Party hereunder.  The grant of a sublicense or appointment of a subdistributor, agent or co-promoter pursuant to Section 2.4 shall not be deemed an assignment or delegation under this Distribution and License Agreement.

16.11

Binding Agreement.

This Distribution and License Agreement shall be binding upon and inure to the benefit of all successors and permitted assigns of the Parties.  

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16.12

Counterparts.

This Distribution and License Agreement may be executed by original or facsimile signature in several counterparts, all of which shall be deemed to be originals, and all of which shall constitute one and the same Distribution and License Agreement.

16.13

No Agency.

Nothing herein contained shall be deemed to create an agency, joint venture, amalgamation, partnership or similar relationship between AAC and Baxter.  Notwithstanding any of the provisions of this Distribution and License Agreement, neither Party shall at any time enter into, incur, or hold itself out to Third Parties as having authority to enter into or incur, on behalf of the other Party, any commitment, expense, or liability whatsoever, and all such commitments, expenses and liabilities undertaken or incurred by one Party in connection with or relating to the development, manufacture or sale of CoSeal Accessory(ies)or CoSeal Unit(s) or components thereof shall be undertaken, incurred or paid exclusively by that Party, and not as an agent or representative of the other Party.

16.14

Notice.

All communications between the Parties with respect to any of the provisions of this Distribution and License Agreement will be sent to the addresses set forth below, or to such other addresses as designated by one Party to the other Party by notice pursuant hereto, by internationally recognized courier or by prepaid, certified air mail (which shall be deemed received by the other Party on the seventh (7^th) Business Day following deposit in the mails), or by facsimile transmission or other electronic means of communication (which shall be deemed received when transmitted), with confirmation by letter sent at or before the close of business the next following Business Day:

If to AAC, at:

Angiotech Pharmaceuticals, Inc.

1618 Station Street

Vancouver, British Columbia, CANADA V6A 1B6

Attention:  Chief Business Officer

with a copy to:

Angiotech Pharmaceuticals, Inc.

1618 Station Street

Vancouver, British Columbia, CANADA V6A 1B6

Attention:  General Counsel

If to Baxter, at:

Baxter Healthcare Corporation

1627 Lake Cook Road

Mailstop LCIV-1W

Deerfield, Illinois 60015

Attention:  President, Venture Management

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with a copy to:

Baxter Healthcare Corporation

One Baxter Parkway

Deerfield, Illinois 60015

Attention:  General Counsel

and to:

Baxter Healthcare Corporation

Attn: Associate General Counsel of Baxter BioScience

One Baxter Way

Westlake Village, CA  91362

16.15

Headings.

  The Article, Section and subsection headings are for convenience only and will not be deemed to affect in any way the language of the provisions to which they refer.

16.16

Authority.

  The undersigned represent that they are authorized to sign this Distribution and License Agreement on behalf of the Parties hereto.

16.17

No Implied Licenses.

  Nothing in this Distribution and License Agreement shall be construed as granting either Party by implication, estoppel or otherwise, any license rights which are not expressly set forth herein.

16.18

Entire Agreement.

  This Distribution and License Agreement, including the Schedules appended hereto, together with the Manufacturing Agreement which is hereby incorporated by reference as if fully set forth herein, contains the entire understanding of the Parties relating to the matters referred to herein, and may only be amended by a written document, duly executed on behalf of the respective Parties.

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IN WITNESS WHEREOF, the Parties hereto have caused this Distribution and License Agreement to be executed by their duly authorized representatives, effective as of the day and year first above written, although actually signed on the dates set forth below.

Vancouver, British Columbia

Deerfield, Illinois

Angiotech Pharmaceuticals, Inc.

Baxter Healthcare Corporation

/s/ William L. Hunter

/s/ Gregory Bosch

Dr. William L. Hunter

Gregory Bosch

President and Chief Executive Officer

Vice President & General Manager

Biosurgery

Date April 18, 2003

Date April 18, 2003

Angiotech International, Inc.

Baxter Healthcare, S. A.

/s/ David D. McMasters

/s/ Gregory Bosch

David D. McMasters

Gregory Bosch

Managing Officer

Under Power of Attorney

from Baxter Healthcare, S.A.

Date April 18, 2003

Date April 18, 2003

Cohesion Technologies, Inc.

/s/ Jeanne M. Bertonis

Jeanne M. Bertonis

Secretary

Date April 18, 2003

62

Confidential

SCHEDULE 1.3

AAC PATENTS

Patent Family	Patent Number	Title	Dates	International Patents and Applications (per patent family)
1	5,874,500	CROSSLINKED POLYMER COMPOSITIONS AND METHODS FOR THEIR USE	Issued 2/23/99 Filed 12/18/96	Off of ’500 Patent Australia 717660 (issued) Canada 2239775 (pending) Europe 96944824.0 (published) Japan 9-522938 (pending) Off of ’889 Patent WIPO 02/19122 (published)
	6,051,648	CROSSLINKED POLYMER COMPOSITIONS AND METHODS FOR THEIR USE	Issued 4/18/00 Filed 1/13/99
	09/932,536	CROSSLINKED POLYMER COMPOSITIONS AND METHODS FOR THEIR USE	Filed 11/27/01 (allowed)
	6,458,889	COMPOSITIONS AND SYSTEMS FOR FORMING CROSSLINKED BIOMATERIALS AND ASSOCIATED METHODS OF PREPARATION AND USE	Issued 10/1/02 Filed 06/15/01
	6,166,130	METHOD OF USING CROSSLINKED POLYMER COMPOSITIONS IN TISSUE TREATMENT APPLICATIONS	Issued 12/26/00 Filed 4/30/99
	6,323,278	METHOD OF MAKING CROSSLINKED POLYMER MATRICES IN TISSUE TREATMENT APPLICATIONS	Issued 11/27/01 Filed 12/08/00
	10/262,640	METHOD FOR TISSUE REPAIR USING ADHESIVE MATERIALS	Filed 09/30/02
2	6,312,725	RAPID GELLING BIOCOMPATIBLE POLYMER COMPOSITION (THIOL PEGS)	Issued 11/6/01 Filed 04/16/99	Japan 2000-611963 9 (published)
	10/012,263	RAPID-GELLING BIOCOMPATIBLE POLYMER COMPOSITION AND ASSOCIATED METHODS OF PREPARATION AND USE	Filed 11/05/01
3	5,162,430	COLLAGEN-POLYMER CONJUGATES	Issued 11/10/92 Filed 11/14/89	Australia 638637 (issued) Japan 2505312 (issued) France 444157 (issued) Germany 68928754.2 (issued) Italy 444157 (issued) UK 444157 (issued)
	5,304,595	COLLAGEN-POLYMER CONJUGATES	Issued 04/19/94 Filed 12/30/92
	5,264,214	COMPOSITION FOR BONE REPAIR	Issued 11/23/93 Filed 08/14/92
	5,324,775	BIOLOGICALLY INERT, BIOCOMPATIBLE-POLYMER CONJUGATES	Issued 06/28/94 Filed 07/02/92
	5,565,519	CLEAR, CHEMICALLY MODIFIED COLLAGEN-POLYMER CONJUGATES FOR OPHTHALMIC APPLICATIONS	Issued 10/15/96 Filed 11/3/93

63

Confidential

SCHEDULE 1.3

AAC PATENTS

(continued)

Patent Family	Patent Number	Title	Dates	International Patents and Applications (per patent family)
4	6,495,127	COMPOSITIONS AND SYSTEMS FOR FORMING HIGH STRENGTH MEDICAL SEALANTS, AND ASSOCIATED METHODS OF PREPARATION AND USE	Issued 12/17/02 Filed 08/28/00	Europe 00959535.6 (published) Japan 2001-520763 (pending)
5	6,165,489	CROSSLINKED COLLAGEN COMPOSITIONS FOR IN SITU ADMINISTRATION	Issued 12/26/00 Filed 04/28/99	None
6	5,614,587	COLLAGEN-BASED BIOADHESIVE COMPOSITIONS	Issued 03/25/97 Filed 06/07/95	Canada 2172906 (pending) Europe 96108503.2 (published) Japan 8-139317 (published)
7	5,968,018	CELL SEPARATION DEVICE AND IN-LINE ORIFICE MIXER SYSTEM	Issued 10/19/99 Filed 10/30/96	Japan 10-520756 (published)

64

Confidential

Confidential

SCHEDULE 1. 4

AAC TRADEMARKS

COSEAL®

ADHIBIT™

ANGIOTECHKNOWLEDGY™

65

Confidential

SCHEDULE 1. 15

COSEAL ACCESSORIES

Cohesion Part Number	Description
AES-500	Air Enhanced Spray Accessory 5X
ARS-530	Air Regulator System
FXP-060	CoSeal Extended Applicators 22cm
FXP-069	CoSeal Replacement Applicators

66

Confidential

SCHEDULE 1.21

COSEAL INGREDIENTS

	Molecular Formula
[***]	[***]
[***]	[***]

Structure of [***]

Structure of [***]

68

Confidential

	Chemical Name	Chemical Abstracts Service Number	Average Molecular Weight (Mw)	Molecular Weight Distribution Mw/Mn (GPC)
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

68

Confidential

SCHEDULE 2.1(b)

THIRD PARTY RIGHTS

·

License and Distributorship Agreement (EU) by and between Cohesion and Tyco Healthcare Group AG, dated and effective as of September 15, 2000

·

International Distributor Agreement between Cohesion and TAG Medical, dated December 15, 2000

·

International Distributor Agreement between Cohesion and Downuri Corp., dated July 15, 2002

·

United States Manufacturer's Rep Agreement between Cohesion and Products for Surgery, Inc., dated July 31, 2002

·

Distributor Agreement between Cohesion and Japan Lifeline Co., Ltd., dated August 1, 2000

·

International Distributor Agreement between GM Medical Pacific L.T.D. and Cohesion, made and entered into effective as of December 15, 2000

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Confidential

SCHEDULE 5.2(a)

COSEAL SEALANT UNIT MINIMUM SALES

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Worldwide CoSeal Sealant

Unit Minimum Sales

(Excluding Japan):

[***]

The above and below CoSeal Sealant Unit Minimum Sales are expressed in Thousands of Dollars and apply to Baxter’s worldwide Net Sales of CoSeal Sealant Units, including related AAC Patented Accessory(ies), excluding sales in Japan.  Beginning in the first full calendar year in which Baxter has the right to sell after receiving Japanese NHI reimbursement approval for the CoSeal Sealant Unit, the following additional amounts (also expressed in Thousands of Dollars) shall be added to the above CoSeal Sealant Unit Minimum Sales:

Year1

Year2

Year3

Year4

Year5

Year6

Year7

Additional CoSeal Sealant Unit

Minimum Sales Following

Reimbursement Approval in Japan:

[***]

By way of example only, and not definition, if the Japanese NHI reimbursement approval is obtained in calendar year 2004, then Baxter’s applicable CoSeal Sealant Unit Minimum Sales figure for 2005 shall be equal to the 2005 minimum of [***] set forth above, plus the Year 1 additional minimum following Regulatory Approval in Japan of [***], for a total 2005 CoSeal Sealant Unit Minimum Sales number of [***]

All of the above CoSeal Sealant Unit Minimum Sales are subject to the periodic reevaluation, adjustment and Baxter’s right to cure, all as set forth in Article 5.

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Confidential

SCHEDULE 8.1(d)

COMMERCIAL SAMPLES

TO BE PROVIDED BY AAC

1.

In accordance with Section 8.1(d), AAC will provide [***] to Baxter, a total of 750 samples of CoSeal Unit(s) for use in the United States of which 500 will be sterile and 250 will be sterile or non-sterile at the option of AAC.  Baxter, may, at its option order an additional 250 sterile samples [***]

2.

In accordance with Section 8.1(d), AAC will provide, [***] to Baxter, a total of 750 samples of CoSeal Unit(s) for use in the Territory outside of the United States, of which 500 will be sterile and 250 will be sterile or non-sterile at the option of AAC.  Baxter, may, at its option order an additional 250 sterile samples [***]

71

EX-10.6

Exhibit 10.6

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL.

Confidential

Manufacturing and Supply Agreement

by and among

Angiotech Pharmaceuticals, Inc.

Angiotech International, GmbH

Cohesion Technologies, Inc.

and

Baxter Healthcare Corporation

Baxter Healthcare, S.A.

CONFIDENTIAL

Manufacturing and Supply Agreement

This Manufacturing and Supply Agreement (“Manufacturing Agreement”), dated as of April 1, 2003 (“Effective Date”) is entered into by and among:

Angiotech Pharmaceuticals, Inc. (“Angiotech”), a British Columbia corporation with principal offices at 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6;

Angiotech International GmbH (“Angiotech International”), which is organized and existing under the laws of Switzerland, and is a wholly-owned subsidiary (and an “Affiliate” as defined herein) of Angiotech;

Cohesion Technologies, Inc. (“Cohesion”), a Delaware corporation with principal offices at 2500 Faber Place, Palo Alto, California 94303, and a wholly-owned subsidiary (and an “Affiliate” as defined herein) of Angiotech.  (Angiotech, Angiotech International and Cohesion shall be collectively referred to herein as “AAC”);

Baxter Healthcare Corporation (“Baxter Healthcare”), a Delaware corporation with principal offices at One Baxter Parkway, Deerfield, Illinois 60015; and

Baxter Healthcare, S.A. (“BHSA”), which is organized and existing under the laws of Switzerland (Baxter Healthcare and BHSA shall be collectively referred to herein as “Baxter”).

RECITALS

WHEREAS, Angiotech has acquired Cohesion which Controls certain biosurgical products, and particularly the CoSeal Sealant Unit, CoSeal Adhesion Prevention Unit (each as defined below) and their components, as well as certain CoSeal Accessory(ies);

WHEREAS, Baxter has substantial expertise in distributing and commercializing medical products and devices worldwide, and through the Distribution and License Agreement (as defined herein) has acquired exclusive rights to exploit the CoSeal Sealant Unit in the Sealant Territory; exclusive rights to exploit the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory; exclusive rights to exploit certain CoSeal Accessory(ies) in the Territory for use with CoSeal Unit(s); and an option to obtain (a) exclusive rights to exploit the CoSeal Sealant Unit in Japan, and (b) exclusive rights to exploit the CoSeal Adhesion Prevention Unit in the United States;

WHEREAS, the Distribution and License Agreement contemplates that Baxter will manufacture and supply for clinical and commercial purposes the CoSeal Sealant Products and the CoSeal Adhesion Prevention Products solely for use, testing and sale as a component of a CoSeal Unit, and the CoSeal Accessories solely to sell for use with a CoSeal Unit; and

WHEREAS, AAC wishes to convey such manufacturing and supply rights to Baxter.

1

CONFIDENTIAL

NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the sufficiency of which is hereby acknowledged, AAC and Baxter (individually referred to as “Party” and collectively as “Parties”) hereby agree as follows:

Article 1
Definitions

Any capitalized terms not defined in this Manufacturing Agreement shall have the meaning given such term(s) in the Distribution and License Agreement.  Any references in this Manufacturing Agreement to “Sections” shall refer to Sections of this Manufacturing Agreement, unless specified to be referring to Sections of the Distribution and License Agreement.  For purposes of this Manufacturing Agreement, the following capitalized terms, whether used in the singular or plural, shall have the following meanings:

1.1

“AAC Manufacturing Know-How” shall mean information, trade secrets, data, materials and formulations, together with all Improvements, that are Controlled by AAC or its Affiliates; and (a) that are in existence as of the Effective Date, or that arise thereafter until the date of Successful Completion of Manufacturing Technology Transfer, and (i) are used for the manufacture of CoSeal Accessory(ies), Product(s) or CoSeal Units by AAC prior to the Successful Completion of Manufacturing Technology Transfer, and (ii) are transferred to Baxter; and (b) that are in existence as of the date of Successful Completion of Manufacturing Technology Transfer or that arise thereafter until expiration or termination of this Manufacturing Agreement, and (i) are necessary or used for the manufacture of CoSeal Accessory(ies), Product(s) or CoSeal Units by AAC, and (ii) are transferred to Baxter at the sole option of AAC.  AAC Manufacturing Know-How shall expressly include AAC’s or its Affiliates’ communications with any Regulatory Authority regarding the CoSeal Accessory(ies), Products or the CoSeal Units or components thereof; provided, however, that such communications shall continue to be accorded the status of Confidential Information of AAC under this Manufacturing Agreement.

1.2

“AAC Manufacturing Patents” shall mean (a) the Patents Controlled by AAC and its Affiliates from the Effective Date until the date of Successful Completion of Manufacturing Technology Transfer having one or more valid and unexpired claims (i) that cover one or more CoSeal Accessory(ies), Products or CoSeal Units, or (ii) that cover processes directed to making one or more CoSeal Accessory(ies), Products or CoSeal Units, and (b) all Patent applications filed and Patents obtained for AAC’s or its Affiliates’ Improvements directly relating to the CoSeal Sealant Product, the CoSeal Adhesion Prevention Product, or any CoSeal Unit that are discovered, conceived or reduced to practice by AAC and/or its Affiliates (or on their behalf) under the Distribution and License Agreement during its term, but excluding Joint Patents.  For purposes of this Manufacturing Agreement, the phrase “valid and unexpired claim” shall mean a composition of matter, method or device claim (or equivalent thereof) of an issued and unexpired Patent, or a composition of matter, method or device claim (or equivalent thereof) of a pending application within the Patents in the Territory covering a CoSeal Accessory(ies), Product(s) or a CoSeal Unit(s), which (y) has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal; and (z) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.  

2

CONFIDENTIAL

AAC Manufacturing Patents shall expressly include the Patents owned or Controlled by AAC that are set forth in Schedule 1.2, as it may be amended by the Parties from time to time.  For the purposes of Patent prosecution and maintenance, AAC Manufacturing Patents shall be considered AAC Patents under Article 10 of the Distribution and License Agreement.

1.3

“Baxter Manufacturing Know-How” shall mean information, trade secrets, data, materials and formulations together with all Improvements: (a) that are Controlled by Baxter or its Affiliates during the term of this Manufacturing Agreement; and (b) that are transferred to AAC at the sole option of Baxter and are necessary or used for the manufacturing of CoSeal Accessory(ies), Product(s) or CoSeal Unit(s) by Baxter.  Baxter Manufacturing Know-How shall expressly include Baxter’s or its Affiliates’ communications with any Regulatory Authority regarding the CoSeal Accessory(ies), Products or the CoSeal Units or components thereof; provided, however, that such communications shall continue to be accorded the status of Confidential Information of Baxter under this Manufacturing Agreement.

1.4

“Baxter Manufacturing Patents” shall mean Patent applications filed and Patents obtained that are directly related to the manufacture of CoSeal Accessory(ies), Products, CoSeal Units or Improvements, and that are discovered, conceived or reduced to practice by Baxter and/or its Affiliates (or on their behalf) during the term of this Manufacturing Agreement, but excluding Joint Patents.

1.5

“Baxter Supply Agreement” shall mean an agreement setting forth the terms under which Baxter shall manufacture and supply a product for AAC pursuant to Section 4.2.

1.6

“Commercialization Date” shall mean, with reference to a CoSeal Unit in existence as of the Effective Date, the occurrence of either of the following events without regard to order: (a) with regard to the United States, the date of FDA approval to manufacture at a manufacturing facility by or on behalf of Baxter, but excluding an AAC facility, or (b) with regard to the European Union, the date of the acceptance of the change notification by the notified body.  The first of these events to occur shall be referred to herein as the “First Commercialization Date,” and the second of these events to occur shall be referred to herein as the “Second Commercialization Date.”

1.7

 “Deliver” or “Delivery,” with respect to CoSeal Accessory(ies) and CoSeal Units, shall mean, and shall take place upon, the transfer of possession of such CoSeal Accessory or CoSeal Unit to a carrier F.O.B at the place of manufacture, or F.O.B at the place of final sterilization, if any, of such CoSeal Accessory or CoSeal Unit.

1.8

“Distribution and License Agreement” shall mean the Distribution and License Agreement among the Parties, dated as of the same date as this Manufacturing Agreement.

1.9

“Manufacturing Agreement” shall mean this Manufacturing and Supply Agreement together with all exhibits, schedules, and appendices attached to this Manufacturing and Supply Agreement, all as respectively amended, modified or supplemented by the Parties in accordance with the terms of this Manufacturing and Supply Agreement.

3

CONFIDENTIAL

1.10

“Non-Licensed Product” shall mean any product for which Baxter has not acquired sales, marketing and distribution rights pursuant to the Distribution and License Agreement.

1.11

“Specification(s)” means the requirements, standards, quality control testing and other attributes pertaining to a Product or a CoSeal Unit, as set forth in Schedule 1.11, along with any valid amendments or modifications thereto.

1.12

“Successful Completion of Manufacturing Technology Transfer” shall mean the day after the completion of three (3) consecutive successful validation runs of the first CoSeal Unit that are performed by or on behalf of Baxter.

Article 2
Grant of Manufacturing Rights

2.1

CoSeal Sealant Product and CoSeal Adhesion Prevention Product Exclusive Manufacturing Rights.

(a)

CoSeal Sealant Product.  Subject to the terms and conditions of this Manufacturing Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(i)  a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Manufacturing Patents to make and have made the CoSeal Sealant Products, for the purpose of assembly into CoSeal Sealant Units, in the Sealant Territory.

(ii)  a non-exclusive license under AAC Manufacturing Know-How, with right to sublicense as set forth in Section 2.4, to make and have made the CoSeal Sealant Products, for the purpose of assembly into CoSeal Sealant Units, in the Sealant Territory during the term of this Manufacturing Agreement.  Upon expiration or termination of this Manufacturing Agreement, the license granted in this Section 2.1(a)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Manufacturing Know-How transferred to Baxter under this Section 2.1(a)(ii) during the term of this Manufacturing Agreement.

(b)

CoSeal Adhesion Prevention Product.  Subject to the terms and conditions of this Manufacturing Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(i)  a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Manufacturing Patents to make and have made the CoSeal Adhesion Prevention Products, for the purpose of assembly into CoSeal Adhesion Prevention Units, in the Adhesion Prevention Territory and the United States.

(ii)

a non-exclusive license under AAC Manufacturing Know-How, with right to sublicense as set forth in Section 2.4, to make and have made the CoSeal Adhesion Prevention Products, for the purpose of assembly into CoSeal Adhesion Prevention Units, in the Adhesion Prevention Territory and the United States.  Upon expiration or termination of this

4

CONFIDENTIAL

Manufacturing Agreement, the license granted in this Section 2.1(b)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Manufacturing Know-How transferred to Baxter under this Section 2.1(b)(ii) during the term of this Manufacturing Agreement.

(c)

CoSeal Devices and CoSeal Accessories.  Subject to the terms and conditions of this Manufacturing Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(i)  a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Manufacturing Patents to make and have made the CoSeal Devices, for the purpose of assembly into CoSeal Units, and the CoSeal Accessories in the Field in the Territory.

(ii)  a non-exclusive license under AAC Manufacturing Know-How, with right to sublicense as set forth in Section 2.4, to make and have made the CoSeal Device(s) , for the purpose of assembly into CoSeal Units, and the CoSeal Accessory(ies) in the Field in the Territory.  Upon expiration or termination of this Manufacturing Agreement, the license granted in this Section 2.1(c)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Manufacturing Know-How transferred to Baxter under this Section 2.1(c)(ii) during the term of this Manufacturing Agreement.

(d)

Limitations.  The license grants to Baxter pursuant to this Section 2.1 under AAC Manufacturing Patents, AAC Manufacturing Know-How, and AAC Trademarks to make and have made Products and CoSeal Devices shall be exercisable solely for the purpose of (i) including Products or CoSeal Devices as components of CoSeal Units, and (ii) selling the CoSeal Accessory(ies) for use with a CoSeal Unit.

2.2

Grant Back of Rights to AAC.

(a)

CoSeal Sealant Unit(s) and Components Thereof.  Subject to the terms and conditions of this Manufacturing Agreement, Baxter hereby grants to AAC and its Affiliates, and AAC, on behalf of itself and its Affiliates, hereby accepts, a fully paid-up, irrevocable, non-exclusive license under the rights granted to Baxter in this Article 2, with the right to grant sublicenses, under AAC Manufacturing Patents, AAC Trademarks, and AAC Manufacturing Know-How that are in existence on the Effective Date, or that arise thereafter until the date of Successful Completion of Manufacturing Technology Transfer, to make and have made the  CoSeal Sealant Unit(s) and components thereof in the Sealant Territory in the following instances:

(i)

from the Effective Date until the Second Commercialization Date, for the purpose of fulfilling its obligations under this Manufacturing Agreement, and thereafter only for the purpose of acting as a source of supply of CoSeal Sealant Unit(s) to Baxter; and

(ii)

at all times for all purposes other than sales, marketing and distribution of the CoSeal Sealant Unit(s).

(b)

CoSeal Adhesion Prevention Unit(s) and Components Thereof.  Subject to the terms and conditions of this Manufacturing Agreement, Baxter hereby grants to AAC and its

5

CONFIDENTIAL

Affiliates, and AAC, on behalf of itself and its Affiliates, hereby accepts, a fully paid-up, irrevocable, non-exclusive license under the rights granted to Baxter in this Article 2, with the right to grant sublicenses, under AAC Manufacturing Patents, AAC Trademarks, and AAC Manufacturing Know-How that are in existence on the Effective Date, or that arise thereafter until the date of Successful Completion of Manufacturing Technology Transfer, to make and have made the CoSeal Adhesion Prevention Unit(s) and components thereof in the Adhesion Prevention Territory in the following instances:

(i)

from the Effective Date until the Second Commercialization Date,  for the purpose of fulfilling its obligations under this Manufacturing Agreement, and thereafter only for the purpose of acting as a source of supply of CoSeal Adhesion Prevention Unit(s) to Baxter;

(ii)

for the purpose of marketing, selling and distributing the Adhesion Prevention Unit(s), in the event that Baxter fails to exercise the CoSeal Adhesion Prevention Option, as described in the Distribution and License Agreement, and no agreement is reached by the Parties under Section 4.4 after Baxter's election to continue to retain its exclusive manufacturing rights under Section 2.6; and

(iii)

at all times for all purposes other than sales, marketing and distribution of the  CoSeal Adhesion Prevention Unit.

(c)

CoSeal Accessory(ies).  Subject to the terms and conditions of this Manufacturing Agreement, Baxter hereby grants to AAC and its Affiliates, and AAC, on behalf of itself and its Affiliates, hereby accepts, a fully paid-up, irrevocable, non-exclusive license under the rights granted to Baxter in this Article 2, with the right to grant sublicenses, under AAC Manufacturing Patents, AAC Trademarks, and AAC Manufacturing Know-How that are in existence on the Effective Date, or that arise thereafter until the date of Successful Completion of Manufacturing Technology Transfer, to make and have made the CoSeal Accessory(ies) and components thereof in the Field in the Territory in the following instances:

(i)

from the Effective Date until the Second Commercialization Date, for the purpose of fulfilling its obligations under this Manufacturing Agreement, and thereafter only for the purpose of acting as a source of supply of CoSeal Accessory(ies) to Baxter;

(ii)

at all times for all purposes other than sales, marketing and distribution of the CoSeal Accessory(ies) for use with a CoSeal Unit(s); and

(iii)

at all times for all purposes in connection with a CoSeal Unit(s) for which AAC has sales, marketing and distribution rights.

2.3

CoSeal Devices and CoSeal Accessories Exclusive Manufacturing Rights.  With respect to CoSeal Devices, as of the date of Successful Completion of Manufacturing Technology Transfer, and with respect to CoSeal Accessories, as of the Effective Date, Baxter, at its sole option, shall have the right to: (a) receive an assignment of such agreements as AAC may have with Third Party CoSeal Device or Third Party CoSeal Accessory(ies) manufacturers, subject to any required consents and the effective assumption of such agreements by Baxter; (b) negotiate new agreements with such Third Party CoSeal Device or Third Party CoSeal

6

CONFIDENTIAL

Accessory(ies) manufacturers; (c) use Third Party CoSeal Device or Third Party CoSeal Accessory(ies) manufacturers of Baxter’s choosing; (d) manufacture the CoSeal Device(s) or CoSeal Accessory(ies) at a facility by or on behalf of Baxter; and/or (e) with the consent of AAC, have AAC continue to purchase CoSeal Devices or CoSeal Accessory(ies) on behalf of Baxter.  In the event that Baxter elects to receive an assignment of agreements under this Section 2.3(a), then AAC may obtain such CoSeal Device(s) or CoSeal Accessory(ies) from Baxter [***] for the term of the applicable agreement (including any renewals or extensions) or the term of any renegotiated agreement between Baxter and such Third Party CoSeal Device or CoSeal Accessory(ies) manufacturer.  In the event that Baxter elects to interact directly with such Third Party CoSeal Device manufacturers or Third Party CoSeal Accessory(ies) manufacturers under this Section 2.3(b) or (c), and Baxter does not receive an assignment under this Sect ion 2.3(a), or Baxter elects to manufacture CoSeal Device(s) or CoSeal Accessory(ies) itself under this Section 2.3(d), then AAC may obtain such CoSeal Device(s) or CoSeal Accessory(ies) from Baxter [***]

2.4

Sublicense.  Baxter and its Affiliates shall have the right to grant a sublicense under the licenses granted to Baxter and its Affiliates hereunder in connection with the performance of Baxter’s manufacturing obligations under this Manufacturing Agreement, upon fulfillment of the following conditions: (a) that Baxter obtain the prior written consent of AAC before executing any such sublicense agreement, which consent shall not be unreasonably withheld or delayed; (b) that Baxter shall provide a copy of any such executed sublicense agreement to AAC within ten (10) Business Days after execution; and (c) that the execution and delivery by Baxter of such sublicense agreement to any Third Party shall not in any way diminish, reduce or eliminate any of Baxter’s obligations under this Manufacturing Agreement, and Baxter shall remain liable for such obliga tions.  Baxter shall obtain contractual undertakings from every sublicensee that will provide that the rights of such sublicensee shall terminate upon termination of this Manufacturing Agreement.

2.5

Ownership of Intellectual Property; Retention of Certain Rights.  AAC retains all rights to all AAC Manufacturing Patents, AAC Trademarks, and AAC Manufacturing Know-How, to the extent such rights are not expressly granted to Baxter herein or in the Distribution and License Agreement.  These retained rights expressly include the right to develop, have developed, make, have made, use, have used, offer for sale, sell, have sold, market, have marketed, distribute, have distributed, import, export, and otherwise fully exploit and commercialize (a) Non-Licensed Products throughout the Territory at all times and (b) the CoSeal Accessories, the CoSeal Devices, the Products and the CoSeal Units for the purpose of exercising its retained rights regarding Non-Licensed Products at all times.

2.6

Option to Manufacture If Distribution Rights Are Terminated.  

(a)

Termination of CoSeal Sealant Unit Distribution Rights.  In the event that Baxter’s rights to market, distribute and sell the CoSeal Sealant Unit are terminated under the Distribution and License Agreement by AAC or by Baxter, then Baxter, at its option, may elect to retain, or terminate, its exclusive manufacturing rights with respect to both the CoSeal Sealant Unit and the CoSeal Adhesion Prevention Unit.  Baxter shall have ninety (90) days from the date of termination of its rights by AAC under the Distribution and License Agreement to decide whether it wishes to continue to retain its exclusive manufacturing rights with respect to both the

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CoSeal Sealant Unit and the CoSeal Adhesion Prevention Unit.  If Baxter elects to continue to retain its exclusive manufacturing rights, Baxter shall provide written notice of such election to AAC within such ninety (90) day period.  If (i) Baxter elects to terminate its exclusive manufacturing rights pursuant to this Section 2.6(a), or (ii) Baxter fails to provide written notice of such election pursuant to this Section 2.6(a), then the exclusive manufacturing rights with respect to such CoSeal Sealant Units and CoSeal Adhesion Prevention Units shall revert to AAC without further action by the Parties, and Baxter shall act promptly to facilitate the transfer of its then current manufacturing technology used to manufacture the CoSeal Sealant Units, CoSeal Adhesion Prevention Units, CoSeal Accessories, and components of the CoSeal Units to AAC.  Such transfer to AAC of Baxter’s manufacturing technology used to manufacture the CoSeal Sealant Units, CoSeal Adhesion Prevention Units, CoSeal A ccessories, and components of the CoSeal Units shall be conducted at AAC’s sole expense, in accordance with a transitional period plan that is consistent with the responsibilities and timelines included with the transitional period plan prepared pursuant to Section 4.1(a)(v).  In no event shall Baxter’s responsibilities relating to this transfer of Baxter’s manufacturing technology be less than AAC’s obligations and responsibilities under the transitional period plan prepared pursuant to Section 4.1(a)(v) and as set forth under Section 3.3 (including no less than two thousand eighty (2080) personnel work hours at no cost to AAC, other than reimbursement to Baxter of out-of-pocket expenses related thereto).  Notwithstanding the foregoing, if Baxter’s CoSeal Sealant Unit distribution rights are terminated by Baxter for reason other than AAC’s uncured material breach under Section 14.3 of the Distribution and License Agreement, Baxter will pay all such manufacturing techn ology transfer costs.  In no event shall Baxter’s obligations under this Section 2.6(a) to transfer manufacturing technology exceed eighteen (18) months after (i) the date that Baxter provides written notice to AAC of Baxter’s election to terminate its exclusive CoSeal Sealant Unit and CoSeal Adhesion Prevention Unit manufacturing rights, or (ii) in the absence of such written notice, the expiration of the ninety (90) day notice period set forth in this Section 2.6(a), whichever occurs first.

(b)

Termination of CoSeal Adhesion Prevention Unit Distribution Rights.  In the event that Baxter’s rights to market, distribute and sell the CoSeal Adhesion Prevention Unit are terminated under the Distribution and License Agreement by AAC or by Baxter (or Baxter does not exercise the Adhesion Prevention Option), then AAC, at its option, may choose to manufacture the CoSeal Adhesion Prevention Unit or may elect to allow Baxter to retain its exclusive manufacturing rights with respect to the CoSeal Adhesion Prevention Unit, but in either event Baxter shall retain its exclusive manufacturing rights with respect to the CoSeal Sealant Unit.  AAC shall have ninety (90) days from the date of termination of Baxter’s rights under the Distribution and License Agreement to decide whether it wishes to manufacture the CoSeal Adhesion Prevention Unit.  If AAC elects to manuf acture the CoSeal Adhesion Prevention Unit, it shall provide written notice of such election to Baxter within such ninety (90) day period.  If AAC elects to allow Baxter to retain exclusive manufacturing rights under this Section 2.6(b), then the exclusive manufacturing rights with respect to such CoSeal Adhesion Prevention Unit shall remain with Baxter without further action by the Parties.  If (i) AAC elects to manufacture the CoSeal Adhesion Prevention Unit pursuant to this Section 2.6(b), or (ii) AAC fails to provide written notice of its election to manufacture the CoSeal Adhesion Prevention Unit pursuant to this Section 2.6(b), then the exclusive manufacturing rights with respect to such CoSeal Adhesion Prevention Unit shall revert to AAC without further action by the Parties, and Baxter shall act promptly to facilitate the transfer of its then current manufacturing technology

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used to manufacture the CoSeal Accessories, the CoSeal Adhesion Prevention Unit and components of the CoSeal Adhesion Prevention Unit to AAC.  Such transfer to AAC of Baxter’s manufacturing technology used to manufacture the CoSeal Accessories, the CoSeal Adhesion Prevention Unit and components of the CoSeal Adhesion Prevention Unit shall be conducted at AAC’s sole expense, in accordance with a transitional period plan that is consistent with the responsibilities and timelines included with the transitional period plan prepared pursuant to Section 4.1(a)(v).  In no event shall Baxter’s responsibilities relating to this transfer of Baxter’s manufacturing technology be less than AAC’s obligations and responsibilities under the transitional period plan prepared pursuant to Section 4.1(a)(v) and as set forth under Section 3.3 (including no less than two thousand eighty (2080) personnel work hours at no cost to AAC, other than reimbursement to Baxter of out-of-pocket expenses re lated thereto).  Notwithstanding the foregoing, if Baxter’s CoSeal Adhesion Prevention Unit distribution rights are terminated by Baxter for reason other than AAC’s uncured material breach under Section 14.3 of the Distribution and License Agreement, Baxter will pay all such manufacturing technology transfer costs.  In no event shall Baxter’s obligations under this Paragraph 2.6(b) to transfer manufacturing technology exceed eighteen (18) months after (i) the date that AAC provides written notice to Baxter of AAC’s election to manufacture the CoSeal Adhesion Prevention Unit, or (ii) in the absence of such written notice, the expiration of the ninety (90) day notice period set forth in this Section 2.6(b), whichever occurs first.

2.7

Sharing of Know-How.  During the term of this Manufacturing Agreement, Baxter, at its sole option, may (but shall not have the obligation to) transfer to AAC Baxter Manufacturing Know-How, and AAC shall have the right to use such Baxter Manufacturing Know-How in conjunction with Non-Licensed Products.  After the date of Successful Completion of Manufacturing Technology Transfer, AAC, at its sole option, may (but shall not have the obligation to) transfer to Baxter AAC Manufacturing Know-How, and Baxter shall have the right to use such AAC Manufacturing Know-How in conjunction with CoSeal Accessories, Products and CoSeal Units.  Any transfer under this Section 2.7 shall not be effective until the content of such transfer has been set forth or confirmed in writing and signed by both Parties.

Article 3
Technology Transfer

3.1

Technology Transfer.  The Parties shall cooperate to expedite transfer of Cohesion’s Product and CoSeal Unit manufacturing technology from the Cohesion facility to a facility designated by Baxter, where manufacturing will be conducted by or on behalf of Baxter.  AAC will make employees of appropriate skill and experience reasonably available to Baxter to facilitate such transfer pursuant to Section 3.3.  AAC and Baxter will cooperate to minimize the expenses associated with such transfer and to ensure that the transfer of such Product and CoSeal Unit manufacturing is effectively coordinated.

3.2

Hiring of Employees.  Baxter shall have the right, but not the obligation, to hire such Cohesion employees, including but not limited to manufacturing, quality assurance, quality control and regulatory employees, as are needed to facilitate the transfer of Product and CoSeal Unit manufacturing to Baxter’s facility.  Any such hiring decisions, and the terms thereof, shall be solely at Baxter’s discretion.  AAC shall assist Baxter in making its hire/no hire decision regarding employees by providing Baxter with a list of key employees that have been designated

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by AAC as available for hiring by Baxter, including information regarding job titles, job descriptions, salary and benefit information, as well as access to such individuals for interviews and direct evaluations by Baxter.  Notwithstanding the foregoing, Baxter expressly agrees not to solicit for employment any AAC employees, other than those identified on such list of key employees, without AAC’s prior written consent, provided however, that nothing herein shall prohibit Baxter from hiring any AAC employees who respond to industry-wide or general employment solicitations, advertised employment opportunities, or other available employment opportunities at Baxter.

3.3

Costs of Technology Transfer.  Except for such costs to be borne by AAC as set forth herein, Baxter shall be solely responsible for any and all costs associated with the transfer of manufacturing of Products and CoSeal Units from the Cohesion facility to the facility where Products and CoSeal Units are to be manufactured by or on behalf of Baxter.  To facilitate the transfer, AAC shall provide up to two thousand eighty (2080) personnel work hours at no cost to Baxter, other than reimbursement to AAC of out-of-pocket expenses related thereto.  Baxter shall pay to AAC [***] per personnel work hour, plus reimbursement to AAC of related out-of-pocket expenses, for any personnel work hours of assistance requested by Baxter and agreed to be provided by AAC in excess of two thousand eighty (2080) personnel work hours.  AAC shall be responsible for a ll costs associated with Cohesion’s termination of manufacturing the Product and the CoSeal Unit at the Cohesion facility (including severance payments to employees).

3.4

Delivery of Raw Materials and Finished Goods Following Commercialization Date.  Following each Commercialization Date, AAC and Baxter shall determine an appropriate allocation between them relating to inventory of raw materials and finished goods on hand at AAC.  AAC shall deliver to such location in the United States such allocation of inventory of raw materials and finished goods as the Program Directors have reasonably agreed should be transferred to Baxter pursuant to Section 3.1(a) of the Distribution and License Agreement.  Baxter shall reimburse to AAC its cost for any such raw material transferred to Baxter.

3.5

Batch Records and Data.  Upon request, within thirty (30) days following Delivery, AAC shall provide (and shall require any Third Party manufacturer to provide) Baxter with properly completed copies of batch records prepared in accordance with the Specifications and applicable laws; provided, however, that if testing reveals an “out-of-Specification” result, AAC (or the Third Party manufacturer, as the case may be) shall provide such batch records within ten (10) days following resolution of the “out-of-Specification” result.  The Parties agree that AAC shall provide these records to Baxter solely for the purpose of assisting with manufacturing technology transfer, and Baxter shall not bear the responsibility for correction of any “out-of-Specification” results.

Article 4
Manufacture and Supply

4.1

Manufacture of the CoSeal Units.

(a)

Effective Date to Second Commercialization Date.  With respect to CoSeal Units, from the Effective Date until the Second Commercialization Date, and with

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respect to CoSeal Accessories, from the Effective Date until the later of six (6) months after the Effective Date or the date of Successful Completion of Manufacturing Technology Transfer, AAC will be responsible for supplying Baxter with CoSeal Accessories and CoSeal Units under the following terms and conditions:

(i)

Forecasting.  In accordance with Section 4.1(a), the CoSeal Accessories (unless Baxter elects to obtain its own supply of CoSeal Accessories pursuant to Section 2.3) and CoSeal Units shall be supplied by AAC to Baxter.  On or before the first day of each calendar month, Baxter shall furnish to AAC a written twelve (12) month rolling forecast of the quantities of CoSeal Accessories and CoSeal Units that Baxter estimates it will order from AAC during such twelve (12) month forecast period (the “Forecast”; the first of which is attached hereto as Schedule 4.1).  The first three (3) months of each Forecast shall constitute a binding order for the quantities of CoSeal Accessories and CoSeal Units specified therein (the “Firm Commitment”), and the following nine (9) months of the Forecast shall be non-binding, good faith estimates.  Thereafter, until the Second Commercialization Date, Baxter’s sole legal remedy for AAC’s failure to provide a given CoSeal Unit(s) according to the Forecast shall be either suspension of Baxter’s Minimum Sales requirements for the given CoSeal Unit(s) for that calendar year, or a downward adjustment of Baxter’s Minimum Sales requirements for the given CoSeal Unit(s) for that calendar year that is equal to the sales that would be attributable to the given CoSeal Unit(s) that AAC failed to provide.  The Program Directors shall determine which of the two remedies (i.e., suspension or adjustment) shall apply.

(ii)

Purchase Orders.  On or before the first (1^st) day of each calendar month, Baxter shall submit a purchase order for the Firm Commitment portion of the Forecast, as to which no purchase order has been previously submitted, which specifies the actual quantities of CoSeal Accessories and CoSeal Units to be delivered to Baxter hereunder and the requested shipping dates for each order (“Purchase Order”).  Baxter shall submit each Purchase Order to AAC at least sixty (60) days in advance of the shipment date requested in the Purchase Order.  For example, a Purchase Order placed on January 1^st will request shipping dates during the month of March or at least sixty (60) days after January 1^st.  In the event of a conflict between the terms of any Purchase Order and this Manufacturing Agreement, this Manufacturing Agreement shall c ontrol.  In any given month, Baxter shall not submit a Purchase Order with respect to any month contained within the Firm Commitment for less than [***] of the amount forecasted one (1) month earlier for such month, nor shall AAC be obligated to accept a Purchase Order to the extent that it exceeds by more than [***] the amount forecasted one (1) month earlier for such month.  For example, the Firm Commitment included in a January 1^st forecast includes the months of January, February and March.  The Firm Commitment for the month of March must be no less than [***] of the amount forecasted for March in the December 1^st forecast or one (1) month earlier than the January 1^st forecast.  Likewise, the Firm Commitment for the month of March must be no greater than [***] of the amount forecasted for March in the December 1^st forecast or one (1) month earlier than the January 1^st forecast.  Notwithstanding the foregoing, once AAC accepts a Purchase Order that failed to meet such requirements, it shall not thereafter reject such Purchase Order for such failure.  All Purchase Orders shall reflect orders of a size that the Parties have agreed are within the reasonably anticipated capacity of Cohesion.

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(iii)

Raw Material or Capacity Shortage.  In the event that AAC is unable to supply Baxter with CoSeal Accessories or CoSeal Units in the quantities ordered by Baxter in accordance with Section 4.1(a)(ii), due to AAC’s insufficient supplies of raw materials for Products or CoSeal Units or other manufacturing capacity constraints, AAC shall use Commercially Reasonable Efforts to equitably allocate available raw materials or manufacturing capacity, as the case may be, in a manner consistent with the Parties’ anticipated needs.  Notwithstanding the foregoing, AAC shall allocate manufacturing capacity and raw materials first to the manufacture of CoSeal Units for commercial sale.

(iv)

Baxter Modification or Cancellation.  Baxter may request modification of the delivery date, Specifications or quantity of CoSeal Accessories or CoSeal Units in a Purchase Order only by submitting a written change order to AAC.  Such change order shall be effective and binding against AAC only upon written or deemed acceptance by AAC, not to be unreasonably withheld or delayed.  Notwithstanding the foregoing, Baxter shall remain responsible for the Firm Commitment portion of the Forecast.  AAC shall notify Baxter of its approval or rejection of any such change order within ten (10) days after receipt thereof; provided, however, that AAC’s failure to so notify Baxter within such ten (10) day period, (A) with respect to a requested modification of the delivery date or quantity of CoSeal Accessories or CoSeal Units in a Purchase Order, shall be deemed to be an ac ceptance of such change order if AAC received actual notice of such requested modification, and (B) with respect to a requested modification of the Specifications, shall be deemed to be a rejection of such change order.

(v)

Transitional Period Plan.  Within ninety (90) days after the Effective Date, the Parties shall negotiate in good faith and devise a transitional period plan which will set forth, among other things, the Parties’ responsibilities relating to the manufacture of the CoSeal Accessories, Products and CoSeal Units during the transfer of manufacturing technology from AAC to Baxter, the time frame for such transfer, and the Parties’ mutually determined collaborative and comprehensive plan that will ensure a supply of CoSeal Accessories and a smooth transition of manufacturing of the Products and CoSeal Units from AAC to Baxter.

(b)

Second Commercialization Date to Termination of Baxter’s Manufacturing Rights.  From the Second Commercialization Date until the date of expiration or early termination of this Manufacturing Agreement (in whole or in part), where such expiration or early termination results in the loss of Baxter’s right to manufacture and/or supply CoSeal Accessories, Products and CoSeal Units, Baxter will be responsible for manufacture of Baxter’s entire requirements for commercial supply of such CoSeal Accessories, Products and CoSeal Units.

4.2

Manufacture by Baxter for AAC.  

(a)

Pre-Commercialization Supply.  If, following the Second Commercialization Date, AAC requests that Baxter supply to AAC formulations of the Products for AAC’s research or clinical trial activities, Baxter may, in its sole discretion, agree to provide AAC with then current formulations of the Products, at a price to be negotiated by the Parties, in amounts that are forecasted in the same manner as set forth in Sections 4.1(a)(i), (ii) and (iv), and

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in accordance with such other terms as are agreed to by the Parties and set forth in a Baxter Supply Agreement.

(b)

Commercial Supply.  If, following the second Commercialization Date, AAC requests that Baxter supply to AAC a Non-Licensed Product containing the CoSeal Ingredients or formulations of the Products for inclusion as part of a Non-Licensed Product for AAC’s commercialization of such Non-Licensed Product, Baxter, in its sole discretion, may supply AAC with such Non-Licensed Product in amounts that are forecasted in the same manner as set forth in Sections 4.1(a)(i), (ii) and (iv), and in accordance with such other terms as are agreed to by the Parties and set forth in a Baxter Supply Agreement.  The terms and conditions of such Baxter Supply Agreement, including transfer price and forecasted amounts, shall be negotiated by the Parties in good faith at least nine (9) months prior to the date that AAC expects to obtain its first Regulatory Approval of such Non-Licensed Product.

4.3

CoSeal Unit Manufacturing Procedures, Standards and Compliance with Laws.   All CoSeal Accessories and CoSeal Units used for pre-clinical, clinical and commercial purposes will be manufactured, tested and released by the Parties according to current good manufacturing practices (“GMPs”), standards, and applicable corresponding laws in the Territory for the production of the CoSeal Accessories and CoSeal Units.  During the time in which it is responsible for manufacturing the CoSeal Accessories or CoSeal Units(s), each Party will be fully responsible for maintaining its facilities and procedures, and for ensuring that any Third Party used by such Party for manufacturing CoSeal Accessories or CoSeal Units or components thereof maintains its facilities and procedures, in compliance with current GMPs, standards and applicable corresponding laws.

4.4

Transfer Price if Baxter Elects To Manufacture, But Does Not Distribute, Product; Inventory.   If Baxter retains its exclusive manufacturing rights with respect to a CoSeal Unit in accordance with Section 2.6, the Parties will negotiate in good faith a mutually acceptable transfer price for such CoSeal Units that are manufactured by Baxter and distributed by AAC (or its Third Party distributor).

4.5

Rights and Obligations after Transfer of Manufacturing.  Where Baxter, during the term of this Agreement or by termination or expiration of this Agreement, is obligated to transfer manufacturing technology and Baxter Manufacturing Know-How pertaining to any CoSeal Accessories, Product or CoSeal Unit hereunder from Baxter to AAC (or to a Third Party manufacturer identified by AAC) to enable AAC (or such Third Party manufacturer) to manufacture and/or supply such CoSeal Accessories, Product or CoSeal Unit, Baxter will use its Commercially Reasonable Efforts to effect such transfer fully and efficiently.  In such event, Baxter shall continue to manufacture and supply CoSeal Accessories, Product or CoSeal Unit to AAC according to AAC’s current forecasts for such CoSeal Accessories, Product or CoSeal Unit, until such time that AAC (or such Third Pa rty manufacturer) is able to independently manufacture such CoSeal Accessories, Product or CoSeal Unit in amounts needed by AAC.  However, in no event shall Baxter be required to continue to supply AAC for a period of more than eighteen (18) months after (a) with respect to a transfer pursuant to Section 2.6(a), (i) the date that Baxter provides written notice to AAC of Baxter’s election to terminate its exclusive CoSeal Sealant Unit and CoSeal Adhesion Prevention Unit manufacturing rights, or (ii) in the absence of such written notice, the expiration of the ninety (90) day notice period set forth in

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Section 2.6(a), whichever occurs first; (b) with respect to a transfer pursuant to Section 2.6(b), (i) the date that AAC provides written notice to Baxter of AAC’s election to manufacture the CoSeal Adhesion Prevention Unit, or (ii) in the absence of such written notice, the expiration of the ninety (90) day notice period set forth in Section 2.6(b), whichever occurs first; (c) with respect to a transfer following termination of this Manufacturing Agreement pursuant to Section 10.3, the expiration of the thirty (30) day cure period; and (d) with respect to a transfer pursuant to Section 10.4, the date that AAC receives written notice from Baxter of Baxter’s election to discontinue manufacturing either of the CoSeal Units.  The Parties will negotiate in good faith a mutually acceptable transfer price for such CoSeal Units that are manufactured by Baxter and distributed by AAC (or its Third Party distributor).

4.6

Certificate of Analysis.   AAC shall deliver to Baxter with fulfillment of each CoSeal Unit order a certificate of analysis confirming that such order meets the Specifications applicable to such CoSeal Unit (each, a “Certificate of Analysis”) and a certificate of compliance of such order.  AAC shall test batches Delivered hereunder in accordance with agreed upon standard testing and inspection protocols, which shall in any event be consistent with generally accepted standards in the medical device industry as then in effect.  Baxter shall be responsible for reasonable inspection of each order for physical damage in shipping and shortage.  Within twenty-one (21) days after receipt of each order of CoSeal Unit, together with AAC's Certificate of Analysis and certificate of compliance pertaining to each such order, Baxter shall notify A AC if, in Baxter's determination, such order fails to conform to the Specifications.  Baxter shall provide notice of rejection of the applicable order to AAC within such twenty-one (21) day period.  Orders not rejected within such twenty-one (21) day period in a written notice of rejection sent to AAC shall be deemed to have been accepted by Baxter.  Once Baxter accepts an order of CoSeal Unit, it shall not have the right to reject such order thereafter.  If Baxter determines that such order does not conform to Specifications, it shall send to AAC, via overnight delivery service or certified mail, return receipt requested, within such twenty-one (21) day period a written notice of rejection of the order, along with a sample of the rejected order to the VP, Manufacturing at the following address: Cohesion Technologies, Inc., 2500 Faber Place, Palo Alto, CA  94303.  If AAC agrees that the order is defective or non-conforming, it will, at its option (a) replace, whether through rep rocessing or otherwise, such order, or (b) reimburse Baxter its out-of-pocket costs in destroying such order.  Furthermore, AAC shall pay for the shipping cost associated with the delivery of the replacement order, if any.  If AAC does not agree with Baxter's determination that such order is defective or non-conforming, then after reasonable efforts to resolve the disagreement, either Party may submit a sample from the order to a mutually agreed upon independent Third Party laboratory for resolution of the dispute.  The independent laboratory’s results shall be final and binding.  Unless otherwise agreed to by the Parties in writing, the costs associated with such testing and review shall be borne by the Party against whom the independent laboratory rules.  For purposes of this Section 4.6, the twenty-one (21) day period shall commence on the date of Baxter’s receipt of the order and the related Certificate of Analysis.

4.7

Replacement of Defective Item.   In accordance with the terms set forth in this Manufacturing Agreement, AAC shall replace, whether through reprocessing or otherwise, at its sole expense, all items that do not comply or are found not to comply with the Specifications (“Defective Item”), or shall credit Baxter for amounts already paid for the Defective Item.  EXCEPT IN THE EVENT OF A BAXTER THIRD PARTY

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CLAIM OR AAC THIRD PARTY CLAIM, AS SET FORTH IN ARTICLE 11, THE OBLIGATION OF AAC TO REPLACE DEFECTIVE ITEMS IN ACCORDANCE WITH THE SPECIFICATIONS OR APPLICABLE LAWS SHALL BE BAXTER’S SOLE AND EXCLUSIVE REMEDY UNDER THIS MANUFACTURING AGREEMENT FOR DEFECTIVE ITEMS, AND IS IN LIEU OF ANY OTHER WARRANTY, EXPRESS OR IMPLIED.

4.8

Delivery.   AAC shall tender CoSeal Accessory and CoSeal Unit for delivery, F.O.B. the place of manufacture (or as otherwise designated by AAC), whether at the site of a Third Party manufacturer or otherwise, as the case may be, in accordance with the Specifications and addressed to the shipping address specified by Baxter.  Baxter shall provide AAC with standard shipping instructions at least two (2) months prior to the first requested shipping date hereunder; thereafter, such shipping instructions may be changed upon reasonable written notice to AAC.  AAC shall not Deliver any batch of CoSeal Unit prior to completion of quality control testing by AAC without the consent of Baxter, which consent shall not be unreasonably withheld or delayed.  Baxter shall be responsible for all costs and risk of loss associated with the shipping materials (fr om and after Delivery), shipping instructions and the CoSeal Units from and after Delivery.

Article 5
Records; Regulatory Matters

5.1

Recordkeeping.   AAC shall maintain (and shall require any Third Party manufacturer to maintain) true and accurate books, records, test and laboratory data, reports and all other information relating to manufacturing under this Manufacturing Agreement, including all information required to be maintained by applicable laws.  Such information shall be maintained in forms, notebooks and records for a period of at least two (2) years from the relevant finished CoSeal Unit expiration date, or longer if required under applicable laws.

5.2

Regulatory Responsibility and Compliance.

(a)

AAC agrees to use Commercially Reasonable Efforts to cause, (i) within six (6) months after the Effective Date, the transfer of title and ownership to Baxter of Regulatory Approvals and related Regulatory Filings which are owned by AAC and are filed, issued and in full force and effect as of the Effective Date, and (ii) within six (6) months after obtaining Regulatory Approval for the each of the [***], [***] or [***] indications, the transfer of title and ownership to Baxter of Regulatory Approvals and related Regulatory Filings, licenses or permits for such approved indication.

(b)

AAC shall be responsible for obtaining and maintaining any establishment licenses or permits required by the FDA, by applicable laws or by Regulatory Authorities that pertain to its CoSeal Unit manufacturing facility.  AAC hereby grants to Baxter the right to reference such establishment files for the purpose of obtaining and maintaining Regulatory Approval.

5.3

Governmental Inspections and Requests. AAC shall advise Baxter within three (3) Business Days if an authorized agent of any Regulatory Authority visits a facility where manufacturing activity with respect to CoSeal Devices or CoSeal Units takes place, where the

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interest of the Regulatory Authority is specifically related to manufacturing activity with respect to CoSeal Devices or CoSeal Units (and shall require any Third Party manufacturers to do the same within five (5) Business Days with respect to their facilities).  In such circumstance, AAC shall furnish (and shall require any Third Party manufacturer to furnish) to Baxter a copy of sections of the report by such Regulatory Authority which are specifically related to the CoSeal Devices or CoSeal Units within ten (10) days of receipt of such report.  Further, upon receipt of a Regulatory Authority written request to inspect a manufacturing facility or the manufacturing facilities of a Third Party manufacturer, or to audit AAC’s (or its Third Party manufacturer’s) books and records with respect to manufacturing of CoSeal Devices or CoSeal Units under this Manufacturing Agreement, AAC shall notify Baxter thereof within three (3) Business Days (and require any Third Party manufacturer to notify Baxter within five (5) Business Days thereof), and shall provide (and require any Third Party manufacturer to provide) Baxter with a copy of any written document received from such Regulatory Authority.  AAC shall provide Baxter with notice of any such non-written inspection request from a Regulatory Authority which specifically relates to the CoSeal Devices or CoSeal Units as promptly as reasonably practicable under the circumstances.  AAC shall also provide to Baxter such notice as is reasonably practicable under the circumstances of any action by a Regulatory Authority, resulting from an inspection of a facility where manufacturing activity with respect to CoSeal Devices or CoSeal Units takes place, which is reasonably anticipated to materially affect AAC’s ability to perform its obligations under this Manufacturing Agreement.  Nothing in this Section 5.3 shall require AAC to submit to Baxter any books, records, data or information relating to the manufacture or distribution of any pr oducts not covered under this Manufacturing Agreement or the Distribution and License Agreement.

5.4

Recall and Field Corrective Action.  This Section 5.4 shall govern recall arising after the Effective Date from the CoSeal Accessories and CoSeal Units manufactured by AAC (or on its behalf by a Third Party) for Baxter.  In the event that AAC believes a recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action may be necessary with regard to any CoSeal Accessory or CoSeal Unit provided to Baxter under this Manufacturing Agreement, AAC shall immediately notify Baxter in writing.  In the event that Baxter believes a recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action may be necessary with regard to any CoSeal Accessory or CoSeal Unit provided by AAC under this Manufacturing Agreement, Baxter shall immediately notify AAC in writing.  Baxter shall provide reasonable c ooperation and assistance to AAC.  Notwithstanding Sections 4.7 and 4.8, the cost of any such recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action shall be borne by AAC, unless such recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action is caused in material part by Baxter's breach of its obligations under this Manufacturing Agreement, the Distribution and License Agreement (including obligations regarding advertising, distribution and storage of the CoSeal Units) or applicable laws, or by its willful misconduct; then such cost shall be borne by Baxter to the extent such recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action was due to such causes.  For purposes of this Section 5.4, the Party bearing the costs of any recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action shall only be required to reimburse the other Party for reasonable, actual and do cumented out-of-pocket costs incurred by such other Party for such recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or

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field corrective action (including costs of retrieving CoSeal Accessory or CoSeal Unit already delivered to customers, costs and expenses such other Party is required to pay for notification, shipping and handling charges, and all other costs reasonably related to such recall, field alert, CoSeal Accessory or CoSeal Unit withdrawal, or field corrective action), and the cost to replace, or the actual replacement of, the CoSeal Accessory or CoSeal Unit.

5.5

Quality Agreement.   Upon the transfer of responsibility for all permits and licenses required by any Regulatory Authority with respect to CoSeal Accessories or CoSeal Units under this Manufacturing Agreement, including any product licenses, applications and amendments in connection therewith, the Parties shall execute a quality agreement, which will reflect the division of quality responsibilities while a CoSeal Accessory or CoSeal Unit is made by AAC for Baxter (“Quality Agreement”).  AAC shall use Commercially Reasonable Efforts to comply with the Quality Agreement, but in any event shall comply with applicable laws.  In the event of a conflict between the terms of this Manufacturing Agreement and the Quality Agreement, this Manufacturing Agreement shall control, but AAC shall in any event comply with applicable laws.  The failure of a Party to comply with a requirement of the Quality Agreement shall not be actionable, unless it constitutes a material breach of this Manufacturing Agreement or the Distribution and License Agreement, or a material violation of law of any jurisdiction in which CoSeal Accessories or CoSeal Units are distributed.

5.6

Quality, Environmental, Heath and Safety Audits.   AAC shall permit Baxter's personnel, upon reasonable notice, at reasonable intervals, and for reasonable duration during regular business hours, to visit the facility where any CoSeal Accessory, Product or CoSeal Unit is manufactured, tested, or stored by, or on behalf of, AAC; or to audit compliance with this Manufacturing Agreement, including but not limited to the Specifications, GMPs, or applicable laws; provided, however, that such audits shall be conducted not more than once in any twelve (12) month period, other than "for cause" audits, which Baxter shall be entitled to conduct following the implementation of measures in response to Form 483’s delivered by the FDA to AAC pertaining to the manufacture of a CoSeal Accessory, Product or CoSeal Unit.

All information obtained by Baxter in any such review, including without limitation the findings and results related thereto, shall be deemed AAC Confidential Information.  AAC will have responsibility to audit its permitted subcontractors and suppliers at reasonable intervals for compliance with (a) the Specifications, (b) current GMPs, and (c) applicable laws.  Baxter shall have the right to confirm audits of subcontractors and suppliers of AAC for any CoSeal Accessory, Product, or CoSeal Unit manufactured under this Manufacturing Agreement.

5.7

Complaints and Adverse Events.   The Party responsible for all permits and licenses required by any Regulatory Authority with respect to a given CoSeal Accessory(ies) or CoSeal Unit(s) under this Manufacturing Agreement, including any product licenses, applications and amendments in connection therewith, shall be responsible for evaluating and investigating complaints and for reporting all Adverse Events to Regulatory Authorities in the applicable Territory.  If the responsible Party becomes aware of any Adverse Event, it shall evaluate, investigate and determine the necessity of reporting all information in its possession regarding such Adverse Event as soon as practicable, in order to fulfill regulatory reporting obligations within the time frames required by Regulatory Authorities and law; provided, however, that AAC shall not be required to communic ate with customers of Baxter.  The Parties

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will comply with all applicable reporting laws, rules and regulations governing Adverse Events.  Baxter and AAC agree to supply all complaint information (including Adverse Event information) to the responsible Party within five (5) Business Days of learning of a complaint or event; to cooperate with investigations and corrective actions; and to comply with all applicable reporting laws, rules and regulations governing Adverse Events.

5.8

Compliance.   The obligations of AAC and Baxter set forth in this Article 5 are intended to comply with the laws, rules and regulations of each country in the Territory in which the CoSeal Accessory or CoSeal Units are distributed and sold.  The requirements of this Article 5 shall therefore be construed and interpreted to comply with all such laws, rules and regulations.  To the extent provisions of this Article 5 do not adequately reflect any such law, rule or regulation, such provisions shall be revised to the extent reasonably necessary to make such provisions legal and valid in accordance with such laws, rules and regulations.

Article 6
Payments

6.1

Technology Transfer Timing and Fee.   The Parties will commence the transfer of manufacturing technology pertaining to the Products and CoSeal Units as soon as possible, but not later than thirty (30) days after the Effective Date, and anticipate that transfer of manufacturing of the Products or CoSeal Units from the Cohesion facility to a facility where the Products or CoSeal Units will be manufactured by or on behalf of Baxter will be completed by September 30, 2004.  Within fifteen (15) days of the date of the Successful Completion of Manufacturing Technology Transfer of the first Product or corresponding CoSeal Unit, Baxter will pay to Cohesion [***].  Within fifteen (15) days after the first Commercialization Date, Baxter will pay to Cohesion the sum of [***], and within fifteen (15) days after the second Commercialization Date, Baxter will pa y to Cohesion an additional [***].

6.2

Currency.   Unless otherwise agreed by the Parties in writing, all amounts paid by Baxter under this Manufacturing Agreement shall be paid to Cohesion or its designee in Dollars by wire transfer to a financial institution to be designated by Cohesion.  Written or electronic notice of each such transaction shall be promptly provided to such financial employee or officer as is designated by AAC.  Subject to Section 6.4, such payments shall be without deduction of collection, wire transfer or other charges, and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes, except only as permitted in the definition of Net Sales in Section 1.37 of the Distribution and License Agreement.

6.3

Interest Due.  In case of any delay in payment by Baxter to Cohesion or its designee, interest on the overdue payment shall accrue at an annual interest rate equal to the lesser of: (a) the prime rate as reported in the Money Rates set forth in The Wall Street Journal, plus three (3) percentage points, as determined for each month on the last Business Day of the previous month, or (b) the maximum amount permitted by law, in either instance assessed from the date that payment was initially due.  The foregoing interest shall be due from Baxter without any special notice, and shall be in addition to any other remedies that AAC may have pursuant to this Manufacturing Agreement.

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6.4

Taxes.  The Parties agree that any taxes that either Party is required by law to withhold from amounts payable to the other Party under this Manufacturing Agreement (whether under this Article 6 or otherwise) shall be deducted by the paying Party from the amounts paid to the non-paying Party hereunder at the rate(s) required by applicable law, and shall be promptly paid to the appropriate governmental authority on behalf of the non-paying Party.  The paying Party shall promptly provide to the non-paying Party receipts from the government or taxing authority evidencing payment of such taxes, if available, or other written proof of payment if official receipts are not available, and shall provide reasonable assistance to the non-paying Party to obtain tax credits therefor.

Article 7
Representations and Warranties

7.1

Representations and Warranties of AAC.  

(a)

Authorization.  AAC, jointly and severally, represents, warrants and covenants that:

(i)

this Manufacturing Agreement has been duly executed and delivered by AAC and constitutes a valid and binding obligation of AAC, enforceable against AAC in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles;

(ii)

the execution, delivery and performance of this Manufacturing Agreement have been duly authorized by all necessary action on the part of AAC, its officers and directors and does not conflict with any agreement, instrument or understanding, oral or written, to which AAC is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

(iii)

AAC has full power and authority to perform the obligations set forth herein, and that AAC is not subject to any order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Manufacturing Agreement;

(iv)

AAC is duly organized, validly existing and in good standing under the laws of the jurisdiction where it is organized; and

(v)

AAC Controls the AAC Manufacturing Patents set forth in Schedule 1.2.

(b)

AAC’s Rights (CoSeal Ingredients and Product(s)).  As of the Effective Date, AAC, jointly and severally, represents and warrants, with respect only to CoSeal Ingredients and Product(s) as they are configured in the CoSeal Sealant Unit (both the formulation marketed as of the Effective Date and the “premix” formulation) and the CoSeal Adhesion Prevention Unit as of the Effective Date, that to its knowledge, upon reasonable inquiry, the granting of the licenses to Baxter hereunder does not conflict with any contractual

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obligation of AAC to any Third Party, except as set forth in Schedule 2.1(b) of the Distribution and License Agreement.

(c)

AAC’s Rights (CoSeal Ingredients, CoSeal Accessories, Product(s), CoSeal Devices, and CoSeal Units).  As of the Effective Date, AAC, jointly and severally, represents and warrants, with respect only to CoSeal Ingredients, CoSeal Devices, and Product(s) as they are configured in CoSeal Units as of the Effective Date, and CoSeal Accessories and CoSeal Units as of the Effective Date, that Schedule 1.2 contains the full and complete list of all material AAC Manufacturing Patents relating to CoSeal Accessory(ies), Products(s), CoSeal Device(s) and CoSeal Unit(s) Controlled by AAC as of the Effective Date, which Control by AAC as of the Effective Date is subject to those Third Party Rights granted prior to the Effective Date in those agreements set forth in Schedule 2.1(b) of the Distribution and License Agreement and to research use only rights and limited non-commercial rights granted to Third Parties pursuant to material transfer agreements or feasibility study agreements.

The sole remedy for inadvertent failure to include an AAC Manufacturing Patent on Schedule 1.2 shall be amendment of such schedule to include the omitted AAC Manufacturing Patent, and such omission shall not be deemed a material breach by AAC of the representations and warranties set forth in this Section 7.1(c).

(d)

No Conflicting Agreements.  AAC, jointly and severally, represents and warrants that it has not to its knowledge granted, and during the term of this Manufacturing Agreement will not grant, any right to a Third Party in the Field in the Territory, except as set forth in Schedule 2.1(b) of the Distribution and License Agreement, that would conflict with the licenses and rights granted to Baxter hereunder.

(e)

No Proceedings or Challenges; Non-Infringement.  As of the Effective Date, to AAC’s actual knowledge, upon reasonable inquiry, there are no proceedings before any court, administrative tribunal or other authority commenced, pending or threatened which would challenge the validity of AAC Manufacturing Patents or assert a right or interest of a Third Party in AAC Manufacturing Patents or any portion thereof.  As of the Effective Date, to AAC’s actual knowledge, upon reasonable inquiry, AAC is not aware of, nor has any Third Party asserted, any claim, notice, or concern about the potential infringement of any Third Party proprietary rights as a result of the manufacture, use, offer to sell, sale, importation or distribution of Product(s).

(f)

No Dominant Patents.  As of the Effective Date, to AAC’s actual knowledge and with respect only to CoSeal Ingredients, Product(s), CoSeal Devices and CoSeal Units as of the Effective Date, there are no Patents owned or Controlled by AAC that are dominant to the AAC Manufacturing Patents licensed to Baxter hereunder.  With the exception of Patents covering [***] or any other component of an Improvement as a separate entity (for instance, apart from its use within such Improvement), should any such Patents that are owned or Controlled by AAC become known to AAC, such Patents shall be deemed “AAC Manufacturing Patents” for the purposes of this Manufacturing Agreement, AAC shall notify Baxter in writing of such Patents and Schedule 1.2 shall be amended to include such Patents.

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7.2

Representations and Warranties of Baxter.

(a)

Authorization.  Baxter, jointly and severally, represents, warrants and covenants that:

(i)

this Manufacturing Agreement has been duly executed and delivered by Baxter and constitutes a valid and binding obligation of Baxter, enforceable against Baxter in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles;

(ii)

the execution, delivery and performance of this Manufacturing Agreement by Baxter have been duly authorized by all necessary action on the part of Baxter, its officers and directors, and does not conflict with any agreement, instrument or understanding, oral or written, to which Baxter is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

(iii)

Baxter has full power and authority to perform the obligations set forth herein, and that Baxter is not subject to any order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Manufacturing Agreement; and

(iv)

Baxter is duly organized, validly existing and in good standing under the laws of the jurisdiction where it is organized.

(b)

No Impairing Agreements.  Baxter, jointly and severally, represents, warrants and covenants that, during the term of this Manufacturing Agreement, it will not knowingly enter into any agreements, oral or written, that would in any way impair its ability to fulfill its obligations under this Manufacturing Agreement.

(c)

No Dominant Patents.  If Baxter has any dominant Patent that was filed before the Effective Date or during the term of this Manufacturing Agreement that contains claims that would cover the CoSeal Ingredients for use in the Field, Product(s) for use in the Field, CoSeal Devices(s) for use in the Field, or CoSeal Unit(s) for use in the Field, then Baxter shall not assert such dominant Patent against AAC or its licensees during the term of this Manufacturing Agreement in any manner, and will make no claim under this Manufacturing Agreement for additional compensation.

Article 8
Limitations on Representations and Warranties

8.1

Limitations on Representations and Warranties

THE LIMITED WARRANTIES CONTAINED IN ARTICLE 7 ARE THE SOLE WARRANTIES GIVEN BY THE PARTIES HEREUNDER, AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES PROVIDED BY

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COMMON LAW, STATUTE OR OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, PUNITIVE, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS AND LOSS OR INTERRUPTION OF BUSINESS.  THE FOREGOING PROVISION SHALL NOT BE CONSTRUED TO LIMIT A PARTY'S INDEMNIFICATION OBLIGATION UNDER THIS MANUFACTURING AGREEMENT FOR THIRD PARTY CLAIMS WHICH MAY INCLUDE CONSEQUENTIAL, PUNITIVE OR OTHER TYPES OF DAMAGES.

Article 9
Confidentiality

9.1

Confidentiality.  

(a)

No Disclosure or Use.  During the term of this Manufacturing Agreement, and for a period of three (3) years thereafter, each Party shall keep confidential all information received from the other Party (the “Confidential Information”), and shall not disclose or use such Confidential Information without the other Party’s written consent, except to the extent contemplated by this Manufacturing Agreement.  This restriction shall not, however, prevent disclosure of such Confidential Information if and to the extent that disclosure is required by law; provided that the disclosing Party informs the other Party without delay of any such requirement, in order to allow such other Party to object to such disclosure and to seek an appropriate protective order or similar protection prior to disclosure.

(b)

No Misappropriation.  The Parties agree that the transfer of intellectual property rights and of rights in regulatory documentation by one Party to the other Party pursuant to this Manufacturing Agreement shall not, to the actual knowledge of the transferring Party, misappropriate the proprietary or trade secret information of a Third Party.

9.2

Exceptions.  

The above obligations shall not apply, or shall cease to apply, to Confidential Information of the disclosing Party which:

(a)

is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available;

(b)

is known by the receiving Party at the time of receiving such Confidential Information, as evidenced by its written records;

(c)

is hereafter furnished to the receiving Party by a Third Party, as a matter of right and without restriction on disclosure;

(d)

is independently developed by the receiving Party without resort to the Confidential Information of the disclosing Party or any breach of this Article 9;

(e)

is entered into evidence in a legal proceeding or submitted for use in a dispute resolution proceeding to enforce one or more rights of a Party under this Manufacturing Agreement; provided that the receiving Party shall give the disclosing Party prompt written

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notice and sufficient opportunity to object to such use or disclosure, or to request confidential treatment of the Confidential Information; or

(f)

is the subject of a written permission to disclose provided by the disclosing Party.

9.3

Permitted Disclosures.  

(a)

Each Party may disclose Confidential Information: (i) for the purpose of preparing, filing, prosecuting and maintaining Patents; (ii) for obtaining Regulatory Approvals; (iii) for the manufacture, marketing, distribution or sale of CoSeal Unit(s); or (iv) to any individuals that are required by law, contract or otherwise not to use or disclose such Confidential Information except as permitted by this Manufacturing Agreement.  Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that such individuals do not disclose or make any unauthorized use of the Confidential Information.

(b)

In order to exploit rights retained by or granted to the Parties under this Manufacturing Agreement, each Party may publish or publicly present any research or other data which may involve the disclosure of Confidential Information; provided that the publishing Party agrees to furnish the non-publishing Party with copies of any proposed oral, written, graphic or electronic public disclosure prior to submission for publication or presentation.  The non-publishing Party shall then have forty five (45) days to review such contemplated publication or presentation.  At the end of the forty five (45) day period, the publishing Party may proceed with the contemplated publication or presentation unless (i) the non-publishing Party reasonably requests additional time to fully protect its intellectual property rights, in which case any such contemplated publication or presentation containing the details of a patentable invention must be withheld by the publishing Party for an additional period of forty five (45) days or until a patent application is filed thereon by the non-publishing Party, whichever is earlier in time; or (ii) the non-publishing Party reasonably requests that trade secret information or other Confidential Information of the non-publishing Party be redacted from the contemplated publication or presentation, in which case any such request shall be honored by the publishing Party.

9.4

Disclosure of Manufacturing Agreement.  Except as required by law, neither AAC nor Baxter shall release to any Third Party or publish in any way any Confidential Information with respect to the terms of this Manufacturing Agreement or concerning their cooperation without the prior written consent of the other Party, which consent will not be unreasonably withheld or delayed; provided; however, that either Party may disclose the terms of this Manufacturing Agreement to the extent required to comply with applicable laws, including without limitation: (a) any instance where a Party must comply with the rules and regulations promulgated by the U.S. Securities and Exchange Commission, a stock reporting organization (i.e., the New York Stock Exchange) or similar authorities in other jurisdictions, and (b) any instance where a Party becomes legally compelled (by de position, interrogatory, request for documents, subpoena, civil investigative demand or similar process).  Notwithstanding any other provision of this Manufacturing Agreement, each Party may disclose the terms of this Manufacturing Agreement (y) to its legal counsel or (z) to lenders, investment bankers, attorneys, financial advisors and other financial institutions of its choice solely for purposes of

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financing the business operations of such Party, or to a potential acquirer of all or substantially all of the assets or equity interests of such Party (A) upon the written consent of the other Party, or (B) if the Party disclosing such terms obtains a signed confidentiality agreement with such intended recipient with respect to such Confidential Information, upon terms substantially similar to those contained in this Article 9.

9.5

Press Release.  Within twenty (20) Business Days after execution of this Manufacturing Agreement, either or both of the Parties may issue a press release pertaining to the execution of this Manufacturing Agreement.  Any such press release will recite language that has been mutually agreed upon by the Parties.  Except as otherwise required by law, applicable governmental regulations or New York Stock Exchange rules, without the prior written agreement of the Parties, neither Party will issue any other press release concerning the terms or existence of this Manufacturing Agreement.

9.6

Confidential Information of Each Party.  The Parties agree that the material financial terms of the Manufacturing Agreement shall be considered the Confidential Information of both Parties.

9.7

Employee Obligations.  Each Party shall undertake to ensure that all of its employees who have access to Confidential Information are under obligations of confidentiality to such Party.

9.8

Prior Confidentiality Agreements.  

The Parties and/or their Affiliates are parties to the following Confidentiality Agreements:

(a)

Mutual Confidentiality Agreement by and between Baxter Healthcare and Angiotech, dated as of October 15, 2002;

(b)

Letter Agreement by and between Baxter International, Inc. and Cohesion, dated as of September 6, 2002 (the "Letter Agreement");

(c)

Amendment to the Letter Agreement by and between Baxter Healthcare, Cohesion, and Angiotech, dated as of January 31, 2003; and

(d)

CoSeal Units Distribution Agreement by and between Angiotech, Cohesion and Baxter Healthcare, dated February 25, 2003 (the above agreements set forth in this Section 9.8, collectively, the “Prior Confidentiality Agreements”).

The Prior Confidentiality Agreements shall govern disclosures made among the Parties and their Affiliates up to the Effective Date according to their respective terms, and this Manufacturing Agreement shall govern disclosures made on and after the Effective Date under this Manufacturing Agreement.

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9.9

Confidential Information upon Expiration or Termination.  

  Upon expiration or termination of this Manufacturing Agreement, each Party shall cease to use or disclose Confidential Information for any purpose, except for use or disclosure that is permitted under this Manufacturing Agreement after expiration or termination of this Manufacturing Agreement.

Article 10
Term and Termination

10.1

Term.  

(a)

Term.  The term of this Manufacturing Agreement shall be the longer of: (i) ten (10) years from the Effective Date, or (ii) the expiration date of the last to expire AAC Patent listed on Schedule 1.3 of the Distribution and License Agreement, as it may be amended by the Parties from time to time; provided, however, that in no event shall the term of this Manufacturing Agreement exceed thirty (30) years.

(b)

Accrued Obligations.  Except where explicitly provided elsewhere herein, termination of this Manufacturing Agreement for any reason, or expiration of this Manufacturing Agreement, will not affect: (i) obligations of the Parties, including any payments which have accrued as of the date of termination or expiration, or (ii) rights and obligations of the Parties at law or in equity which, from the context thereof, are intended to survive termination or expiration of this Manufacturing Agreement; nor prejudice any Party’s right to obtain performance of any obligation then due and owing.

10.2

Termination for Insolvency.  Either Party may terminate this Manufacturing Agreement immediately upon delivery of written notice to the other Party: (a) upon the institution by or against the other Party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of the other Party’s debts; provided, however, with respect to involuntary proceedings, that such proceedings are not dismissed within thirty (30) days; (b) upon the other Party’s making an assignment for the benefit of creditors; or (c) upon the other Party’s dissolution or ceasing to do business.  All licenses granted under this Manufacturing Agreement, whether by Baxter or AAC, shall be deemed to be the grant of licenses of "Intellectual Property" under Section 365(n) of the United States Bankruptcy Code, as amended.  Should either Party elect to terminate this Manufacturing Agreement pursuant to this Section 10.2, Baxter’s sole obligations shall be to cease manufacture and sale of the Product, subject to the sell-off period provided in the Distribution and License Agreement and to facilitate the transfer of manufacturing technology to AAC (or a Third Party designated by AAC), if requested to do so by AAC or an officer of the bankruptcy court within thirty (30) days of receipt or delivery of the notice to terminate.  Such transfer of manufacturing technology to AAC shall be at the sole expense of AAC.  Where termination is effected pursuant to this Section 10.2, Baxter shall have no continuing obligation to supply product under this Manufacturing Agreement after the thirty (30) day termination period.

10.3

Termination for Material Breach.  Either Party may terminate this Manufacturing Agreement upon thirty (30) days prior written notice to the other Party upon a material breach by the other Party of any of its obligations under this Manufacturing Agreement (and such obligations specifically include a failure by a Party to pay any amount owing under

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this Manufacturing Agreement); provided, however, that such termination shall become effective only if the breaching Party shall fail to: (a) remedy or cure the breach within such thirty (30) day period, or initiate a remedy or cure within such period if it is not practicable to complete the cure in such period; or (b) within thirty (30) days after the date of the non-breaching Party’s written notice of material breach, provide written notice of the breaching Party’s dispute of the alleged breach or failure to cure and its invocation of the dispute resolution provisions set forth in Article 12.  If the non-breaching Party elects not to terminate this Manufacturing Agreement pursuant to this Section 10.3, then the non-breaching Party shall be entitled to seek, subject to Sections 12.2 and 12.3, any equitable remedies and damages permitted by law, except to the extent otherwise limited by this Manufacturing Agreement.

10.4

Baxter’s Termination of Manufacturing.  Baxter, at its sole option, shall have the right for any or no reason to terminate its manufacturing rights under this Manufacturing Agreement.  If Baxter elects to discontinue manufacturing either of the CoSeal Units, Baxter shall promptly provide written notice to AAC of its election not to manufacture such CoSeal Unit and this Manufacturing Agreement shall terminate, subject to Baxter's obligation to continue to manufacture CoSeal Accessories, Products and CoSeal Units for the benefit of AAC for a period not to exceed eighteen (18) months from the date that AAC receives such written notice from Baxter pursuant to this Section 10.4.  Within ten (10) Business Days after AAC’s receipt of such written notice, the Parties shall commence the transfer of manufacturing technology used to manufacture CoSe al Accessories, CoSeal Devices, Products and CoSeal Units to AAC (or to Third Party manufacturers identified by AAC).  Such transfer shall be conducted at Baxter’s sole expense, in accordance with a transitional period plan that is consistent with the responsibilities and timelines included with the transitional period plan prepared pursuant to Section 4.1(a)(v).  In no event shall Baxter’s responsibilities relating to this transfer of Baxter’s manufacturing technology be less than AAC’s obligations and responsibilities under the transitional period plan prepared pursuant to Section 4.1(a)(v) and as set forth under Section 3.3 (including no less than two thousand eighty (2080) personnel work hours at no cost to AAC, other than reimbursement to Baxter of out-of-pocket expenses related thereto).  In addition, the Distribution and License Agreement shall also terminate in its entirety as of the effective termination date applicable to this Manufacturing Agreement, subject to B axter’s inventory sell off rights pursuant to Section 14.8 of the Distribution and License Agreement.

10.5

Effect of Expiration or Termination.  

(a)

License of Rights to AAC As Applied to Marketed CoSeal Units, CoSeal Accessories and Components Thereof.  

(i)

Expiration or Termination of Manufacturing Agreement.  Upon expiration or termination of this Manufacturing Agreement, Baxter shall grant to AAC a fully paid up, royalty free and irrevocable right and license under the Baxter Manufacturing Patents, Baxter Trademarks and Baxter Manufacturing Know-How existing as of the date of such expiration or termination, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Baxter Manufacturing Patents, Baxter Trademarks and Baxter Manufacturing Know-How to manufacture (itself or through contractually bound Third Party(ies) of AAC) Product(s), CoSeal Device(s) or CoSeal Unit(s) which are being sold

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or offered for sale in the Field under the Distribution and License Agreement for indications approved in the Field at the date of termination or expiration.

(ii)

Termination of CoSeal Adhesion Prevention Unit Rights.  After Baxter’s exercise of its CoSeal Adhesion Prevention Option, in the event that Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit is terminated and if this Manufacturing Agreement otherwise continues in full force and effect, then Baxter shall grant to AAC a fully paid up, royalty free and irrevocable right and license under the Baxter Manufacturing Patents, Baxter Trademarks and Baxter Manufacturing Know-How existing as of the date of termination of Baxter’s rights to manufacture the CoSeal Adhesion Prevention Unit, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Baxter Manufacturing Patents, Baxter Trademarks and Baxter Manufacturing Know-How to manufacture (itself or through contractually bound Third Party(ies) of AAC) the CoSeal Adhes ion Prevention Product(s), CoSeal Adhesion Prevention Device(s) or CoSeal Adhesion Prevention Unit(s) which are being sold or offered for sale in the Field under the Distribution and License Agreement for indications approved in the Field at the date of termination of Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit.

(b)

Covenant by Baxter not to Sue AAC for Manufacture of Marketed CoSeal Units and CoSeal Accessories.  

(i)

Expiration or Termination of Manufacturing Agreement.  Upon expiration or termination of this Manufacturing Agreement (other than termination by Baxter for breach hereof by AAC), Baxter and Affiliates (and their respective successors and assigns) covenant not to sue (either at the time of, or subsequent to expiration or termination of this Manufacturing Agreement):

(A) AAC,

(B) any contractually bound Third Party licensee of AAC or Affiliate licensee of AAC, or

(C) any Third Party(ies) that is/are a contractually bound sublicensee(s) of such Third Party licensee or Affiliate licensee,

under the Patents Controlled by Baxter existing as of the date of such expiration or termination, for any manufacture by AAC and Affiliates (and their respective successors and assigns) or by any such Third Party licensee or sublicensee of CoSeal Accessories, Product(s), CoSeal Device(s) or CoSeal Unit(s) which are being sold or offered for sale in the Field under the Distribution and License Agreement for indications approved in the Field at the date of expiration or termination (“CoSeal Covenant Subject Matter”).  For the avoidance of doubt, Baxter and its Affiliates (and their respective successors and assigns) shall not assert at any time after the date of such expiration or termination, and shall take no steps to assert after the date of such expiration or termination, any Patents Controlled by Baxter that cover the CoSeal Covenant Subject Matter against AAC or any such Thi rd Party licensee or Affiliate licensee or any of their

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sublicensees, for any use, marketing, distribution, sale, offer for sale, export or import of the CoSeal Covenant Subject Matter in accordance with this Section 10.5(b)(i).

(ii)

Termination of CoSeal Adhesion Prevention Unit Rights.  After Baxter’s exercise of its CoSeal Adhesion Prevention Option, in the event that Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit is terminated and if this Manufacturing Agreement otherwise continues in full force and effect, then Baxter and Affiliates (and their respective successors and assigns) covenant not to sue (either at the time of, or subsequent to termination of Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit):

(A) AAC,

(B) any contractually bound Third Party licensee of AAC or Affiliate license of AAC, or

(C) any Third Party(ies) that is/are a contractually bound sublicensee(s) of such Third Party licensee or Affiliate licensee,

under the Patents Controlled by Baxter existing as of the date of such termination, for any manufacture by AAC and Affiliates (and their respective successors and assigns) or by any such Third Party licensee or sublicensee of CoSeal Accessories, CoSeal Adhesion Prevention Product(s), CoSeal Adhesion Prevention Device(s) or CoSeal Adhesion Prevention Unit(s) which are being sold or offered for sale in the Field under the Distribution and License Agreement for indications approved in the Field at the date of termination of Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit (“CoSeal Adhesion Prevention Covenant Subject Matter”).  For the avoidance of doubt, Baxter and its Affiliates (and their respective successors and assigns) shall not assert at any time after the date of such expiration or termination, and shall take no steps to assert after the date of such expiration or termination, any Patents Controlled by Baxter that cover the CoSeal Adhesion Prevention Covenant Subject Matter against AAC or any such Third Party licensee, Affiliate licensee or any of their sublicensees, for any use, marketing, distribution, sale, offer for sale, export or import of the CoSeal Covenant Subject Matter in accordance with this Section 10.5(b)(ii).

(c)

License of Rights to AAC As Applied to Other Products, CoSeal Units for Additional Indications, Other Devices, and Processes.  With respect to rights and licenses not set forth in Section 10.5(a), upon expiration or termination of this Manufacturing Agreement, and subject to negotiation of a royalty (if applicable) and a license agreement acceptable to the Parties, Baxter shall grant to AAC:

(i)

one or more royalty-bearing, non-exclusive right(s) and license(s) (negotiated in good faith by the Parties for a period not to exceed ninety (90) days)under Patents Controlled by Baxter and Baxter Trademarks: (A) existing as of the date of such expiration or termination, such that AAC has all necessary or used rights and licenses (including the right to sublicense) under such Patents Controlled by Baxter and Baxter Trademarks to manufacture (itself or through contractually bound Third Party(ies)) such Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Unit(s) which are

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intended to be sold or offered for sale for indications approved subsequent to the date of termination or expiration, and (B) having one or more valid and unexpired claims or marks that cover one or more of such Products, devices or CoSeal Unit(s) or that cover processes directed to making or using one or more of such Products, devices or CoSeal Units, and

(ii)

a fully paid up, royalty-free, irrevocable, non-exclusive license (with a right to sublicense) under the Baxter Manufacturing Know-How existing as of the date of termination or expiration, to manufacture (itself or through contractually bound Third Party(ies) of AAC) such Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Unit(s) which are intended to be sold or offered for sale for indications (as well as related processes) in development at the date of termination or expiration.

(d)

License of Rights to AAC upon Termination of  CoSeal Adhesion Prevention Rights.  With respect to rights and licenses not set forth in Section 10.5(a), after Baxter’s exercise of its CoSeal Adhesion Prevention Option, in the event that Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit is terminated and if this Manufacturing Agreement otherwise continues in full force and effect, and subject to negotiation of a royalty (if applicable) and a license agreement acceptable to the Parties, Baxter shall grant to AAC:

(i)

one or more royalty-bearing, non exclusive right(s) and license(s) (negotiated in good faith by the Parties for a period not to exceed ninety (90) days) under Patents Controlled by Baxter and Baxter Trademarks: (A) existing as of the date of such expiration or termination, such that AAC has all necessary or useful rights and licenses (including the right to sublicense) under such Patents Controlled by Baxter and Baxter Trademarks to manufacture (itself or through contractually bound Third Party(ies)) such CoSeal Adhesion Prevention Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Adhesion Prevention Unit(s) which are intended to be sold or offered for sale for indications approved subsequent to the date of termination or expiration, and (B) having one or more valid and unexpired claims or marks that cover one or more of such CoSeal A dhesion Prevention Products, devices or CoSeal Adhesion Prevention Unit(s) or that cover processes directed to making or using one or more of such CoSeal Adhesion Prevention Products, devices or CoSeal Adhesion Prevention Units, and

(ii)

a fully paid up, royalty-free, irrevocable, non-exclusive license (with a right to sublicense) under the Baxter Manufacturing Know-How existing as of the date of termination of Baxter’s manufacturing rights to the CoSeal Adhesion Prevention Product, to manufacture (itself or through contractually bound Third Party(ies) of AAC) such CoSeal Adhesion Prevention Products and devices as are sold or offered for sale in conjunction with Drug-Loaded Products or such CoSeal Adhesion Prevention Unit(s) which are intended to be sold or offered for sale for indications (as well as related processes) in development at the date of termination of Baxter’s right to manufacture the CoSeal Adhesion Prevention Unit.

(d)

Information.  In the event of termination of this Manufacturing Agreement for any reason other than AAC’s uncured material breach of this Agreement, Baxter shall make customer information reasonably available to AAC that is comparable to the customer

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information provided by AAC to Baxter pursuant to Section 8.1(b) of the Distribution and License Agreement.

(e)

Additional Obligations.  Upon expiration or termination of this Manufacturing Agreement (or termination of a Party’s rights and obligations with respect to a given CoSeal Unit) by either Party, Baxter shall deliver to AAC (or to its designee, as permitted under the applicable law) all Regulatory Approvals (including all supporting data, quality system records and information) for such CoSeal Unit(s), including CoSeal Accessory(ies), in the Territory as of the effective date of the termination.  In the event of termination by AAC or termination by Baxter for material breach by AAC, such transfer shall be at AAC’s sole expense.  Except as set forth in Section 10.2, in the event of termination by Baxter or termination by AAC for material breach by Baxter, such transfer shall be at the Baxter’s sole expense.

10.6

Inventory.  Notwithstanding the foregoing, upon early termination of this Manufacturing Agreement (so long as this termination is not for reason of Baxter’s uncured material breach), and further upon the terminating Party’s election, Baxter shall be allowed to complete all work in process under the provisions specified in the Section 14.8 of the Distribution and License Agreement.

Article 11
Product Liability, Indemnification and Insurance

11.1

Responsibility and Control.  Baxter and AAC shall each be solely responsible for the safety of its own employees, agents, Affiliates or independent contractors with respect to its performance under this Manufacturing Agreement, and each shall hold the other Party harmless with regard to any liability for damages or personal injuries resulting from acts of its respective employees, agents, Affiliates or independent contractors.

11.2

Baxter Right to Indemnification.  AAC shall defend, indemnify, and hold harmless Baxter, its Affiliates, successors, and assigns and their respective directors, officers, employees, agents, and independent contractors (collectively the "Baxter Indemnitees") from and against any and all liabilities, damages, losses, settlements, claims, actions, suits, judgments, interest, penalties, fines, costs, or expenses (including, without limitation reasonable attorneys' fees) (any of the foregoing, "Section 11.2 Damages") incurred or asserted against any Baxter Indemnitee of whatever kind or nature including, without limitation, any claim or liability based upon negligence, warranty, strict liability, or violation of governmental regulation, or otherwise arising from or occurring as a result of a claim or demand made by a Third Party against any Ba xter Indemnitee (a "Baxter Third Party Claim") because of (a) the manufacture, packaging, testing, labeling, storage, handling, or delivery of any, Product or CoSeal Unit by or on behalf of AAC, or attributes of any Product or CoSeal Unit, including but not limited to the immunogenicity, toxicity, teratogenicity, carcinogenicity, or inherent risk of the use or administration of any Product or CoSeal Unit; (b) the material breach by AAC of its representations, warranties, or obligations under this Manufacturing Agreement; (c) the violation of any applicable law by AAC; or (d) the negligence or willful misconduct of AAC, its employees, other agents, independent contractors, sublicensees or Affiliates in connection with this Manufacturing Agreement (clauses (a) through (d) being the "AAC Activities"); provided, however, that AAC shall have no such obligation to defend, indemnify, or hold harmless the

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Baxter Indemnitees against a Baxter Third Party Claim to the extent any Section 11.2 Damages are based upon, or are the result of, or arise from, Baxter Activities (as defined below).  The indemnification provided under clause (a) of this Section 11.2, shall apply only to Products manufactured by AAC.  The indemnification provided under clauses (b) through (d) of this Section 11.2, shall be applicable during the term of this Manufacturing Agreement.

11.3

AAC Right to Indemnification.  Baxter shall defend, indemnify, and hold harmless AAC, its Affiliates, successors, and assigns and their respective directors, officers, employees, agents, and independent contractors (collectively the "AAC Indemnitees") from and against any and all liabilities, damages, losses, settlements, claims, actions, suits, judgments, interest, penalties, fines, costs, or expenses (including, without limitation, reasonable attorneys' fees) (any of the foregoing, "Section 11.3 Damages") incurred or asserted against any AAC Indemnitee of whatever kind or nature including, without limitation, any claim or liability based upon negligence, warranty, strict liability, or violation of governmental regulation, or otherwise arising from or occurring as a result of a claim or demand made by a Third Party against any AAC Indemn itee (an "AAC Third Party Claim") because of (a) the manufacture, packaging, testing, labeling, storage, handling, or delivery of any Product or CoSeal Unit by or on behalf of Baxter, or attributes of any Product or CoSeal Unit, including but not limited to the immunogenicity, toxicity, teratogenicity, carcinogenicity, or inherent risk of the use or administration of any Product or CoSeal Unit; (b) the material breach by Baxter of its representations, warranties, or obligations under this Manufacturing Agreement, (c) the violation of any applicable law by Baxter, or (d) the negligence or willful misconduct of Baxter, its employees, other agents, independent contractors, sublicensees or Affiliates in connection with this Manufacturing Agreement (clauses (a) through (d) being the "Baxter Activities"); provided, however, that Baxter shall have no such obligation to defend, indemnify, or hold harmless the AAC Indemnitees against an AAC Third Party Claim to the extent any Section 11.3 Damages are based upon, or are the result of, or arise from, AAC Activities.  The indemnification provided under clause (a) of this Section 11.3, shall apply only to Products manufactured by or on behalf of Baxter, other than by AAC under this Manufacturing Agreement.  The indemnification provided under clauses (b) through (d) of this Section 11.3, shall be applicable during the term of this Manufacturing Agreement.  

11.4

Indemnification Procedures.  Promptly after receipt by a Baxter Indemnitee or an AAC Indemnitee (together or individually, an “Indemnitee”) of notice of any pending or threatened claim against it (an “Action”), such Indemnitee shall give written notice to the Party to whom the Indemnitee is entitled to look for indemnification pursuant to this Article 11 (the “Indemnifying Party”) of the commencement thereof.  The failure to so notify the Indemnifying Party shall not relieve it of any liability that it may have to any Indemnitee hereunder, except to the extent the Indemnifying Party demonstrates that it is prejudiced thereby.  In case any Action that is subject to indemnification under Section 11.2 or Section 11.3 shall be brought against an Indemnitee and it shall give written notice to the Indemnifying Party of the c ommencement thereof, the Indemnifying Party shall be entitled to participate therein and, if it so desires, to assume the defense thereof with counsel reasonably satisfactory to such Indemnitee and, after notice from the Indemnifying Party to the Indemnitee of its election to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnitee under this Article 11 for any fees of other counsel or any other expenses, in each case subsequently incurred by such Indemnitee in connection with the defense thereof.  Notwithstanding an Indemnifying Party’s

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election to assume the defense of any such Action that is subject to indemnification under Section 11.2 or Section 11.3, the Indemnitee shall have the right to employ separate counsel and to participate in the defense of such Action at its own expense.  If an Indemnifying Party assumes the defense of such Action, no compromise or settlement thereof may be effected by the Indemnifying Party without the Indemnitee’s written consent, which consent shall not be unreasonably withheld or delayed, unless (a) there is no finding or admission of any violation of law or any violation of the rights of any Third Party and no effect on any other claims that may be made against the Indemnitee and (b) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party.

11.5

Compliance.  The Parties shall comply fully with all applicable laws and regulations in connection with their respective activities under this Manufacturing Agreement.

11.6

Baxter Insurance.

(a)

Baxter shall, until expiration of the last batch of CoSeal Unit sold under the Distribution and License Agreement, or of Product or CoSeal Unit manufactured hereunder, by Baxter, its Affiliates and sublicensees, obtain and maintain at its own cost and expense, any combination of insurance or self-insurance, at Baxter’s sole discretion, for its commercial liability, including, but not limited to, product liability and contractual liability insurance, with respect to its activities hereunder.

(b)

Such insurance or self-insurance shall be in such amounts and subject to such deductibles as the Parties may agree based upon standards prevailing in the industry at the time, but under no circumstances shall be less than: (i) Four Million Dollars ($4,000,000) per occurrence for damage, injury and/or death to persons prior to Regulatory Authority approval of a CoSeal Unit; (ii) Ten Million Dollars ($10,000,000) per occurrence for damage, injury and/or death to persons after Regulatory Authority approval of a CoSeal Unit; or One Million Dollars ($1,000,000) per occurrence for damage/or injury to property.  Such insurance or self-insurance shall be written to cover claims incurred, discovered, manifested, or made in connection with clinical development and commercial sale of CoSeal Units in the Territory.  Upon written request of AAC, Baxter shall provide to AA C copies of its Certificates of Insurance.

11.7

AAC Insurance.  

(a)

AAC shall, until expiration of the last batch of Product or CoSeal Unit sold or manufactured by AAC, its Affiliates, and sublicensees for Baxter under this Manufacturing Agreement, obtain and maintain at its own cost and expense, any combination of insurance or self-insurance, at AAC’s sole discretion, for its commercial liability, including, but not limited to, product liability and contractual liability insurance, with respect to its activities hereunder.  

(b)

Such insurance or self-insurance shall be in such amounts and subject to such deductibles as the Parties may agree based upon standards prevailing in the industry at the time, but under no circumstances shall be less than: (i) Four Million Dollars ($4,000,000) per occurrence for damage, injury and/or death to persons prior to Regulatory Authority approval of a CoSeal Unit; (ii) Ten Million Dollars ($10,000,000) per occurrence for damage, injury and/or

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death to persons after Regulatory Authority approval of a CoSeal Unit; or One Million Dollars ($1,000,000) per occurrence for damage/or injury to property.  Such insurance or self-insurance shall be written to cover claims incurred, discovered, manifested, or made in connection with clinical development and commercial sale of CoSeal Units in the Territory.  Upon the written request of Baxter, AAC shall provide to Baxter copies of its Certificates of Insurance.

11.8

Method of Insurance.All insurance required of either Party under this Manufacturing Agreement shall, at each Parties’ discretion with respect to its insurance, be through self-insurance or a combination of self-insurance and commercially placed insurance.  Where the Party uses commercially placed insurance, such insurance shall (i) be issued by reputable, financially sound companies; (ii) provide that the insurance company will endeavor to provide at least thirty (30) days notice of cancellation of coverage, non-renewal or material change of coverage to both Baxter and AAC, but its failure to do so shall impose no penalty or additional obligations under this Manufacturing Agreement; and (iii) contain a severability of interest or separation of the insureds provision, affording defense and coverage for an insured in the event of a claim br ought by another insured.

11.9

Additional Requirements.  All of the foregoing liability policies shall be primary and non-contributory and contain a waiver of subrogation in favor of the other Party or the other Party’s designee.  

11.10

No Limitation.  Nothing in this Article 11 regarding insurance coverage amounts shall be deemed or interpreted as a limitation on the indemnities set forth in this Manufacturing Agreement.

Article 12
Miscellaneous Provisions

12.1

Governing Law.  This Manufacturing Agreement shall be governed, interpreted and construed in accordance with the laws of New York, without regard to conflict of laws principles thereof.  

12.2

Escalation of Dispute Resolution.  The Parties shall attempt to settle any dispute through good faith negotiations in the spirit of mutual cooperation between business executives with authority to resolve the dispute.  Prior to taking action as provided in Section 12.3 of this Manufacturing Agreement, the Parties shall first submit such dispute to Angiotech’s Chief Executive Officer and to Baxter’s General Manager of the BioSurgery Business (“Heads”) for resolution.  The Heads to whom any dispute is submitted shall attempt to resolve the dispute through good faith negotiations over a reasonable period, not to exceed fifteen (15) Business Days in the aggregate unless otherwise agreed upon by the Heads.  Such fifteen (15) Business Day period shall be deemed to commence on the date the dispute was submitted to the Heads.   ;All negotiations pursuant to this Section 12.2 shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

12.3

Arbitration.  Any dispute that is not resolved by negotiations pursuant to Section 12.2 shall, upon the submission of the written request of either Party to the other Party, be resolved by binding arbitration before a three person panel of Arbitrators (the “Panel”),

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conducted in accordance with the Rules of CPR Institute for Dispute Resolution, except to the extent that such rules are inconsistent with this Manufacturing Agreement.  Each Party shall select its own Arbitrator (a “Party Arbitrator”) and shall notify the other Party of its selection within fifteen (15) Business Days after receipt of the written request for binding arbitration.  However, neither Party may select as a Party Arbitrator any Third Party who is currently engaged to provide non-arbitration related legal services to such Party or that has derived more than ten percent (10%) of its revenues from non-arbitration related legal services provided to such Party within the past twelve (12) months. The Party Arbitrators shall then mutually select a third Arbitrator (a “Neutral Arbitrator”) in accordance with the Rules of the CPR Institute for Dispute Resolution.  Such Neutral Arbitrator may not be currently engaged by either Party and may not have derived more than ten p ercent (10%) of its revenues from services provided to either Party within the past twelve (12) months.  Each member of the Panel shall be free of any subject matter conflict and conflict with a Party.  The Panel shall resolve the dispute in accordance with this Manufacturing Agreement and the substantive rules of law (but not the rules of procedure) that would be applied by a federal court sitting at the site of the arbitration.  The arbitration shall take place in Chicago, Illinois if initiated by AAC, and in Seattle, Washington if initiated by Baxter.  The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16.  Except as set forth in this Manufacturing Agreement, the Panel is not empowered to award damages in excess of compensatory damages.  The Panel has no power or authority, under the CPR Rules for Non-Administered Arbitration or otherwise, to relieve the Parties from their agreement hereunder to arbitrate, or otherwise to amend or disregard any provision of this Manufacturing Agreement, including the provisions of this Section 12.3.  The award of the Panel shall be the sole and exclusive remedy of the Parties, and shall be enforceable in any court of competent jurisdiction, subject only to revocation on grounds of fraud or clear bias on the part of any member of the Panel.  The statute of limitations of the State of New York, applicable to the commencement of a lawsuit, shall apply to the commencement of an arbitration under this Section 12.3, except that no defenses shall be available based upon the passage of time during any negotiation or mediation pursuant to Section 12.2.

12.4

Waiver.  The failure on the part of AAC or Baxter to exercise or enforce any rights conferred upon it hereunder shall not be deemed to be a waiver of any such rights and shall not operate to bar the exercise or enforcement thereof at any time or times thereafter.  The observance of any term of this Manufacturing Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) by the Party entitled to enforce such term, but any such waiver shall be effective only if set forth in a writing signed by the Party against whom such waiver is to be asserted.

12.5

Force Majeure.  Neither Party shall be held liable or responsible to the other Party, nor be deemed to have defaulted under or breached this Manufacturing Agreement, for failure or delay in fulfilling or performing any term of this Manufacturing Agreement, other than an obligation to make a payment, when such failure or delay is caused by or results from fire, floods, earthquakes, embargoes, prohibitions or interventions, war, acts of war (whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts, acts of God, or any other cause beyond the reasonable control of the affected Party (hereinafter a “Force Majeure”).  Nothing in this provision shall be interpreted to restrict either Party from exercising

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its rights to terminate this Manufacturing Agreement pursuant to its terms during such periods of Force Majeure.

12.6

Severability.  It is the intention of the Parties to comply with all applicable laws, domestic or foreign, in connection with the performance of its obligations hereunder.  In the event that any provision of this Manufacturing Agreement, or any part hereof, is found invalid or unenforceable, the remainder of this Manufacturing Agreement will be binding on the Parties hereto, and will be construed as if the invalid or unenforceable provision or part thereof had been deleted, and this Manufacturing Agreement shall be deemed modified to the extent necessary to render the surviving provisions enforceable to the fullest extent permitted by law.

12.7

Survival.  The following Articles and Sections shall survive termination or expiration of this Manufacturing Agreement, with such limitations as are noted: Article 1, to the extent definitions are embodied in the following listed Articles and Sections of this Manufacturing Agreement; Sections 2.1(a)(ii), 2.1(b)(ii), 2.1(c)(ii), 4.5, 5.1, 5.4 (as applicable), 5.7, and 5.8; Articles 8 and 9; Sections 10.1(b), 10.5 and 10.6; and Articles 11 and 12 (excluding Section 12.8).

12.8

Government Acts.  In the event that any act, regulation, directive, or law of a government, including its departments, agencies or courts, (a “Government Act”) should make impossible or prohibit, restrain, modify or limit any material act or obligation of AAC or Baxter under this Manufacturing Agreement, the Party, not so affected shall have the right, at its option, to suspend or terminate this Manufacturing Agreement.  Such right of suspension or termination may be exercised as to the country which committed the Government Act only if after thirty (30) days of good faith negotiations between the Parties, the Parties cannot agree to make such modifications to this Manufacturing Agreement as may be necessary to fairly address the Government Act.

12.9

Government Approvals.  Each Party will use commercially reasonable efforts to obtain any government approval required to enable this Manufacturing Agreement to become effective, or to enable any payment hereunder to be made, or enable any other obligation hereunder to be observed or performed.  Each Party will keep the other Party informed of its progress in obtaining any such governmental approvals.

12.10

Assignment.  This Manufacturing Agreement may not be assigned in part or in whole, or delegated in whole or in part, by either Party without the prior written consent of the other Party; provided, however, that either Party may assign this Manufacturing Agreement, without the consent of the other Party, (a) in part or in whole to any of its Affiliates, if the assigning Party remains liable for the full performance of its Affiliates’ obligations hereunder, or (b) in connection with the transfer or sale of all or substantially all of its assets or business to which this Manufacturing Agreement relates, or in the event of its merger or consolidation with, acquisition by, or sale to another company.  The Parties acknowledge that Baxter may elect to assign to one or more Third Parties, on a country-by-country or region-by-region basis, certain of its ri ghts and to delegate certain of its obligations under this Manufacturing Agreement; provided, however, that Baxter may not assign such rights or delegate such obligations in the United States, Europe or Japan to a Third Party without AAC’s prior written consent.  In all cases, (x) the assigning or delegating Party shall provide the other Party with prompt written

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notice of any such assignment or delegation; (y) the assignee or delegatee shall accept such assignment or delegation in writing and agree to the related obligations of such assignment or delegation; and (z) and (z) the assignment or delegation shall not in any way diminish, reduce or eliminate any of the assigning or delegating Party’s obligations under this Distribution and License Agreement, and such Party shall remain liable for all such obligations.  Any purported assignment or delegation in contravention of this Section 12.10 shall, at the option of the non-assigning or non-delegating Party, be null and void and of no effect.  Unless the Parties otherwise agree in writing, no assignment or delegation shall release either Party from responsibility for the performance of any accrued obligation of such Party hereunder.  The grant of a sublicense pursuant to Section 2.4 of this Manufacturing Agreement shall not be deemed an assignment or delegation under this Manufacturing Agreement.

12.11

Binding Agreement.  This Manufacturing Agreement shall be binding upon and inure to the benefit of all successors and permitted assigns of the Parties.

12.12s

Counterparts.  This Manufacturing Agreement may be executed by original or facsimile signature in several counterparts, all of which shall be deemed to be originals, and all of which shall constitute one and the same Manufacturing Agreement.

12.13

No Agency.  Nothing herein contained shall be deemed to create an agency, joint venture, amalgamation, partnership or similar relationship between AAC and Baxter.  Notwithstanding any of the provisions of this Manufacturing Agreement, neither Party shall at any time enter into, incur, or hold itself out to Third Parties as having authority to enter into or incur, on behalf of the other Party, any commitment, expense, or liability whatsoever, and all such commitments, expenses and liabilities undertaken or incurred by one Party in connection with or relating to the development, manufacture or sale of CoSeal Unit(s) or components thereof shall be undertaken, incurred or paid exclusively by that Party, and not as an agent or representative of the other Party.

12.14

Notice.  All communications between the Parties with respect to any of the provisions of this Manufacturing Agreement will be sent to the addresses set forth below, or to such other addresses as designated by one Party to the other Party by notice pursuant hereto, by internationally recognized courier or by prepaid, certified air mail (which shall be deemed received by the other Party on the seventh (7^th) Business Day following deposit in the mails), or by facsimile transmission or other electronic means of communication (which shall be deemed received when transmitted), with confirmation by letter sent at or before the close of business the next following Business Day:

If to AAC, at:

Angiotech Pharmaceuticals, Inc.
1618 Station Street
Vancouver, British Columbia, CANADA V6A 1B6
Attention:  Chief Business Officer

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with a copy to:

Angiotech Pharmaceuticals, Inc.
1618 Station Street
Vancouver, British Columbia, CANADA V6A 1B6
Attention:  General Counsel

If to Baxter, at:

Baxter Healthcare Corporation
1627 Lake Cook Road
Mailstop LCIV-1W

Deerfield, Illinois 60015
Attention:  President, Venture Management

with copies to:

Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015
Attention:  General Counsel

Baxter Healthcare Corporation
Attn: Associate General Counsel of Baxter BioScience
One Baxter Way
Westlake Village, CA  91362

12.15

Headings.  The Article, Section and subsection headings are for convenience only and will not be deemed to affect in any way the language of the provisions to which they refer.

12.16

Authority.  The undersigned represent that they are authorized to sign this Manufacturing Agreement on behalf of the Parties hereto.

12.17

No Implied Licenses.  Nothing in this Manufacturing Agreement shall be construed as granting either Party by implication, estoppel or otherwise, any license rights which are not expressly set forth herein.

12.18

Entire Agreement.  This Manufacturing Agreement, including the Schedules appended hereto, together with the Distribution and License Agreement which is hereby incorporated by reference as if fully set forth herein, contains the entire understanding of the Parties relating to the matters referred to herein, and may only be amended by a written document, duly executed on behalf of the respective Parties.

<Signature Page Follows>

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IN WITNESS WHEREOF, the Parties hereto have caused this Manufacturing Agreement to be executed by their duly authorized representatives effective as of the day and year first above written, although actually signed on the dates set forth below.

Vancouver, British Columbia

Deerfield, Illinois
Angiotech Pharmaceuticals, Inc.

Baxter Healthcare Corporation

/s/ William L. Hunter

/s/ Gregory Bosch

Dr. William L. Hunter

Gregory Bosch

President and Chief Executive Officer

Vice President & General Manager

Biosurgery

Date April 18, 2003

Date April 18, 2003

Angiotech International, Inc.

Baxter Healthcare, S. A.

/s/ David D. McMasters

/s/ Gregory Bosch

David D. McMasters

Gregory Bosch

Managing Officer

Under Power of Attorney

from Baxter Healthcare, S.A.

Date April 18, 2003

Date April 18, 2003

Cohesion Technologies, Inc.

/s/ Jeanne M. Bertonis

Jeanne M. Bertonis

Secretary

Date April 18, 2003

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SCHEDULE 1.2

AAC MANUFACTURING PATENTS

Patent Family	Patent Number	Title	Dates	International Patents and Applications (per patent family)
1	5,874,500	CROSSLINKED POLYMER COMPOSITIONS AND METHODS FOR THEIR USE	Issued 2/23/99 Filed 12/18/96	Off of ’500 Patent Australia 717660 (issued) Canada 2239775 (pending) Europe 96944824.0 (published) Japan 9-522938 (pending) Off of ’889 Patent WIPO 02/19122 (published)
	6,051,648	CROSSLINKED POLYMER COMPOSITIONS AND METHODS FOR THEIR USE	Issued 4/18/00 Filed 1/13/99
	09/932,536	CROSSLINKED POLYMER COMPOSITIONS AND METHODS FOR THEIR USE	Filed 11/27/01 (allowed)
	6,458,889	COMPOSITIONS AND SYSTEMS FOR FORMING CROSSLINKED BIOMATERIALS AND ASSOCIATED METHODS OF PREPARATION AND USE	Issued 10/1/02 Filed 06/15/01
2	6,312,725	RAPID GELLING BIOCOMPATIBLE POLYMER COMPOSITION (THIOL PEGS)	Issued 11/6/01 Filed 04/16/99	Japan 2000-611963 9 (published)
	10/012,263	RAPID-GELLING BIOCOMPATIBLE POLYMER COMPOSITION AND ASSOCIATED METHODS OF PREPARATION AND USE	Filed 11/05/01
3	5,162,430	COLLAGEN-POLYMER CONJUGATES	Issued 11/10/92 Filed 11/14/89	Australia 638637 (issued) Japan 2505312 (issued) France 444157 (issued) Germany 68928754.2 (issued) Italy 444157 (issued) UK 444157 (issued)
	5,304,595	COLLAGEN-POLYMER CONJUGATES	Issued 04/19/94 Filed 12/30/92
	5,264,214	COMPOSITION FOR BONE REPAIR	Issued 11/23/93 Filed 08/14/92
	5,324,775	BIOLOGICALLY INERT, BIOCOMPATIBLE-POLYMER CONJUGATES	Issued 06/28/94 Filed 07/02/92
	5,565,519	CLEAR, CHEMICALLY MODIFIED COLLAGEN-POLYMER CONJUGATES FOR OPHTHALMIC APPLICATIONS	Issued 10/15/96 Filed 11/3/93
4	6,495,127	COMPOSITIONS AND SYSTEMS FOR FORMING HIGH STRENGTH MEDICAL SEALANTS, AND ASSOCIATED METHODS OF PREPARATION AND USE	Issued 12/1702 Filed 08/28/00	Europe 00959535.6 (published) Japan 2001 - 520763 (pending)

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SCHEDULE 1.2

AAC MANUFACTURING PATENTS

(continued)

Patent Family	Patent Number	Title	Dates	International Patents and Applications (per patent family)
5	6,165,489	CROSSLINKED COLLAGEN COMPOSITIONS FOR IN SITU ADMINISTRATION	Issued 12/26/00 Filed 04/28/99	None
6	5,614,587	COLLAGEN-BASED BIOADHESIVE COMPOSITIONS	Issued 03/25/97 Filed 06/07/95	Canada 2172906 (pending) Europe 96108503.2 (published) Japan 8-139317 (published)
7	6,328,229	LOW VOLUME MIXING SPRAY HEAD FOR MIXING AND DISPENSING OF TWO REACTIVE FLUID COMPONENTS	Issued 12/11/01 Filed 12/18/98	None
8	5,643,464	PROCESS FOR PREPARING A STERILE, DRY CROSSLINKING AGENT	Issued 07/01/97 Filed 06/30/95	None
9	5,968,018	CELL SEPARATION DEVICE AND IN-LINE ORIFICE MIXER SYSTEM	Issued 10/19/99 Filed 10/30/96	Japan 10-520756 (published)

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SCHEDULE 1.11

SPECIFICATIONS

See Attached [***] and [***] Material Safety Data Sheets and additional information pertaining to [***] and [***], individually and as combined.

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[***] MATERIAL SAFETY DATA SHEET

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SUPPLIER/MANUFACTURER NAME & ADDRESS

Raylo Chemicals Inc., A Laporte Fine Chemicals Co.

8045 Argyll Road

Edmonton, Alberta, Canada

T6C 4A9

Phone No:

(780) 468-6060

Fax No:

(780) 468-4784

24-HOUR EMERGENCY PHONE NO: (780) 463-3382

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

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

1 - PRODUCT IDENTIFICATION

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

PRODUCT NAME: [***]

FORMULA: [***]

FORMULA WT: [***]

COMMON SYNONYMS: [***]

PRODUCT NUMBER: [***]

CHEMICAL FAMILY: [***]

CAS NO.: Not available

NIOSH/RTECS NO.: Not available

CREATION DATE: February 8, 2001

REVISION DATE: N/A

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

2 - COMPOSITION/INFORMATION ON INGREDIENTS

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

         Hazardous Ingredients

Wt. %

CAS NO.

[***]

42

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

3 - PHYSICAL DATA

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

BOILING POINT (°C): Not available

VAPOR PRESSURE (MM HG): Not available

MELTING POINT (°C): [***]

VAPOR DENSITY (AIR=1): Not available

SPECIFIC GRAVITY (Kg/L): Not available

(H2O=1)                         

EVAPORATION RATE: (SLOWER/FASTER/EQUAL TO BUTYL ACETATE) N/A

SOLUBILITY (H2O) (ml/g): [***]

APPEARANCE & ODOR: [***]

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

4 - FIRE AND EXPLOSION HAZARD DATA

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

FLASH POINT (CLOSED CUP): Not available

NFPA 704M RATING: Not available

FLAMMABLE LIMITS: UPPER – N/A

%

LOWER – N/A  %

FIRE EXTINGUISHING MEDIA: Dry chemicals, foam.  DO NOT USE WATER.

SPECIAL FIRE-FIGHTING PROCEDURES: wear self-contained breathing apparatus and full protective gear.

UNUSUAL FIRE & EXPLOSION HAZARDS: Reacts with water.  

TOXIC GASES PRODUCED: Not available

43

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

5 - HEALTH HAZARD DATA

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

To the best of our knowledge the chemical, physical and toxicological properties of this product have not been fully investigated.  Exercise due care, handle as a chemical which is toxic.  

THRESHOLD LIMIT VALUE (TLV/TWA):

Not available

(PPM)

PERMISSIBLE EXPOSURE LIMIT (PEL):

Not available

 (PPM)

TOXICITY:   LD50/ OTHER

(ORAL-RAT)(MG/KG)

Not available

CARCINOGENICITY:  

NTP:

IARC:

 Z LIST:      

OSHA REG: N/A

EFFECTS OF OVEREXPOSURE: N/A

TARGET ORGANS: Not available

MEDICAL CONDITIONS GENERALLY AGGRAVATED BY EXPOSURE: Not available

ROUTES OF ENTRY: Inhalation, Skin Absorption, Ingestion

EMERGENCY AND FIRST AID PROCEDURES

Skin Contact:

Immediately wash skin with copious amounts of water for at least 15 minutes while removing contaminated clothing.  If irritation persists, SEEK MEDICAL ATTENTION.

Eye Contact:

Immediately flush the eyes with copious amounts of water for at least 15 minutes.  Ensure adequate flushing of the eyes by separating the eyelids with fingers.  If irritation persists, SEEK MEDICAL ATTENTION.

Inhalation:

Remove to fresh air, rest and keep warm.  In severe cases or if symptoms persist, SEEK MEDICAL ATTENTION.

Ingestion:

Wash out mouth with copious amounts of water for at least 15 minutes.  DO NOT induce vomiting.  SEEK MEDICAL ATTENTION.

44

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

6 - REACTIVITY DATA

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

STABILITY:

[***]

HAZARDOUS POLYMERIZATION: [***]

CONDITIONS TO AVOID: Not available

INCOMPATIBLES: [***]

DECOMPOSITION PRODUCTS: [***]

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

7 - SPILL AND DISPOSAL PROCEDURES

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

STEPS TO BE TAKEN IN THE EVENT OF A SPILL OR DISCHARGE:

Evacuate unnecessary persons from the area.  Wear appropriate safety equipment.  Provide thorough ventilation to remove dusts and vapors.  Sweep up material and hold for proper disposal.  DO NOT USE WATER.

DISPOSAL PROCEDURE:

If approved, may be burnt in a chemical incinerator equipped with an afterburner and scrubber.  Comply with all federal, provincial and local regulations.

EPA HAZARDOUS WASTE NUMBER:

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

8 - PROTECTIVE EQUIPMENT

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

-

VENTILATION Handle in a well-ventilated area.

RESPIRATORY PROTECTION: NIOSH approved dust/mist respirator.

EYE/SKIN PROTECTION: Safety glasses/ goggles and protective gloves.

45

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

9 - STORAGE AND HANDLING PRECAUTIONS

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

SPECIAL PRECAUTIONS: Not available

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

10 - TRANSPORTATION DATA AND ADDITIONAL INFORMATION

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

DOMESTIC (D.O.T.):  [***]

PROPER SHIPPING NAME: N/A

HAZARD CLASS: N/A

UN/NA:  [***]

PACKING GROUP: N/A

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

11 - PREPARATION DATE OF MSDS

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

Prepared By: Anne Luong

Phone:

(780) 468-6060

Date: February 8, 2001

Date Printed: February 15, 2001

Version: One

NOTE:

1.

Only selected Registry of Toxic Effects of Chemical Substances (RTECS) data is presented here.  See entry in RTECS for complete information.

2.

The burden of safe use of our materials must rest with the user.  We cannot assume responsibility for the completeness or accuracy of any information supplied by us concerning the hazards or recommended use of the chemicals.

46

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

SUPPLIER/MANUFACTURER NAME & ADDRESS

Raylo Chemicals Inc., A Laporte Fine Chemicals Co.

8045 Argyll Road

Edmonton, Alberta, Canada

T6C 4A9

Phone No:

(780) 468-6060

Fax No:

(780) 468-4784

24-HOUR EMERGENCY PHONE NO: (780) 463-3382

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

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

1 - PRODUCT IDENTIFICATION

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

PRODUCT NAME: [***]

FORMULA:  [***]

FORMULA WT: [***]

COMMON SYNONYMS: [***]

PRODUCT NUMBER: [***]

CHEMICAL FAMILY: [***]

CAS NO.: N/A

NIOSH/RTECS NO.:

N/A

CREATION DATE: February 8^th, 2001

REVISION DATE: N/A

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

2 - COMPOSITION/INFORMATION ON INGREDIENTS

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

           Hazardous Ingredients

Wt. %

       CAS NO.

[***]

47

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

3 - PHYSICAL DATA

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

BOILING POINT (°C): Not available

VAPOR PRESSURE (MM HG): Not available

MELTING POINT (°C): [***]

VAPOR DENSITY (AIR=1): Not available

SPECIFIC GRAVITY (Kg/L): Not available

(H2O=1)                         

EVAPORATION RATE: (SLOWER/FASTER/EQUAL TO BUTYL ACETATE) Not available

SOLUBILITY (H2O) (ml/g): [***]

APPEARANCE & ODOR: [***]

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

4 - FIRE AND EXPLOSION HAZARD DATA

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

FLASH POINT (CLOSED CUP): Not available

NFPA 704M RATING: Not available

FLAMMABLE LIMITS: UPPER – N/A

%

LOWER – N/A

%

FIRE EXTINGUISHING MEDIA: Dry chemicals, foam.

SPECIAL FIRE-FIGHTING PROCEDURES: Wear full protective clothing & NIOSH approved self contained breathing apparatus .

UNUSUAL FIRE & EXPLOSION HAZARDS: Not available

TOXIC GASES PRODUCED: Not available

48

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

5 - HEALTH HAZARD DATA

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

To the best of our knowledge the chemical, physical and toxicological properties of this product have not been fully investigated.  Exercise due care, handle as a chemical which is toxic.  

THRESHOLD LIMIT VALUE (TLV/TWA):

N/A

(PPM) Not available

PERMISSIBLE EXPOSURE LIMIT (PEL):

N/A

 (PPM) Not available

TOXICITY:   LD50/ OTHER

(ORAL-RAT)(MG/KG): Not available

CARCINOGENICITY:  

NTP:

N/A

IARC:

N/A

 Z LIST:    N/A      OSHA REG: N/A

EFFECTS OF OVEREXPOSURE: Not available

TARGET ORGANS: Not available

MEDICAL CONDITIONS GENERALLY AGGRAVATED BY EXPOSURE: Not available

ROUTES OF ENTRY: Not available

EMERGENCY AND FIRST AID PROCEDURES

Skin Contact:

Immediately wash skin with copious amounts of water for at least 15 minutes while removing contaminated clothing.  If irritation persists, SEEK MEDICAL ATTENTION.

Eye Contact:

Immediately flush the eyes with copious amounts of water for at least 15 minutes.  Ensure adequate flushing of the eyes by separating the eyelids with fingers.  If irritation persists, SEEK MEDICAL ATTENTION.

Inhalation:

Remove to fresh air, rest and keep warm.  In severe cases or if symptoms persist, SEEK MEDICAL ATTENTION.

Ingestion:

Wash out mouth with copious amounts of water for at least 15 minutes.  DO NOT induce vomiting.  SEEK MEDICAL ATTENTION.

49

CONFIDENTIAL

[***] MATERIAL SAFETY DATA SHEET

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

6 - REACTIVITY DATA

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

STABILITY:

[***]

HAZARDOUS POLYMERIZATION: [***]

CONDITIONS TO AVOID: Not available

INCOMPATIBLES: [***]

DECOMPOSITION PRODUCTS: [***]

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

7 - SPILL AND DISPOSAL PROCEDURES

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

STEPS TO BE TAKEN IN THE EVENT OF A SPILL OR DISCHARGE:

Evacuate unnecessary persons from the area.  Wear appropriate safety equipment.  Provide thorough ventilation to remove dusts and vapors.  Sweep up material and hold for proper disposal.  

DISPOSAL PROCEDURE:

If approved, may be burnt in a chemical incinerator equipped with an afterburner and scrubber.  Comply with all federal, provincial and local regulations.

EPA HAZARDOUS WASTE NUMBER: N/A

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

8 - PROTECTIVE EQUIPMENT

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

VENTILATION: Handle in a well-ventilated area, i.e. fume hood.

RESPIRATORY PROTECTION: NNIOSH approved dust/mist respirator with chemical goggles

EYE/SKIN PROTECTION: Chemical safety goggles, coveralls, and protective gloves.

50

CONFIDENTIAL

COH206 MATERIAL SAFETY DATA SHEET

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

9 - STORAGE AND HANDLING PRECAUTIONS

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

SPECIAL PRECAUTIONS: N/A

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

10 - TRANSPORTATION DATA AND ADDITIONAL INFORMATION

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

DOMESTIC (D.O.T.):  [***]

PROPER SHIPPING NAME: N/A

HAZARD CLASS: N/A

UN/NA: [***]

PACKING GROUP: N/A

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

11 - PREPARATION DATE OF MSDS

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

Prepared By: Anne Luong

Phone:

(780) 468-6060

Date: February 8^th, 2001

Date Printed: February 15, 2001

Version: One

NOTE:

2.

Only selected Registry of Toxic Effects of Chemical Substances (RTECS) data is presented here.  See entry in RTECS for complete information.

2.

The burden of safe use of our materials must rest with the user.  We cannot assume responsibility for the completeness or accuracy of any information supplied by us concerning the hazards or recommended use of the chemicals.

51

CONFIDENTIAL

	Molecular Formula
[***]	[***]
[***]	[***]

[***]

52

CONFIDENTIAL

	Chemical Name	Chemical Abstracts Service Number	Trade Name	Average Molecular Weight (Mw)	Molecular Weight Distribution Mw/Mn (GPC)
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]

	Weight (g)	Viscosity (cP)	Color	pH
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

53

CONFIDENTIAL

SCHEDULE 4.1

FORECAST – COSEAL SEALANT PRODUCT

(TO BE ADDED BY BAXTER)

54

EX-10.9

Exhibit 10-9

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

AMENDMENT NO. 2 TO DISTRIBUTION AND LICENSE AGREEMENT

BY AND AMONG:

Angiodevice International GmbH

(hereinafter “AAC”)

AND:

Baxter Healthcare Corporation

Baxter Healthcare, S.A.

(hereinafter “Baxter”)

WHEREAS, Angiotech Pharmaceuticals, Inc., Angiotech International GmbH (now called Angiotech International AG) and Cohesion Technologies, Inc., on the one hand, and Baxter, on the other hand, previously executed a Distribution and License Agreement, effective as of April 1, 2003 (the “Original Agreement”);

WHEREAS, by assignment, Angiodevice International GmbH is the successor in interest to all rights and obligations of Angiotech Pharmaceuticals, Inc., Angiotech International GmbH (now called Angiotech International AG) and Cohesion Technologies, Inc. under the Original Agreement;

WHEREAS, AAC and Baxter previously amended the Original Agreement by executing Amendment No. 1, dated December 23, 2004 (hereinafter, the Original Agreement as amended by Amendment No. 1 shall be referred to as the “Agreement”);

WHEREAS, by this Amendment No. 2 (“Amendment”), having an effective date of October 8, 2007 (“Amendment Effective Date”), AAC and Baxter now desire to further amend certain terms and conditions of the Agreement;

WHEREAS, AAC and Baxter desire that all other terms and conditions of the Agreement remain in full force and effect;

NOW, THEREFORE, in consideration of the promises and mutual covenants hereinafter set forth, the sufficiency of which is hereby acknowledged, AAC and Baxter hereby agree as follows:

1.

Capitalized terms in this Amendment shall have the same meaning as those in the Agreement, unless specifically defined otherwise in this Amendment.  All Article and Section references shall refer to the corresponding Article and Section in the Agreement.

2.

Except as expressly modified herein, the Agreement shall remain in full force and effect in accordance with its terms.  To the extent that there are any inconsistencies between this

1

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

Amendment and the Agreement, the terms of this Amendment shall supersede those set forth in the Agreement.

3.

Amendments.

3.1

Amendment to Section 2.2(b).  The penultimate paragraph of Section 2.2(b) of the Agreement is hereby deleted and restated in its entirety as follows:

“Upon commencement of the [***] surgery adhesion prevention study or another adhesion prevention study, Baxter shall use Commercially Reasonable Efforts to conduct the applicable study, at its sole expense, and to use the data from such study to seek FDA approval for the applicable adhesion prevention indication; provided that Baxter shall not be required, under any circumstances, to spend more than [***] Dollars ($[***]) to conduct such study.  If Baxter seeks FDA approval for a CoSeal Adhesion Prevention Unit for any adhesion prevention indication based on data from such study, and provided that AAC and Baxter have established a revised mutually agreed upon schedule of CoSeal Unit Minimum Sales as described in Section 5.2(b), the CoSeal Adhesion Prevention Option described in this Section 2.2(b) shall be deemed exercised by Baxter upon [***], and in such circumstances, AAC shall waive Baxter’s obligation to pay the option exercise fee set forth in Section 9.2(a).

At Baxter’s reasonable request, in order to assist Baxter in deciding whether to conduct the [***] surgery adhesion prevention study or another adhesion prevention study, AAC shall provide to Baxter appropriate AAC research program data and results that are directly related to AAC’s Drug-Loaded Product program for adhesion prevention barrier indications, including, but not limited to, data regarding [***] or any other molecule.  Baxter shall not use such data or results for any purpose other than its evaluation of whether to conduct the [***] surgery adhesion prevention study or another adhesion prevention study, or no study at all.  For avoidance of doubt, the Parties hereby agree that Baxter shall have absolute discretion in deciding whether to conduct and how to conduct the [***] surgery adhesion prevention study or another adhesion prevention study.

Should Baxter fail to seek FDA approval for the [***] surgery adhesion prevention indication or another adhesion prevention indication (for example, by discontinuing the [***] surgery adhesion prevention study, or by failing to use Commercially Reasonable Efforts to conduct such study or another adhesion prevention study, or by notifying AAC in writing that Baxter will not seek FDA approval for a CoSeal Adhesion Prevention Unit), and in any event if Baxter fails to initiate a [***] surgery adhesion prevention study by December 31, 2008, then upon written notice to Baxter, AAC shall have the right to conduct one or more adhesion prevention studies using the CoSeal Adhesion Prevention Unit.  AAC’s sole

2

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

and exclusive remedy for Baxter’s failure to use Commercially Reasonable Efforts to conduct the [***] surgery adhesion prevention study or another adhesion prevention study, failure to seek FDA approval for the [***] surgery adhesion prevention indication or another adhesion prevention indication, or failure to initiate a [***] surgery adhesion prevention study by December 31, 2008, shall be AAC’s right to conduct, without any restrictions or any requirement to consult with Baxter, one or more adhesion prevention studies using the CoSeal Adhesion Prevention Unit.  If AAC elects to conduct such adhesion prevention study(ies), AAC may request to use, and Baxter may elect to provide, clinical study data generated or obtained by Baxter pursuant to this Section 2.2; provided that, in such event, the option fee payable by Baxter (as set forth in Section 9.2(a)) shall be reduced by an amount equal to Ba xter’s reasonable out-of-pocket costs incurred in generating and/or obtaining such clinical study data (but only to the extent that such data are provided by Baxter to AAC).

If AAC elects to so conduct one or more adhesion prevention studies using the CoSeal Adhesion Prevention Unit(s), Baxter shall have a right to exercise the CoSeal Adhesion Prevention Option described in this Section 2.2(b) by written notice to AAC before the later to occur of:  (i) [***], and (ii) [***] (the later to occur of clause (i) and (ii) shall be referred to herein as the “Option Expiration Date”).  At Baxter’s request before the Option Expiration Date, AAC shall provide to Baxter appropriate AAC research program data and results that are directly related to AAC’s Drug-Loaded Product program for adhesion prevention barrier indications and that are in AAC’s possession at the time of such request.  Baxter shall not use such data or results for any purpose other than its evaluation of whether to exercise the CoSeal Adhesion Prevention Option.  This Option Expiration Date may be extended by mutual written agreement of the Parties.  If Baxter declines or fails to exercise the CoSeal Adhesion Prevention Option as set forth above, or if the Option Expiration Date passes before AAC and Baxter have established a mutually agreed upon schedule of CoSeal Unit Minimum Sales as described in Section 5.2(b), Baxter shall not owe AAC any monetary payments under Section 9.2(a) and all rights granted to Baxter with respect to the CoSeal Adhesion Prevention Unit(s) in the Adhesion Prevention Territory shall immediately terminate and revert to AAC without necessity of notice.”

3.2

Insertion of New Sections 2.8 and 2.9.  After Section 2.7, the following new Sections 2.8 and 2.9 are hereby inserted:

3

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

2.8

AAC’s Right to Purchase CoSeal Ingredients and CoSeal Products.  During the term of this Agreement, Baxter shall supply and sell to AAC raw CoSeal Ingredients at [***]; formulated CoSeal Ingredients at [***]; and finished CoSeal Units at [***]; provided that AAC shall use such raw CoSeal Ingredients, formulated CoSeal Ingredients and finished CoSeal Units solely for research, development and/or clinical trial purposes, and shall not resell such supplied CoSeal Units into the surgical/ hospital environment in any geographical market.  AAC shall indemnify Baxter for any Third-Party claims that may arise from AAC’s use or exploitation of the supplied CoSeal Ingredients and CoSeal Units.  AAC shall communicate its supply needs in connection with this Section 2.8 at least 60 (sixty) days in advance of the requested delivery date, and Baxter shall use commercially rea sonable, good faith efforts to meet AAC’s supply needs; provided, however, if AAC’s orders for raw CoSeal Ingredients, formulated CoSeal Ingredients and/or finished CoSeal Units in any given calendar quarter should equal or exceed [***], [***], or [***], respectively, then AAC and Baxter shall cooperate to ensure an appropriate lead time and delivery date for such increased quantity of raw CoSeal Ingredients, formulated CoSeal Ingredients or finished CoSeal Units (as applicable).”

2.9

Baxter Use of AAC Clinical Data.  Within thirty (30) days of the Amendment Effective Date, AAC shall provide to Baxter, free of charge, AAC’s pulmonary surgery clinical study data regarding CoSeal Sealant Units, which Baxter shall use solely for the purpose of expanding the CE Mark for the CoSeal Sealant Unit into thoracic surgery sealant indications.  Baxter shall file for expansion of the CE Mark for the CoSeal Sealant Unit into thoracic surgery sealant indications by [ ***].  AAC shall also provide to Baxter, free of charge, AACs endometriosis and myomectomy clinical study data, all previous correspondence with the FDA surrounding previous proposed/potential adhesion prevention IDE studies, all pre-clinical reports and raw data in AAC’s possession regarding CoSeal Adhesion Prevention Unit(s), which Baxter shall use solely for the purpose of expanding the CE m ark for the CoSeal Adhesion Prevention Unit(s) into [***] adhesion prevention indications and for the purposes of obtaining an FDA approved indication for [***] adhesion prevention.  Baxter shall file for expansion of the CE Mark for the CoSeal Adhesion Prevention Unit into [***] adhesion prevention indications by [ ***].  AAC shall reasonably cooperate with Baxter in connection with Baxter’s efforts to obtain both such expansions of the CE mark.  If Baxter is not able to meet either or both of the above filing dates, Baxter and AAC shall meet and discuss in good faith the reasons for Baxter missing the applicable filing date(s) and a grant by AAC to Baxter of a thirty (30) day extension of time for the applicable filing date(s), granting of such extension not to be unreasonably withheld.  AAC’s sole and exclusive remedy for Baxter’s failure to meet either or both of the above filing date(s), including any extensions thereto, shall be AAC’s right to use such data to fi le for a CE Mark for the applicable indication.  No such filing by AAC shall serve to diminish Baxter’s rights to CoSeal Units under the Distribution and License

4

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

Agreement.  All of Baxter’s activities associated with such expansions of the CE Mark shall be at Baxter’s expense.”

3.3

Amendment to Section 3.2.  The last two sentences of Section 3.2 of the Agreement are hereby deleted and restated in their entirety as follows:

“A draft Commercialization Plan for the CoSeal Adhesion Prevention Unit shall be prepared by Baxter within six (6) months after the date that Baxter or AAC (as applicable) files with the FDA the Pre-Market Approval Application that pertains to the CoSeal Adhesion Prevention Unit.  Within three (3) months after FDA approval of the CoSeal Adhesion Prevention Unit, Baxter shall prepare a final CoSeal Adhesion Prevention Unit Commercialization Plan, and the Program Directors shall review and, if acceptable, approve such CoSeal Adhesion Prevention Unit Commercialization Plan.”

3.4

Amendment to Section 3.3.  Section 3.3 of the Agreement is hereby amended by substituting the phrase “any adhesion prevention indication” for the phrase “the [***] surgical indication,” in the first sentence (third line) and the third sentence (eleventh line).

3.5

Amendment to Section 5.2.  Section 5.2 of the Agreement is hereby deleted and restated in its entirety as follows:

“5.2

Minimum Sales.  Baxter shall meet the annual minimum sales commitments applicable to Baxter’s Net Sales for each CoSeal Unit, including AAC Patented Accessory(ies).

(a)

CoSeal Unit Minimum Sales.  Baxter shall meet the minimum sales for the CoSeal Units, including AAC Patented Accessory(ies) (“CoSeal Unit Minimum Sales” or “Minimum Sales”), as set forth in Schedule 5.2(a) (notwithstanding the heading on such schedule as of the Amendment Effective Date that states “CoSeal Sealant Unit Minimum Sales”).  From the Effective Date of the Distribution and License Agreement until the effective date of the Revised CoSeal Unit Minimum Sales schedule described below, CoSeal Unit Minimum Sales are applicable to sales of CoSeal Sealant Units only.

(b)

Revision of CoSeal Unit Minimum Sales.  In advance of Baxter’s exercise of the CoSeal Adhesion Prevention Option, AAC and Baxter shall discuss and establish, by mutual agreement, a revised schedule of Minimum Sales for the CoSeal Units, including AAC Patented Accessory(ies) (“Revised CoSeal Unit Minimum Sales”).  Such Revised CoSeal Unit Minimum Sales amounts shall reflect the FDA approved adhesion prevention indication’s market opportunity for CoSeal Adhesion Prevention Units, projected clinical acceptance and competitive environment (as of the Amendment Effective Date, this indication is projected to be [***] surgery adhesion prevention; however. such projection is subject to change by Baxter).

5

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

Revised CoSeal Unit Minimum Sales will be established between Baxter and AAC within ninety (90) days after a pre-IDE meeting with the FDA for any given adhesion prevention indication.  If the approved, FDA labeled indication is materially narrower than or otherwise materially different from the indication used by the Parties to establish the Revised CoSeal Unit Minimum Sales after the pre-IDE meeting with the FDA, the Parties shall meet to revise the previously established Revised CoSeal Unit Minimum Sales amounts, and to correspondingly revise Schedule 5.2(a).  Such discussions will be conducted in good faith and in an effort to accurately assess the market potential, clinical acceptance and competitive environment of the FDA approved indication(s) for the CoSeal Adhesion Prevention Unit.  Such Revised CoSeal Unit Minimum Sales amounts shall take effect within sixty (60) days after the first sal e date of a CoSeal Adhesion Prevention Unit (but such effective date shall be no earlier than [***]), and on and after such effective date, all references to “CoSeal Sealant Unit Minimum Sales,” “CoSeal Adhesion Prevention Unit Minimum Sales,” and “Minimum Sales” recited in this Distribution and License Agreement shall be deemed to refer only to such Revised CoSeal Unit Minimum Sales.  When such Revised CoSeal Unit Minimum Sales have been agreed upon by the Parties in writing, this Distribution and License Agreement shall be amended to include such schedule of Revised CoSeal Unit Minimum Sales, and such schedule shall be attached hereto as Schedule 5.2(a).  For the avoidance of doubt, the Parties have mutually agreed that the two discrete schedules for CoSeal Sealant Unit Minimum Sales and CoSeal Adhesion Prevention Unit Minimum Sales that were envisioned as of the Effective Date of the Distribution and License Agreement hereinafter shall be set forth in one schedule t hat sets forth the combined minimum sales of CoSeal Sealant Units and CoSeal Adhesion Prevention Units.”

3.6

Amendment to Section 6.1(c).  Section 6.1(c) of the Agreement is hereby deleted and restated in its entirety as follows:

“(c)

Indications for CoSeal Adhesion Prevention Unit.  Each Party (the “Non-Conducting Party”) shall cooperate in the efforts of the other Party (the “Conducting Party”) to obtain Regulatory Approval for an adhesion prevention indication for the CoSeal Adhesion Prevention Unit in accordance with Section 2.2(b).  If any clinical trial plan, clinical trial protocol or subsequent clinical trial does not achieve the anticipated clinical outcome, the Non-Conducting Party shall have no recourse against the Conducting Party for such failure to achieve a clinically significant result.  Prior to the Conducting Party filing the Pre-Market Approval Application with the FDA, the Program Directors of AAC and Baxter shall decide whether to file a new Pre-Market Approval Application or a supplement to the existing Pre-Market Approval Application.  After such decision , the Conducting Party shall prepare and draft regulatory documents and submit such documents, along with a written statement confirming the truth and accuracy of such documents, for filing with the FDA.  In the event that the Parties do not agree upon any aspect of the regulatory

6

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

documents, except where a change would nullify such written statement confirming the truth and accuracy of such documents, the final decision with respect to such aspect shall be made by the Conducting Party.  However, nothing in this Section 6.1(c) shall be interpreted to require Baxter to exercise the CoSeal Adhesion Prevention Option.”

3.7

Amendment to Section 6.1(e).  Section 6.1(e) of the Agreement is hereby deleted and restated in its entirety as follows:

“(e)

Meeting Attendance.  Upon the request of Baxter and with AAC's prior agreement, such agreement not to be unreasonably withheld, and to the extent permitted by law, Baxter may elect to attend meetings between AAC and the applicable Regulatory Authorities concerning the [***] surgery indication for the CoSeal Sealant Unit in a given country within the Territory.  Upon the request of the Non-Conducting Party and with the Conducting Party’s prior agreement, such agreement not to be unreasonably withheld, and to the extent permitted by law, the Non-Conducting Party may elect to attend meetings between the Conducting Party and the applicable Regulatory Authorities concerning the adhesion prevention indication being pursued by the Conducting Party for the CoSeal Adhesion Prevention Unit in a given country within the Territory.”

3.8

Amendment to Section 6.1(f)(i).  Section 6.1(f)(i) of the Agreement is hereby deleted and restated in its entirety as follows:

“(i)  [***] Surgery and [***] Surgery Indications for CoSeal Sealant Unit and Adhesion Prevention Indication for the CoSeal Adhesion Prevention Unit.  AAC shall bear sole financial responsibility, including Regulatory Filing fees, and subject to Section 6.1(a), shall be responsible for all development, clinical and regulatory activities relevant to the [***] surgery indication for the CoSeal Sealant Unit and [***] surgery indications for the CoSeal Sealant Unit  (whether related to the formulation marketed as of the Effective Date or “pre-mix” formulation of the CoSeal Sealant Product).  AAC shall be responsible for preparation of regulatory documents and any supplemental studies necessary to achieve Regulatory Approval for the [***] surgery and [***] surgery indications in the Territory (Baxter’s only financial obligation regarding such approvals shall be the Milestone p ayment set forth in Section 9.3).  The Conducting Party shall bear sole financial responsibility, including Regulatory Filing fees, and subject to Section 6.1(c), shall be responsible for all development, clinical and regulatory activities relevant to the selected adhesion prevention indication for the CoSeal Adhesion Prevention Unit.  The Conducting Party shall be responsible for preparation of regulatory documents and any supplemental studies necessary to achieve Regulatory Approval for the selected adhesion prevention indication for the CoSeal Adhesion Prevention Unit in the Territory.  (In the event Baxter is the Non-Conducting Party and Baxter exercises its CoSeal Adhesion Prevention Option, Baxter’s only financial obligation regarding such Regulatory Approval(s) shall be the

7

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

option payment set forth in Section 9.2(a), subject to reduction of the option payment amount pursuant to Section 2.2(b)).”

3.9

Amendment to Section 6.2(b).  The first sentence of the second paragraph of Section 6.2(b) of the Agreement is hereby deleted and restated in its entirety as follows:

“With respect to a copy of the complete original Pre-Market Approval Application documentation filed with the FDA that pertains to the CoSeal Adhesion Prevention Unit, the Conducting Party shall provide the Non-Conducting Party with a copy of such complete original documentation within ten (10) days after submission of such documentation to the FDA.”

3.10

Amendment to Section 9.2(a).  Section 9.2(a) of the Agreement is hereby deleted and restated in its entirety as follows:

“(a)

If  AAC conducts the CoSeal Adhesion Prevention Unit clinical trial and Baxter exercises the CoSeal Adhesion Prevention Option, Baxter shall pay to ACC or its designee, within forty five (45) days after the date that Baxter receives from AAC written notification of FDA approval for the CoSeal Adhesion Prevention Unit for the applicable adhesion prevention indication, the lesser of: (i) [***] Dollars ($[***]); or (ii) the actual clinical and regulatory costs of the United States CoSeal Adhesion Prevention Unit clinical trial and FDA approval for the applicable adhesion prevention indication, plus [***] Dollars ($[***]), subject in each case to elimination or reduction pursuant to Section 2.2(b).”

4.

Miscellaneous.

4.1

Continuing Effect.  This Amendment shall be effective for all purposes as of the Amendment Effective Date.  Except as otherwise expressly modified by this Amendment, the Agreement shall remain in full force and effect in accordance with its terms.  As of the Amendment Effective Date, the term “Agreement” (as used herein), and the phrase “Distribution and License Agreement” (as used in the Original Agreement), shall mean the Distribution and License Agreement as amended by Amendment No. 1, and as further amended by this Amendment.

4.2

Counterparts.  This Amendment may be executed in one or more counterparts by original or facsimile signature, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

<Signature Page Follows>

8

CONFIDENTIAL

   Amendment No. 2

AAC/Baxter Distribution and License Agreement

IN WITNESS WHEREOF, AAC and Baxter have caused this Amendment to the Agreement to be executed by their respective duly authorized representatives as of the Amendment Effective Date.

Zug, Switzerland

Angiodevice International GmbH

/s/ Jürg Dannecker	/s/ Hans Peter Weber
Signature	Signature
Jürg Dannecker	Hans Peter Weber
Managing Director	Managing Director
Date: October 17, 2007	Date: October 17, 2007
Deerfield, Illinois
Baxter Healthcare Corporation	Baxter Healthcare, S.A.
/s/ J D Amundson	/s/ Ignacio Martinez de Lecea
Signature	Signature
Name:  J D Amundson	Name:  Ignacio Martinez de Lecea
Title:  EVP/President Bioscience	Title:  Corporate Counsel
Date: October 5, 2007	Date: October 8, 2007

9

EX-10.10

Exhibit 10.10

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

     ANGIOTECH PHARMACEUTICALS, INC.,

ANGIOTECH PHARMACEUTICALS (US), INC.,

QUAICH ACQUISITION, INC.,

and

QUILL MEDICAL, INC.

Dated as of May 25, 2006
 

TABLE OF CONTENTS
		Page
ARTICLE 1. DEFINITIONS		1
1.1	Defined Terms	1
ARTICLE 2. THE MERGER		19
2.1	The Merger	19
2.2	Effective Time	20
2.3	Escrow	20
2.4	Effect of the Merger	20
2.5	Certificate of Incorporation; Bylaws	20
2.6	Directors and Officers	20
2.7	The Merger Consideration; Effect on Outstanding Securities of the Company	21
2.8	Dissenting Shares	31
2.9	Surrender and Payment	32
2.10	Lost, Stolen or Destroyed Certificates	34
2.11	Taking of Necessary Action; Further Action	34
2.12	Tax Withholding	34
2.13	Permitted Distribution	34
2.14	Stockholder Representative	34
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY		35
3.1	Organization of the Company	35
3.2	Capitalization of the Company	35
3.3	Stockholders’ Agreements, etc	36
3.4	Authorization	36
3.5	Officers and Directors	37
3.6	Bank Accounts	37
3.7	Subsidiaries	37
3.8	Property and Equipment	37
3.9	Accounts Receivable	38
3.10	Environmental Matters	38
3.11	Contracts	39
3.12	No Conflict or Violation; Consents	40
3.13	Financial Statements; Books and Records	41
3.14	Absence of Certain Changes or Events	42
3.15	Liabilities	44
3.16	Litigation	44
3.17	Labor Matters	44
3.18	Employee Benefit Plans	45
3.19	Compliance with Laws	46
3.20	Intellectual Property	48
3.21	Tax Matters	51
3.22	Insurance	54
3.23	Product Warranty	55
3.24	Brokers’ and Finders’ Fees	55
3.25	No Other Agreements to Sell the Company or the Assets	55
3.26	Board Recommendation	55
3.27	Material Misstatements or Omissions	55
3.28	Hart-Scott-Rodino	55
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER, PARENT AND MERGER SUB		55
4.1	Organization	56

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4.2	Authorization	56
4.3	No Conflicts	56
4.4	Merger Consideration	57
4.5	Brokers’ and Finders’ Fees	57
4.6	Approvals	57
4.7	Buyer’s Stock	57
4.8	SEC Filings; Financial Statements	57
4.9	Absence of Changes	58
4.10	Litigation	58
4.11	Compliance with Laws	58
ARTICLE 5. COVENANTS		59
5.1	Conduct of Business of the Company	59
5.2	No Solicitation	61
5.3	Proxy Statement; Company Board Recommendation	63
5.4	Expenses	64
5.5	Public Disclosure	64
5.6	Access to Information	64
5.7	Commercially Reasonable Efforts	64
5.8	Notification of Certain Matters	65
5.9	Proprietary Rights	65
5.10	FIRPTA Certificate	65
5.11	Voting Agreements	66
5.12	Enforcement of Company Proprietary Rights	66
5.13	Minimum Net Working Capital	66
ARTICLE 6. CONDITIONS TO THE MERGER		66
6.1	Conditions to Obligations of Each Party to Effect the Merger	66
6.2	Additional Conditions to Obligations of the Company	66
6.3	Additional Conditions to the Obligations of Buyer and Merger Sub	67
ARTICLE 7. INDEMNIFICATION		69
7.1	Indemnification by Parent, Buyer and Surviving Corporation	69
7.2	Indemnification by the Company Stockholders	69
7.3	Exclusive Remedy	70
7.4	No Contribution	70
7.5	Indemnification Claims	70
7.6	Third-Party Claims	71
7.7	Payment of Claims: Set Off Limitations	72
7.8	Limitations of Liability	73
ARTICLE 8. TERMINATION, AMENDMENT AND WAIVER		74
8.1	Termination	74
8.2	Procedure for Termination	75
8.3	Effect of Termination	75
8.4	Extension; Waiver	75
ARTICLE 9. MISCELLANEOUS PROVISIONS		76
9.1	Notices	76
9.2	Entire Agreement	77
9.3	Further Assurances; Post-Closing Cooperation	77
9.4	Amendment and Modification	77
9.5	Waiver of Compliance; Consents	78
9.6	Third-Party Beneficiaries	78
9.7	No Assignment; Binding Effect	78

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9.8	Headings	78
9.9	Invalid Provisions	78
9.10	Governing Law	78
9.11	Arbitration	79
9.12	Construction	80
9.13	Currency	80
9.14	Counterparts	80

-iii-

EXHIBITS AND SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER

Exhibit A	Form of Voting Agreement
Exhibit B	Form of Stockholder Representative Agreement

-iv-

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of May 25, 2006 (this “Agreement”), is by and among Angiotech Pharmaceuticals, Inc., a corporation organized under the laws of British Columbia (“Parent”), Angiotech Pharmaceuticals (US), Inc., a Washington corporation and wholly-owned subsidiary of Parent (“Buyer”), Quaich Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Buyer (“Merger Sub”), and Quill Medical, Inc., a Delaware corporation (the “Company”).

RECITALS

A.

The respective Boards of Directors of Parent, Buyer, Merger Sub and the Company have determined that it is advisable and in the best interests of their respective stockholders to effect the acquisition of the Company pursuant to the terms and subject to the conditions set forth in this Agreement.

B.

In furtherance of such acquisition, the Boards of Directors of Parent, Buyer, Merger Sub and the Company have each approved and declared advisable the merger of Merger Sub with and into the Company (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement and in accordance with applicable law, including the applicable provisions of the General Corporation Law of the State of Delaware (the “DGCL” or “Delaware Law”).

C.

In connection with the execution of this Agreement and as an inducement to Buyer and Merger Sub to enter into this Agreement, Matthew A. Megaro and Gregory L. Ruff (together, the “Major Stockholders”) shall have executed and delivered to Buyer and Merger Sub, concurrently with the execution and delivery of this Agreement by the parties hereto, a Voting Agreement in the form attached hereto as Exhibit A.

D.

Pursuant to the Merger, each outstanding share of Company Stock (as defined herein) issued and outstanding immediately prior to the Effective Time (as defined herein), other than Dissenting Shares (as defined herein), shall be converted solely into the right to receive the consideration set forth in Section 2.7 hereof, upon the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Buyer, Merger Sub and the Company hereby agree as follows:

ARTICLE 1.

DEFINITIONS

1.1

Defined Terms. As used in this Agreement, the terms below shall have the following meanings:

“AAA” has the meaning set forth in Section 9.11(a).

“Acquisition Agreement” has the meaning set forth in Section 5.2(c).

“Acquisition Proposal” has the meaning set forth in Section 5.2(a).

“Actions” means, collectively, any action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, investigation or dispute as to which written notice has been provided to the applicable party.

“Additional Earnout Year” has the meaning set forth in Section 9.11(d).

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the direct or indirect ownership of more than 50% of all voting securities, equity, or other ownership interests, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.

“Aggregate Liquidation Preference” means the sum of (a) the Series A Preference multip lied by the aggregate number of shares of Series A Preferred Stock outstanding immediately prior to the Effective Time, (b) the Series B Preference multiplied by the aggregate number of shares of Series B Preferred Stock outstanding immediately prior to the Effective Time, (c) the Series C Preference multiplied by the aggregate number of shares of Series C Preferred Stock outstanding immediately prior to the Effective Time, and (d) the Series D Preference multiplied by the aggregate number of shares of Series D Preferred Stock outstanding immediately prior to the Effective Time. Shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock that are converted to Company Common Stock immediately prior to the Effective Ti me shall not be considered outstanding at the Effective Time.

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

“Alternative Transaction Fee” means $5,000,000.00.

“Angiotech SEC Reports” has the meaning set forth in Section 4.8(a).

“Appraisal Claims” has the meaning set forth in Section 7.2(b).

“Assets” means the right, title and interest of any Person in its properties, assets and rights of any kind, whether tangible or intangible, real or personal, including without limitation the right, title and interest in the following:  all Contracts and Contract Rights; all machinery, equipment and computer hardware; all inventory; all Books and Records; all Proprietary Rights; all Permits; all return and other rights under or pursuant to all warranties, representations and guarantees made by suppliers and other third parties in connection with the Assets or services furnished to such Person; all cash, accounts receivable, deposits and prepaid expenses; and all goodwill.

-2-

“Balance Sheet” means the unaudited or audited, as the case may be, balance sheet of the Company as of the Balance Sheet Date which constitutes a portion of the Financial Statements.

“Balance Sheet Date” means December 31, 2005.

“Bankruptcy Event” means with respect to a Person: (a) an adjudication that it is bankrupt or insolvent, or the entry of an order for relief under applicable bankruptcy or any similar law; (b) the making by it of a general assignment for the benefit of creditors; (c) the commencement by it of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official over it or any substantial part of its property, or consent to any such relief or to the appointment of or taking of possession by any such official in an involuntary case or other proceeding commenced against it; or (d) the commencement against it of an involuntary case or other pr oceeding seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official over it or any substantial part of its property, such involuntary case or other proceeding remaining undismissed or unstayed for a period of 60 calendar days.

“Barbed Suture Products” means (whether in the form existing on the Closing Date or as later developed, modified or enhanced by Buyer or its Affiliates) self-anchoring sutures and devices for all fields of use, the manufacture, use, sale, offer for sale, or importation of which, if performed by a Person who did not own or have license to the Company Patent Rights and/or Company Know-How, would constitute misappropriation of Company Know-How and/or infringe a Valid Claim of at least one patent included in the Company Patent Rights, including without limitation Contour Threads™ and Quill® Barbed Sutures for tissue repair and wound closure to the extent they meet the foregoing test.

“Basket” has the meaning set forth in Section 7.8(a).

“Bonus Payments” means all bonus payments, retention payments, incentive compensation payments, service award payments or other similar payments payable by the Company to any of the Company’s current or past Employees or consultants, in connection with the transactions contemplated by this Agreement or otherwise.

“Books and Records” means all books, records, lists, ledgers, financial data, financial files, financial reports, Tax Returns and related work papers and letters from accountants relating to the Assets of the Company or the Business, minute books and stock transfer ledgers.

-3-

“Business” means the business and operations of the Company, as conducted by the Company as of the date of this Agreement.

“Business Combination” means, with respect to any Person, (a) any merger, consolidation or other business combination to which such Person is a party, (b) any sale, dividend, split or other disposition of any capital stock or other equity interests of such Person (except for issuances of common stock upon conversion of preferred stock outstanding on the date hereof or the exercise of options or warrants outstanding on the date hereof or issued in accordance with the covenants of this Agreement), (c) any tender offer (including a self tender), exchange offer, recapitalization, restructuring, liquidation, dissolution or similar or extraordinary transaction, (d) any sale, dividend or other disposition of all or a material portion of the Assets of such Person (including by way of exclusive license or joint venture formation) or (e) the entering into of any agre ement or understanding, the granting of any rights or options, or the acquiescence of such Person, with respect to any of the foregoing.

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of New York are authorized or obligated to close.

“Buyer” has the meaning set forth in the preamble.

“Cash Pro-Rata Portion” means the dollar amount of the Initial Merger Consideration which each Company Holder is entitled to receive as set forth on the Merger Consideration Spreadsheet relative to the aggregate amount of the Initial Consideration that the Company Holders are entitled to receive in respect of their shares of Company Stock or pursuant to Section 2.7(c).

“CDAPCA” has the meaning set forth in Section 3.19(b).

“Certificate of Merger” has the meaning set forth in Section 2.2.

“Certificates” has the meaning set forth in Section 2.9(b).

“Claim Notice” has the meaning set forth in Section 7.5.

“Closing” has the meaning set forth in Section 2.1(b).

“Closing Date” has the meaning set forth in Section 2.1(b).

“Code” means the Internal Revenue Code of 1986, as amended.

“Combination Product” means any product of the Parent, Buyer, Surviving Corporation or their respective Affiliates that is comprised of one or more Barbed Suture Products and bundled with, packaged with or sold in connection with one or more other products of the Parent, Buyer, Surviving Corporation or their respective Affiliates.

-4-

“Combination Product Adjustment” shall mean if, on a country-by-country basis, a Barbed Suture Product is sold as part of a Combination Product, Net Sales for such Combination Product shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction A/(A + B), where A is the average sales price of the Barbed Suture Product, if sold separately in finished form in such country, and B is the average sales price of all other products in the combination, if sold separately in finished form in such country. If, on a country-by-country basis, the Barbed Suture Product is sold separately in finished form in such country but the other product(s) in the Combination Product is not sold separately in finished form in such country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by the fra ction C/(C+D) where C is the average sales price of the Barbed Suture Product and D is the difference between the average sales price of the Combination Product and the average sales price of the Barbed Suture Product. If, on a country-by-country basis, the other product(s) in the Combination Product is sold separately in finished form in such country but the Barbed Suture Product is not sold separately in finished form in such country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction one (1) minus (E/(E+F)) where E is the average sales price of the other product(s) in the Combination Product and F is the difference between the average sales price of the Combination Product and the average sales price of the other product(s).  If, on a country-by­country basis, neither the Barbed Suture Product nor the other product(s) is sold separately in finished form in such country, Net Sales for such Combination Product shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction G/(G + H), where G is the fair market value of the Barbed Suture Product determined in good faith by Parent based on available market information, and H is the fair market value of all the other products in the Combination Product determined in good faith by Parent based on available market information.

“Commercialization Efforts” shall mean efforts (a) to commercialize all Barbed Suture Products for the indications for which the requisite governmental approval, including FDA clearance, has been granted, (b) to develop and obtain the requisite governmental approval, including FDA clearance, of the orthopedic indication of a Barbed Suture Product for tendon repair and (c) to commercially exploit the Company’s existing Company Proprietary Rights.

“Commercially Reasonable Efforts” shall mean efforts and deployment of resources, consistent with the exercise of reasonable and prudent scientific and business judgment in good faith, normally used by a company in the medical device industry for a product owned by it or to which it has rights, which is of similar market potential at a similar stage in its development or product life, taking into account issues of safety and efficacy, product profile, product portfolio management, with consideration to the competitiveness of the marketplace, the proprietary position of the product, the regulatory and reimbursement structure involved, the cost of scaling up a manufacturing process (including facility costs), the profitability of the applicable products, and other relevant factors applicable to the medical device industry.

“Common Merger Consideration” means the dollar amount equal to a fraction,

(x) the numerator of which is equal to the Initial Merger Consideration minus the Aggregate Liquidation Preference, and (y) the denominator of which is equal to the number of shares of Company Common Stock outstanding immediately prior to the Effective Time, including such shares of Company Common Stock issued upon the conversion of Company Preferred Stock and the exercise of Company Options and Company Warrants prior to the Effective Time.

-5-

“Common Warrants” means any warrants to purchase shares of Company Common Stock, whether exercisable or unexercisable, granted by the Company.

“Common Warrantholder” has the meaning set forth in Section 2.7(d).

“Company” has the meaning set forth in the preamble.

“Company Acquisition” shall mean any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Company pursuant to which Company’s stockholders immediately preceding such transaction hold less than 50% of the aggregate equity interests in the surviving or resulting entity of such transaction,

(ii) a sale or other disposition by Company of assets representing in excess of 50% of the aggregate fair market value of Company’s business immediately prior to such sale, or (iii) the acquisition by any Person (including by way of a tender offer or an exchange offer or issuance by Company), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 50% of the voting power of the then outstanding shares of capital stock of Company other than the sale of securities of the Company in connection with a bona fide financing transaction for capital raising purposes.

“Company Common Stock” means the common stock, par value $0.001 per share, of the Company.

“Company Disclosure Schedule” has the meaning set forth in Article 3.

“Company Holder” means the Company Stockholders together with the Company Optionholders entitled to Merger Consideration and included on the Merger Consideration Spreadsheet pursuant to Section 2.7(c).

“Company Holders Protection Payment” has the meaning set forth in Section 5.12(a).

“Company Know-How” means any and all proprietary information and know-how of the Company relating to the Company’s proprietary sutures, including without limitation methods for making and optimizing the performance of such sutures, and methods and devices for the delivery of such sutures, which information is licensed to, or owned or controlled by the Company, including but not limited to, all technical data, practices, plans, specifications, procedures and other information.

-6-

“Company Material Adverse Effect” means any change, circumstance or effect that is materially adverse to the business, operations, assets, properties, liabilities, financial condition or results of operations of the Company, taken as a whole, or that materially impairs the ability of the Company to consummate any of the transactions contemplated by this Agreement; provided, however, that any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which the Company operates except to the extent the Company is affected in a disproportionate manner as compared to other similarly situated companies in the same industries; (ii) national or international political or social conditions, including terrorism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP or other similar accounting requirements in foreign countries which are not specific to the Company; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental or Regulatory Authority except to the extent the Company is affected in a materially disproportionate manner as compared to other similarly situated companies in the same industries; (vi) any action taken by Parent, Buyer or Merger Sub prior to or on the Closing Date; (vii) the public announcement, pendency or completion of the transactions contemplated by this Agreement; or (viii) any failure, in and of itself, by the Company to meet any internal or disseminated projections, forecasts or revenue or earnings predictions (previously supplied to Parent, Buyer or Merger Sub prior to Closing) for any period; or (x) any compliance by the Company with any request made by Buyer or its Affiliates, shall not be taken into account in determining whether a “Company Material Adverse Effect” has occurred or would reasonably be expected to occur. References in this Agreement to dollar amount thresholds shall not be deemed to be evidence of a Company Material Adverse Effect or materiality.

“Company Options” means any options to purchase shares of Company Common Stock, whether vested or unvested, granted by the Company pursuant to any Company Stock Plan.

“Company Patent Rights” means all of the following Proprietary Rights of the Company: (a) all United States and foreign patents, patent applications and provisional applications relating to the Barbed Suture Products and set forth on Section 3.20(b) of the Company Disclosure Schedule and (b) all United States and foreign patents issued with respect to the applications identified in clause (a) hereof including divisional applications, continuations, re examinations and re issues of such applications or patents.

“Company Permits” has the meaning set forth in Section 3.19(b).

“Company Preferred Stock” means the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.

“Company Proprietary Right” shall mean any Proprietary Right that (a) is owned by, (b) is licensed to the Company or (c) was developed or created by or for the Company.

“Company Stock” means the Company Common Stock and the Company Preferred Stock.

“Company Stock Plan” means the Quill Medical Stock Option Plan.

-7-

“Company Stockholder” means each holder of Company Stock immediately prior to the Effective Time.

“Company Stockholder Approval” means the adoption of this Agreement and the approval of the Merger by (a) the holders of at least a majority of the outstanding shares of Company Stock and Preferred Stock, voting together as a single class and on an as-converted basis, (b) the holders of a majority of the outstanding shares of Series B Preferred Stock, voting together as a single class, (c) the holders of a majority of the outstanding shares of Series C Preferred Stock, voting together as a single class and (d) the holders of a majority of the outstanding shares of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as a single class and on an as-converted basis.

“Company Stockholders’ Meeting” has the meaning set forth in Section 5.3(a).

“Company Warrants” means the Common Warrants and the Preferred Warrants.

“Confidentiality Agreement” has the meaning set forth in Section 5.6.

“Contested Claim” has the meaning set forth in Section 7.5.

“Contract Rights” means all rights and obligations under the Contracts.

“Contracts” means all agreements, contracts, leases (whether for real or personal property), purchase orders, undertakings, covenants not to compete, employment agreements, confidentiality agreements, licenses, instruments, obligations and commitments to which a Person is a party or by which a Person or any of its Assets are bound or affected, whether written or oral.

“Cosmetic Indications” means use of the Barbed Suture Products for aesthetic correction of ptosis in aesthetic and cosmetic surgery, including breast and other non-facial applications.

“CSA” has the meaning set forth in Section 3.19(b).

“DEA” has the meaning set forth in Section 3.19(b).

“Deferred Compensation Plan” has the meaning set forth in Section 3.18(f).

“DGCL” or “Delaware Law” has the meaning set forth in the recitals.

“Dissenting Shares” has the meaning set forth in Section 2.8(a).

“Earnout Objection Statement” has the meaning set forth in Section 2.7(g)(viii).

“Earnout Payment” means any payment made to Company Holders pursuant to Section 2.7(g) and Section 9.11, if applicable.

“Earnout Payment Actual Value” has the meaning set forth in Section 2.7(g)(viii).

-8-

“Earnout Payment Calculation” has the meaning set forth in Section 2.7(g)(viii).

“Earnout Payment High Value” has the meaning set forth in Section 2.7(g)(viii).

“Earnout Payment Low Value” has the meaning set forth in Section 2.7(g)(viii).

“Earnout Period” means the five year period beginning on the first day of the first full calendar quarter immediately after the Closing and ending on the last day of the last calendar quarter of Earnout Year Five.

“Earnout Pro-Rata Portion” means the relative percentage of any Earnout Payment which each Company Holder is entitled to receive as set forth on the Merger Consideration Spreadsheet relative to the aggregate amount of the Aggregate Earnout Amount, the Orthopedic Milestone Payment and the Wound Closure Milestone Payment that the Company Holders may be entitled to receive in respect of their shares of Company Stock.

“Earnout Year” means any of Earnout Year One, Earnout Year Two, Earnout Year Three, Earnout Year Four or Earnout Year Five.

“Earnout Year Five” means the four calendar quarter period beginning on the first day of the first full calendar quarter immediately after Earnout Year Four and ending on the last day of the fourth calendar quarter immediately after the Earnout Year Four.

“Earnout Year Four” means the four calendar quarter period beginning on the first day of the first full calendar quarter immediately after Earnout Year Three and ending on the last day of the fourth calendar quarter immediately after the Earnout Year Three.

“Earnout Year One” means the four calendar quarter period beginning on the first day of the first full calendar quarter immediately after the Closing and ending on the last day of the fourth calendar quarter immediately after the Closing.

“Earnout Year Three” means the four calendar quarter period beginning on the first day of the first full calendar quarter immediately after Earnout Year Two and ending on the last day of the fourth calendar quarter immediately after Earnout Year Two.

“Earnout Year Two” means the four calendar quarter period beginning on the first day of the first full calendar quarter immediately after Earnout Year One and ending on the last day of the fourth calendar quarter immediately after Earnout Year One.

“Effective Time” has the meaning set forth in Section 2.2.

“Employee Plans” has the meaning set forth in Section 3.18(a).

“Employees” means all officers and directors of the Company and all other Persons employed by the Company on a full or part-time basis.

“Encumbrance” means any claim, lien, pledge, option, charge, easement, tax assessment, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of Law, and includes any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof.

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“End Date” has the meaning set forth in Section 8.1(b).

“Environmental Laws” means all applicable U.S. federal, state, district and local laws, all rules or regulations promulgated thereunder, and all orders, consent orders, judgments, notices, permits or demand letters issued, promulgated or entered pursuant thereto, relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, ground water, land surface, or subsurface strata), including, without limitation, (a) laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, industrial materials, wastes or other substances into the environment and (b) laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of pollutants, contaminants, chemicals, industrial ma terials, wastes or other substances. Environmental Laws shall include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), the Toxic Substances Control Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended (“RCRA”), the Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended, and all analogous laws promulgated or issued by any state or other Governmental or Regulatory Authority.

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

“ERISA Affiliate” means any entity which is (or at any relevant time was) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliated service group” with, or otherwise required to be aggregated with, the Company as set forth in Section 414(b), (c), (m) or (o) of the Code.

“Escrow Agreement” means shall have the meaning set forth in Section 2.3(a).

“Escrow Amount” means Net Working Capital equal to $2,000,000.00.

“Escrow Pro-Rata Portion” means the dollar amount of the Escrow Amount which each Company Holder may be entitled to receive as set forth on the Merger Consideration Spreadsheet, subject to the provisions of Article 7 of this Agreement, relative to the aggregate amount of the Escrow Amount that the Company Holders may be entitled to receive pursuant to the terms of this Agreement, subject to the provisions of Article 7 of this Agreement.

“Exchange” has the meaning set forth in Section 2.7(g)(ix).

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

“Exchange Agent” shall have the meaning set forth in Section 2.9(a).

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“Expenditures” means all direct costs and indirect costs incurred by Parent, Buyer, Surviving Corporation or its Affiliates, including, without limitation, manufacturing costs, general and administrative costs, marketing and other commercial expenses.

“Expense Pro-Rata Portion” means the relative percentage of all amounts paid by the Company Holders to Parent, Buyer or the Surviving Corporation by the Company Holders pursuant to Section 7.2(c) in respect of a Special Claim or an Infringement Claim relative to the aggregate amount of all costs, liabilities or expenses incurred by Parent, Buyer or the Surviving Corporation in connection with such Special Claim or Infringement Claim.

“Extraordinary Transaction” means any (a) merger, consolidation or reorganization of Parent, Buyer or the Surviving Corporation following which the direct or indirect owners of 50% or more of the combined voting power of Parent’s, Buyer’s or the Surviving Corporation’s (as the case may be) then outstanding voting securities immediately prior to the closing of such transaction do not beneficially own, directly or indirectly, more than 50% of the combined voting power of Parent’s, Buyer’s or the Surviving Corporation’s (as the case may be) then outstanding voting securities, (b) sale, transfer, divestiture or other distribution of substantially all of the assets of Parent, Buyer, the Business or the Surviving Corporation to a third party that is not an Affiliate of Parent, Buyer or the Surviving Corporation, or (c) any Person acquires a “ beneficial ownership”) (as such term is used in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of Parent, Buyer or the Surviving Corporation (as the case may be) representing 50% or more of the combined voting power of Parent’s, Buyer’s or the Surviving Corporation’s (as the case may be) then outstanding voting securities.

“Facilities” has the meaning set forth in Section 3.8(a).

“FDA” means the United States Food and Drug Administration.

“FDCA” has the meaning set forth in Section 3.19(b).

“Financial Statements” means the (a) the audited consolidated balance sheet of the Company as at December 31, 2004 and December 31, 2005 and the related audited consolidated statement of operations and comprehensive loss, consolidated statements of shareholders’ deficit and consolidated statement of cash flows for each of the fiscal years then ended, together with the report thereon of independent certified public accountants, each prepared in accordance with GAAP consistently applied throughout the periods covered, and (b) an unaudited consolidated balance sheet of the Company as at March 31, 2006, and the related unaudited consolidated statement of operations and comprehensive loss and consolidated statement of cash flows for such period, each prepared in accordance with GAAP consistently applied throughout the periods covered.

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

“Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, bureau, board, commission, department, ministry or a branch thereof, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, province, county, city or other political subdivision.

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“HSR” has the meaning set forth in Section 3.28.

“Indemnifiable Losses” means any and all losses, damages, awards, assessments, judgments, fines, penalties, costs and expenses (including reasonable attorneys’ fees), including, without limitation, those that are actual or reasonably foreseeable. The amount of any such Indemnifiable Losses for the purposes of indemnification hereunder shall be limited to the actual, direct and reasonably foreseeable damages sustained by the Indemnified Party determined net of the sum of any amounts that would be reasonably expected to be recoverable by any Indemnified Party under insurance policies of the Indemnified Party with respect to such Indemnifiable Losses (regardless of whether claims are actually made against such insurance or whether such insurance recovery is actually obtained) and refund, credit or reduction in tax realized or that would be reasonably expe cted to be realizable by the Indemnified Party (or any consolidated, combined or unitary group of which the Indemnified Party is also a member) arising from the incurrence or payment of such Indemnifiable Losses (based upon the maximum marginal tax rate applicable to such persons), and shall not include any actual or alleged lost profits, lost opportunities or other consequential, incidental or special damages, provided, however, that any actual or alleged lost profits, lost opportunities or other consequential, incidental or special damages recovered against Parent, Buyer or the Surviving Corporation as part of a Third-Party Claim brought against Parent, Buyer or the Surviving Corporation may be included.

“Indemnified Party” has the meaning set forth in Section 7.3.

“Indemnifying Party” has the meaning set forth in Section 7.5.

“Independent Accounting Firm” means an accounting firm mutually acceptable to Buyer and the Stockholder Representative to resolve any remaining objections or, if Buyer and the Stockholder Representative are unable to agree on the choice of an accounting firm, a nationally-recognized accounting firm selected by Buyer and the Stockholder Representative by lot (after excluding accounting firms that represent, or have represented within the past five years, Parent, Buyer, the Company or the Stockholder Representative). The determination of any accounting firm so selected shall be set forth in writing and shall be conclusive and binding upon the parties.

“Infringement Claim” has the meaning set forth in Section 7.2(c)(ii).

“Infringement Recovery” has the meaning set forth in Section 7.2(c).

“Initial Merger Consideration” means an amount equal to $40,000,000.00.

“IRS” means the United States Internal Revenue Service.

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in the United States, any foreign country, or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.

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“Lease” means a real property lease or a personal property lease, as applicable.

“Liability” or “Liabilities” means any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, whether accrued, absolute, contingent, matured, unmatured, liquidated, unliquidated, known or unknown.

“Litigation Claims” has the meaning set forth in Section 7.2(c).

“Major Stockholder” has the meaning set forth in the recitals.

“Maximum Earnout Amount” has the meaning set forth in Section 2.7(g)(vii).

“Merger” has the meaning set forth in the preamble.

“Merger Consideration” means the consideration to be paid to the Company Holders pursuant to Section 2.7.

“Merger Consideration Spreadsheet” shall mean the spreadsheet delivered by the Company to Buyer on the date hereof, as the same may be amended on or before the Closing Date.

“Merger Sub” has the meaning set forth in the preamble.

“Milestone Excess” means, in the event the Earnout Payment for the Earnout Year in which the Wound Closure Milestone and/or Orthopedic Milestone occur is less than the amount of the Wound Closure Milestone Payment and/or Orthopedic Milestone Payment, as applicable, any such additional amount of the Wound Closure Milestone Payment and/or Orthopedic Milestone Payment, as applicable, in excess of the Earnout Payment payable in such Earnout Year.

“Multiemployer Plan” means any “multiemployer plan,” as defined in Section 4001(a)(3) or 3(37) of ERISA, which the Company or any ERISA Affiliate contributes to or is required to contribute to, or, after September 25, 1980, contributed to or was required to contribute to, or under which the Company or any ERISA Affiliate may incur any liability.

“Net Sales” means the actual sales proceeds of Barbed Suture Products (subject to any Combination Product Adjustment) according to GAAP, consistently applied, minus discounts, credits, allowances, charge backs, fees, refusals, rebates, freight and other transportation charges, and sales and use taxes, tariffs, duties, surcharges and other governmental charges.

“Net Working Capital ” means the positive or negative number obtained by subtracting (a) the current liabilities of the Company as of the Effective Time from (b) the current assets of the Company (including cash) as of the Effective Time. The calculation of Net Working Capital for purposes of this Agreement shall take into account either the payment or the accrual of all Outstanding Bonus Payments and all Transaction Expenses incurred by the Company in connection with this Agreement and the other transactions contemplated by this Agreement.

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“Net Working Capital Certificate” has the meaning set forth in Section 6.3(m).

“Non-Standard Income” shall mean any (a) Product Line Divestiture Proceeds,

(b) Third-Party Manufacturing Revenue and (c) payments that do not also constitute an Infringement Recovery that the Buyer and/or its Affiliates receives from a licensee or sublicensee of the Company Proprietary Rights in consideration for the license or sublicense of such rights, which payments shall include, without limitation, license fees, milestone payments, license maintenance fees, Royalty Payments, and other payments received for such a license or sublicense, but specifically excluding for purposes of (a), (b) and (c), Standard Income, bona fide payments for research and development, marketing, sales and/or other services, bona fide reimbursement for costs and expenses incurred by the Buyer and/or its Affiliates (such as patent prosecution costs), payments to the extent of fair market value for the issuance of equity or debt (or for debt financing such as loans, provided, however , that any such debt financing is not given in consideration of such license or sublicense), and payments resulting from any bona fide arms length agreement relating to the supply of the applicable Barbed Suture Product (and/or ingredients or components thereof).

“Optionholder” has the meaning set forth in Section 2.7(c).

“Order” or “Orders” means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

“Orthopedic Milestone” has the meaning set forth in Section 2.7(h)(ii).

“Orthopedic Milestone Payment” has the meaning set forth in Section 2.7(h)(ii).

“Outstanding Bonus Payments” means all bonus payments, retention payments, incentive compensation payments, service award payments or other similar payments outstanding and payable by the Company to any of the Company’s current or past Employees or consultants, in connection with the transactions contemplated by this Agreement or otherwise, as of the Effective Time.

“Parent” has the meaning set forth in the preamble.

“Parent Common Stock” means shares of common stock of Parent, no par value per share.

“Parent Material Adverse Effect” means any change, circumstance or effect that is materially adverse to the business, operations, assets, properties, liabilities, financial condition or results of operations of Parent, Buyer or Merger Sub, taken as a whole, or that materially impairs the ability of the Parent, Buyer or Merger Sub to consummate any of the transactions contemplated by this Agreement; provided, however, that any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which Parent, Buyer or Merger Sub operate except to the extent Parent, Buyer or Merger Sub are affected in a disproportionate manner as compared to other similarly situated companies in the same industries; (ii) national or international political or social conditions, including terro rism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP or other similar accounting requirements in foreign countries which are not specific to Parent, Buyer or Merger Sub; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental or Regulatory Authority except to the extent Parent, Buyer or Merger Sub are affected in a materially disproportionate manner as compared to other similarly situated companies in the same industries; (vi) any action taken by the Company prior to or on the Closing Date; (vii) the public announcement, pendency or completion of the transactions contemplated by this Agreement; or (viii) changes in the market price of Parent Common Stock, shall not be taken into account in determining whether a “Parent Material Adverse Effect” has occurred or would reasonably be expected to occur. References in this Agreement to dollar amount thresholds shall not be deemed to be evidence of a Parent Material Adverse Effect or materiality.

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“Peak Year” means (a) [***] or (b) [***].

“Permits” means all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any governmental authority, whether foreign, federal, national, state or local, necessary for the operation of the Business or ownership of the Assets of any Person.

“Permitted Distribution” has the meaning set forth in Section 2.13.

“Permitted Encumbrances” means (a) statutory liens of landlords, liens of carriers, warehousepersons, mechanics and material persons, and purchase money liens incurred in the ordinary course of business for sums (i) not yet due and payable or (ii) being contested in good faith, if, in either such case, an adequate reserve shall have been made therefor in such Person’s financial statements; (b) liens incurred or deposits made in connection with workers’ compensation, unemployment insurance and other similar types of social security programs or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, in each case in the ordinary course of business, consistent with past practice; (c) easements, rights-of­way, restriction s and other similar charges or encumbrances, in each case, which do not interfere with the ordinary conduct of business of the Company and do not materially detract from the value of the property upon which such encumbrance exists and (d) liens securing taxes, assessments and governmental charges not yet due and payable.

“Person” means any person or entity, whether an individual, trustee, corporation, limited liability company, general partnership, limited partnership, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority or any similar entity.

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“Preferred Warrants” means the Series B Warrants, the Series C Warrants and the Series D Warrants.

“Preferred Warrantholder” has the meaning set forth in Section 2.7(e).

“Product Line Divestiture Proceeds” means any payments that do not also constitute an Infringement Recovery, Standard Income or Non-Standard Income that the Buyer and/or its Affiliates receives from a sale of less than substantially all of the Company Proprietary Rights to a third party that is not an Affiliate of Parent, Buyer or the Surviving Corporation.

“Product Revenue” means the aggregate worldwide Net Sales of Barbed Suture Products by Parent, Buyer and Buyer’s Affiliates to a third party who is not an Affiliate of Parent or Buyer (including, without limitation, distributors and end-users but excluding sales to a licensee or sublicensee of Parent, Buyer or a Buyer’s Affiliate) in any field of use during an Earnout Year.

“Proprietary Rights” means all (a) U.S. and foreign patents, patent applications, patent disclosures and improvements thereto, including petty patents and utility models and applications therefor; (b) U.S. and foreign trademarks, service marks, trade dress, logos, trade names and corporate names, whether registered or unregistered, and the goodwill associated therewith; (c) U.S. and foreign copyrights, whether registered or unregistered; (d) U.S. and foreign mask work rights and registrations and applications for registration thereof; (e) rights in Trade Secrets; (f) domain name registrations; (g) other proprietary rights, and (h) licenses to or from third parties granting any rights with respect to any of the foregoing.

“Proxy Statement” has the meaning set forth in Section 5.3(a).

“Related Party” means (a) any of the Company’s officers, directors, stockholders and any officers, directors, partners, associates or relatives of such officers, directors and stockholders, (b) any Person in which the Company or any stockholder or any Affiliate, associate or relative of any such Person has any direct or indirect interest and (c) any direct or indirect trustee or beneficiary of any stockholder.

“Return” or “Returns” has the meaning set forth in Section 3.21(a)(ii).

“Royalty Payment” means any royalty payment received by Parent, Buyer or an Affiliate of Buyer from a licensee or sublicensee of the Company Proprietary Rights based on net sales of Barbed Suture Products by such licensee or sublicensee which royalty payment does not also constitute an Infringement Recovery.

“Scheduled Contract” has the meaning set forth in Section 3.11(a).

“SEC” has the meaning set forth in Section 5.11.

“Series A Preferred Stock” means the Series A preferred stock, par value $0.001 per share, of the Company.

“Series A Preference” means $1.00.

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“Series B Preferred Stock” means the Series B preferred stock, par value $0.001 per share, of the Company.

“Series B Preference” means $2.00.

“Series B Warrants” means any warrants to purchase shares of Series B Preferred Stock, whether exercisable or unexercisable, granted by the Company.

“Series C Preferred Stock” means the Series C preferred stock, par value $0.001 per share, of the Company.

“Series C Preference” means $2.20.

“Series C Warrants” means any warrants to purchase shares of Series C Preferred Stock, whether exercisable or unexercisable, granted by the Company.

“Series D Preferred Stock” means the Series D preferred stock, par value $0.001 per share, of the Company.

“Series D Preference” means $5.00.

“Series D Warrants” means any warrants to purchase shares of Series D Preferred Stock, whether exercisable or unexercisable, granted by the Company.

“Special Claim” has the meaning set forth in Section 7.2(c)(i).

“Special Recovery” shall mean all proceeds of an Infringement Recovery actually received by the Parent, Buyer or the Surviving Corporation (including without limitation all special, consequential and incidental damages) from any final and non-appealable (or not appealed within the time permitted) judgment resolving Infringement Claims or Special Claims in favor of Parent, Buyer or the Surviving Corporation but excluding any Standard Income and Non-Standard Income.

“Standard Income” shall mean any (a) Product Line Divestiture Proceeds from Cosmetic Indications and Wound Closure Indications, (b) Third-Party Manufacturing Revenue from Cosmetic Indications and Wound Closure Indications, and (c) payments that do not also constitute an Infringement Recovery that the Buyer and/or its Affiliates receives from a licensee or sublicensee of the Company Proprietary Rights in consideration for the license or sublicense of such rights for Cosmetic Indications and Wound Closure Indications, which payments shall include, without limitation, license fees, milestone payments, license maintenance fees, Royalty Payments and other payments received for such a license or sublicense, but specifically excluding for purposes of (a), (b) and (c) above, bona fide payments for research and development, marketing, sales and/or other services, bona f ide reimbursement for costs and expenses incurred by the Buyer and/or its Affiliates (such as patent prosecution costs), payments to the extent of fair market value for the issuance of equity or debt (or for debt financing such as loans, provided, however, that any such debt financing is not given in consideration of such license or sublicense), and payments resulting from any bona fide arms length agreement relating to the supply of the applicable Barbed Suture Product (and/or ingredients or components thereof) to such licensee or sublicensee for Cosmetic Indications and Wound Closure Indications.

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“Stockholder Representative” means the Person mutually acceptable to Parent, Buyer and the Company will become a party to the Stockholder Representative Agreement.

“Stockholder Representative Agreement” means an agreement acknowledged by the Stockholder Representative substantially in the form of Exhibit B hereto.

“Subsidiary” means any Person in which the Company or Buyer, as the context requires, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least 50% of either the equity interest in, or the voting control of, such Person.

“Superior Proposal” means a bona fide Acquisition Proposal for all of the Company Stock (or all or substantially all of the assets of the Company), made in writing and not initiated, solicited or encouraged in violation of Section 5.2(a) of this Agreement, on terms which the board of directors of the Company (A) determines in its good faith judgment, if accepted, is reasonably likely to be consummated on a timely basis, taking into account all legal, financial and regulatory aspects of such Acquisition Proposal and (B) determines in its good faith judgment to be more favorable to Company and the stockholders of the Company than the Merger.

“Superior Transaction” has the meaning set forth in Section 5.2(c).

“Surviving Corporation” has the meaning set forth in Section 2.1(a).

“Tax” or “Taxes” has the meaning set forth in Section 3.21(a)(i).

“to the knowledge” or “knowledge” of a party (or similar phrases) means to the extent of matters which are actually known by such party after reasonable inquiry and when used in respect of the Company, the term “to the knowledge” or “knowledge” shall mean the matters which are actually known by the Company’s officers and directors after reasonable inquiry.

“Third-Party Claim” has the meaning set forth in Section 7.6(a).

“Third-Party Manufacturing Revenue” means the difference between the transfer price of a Barbed Suture Product and the cost of manufacturing such Barbed Suture Product as set forth in a bona fide manufacturing agreement between Buyer or an Affiliate of Buyer and a third-party that is not an Affiliate of Buyer.

“Trade Secrets” means all trade secrets and confidential business information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, research and development information, software, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans, mailing and e-mail lists, and customer and supplier mailing and e-mail lists and information), in each case which (i) are not generally known to or accessible by the public; (ii) derive independent economic value from not being generally known to or accessible by the public; (iii) and are subject to efforts by the Company that are reasonable under the circumstances to maintain their secrecy.

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“Trading Day” is a day on which the Exchange is open and available for at least five hours for the trading of securities.

“Transaction Expenses” means out-of-pocket legal, accounting, financial and other costs, fees and expenses incurred by a Party in connection with the negotiation of this Agreement and the consummation of the transactions contemplated hereby.

“USPTO” means the United States Patent and Trademark Office.

“U.S.” means the United States of America.

“Valid Claims” means any claim included in (i) an issued and unexpired patent which neither has been revoked nor held unenforceable, unpatentable nor invalid by a decision of a court or Governmental or Regulatory Authority, unappealable or unappealed within the time allowed for appeal, nor has been admitted by the holder of the patent to be invalid or unenforceable through reissue, disclaimer, abandonment, withdrawal or otherwise, or (ii) any patent application within the Company Proprietary Rights or Company Know-How, so long as such application is being actively prosecuted and has not been pending for more than five years in the country in question and the claim has neither been withdrawn (unless such claim is being pursued in a co-pending application) or abandoned by the owner party of the application nor finally cancelled, withdrawn, abandoned or rejected by any admi nistrative agency or other body of competent jurisdiction not subject to further appeal.

“Warrantholder” means Preferred Warrantholders and Common Warrantholders.

“Wound Closure Indication” means use of the Barbed Suture Products for soft tissue approximation, including, but not limited to the approximation of dermis, fat and skeletal muscle.

“Wound Closure Milestone” has the meaning set forth in Section 2.7(h)(i).

“Wound Closure Milestone Payment” has the meaning set forth in Section 2.7(h)(i).

ARTICLE 2.

THE MERGER

2.1

The Merger.

(a)

The Merger. At the Effective Time, and on the terms and subject to the conditions of this Agreement and the DGCL, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation.  The Company, as the surviving corporation after the Merger, is sometimes referred to in this Agreement as the “Surviving Corporation”.

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(b)

Closing. The closing of the Merger and the other transactions contemplated hereby (the “Closing”) shall take place at 8:00 a.m., California time, on a date to be specified by the parties (the “Closing Date”), which shall be no later than the third Business Day after satisfaction or waiver of the conditions set forth in Article 6, unless another time or date is agreed to by the parties hereto. The Closing shall take place at the offices of Heller Ehrman LLP, 275 Middlefield Road, Menlo Park, California, or at such other location as the parties hereto shall mutually agree.

2.2

Effective Time. At the Closing, the parties hereto shall cause the Merger to be consummated by executing and filing a certificate of merger with the Secretary of State of the State of Delaware as required by, and executed in accordance with the relevant provisions of, the DGCL (the “Certificate of Merger”), the time of acceptance by the Secretary of State of Delaware of such filing or such later time as may be agreed to by the parties and set forth in the Certificate of Merger being referred to in this Agreement as the “Effective Time”.

2.3

Escrow. On or prior to the Closing, Buyer, the Stockholder Representative and the Escrow Agent shall enter into an escrow agreement in the form mutually agreed to by the parties (the “Escrow Agreement”), and, promptly following the execution and delivery of the Escrow Agreement by each of the parties thereto, Buyer and Surviving Corporation shall cause the Escrow Amount to be deposited with the Escrow Agent.

2.4

Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

2.5

Certificate of Incorporation; Bylaws. At the Effective Time, the Company’s Certificate of Incorporation in effect immediately prior to the Effective Time shall be amended in its entirety as set forth in the Certificate of Merger, and as so amended shall be the Certificate of Incorporation of the Surviving Corporation, until duly amended in accordance with applicable Law. At the Effective Time, the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter duly amended in accordance with applicable Law, the Certificate of Incorporation of the Surviving Corporation and such Bylaws.

2.6

Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation and in accordance with applicable Law. The Company shall cause each director and officer of the Company to tender his or her resignation prior to the Effective Time, with each such resignation to be effective as of the Effective Time.

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2.7

The Merger Consideration; Effect on Outstanding Securities of the Company. On the terms and subject to the conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Buyer, Merger Sub, the Company or the holder of any Company Stock, the following shall occur:

(a)

Conversion of Company Common Stock. Each share of Company Common Stock issued and outstanding at the Effective Time (other than any Dissenting Shares as provided in Section 2.8 and other than any shares of Company Common Stock held by Buyer or in the treasury of the Company) shall be canceled and extinguished, and shall be automatically converted into solely the right to receive an amount of cash, without interest, equal to (i) the Common Merger Consideration in accordance with their Cash Pro-Rata Portion and (ii) the rights to receive payments, if and when payable, as set forth in Sections 2.7(g), 2.7(h) and 2.7(l) in accordance with their Earnout Pro-Rata Portion, each as set forth on the Merger Consideration Spreadsheet. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time in the treasury of the Company shall be canceled and extinguished without consideration.

(b)

Conversion of Company Preferred Stock. Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock issued and outstanding at the Effective Time (other than any Dissenting Shares as provided in Section 2.8 and other than any shares of Company Preferred Stock held by Buyer or in the treasury of the Company) shall be canceled and extinguished, and shall be automatically converted into solely the right to receive an amount of cash, without interest, an amount equal to the Series A Preference, the Series B Preference, the Series C Preference and the Series D Preference, respectively. Each share of Company Preferred Stock issued and outstanding at the Effective Time held by Buyer or in the treasury of the Company shall be canceled and extinguished without consideration.

(c)

Company Options. Buyer shall not assume any Company Options. Pursuant to the terms of the Company Stock Plan and the stock option agreements entered into between the Company and the holders of Company Options (each, an “Optionholder”) and upon the terms and subject to the conditions set forth in this Agreement, the Board of Directors of the Company shall adopt resolutions and execute all necessary amendments to stock option agreements to provide that each outstanding Company Option unexercised immediately prior to the Effective Time shall be automatically canceled and terminated as of the Effective Time and each holder of such cancelled Company Option shall be entitled to receive an amount of cash, without interest, equal to (i) the Common Merger Consideration in accordance with their Cash Pro-Rata Portion (which reflects a reduction for the amount of the exercise price of eac h Company Option) and (ii) the rights to receive payments, if and when payable, as set forth in Sections 2.7(g), 2.7(h) and 2.7(l) in accordance with their Earnout Pro-Rata Portion, each as set forth on the Merger Consideration Spreadsheet as if such unexercised option had been exercised immediately prior to the Effective Time.

(d)

Common Warrants. Buyer shall not assume any Common Warrants. Upon the terms and subject to the conditions set forth in this Agreement, the Company will take all action necessary to cause each Common Warrant to be exercised prior to the Effective Time and to cause each outstanding Common Warrant issued and outstanding at the Effective Time to

be automatically canceled and terminated as of the Effective Time without consideration such that each holder of a Common Warrant (each, a “Common Warrantholder”) shall cease to have any rights with respect thereto after the Effective Time.

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(e)

Preferred Warrants. Buyer shall not assume any Preferred Warrants. Upon the terms and subject to the conditions set forth in this Agreement, the Company will take all action necessary to cause the each Preferred Warrant to be exercised prior to the Effective Time and to cause the outstanding Preferred Warrants issued and outstanding at the Effective Time to be automatically canceled and terminated as of the Effective Time without consideration such that the each holder of a Preferred Warrant (each, a “Preferred Warrantholder”) shall cease to have any rights with respect thereto.

(f)

Common Stock of Merger Sub. Each share of common stock of Merger Sub issued and outstanding at the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation.

(g)

Earnout Payments. Subject to the terms and conditions of this Agreement, including Sections 2.7(h), 2.7(l), 7.2 and 7.7:

(i)

With respect to Earnout Year One, each Company Holder shall be entitled to receive their Earnout Pro-Rata Portion of the amount equal to (i) [***] (ii) [***] less, in the event the Wound Closure Milestone occurs during Earnout Year One, the amount of the Wound Closure Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h), and/or, in the event the Orthopedic Milestone is satisfied in Earnout Year One, the amount of the Orthopedic Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h) (in the event the amount calculated hereunder is zero or less than zero, no Earnout Payment shall be payable for such Earnout Year and the Milestone Excess shall be credited against future Earnout Payments), plus the Expense Pro-Rata Portion of any Infringement Recovery received by Parent, Buyer or the Surviving Corporation during Earnout Year One, [***] of any Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year One, and [***] of any Non-Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year One;

(ii) With respect to Earnout Year Two, each Company Holder shall be entitled to receive their Earnout Pro-Rata Portion of the amount equal to (i) [***] (ii) [***] less (x) in the event Wound Closure Milestone occurs during Earnout Year Two, the amount of the Wound Closure Milestone Payment payable by Buyer to the Company  Stockholders in accordance with Section 2.7(h), and/or satisfied in Earnout Year Two, the Orthopedic Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h) and/or (y) any Milestone Excess (in the event the amount calculated hereunder is zero or less than zero, no Earnout Payment shall be payable for such Earnout Year and the remaining Milestone Excess shall be credited against future Earnout Payments), plus the Expense Pro-Rata Portion of any Infringement Recovery received by Parent, Buyer or the Surviving Corporation during Earnout Year Two, [***] of any Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Two, and [***] of any Non-Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Two;

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(iii)

With respect to Earnout Year Three, each Company Holder shall be entitled to receive their Earnout Pro-Rata Portion of the amount equal to (i) [***] (ii) [***] less (x) in the event the Wound Closure Milestone occurs during Earnout Year Three, the amount of the Wound Closure Milestone Payment payable by Buyer to the Company Stockholders in accordance with Section 2.7(h), and/or, in the event the Orthopedic Milestone is satisfied in Earnout Year Three, the Orthopedic Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h) and/or (y) any remaining Milestone Excess after giving effect to any Milestone Excess credited against Earnout Payments in any prior Earnout Years (in the event the amount calculated hereunder is zero or less than zero, no Earnout Payment shall be payable for such Earnout Year and the remaining Milestone Excess shall be credited against future Earnout Payments), plus the Expense Pro-Rata Portion of any Infringement Recovery received by Parent, Buyer or the Surviving Corporation during Earnout Year Three, [***] of any Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Three, and [***] of any Non-Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Three;

(iv)

With respect to Earnout Year Four, each Company Holder shall be entitled to receive their Earnout Pro-Rata Portion of the amount equal to (i) [***] (ii) [***] less (x) in the event the Wound Closure Milestone occurs during Earnout Year Four, the amount of the Wound Closure Milestone Payment payable by Buyer to the Company Stockholders in accordance with Section 2.7(h), and/or, in the event the Orthopedic Milestone is satisfied in Earnout Year Four, the Orthopedic Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h) and/or (y) any remaining Milestone Excess after giving effect to any Milestone Excess credited against Earnout Payments in any prior Earnout Year (in the event the amount calculated hereunder is zero or less than zero, no Earnout Payment shall be payable for such Earnout Year and the remaining Milestone Excess shall be credited against future Earnout Payments), plus the Expense Pro-Rata Portion of any Infringement Recovery received by Parent, Buyer or the Surviving Corporation during Earnout Year Four, [***] of any Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Four, and [***] of any Non-Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Four; and

(v)

With respect to Earnout Year Five, each Company Holder shall be entitled to receive their Earnout Pro-Rata Portion of the amount equal to (i) [***] (ii) [***] less (x) in the event the Wound Closure Milestone occurs during Earnout Year Five, the amount of any Wound Closure Milestone Payment payable by Buyer to the Company  Stockholders in accordance with Section 2.7(h), and/or, in the event the Orthopedic Milestone is satisfied in Earnout Year Five, the Orthopedic Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h) and/or (y) any remaining Milestone Excess after giving effect to any Milestone Excess credited against Earnout Payments in any prior Earnout Year (in the event the amount calculated hereunder is zero or less than zero, no Earnout Payment shall be payable for such Earnout Year and the remaining Milestone Excess will be of no further force or effect), plus the Expense Pro-Rata Portion of any Infringement Recovery received by Parent, Buyer or the Surviving Corporation during Earnout Year Five, [***] of any Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Five, and [***] of any Non-Standard Income received by Parent, Buyer or the Surviving Corporation during Earnout Year Five.

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(vi)

Strength of Patent Rights. Notwithstanding the foregoing, in the event that, during any Earnout Year, one or more products are marketed or sold by one or more Persons other than Buyer or its Affiliates, in a country, and all of the following apply: (a) such product(s) are a self-anchoring suture that are used for the same indication as a Barbed Suture Product of Company which is a self-anchoring suture, or are a self-anchoring device which is not a self-anchoring suture that receives regulatory approval through a 510(k) process (or similar foreign process) in which approval is obtained by a demonstration of equivalence to a previously approved Barbed Suture Product of the Company which is a self-anchoring device but not a self-anchoring suture; (b) such product(s) do not infringe any valid and enforceable claim within the Company Patent Rights; and (c) one of the following applies: (i) if Buyer and/or its Affiliat es has recognized Product Revenue in such country and one of the following applies: (A) the market share of Buyer or its Affiliates has decreased by [***] or more of its market share in such country, which decrease is attributable to the competitive effects of such product(s), or (B) if the average sale price of the applicable Barbed Suture Product(s) of Company in such country has decreased by [***] or more, which decrease is attributable to the competitive effects of such product(s); or (ii) if Buyer and/or its Affiliates has not yet recognized Product Revenue in such country, there are two or more Persons selling product(s) in such country that meet the requirements of (a) and (b) above and the aggregate market share of such product(s) in such country is [***] or more, then during the period of time that the foregoing test is met, Buyer may exclude [***] of the Product Revenue attributable to such Barbed Suture Product of Company in such country from the calculation of the applicable Earnout Payment in su ch Earnout Year. For purposes of determining whether or not the product or products infringe a valid and enforceable claim within the Company Patent Rights, in the absence of determination by a court or pursuant to arbitration, Buyer shall be entitled to rely upon a reasoned infringement opinion from an independent law firm selected by Buyer and reasonably acceptable to the Stockholder Representative, which opinion shall be controlling for purposes of this Section 2.7(g)(vi); provided that during the period of time that Buyer or its Affiliates is seeking legal remedies for a Person’s sales of a product described above, such product shall be treated for purposes of this Section 2.7(g)(iv) as if it does not infringe any issued and enforceable claim within the Company Patent Rights in such country.

(vii)

Maximum Earnout Amount. Subject to the further rights of Buyer and the Surviving Corporation set forth in this Agreement, including Section 7.7, the aggregate amount of the payments to be paid by Buyer to the Company Holders during the Earnout Period pursuant to this Section 2.7 and Section 9.11, if applicable, including any Earnout Payments, Milestone Payments, payments of any portion of Infringement Recoveries or License Income but excluding (i) any payment of the Company Holders Protection Payment, (ii) any payments of the Expense Pro-Rata Portion of any Infringement Recovery (that is not a Special Recovery) up to the amount the Company Holders paid to Parent, Buyer or the Surviving Corporation pursuant to Section 7.2(c) and (iii) any Infringement Recovery that is a Special Recovery, shall not exceed $160,000,000.00 (the “Maximum Earnout Amount”). Upon (i) distributi ng Earnout Payments equal to the Maximum Earnout Amount, (ii) the payment of the Earnout Payment with respect to Earnout Year Five or (iii) the consummation of an Extraordinary Transaction and the payment to the Company Holders of the amounts specified in Section 2.7(l), Buyer’s obligation to make any additional or future Earnout Payments pursuant to the terms and conditions of this Agreement shall cease and the rights of the Company Holders to receive Earnout Payments shall terminate. To the extent that any provision of this Section 2.7 would otherwise require Buyer to make an Earnout Payment resulting in Buyer paying Earnout Payments that, in the aggregate, exceed the Maximum Earnout Amount, Buyer shall be entitled to reduce such Earnout Payment such that the Maximum Earnout Amount is not exceeded, and no further Earnout Payment shall be due or payable to the Company Holders thereafter. For purposes of this Section 2.7, any amounts offset by Buyer against any Earnout Payment, the Wound Closure Milesto ne Payment or the Orthopedic Milestone Payment pursuant to Section 7.6 or otherwise shall be deemed to have been paid by Buyer pursuant to this Section 2.7. Nothwithstanding any thing in this Section 2.7(g)(vii) to the contrary, Buyer shall pay each Company Holder its Earnout Pro-Rata Portion of any Special Recovery obtained by Buyer, Parent or Company.

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(viii)

Determination of Earnout Payments. Within 45 calendar days of the end of each Earnout Year, Buyer shall deliver to the Stockholder Representative a written statement of Buyer’s calculations of the Earnout Payment in the form agreed to by the parties prior to the Closing (the “Earnout Payment Calculation”). Buyer shall promptly provide to the Stockholder Representative any supplementary documentatio n related to the Earnout Payment reasonably requested by the Stockholder Representative. The Product Revenue upon which the Earnout Payment Calculation is determined shall be calculated in accordance with GAAP on a basis consistently applied from year-to-year.  The Stockholder Representative shall have 45 calendar days to deliver to Buyer written objections to the Earnout Payment Calculation (the “Earnout Objection Statement”) and the Stockholder Representative’s revised calculation of the Earnout Payment Calculation.  The Stockholder Representative may, by written notice to Buyer, waive or shorten such period for objection. After delivery of an Earnout Objection Statement, an authorized representative of Buyer and the Stockholder Representative shall promptly negotiate in good faith with respect to the Earnout Payment Calculation and the objections thereto, and if they are unable to reach an agreement within 45 calendar days after delivery to Buyer of such Earnout Objection Statement, the dispute shall be submitted to the Independent Accounting Firm. Each of the parties to this Agreement shall, and shall cause their respective officers, directors, employees, and representatives to, provide full cooperation to the Independent Accounting Firm. The Independent Accounting Firm shall (i) consider only those matters as to which there is a dispute between the parties, and (ii) be instructed to reach its conclusions regarding any such dispute within 30 calendar days after its appointment and provide a written explanation of its decision.  In the event that Buyer and the Stockholder Representative shall submit any dispute to an Independent Accounting Firm, each such party may submit a “position paper” to the Independent Accounting Firm setting forth the position of such party with respect to such dispute, to be considered by such Independent Accounting Firm as it deems fit. All fees and expenses relating to the engagement of the Independent Accounting Firm shall be as follows: (i) if the accounting firm resolves all of the objections in favor of Buyer as set forth in the Proposed Earnout Payment Calculation (the Earnout Payment Calculation so determined is referred to herein as the “Earnout Payment Low Value”), the Company Holders shall be responsible for all of the fees and expenses of the accounting firm; (ii) if the accounting firm resolves all of the remaining objections in favor of the Stockholde r Representative as set forth in the Earnout Objection Statement (the final Earnout Payment Calculation so determined is referred to herein as the “Earnout Payment High Value”), Buyer shall be responsible for all of the fees and expenses of the accounting firm; and (iii) if the accounting firm resolves some of the remaining objections in favor of Buyer and some objections in favor of the Stockholder Representative (the Earnout Payment Calculation so determined is referred to herein as the “Earnout Payment Actual Value”), the Company Holders shall be responsible for that fraction of the fees and expenses of the accounting firm equal to (x) the difference between the Earnout Payment High Value and the Earnout Payment Actual Value over (y) the difference between the Earnout Payment High Value and the Earnout Payment Low Value, and Buyer shall be responsible for the remainder of the fees and expenses.  The Earnout Payment Calculation, as so adjusted by agreeme nt or by the Independent Audit Firm (if required), shall be final and binding on the parties.

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(ix)

Earnout Payment. In connection with the delivery of the Earnout Payment Calculation, Buyer shall pay to each Company Holder such holder’s Earnout Pro-Rata Portion of the Earnout Payment based on the Earnout Payment Calculation. Within 15 calendar days after the determination of the Earnout Payment in accordance with this Section 2.7(g) (including resolution of any dispute), Buyer shall pay to each Company Holder such holder’s Earnout Pro-Rata Portion of any additional payment due to Company Holders in an amount equal to the amount by which the final Earnout Payment exceeds the Earnout Payment paid in connection with the Earnout Payment Calculation. Any payment hereunder shall be paid in the form of (i) immediately available funds, (ii) whole shares of Parent Common Stock or (iii) any combination thereof, with such payments being made to the accounts of or, in the case of shares of Parent Common Stock, is sued to the account of each Company Holder as designated to Buyer in writing by the Stockholder Representative; provided, however, (x) no less than [***] of all Earnout Payments shall be paid in cash and (y) Buyer may not pay any shares of Parent Common Stock to a Company Holder if (1) such shares of Parent Common Stock are not, if and when issued in connection with the transactions contemplated by this Agreement, duly authorized, fully paid, nonassessable and freely tradable under all federal and state securities laws, including the Securities Act, and otherwise transferable without restriction, (2) Parent is not listed for trading on the Exchange at the time of payment or is subject to any restriction, supervision, halt of trading or similar impediment to trading from the Exchange or any Governmental or Regulatory Authority, (3) the average daily volume of trading of Parent Common Stock for the 30 Trading Day period ending on the penultimate Trading Day prior to the date on which Buyer is req uired to make payment hereunder is not more than [***] than the volume of trading for the 30 Trading Day period ending on the last Trading Day prior to the Effective Date of this Agreement, (4) the weighted average of the selling prices on the Nasdaq National Market or the New York Stock Exchange (the “Exchange”) as reported in The Wall Street Journal, (or if not reported therein, any other authoritative source) of one share of Parent Common stock during the 30 Trading Day period ending on the penultimate Trading Day prior to the date on which Buyer is required to make payment hereunder is less than the sum of [***] and [***] or (5) if compliance with Rule 506 of Regulation D of the Securities Act of 1933, as amended is required at the time of the offer or sale of Parent Common Stock and such Company Holder is not an accredited investor under such rule. The value of shares of Parent Common Stock, if any, issued in connection with the payment of any Earnout Payment shall be equal to the weighted average of the selling prices on the Exchange as reported in The Wall Street Journal, (or if not reported therein, any other authoritative source) of one share of Parent Common stock during the 30 Trading Day period ending on the penultimate Trading Day prior to the date on which Buyer is required to make payment hereunder. No fractional shares of Parent Common Stock shall be issued in connection with any Earnout Payment made in accordance with the provisions of this Section 2.7(g). Instead, the number of shares of Parent Common Stock to which a Company Holder is entitled to receive in accordance with the provisions of this Section 2.7(g) shall be rounded to the nearest whole share (with 0.5 shown rounded up to the nearest whole share).

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(x)

Infringement Recovery. In the event Parent, Buyer or the Surviving Corporation receives an Infringement Recovery for which the Company Holders paid amounts to Parent, Buyer or the Surviving Corporation pursuant to Section 7.2(c) following the end of Earnout Year Five, Parent, Buyer or the Surviving Corporation, as applicable, shall deliver to the Stockholder Representative (for distribution to each Company Holder in accordance with their Earnout Pro-Rata Portion) within 30 calendar days of the receipt of such Infringement Recovery the Expense Pro-Rata Portion of such Infringement Recovery.

(h)

Milestone Payments. Following the Closing, subject to the terms and conditions of this Agreement, including without limitation Section 7.7, the Company Holders shall be entitled to collectively receive from Buyer their Earnout Pro-Rata Portion of:

(i)

$10,000,000.00 in cash upon the first sale of a Barbed Suture Product by Buyer or its Affiliates to a third party that is not an Affiliate of Parent, Buyer or the Surviving Corporation that may be included in Net Sales and where such Barbed Suture Product has received regulatory clearance for a wound closure indication and is labelled for use in such wound closure indication (the “Wound Closure Milestone,” with such amount being the “Wound Closure Milestone Payment”); and

(ii)

[***] in cash upon receipt by Buyer or its Affiliates of [***] for an Barbed Suture Product in the field of [***] (the “Orthopedic Milestone,” with such amount being the “Orthopedic Milestone Payment”).

(iii)

Buyer agrees to notify the Stockholder Representative within 30 calendar days after the occurrence of either the Wound Closure Milestone and the Orthopedic Milestone. Each of the Wound Closure Milestone Payment and the Orthopedic Milestone Payment will be promptly payable following the end of the Earnout Year during which the Wound Closure Milestone or the Orthopedic Milestone is satisfied.  The amount of the Wound Closure Milestone Payment or the Orthopedic Milestone Payment shall not be reduced as a result of any Earnout Payment or Milestone Excess.

(i)

Merger Consideration Spreadsheet.

(i)

The Merger Consideration Spreadsheet sets forth (i) the name of each Company Holder, (ii) the address of each Company Holder, (iii) the telephone number and facsimile number for each Company Holder, (iv) each Company Holder’s Cash Pro-Rata Portion, (v) each Company Holder’s Earnout Pro-Rata Portion and (vi) each Company Holder’s Escrow Pro-Rata Portion.

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(ii)

At the Closing, the Company shall deliver to Buyer an updated Merger Consideration Spreadsheet setting forth (i) the name of each Company Holder, (ii) the address of each Company Holder, (iii) the telephone number and facsimile number for each Company Holder, (iv) the final calculation of each Company Holder’s Cash Pro-Rata Portion, (v) the final calculation of each Company Holder’s Earnout Pro-Rata Portion and (vi) the final calculation of each Company Holder’s Escrow Pro-Rata Portion.  The Company hereby represents and warrants that such updated Merger Consideration Spreadsheet shall be true and correct in all respects. Following the Closing, each Company Holder shall notify the Stockholder Representative in writing of any change to such Company Holder’s address, telephone number or facsimile number and the Stockholder Representative shall inform Buyer in writing of any such change not less tha n 20 calendar days prior to the end of any Earnout Year.  The Company and the Stockholder Representative acknowledge that Buyer is relying on the accuracy of the Merger Consideration Spreadsheet in distributing the Merger Consideration in accordance with this Agreement.

(iii)

Upon payment of the appraised value of any Dissenting Shares, the Merger Consideration Spreadsheet shall be deemed to be automatically updated to (i) delete (A) the name of each Company Stockholder of Dissenting Shares, (B) the address of each Company Stockholder of Dissenting Shares, (C) the telephone number and facsimile number for each Company Stockholder of Dissenting Shares, (D) the final calculation of each Company Stockholder of Dissenting Shares’ Cash Pro-Rata Portion, (E) the final calculation of each Company Stockholder of Dissenting Shares’ Earnout Pro-Rata Portion and (F) the final calculation of each Company Stockholder of Dissenting Shares’ Escrow Pro-Rata Portion, (ii) in the event any payments made by Parent, Buyer, the Merger Sub or the Surviving Corporation after the Effective Time with respect to any Dissenting Shares are less that the portion of the Initial Merger Consideration to which the holders of such Dissenting Shares would have been entitled had such Dissenting Shares not been Dissenting Shares, the Cash Pro-Rata Portion of each remaining Company Holder shall be increased retroactively to the time of Closing by each Company Holder’s Earnout Pro-Rata Portion of the amount by which the payments made by Parent, Buyer, the Merger Sub or the Surviving Corporation after the Effective Time with respect to any Dissenting Shares are less that the portion of the Initial Merger Consideration to which the holders of such Dissenting Shares would have been entitled had such Dissenting Shares not been Dissenting Shares, (iii) the Earnout Pro-Rata Portion of each remaining Company Holder shall be increased retroactively to the time of Closing by each Company Holder’s Earnout Pro-Rata Portion of the aggregate Earnout Pro-Rata Portion eliminated pursuant to (i)(E) above, and (iv) the Escrow Pro-Rata Portion of each remaining Company Holder shall be increased retroactively to the time of Clo sing by each Company Holder’s Earnout Pro-Rata Portion of the aggregate Escrow Pro-Rata Portion eliminated pursuant to (i)(F) above.

(j)

Post-Closing Covenants.

(i)

Except as expressly set forth in this Section 2.7(j), from and after the Closing, any and all decisions regarding efforts which Buyer or its Affiliates shall cause to be expended with respect to the design, development, production, marketing or sale of Barbed Suture Products, any other matters directly or indirectly related to the amount of Product Revenues, or the satisfaction of either the Wound Closure Milestone or the Orthopedic Milestone, shall be in the sole and absolute discretion of Buyer and its Affiliates without any express (except as set forth in this Agreement) or implied obligation or liability to any party, including, but not limited to, any Company Stockholder, provided, however, that (A) neither Buyer nor its Affiliates shall take any action with the primary intent to negatively impact the amount of any Earnout Amount or the satisfaction of either the Wound Closure Milestone or the Orthop edic Milestone Payment and (B) in no event shall Buyer or its Affiliates manipulate the recognition of Product Revenues in or between Earnout Years. With respect to any Extraordinary Transaction, the preceding sentence shall not apply, but rather the parties agree that from the Effective Time and during the periods with respect to which any Earnout Amount may be earned, neither Buyer nor its Affiliates shall engage in any such transaction with the primary intent to negatively impact the amount of any Earnout Amount (it being agreed and acknowledged by the parties that, for purposes of this sentence only, “primary intent” shall mean the primary intent of Buyer’s chief executive officer, chief operating officer or chief financial officer, whose approval will be required to consummate any such transaction).

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(ii)

In addition, (A) during Earnout Year One, Parent, Buyer, the Surviving Corporation and their Affiliates shall commit a minimum of $7,500,000.00 of Expenditures, in the aggregate, to Commercialization Efforts, (B) during Earnout Year Two, Parent, Buyer, the Surviving Corporation and their Affiliates shall commit a minimum of $10,000,000.00 of Expenditures, in the aggregate, to Commercialization Efforts, (C) during Earnout Year Three, Parent, Buyer, the Surviving Corporation and their Affiliates shall commit a minimum of $10,000,000.00 of Expenditures, in the aggregate, to Commercialization Efforts and (D) during Earnout Year Four and Earnout Year Five, Parent, Buyer, Surviving Corporation and their Affiliates shall use their Commercially Reasonable Efforts to support Commercialization Efforts, provided, however, that in event Product Revenues exceed [***] at any time during Earnout Year Three, then Parent, B uyer, Surviving Corporation and their Affiliates shall no longer be required to commit any Expenditures to Commercialization Efforts during the remaining portion of Earnout Year Three.

(iii)

During the Earnout Period, Parent and Buyer hereby agrees that neither Parent, Buyer, the Surviving Corporation nor its Affiliates shall commercialize a product that is directly competitive with a commercially available Barbed Suture Product.

(k)

Audit Rights. Until the earlier to occur of (i) the end of the Earnout Period or (ii) the payment by Buyer of Earnout Payments equal to the Maximum Earnout Amount in the aggregate, the Stockholder Representative and his representatives, agents, and consultants, if any, shall have reasonable access to, and shall be able to review and audit, once during each Earnout Year, upon 10 calendar days written notice and during normal business hours, the books, records, documents (whether in hardcopy, electronic or other form), and operations of Parent, Buyer and the Surviving Corporation relating to the Barbed Suture Products, as reasonably required solely to permit the Stockholder Representative to (A) verify compliance of Parent, Buyer and the Surviving Corporation with their obligations under this Agreement, (B) verify any determination and payment of the Earnout Payments hereunder and (C) verify the volumes of sales o f Barbed Suture Products. Buyer agrees to reasonably assist the Stockholder Representative in connection with the exercise by the Stockholder Representative of the Audit Rights granted by this Section 2.7(k). Within 30 calendar days of the end of the second and fourth calendar quarters of each Earnout Year, Buyer shall deliver to the Stockholder Representative a report in reasonable detail setting forth for the preceding six calendar months, Product Revenues, Expenditures for Commercialization Efforts, Standard Income, Non-Standard Income and the status of FDA clearance for Barbed Suture Products in the field of tendon repair.  All information obtained in connection with such activity shall be subject to the provisions of the Confidentiality Agreement.

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(l)

Other Transaction.

(i)

Subject to Section 2.7(l)(iv), in the event of the consummation of an Extraordinary Transaction during Earnout Year One, Earnout Year Two or Earnout Year Three, each Company Holder shall be entitled to receive, in lieu of any future payments pursuant to Section 2.7(g), an amount equal to [***], and upon payment thereof, any obligation of Parent, Buyer, Surviving Corporation or any successor thereto to make any additional or future payment to the Company Holders pursuant to the terms of this Agreement and the rights of the Company Holders to receive any such payment, shall terminate.

(ii)

Subject to Section 2.7(l)(iv), in the event of the consummation of an Extraordinary Transaction during Earnout Year Four, each Company Holder shall be entitled to receive, in lieu of any future payments pursuant to Section 2.7(g), an amount equal to [***] which amount shall not exceed the remaining unpaid portion of the Maximum Earnout Amount, and upon payment thereof, any obligation of Parent, Buyer, Surviving Corporation or any successor thereto to make any additional or future payment to the Company Holders pursuant to the terms of this Agreement and the rights of the Company Holders to receive any such payment, shall terminate.

(iii)

Subject to Section 2.7(l)(iv), in the event of the consummation of an Extraordinary Transaction during Earnout Year Five, each Company Holder shall be entitled to receive, in lieu of any future payments pursuant to Section 2.7(g), an amount equal to [***] which amount shall not exceed the remaining unpaid portion of the Maximum Earnout Amount, and upon payment thereof, any obligation of Parent, Buyer, Surviving Corporation or any successor thereto to make any additional or future payment to the Company Holders pursuant to the terms of this Agreement and the rights of the Company Holders to receive any such payment, shall terminate.

(iv)

[***] calendar days prior to the anticipated closing of an Extraordinary Transaction prior to the end of Earnout Year Five the other party to such Extraordinary Transaction shall (i) agree in writing to assume the rights and obligations of Parent, Buyer and the Surviving Corporation under this Agreement, or (ii) elect not assume the rights and obligations of Parent, Buyer and the Surviving Corporatio n under this Agreement.

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(A)

In the event the other party to such Extraordinary Transaction agrees to assume the rights and obligations of Parent, Buyer and the Surviving Corporation under this Agreement, Parent shall provide written notice to the Stockholder Representative of such Extraordinary Transaction [***] calendar days prior to the anticipated closing of such Extraordinary Transaction setting forth the material terms thereof. Buyer shall promptly provide to the Stockholder Representative any supplementary documentation related to the Extraordinary Transaction reasonably requested by the Stockholder Representative. The Stockholder Representative may, in its sole discretion, elect within [***] calendar days of such notice to have this Agreement assumed by the other party to the Extraordinary Transaction.  In the event of such assumption, the other party to such Extraordinary Transaction shall agree in writing to assume the rights and ob ligations of Parent, Buyer and the Surviving Corporation under this Agreement and no payments shall be due or owing to the Company Holders pursuant to Sections 2.7(l)(i), (ii) or (iii). In the event the Stockholder Representative does not elect to have this Agreement assumed by the other party to the Extraordinary Transaction, payments under Sections 2.7(l)(i), (ii) or (iii) shall be due and owing to the Company Holders.

(B)

In the event the other party to such Extraordinary Transaction elects not to assume the rights and obligations of Parent, Buyer and the Surviving Corporation under this Agreement, then each Company Holder shall be entitled to receive in lieu of the amounts the Company Holder is entitled to receive pursuant to Sections 2.7(l)(i), (ii) or (iii), their Earnout Pro-Rata Portion of the unpaid Maximum Earnout Amount.

(v)

In the event of an Extraordinary Transaction of Parent, or a determination in the discretion of the Board of Directors of Parent by resolution adopted by the affirmative vote of a simple majority of the votes cast by the Board of Directors of Parent that a Extraordinary Transaction is about to occur, except with the prior written consent of the Stockholder Representative, Parent shall, subject to Section 5.12(b), pay to the Company Holders the amount of [***] (the “Company Holders Protection Payment”), which payment shall be made within 90 days of the later of (A) the date of such Extraordinary Transaction or such Board of Directors’ determination, or (B) the date upon which the Stockholder Representative first becomes aware of such Extraordinary Transaction or such Board of Directors’ determination; provided that for purposes of this Section 2.7(l) only, the percentages set forth in the definition of “Extraordinary Transaction” shall be [***] instead of [***]. Notwithstanding the foregoing, the Company Holders Protection Payment shall only be required to be made by Parent to the Company Holders upon a determination by the Board of Directors of Parent (which determination shall be made (i) at the Board of Directors’ sole discretion and (ii) prior to consummation of the Extraordinary Transaction, as applicable) that the Company Holders Protection Payment is appropriate in the circumstances of such Extraordinary Transaction.

(vi)

In the event of a Bankruptcy Event of Parent, Buyer or the Surviving Corporation during the Earnout Period, each Company Holder shall be entitled to receive each Company’s Holder’s Earn-out Pro Rata Portion of an amount equal to [***].

2.8

Dissenting Shares.

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(a)

Notwithstanding anything to the contrary in this Agreement, if required by the DGCL, but only to the extent required thereby, shares of Company Stock which are issued and outstanding immediately prior to the Effective Time and which are held by Company Stockholders who have properly exercised appraisal rights with respect thereto in accordance with the DGCL (any such shares being referred to herein as “Dissenting Shares”) shall not be exchangeable for the right to receive the Merger Consideration as determined in accordance with Section 2.7 but the holder of the Dissenting Shares shall be entitled only to receive the appraised value of such shares of Company Stock in accordance with the provisions of the DGCL unless and until such Company Stockholders fail to perfect or effectively withdraw or lose such right to appraisal and payment under the DGCL. If, after the Effective Time, any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) such holder’s appraisal or dissenters’ rights under the DGCL, then each of such holder’s shares of Company Stock shall automatically be converted into and represent only the right to receive the Merger Consideration therefor, as provided in Section 2.7, upon surrender of its Certificates.  

(b)

Prior to the Closing, the Company shall conduct the defense of any claim of appraisal or dissenters’ rights under the DGCL. The Company shall give Buyer (i) prompt notice of its receipt of any written demands for appraisal of any shares of Company Stock, withdrawals of such demands, and any other instruments relating to the Merger served pursuant to applicable Law and received by the Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under applicable Law.  From and after the Closing, the Stockholder Representative shall conduct the defense of any claim of appraisal or dissenters’ rights under the DGCL. The Stockholder Representative shall give Buyer the opportunity to participate in all negotiations and proceedings with respect to any claim of appraisal or dissenters’ rights under the DGCL.

2.9

Surrender and Payment.

(a)

Prior to the Effective Time, Buyer shall (i) appoint an agent (the “Exchange Agent”) for the purpose of exchanging certificates representing Company Stock for the Merger Consideration set forth in Section 2.7 and (ii) irrevocably deposit with the Exchange Agent the Initial Merger Consideration to be paid in respect of shares of Company Stock.

(b)

As soon as practicable after the Effective Time, Buyer shall send to each holder of a certificate or certificates which immediately prior to the Effective Time evidenced outstanding shares of Company Stock (the “Certificates”), a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates representing shares of Company Stock to the Exchange Agent).

(c)

Company Stockholders, upon surrender to the Exchange Agent of a Certificate or Certificates representing such shares of Company Stock, together with a properly completed letter of transmittal covering such shares of Company Stock, will be entitled to receive the Merger Consideration payable in respect of such shares of Company Stock on the terms provided for in this Agreement. Until so surrendered, each Certificate representing shares of Company Stock that have been converted into the right to receive the Merger Consideration shall, after the Effective Time, represent for all purposes only the right to receive the Merger Consideration.

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(d)

If any portion of the Merger Consideration is to be paid to a Person other than the registered holder of Company Stock represented by the Certificate or Certificates surrendered in exchange therefor, it shall be a condition to such payment that the Certificate or Certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and accompanied by all documents required to evidence and effect the transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Company Stock or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(e)

After the Effective Time, there shall be no further registration of transfers of shares of Company Stock. If, after the Effective Time, Certificates representing shares of Company Stock are presented to the Surviving Corporation, they shall be cancelled and exchanged for the consideration provided for, and in accordance wit h the procedures set forth, in this Article 2.

(f)

Buyer and Company acknowledge that any and all Earnout Payments, Milestone Payments, and payments relating to indemnification obligations of Parent, Buyer or Merger Sub shall be delivered to the Stockholder Representative as agent and on behalf of the Company Holders, and the Stockholder Representative shall distribute such payments to the Company Holders pursuant to the terms of the Stockholder Representation Agreement.

(g)

Any portion of the Merger Consideration that remains unclaimed by any Company Holder (i) 12 months after the Effective Time with respect to the Initial Merger Consideration, (ii) 12 months after the date of any Earnout Payment or (iii) 12 months after the date of either the Wound Closure Milestone or the Orthopedic Milestone Payment, shall be returned to Buyer, upon demand, and any holder who has not exchanged such holder’s shares of Company Stock for the Merger Consideration in accordance with this Section 2.9 prior to that time shall thereafter look only to Buyer for payment of the Merger Consideration in respect of such holder’s shares of Company Stock. Notwithstanding the foregoing, neither Buyer, the Company nor the Surviving Corporation shall be liable to any holder of shares of Company Stock for any amount paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any a mounts remaining unclaimed by holders of shares of Company Stock three years after the Effective Time (or such earlier date prior to such time as such amounts would otherwise escheat to or become property of any governmental entity) shall, to the extent permitted by applicable law, become the property of the remaining Company Shareholders, free and clear of any claims or interest of any Person previously entitled thereto and Buyer shall deliver such unclaimed consideration to the Stockholder Representative for distribution to the remaining Company Holders consistent with their Earnout Pro-Rata Portion (after recalculating such Earnout Pro-Rata Portion without giving effect to ownership by the holders of the unclaimed portions of the Merger Consolidation).

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(h)

Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.9(a) to pay for shares of Company Stock for which appraisal rights have been perfected shall be returned to Buyer upon demand.

2.10

Lost, Stolen or Destroyed Certificates. In the event any Certificates evidencing shares of Company Stock shall have been lost, stolen or destroyed, Buyer shall pay the portion of the Merger Consideration applicable to such shares or options in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof; provided, however, that Buyer may, in its discretion and as a condition precedent to the payment thereof, require the owner of such lost, stolen or destroyed Certificates to execute and deliver to Buyer (i) an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and (ii) an indemnity agreement in customary form and substance.

2.11

Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and or to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company, the officers and directors of the Surviving Corporation and Buyer are fully authorized to take all lawful and reasonable action in furtherance thereof.

2.12

Tax Withholding. Buyer shall be entitled to deduct and withhold, from the Merger Consideration otherwise payable to the Company Holders, such amounts as may be required to be deducted and withheld under the Code and any other applicable Tax Laws. To the extent amounts are so withheld and paid to any appropriate Taxing authority, Buyer shall be treated as though it had paid, from the Merger Consideration from which withholding was required, an appropriate amount otherwise payable directly to such Company Holders.

2.13

Permitted Distribution. The Company shall be entitled, in its sole discretion, to make a one-time cash distribution immediately prior to the Closing to the Stockholder Representative (for distribution to each Company Holder in accordance with their Earnout Pro-Rata Portion) in an aggregate amount of the Net Working Capital of the Company less the Escrow Amount (the “Permitted Distribution”).

2.14

Stockholder Representative. By voting in favor of the Merger or participating in the Merger and accepting the benefits thereof and by the Company Holders accepting the receipt of any Permitted Distribution and/or Initial Merger Consideration, each Company Holder shall be deemed to have approved the designation of and designates the Stockholder Representative as the representative of the Company Holders and as the attorney-in­fact and agent for and on behalf of each Company Holder with respect to claims for indemnification under the Merger Agreement, with respect to the right to receive Merger Consideration, and the taking by the Stockholder Representative of any and all actions and the making of any decisions required or permitted to be taken by the Stockholder Representative under this Agreement and the Stockholder Representative Agreement attached hereto as Exhibit

B.

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ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement of Buyer and Merger Sub to enter into this Agreement, the Company hereby makes the following representations and warranties to Buyer and Merger Sub which representations and warranties are, as of the date hereof, true and correct, except as otherwise set forth in written disclosure schedules of the Company (the “Company Disclosure Schedule”) delivered by the Company to Buyer and Merger Sub on the date hereof. The Company Disclosure Schedule is numbered to correspond to the various sections of this Article 3 setting forth certain exceptions to the representations and warranties contained in this Article 3 and certain other information called for by this Agreement.

3.1

Organization of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to conduct the Business as it is presently being conducted and to own or lease, as applicable, the Assets owned or leased by it.  The Company is duly qualified to do business as a foreign corporation in the State of North Carolina and in each jurisdiction in which the character of its properties owned, operated or leased, or the nature of its activities, makes such qualification necessary, except in those jurisdictions where the failure to be so qualified would not have a Company Material Adverse Effect. Each jurisdiction in which the Company is qualified to do business as a foreign corporation is set forth in Section 3.1 of the Company Disclosure Schedule.

3.2

Capitalization of the Company.

(a)

Authorized Capitalization. As of the date of this Agreement, the authorized capitalization of the Company consists of (i) 12,000,000 shares of Company Common Stock, of which 3,150,194 shares are issued and outstanding, and (ii) 6,658,500 shares of Company Preferred Stock, of which 5,153,515 shares are issued and outstanding. Of the 5,153,515 shares of Company Preferred Stock issued and outstanding as of the date of this Agreement, 1,500,000 shares have been designated as Series A Preferred Stock, 1,427,482 of which are issued and outstanding, 3,000,000 shares have designated as Series B Preferred Stock, 1,832,649 of which are issued and outstanding, 1,324,500 shares have designated as Series C Preferred Stock, 1,287,145 of which are issued and outstanding, and 628,000 shares have designated as Series D Preferred Stock, 606,239 of which are issued and outstanding.  The Company has no other capital stock author ized or, as of the date of this Agreement, issued and outstanding. Except as set forth in Section 3.2(a) of the Company Disclosure Schedule, no Company Stock has been issued which is subject to a right of repurchase on the part of the Company. The Merger Consideration Spreadsheet, which sets forth the name and address of each Company Stockholder, the number of shares of Company Stock held by each such holder, and the amount of Merger Consideration to be received by each Company Stockholder is true and correct in all respects.

(b)

Company Options and Company Warrants. As of the date of this Agreement, (i) 1,025,396 shares of Company Common Stock are reserved for issuance pursuant to the Company Stock Plan, of which 694,114 shares are subject to outstanding Company Options, (ii) 70,000 shares of Company Common Stock are reserved for issuance upon exercise of outstanding Common Warrants, (iii) 42,855 shares of Series B Preferred Stock are reserved for issuance upon exercise of outstanding Series B Warrants, (iv) 33,689 shares of Series C Preferred Stock are reserved for issuance upon exercise of outstanding Series C Warrants, and (v) 4,807 shares of Series D Preferred Stock are reserved for issuance upon exercise of outstanding Series D Warrants. Section 3.2(b) of the Company Disclosure Schedule sets forth the name of each holder of Company Options, Common Warrants and Preferred Warrants as of the date of this Agreement, as well as the number of Company Options, Common Warrants or Preferred Warrants held by each such holder, the number of shares of Company Stock for which each such Company Option, Common Warrant or Preferred Warrant is exercisable or convertible into (both vested and unvested in the case of Company Options), and the price per share of Company Stock for which each such Company Option, Common Warrant or Preferred Warrant is exercisable or convertible into (without taking into account whether or not such Company Option, Common Warrant or Preferred Warrant is in fact exercisable or convertible on the date hereof). The Company has previously made available to Buyer true and correct copies of all outstanding Common Warrants, Preferred Warrants and all option agreements governing outstanding Company Options.

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(c)

No Other Options, Warrants or Other Securities. Except for the Company Options, Common Warrants and Preferred Warrants referred to above, there are no outstanding options, warrants, convertible securities or rights of any kind to purchase or otherwise acquire any shares of capital stock or other securities of the Company.

(d)

Valid Issuances. All outstanding shares of Company Stock are, and any shares of Company Stock issued upon exercise of any Company Option, Common Warrant or Preferred Warrant will be, validly issued, fully paid and non-assessable and not subject to any preemptive or similar rights created by statute, the Company’s Certificate of Incorporation, Bylaws or any Contract. The Company Options, Common Warrants and Preferred Warrants have been, and the shares of Company Stock outstanding on the date hereof have been, issued in compliance with all currently applicable federal and state Laws.

3.3

Stockholders’ Agreements, etc. The Company is not a party or subject to any agreement or understanding, and, to the Company’s knowledge, there is no Contract, arrangement or understanding between or among any Persons, which affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to the Company Stock, including without limitation any voting trust agreement or proxy.

3.4

Authorization. The Company has the corporate power and authority to (i) execute and deliver this Agreement and (ii) assuming the Company Stockholder Approval, consummate the Merger and the other transactions contemplated hereby. The execution and delivery of this Agreement, and the consummation of the Merger and the other transactions contemplated hereby, have been duly and validly authorized by the vote of the Company’s board of directors, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger and the other transactions contemplated hereby (other than, with respect to the Merger, the Company Stockholder Approval and those actions listed in Section 6.1 of this Agreement). This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by Buyer and Merger Sub, con stitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally or by general equitable principles.

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3.5

Officers and Directors. Section 3.5 of the Company Disclosure Schedule contains a true, correct and complete list of all the officers and directors of the Company as of the date of this Agreement.

3.6

Bank Accounts. Section 3.6 of the Company Disclosure Schedule contains a true, correct and complete list of all of the Company’s bank accounts (including bank addresses, telephone numbers, account numbers and account balances), safe deposit boxes and persons authorized to draw thereon or have access thereto as of the date of this Agreement.  

3.7

Subsidiaries. The Company has not had and currently does not have any Subsidiaries.

3.8

Property and Equipment.

(a)

Real Property. The Company does not own any real property. Section 3.8(a) of the Company Disclosure Schedule sets forth a true and complete list of all plants, offices, manufacturing facilities, stores, warehouses, administratio n buildings and all real property and related facilities leased by the Company as of the date of this Agreement (the “Facilities”). True and correct copies of all Leases pursuant to which the Facilities are leased, occupied or used by the Company (as lessee) have been made available to Buyer.  The Company has good and valid leasehold title to, and enjoys peaceful and undisturbed possession of, all leased property described in such Leases (the “Leased Property”), free and clear of any and all Encumbrances, other than any Permitted Encumbrances.  With respect to each Leased Property, there are no pending or, to the knowledge of the Co mpany, threatened condemnation or administrative proceedings relating to, or any pending or threatened Actions relating to, the Company’s leasehold interests in such Leased Property or any portion thereof.

(b)

Leases. With respect to each Lease listed on Section 3.8(a) of the Company Disclosure Schedule (i) there has been no material breach or material default under any such Lease by the Company or, to the knowledge of the Company, as of the date of this Agreement by any other party, (ii) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not cause a material default under any such Lease, (iii) such Lease is a valid and binding obligation of the lessor, is in full force and effect with respect to and is enforceable against the lessor in accordance with its terms, and to the knowledge of the Company, will continue to be legal, binding, enforceable, valid, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby except as such enforceability may be limited by bankruptcy and other similar laws and general principles of equity, (iv) there are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease, and (v) to the knowledge of the Company, all Facilities leased or subleased thereunder have received all material approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in substantial compliance with applicable laws, rules, and regulations.

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(c)

Personal Property. The Company’s personal property Assets (taken as a whole) (i) are free from material defects (patent and, to the knowledge of the Company, latent), (ii) have been maintained in accordance with normal industry practice and (iii) are in such operating condition and repair as is appropriate for the conduct of the Business as presently conducted, subject to normal wear and tear.

(d)

Owned Personal Property. The Company has good and marketable title to all such tangible personal property material to the Company in the operation of the Business, free and clear of any and all Encumbrances other than Permitted Encumbrances.

(e)

Leased Personal Property. Other than personal property owned by the Company, the Company has good and valid leasehold title to all of the tangible personal property Assets material to the Company in the operation of the Business, free and clear of any and all Encumbrances other than Permitted Encumbrances which would not permit the termination of the lease therefor by the lessor. Schedule 3.8(e) of the Company Disclosure Schedule sets forth all Leases for personal property.

3.9

Accounts Receivable. All accounts receivable of the Company that are reflected on the Balance Sheet or on the accounting records of the Company as of the Closing Date represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business of the Company. The reserves, if any, for uncollectible accounts receivable shown on the Balance Sheet and on the accounting records of the Company as of the Closing Date have been or will be calculated consistent with the past practice of the Company and, based on the past practice of the Company, are or will be adequate.

3.10

Environmental Matters.

(a)

To the knowledge of the Company, (i) no notice, notification, demand, request for information, citation, summons or order has been received, (ii) no complaint has been filed, (iii) no penalty has been assessed, and (iv) no investigation, action, claim, suit, proceeding or review is pending or is threatened by any Governmental or Regulatory Authority or other Person relating to or arising out of any Environmental Law; and

(b)

To the knowledge of the Company, (i) there are no Liabilities of or relating to the Company of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law, and (ii) there are no facts, conditions, situations or set of circumstances that could reasonably be expected to result in or be the basis for any such material Liability.

(c)

To the knowledge of the Company, there have been no environmental investigations, studies, audits, tests, reviews or other environmental analyses have been conducted in relation to the current or prior business of the Company or any property or facility now or previously owned or leased by the Company.

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3.11

Contracts.

(a)

Section 3.11(a) of the Company Disclosure sets forth a complete and accurate list as of the date of this Agreement of all of the Contracts in the following categories to which the Company is a party (each a “Scheduled Contract” and collectively, the “Scheduled Contracts”):

(i)

license agreements or royalty agreements, whether the Company is the licensor or licensee thereunder;

(ii)

non-disclosure agreements (whether the Company is the beneficiary or the obligated party thereunder);

(iii)

Contracts or commitments (including groups of related Contracts or commitments) involving future expenditures or Liabilities, actual or potential, in excess of $25,000 after the date hereof;

(iv)

employment contracts, consulting contracts, severance agreements, “stay-bonus” agreements and similar arrangements, including Contracts (A) to employ or terminate executive officers or other personnel and other contracts with present or former officers or directors of the Company or (B) that will result in the payment by, or the creation of any Liability of the Company or Buyer to pay any severance, termination, “golden parachute”, or other similar payments to any present or former personnel following termination of employment or otherwise as a result of the consummation of the transactions contemplated by this Agreement;

(v)

indemnification agreements;

(vi)

promissory notes, loans, indentures, evidences of indebtedness, letters of credit, guarantees, or other instruments or agreements relating to an obligation to repay borrowed mone y, whether the Company shall be the borrower, lender or guarantor thereunder (excluding credit provided by the Company in the ordinary course of business to purchasers of its products and obligations to pay vendors in the ordinary course of business and consistent with past practice);

(vii)

Contracts containing covenants limiting the freedom of the Company or any officer, director, Employee or Affiliate of the Company to engage in any line of business or compete with any Person that relates directly or indirectly to the Business;

(viii)

any Contract with the federal, state or local government or any agency or department thereof;

(ix)

any Contract with a Related Party;

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(x)

Leases of real or personal property (including groups of related Leases) involving annual payments of more than $25,000;

(xi) Contracts or commitments (including groups of related Contracts or commitments) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than six months from the date of this Agreement, result in a loss to the Company, or involve consideration in excess of $25,000;

(xii)

Contracts or commitments concerning a partnership or joint venture;

(xiii)

any Contract not made in the ordinary course of business; and

(xiv)

any other Contract under which the consequences of a default by any party or termination would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Complete and accurate copies of all of the Scheduled Contracts, including all amendments and supplements thereto, have been provided to Buyer. Except as set forth on Section 3.11(a) of the Company Disclosure Schedule, the Company is not a party to any oral Contract.

(b)

Employment Contracts. The Company is not a party to, and is not obligated under, any offer letter, consulting agreement or employment agreement to which it is a party.

(c)

Bonus Payments. The Company has not agreed to any, or become obligated to pay any, Bonus Payments.

(d)

Absence of Defaults. All of the Scheduled Contracts to which the Company is a party are valid, binding and enforceable in accordance with their terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors or (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).  As of the date of this Agreement, there is no material existing (or threatened in writing) default or dispute with respect to any Scheduled Contract. The Company has fulfilled, or is in a position to take all action necessary to enable it to fulfill when due, all of its material obligations under each of such Scheduled Contracts.

3.12

No Conflict or Violation; Consents.

(a)

Assuming the Company Stockholder Approval and all consents, approvals, authorizations, filings and notifications and other actions set forth in Section 3.12(b) have been obtained or made, none of the execution, delivery or performance of this Agreement by the Company, the consummation of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof, will (i) violate or conflict with any provision of the Company’s Certificate of Incorporation, Bylaws or charter documents, (ii) violate, conflict with, or result in a material breach of or constitute a material default (with or without notice or the passage of time) under, or result in the termination of, or accelerate the performance required by, or result in a right to terminate, accelerate, modify or cancel under, or require a notice or consent under, or result in the creation of any Encumbrance (other tha n Permitted Encumbrances) upon any of its Assets under, any Contract to which the Company is a party or by which the Company is bound or to which any of its Assets are subject, or (iii) violate any Law or Order applicable to the Company or (iv) impose any Encumbrance on any of the Assets of the Company (other than Permitted Encumbrances), except in the cases of (iv) above for any such conflicts, violations, defaults, or other occurrence that would not individually or in the aggregate reasonably be expected to have a Company Material Adverse Effect.

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(b)

for obtaining the Company Stockholder Approval, and for filing the Certificate of Merger with the Secretary of State of the State of Delaware, no notices to, declaration, filing or registration with, approvals or Consents of, or assignments by, any Persons (including any federal, national, state or local governmental or administrative authorities) are necessary to be made or obtained by the Company in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

3.13

Financial Statements; Books and Records.

(a)

Financial Statements. The Company has previously made available the Financial Statements to Buyer. The Financial Statements are complete, are in accordance with the Company’s Books and Records and accurately and fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated thereby, in accordance with GAAP consistently applied throughout the periods covered except as indicated in the notes thereto.  The Financial Statements as of and for the 12-month periods ended December 31, 2004 and December 31, 2005 have been audited by an independent registered public accounting firm.

(b)

Books and Records. The Books and Records, in reasonable detail, accurately and fairly reflect in all material respects the activities of the Company and the Business and have been provided to Buyer or made available for its inspection.

(c)

All Accounts Recorded. The Company has not engaged in any material transaction, maintained any bank account or used any corporate funds except for transactions, bank accounts or funds which have been and are reflected in the Books and Records.

(d)

Corporate Records. As of the date of this Agreement, the stock records and minute books of the Company that have been made available to Buyer fully reflect all minutes of meetings, resolutions and other material actions and proceedings of the Company’s stockholders and board of directors and all committees thereof, all issuances, transfers and redemptions of capital stock of the Company and contain true, correct and complete copies of its Certificate of Incorporation and Bylaws and all amendments thereto through the date hereof.

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3.14

Absence of Certain Changes or Events. Since December 31, 2005 through the date of this Agreement, except as otherwise contemplated by this Agreement or set forth in the Company Disclosure Schedule, the Company has conducted the Business only in the ordinary course consistent with past practice and there has not been any:

(a)

event, circumstance or occurrence that constituted a Company Material Adverse Effect;

(b)

failure to operate the Business in the ordinary course so as to use all commercially reasonable efforts to preserve the Business intact and to preserve the continued services of the Employees and the goodwill of suppliers, customers and others having business relations with the Company;

(c)

resignation or termination of any officer, director or manager, or any increase in the rate of compensation payable or to become payable by the Company to any officer, director or representative of the Company (other than standard increases in connection with general, regularly-scheduled reviews consistent with past practice), including the making of any loan to, or the payment, grant or accrual of any bonus, incentive compensation, service award or other similar benefit to, any such Person;

(d)

any payment, loan or advance of any amount to or in respect of, or the sale, transfer or lease of properties or Assets to, or entering into of any Contract with, any Related Party except regular compensation to Employees;

(e)

sale, assignment, license, transfer or Encumbrance of any of the Assets of the Company, tangible or intangible, singly or in the aggregate, other than sales of products and services involving less than $25,000 in the ordinary course of business and consistent with past practice;

(f)

new Contracts (or series of related new Contracts), or extensions, modifications, terminations, accelerations or renewals thereof, except for Contracts involving less than $25,000 entered into, modified or terminated in the ordinary course of business and consistent with past practice;

(g)

actual or threatened in writing (i) termination of any material customer account or group of accounts or (ii) actual and material reduction in purchases or royalties payable by any such customer or occurrence of any event that is likely to result in any such termination or reduction;

(h)

disposition or lapsing of any Proprietary Rights of the Company, in whole or in part, or any disclosure of any trade secret, process or know how to any Person not either an Employee or an employee, agent, or consultant of Buyer or Parent or permitted under a Company Contract;

(i)

change in accounting methods or practices by the Company;

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(j)

revaluation by the Company of any of its Assets, including writing off or establishing reserves with respect to inventory, notes or accounts receivable (other than for which adequate reserves have been previously established);

(k)

aterial damage, destruction or loss (whether or not covered by insurance) adversely affecting the Assets, the Business or the prospects of the Company in an amount in excess of $25,000;

(l)

declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or any redemption, purchase or other acquisition of any equity securities of the Company;

(m)

issuance or reservation for issuance by the Company of, or commitment of it to issue or reserve for issuance, any shares of capital stock or other equity securities or obligations or securities convertible into or exchangeable for shares of capital stock or other equity securities;

(n)

increase, decrease or reclassification of the capital stock of the Company;

(o)

amendment of the Company’s Certificate of Incorporation, Bylaws or charter documents;

(p)

capital expenditure or execution of any lease or any incurring of liability therefor by the Company in one or more related transactions, involving payments or obligations in excess of $25,000 in the aggregate;

(q)

failure to pay any monetary obligation of the Company when due;

(r)

cancellation of any indebtedness or waiver of any rights of substantial value to the Company, except in the ordinary course of business and consistent with past practice;

(s)

indebtedness incurred or guaranteed by the Company for borrowed money or any commitment to borrow money entered into by the Company, or any loans made or agreed to be made by the Company in the aggregate in excess of $25,000;

(t)

material Liability incurred by the Company except in the ordinary course of business and consistent with past practice, or any increase or change in any assumptions underlying or methods of calculating any bad debt, contingency or other reserves;

(u)

payment, discharge or satisfaction of any Liabilities of the Company other than the payment, discharge or satisfaction of Liabilities as reflected or reserved against in the Financial Statements or incurred in the ordinary course of business;

(v)

acquisition of any equity interest in any other Person by the Company; or

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(w)

any agreement by the Company directly or indirectly to do any of the foregoing, other than as expressly contemplated by this Agreement.

3.15

Liabilities. The Company does not have any Liabilities (absolute, accrued, contingent or otherwise) except (i) Liabilities which are reflected and properly reserved against in the Financial Statements, (ii) Liabilities incurred after the Balance Sheet Date in the ordinary course of business and consistent with past practice, (iii) Liabilities arising under the Contracts to which the Company is a party (other than obligations which are required to be reflected on a balance sheet prepared in accordance with GAAP), (iv) Liabilities which do not have, individually or in the aggregate, a Company Material Adverse Effect, and (v) Liabilities arising under this Agreement.

3.16

Litigation. There is no Action pending or, to the knowledge of the Company, threatened against, relating to or affecting the Company or any of the Assets of the Company or any of the officers and directors of the Company which (i) seeks to enjoin or obtain damages in respect of the transactions contemplated hereby, or (ii) seeks to prevent the Company from consummating the transactions contemplated hereby. There are presently no outstanding Orders against or affecting the Company, the Business or any of the Company’s Assets. Section 3.16 of the Company Disclosure Schedule contains a complete and accurate description of all Actions to which the Company has been a party since inception or which relate to any of the Assets of the Company or the Company’s officers or directors as such, or any such Actions which were settled prior to the institution of formal proceedings, other than Actions brought by the Co mpany for collection of monies owed in the ordinary course of business.

3.17

Labor Matters.

(a)

General. The Company is not a party to any labor agreement with respect to its Employees with any labor organization, group or association.  No petition for certification as the exclusive bargaining representative for any of the Employees is pending before the National Labor Relations Board. To the Company’s knowledge, no union organizing activity has occurred with respect to the Employees since the Company’s inception.  There is no unfair labor practice charge or complaint against the Company pending before the National Labor Relations Board or any other domestic or foreign Governmental or Regulatory Authority arising out of the Company’s activities, and the Company has no knowledge of any facts or information which would give rise thereto. There is no labor strike or labor disturbance pending or threatened against the Company, nor is any grievance currently being asserted against it; a nd the Company has not experienced a work stoppage or other labor difficulty. There are no material controversies pending or to the knowledge of the Company, threatened between the Company and the Employees, and the Company has no knowledge of any facts which could reasonably result in any such controversy.

(b)

Compliance. The Company is in material compliance with all currently applicable Laws respecting employment practices, terms and conditions of employment, wages and hours, equal employment opportunity, and the payment of social security and similar taxes and is not engaged in any unfair labor practice. The Company has no knowledge of any claims for past due wages or any penalties for failure to comply with any of the foregoing.

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(c)

Severance Obligations. Except as set forth in Section 3.17(c) of the Company Disclosure Schedule, the Company has not entered into any severance, “stay-bonus” or similar arrangement in respect of any present or former Employee that will result in any obligation (absolute or contingent) of Buyer or the Company to make any payment to any present or former Employee following termination of employment or upon consummation of the transactions contemplated by this Agreement (whether or not employment is continued for any specified period after the Effective Time).  Except as set forth in Section 3.17(c) of the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in the acceleration or vesting of any other rights of any Person to benefits under any Employee Plans.

(d)

Highly Compensated Employees. Section 3.17(d) of the Company Disclosure Schedule sets forth the names of all present Employees (i) with total compensation exceeding $100,000 in 2005 and (ii) expected to receive total compensation exceeding $100,000 in 2006, including all bonuses and other cash compensation, each as paid or is payable by the Company. Notwithstanding any provision of this Agreement or any Section of the Company Disclosure Schedule to the contrary, the Company represents that from and after the Effective Time no benefit or other compensation is payable to any Person identified on Section 3.17(d) of the Company Disclosure Schedule upon the voluntary resignation of such Person from employment with Buyer or the Company as a result of the Merger.

3.18

Employee Benefit Plans.

(a)

Section 3.18(a) of the Disclosure Schedule lists all written (and describes all non-written) employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock or other security option, stock or other security purchase, stock or other security appreciation rights, incentive, deferred compensation, retirement or supplemental retirement, profit sharing, severance, golden parachute, vacation, cafeteria, dependent care, medical care, employee assistance program, education or tuition assistance programs, insurance and other similar fringe or employee benefit plans, programs or arrangements, and any current or former employment or executive compensation or severance agreements, written or otherwise, which are currently sponsored and have been sponsored after January 1, 2000, maintained, contributed to or entered into for the benefit of, or relating to, any present or former Employee or director of the Company, or any trade or business (whether or not incorporated) which is an ERISA Affiliate, whether or not such plan is terminated (collectively, the “Employee Plans”).

(b)

With respect to each Employee Plan, the Company has made available to Buyer a true and complete copy of, to the extent applicable, (i) such Employee Plan, (ii) the three most recent annual reports (Form 5500) as filed with the IRS, (iii) each trust agreement related to such Employee Plan, if applicable, (iv) the most recent summary plan description for each Employee Plan for which such description is required, along with all summaries of material modifications, amendments, resolutions and all other material pla n documentation related thereto, and (v) the most recent IRS determination letter or IRS prototype plan opinion letter issued with respect to any qualified employee pension benefit plan.

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(c)

No Employee Plan is a “defined benefit plan” (within the meaning of Section 3(35) of ERISA), and neither the Company nor any ERISA Affiliate has ever maintained, contributed to or partially or fully withdrawn from any such plan. No Employee Plan is a Multiemployer Plan or “single-employer plan under multiple controlled groups” as described in Section 4063 of ERISA, and neither the Company nor any ERISA Affiliate has ever contributed to or had an obligation to contribute, or incurred any liability in respect of a contribution, to any Multiemployer Plan. No Employee Plan is a “multiple employer plan” within the meaning of Section 413(c) of the Code, or a multiple employer welfare arrangement within the meaning of Section 3(40) of ERISA.

(d)

Except as set forth in Section 3.18(d) of the Company Disclosure Schedule, there is no contract, agreement, plan or arrangement covering any Employee or former Employee that, individually or collectively, requires the payment by the Company of any amount (i) that is not deductible by reason of Section 162(a)(1), 162(m) or 404 of the Code or (ii) that is an “excess parachute payment” pursuant to Section 280G of the Code.

(e)

Neither the Company nor any ERISA Affiliate has announced to their employees, former employees, consultants or directors an intention to create, or has otherwise created, a legally binding commitment to adopt, change or terminate any Employee Plan which is intended to cover Employees or former Employees and is not otherwise listed under Section 3.18(a) of the Disclosure Schedule

(f)

Except as set forth in Section 3.18(f) of the Company Disclosure Schedule, no Company Employee Plan is a nonqualified deferred compensation plan within the meaning of Section 409A(d)(1) of the Code (each such plan listed in Section 3.18(f) of the Company Disclosure Schedule, a “Deferred Compensation Plan”). Each Deferred Compensation Plan satisfies the requirements to avoid the consequences set forth in Section 409A(a)(1). The Company has not, (i) granted to any person an interest in any Deferred Compensation Plan which interest has been or, upon the lapse of a substantial risk of forfeiture with respect to such interest, will be subject to the Tax imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code, or (ii) modified the terms of any Deferred Compensation Plan in a manner that could cause an interest previously granted under such plan to become subject to the Tax imposed by Section 409A(a) (1)(B) or (b)(4) of the Code.

3.19

Compliance with Laws.

(a)

The Company has conducted the Business in substantial compliance with all applicable known Laws and Orders. The Company has not received any notice to the effect that, or has otherwise been advised that, the Company is not in compliance with any such Laws or Orders.

(b)

Except as would not, individually or in the aggregate, have a Company Material Adverse Effect:

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(i)

the Company is in possession of all franchises, grants, authorizations, licenses, establishment registrations, product listings, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental or Regulatory Authority, including, without limitation, the FDA, the United States Drug Enforcement Agency (“DEA”) and similar authorities in the U.S. and non-U.S. jurisdictions necessary for the Company to carry on its Business as it is now being conducted (the “Company Permits”), and, as of the date of this Agreement, no suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened, except where the failure to have, or the suspension or cancellation of, any of the Company Permits would not, individually or in the aggregate, have the Company Material Adverse Effect. Except for conflict s, defaults or violations which, individually or in the aggregate, would not have a Company Material Adverse Effect, the Company is not in conflict with, or in default of, (i) any Law applicable to the Company or by which any property, asset or product of the Company is bound or affected, including, without limitation, the Federal Food, Drug and Cosmetic Act (the “FDCA”), the Comprehensive Drug Abuse Prevention and Control Act of 1970 (the “CDAPCA”), the Controlled Substances Act (the “CSA”) and any other similar act or Law or (ii) any Company Permits;

(ii)

all of the clinical studies which have been, or are being conducted by or for the Company, are being conducted in compliance with generally accepted good clinical practices and all applicable requirements;

(iii)

to the knowledge of the Company, none of its officers, employees or agents (during the term of such person’s employment by the Company or while acting as an agent of the Company) has (A) made any untrue statement of a material fact or fraudulent statement to the FDA or any Governmental or Regulatory Authority; (B) failed to disclose a material fact required to be disclosed to the FDA or similar Governmental or Regulatory Authority or (C) committed an act, made a statement or failed to make a statement that could reasonably be expected to provide a basis for the FDA or similar Governmental or Regulatory Authority to invoke its Application Integrity Policy or similar governmental policy or regulation, rule, regulation or Law;

(iv)

to the knowledge of the Company, the Company has not received any written notice that the FDA or any similar Governmental or Regulatory Authority (including, without limitation, non-U.S. regulatory agencies) has commenced, or overtly threatened to initiate, any action to withdraw its approval or request the recall of any product of the Company, or commenced, or overtly threatened to initiate, any action to enjoin production at any facility of the Company; and

(v)

to the knowledge of the Company, as to each article of drug, device or cosmetic manufactured and/or distributed by the Company, such article is not adulterated or misbranded within the meaning of the FDCA or any similar governmental act or Law of any jurisdiction (including, without limitation, non-U.S. jurisdictions); and to the knowledge of the Company, none of the Company’s officers, employees or agents (during the term of such person’s employment by the Company or while acting as an agent of the Company), subsidiaries or Affiliates has been convicted of any crime or engaged in any conduct for which debarment or similar punishment is mandated or permitted by any applicable Law.

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(c)

As to each product subject to the jurisdiction of the FDA under the FDCA which is developed, manufactured, tested, distributed, held and/or marketed directly by the Company, such product is being developed, manufactured, held and distributed in substantial compliance with all applicable requirements under the FDCA, if applicable, including, but not limited to, such requirements relating to investigational use, pre-market clearance, good manufacturing practices, labeling, advertising, record keeping, filing of reports and security, except for such non-compliance which, individually or in the aggregate, would not have a Company Material Adverse Effect.

(d)

To the knowledge of the Company, the Company has made available for Buyer’s review any and all documents in its possession material to assessing the Company’s compliance with the FDCA or the CDAPCA and implementing regulations, including, but not limited to, copies in its possession of (i) all FDA Form 483s issued during the last three years; (ii) all audit reports performed during the last three years, whether performed by the Company or an outside consultant; (iii) any material document (prepared by the Company) concerning any material oral or written communication received from the FDA, the DEA or the United States Department of Justice during the last three years; (iv) any administrative or judicial order, ruling or agreement issued or entered into during the last three years in which the Company or its respective predecessor companies were a named party or (v) any recall notice or order relating to any p roduct of the Company.

(f)

Section 3.19(f) of the Company Disclosure Schedule sets forth a complete and accurate list of (i) products made by the Company in collaboration with the FDA or similar U.S. or non-U.S. governmental agency; (ii) each clinical trial protocol submitted by the Company to the FDA or similar U.S. or non-U.S. governmental agency; (iii) each new Pre-Market Approval or 510(k) Notification and any amendments or supplements thereto filed by the Company pursuant to the FDCA, or any non-US. equivalents; (iv) each product license application filed by the Company pursuant to the Public Health Service Act, as amended, or any non-U.S. equivalents and (v) each establishment license application filed with respect to any product of the Company under the Public Health Service Act, as amended, or any non-U.S. equivalents.

3.20

Intellectual Property.

(a)

Section 3.20(a) of the Company Disclosure Schedule contains a true, correct and complete list of all the following types of Company Proprietary Rights owned by or licensed to the Company, including: (i) for each issued patent and pending patent application (including petty patents and utility models and applications therefor, as applicable), the number, issue date, title and priority information for each country in which such patent has been issued, or the application number, date of filing, title and priority information for each country in which a patent application is pending; (ii) for each registered trademark, tradename or service mark, the application serial number or registration number thereof, if applicable, the international classification of goods or the description of the goods or services covered thereby, the countries in which such tradename or trademark is registered, and the expiration date for each cou ntry in which such trademark or tradename has been registered and (iii) for each registered copyright, the number and date of registration thereof for each country in which a copyright has been registered. Section 3.20(a) of the Company Disclosure Schedule also lists any proceedings or actions of which the Company is aware that are pending as of the date hereof before any court or tribunal (including the USPTO or equivalent authority anywhere in the world) related to any of the Company Proprietary Rights.

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(b)

Except as set forth in Section 3.20(b) of the Company Disclosure Schedule, each item of Company Proprietary Rights listed in Section 3.20(a) of the Company Disclosure Schedule and to the knowledge of the Company, any other item that constitutes a Company Proprietary Right that is not listed in Section 3.20(b) of the Company Disclosure Schedule, is owned exclusively by the Company (excluding Company Proprietary Rights licensed to the Company under any license) and is free and clear of any Encumbrances. In furtherance of and without limiting the foregoing, the Company (i) owns or is licensed to use exclusively all trademarks, service marks and trade names used by the Company in connection with the operation or conduct of the Business, including the sale of any products or technology or the provision of any services by the Company and (ii) owns exclusively, or is licensed to use, all copyrighted works that are used by the Company in connection with the operation or conduct of the Business as currently conducted and as proposed to be conducted.

(c)

Except as set forth in Section 3.20(c) of the Company Disclosure Schedule, the Company has not received any written notice of (i) any alleged invalidity with respect to any of the Company Proprietary Rights or (ii) any alleged infringement of any rights of others due to any activity by the Company in connection with the operation or conduct of the Business as currently conducted and as currently proposed to be conducted. The Company has all requisite right, title and interest in or, to the knowledge of the Company, valid and enforceable rights under, Contracts (including licenses) to use all Company Proprietary Rights currently being used by the Company or necessary to the conduct of the Business as presently conducted, and to the knowledge of the Company, the use by the Company of each of the Company Proprietary Rights does not infringe upon the valid Proprietary rights of any third party.

(d)

To the extent that any Company Proprietary Rights have been developed or created by any Person other than the Company, the Company has a written agreement with such Person with respect thereto and, to the knowledge of the Company, the Company has either (i) obtained ownership of, and is the exclusive owner of, all such Company Proprietary Rights by operation of law or by valid assignment of any such rights or (ii) has obtained a license under or to such Company Proprietary Rights. Section 3.20(d) of the Company Disclosure Schedule lists all such agreements.

(e)

Except as set forth in Section 3.20(e) of the Company Disclosure Schedule, the Company has not transferred ownership of or granted any license of or other right to use or authorized the retention of any rights to use, any Proprietary Rights that are or were Company Proprietary Rights, to any other Person.

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(f)

The Company Proprietary Rights constitute all of the Proprietary Rights currently used by the Company in the conduct of the Business as it is currently conducted or as reasonably contemplated to be conducted. Except as set forth in Section 3.20(f) of the Company Disclosure Schedule, each of the Company Proprietary Rights owned or used by the Company immediately prior to the Closing will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing. Except as set forth in Section 3.20(f) of the Company Disclosure Schedule, the Company has taken all necessary and desirable action to maintain and protect each item of the Company Proprietary Rights that it owns or uses. In furtherance of and without limiting the foregoing, no consents from third parties are required for the Company to continue exercising any Company Proprietary Rights subsequent to the Closing.

(g)

Section 3.20(g) of the Company Disclosure Schedule lists all Contracts to which the Company is a party with respect to any inbound or outbound licenses or other grant of rights in connection with Proprietary Rights. No Person other than the Company has ownership rights to improvements made by the Company in Proprietary Rights which have been licensed to the Company.

(h)

Section 3.20(h) of the Company Disclosure Schedule lists all Contracts, licenses and other agreements between the Company and any other Person wherein or whereby the Company has agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or Liability or provide a right of rescission with respect to the infringement or misappropriation by the Company or such other Person of the Proprietary Rights of any Person other than the Company.

(i)

The operation of the Business as currently conducted or, to the knowledge of the Company, as presently proposed to be conducted, including the Company’s design, development, use of the products, technology or services (including products, technology or services currently under development) of the Company does not infringe or misappropriate the Proprietary Rights of any Person, violate the rights of any Person (including rights to privacy or publicity), or constitute unfair competition or an unfair trade practice under any applicable Law.  The Company has not received notice from, and there is no reasonable basis for any Person claiming that such operation or any act, product, technology or service (including products, technology or services currently under development) of the Company infringes or misappropriates the valid and enforceable Proprietary Rights of any Person or constitutes unfair competition or tr ade practices under any applicable Law. These representations are in addition to those of Section 3.16 of this Agreement or any other provision hereof.

(j)

Each item of Company Proprietary Rights is valid and subsisting, and all required registration, maintenance, renewal fees, annuity fees and taxes due through the date of this Agreement in connection with such Company Proprietary Rights have been paid and all necessary documents and certificates in connection with such Company Proprietary Rights have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Proprietary Rights. In each case in which the Company has acquired ownership of Proprietary Rights from any Person, the Company has obtained an assignment from such Person to transfer all rights in such Proprietary Rights to the Company, and, to the extent of any such assignments of Proprietary Rights in patents, patent applications, registered trademarks or registrations therefor, the Company has properly submitted each such assignment for recordation with the USPTO.

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(k)

Except as set forth in Section 3.20(k) of the Company Disclosure Schedule, there are no Contracts between the Company and any other Person with respect to Company Proprietary Rights under which there is any claim (or facts that may reasonably lead to a claim) known to the Company regarding the scope of such Contract or license, or performance under such Contract, including with respect to any payments to be made or received by the Company thereunder.

(l)

Except as set forth in Section 3.20(l) of the Company Disclosure Schedule, to the knowledge of the Company, as of the date of this Agreement and as of the Closing Date, no Person is infringing or misappropriating any Company Proprietary Rights.

(m)

The Company has taken commercially reasonable steps to protect its rights in confidential information and Trade Secrets of the Company or confidential information or Trade Secrets provided by any other Person to the Company subject to a duty of confidentiality.  All current and former Employees, consultants and independent contractors of the Company have executed proprietary information, confidentiality or similar agreements, as applicable, forms of which have been provided to Buyer or made available to Buyer for review.

(n)

Except as set forth in Schedule 3.20(a) of the Company Disclosure Schedule, no Company Proprietary Right, or product, technology or service of the Company, used by the Company in connection with the operation or conduct of the Business as currently conducted or as proposed to be conducted is subject to any Order or Action (except for patent and/or trademark/service mark application and prosecution before the USPTO and copyright registration prosecution before the U.S. Copyright Office) that restricts, or that is reasonably expected to restrict in any manner, the use, transfer or licensing of any Company Proprietary Rights by the Company or that may affect the validity, use or enforceability of such Company Proprietary Rights.

(o)

Except as set forth in Section 3.20(o) of the Company Disclosure Schedule, neither this Agreement nor any transactions contemplated by this Agreement will require Buyer to grant any rights or licenses with respect to the Proprietary Rights of Buyer to any Person pursuant to any Contract to which the Company is a party or by which any of the Company Proprietary Rights are bound.

(p)

The Company has taken all reasonably necessary and appropriate steps to protect and preserve ownership of Company Proprietary Rights.

3.21

Tax Matters.

(a)

For purposes of this Section 3.21 and other provisions of this Agreement relating to Taxes, the following definitions shall apply:

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(i)

The term “Tax” or “Taxes” shall mean all taxes, however denominated, including any interest, penalties or other additions to tax that may become payable in respect thereof, (A) imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including but not limited to, federal, state and foreign income taxes), payroll and employee withholding taxes, unemployment insurance contributions, social security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, withholding taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers’ compensation, Pension Benefit Guaranty Corpo ration premiums and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which are required to be paid, withheld or collected, (B) any liability for the payment of amounts referred to in (A) as a result of being a member of any affiliated, consolidated, combined or unitary group, or (C) any liability for amounts referred to in (A) or (B) as a result of any obligations to indemnify another person or as a result of being a successor in interest or transferee of another person.

(ii)

The term “Return” or “Returns” shall mean all reports, estimates, declarations of estimated tax, information statements and returns required to be filed in connection with any Taxes, including information returns with respect to backup withholding and other payments to third parties.

(b)

All Returns required to be filed by or on behalf of the Company have been duly filed on a timely basis and such Returns are true, complete and correct.  All Taxes shown to be payable on such Returns or on subsequent assessments with respect thereto, and all payments of estimated Taxes required to be made by or on behalf of the Company under Section 6655 of the Code or comparable provisions of state, local or foreign law, have been paid in full on a timely basis, and no other Taxes are payable by the Company with respect to items or periods covered by such Returns (whether or not shown on or reportable on such Returns). The Company has withheld and paid over all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. There are no liens on any of the assets of the Company with respect to Taxes, other than liens for Taxes not yet due and payable. The Company has not been at any time a member of an affiliated group of corporations filing consolidated, combined or unitary income or franchise tax returns other than as members of a group of which the Company is the ultimate parent for a period for which the statute of limitations for any Tax potentially applicable as a result of such membership has not expired.

(c)

No deficiencies for Taxes of the Company have been claimed, proposed or assessed in writing by any taxing or other governmental authority which has not been resolved and, if applicable, paid. There are, to the knowledge of the Company, no pending or threatened audits, assessments or other Actions for or relating to any Liability in respect of Taxes of the Company. The amount of the Company’s liabilities for unpaid Taxes for all periods through the date of the Balance Sheet do not, in the aggregate, exceed the amount of the liability accruals for Taxes reflected on the Company Balance Sheet, and the Company Balance Sheet properly accrues in accordance with GAAP all liabilities for Taxes of the Company payable after the date of the Financial Statements attributable to transactions and events occurring prior to such date.  No liability for Taxes of the Company has been incurred and no amount of taxable income has been realized (or prior to and including the Effective Time will be incurred or realized) after the date of the Balance Sheet other than in the ordinary course of business.

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(d)

The Company has not granted any Person a power of attorney with respect to Taxes. Buyer has been furnished by the Company true and complete copies of (i) all income tax audit reports, statements of deficiencies, closing or other agreements received by or on behalf of the Company relating to Taxes, and (ii) all federal, state and foreign income or franchise tax returns and state sales and use tax Returns for or including the Company for all periods ending on and after December 31, 2002.

(e)

To the knowledge of the Company, no audit of the Returns of or including the Company by a government or taxing authority is in process, threatened or, to the Company’s knowledge, pending (either in writing or orally, formally or informally).  No deficiencies exist or have been asserted (either in writing or orally, formally or informally) or are expected to be asserted with respect to Taxes of the Company, and the Company has not received notice (either in writing or orally, formally or informally) nor does it expect to receive notice that it has not filed a Return or paid Taxes required to be filed or paid. The Company is not a party to any action or proceeding for assessment or collection of Taxes, nor has such event been asserted or to the Company’s knowledge threatened (either in writing or orally, formally or informally) against the Company or any of its respective assets. No waiver or extension of an y statute of limitations is in effect with respect to Taxes or Returns of the Company.  The Company has disclosed on its federal and state income and franchise tax returns all positions taken therein that could give rise to a substantial understatement penalty within the meaning of Code Section 6662 or comparable provisions of applicable state tax laws.

(f)

The Company has not: (i) agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (ii) acquired or owns any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; (iii) made and will not make a consent dividend election under Section 565 of the Code; (iv) elected at any time to be treated as an S corporation within the meaning of Sections 1361 or 1362 of the Code or (v) made any of the foregoing elections or is required to apply any of the foregoing rules under any comparable state or local Tax provisions.

(g)

The Company is not (nor has it ever been) party to any tax sharing agreement. Since inception, the Company has not been a distributing corporation or a controlled corporation in a transaction described in Section 355(a) of the Code. The Company (i) is not a partner for Tax purposes with respect to any joint venture, partnership, or other arrangement or contract which is treated as a partnership for Tax purposes; (ii) does not own a single member limited liability company which is treated as a disregarded entity; (iii) is not a stockholder of a “controlled foreign corporation” as defined in Section 957 of the Code or a “passive foreign investment company” as defined in Section 1297 of the Code (or any similar provision of state, local or foreign Law) and (iv) is not a “personal holding company” as defined in Section 542 of the Code (or any similar provision of state, local or foreign Law).

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(h)

The Company has withheld and paid over all Taxes required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, stockholder or other third party.

(i)

The Company is not, nor has it 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.  The Company is not a “consenting corporation” under Section 341(f) of the Code. Except as set forth in Section 3.21(g) of the Company Disclosure Schedule, the Company has not entered into any compensatory agreements with respect to the performance of services which payment thereunder would result in a nondeductible expense to the Company pursuant to Section 280G or 162(m) of the Code or an excise tax to the recipient of such payment pursuant to Section 4999 of the Code. The Company has not agreed to, nor is it required to make, other than by reason of the Merger, any adjustment under Code Section 481(a) by reason of, a change in accounting method, and the Company will not otherwise have any income reportable for a period ending after the Closing Date attributable to a transaction or other event (e.g., an installment sale) occurring prior to the Closing Date. The Company is not, nor has it been, a “reporting corporation” subject to the information reporting and record maintenance requirements of Section 6038A and the regulations thereunder.  The Company does not have and has not ever had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country.

(j)

No payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be, as a direct or indirect result of the transactions contemplated by this Agreement, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the regulations thereunder. No compensation payable to any Employee is non-deductible under Section 162(m) of the Code.

(k)

The Company Disclosure Schedule contains accurate and complete information regarding the Company’s net operating losses for federal and state tax purposes. As of the date of this Agreement, the Company has no net operating losses and credit carryovers or other tax attributes currently subject to limitation under Sections 382, 383, or 384 of the Code or comparable provisions of applicable state law.

3.22

Insurance. The Company has provided Buyer with copies of all insurance policies to which the Company is a party or is a beneficiary or named insured, and all such insurance policies are in full force and effect. Section 3.22 of the Company Disclosure Schedule sets forth a summary of each insurance policy or binders of insurance (including policies providing property, casualty, liability, and workers’ compensation coverage and bond and surety arrangements) to which the Company is a party, a named insured, or otherwise the beneficiary of coverage. Except as set forth in Section 3.22 of the Company Disclosure Schedule, there have been no claims in excess of $100,000 asserted under any of the insurance policies of the Company in respect of all general liability, professional liability, property liability and worker’s compensation and medical claims since the Company’s incorporation.

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3.23

Product Warranty. No product manufactured or delivered directly by the Company for research purposes is subject to any express or implied warranty, guaranty or indemnity and the Company has no Liability (and to the knowledge of the Company, there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any Liability) for replacement or repair thereof.

3.24

Brokers’ and Finders’ Fees. Except as set forth in Section 3.24 of the Company Disclosure Schedule, the Company has not entered into and will not enter into any contract, agreement, arrangement or understanding with any Person which will result in the obligation of Buyer or the Company to pay any finder’s fee, brokerage commission, or similar payment in connection with the transactions contemplated hereby.

3.25

No Other Agreements to Sell the Company or the Assets. The Company has no legal obligation, absolute or contingent, to any other Person to sell all or substantially all of the Assets of the Company (other than inventory in the ordinary course of business) all or substantially all of or to effect any merger, consolidation or other reorganization of the Company or to enter into any agreement with respect thereto, except pursuant to the Company Options and Company Warrants and this Agreement.

3.26

Board Recommendation. The Company’s Board of Directors has, pursuant to a unanimous written consent dated May 24, 2006 (i) approved, adopted and declared advisable this Agreement and the transactions and agreements contemplated hereby; (ii) determined that this Agreement is in the best interests of the Company and the Company Stockholders and (iii) resolved to recommend approval of the adoption of this Agreement and the transactions and agreements contemplated hereby to the Company Stockholders.

3.27

Material Misstatements or Omissions. None of the representations or warranties by the Company in this Agreement (including all schedules, certificates and exhibits hereto) contains or will contain at the Effective Time any untrue statement of a material fact, or omits or will omit at the Effective Time to state any material fact necessary to make the statements or facts contained therein not misleading.

3.28

Hart-Scott Rodino. The Company’s ultimate parent entity, as the term “ultimate parent entity” is defined under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) regulations at 16 C.F.R. Section 801.1, does not satisfy, and will not satisfy at the time of the Closing of the Merger, the $10 million (as adjusted) portion of the HSR Act size-of­person threshold test.

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF

BUYER, PARENT AND MERGER SUB

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As an inducement of the Company to enter into this Agreement, Buyer, Parent and Merger Sub hereby make the following representations and warranties to the Company which representations and warranties are, as of the date hereof, and will be, as of the Closing Date, true and correct.

4.1

Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington. Parent is a corporation duly organized, validly existing and in good standing under the laws of the province of British Columbia. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the outstanding capital stock of Merger Sub is owned of record and beneficially by Buyer. Except for obligations or liabilities incurred in connection with its incorporation or organization and the transactions contemplated by this Agreement, Merger Sub has not and will not have prior to the Effective Time incurred, directly or indirectly, through any subsidiary or affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. Merger Sub has no Subsidiaries.

4.2

Authorization. Each of Parent, Buyer and Merger Sub has all requisite corporate power and corporate authority to enter into this Agreement and to perform its obligations hereunder and has taken all corporate action necessary to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent, Buyer and Merger Sub and, assuming the due authorization, execution and delivery of this Agreement by each of the other parties to this Agreement, this Agreement is a valid and binding obligation of each of Parent, Buyer and Merger Sub, enforceable against each of Parent, Buyer and Merger Sub in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally or by general equitable principles.

4.3

No Conflicts. Neither the execution and delivery of this Agreement, nor the consummation of the Merger or the other transactions contemplated hereby, nor compliance by Parent, Buyer and Merger Sub with all of the provisions hereof will (i) conflict with or result in any breach of any provision of the certificate of incorporation, bylaws or other charter documents of Parent, Buyer or Merger Sub, (ii) except as would not reasonably be expected to have a Parent Material Adverse Effect, violate any material order, writ, injunction, decree, statute, rule or regulation applicable to Parent, Buyer or Merger Sub, or by which any of their properties or assets may be bound, or (iii) except as would not reasonably be expected to have a Parent Material Adverse Effect, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, or result in any material change in, o r give rise to any right of termination, cancellation, acceleration, redemption or repurchase under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation to which Parent, Buyer or Merger Sub is a party or by which any of them or any of their properties or assets may be bound.

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4.4

Merger Consideration. Parent and Buyer will have available sufficient cash, cash equivalents, and shares of Parent Common Stock to enable each of Parent, Buyer and Merger Sub to perform their respective obligations under this Agreement including, without limitation, payment of the Merger Consideration pursuant to Section 2.7 of this Agreement, which includes, but is not limited to, payment of cash consideration due at Closing, the Earnout Payments, and the Milestone Payments.

4.5

Brokers’ and Finders’ Fees. Parent, Buyer, and Merger Sub have not entered into and will not enter into any contract, agreement, arrangement or understanding with any Person which will result in the obligation of Parent, Buyer or Merger Sub to pay any finder’s fee, brokerage commission, or similar payment in connection with the transactions contemplated hereby.

4.6

Approvals. The execution and delivery of this Agreement, and the consummation of the Merger and the other transactions contemplated hereby have been duly and validly authorized by the board of directors of each of Parent, Buyer, and Merger Sub and no other corporate proceedings on the part of either Parent, Buyer, or Merger Sub are necessary to authorize this Agreement or to consummate the Merger and the other transactions contemplated hereby. No approval of the stockholders of Parent is required under applicable law, Parent’s certificate of incorporation and bylaws, the rules of Nasdaq and the Toronto Stock Exchange and any other applicable legal requirement in connection with the execution and delivery of this Agreement by Parent, Buyer, and Merger Sub, the performance of their respective obligations hereunder and the consummation of the Merger and the other transactions contemplated hereby.

4.7

Parent’s Stock. Shares of Parent’s stock to be issued as part of the Merger Consideration have been duly authorized and, when so issued, will be fully paid and nonassessable, and will not be subject to preemptive rights.

4.8

SEC Filings; Financial Statements.

(a)

Parent and Buyer have on a timely basis filed all forms, reports, and documents required to be filed by each of them with the SEC since December 31, 2000 (collectively, the “Angiotech SEC Reports”). The Angiotech SEC Reports (i) at the time filed with the SEC, complied in all material respects with all applicable legal requirements, and (ii) did not at the time filed with the SEC (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Angiotech SEC Reports or necessary in order to make the statements in such Angiotech SEC Reports, in light of the circumstances under which they were made, not misleading. None of Buyer’s subsidiaries is required to file any forms, reports, or other documents with the SEC. Buyer maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and procedures are effective to ensure that all material information concerning Buyer and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Buyer’s filings with the SEC and other public disclosure documents.

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(b)

Each of Parent’s or Buyer’s financial statements (including, in each case, any related notes) contained in the Angiotech SEC Reports, including any Angiotech SEC Reports filed after the date of this Agreement until the Effective Time, complied or will comply as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared or will be prepared in accordance with GAAP (or Canadian GAAP, as the case may be) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements, or, in the case of unaudited statements, as permitted by the rules and regulations governing Quarterly Reports on Form 6-K), and fairly presented or will fairly present the consolidated financial position of Buyer and its Subsidiaries as at the respective dates and the consolidated results of its operations and ca sh flows for the periods indicated, except that the unaudited interim financial statements were or are subject to norma l and recurring year-end adjustments that were not or are not expected to be material in amount or effect (except as may be indicated in such financial statements or notes thereto).

4.9

Absence of Changes. Except as contemplated by this Agreement, since March 31, 2006, neither Parent nor Buyer has incurred, suffered, or made any of the following: (a) any change that is materially adverse to the business, operations, assets, properties, liabilities, financial condition or results of operations of Parent or Buyer; (b) a declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of Parent’s, Buyer’s, or their Subsidiaries’ capital stock, or any purchase, redemption or other acquisition by Parent or Buyer of any shares of Parent’s or Buyer’s capital stock or other securities of Parent or Buyer or any options, warrants, calls or rights to acquire any such shares or other securities, except for repurchases which are not, individually or in the aggregate, material in amount from employees following their termination pursuant to the terms of their pre-existing stock option or purchase agreements; (c) a material change by Parent or Buyer in accounting methods, principles or practices, except as required by concurrent changes in GAAP or Canadian GAAP, as the case may be; (d) a material revaluation by Parent or Buyer of any of its material assets, including writing off notes or accounts receivable other than in the ordinary course of business; or (e) any amendment to Parent or Buyer’s certificate of incorporation or bylaws, or execution of any agreement with respect to, or consummation of, any merger, consolidation, share exchange, business combination or recapitalization.

4.10

Litigation. Except as disclosed in Parent’s SEC Reports, there is no Action pending or threatened, or, to the knowledge of Buyer, anticipated against, relating to or affecting Parent, Buyer, or Merger Sub or any of the Assets of Parent, Buyer, or Merger Sub or any of the officers and directors of Parent, Buyer, or Merger Sub which (i) seeks to enjoin or obtain damages in respect of the transactions contemplated hereby, or (ii) seeks to prevent Parent, Buyer, or Merger Sub from consummating the transactions contemplated hereby. Except as disclosed in Parent’s SEC Reports, there are presently no outstanding Orders against or affecting Parent, Buyer, Merger Sub or their respective business or Assets except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

4.11

Compliance with Laws.

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(a)

Parent and Buyer have conducted their respective businesses in substantial compliance with all applicable Laws and Orders except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Neither Parent nor Buyer has received any notice to the effect that, or has otherwise been advised that, Parent or Buyer is not in compliance with any such Laws or Orders except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(b)

There are no pending or, to the knowledge of Buyer, threatened actions against any director or officer of Parent or Buyer pursuant to Section 8A or 20(b) of the Securities Act, 15 U.S.C. §§ 77h-1 or 77t(b), or Section 21(d) or 21C of the Exchange Act, 15 U.S.C. §§ 78u(d) or 78u-3, except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(c)

Buyer is in compliance in all material respects and will continue to remain in compliance in all material respects after the date hereof, up to and including, but not beyond the Effective Time, with all current listing and corporate governance requirements of the Nasdaq National Market System, and is in compliance in all material respects, and will continue to remain in compliance in all material respects after the date hereof, up to and including, but not beyond the Effective Time, with all rules, regulations, and requirements of Sarbanes-Oxley and the SEC, except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

ARTICLE 5.

COVENANTS

5.1

Conduct of Business of the Company. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, the Company agrees (except as contemplated by this Agreement or to the extent that Buyer shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, to pay its debts and Taxes when due, to pay or perform other obligations when due, and, to the extent consistent with such business, to use all commercially reasonable efforts consistent with past practice and policies to preserve intact its present business organization, keep available the services of its present officers, key employees and independent contractors, and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealing s with it, all with the goal of preserving unimpaired its goodwill and ongoing businesses at the Effective Time. Following the date of this Agreement, the Company shall promptly notify Buyer of any materially negative event related to the Company or the Business. Except as disclosed on the Company Disclosure Schedule, without limiting the foregoing, except as expressly contemplated by this Agreement, the Company shall not, witho ut the prior written consent of Buyer:

(a)

Enter into any commitment or transaction not in the ordinary course of business consistent with past practice;

(b)

Transfer to any Person or entity any Company Proprietary Rights;

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(c)

Enter into any material agreements (or material amendments thereto) pursuant to which any party is granted marketing, distribution or similar rights of any type or scope with respect to any products of the Company other than in the ordinary course of business consistent with past practice;

(d)

Except for amending all Company Options and Company Warrants to facilitate the transactions contemplated by this Agreement and in the manner consistent with this Agreement, amend, terminate or otherwise modify, except in the ordinary course of business, or violate the material terms of, any of the agreements set forth or described in the Disclosure Schedule;

(e)

Commence or settle any litigation, mediation or arbitration proceeding;

(f)

Set aside or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or other equity interests, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock (or options, warrants or other rights exercisable therefore), except pursuant to purchase rights under agreements with employees and consultants;

(g)

Except for the issuance of Company Stock upon exercise of presently outstanding Company Options or Company Warrants (as to which the Company shall deduct and withhold such amounts as it is required to deduct and withhold under any provision of federal, state, local or foreign tax law) or upon conversion of outstanding Company Preferred Stock, issue, grant, deliver or sell or authorize or propose the issuance, grant, delivery or sale of, or purchase or propose the purchase of, any voting debt or any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities;

(h)

Cause or permit any amendments to its Certificate of Incorporation or Bylaws (or other charter documents);

(i)

Acquire or agree to acquire any assets in excess of $50,000 in the case of a single transaction, or acquire by merging or consolidating with or by purchasing or by any other manner, any equity securities;

(j)

Mortgage, pledge or otherwise encumber any Assets or sell, transfer, license or otherwise dispose of any Assets, except for sales of products and services involving less than $100,000 in the ordinary course of business and consistent with past practice;

(k)

Cancel, release or assign any indebtedness owed to it or any claims or rights held by it;

(l)

Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any of its debt securities or guarantee any debt securities of others;

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(m)

Grant any severance, termination or bonus pay (i) to any director or officer or (ii) to any other employee other than pursuant to the existing agreements of the Company;

(n)

Adopt or amend any employee benefit plan, or enter into any employment contract, extend employment offers to any Person, pay or agree to pay any special bonus or special remuneration to any director or employee other than in connection with normal annual bonus and salary adjustments for all non-officers and directors upon consultation with Buyer, or increase the salaries or wage rates of its other employees, except as consistent with the ordinary course of business consistent with past practice;

(o)

Revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable, other than in the ordinary course of business consistent with past practice;

(p)

Pay, discharge or satisfy any Liability, other than the payment, discharge or satisfaction in the ordinary course of business of (i) Liabilities reflected or reserved against in the Financial Statements or (ii) Liabilities that arose in the ordinary course of business subsequent to the date of the Balance Sheet, or (iii) Liabilities under contracts entered into in the ordinary course of business; or (iv) expenses consistent with the provisions of this Agreement incurred in connection with the transactions contemplated hereby;

(q)

Make or change any election in respect of Taxes, adopt or change any material accounting method in respect of Taxes, enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement, settle or compromise any claim, notice, audit report or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes;

(r)

Take any action that would cause any representation or warranty of the Company in this Agreement to be or become untrue in any material respect, other than as expressly contemplated by this Agreement; or

(s)

Take, or agree in writing or otherwise to take, any of the actions described in Sections 5.1(a) through (r) above, or any othe r action that would prevent the Company from performing or cause the Company not to perform its covenants hereunder, other than as expressly contemplated by this Agreement.

If the Company wishes to obtain the consent of Buyer to take actions for which prior consent is required pursuant to this Section 5.1, it shall request such consent in writing by facsimile to the attention of the Chief Executive Officer of Buyer. A consent signed by such officer shall be deemed sufficient for purposes hereof.

Notwithstanding anything to the contrary contained herein (and Buyer hereby consents to the following), the Company may, in its sole discretion, make the Permitted Distribution.

5.2

No Solicitation.

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(a)

Until the earlier of the Effective Time or the date of termination of this Agreement pursuant to the provisions of Article 8, the Company will not, nor will the Company authorize or knowingly permit any of the Company’s officers, directors or representatives to (directly or indirectly), take any of the following actions with any Person other than Buyer and its designees: (a) solicit, encourage, initiate, entertain, substantially review or participate in any negotiations or discussions with any Person, other than Buyer, rela ting to any offer or proposal (formal or informal, oral, written or otherwise) (an “Acquisition Proposal”), with respect to any possible Business Combination with the Company; (b) disclose information with respect to the Company, which is not customarily disclosed in the ordinary course of business, to any Person, other than Buyer, relating to (or could be used for the purpose of formulating an offer or proposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, any possible Business Combination with the Company; (c) agree to, enter into a Contract with any Person, other than Buyer, providing for, or approve a Business Combination with the Company; (d) make or authorize any statement, recommendation, solicitation or endorsement in support of any possible Business Combination with the Company, other than by Buyer; or (e) authorize or knowingly permit a Company representative to take any such action; provided, however, that prior to receipt of the approval of this Agreement and the transactions contemplated hereby by the Company Stockholders, the Company may, to the extent required by the fiduciary obligations of the Company’s Board of Directors, as determined in good faith based on the advice of outside legal counsel, in response to any such Acquisition Propo sal that was not solicited by the Company after the date of this Agreement and that did not otherwise result from a breach or a deemed breach of this Section 5.2(a), (i) furnish information with respect to the Company to the Person making such proposal pursuant to a confidentiality agreement not less restrictive of the other party (the “Potential Acquiror”) than the Confidentiality Agreement, and (ii) participate in negotiations regarding such proposal. Without limiting the foregoing, it is agreed that any violation of the restrictions set forth in the preceding sentence by any executive officer of the Company, director of the Company or investment banker, attorney or other advisor or representative of the Company whether or not such person is purporting to act on behalf of the Company or otherwise, shall not be deemed to be a breach of this Section 5.2(a) by the Company.

(b)

Except as provided in Section 5.2(c), the board of directors of the Company (i) shall recommend to the stockholders of the Company the adoption of this Agreement, (ii) shall not withdraw or modify, in any manner adverse to Buyer, its approval and recommendation of the adoption of this Agreement and (iii) shall not approve or recommend, or propose to approve or recommend, any Acquisition Proposal.

(c)

If prior to the Effective Time the board of directors of the Company determines in good faith, after consultation with its financial and outside legal counsel, that any Acquisition Proposal constitutes a Superior Proposal and the board of directors of the Company believes in its good faith judgment, after receiving the advice of its outside legal counsel that failing to terminate this Agreement and enter into a transaction (the “Superior Transaction”) with respect to the Superior Proposal would constitute a breach of its fiduciary duties under applicable law, the Company may take any of the actions prohibited by 5.2(b) and terminate this Agreement and enter into a binding acquisition agreement (an “Acquisition Agreement”) with respect to such Superior Transaction, provided, however, that, prior to any such termination, (i) the Company has provided Buyer thre e Business Days written notice that it intends to terminate this Agreement pursuant to this Section 5.2(c), identifying the Superior Transaction then determined to be more favorable and the parties thereto and delivering to Buyer a copy of the Acquisition Agreement for such Superior Transaction in the form to be entered into, (ii) the Company causes its legal counsel and its financial advisor to afford Buyer the opportunity, within such three Business Day period, to match the terms of the Superior Transaction and to negotiate with Buyer to make other adjustments in the terms and conditions of this Agreement that would permit the board of directors of the Company to recommend this Agreement as revised, (iii) the Company has not received from Buyer, within three Business Days of Buyer’s receipt of the notice referred to in clause (i), an offer that the board of directors of the Company determines in good faith, after consultation with and taking into account the advice of its outside legal counsel, matche s or exceeds such Superior Transaction or is otherwise sufficient to permit the board of directors of the Company to continue to recommend this Agreement, as amended by such offer from Buyer, and the Merger, rather than the Superior Transaction, and (iv) Buyer’s right to match any Superior Transaction shall apply equally with respect to any subsequent increase or other revision of the terms of any Superior Transaction.

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(d)

The Company shall immediately cease and cause to be terminated any contacts or negotiations with any Person relating to any such transaction or Business Combination. In addition to the foregoing, if the Company receives prior to the Effective Time or the termination of this Agreement any offer or proposal (formal or informal, oral, written or otherwise) relating to, or any inquiry or contact from any Person with respect to, an Acquisition Proposal, the Company shall within 24 hours notify Buyer thereof and provide Buyer with the details thereof, including the identity of the Person or Persons making such offer or proposal, and unless otherwise prohibited by a Nondisclosure Agreement or similar agreement in effect on the date hereof, will keep buyer fully informed on a current basis of the status and details of any such offer or proposal and of any modification to the terms thereof; provided, however, that this provision shall not in any way be deemed to limit the obligations of the Company and its representatives set forth in the previous sentence.

5.3

Proxy Statement; Company Board Recommendation.

(a)

The Company will prepare and mail as soon as reasonably practicable, but in no event later than 10 calendar days after the date of this Agreement, a proxy statement relating to the Company’s stockholders’ meeting called for approval and adoption of this Agreement, the Merger and related matters (the “Company Stockholders’ Meeting”), in form and substance reasonably acceptable to Buyer, with respect to the solicitation of proxies from the stockholders of the Company to approve this Agreement, the Merger and related matters in accordance with the Company’s Certificate of Incorporation, the Company’s Bylaws and the DGCL (the “Proxy Statement”). The Proxy Statement shall, if applicable, include a solicitation of proxies necessary to prevent the Bonus Payments made in connection with this Agreement from giving rise to a “ parachute payment” under section 280G of the Code. Prior to the Closing Date and at the earliest practicable date following the date hereof, the Company shall hold the Company Stockholders’ Meeting for the purpose of seeking approval of this Agreement and the Merger.

(b)

If the Company holds the Company Stockholders’ Meeting, the Company’s Board of Directors will solicit proxies from the Company Stockholders to vote such stockholders’ shares at the Company Stockholders’ Meeting. The Proxy Statement will also include the recommendation of the Company’s Board of Directors in favor of approval of this Agreement and the Merger.

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5.4

Expenses. All fees and expenses of third parties incurred by a party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting fees and expenses, shall be the obligation of the respective party incurring such fees and expenses. For the avoidance of doubt, all expenses in connection with the registration for resale of all shares of Parent Common Stock issued hereunder shall be borne by Parent, Buyer or the Surviving Corporation.

5.5

Public Disclosure. Except as required by Law (including federal and state securities Laws) and except to the extent such information may have been previously disclosed to the public other than in violation of this Section 5.5, or as may be reasonably necessary to complete the Merger, neither party hereto shall disclose the existence of, or any subject matter of, or the terms and conditions of, this Agreement to any third party (other than a party’s financial and legal advisors) without the prior written consent of the other (which shall not be unreasonably withheld or delayed), and each party hereto shall be responsible for preventing disclosure by the Company’s financial and legal advisors.  The parties hereto shall mutually agree to the timing and content of any announcements, press releases or public statements concerning the proposed Merger.

5.6

Access to Information. From the date of this Agreement until the Effective Time, the Company will afford to Buyer and its authorized representatives (including counsel, environmental and other consultants, accountants, auditors and agents) reasonable access during normal business hours and upon reasonable notice to all of its facilities, personnel and operations and to all of its and its subsidiaries books and records, will permit the other and its authorized representatives to conduct inspections as they may reasonably request and will instruct its officers and those of its subsidiaries to furnish such persons with such financial and operating data and other information with respect to its business and properties as they may from time to time reasonably request, subject to the restrictions set forth in the Confidential Disclosure Agreement by and between the Company and Parent dated as of February 20, 2006 (the “Confidentiality Agreement”). Buyer and Merger Sub agree that each of them will treat any such information in accordance with the Confidentiality Agreement, which shall remain in full force and effect in accordance with its terms.

5.7

Commercially Reasonable Efforts. Each party to this Agreement shall use its commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to promptly consummate and make effective the transactions contemplated by this Agreement, (ii) lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to this Agreement to consummate the transactions contemplated by this Agreement and (iii) fulfill all conditions to the such party’s obligations under this Agreement.  Each party to this Agreement shall cooperate fully with the other parties to this Agreement in promptly seeking to obtain all such authorizations, consents, orders and approvals, giving such notices, and making such filings. Notwithstanding the foregoing or anything to the contrary set forth in this Agreement, in connection with obtaining such consents from third parties, no party to this Agreement shall be required to make payments, commence litigation or agree to modifications of the terms and conditions of any agreements with third parties. The parties to this Agreement shall not take any action that is reasonably likely to have the effect of unreasonably delaying, impairing or impeding the receipt of any required authorizations, consents, orders or approvals.

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5.8

Notification of Certain Matters. The Company shall give prompt notice to Buyer, and Buyer shall give prompt notice to the Company, of (i) the occurrence or non-occurrence of any event, which occurrence or non-occurrence has caused or is reasonably likely to cause any representation or warranty of the Company, on the one hand, or of Buyer or Merger Sub, on the other hand, contained in this Agreement to be untrue or inaccurate at or prior to the Effective Time and (ii) any failure of the Company, on the one hand, or of Buyer or Merger Sub, on the other hand, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. No information or knowledge obtained pursuant to this Section 5.8 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Merger.

5.9

Proprietary Rights. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement and the Effective Time, the Company shall give Buyer prompt notice that any Person shall have (i) commenced, or shall have notified the Company in writing that it intends to commence, an Action or (ii) provided the Company with written notice, in either case which allege(s) that any of the Company Proprietary Rights presently embodied in the Company’s products sold or otherwise distributed in connection with the operation or conduct of the Business infringe or otherwise violate the intellectual property rights of such Person. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement and the Effective Time, the Company shall take commercially reasonable actions to maintain, perfect, preserve or renew the Compan y Proprietary Rights, including, without limitation, the payment of any registration, maintenance, renewal fees, annuity fees and taxes or the filing of any documents, applications or certificates related thereto, and to promptly respond and prepare to respond to all requests, related to the Company Proprietary Rights, received from Governmental or Regulatory Authorities. At the Closing, the Company will notify Buyer of all material actions which must be taken within the 180 days following the Closing and which are reasonably necessary to maintain, perfect, preserve or renew the Company Proprietary Rights, including the payment of any registration, maintenance, renewal fees, annuity fees and taxes or the filing of any documents, applications or certificates related thereto.

5.10

FIRPTA Certificate. The Company shall have delivered to Buyer, not more than 10 days before the Closing Date, a statement in accordance with Treasury Regulations Section 1.1445-2(c)(3) and 1.897-2(h) certifying that the Company is not, and has not been, a “United States real property holding corporation” for purposes of Sections 897 and 1445 of the Code. In addition, the Company shall have delivered to Buyer on the Closing Date a copy of the notification to the IRS, prepared in accordance with Treasury Regulations Section 1.897-2(h)(2), of delivery of the statement referred to in the preceding sentence, signed by a responsible corporate officer of the Company. The Company acknowledges that Buyer may cause the Company to file such notification with the IRS on or after the Closing Date.

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5.11

Voting Agreements. Contemporaneously with the execution of this Agreement, each of the Major Stockholders have entered into Voting Agreements with Buyer (in the form of Exhibit A attached hereto) with respect to the voting of their Company Common Stock and which Voting Agreements, among other things, prohibit the Major Stockholders from selling or transferring their Company Stock prior to the Effective Time.

5.12

Enforcement of Company Proprietary Rights. Parent, Buyer and Surviving Corporation shall use Commercially Reasonable Efforts to enforce and prosecute the Company’s Proprietary Rights following the Closing, provided that Parent, Buyer and Surviving Corporation determine, in their reasonable discretion, that such enforcement and prosecution of the Company Proprietary Rights is in best interests of the Barbed Suture Products and Parent, Buyer and the Surviving Corporation.

5.13

Minimum Net Working Capital . The Net Working Capital (after deduction of the Permitted Distribution) as of the Closing shall not be less tha n the Escrow Amount.

ARTICLE 6.

CONDITIONS TO THE MERGER

6.1

Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction or mutual waiver at or prior to the Closing of the following conditions:

(a)

Governmental and Regulatory Approvals. Approvals from any Governmental or Regulatory Authority necessary for consummation of the Merger and the other transactions contemplated hereby shall have been obtained.

(b)

No Injunctions or Regulatory Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other Order issued by any court of competent jurisdiction or Governmental or Regulatory Authority or other legal or regulatory restraint or prohibition preventing the consummation of the Merger and the other transactions contemplated by this Agreement shall be in effect; nor shall there be any action taken, or any Law or Order enacted, entered, enforced or deemed applicable to the Merger or the other transactions contemplated by this Agreement that would prohibit the consummation of the Merger or the other transactions contemplated by this Agreement.

(c)

Company Stockholder Approval. The Company shall have obtained the Company Stockholder Approval.

6.2

Additional Conditions to Obligations of the Company. The obligation of the Company to consummate the Merger and the other transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by the Company:

(a)

Representations, Warranties and Covenants of Buyer and Merger Sub. (i) The representations and warranties of Parent, Buyer and Merger Sub set forth in Article 4 of this Agreement shall be true and correct in all material respects without regard to materiality qualifiers contained therein as of the Effective Time, with the same force and effect as if made as of the Effective Time except (x) for changes specifically permitted by the terms of this Agreement, and (y) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date; (ii) the covenants and agreements set forth in this Agreement to be performed or complied with by Parent, Buyer and Merger Sub at or prior to the Closing shall have been performed or complied with in all material respects without regard to materiality qualifiers contained therein and (i ii) the Company shall have received a certificate from an authorized officer of Buyer and Parent, dated as of the Closing Date, certifying as to the matters set forth in clauses (i) and (ii) of this Section 6.2(a).

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(b)

Exchange Agent Certificate. The Exchange Agent shall have delivered to the Company a certificate, dated as of the Closing Date, to the effect that the Exchange Agent has received the Initial Merger Consideration from Buyer and appropriate instructions and authorization to deliver the Initial Merger Consideration as required by this Agreement.

(c)

Legal Opinion. The Company shall have received a legal opinion (i) relating to Parent from Irwin, White & Jennings, Barristers and Solicitors, Canadian counsel to Parent and (ii) relating to Buyer and Merger Sub from Heller Ehrman LLP, counsel to Buyer, each in a customary form reasonably acceptable to the Company.

(d)

Good Standing. The Company shall have received a certificate of status, compliance good standing or like certificate with respect to Parent, Buyer and Merger Sub issued by the Secretary of State of the state or province, as the case may be, of each such entity’s incorporation.

(e)

Escrow Agreement. Buyer, Merger Sub and the Escrow Agent shall have executed the Escrow Agreement.

6.3

 Additional Conditions to the Obligations of Buyer and Merger Sub. The obligation of Parent, Buyer and Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Buyer:

(a)

Representations, Warranties and Covenants of the Company. (i) The representations and warranties of the Company set forth in Article 3 of this Agreement shall be true and correct in all material respects without regard to materiality qualifiers contained therein as of the Effective Time, with the same force and effect as if made as of the Effective Time except (x) for changes specifically permitted by the terms of this Agreement, and (y) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date; (ii) the covenants and agreements set forth in this Agreement to be performed or complied with by the Company at or prior to the Closing shall have been performed or complied with in all material respects without regard to materiality qualifiers contained therein and (iii) Buyer shall have received a certificate from the President and Chief Executive Officer of the Company, dated as of the Closing Date, certifying as to the matters set forth in clauses (i) and (ii) of this Section 6.3(a).

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(b)

Legal Opinion. Buyer shall have received a legal opinion from Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., counsel to the Company, in a customary form reasonably acceptable to Buyer.

(c)

Company Options. All Company Options shall have been exercised or amended in manner reasonably satisfactory to Buyer to provide for their termination at the Effective Time.

(d)

Company Warrants. All Company Warrants shall have been exercised or amended in a manner reasonably satisfactory to Buyer to provide for their termination at the Effective Time.

(e)

Consents, Waivers, Approvals. The Company shall have obtained or made any consents, waivers, approvals, notifications, disclosures, filings and registrations set forth on Section 6.3(e) of the Company Disclosure Schedule and shall have and provided to Buyer evidence of such action.

(f)

Dissenting Shares. Not more than 5% of the issued and outstanding shares of Company Stock shall be Dissenting Shares.

(g)

FIRPTA Certificate. Buyer shall have no actual knowledge and shall not have received a notice pursuant to Treasury Regulations Section 1.445-4 that the statement delivered by the Company pursuant to Section 5.10 is false.

(h)

Section 280G. The Company and any person who is a “disqualified individual” (as defined in Section 280G(c) of the Code and the proposed Treasury Regulations promulgated hereunder) with respect to the Company shall have taken any and all actions necessary to provide that no payment or acceleration of any right to benefits or payment pursuant to this Agreement, any Employee Plan, Contract or any other plan or arrangement shall constitute an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code.

(i)

401(k) Plan. Each Employee Plan intended to qualify under Section 401(k) of the Code shall have been terminated in a manner satisfactory to Buyer and such that Buyer shall have no further liability thereunder after the Effective Time.

(j)

Good Standing. Buyer and Merger Sub shall have received a certificate of status, compliance good standing or like certificate with respect to the Company issued by the Secretary of State of the State of Delaware.

(k)

Escrow Agreement. The Company, the Stockholder Representative and the Escrow Agent shall have executed the Escrow Agreement.

(l)

Stockholder Representative Agreement. The Stockholder Representative, who shall be reasonably acceptable to Buyer, shall have acknowledged the Stockholder Representative Agreement.

(m)

Net Working Capital Certificate. Buyer and Merger Sub shall have received a certificate executed by the Chief Executive Officer and Chief Financial Officer of the

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Company, dated as of the Closing, certifying that the Net Working Capital of the Company as of the Closing Date, which amount shall reflect the Permitted Distribution is not less than the Escrow Amount (the “Net Working Capital Certificate”).

ARTICLE 7.

INDEMNIFICATION

7.1

Indemnification by Parent, Buyer and Surviving Corporation. Subject to the limitations set forth in this Agreement from and after the Effective Time, Parent, Buyer and the Surviving Corporation, jointly and severally, will indemnify, defend, and hold harmless each of the Company Holders, and each of their respective directors, officers, employees, representatives and other Affiliates, from and against any and all Indemnifiable Losses related to or arising out of or in connection with any breach by Parent, Buyer or Merger Sub of any representation, warranty, covenant, agreement, obligation, or undertaking made by Parent, Buyer or Merger Sub in this Agreement (including any schedule or exhibit hereto), or any other agreement, instrument, certificate, or other document delivered on or after the Effective Date hereof by or on behalf of Parent, Buyer or Merger Sub in connection with this Agreement or the Merger.

7.2

Indemnification by the Company Holders. Subject to the limitations set forth in this Agreement, by virtue of the approval of the execution and delivery by the Company of this Agreement, from and after the Effective Time, each of the Company Holders (regardless of whether or not such Company Holder has actually voted his, her or its Company Stock, if any, in favor of the execution and delivery by the Company of this Agreement) shall be deemed to have agreed, severally (but not jointly) and in proportion to each Company Holder’s Escrow Pro-Rata Portion of the Escrow Amount, and to each Company Holder’s Earnout Pro-Rata Portion, if and when payable, of the Maximum Earnout Amount, the Wound Closure Milestone Payment and the Orthopedic Milestone Payment otherwise due to them, to indemnify, defend and hold harmless Parent, Buyer, the Surviving Corporation, and each of their respective directors, officers, emp loyees, representatives and other Affiliates, from and against any and all Indemnifiable Losses related to or arising out of or in connection with:

(a)

any breach by the Company of any representation, warranty, covenant, agreement, obligation or undertaking made by the Company in this Agreement (as modified by the Company Disclosure Schedule, in the case of representations and warranties made as of the date of this Agreement), or any other agreement, instrument or certificate delivered on or after the Effective Date hereof by or on behalf of the Company in connection with this Agreement or the Merger, including but not limited to the Merger Consideration Spreadsheet (as may be amended by the Stockholder Representative and provided to Buyer);

(b)

any payments made by Parent, Buyer, the Merger Sub or the Surviving Corporation after the Effective Time with respect to any Dissenting Shares to the extent that such payments exceed the portion of the Initial Merger Consideration to which the holders of such Dissenting Shares would have been entitled had such Dissenting Shares not been Dissenting Shares (collectively “Appraisal Claims”); and

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(c)

any costs, liabilities or expenses incurred by Parent, Buyer or the Surviving Corporation after the Effective Time, including:

(i)

all legal, mediation and arbitration expenses related to any claim brought by or against the parties listed on Section 7.2(c)(i) of the Company Disclosure Schedule up to $1,000,000.00 of the Escrow Amount and 50% of such additional expenses greater than $1,000,000.00 of the Escrow Amount up to a maximum amount of $10,000,000.00 (which represents 50% of $20,000,000.00 worth of applicable legal, mediation and arbitration expenses incurred by Parent, Buyer or the Surviving Corporation) (“Special Claims”); and

(ii)

50% of all legal, mediation and arbitration expenses incurred in connection with the enforcement, defense, prosecution, interference or opposition of any claim brought (A) by the Company (1) against a party relating to a self-anchoring device or suture that received regulatory approval through a 510(k) process (or similar foreign process) in which approval was obtained by a demonstration of equivalence to a previously approved Barbed Suture Product, or (2) against a party that, together with any other party other than Parent, Buyer, Surviving Corporation or its Affiliates, has greater than 10% of the market share in the relevant country for product(s) that are a self-anchoring suture that are used for the same indication as a Barbed Suture Product which is a self-anchoring suture, or (B) against the Company relating to any Company Proprietary Right (the “Infringement Claims”), provided, further, that any judgment or settlement recovered by Parent, Buyer or the Surviving Corporation that arises out of a (A) a Special Claim or (B) an Infringement Claim that does not represent an Indemnifiable Loss under Section 7.2(a) and for which the Company Holders indemnify Parent, Buyer and Surviving Corporation for such legal, mediation, arbitration and other expenses incurred therewith as required pursuant to this Section 7.2(c), shall constitute an “Infringement Recovery,” provided, however, that Standard Income and Non-Standard Income shall not constitute an Infringement Recovery.

7.3

Exclusive Remedy. The indemnification provisions set forth in this Article 7 and the corresponding recourse of any party entitled to indemnification pursuant to this Article 7 (an “Indemnified Party”) shall be the sole and exclusive remedy of such Indemnified Party for any Indemnifiable Losses under the indemnification provisions contained in, and for any breach of, this Agreement except for claims based on fraud or intentional misrepresentation.

7.4

No Contribution. Except as provided in Section 7.1, each Company Holder by virtue of the approval of the execution and delivery by the Company of this Agreement, waives and acknowledges and agrees that he shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against the Surviving Corporation in connection with any indemnification obligation or any other liability accruing, arising or otherwise based on a set of facts, events or circumstances in existence prior the Effective Time to which he or she may become subject under or in connection with this Agreement.

7.5

Indemnification Claims. If an Indemnified Party wishes to assert an indemnification claim against a party responsible for indemnification under this Agreement (an “Indemnifying Party”) (which term shall be deemed to include all Indemnifying Parties if more than one), the Indemnified Party shall deliver to the Indemnifying Party a written notice (a “Claim Notice”) prior to the earlier of the expiration of the time period set forth in Section 7.8(c) or the date on which the final Earnout Payment is made, containing (i) a statement that a specific representation, warranty, covenant or other indemnifiable matter has been breached by such other party (including an identification of such representation, warranty, covenant or other indemnifiable matter); (ii) a detailed description of the facts and circumstances, to the extent known, giving rise to the alleged breach of such representation, warranty, covenant or other indemnifiable matter; and (iii) an assertion that a claim for recovery under this Article 7 is due, including a reasonable estimate of the total amount of, the Indemnifiable Losses actually incurred or expected to be incurred by the Indemnified Party as a direct result of such alleged breach. If, within 45 calendar days after a Claim Notice is received by the Indemnifying Party, the Indemnifying Party does not contest such Claim Notice in writing to the Indemnified Party, the Indemnifying Party shall be conclusively deemed to have consented, to the recovery by the Indemnified Party of the full amount of Indemnifiable Losses specified in the Notice of Claim in accordance with this Article 7 (subject to the limitations contained in Sections 7.7 and 7.8 hereof), including, in the case of the Company Holders, the forfeiture of the Escrow Amount, the Maximum Earnout Amount, the Wound Closure Milestone Payment and the Orthopedic Milestone P ayment equal to such Indemnifiable Losses and, without further notice, to have stipulated to the entry of a final judgment for damages against the Indemnifying Party for such amount in any court having jurisdiction over the matter where venue is proper. If the Indemnifying Party gives the Indemnified Party written notice contesting all or any portion of a Claim Notice (a “Contested Claim”) within 45 calendar days, then such Contested Claim shall be resolved by either (i) a written settlement agreement or memorandum executed by the Indemnified Party and the Indemnifying Party or (ii) in the absence of such a written settlement agreement within 45 calendar days following receipt by the Indemnifying Party of the Claim Notice, by such appropriate remedies available to the parties under applicable law.

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7.6

Third-Party Claims.

(a)

In the event that any Indemnified Party desires to make a claim against an Indemnifying Party in connection with any third-party litigation, arbitration, action, suit, proceeding, claim or demand at any time instituted against or made upon it for which it may seek indemnification hereunder (a “Third-Party Claim”), then the Indemnified Party will promptly deliver a Claim Notice to the Indemnifying Party (or, if the Indemnifying Party is the Company Holders, the Stockholder Representative); provided that failure to promptly give such Claim Notice will not relieve the Indemnifying Party of its indemnification obligations under this Section 7.6, except to the extent, if any, that the Indemnifying Party has actually been prejudiced thereby.

(b)

The Indemnifying Party will have the right to assume the defense of the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party by written notice to the Indemnified Party within 45 calendar days after the Indemnifying Party has received the Claim Notice; provided, however, that the Indemnifying Party must conduct the defense of the Third-Party Claim actively and diligently thereafter in order to preserve its rights in this regard; and provided, further, that the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third-Party Claim.

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(c)

The Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party (which consent will not be unreasonably withheld or delayed) unless the judgment or proposed settlement (i) includes an unconditional release of all liability of each Indemnified Party with respect to such Third-Party Claim, and (ii) involves only the payment of money damages that are fully covered by the Indemnifying Party (consisting, in the case that the Company Holders, of amounts deemed to be paid by the Company Holders pursuant to Section 7.7 by distribution of amounts to Buyer from the Escrow Amount, or by setoff from the unpaid portion of Maximum Earnout Amount, the Wound Closure Milestone Payment and the Orthopedic Milestone Payment Contingent Payments in accordance with Section 7.7 (and subject to the limitations set fo rth in Section 7.7 and 7.8) to be made by Buyer) and does not impose an injunction or other equitable relief upon the Indemnified Party. So long as the Indemnifying Party has assumed and is conducting the defense of the Third-Party Claim in accordance with Section 7.6(b), the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (which consent will not be unreasonably conditioned, withheld or delayed by the Indemnifying Party).

(d)

In the event the Indemnifying Party fails to assume the defense of the Third-Party Claim in accordance with Section 7.6(b), (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter in to any settlement with respect to, the Third-Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (ii) the Indemnifying Party will remain responsible for any Indemnifiable Losses (subject to the limitations contained in Sections 7.7 and 7.8 hereof) the Indemnified Party may suffer as a result of such Third-Party Claim to the extent subject to indemnification under this Agreement.

7.7

Payment of Claims: Set Off Limitations.

(a)

General. In no event shall the Company Holders be required to return any (or forfeit any earned or payable but not yet paid) Earnout Payments or any Wound Closure Milestone Payment or any Orthopedic Milestone Payment paid to the Company Holders hereunder and Parent’s, Buyer’s and the Surviving Corporation’s sole recourse for Indemnifiable Losses under this Article 7 shall be to set off Indemnifiable Losses against the Escrow Amount, any unearned or not yet payable Earnout Payments, Wound Closure Milestone Payments or Orthopedic Milestone Payments.

(b)

Payment of Claims Against the Company Holders. Subject to Section 7.8, in order to satisfy any indemnification obligations of the Company Holders pursuant to this Agreement, Parent, Buyer and the Surviving Corporation (and each of their respective directors, officers, employees, representatives and other Affiliates) shall have the right to recover Indemnifiable Losses that have been incurred by recovering first against the Escrow Amount, to the extent available, and then by setting off any such Indemnifiable Losses against any unearned portion of the Earnout Payments, the Wound Closure Milestone Payment and the Orthopedic Milestone Payment. All such recoveries the available portion of the Escrow Amount shall be made on a pro-rata basis from all Company Holders based on their Escrow Pro-Rata Portion.  All such recoveries from available portions of the Earnout Payments, the Wound Closure Milestone Payment and t he Orthopedic Milestone Payment, as applicable, shall be made on a pro-rata basis from all Company Holders based on their Earnout Pro-Rata Portion.

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(c)

Claims Against Buyer. Any indemnification obligations of Buyer or Merger Sub pursuant to this Article 7 shall be paid in cash.

(d)

Tax Treatment. The parties agree that to the greatest extent possible the payment of any indemnity hereunder shall be treated as an adjustment to the Merger Consideration paid by Buyer hereunder for Tax purposes.

7.8

Limitations of Liability.

(a)

Threshold. No Indemnifying Party will be required to indemnify an Indemnified Party hereunder until such time as the aggregate amount of Indemnifiable Losses for which (i) Parent, Buyer, the Surviving Corporation, and their respective directors, officers, employees, representatives, and other Affiliates, on the one hand, or (ii) the Company, the Company Holders and their respective directors, officers, employees, representatives, and other Affiliates, as the case may be, on the other hand, are otherwise entitled to indemnification pursuant to this Agreement exceeds $500,000.00 (the “Basket”), at which time the Indemnifying Party shall be obligated to indemnify the Indemnified Party for the full amount of such Indemnifiable Losses that exceeds $250,000.00, subject to limitations of this Article 7.  Notwithstanding anything to the contrary in this Section 7.8, the threshold limits imposed by this Section 7.8(a) shall not apply to (A) any claims with respect to Buyer’s failure to deliver the Merger Consideration, (B) any breach of the covenant contained in Section 5.13 and (C) any Special Claim.

(b)

Maximum Liability. The parties specifically agree that, notwithstanding any provision of this Agreement to the contrary, the maximum aggregate liability of all of the Company and the Company Holders on the one hand, and Buyer, Merger Sub and the Surviving Corporation, on the other hand, for indemnification under this Article 7, except in the case of fraud or, with respect to clause (ii) below only, Buyer’s failure to deliver the Merger Consideration, will not exceed:

(i)

in the case of indemnification claims against the Company and the Company Holders, an amount equal to the sum of (x) $20,000,000.00 and (y) 15% of the unpaid portion of the Maximum Earnout Amount, subject to the limitations and the set-off procedures set forth in Section 7.7; or

(ii)

in the case of indemnification claims against Parent, Buyer, Merger Sub and the Surviving Corporation, an amount equal to $20,000,000.00 plus 15% of the unpaid portion of the Maximum Earnout Amount, subject to the limitations and the set-off procedures set forth in Section 7.7.

(c)

Time Limit. All representations and warranties in this Agreement shall survive the Closing and shall expire on the 90^th calendar day following the end of Earnout Year Two and no Indemnifying Party will be liable for any Indemnifiable Losses hereunder with respect to a breach of such representations and warranties unless a written claim for indemnification is given by the Indemnified Party to the Indemnifying Party with respect thereto on or before the 90th calendar day following the end of Earnout Year Two; provided, however, that (i) any claim against Parent, Buyer, Merger Sub or the Surviving Corporation with respect to Buyer’s failure to deliver the Merger Consideration shall expire when the applicable statute of limitations has expired and (ii) the representations and warranties set forth in Sections 3.20 and 3.21 shall survive the Closing and expire on the earlier of the 90^{t h} calendar year following (A) the end of Earnout Year Five, (B) the end of the Additional Earnout Year, if applicable, or (C) when the applicable statute of limitations has expired.

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ARTICLE 8.

TERMINATION, AMENDMENT AND WAIVER

8.1

Termination. Except as provided in Section 8.2 below, this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time:

(a)

by mutual consent of the boards of directors of the Company and Buyer;

(b)

by Buyer or the Company if: (i) the Effective Time has not occurred within 60 days from the date of this Agreement (the “End Date”) (provided that the right to terminate this Agreement under this clause (i) shall not be available to any party whose willful failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date); (ii) there shall be a final non-appealable order, decree or ruling of a court of competent jurisdiction in effect preventing consummation of the Merger; (iii) there shall be any statute, rule, regulation or non-appealable order enacted, promulgated or issued or deemed applicable to the Merger by any governmental entity that would make consummation of the Merger illegal; or (iv) the Company Stockholder Approval shall not have been obtained;

(c)

by Buyer or the Company if there shall be any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger, by any governmental entity, which would: (i) prohibit Buyer’s or the Company’s ownership or operation of any portion of the business of the Company; or (ii) compel Buyer or the Company to dispose of or hold separate, as a result of the Merger, any portion of the business or assets of the Company or Buyer; in either case, the unavailability of which assets or business would have a Material Adverse Effect on Buyer or would reasonably be expected to have a Material Adverse Effect on Buyer’s ability to realize the benefits expected from the Merger;

(d)

by Buyer if the Company’s Board of Directors shall have failed to recommend or modifies in a manner adverse to Buyer its recommendation concerning this Agreement or shall have disclosed in any manner its intention to modify in a manner adverse to Buyer such recommendation;

(e)

by Buyer, if (i) a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement shall have occurred that would cause any condition set forth in Section 6.3 not to be satisfied, and such condition cannot reasonably be satisfied by the End Date, or (ii) the Company shall have willfully and materially breached its obligations under Section 5.2 or 5.3;

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(f)

by the Company, if a breach of or failure to perform any representation, warranty, covenant or agreement on the part of Parent, Buyer or Merger Sub set forth in this Agreement shall have occurred that would cause any condition set forth in Section 6.2 not to be satisfied, and such condition cannot reasonably be satisfied by the End Date; or

(g)

by the Company, after compliance with the provisions of Section 5.2(c).

Where action is taken to terminate this Agreement pursuant to this Section 8.1, it shall be sufficient for such action to be authorized by the Board of Directors (as applicable) of the party taking such action.

8.2

Procedure for Termination. In order to terminate this Agreement pursuant to this Article 8, a Party shall provide written notice thereof to the other Parties.

8.3

Effect of Termination.

(a)

In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Buyer, Merger Sub or the Company, or their respective subsidiaries, officers, directors or stockholders except as provided in this Section 8.3 and except that nothing herein shall relieve any party from liability for breach of this Agreement and provided, further, that the provisions of Section 5.5, this Section 8.3 and Article 9 of this Agreement shall remain in full force and effect and survive any termination of this Agreement.

(b)

If this Agreement is terminated for any reason other than pursuant to Section 8.1(a), 8.1(b)(ii) or (iii) or by the Company pursuant to Section 8.1(f) or by the Company pursuant to Section 8.1(b)(i) where the Company has satisfied all of the conditions to its obligations to consummate the Merger set forth in Sections 6.1 and 6.3 and either Buyer has refused to effect the Merger or is unable to effect the Merger, and within 12 months following such termination of this Agreement, a Company Acquisition is consummated, the Company shall pay Buyer the Alternative Transaction Fee. The Alternative Transaction Fee shall be paid to Buyer on the date of the consummation of such Company Acquisition by wire transfer of immediately available funds.

8.4

Extension; Waiver. At any time prior to the Effective Time, Buyer or the Company may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations of the other party hereto; (b) waive any inaccuracies in the representations and warranties made to such party contained in this Agreement or in any document delivered pursuant hereto; and (c) waive compliance with any of the agreements, covenants or conditions for the benefit of such party contained in this Agreement.  Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.

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ARTICLE 9.

MISCELLANEOUS PROVISIONS

9.1

Notices. All notices, requests and other communications hereunder must be in writing and shall be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission against facsimile confirmation or mailed by internationally recognized overnight courier prepaid, to the parties at the following addresses or facsimile numbers:

If prior to the Closing, to the Company:

Quill Medical, Inc.

2505 Meridian Parkway, Suite 150

Research Triangle Park,

North Carolina 27713

Attention: Matthew A. Megaro, President

Facsimile No.: (919) 806-1953

With a copy (which shall not constitute notice) to:

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.

2500 Wachovia Capitol Center

Raleigh, North Carolina 27601

Attention: Merrill M. Mason, Esq.

Facsimile No.: (919) 821-6800

If to the Stockholder Representative:

To the address set forth in the Stockholder Representative Agreement

With a copy (which shall not constitute notice) to:

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.

2500 Wachovia Capitol Center

Raleigh, North Carolina 27601

Attention: Merrill M. Mason, Esq.

Facsimile No.: (919) 821-6800

If to Parent, Buyer or Merger Sub or, if after the Closing, to the Surviving Corporation:

Angiotech Pharmaceuticals (US), Inc.

101 W. North Bend Way, Suite 201

PO Box 2840

North Bend, Washington 98045

Attention: General Counsel

Facsimile No.: (425) 831-3091

With a required copy to:

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Angiotech Pharmaceuticals, Inc.

1618 Station Street

Vancouver, British Columbia

CANADA V6A 1B6

Attention: General Counsel

Attention: Vice President Business Development

Facsimile No.: (604) 221-6915

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

Heller Ehrman LLP

275 Middlefield Road

Menlo Park, California 94025

Attention: Kyle Guse, Esq.

Facsimile No.: (650) 324-0638

All such notices, requests and other communications shall (a) if delivered personally to the address as provided in this Section 9.1, be deemed given upon delivery; (b) if delivered by facsimile transmission to the facsimile number as provided for in this Section 9.1, be deemed given upon receipt of facsimile confirmation; (c) if delivered by overnight courier to the address as provided in this Section 9.1, be deemed given on the earlier of the first Business Day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 9.1). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto.

9.2

Entire Agreement. This Agreement and the Exhibits and Schedules hereto, including the Company Disclosure Schedule and the Confidentiality Agreement, constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

9.3

Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the parties shall execute and deliver to the other party such other documents and instruments, provide such materials and information and take such other actions as the other party may reasonably request to consummate the transactions contemplated by this Agreement and otherwise to cause the other party to fulfill its obligations under this Agreement and the transactions contemplated hereby.

9.4

Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Buyer, Merger Sub and the Company at any time prior to the Effective Time; provided, however, that after approval of this Agreement by Company Stockholders, no such amendment or modification shall change the amount or form of the consideration to be received by Company Holder in the Merger.

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9.5

Waiver of Complianc e; Consents. Any failure of Buyer or Merger Sub, on the one hand, or the Company, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by the Company (with respect to any failure by Buyer or Merger Sub) or Buyer or Merger Sub (with respect to any failure by the Company), respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, suc h consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 9.5.

9.6

Third-Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights upon any other Person, except that the provisions of Section 2.7 are intended for the benefit of the Company Holders.

9.7

No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by any party without the prior written consent of the other parties hereto and any attempt to do so shall be void, except that this Agreement may be assigned without consent in connection with an Extraordinary Transaction pursuant to Section 2.7(l). Subject to the preceding sentence, nothing in this Section

9.7 shall diminish the right of the Stockholder Representative to exercise his or her rights under Section 2.7(l) and provided, further, that this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. Notwithstanding anything to the contrary in this Agreement, Buyer may pledge as collateral all of the shares of Surviving Corporation, as may be required by Parent or Buyer to satisfy the terms and conditions of any bona fide credit agreement, loan agreement or similar agreement or arrangement to which the Parent or Buyer is, or to which Parent, Buyer or the Surviving Corporation may become, a party.

9.8

Headings. The headings and table of contents used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

9.9

Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable; (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

9.10

Governing Law. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Delaware with respect to corporate law matters and in accordance with the laws of the State of New York with respect to all other matters.

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9.11

Arbitration.

(a)

Any dispute, controversy or claim relating to or arising from Section 2.7(j)(ii) shall be exclusively and finally settled by confidential arbitration, and any party may submit such a dispute, controversy or claim to arbitration, provided, however, that the parties may arbitrate any other dispute, controversy or claim relating to or arising from this Agreement in accordance with the provisions of this Section 9.11 by mutual written consent. The arbitration proceeding shall be held at the location of the non-instituting party in the English language and shall be governed by the rules of the American Arbitration Association (the “AAA”) as amended from time to time. Any procedural rule not determined under the rules of the AAA shall be determined by the laws of the State of New York, other than those laws that would refer the matter to another jurisdiction.

(b)

Each party shall select one arbitrator and the two arbitrators so selected shall choose a third arbitrator to resolve the dispute, controversy or claim. Prior to the commencement of arbitration, each Party shall certify that its chosen arbitrator is competent to decide such dispute, controversy or claim and the two arbitrators so certified shall jointly certify that their chosen third arbitrator is likewise competent to decide such dispute, controversy or claim and not have any financial or conflicting interest in the dispute, controversy or claim. Such competence may include the ability to understand disputes which require expertise and knowledge of processes related to the commercial development of a medical device product which is peculiar to persons in the medical device industry.

(c)

The arbitrator(s) shall announce the award and the reasons therefor in writing within six months after the conclusion of the presentation of evidence and oral or written argument, or within such longer period as the parties may agree upon in writing. The decision of the arbitrator(s) shall be final and binding upon the parties. Judgment upon the award rendered may be entered in any court having jurisdiction over the person or the assets of the party owing the judgment or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Unless otherwise determined by the arbitrator(s), each party involved in the arbitration shall bear the expense of its own counsel, experts and presentation of proof, and the expense of the arbitrators and the AAA (if any) shall be divided equally among the parties to the arbitration.

(d)

Notwithstanding the foregoing provisions of this Section 9.11, in the event the arbitrator(s) (i) find that Buyer and its Affiliates did not satisfy their obligations under Section 2.7(j)(ii) and (ii) award money damages to the Company Holders as a result of such finding, the Stockholder Representative may, at his or her sole election, either (i) accept the arbitrator(s) award of money damages or (ii) decline to accept such money damages and elect instead to extend the Earnout Period for one additional four calendar quarter period beginning on the first day of the first full calendar quarter immediately after Earnout Year Five and ending on the last day of the fourth calendar quarter immediately after Earnout Year Five (the “Additional Earnout Year”), for which period each Company Holder shall be entitled receive their Earnout Pro-Rata Portion of the amount equal to (i) the Pr oduct Revenue for the Additional Earnout Year less the Product Revenue for the prior Peak Year multiplied by (ii) two, less (A) in the event the Wound Closure Milestone occurs during the Additional Earnout Year, the amount of any Wound Closure Milestone Payment payable by Buyer to the Company Stockholders in accordance with Section 2.7(h), and/or, in the event the Orthopedic Milestone is satisfied during the Additional Earnout Year, the Orthopedic Milestone Payment payable by Buyer to the Company Holders in accordance with Section 2.7(h) and/or (B) any remaining Milestone Excess after giving effect to any Milestone Excess credited against Earnout Payments in any prior Earnout Year (in the event the amount calculated hereunder is zero or less than zero, no Earnout Payment shall be payable for the Additional Earnout Year and the remaining Milestone Excess will be of no further force or effect), plus the Expense Pro-Rata Portion of any Infringement Recovery resulting from a Special Claim or an Inf ringement Claim initiated by Parent, Buyer or the Surviving Corporation during the Additional Earnout Year, 50% of any Standard Income received by Parent, Buyer or the Surviving Corporation during the Additional Earnout Year, and 25% of any Non-Standard Income received by Parent, Buyer or the Surviving Corporation during the Additional Earnout Year. Any Earnout Payment or money damages paid to the Company Holders in connection with this Section 9.11 shall be determined and paid in accordance with the provisions of Section

2.7.

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9.12

Construction. The parties hereto agree that this Agreement is the product of negotiation between sophisticated parties and individuals, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did partic ipate in, the drafting of each provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party hereto but rather shall be given a fair and reasonable construction without regard to the rule of contra preferentem.

9.13

Currency. Unless otherwise expressly set forth herein, all references herein to currency shall be currency of the U.S.

9.14

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

[Signature page follows]

-80-

IN WITNESS WHEREOF, Buyer, Merger Sub, the Company and the Representative have caused this Agreement to be signed by their duly authorized representatives, all as of the date

first written above.

ANGIOTECH PHARMACEUTICALS, INC.

By: _/s/ K. Thomas Bailey____________________

Name: K. Thomas Bailey

Title: Chief Financial Officer

ANGIOTECH PHARMACEUTICALS (US), INC.

By: __/s/ K/ Thomas Bailey____________________

Name: K. Thomas Bailey

Title: Vice President, Business Development

QUAICH ACQUISITION, INC.

By: __/s/ K/ Thomas Bailey____________________

Name: K. Thomas Bailey

Title: Chief Financial Officer

QUILL MEDICAL, INC.

By: __/s/ Mattew A. Megaro___________________

Name: Matthew A. Megaro

Title: Chief Executive Officer

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

EXHIBIT A TO AGREEMENT AND PLAN OF MERGER

Form of Voting Agreement

EXHIBIT B TO AGREEMENT AND PLAN OF MERGER

Form of Stockholder Representative Agreement

EX-10.11

Exhibit 10.11

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

CONFIDENTIAL

PUBLIC HEALTH SERVICE

PATENT LICENSE AGREEMENT-EXCLUSIVE

COVER PAGE

For PHS internal use only:

Patent License Number: L-103-96/0
Serial Numbers of Licensed Patents:	U.S. Patent Application Serial No. [***], filed [***];
	U.S. Patent Application Serial No. [***], filed [***], now issued as U.S. Patent No. [***] on [***]; and
	U.S. Patent Application Serial. No. [***], filed [***]

Licensee: Angiotech Pharmaceuticals, Inc.

CRADA Number (if applicable)

Additional Remarks:

This Patent License Agreement, hereinafter referred to as the "Agreement," consists of this Cover Page, an attached Agreement, a Signature Page, Appendix A (List of Patent(s) or Patent Application(s)), Appendix B (Fields of Use and Territory), Appendix C (Royalties), Appendix D (Modifications), Appendix E (Benchmarks), and Appendix F (Commercial Development Plan). The Parties to this Agreement are:

1)

The National Institutes of Health ("NIH"), the Centers for Disease Control and Prevention ("CDC"), or the Food and Drug Administration ("FDA"), hereinafter singly or collectively referred to as "PHS," agencies of the United States Public Health Service within the Department of Health and Human Services ("DHHS"); and

2)

The person, corporation, or institution identified above and/or on the Signature Page, having offices at the address indicated on the Signature Page, hereinafter referred to as "Licensee."

Model PHS Patent Liccnse Agreement—Exclusive—Angiotech Pharmaceuticals,

Form 121895 Page 1 of 27 (L403-96(0) (MAL) CONFIDENTIAL 19971117

PHS PATENT LICENSE AGREEMENT—EXCLUSIVE

PHS and Licensee agree as follows:

1.

 BACKGROUND

1.01         In the course of conducting biomedical and behavioral research, PHS investigators made inventions that may have commercial applicability.

1.02         By assignment of rights from PHS employees and other inventors, DHHS, on behalf of the United States Government, owns intellectual property rights claimed in any United States and foreign patent applications or patents corresponding to the assigned inventions. DHHS also owns any tangible embodiments of these inventions actually reduced to practice by PHS.

1.03.       The Assistant Secretary for Health of DHHS has delegated to PHS the authority to enter into this Agreement for the licensing of rights to these inventions under 35 U.S.C.. § § 200-212, the Federal Technology Transfer Act of 1986, 15 U.S.C. § 3710a, and/or the regulations governing the licensing of Government-owned inventions, 37 CFR Part 404.

1.04         PHS desires to transfer these inventions to the private sector through commercialization licenses to facilitate the commercial development of products and processes for public use and benefit.

1.05         Licensee desires to acquire commercialization rights to certain of these inventions in order develop processes, methods, or marketable products for public use and benefit.

1.06         Licensee possesses certain intellectual properties including U.S. Patent Application Serial No. [***], U.S. Patent Application Serial No. [***], PCT cognate application no. [***], and [***] divisional patent applications claiming priority of USSN [***] in the same field as that disclosed in the PHS patent application. Further, Licensee also possesses intellectual property embodied. in U.S. Patent Application Serial No. [***], filed [***] entitled [***].

1.07         Licensee and PHS previously entered into a nonexclusive license agreement to license rights under U.S. Patent Application Serial No. [***], filed [***], namely PHS License Agreement L-331-96/0 which license was fully executed on November 26, 1997.

2

DEFINITIONS

2.01       "Benchmarks" mean the performance milestones that are set forth in Appendix E.

2.02       "Commercial Development Plan" means the written commercialization plan attached as Appendix F.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals,  Inc

Form 121895   Page 2 of 27     (L-103-96/0)  (FINAL) CONFIDENTIAL 19971117

2.03         "First Commercial Sale" means the initial transfer by or on behalf of Licensee or its sublicensees of Licensed Products or the initial practice of a Licensed Process by or on behalf of Licensee or its sublicensees in exchange for cash or some equivalent to which value can be assigned for the purpose of determining Net Sales.

2.04         "Government" means the Government of the United States of America.

2.05         "Licensed Fields of Use" means the fields of use identified in Appendix B.

2.06         "Licensed Patent Rights" shall mean:

a)

U.S. patent applications and patents listed in Appendix A, all divisions and continuations of these applications, all patents issuing from such applications, divisions, and continuations, and any reissues, reexaminations, and extensions of all such patents;

b)

to the extent that the following contain one or more claims directed to the invention or inventions disclosed in a) above: i) continuations-in-part of a) above; ii) all divisions and continuations of these continuations-in-part; iii) all patents issuing from such continuations-in-part, divisions, and continuations; and iv) any reissues, reexaminations, and extensions of all such patents;

c)            to the extent that the following contain one or more claims directed to the invention or inventions disclosed in a) above: all counterpart foreign applications and patents to a) and b) above, including those listed in Appendix A.

Licensed Patent Rights shall not include b) or c) above to the extent that they contain one or more claims directed to new matter which is not the subject matter disclosed in a) above.

2.07         "Licensed Process(es)" means processes which, in the course of being practiced would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction.

2.08         "Licensed Product(s)" means tangible materials which, in the course of manufacture, use, or sale would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction.

2.09        "Licensed Territory" means the geographical area identified in Appendix B.

2.10       "Net Sales" means the total gross receipts for sales of Licensed Products or practice of Licensed Processes by or on behalf of Licensee or its sublicensees, and from leasing, renting, or otherwise making Licensed Products available to others without sale or other dispositions, whether invoiced or not, less returns and allowances actually granted, packing costs, insurance costs, freight out, taxes or excise duties imposed on the transaction (if separately invoiced), and wholesaler and cash discounts in amounts customary in the trade. Net Sales shall not include transfers at or below cost by or on behalf of Licensee of Licensed Products or the practice of Licensed Processes in connection with compassionate use, emergency use, bonafide research, treatment Investigational New Drug Applications (IND's), or the like authorized by the U .S. Food and Drug Administration ("FDA") or corresponding foreign agencies. No deductions shall be made for commissions paid to individuals, whether they be  with independent sales agencies or regularly employed by Licensee, or sublicensees, and on its payroll, or for the cost of collections.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895    Page 3 of 27  (L-103-96/0)  (FINAL) CONFIDENTIAL 19971117

2.11        "Practical Application" means to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

2.12        "Research License" means a nontransferable, nonexclusive license to make and to use the Licensed Products or Licensed Processes as defined by the Licensed Patent Rights for purposes of research and not for purposes of commercial manufacture or distribution or in lieu of purchase.

2.13

"Combined Product" means a product that contains a Licensed Product along with at least one other active component or active ingredient, including any proprietary device, not covered by the Licensed Patent Rights.

2.14

"Effective Date" means the date when the last party to sign has executed this Agreement.

3.

GRANT OF RIGHTS

3.01

PHS hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement:

an exclusive license as set forth in Appendix B for:

[***]

a nonexclusive license as set forth in Appendix B for:

[***]

Model PHS Patent License Agreement—Exclusive--Angiotech Pbarmaceuticals, Inc.

Form 121895  Page 4 of 27  (L-103-96/0) (FINAL)  CONFIDENTIAL  19971117

under the Lisensed Patent Rights in the Licensed Territory to make and have made, to use and have used, and to sell and have sold any Licensed Products in the Licensed Fields of Use and to practice and have practiced any Licensed Processes in the Licensed Fields of Use.

3.02         This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of PHS other than Licensed Patent Rights regardless of whether such patents are dominant or subordinate to Licensed Patent Rights.

4.

SUBLICENSING

4.01         Upon written approval by PHS, which approval will not be unreasonably withheld, Licensee may enter into sublicensing agreements under the Licensed Patent Rights. Each sublicense entered into by Licensee which includes rights within a nonexclusive field of use (as set forth in Appendix B of this Agreement) under this Agreement shall also include; (i) the joint and concurrent licensing of a portion of Licensee's intellectual property rights as described under Article 1.06 above, and/or (ii) rights within an exclusive field of use (as set forth in Appendix B of this Agreement) under this Agreement.

4.02        Licensee agrees that any sublicenses granted by it shall provide that the obligations to PHS of Paragraphs 5.01-5.04, 8.01, 10.01, 10.02, 12.05 and 13.07-13.09 of this Agreement shall be binding upon the sublicensee as if it were a party to this Agreement. Licensee further agrees to attach copies of these Paragraphs to all sublicense agreements.

4.03         Any sublieenses granted by Licensee shall provide for the termination of the sublicense, or at the option of the sublicensee, the conversion of the sublicense to a license directly between such sublicensee(s) and PHS, to the extent it relates to the Licensed Patent Rights upon termination of this Agreement under Article 13. Such conversion is subject to. PHS approval and contingent upon acceptance by the sublicensee of the remaining provisions of this Agreement.

4.04         Licensee agrees to forward to PHS a copy of each fatly executed sublicense agreement postmarked within thirty (30) days of the execution of such agreement. To the extent permitted by law, governmental regulation, and PHS policy, PHS agrees to maintain each such sublicense agreement and all information relating thereto in confidence. Licensee will take reasonable efforts to mark such information as confidential.

5.

GRANT OF RIGHTSSTATUTORY REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS

5.01         PHS reserves on behalf of the Government an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of all inventions licensed under the Licensed Patent Rights throughout the world by or on behalf of the Government and on behalf of any foreign government or international organization pursuant to any existing or future treaty or agreement to which the Government is a signatory. Prior to the First Commercial Sale, Licensee agrees to provide PHS reasonable quantities of Licensed Products or materials made through the Licensed Processes for PHS research use.

Model PHS Patent License Agreement—Exclusive--Angiotech Pharmaceuticals, Inc.

Form 121895 Page 5 of 27 (L-103.96/0) (FINAL) CONFIDENTIAL 19971117

5.02

Licensee agrees that products used or sold in the United States embodying Licensed Products or produced through use of Licensed Processes shall be manufactured substantially in the United States, unless a written waiver is obtained in advance from PHS.

5.03

Licensee acknowledges that PHS may enter into future Cooperative Research and Development Agreements (CRADAs) under the Federal Technology Transfer Act of 1986 that relate to the subject matter of this Agreement. Licensee agrees not to unreasonably deny requests for a Research License from such future collaborators with PHS when acquiring such rights is necessary in order to make a CRADA project feasible. Licensee may request an opportunity to join as a party to the proposed CRADA.

5.04

In addition to the reserved license of Paragraph 5.01 above, PHS reserves the right to grant such nonexclusive Research Licenses directly or to require Licensee to grant nonexclusive Research Licenses on reasonable terms. The purpose of this Research License is to encourage basic research, whether conducted at an academic or corporate facility. In order to safeguard the Licensed Patent Rights, however, PHS shall consult with Licensee before granting to commercial entities a Research License or providing to them research samples of the materials.

6.

ROYALTIES AND REIMBURSEMENT

6.01         Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty as set forth in Appendix C.

6.02

 Licensee agrees to pay to PHS a nonrefundable minimum annual royalty as set forth in Appendix C. The minimum annual royalty is due and payable on January 1 of each calendar year and may be credited against any earned royalties due for sales made in that year. However, the first minimum annual royalty shall be due and payable on January 1, 2000) covering the period from January 1, 2000 to December 31, 2000 inclusive.

6.03

Licensee agrees to pay PHS earned royalties as set forth in Appendix C.

6.04

Licensee agrees to pay PUS benchmark royalties as set forth in Appendix C.

6.05

Licensee agrees to pay PHS sublicensing royalties as set forth in Appendix C.

6.06

A claim of a patent or patent application licensed under this Agreement shall cease to fall within the Licensed Patent Rights for the purpose of computing the minimum annual royalty and earned royalty payments in any given country on the earliest of the dates that a) the claim has been abandoned but not continued, b) the patent expires or irrevocably lapses, or c) the claim has been held to be invalid or unenforceable by an unappealed or unappealable decision of a court of competent jurisdiction or administrative agency.

6.07

No multiple royalties shall be payable because any Licensed Products or Licensed Processes are covered by more than one of the Licensed Patent Rights.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals , Inc.

Form 121895 Page 6 of 27 (L-103-96/0) (FINAL) CONFIDENTIAL 19971117

6.08

On sales of Licensed Products by Licensee to sublicensees or affiliated parties or on sales made in other than an arm's-Iength transaction, the value of the Net Sales attributed under this Article 6 to such a transaction shall be that which would have been received in an arm's-length transaction, based on sales of like quantity and quality products on or about the time of such transaction. Notwithstanding the foregoing, sales between and among Licensee and its sublicensees which are intended for resale shall not be included in Net Sales. In such cases, royalties shall be calculated on the basis of Net Sales of Licensed Product(s) by Licensee or any such sublicensee, whichever is larger, as provided in Section 6.03 hereof.

6.09

With regard to expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights incurred by PHS prior to the effective date of this Agreement, Licensee shall pay to PHS, as an additional royalty, within sixty (60) days of PHS's submission of a statement and request for payment to Licensee, an amount equivalent to such patent expenses previously incurred by PHS for any patent expenses which PHS has not yet received reimbursement as of the Effective Date of this agreement.

6.10

With regard to expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights incurred by PHS on or after the effective date of this Agreement, PHS, at its sole option, may require Licensee:

(a)

to pay PHS on an annual basis, within sixty (60) days of PHS's submission of a statement and request for payment, a royalty amount equivalent to all such patent expenses incurred during the previous calendar year(s); or

(b)

to pay all such patent expenses directly to the law firm employed by PHS to handle such functions. However, in such event, PHS and not Licensee shall be the client of such law firm. Any patent costs incurred after the Effective Date of this Agreement will be shared on a pro rata basis by all commercialization licensees to the Licensed Patent Rights at the time when said costs are incurred.

Under exceptional circumstances, Licensee may be given the right to assume responsibility for the preparation, filing, prosecution, or maintenance of any patent application or patent included with the Licensed Patent Rights. In that event, Licensee shall directly pay the attorneys or agents engaged to prepare, file, prosecute, or maintain such patent applications or patents and shall provide to PHS copies of each invoice associated with such services as well as documentation that such invoices have been paid.

6.11

Licensee may elect to surrender its rights in any country of the Licensed Territory under any Licensed Patent Rights upon sixty (60) days written notice to PHS and owe no payment obligation under Article 6.10 for patent-related expenses incurred in that country after the effective date of such written notice.

6.12

If the Licensee or its sublicensee sells a Combined Product, the Net Sales price for purposes of earned royalty determination under this Article 6 shall be calculated by multiplying the market price of the Combined Product by the fraction of al(a+b), where a is the total market price of the Licensed Product if sold separately and b is the total market price of any other active product or component in the Combined Product if sold separately. If the Licensed Product or any other active component or product in the Combined Product are not sold separately, the Net Sales price upon which a royalty is paid shall be: (a) the market price at which the Licensed Product reasonably could be sold as a separate item, which may be used as a in the above fraction in this paragraph to calculate earned royalty if the Licensed Product

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 7 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

is the only active component of the Combined Product not sold as a separate item; or (b) Net Sales price of the Combined Product multiplied by a factor of 1/x where x is the number of active components or ingredients contained in the Combined Product up to a maximum of [***]

7.

PATENT FILING, PROSECUTION, AND MAINTENANCE

7.01

Except as otherwise provided in this Article 7, PHS agrees to take responsibility for, but to consult with, the Licensee in the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights and shall furnish copies of relevant patent-related documents to Licensee. At Licensee's request and expense, PHS shall cooperate with Licensee in preparing, filing, prosecuting, and maintaining such patent applications and patents included in the Licensed Patent Rights as may be reasonably requested by Licensee from time to time. Notwithstanding the foregoing, PHS will retain Principal Power of Attorney and primary control over the preparation, filing, prosecution, and maintenance of said patent applications and patents. PHS shall provide Licensee with reasonable opportunity to comment on any document PHS intends to file or causes to be filed with the releva nt intellectual property or patent office.

7.02

Upon PBS's written request, Licensee shall assume the responsibility for the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights and shall on an ongoing basis promptly furnish copies of all patent-related documents to PAS. In such event, Licensee shall, subject to the prior approval of PAS, select registered patent attorneys or patent agents to provide such services on behalf of Licensee and PHS. PHS shall provide appropriate powers of attorney and other documents necessary to undertake such actions to the patent attorneys or patent agents providing such services. Licensee and its attorneys or agents shall consult with PHS in all aspects of the preparation, filing, prosecution and maintenance of patent applications and patents included within the Licensed Patent Rights and shall provide PHS sufficient opportunity to comment on any document that Licensee intends to file or to cause to be filed with the relevant intellectual property or patent office.

7.03

At any time, PHS may provide Licensee with written notice that PHS wishes to assume control of the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights. If PHS elects to assume such responsibilities, Licensee agrees to cooperate fully with PHS, its attorneys and agents in the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights and to provide PHS with complete copies of any and all documents or other materials that PAS deems necessary to undertake such responsibilities. Licensee shall be responsible for all reasonable costs associated with transferring patent prosecution responsibilities to an attorney or agent of PHS's choice.

7.04

Each party shall promptly inform the other as to all matters that come to its attention that may affect the preparation, filing, prosecution, or maintenance of the Licensed Patent Rights and permit each other to provide comments and suggestions with respect to the preparation, filing, and prosecution of Licensed Patent Rights, which comments and suggestions shall be considered by the other party.

Model PHS Patent License Agreement--Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 8 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

8.

RECORD KEEPING

8.01

Licensee agrees to keep accurate and correct records of Licensed Products made, used, or sold and Licensed Processes practiced under this Agreement appropriate to determine the amount of royalties due PHS. Such records shall be retained for at least five (5) years following a given reporting period. They shall be available during normal business hours for inspection at the expense of PHS by an accountant or other designated auditor selected by PHS for the sole purpose of verifying reports and payments hereunder. The accountant or auditor shall only disclose to PHS information relating to the accuracy of reports and payments made under this Agreement. If an inspection shows an underreporting or underpayment in excess of five percent (5%) for any twelve (12) month period, then Licensee shall reimburse PHS for the cost of the inspection at the time Licensee pays the unreported royalties, including any late charges as required by Paragraph 9.08 of this Agreement. All paym ents required under this Paragraph shall be due within thirty (30) days of the date PHS provides Licensee notice of the payment due.

8.02

Licensee agrees, as part of its independent audit, to have its auditors conduct a review of sales and royalties at least every two years if annual sales of the Licensed Product or Licensed Processes are equal to or greater than the equivalent of two (2) million U.S. dollars. The review shall address, at a minimum, the amount of gross sales by or on behalf of Licensee during the audit period, the amount of funds owed to the Government under this Agreement, and whether the amount owed has been paid to the Government and is reflected in the records of the Licensee. A report by the auditor shall be submitted promptly to PHS on completion. Licensee shall pay for the entire cost of the review.

9.

REPORTS ON PROGRESS, BENCHMARKS, SALES AND PAYMENTS

9.01

Prior to signing this Agreement, Licensee has provided to PHS the Commercial Development Plan at Appendix F, under which Licensee intends to bring the subject matter of the Licensed Patent Rights to the point of Practical Application. This Commercial Development Plan is hereby incorporated by reference into this Agreement. Based on this plan, performance Benchmarks are determined as specified in Appendix E.

9.02

Licensee shall provide written annual reports on its product development progress or efforts to commercialize under the Commercial Development Plan for each of the Licensed Fields of Use within sixty (60) days after December 31 of each calendar year. These progress reports shall include, but not be limited to: progress on research and development, status of applications for regulatory approvals, manufacturing, sublicensing, marketing, and sales during the preceding calendar year, as well as plans for the present calendar year. PHS also encourages these reports to include information on any of Licensee's public service activities that relate to the Licensed Patent Rights, If reported progress differs from that projected in the Commercial Development Plan and Benchmarks, Licensee shall explain the reasons for such differences. In any such annual report, Licensee may propose amendments to the Commercial Development Plan, acceptance of w hich by PHS may not be denied unreasonably. Licensee agrees to provide any additional information reasonably required by PHS to evaluate Licensee's performance under this Agreement. Licensee may amend the Benchmarks at any time upon written consent by PHS. PHS shall not unreasonably withhold approval of any request of Licensee to extend the time periods of this schedule if such request is supported by a reasonable showing by Licensee of diligence in its performance under the Commercial Development Plan and toward bringing the Licensed Products to the point of Practical Application as defined in 37 CFR 404.3(d). Licensee shall amend the Commercial Development Plan and Benchmarks at the request of PHS to address any Licensed Fields of Use not specifically addressed in the plan originally submitted.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 9 of 27 (L-103-96/0) (FINAL) CONFIDENTIAL 19971117

9.03

Licensee shall report to PHS the date of the First Commercial Sale in each country in the Licensed Territory within ninety (90) days of such occurrence.

9.04

Licensee shall submit to PHS within sixty (60) days after each calendar half-year ending June 30 and December 31 a royalty report setting forth for the preceding half-year period the amount of the Licensed Products sold or Licensed Processes practiced by or on behalf of Licensee in each country within the Licensed Territory, the Net Sales, and the amount of royalty accordingly due. With each such royalty report, Licensee shall submit payment of the earned royalties due. If no earned royalties are due to PI^-IS for any reporting period, the written report shall so state. The royalty report shall be certified as correct by an authorized officer of Licensee and shall include a detailed listing of all deductions made under Paragraph 2.10 to determine Net Sales made under Article 6 to determine royalties due.

9.05

Licensee agrees to forward semi-annually to PHS a copy of such reports received by Licensee from its sublicensees during the preceding half-year period as shall be pertinent to a royalty accounting to PHS by Licensee for activities under the sublicense.

9.06

Royalties due under Article 6 shall be paid in U.S. dollars. For conversion of foreign currency to U.S. dollars, the conversion rate shall be the New York foreign exchange rate quoted in The Wall Street Journal on the day that the payment is due. All checks and bank drafts shall be drawn on United States banks and shall be payable, as appropriate, to the National Institutes of Health, P.O. Box 360120, Pittsburgh, Pennsylvania 15251-6120. Any loss of exchange, value, taxes, or other expenses incurred in the transfer or conversion to U.S. dollars shall be paid entirely by Licensee. The royalty report required by Paragraph 9.04 of this Agreement shall accompany each such payment and a copy of such report shall also be mailed to PHS at its address for notices indicated on the Signature Page of this Agreement.

9.07

Licensee shall be solely responsible for determining if any tax on royalty income is owed outside the United States and shall pay any such tax and be responsible for all filings with appropriate agencies of foreign governments.

9.08

Late charges will be assessed by PHS as additional royalties on any overdue payments at a rate of one (1) percent per month compounded monthly. The payment of such late charges shall not prevent PHS from exercising any other rights it may have as a consequence of the lateness of any payment.

9.09

All plans and reports required by this Article 9 and marked "confidential" by Licensee shall, to the extent permitted by law, be treated by PHS as commercial and financial information obtained from a person and as privileged and confidential and any proposed disclosure of such records by the PHS under the Freedom of Information Act, 5 U.S.C. § 552 shall be subject to the prediselosure notification requirements of 45 CFR § 5.65(d).

9.10

Licensee shall submit to PHS a satisfactory development plan for the identification and development of [***] (excluding [***] and [***]) for the treatment of [***] within six (6)

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 10 of 27 (L-103-96/6) (FINAL) CONFIDENTIAL 19971117

months from the Effective Date. PHS will notify Licensee in writing as to whether the development plan submitted is satisfactory. If PHS determines this development plan to be unsatisfactory, Licensee will be notified in writing of any deficiencies and Licensee will be provided with a reasonable period to remedy any deficiencies.

9.11

Licensee shall submit to PHS a satisfactory development plan for the identification of other indications of [***] other than [***] and [***] and the development of therapeutics therefor within six (6) months from the Effective Date. PHS will notify Licensee in writing as to whether the development plan submitted is satisfactory. If PHS determines this development plan to be unsatisfactory, Licensee will be notified in writing of any deficiencies and Licensee will be provided with a reasonable period to remedy any deficiencies.

9.12

Within twelve (12) months of the Effective Date of this agreement, if PHS receives a bona fide license application from a third party for the commercial development of a [***] for a particular Disease Indication (as defined in Section IV of Appendix C of this Agreement), and Licensee has not specifically addressed the development of any [***] for said Disease Indication in Licensee's then-current Commercial Development Plan, or if Licensee does not elect to pursue the development of any [***] for said Disease Indication and does not, in a manner acceptable to PHS, amend its Commercial Development Plan within three (3) months of being notified of such field of use to include such proposed commercial development for said Disease Indication, Licensee agrees to negotiate in good faith with such third party the extension of a sublicense on commercially reasonable terms. In the event that no agreement can be reached between Licensee and such third party within this three (3) month period (or as otherwise agreed between PHS and Licensee) for this particular Disease Indication, all rights to pursue such proposed commercial development for this particular Disease Indication shall be automatically rescinded, which rights may then be licensed exclusively or nonexclusively by PHS in accordance to 37 CFR Part 404 to a third party.

9.13

Within six (6) months of the Effective Date of this agreement and for a period of at least five (5) years from the Effective Date of this agreement, Licensee shall use reasonable efforts to establish, maintain, andior sponsor an ongoing publicly-accessible, freely-available internet website for public health education and addressing the public health issues associated with fibroproliferative vascular diseases in the United States of America and around the world to the extent permitted by applicable laws and government regulations.

10.

  PERFORMANCE

10.01     Licensee shall use its reasonable best efforts to bring the Licensed Products and Licensed Processes to Practical Application. "Reasonable best efforts" for the purposes of this provision shall include adherence to the Commercial Development Plan at Appendix F and performance of the Benchmarks at Appendix E. The efforts of a sublicensee shall be considered the efforts of Licensee.

10.02     Upon the First Commercial Sale in the United States, its territories, possessions, and commonwealths, until the expiration of this Agreement, Licensee shall use its reasonable best efforts to make Licensed Products and Licensed Processes reasonably accessible to the United States public.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 11 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

11.

INFRINGEMENT AND PATENT ENFORCEMENT

11.01

PHS and Licensee agree to notify each other promptly of each infringement or possible infringement of the Licensed Patent Rights, as well as any facts which may affect the validity, scope, or enforceability of the Licensed Patent Rights of which either Party becomes aware.

11.02

Pursuant to this Agreement and the provisions of Chapter 29 of title 35, United States Code, Licensee may a) bring suit in its own name, at its own expense, and on its own behalf for infringement of presumably valid claims in the Licensed Patent Rights: b) in any such suit, enjoin infringement and collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and c) settle any claim or suit for infringement of the Licensed Patent Rights provided, however, that PHS and appropriate Government authorities shall have the first right to take such actions. If Licensee desires to initiate a suit for patent infringement, Licensee shall notify PHS in writing. If PHS does not notify Licensee of its intent to pursue legal action within ninety (90) days, Licensee will be free to initiate suit. PHS shall have a continuing right to intervene in such suit. Licensee shall take no action to compel the Government either to i nitiate or to join in any such suit for patent infringement. Licensee may request the Government to initiate or join in any such suit if necessary to avoid dismissal of the suit. Should the Government be made a party to any such suit, Licensee shall reimburse the Government for any costs, expenses, or fees which the Government incurs as a result of such motion or other action, including any and all reasonable costs incurred by the Government in opposing any such motion or other action. In all cases, Licensee agrees to keep PHS reasonably apprised of the status and progress of any litigation. Before Licensee commences an infringement action, Licensee shall notify PHS and give careful consideration to the views of PHS and to any potential effects of the litigation on the public health in deciding whether to bring suit.

11.03

In the event that a declaratory judgment action alleging invalidity or non-infringement of any of the Licensed Patent Rights shall be brought against Licensee or raised by way of counterclaim or affirmative defense in an infringement suit brought by Licensee under Paragraph 11.02, pursuant to this Agreement and the provisions of Chapter 29 of Title 35, United States Code or other statutes, Licensee may a) defend the suit in its own name, at its own expense, and on its own behalf for presumably valid claims in the Licensed Patent Rights; b) in any such suit, ultimately to enjoin infringement and to collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and c) settle any claim or suit for declaratory judgment involving the Licensed Patent Rights-provided, however, that PHS and appropriate Government authorities shall have the first right to take such actions and shall have a cont inuing right to intervene in such suit. If PHS does not notify Licensee of its intent to respond to the legal action within a reasonable time, Licensee will be free to do so. Licensee shall take no action to compel the Government either to initiate or to join in any such declaratory judgment action. Licensee may request the Government to initiate or to join any such suit if necessary to avoid dismissal of the suit. Should the Government be made a party to any such suit by motion or any other action of Licensee, Licensee shall reimburse the Government for any costs, expenses, or fees which the Government incurs as a result of such motion or other action. If Licensee elects not to defend against such declaratory judgment action, PHS, at its option, may do so at its own expense. In all cases, Licensee agrees to keep PHS reasonably apprised of the status and progress of any litigation. Before Licensee commences an infringement action, Licensee shall notify PITS and give careful consideration to the views of PHS and to any potential effects of the litigation on the public health in deciding whether to bring suit.

Model PHS Patent License Agreement--Exclusive--Angiotech Pharmaceuticals, Inc.

Form 121895 Page 12 of 27 (L-103-96/9) (FINAL) CONFIDENTIAL 19971117

11.04

In any action under Paragraphs 11.02 or 11.03, the expenses including costs, fees, attorney fees, and disbursements, shall be paid by Licensee. Up to fifty percent (50%) of such expenses may be credited against the royalties payable to PHS under Paragraph 6.03 under the Licensed Patent Rights in the country in which such a suit is filed. In the event that fifty percent (50%) of such expenses exceed the amount of royalties payable by Licensee in any calendar year, the expenses in excess may be carried over as a credit on the same basis into succeeding calendar years. A credit against litigation expenses, however, may not reduce the royalties due in any calendar year to less than the minimum annual royalty. Any recovery made by Licensee, through court judgment or settlement, first shall be applied to reimburse PHS for royalties withheld as a credit against litigation expenses and then to reimburse Licensee for its litigation expense. Any remaining recoveries shall be sh ared equally by Licensee and PHS to the extent the legal action relates to the Licensed Patent Rights.

11.05

PHS shall cooperate fully with Licensee in connection with any action under Paragraphs 11.02 or 11.03. PHS agrees promptly to provide access to all necessary documents and to render reasonable assistance in response to a request by Licensee.

12.

NEGATION OF WARRANTIES AND INDEMNIFICATION

12.01

PHS offers no warranties other than those specified in Article 1.

12.02

PHS does not warrant the validity of the Licensed Patent Rights and makes no representations whatsoever with regard to the scope of the Licensed Patent Rights, or that the Licensed Patent Rights may be exploited without infringing other patents or other intellectual property rights of third parties.

12.03

PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS OF THE LICENSED PATENT RIGHTS.

12.04

PHS does not represent that it will commence legal actions against third parties infringing the Licensed Patent Rights.

12.05

Licensee shall indemnify and hold PHS, its employees, students, fellows, agents, and consultants harmless from and against all liability, demands, damages, expenses, and losses, including but not limited to death, personal injury, illness, or property damage in connection with or arising out of a) the use by or on behalf of Licensee, its sublicensees, directors, employees, or third parties of any Licensed Patent Rights, or b) the design, manufacture, distribution, or use of any Licensed Products, Licensed Processes or materials by Licensee, or other products or processes developed in connection with or arising out of the Licensed Patent Rights. Licensee agrees to maintain a liability insurance program consistent with sound business practice. Notwithstanding any other provision to the contrary, Licensee shall have no obligation to indemnify and hold harmless PHS, its employees, students, fellows, agents, and consultants in connection with or arising out o f the grossly negligent mishandling of Licensed Products, Licensed Processes or materials by PHS, its employees, students, fellows, agents, and consultants.

Model PHS Patent License Agreement--Exclusive--Angiotech Pharmaceuticals,

Form 121895 Page 13 of 27 (L-103-96/0) (FINAL) CONFIDENTIAL 19971117

13.

TERM, TERMINATION, AND MODIFICATION OF RIGHTS

13.01

This Agreement is effective when signed by all parties and shall extend to the expiration of the last to expire of the Licensed Patent Rights unless sooner terminated as provided in this Article 13.

13.02

In the event that Licensee is in default in the performance of any material obligations under this Agreement, including but not limited to the obligations listed in Article 13.05, and if the default has not been remedied within ninety (90) days after the date of notice in writing of such default, PHS may terminate this Agreement by written notice,

13.03

In the event that Licensee becomes insolvent, files a petition in bankruptcy, has such a petition filed against it, determines to file a petition in bankruptcy, or receives notice of a third party's intention to file an involuntary petition in bankruptcy, Licensee shall immediately notify PHS in writing.

13.04

Licensee shall have a unilateral right to terminate this Agreement and/or any licenses in any country by giving PHS sixty (60) days written notice to that effect.

13.05

PHS shall specifically have the right to terminate or modify, at its option, this Agreement, if PHS determines that the Licensee: 1) is not using reasonable best efforts in executing the Commercial Development Plan submitted with its request for a license and the Licensee cannot otherwise demonstrate to PIIS's satisfaction that the Licensee has taken, or can be expected to take svizlein a reasonable time, effective steps to achieve Practical Application of the Licensed Products or Licensed Processes; 2) has not achieved the Benchmarks as may be modified from time to time by prior mutual written consent under Paragraph 9.02; 3) has willfully made a false statement of, or willfully omitted, a material fact in the license application or in any report required by the license agreement; 4) has committed a material breach of a covenant or agreement contained in the license; 5) is not keeping Licensed Products or Licensed Processes reasonably available to the public after co mmercial use commences; 6) cannot reasonably satisfy unmet health and safety needs; or 7) cannot reasonably justify a failure to comply with the domestic production requirement of Paragraph 5.02 unless waived. In making this determination, PHS will take into account the normal course of such commercial development programs conducted with sound and reasonable business practices and judgment and the annual reports submitted by Licensee under Paragraph 9.02. Prior to invoking this right, PHS shall give written notice to Licensee providing Licensee specific notice of, and a ninety (90) day opportunity to respond to, PHS's concerns as to the previous items 1) to 7). If Licensee fails to alleviate PHS's concerns as to the previous items 1) to 7) or fails to initiate corrective action to PHS's satisfaction, PHS may terminate this Agreement.

13.06

When the public health and safety so require, and after written notice to Licensee providing Licensee a sixty (60) day opportunity to respond, PHS shall have the right to require Licensee to grant sublicenses to responsible applicants, on reasonable terms, in any Licensed Fields of Use under the Licensed Patent Rights, unless Licensee can reasonably demonstrate that the granting of the sublicense would not materially increase the availability to the public of the subject matter of the Licensed Patent Rights. PHS will not require the granting of a sublicense unless the responsible applicant has first negotiated in good faith with Licensee.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 14 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

13.07

PHS reserves the right according to 35 U.S.C. § 209(f)(4) to terminate or modify this Agreement if it is determined that such action is necessary to meet requirements for public use specified by federal regulations issued after the date of the license and such requirements are not reasonably satisfied by Licensee.

13.08

Within thirty (30) days of receipt of written notice of PHS's unilateral decision to modify or terminate this Agreement, Licensee may, consistent with the provisions of 37 CFR 404.11, appeal the decision by written submission to the designated PHS official. The decision of the designated PHS official shall be the final agency decision. Licensee may thereafter exercise any and all administrative or judicial remedies that may be available.

13.09

Within ninety (90) days of termination of this Agreement under this Article 13 or expiration under this Article 13, a final report shall be submitted by Licensee. Any royalty payments, including those related to patent expense, due to PHS shall become immediately due and payable upon termination or expiration. If terminated under this Article 13, sublicensees may elect to convert their sublicenses to direct licenses with PHS pursuant to Paragraph 4.03.

14.

GENERAL PROVISIONS

14.01

Neither Party may waive or release any of its rights or interests in this Agreement except in writing. The failure of either Licensee or the Government to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right by the Government or excuse a similar subsequent failure to perform any such term or condition by either party.

14.02

This Agreement constitutes the entire agreement between the Parties relating to the subject matter of the Licensed Patent Rights, and all prior negotiations, representations, agreements, and understandings are merged into, extinguished by, and completely expressed by this Agreement.

14.03

The provisions of this Agreement are severable, and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable under any controlling body of law such determination shall not in any way affect the validity or enforceability of the remaining provisions of this Agreement.

14.04

If either Party desires a modification to this Agreement, the Parties shall, upon reasonable notice of the proposed modification by the Party desiring the change, confer in good faith to determine the desirability of such modification. No modification will be effective until a written amendment is signed by the signatories to this Agreement or their designees.

14.05

The construction, validity, performance, and effect of this Agreement shall be governed by Federal Iaw as applied by the Federal courts in the District of Columbia.

14.06

All notices required or permitted by this Agreement shall be given by prepaid, first class, registered or certified mail, or by a recognized express/overnight delivery service provider, properly addressed to the other Party at the address designated on the following Signature Page, or to such other address as may be designated in writing by such other Party, and shall be effective as of the date of the postmark or verifiable dispatch of such notice.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 15 of 27 (L-103-96i0) (FINAL) CONFIDENTIAL 19971117

14.07

This Agreement shall not be assigned by Licensee except a) with the prior written consent of PHS, such consent not to be withheld unreasonably; or b) as part of a sale or transfer of substantially the entire business of Licensee relating to operations which concern this Agreement. Licensee shall notify PHS within ten (10) days of any assignment of this Agreement by Licensee.

14.08

Licensee agrees in its use of any PHS-supplied materials to comply with all applicable statutes, regulations, and guidelines, including Public Health Service and National Institutes of Health regulations and guidelines. Licensee agrees not to use the materials for research involving human subjects or clinical trials in the United States without complying with 21 CFR Part 50 and 45 CFR Part 46. Licensee agrees not to use the materials for research involving human subjects or clinical trials outside of the United States without notifying PHS, in writing, of such research or trials and complying with the applicable regulations of the appropriate national control authorities. Written notification to PHS of research involving human subjects or clinical trials outside of the United States shall be given no later than sixty (60) days prior to commencement of such research or trials.

14.09

Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities from the U.S., its territories, possessions, and commonwealths. The transfer of such items may require a license from the cognizant Agency of the U.S. Government or written assurances by Licensee that it shall not export such items to certain foreign countries without prior approval of such agency. PHS neither represents that a license is or is not required or that, if required, it shall be issued.

14.10

Licensee agrees to mark the Licensed Products or their packaging sold in the United States with all applicable U.S. patent numbers and similarly to indicate "Patent Pending" status. All Licensed Products manufactured in, shipped to, or sold in other countries shall be marked in such a manner as to preserve PHS patent rights in such countries.

14.11

By entering into this Agreement, PHS does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by the Government, PHS, any other Government organizational unit, or any Government employee. Additionally, Licensee shall not use the names of NIH, CDC, PHS, or DHHS or the Government or their employees in any advertising, promotional, or sales literature without the prior written consent of PHS, except that Licensee may publicly identify the existence of this Agreement and is not prohibited from using publicly available factual information regarding the Licensed Patent Rights, Licensed Products, and Licensed Processes specifically including, but not limited to, the names of the inventors as appears on the Licensed Patent Rights and their associated NIH institutes, without such consent. This provision shall also apply to Paragraph 9.13 of this Agreement.

14.12

The Parties agree to attempt to settle amicably any controversy or claim arising under this Agreement or a breach of this Agreement, except for appeals of modifications or termination decisions provided for in Article 13. Licensee agrees first to appeal any such unsettled claims or controversies to the designated PHS official, or designee, whose decision shall be considered the final agency decision. Thereafter, Licensee may exercise any administrative or judicial remedies that may be available.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 16 of 27 (L-103.96/0) (FINAL) CONFIDENTIAL 19971117

14.13

Nothing relating to the grant of a license, nor the grant itself, shall be construed to confer upon any person any immunity from or defenses under the antitrust laws or from a charge of patent misuse, and the acquisition and use of rights pursuant to 37 CFR Part 404 shall not be immunized from the operation of state or Federal law by reason of the source of the grant.

14.14

Paragraphs 4.03, 8.01, 9.06-9.08, 12.01-12.05, 13.08, 13.09, 14.12, 14.15, and 14.16 of this Agreement shall survive termination of this Agreement.

14.15

Upon termination or expiration of this Agreement by Licensee, Licensee and sublicensee shall be entitled to sell any Licensed Products manufactured prior to the date of such termination or expiration for up to an additional six (6) month period subject to the obligations of Articles 6, 8, and 9.

14.16

To the extent permitted by law, government regulation, and PHS policy, PHS agrees to maintain in confidence and not disclose any confidential information provided by Licensee to PHS under this Agreement or the terms and conditions of this Agreement. Licensee will take reasonable efforts to mark such information as confidential.

14.17

The previous nonexclusive license agreement between Licensee and PHS as described under Paragraph 1.07 (#L-331-96/0) of this Agreement shall terminate upon execution of this Agreement, and the terms of this Agreement shall supersede said previous nonexclusive license agreement. The sublicenses granted by Licensee to each of Boston Scientific and Cook Incorporated shall continue under the terms of this license.

SIGNATURES BEGIN ON NEXT PAGE

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmacenticals, Inc.

Form 121895 Page 17 of 27 (L-103-96/0) (FINAL) CONFIDENTIAL 19971117

PHS PATENT LICENSE AGREEMENT—NONEXCLUSIVE

SIGNATURE PAGE

For PHS:

/s/ Barbara McGarey	11/19/97
Barbara McGarey, J.D.	Date
Deputy Director, Office of Technology Transfer
National Institutes of Health

Mailing Address for Notices:

Office of Technology Transfer National Institutes of Health

6011 Executive Boulevard, Suite 325

Rockville, Maryland 20852

For Licensee (Upon, information and belief, the undersigned expressly certifies or affirms that the contents of any statements of Licensee made or referred to in this document are truthful and accurate.):

by:

/s/ Kennith A. Mellquist	Nov. 17, 1997
Signature of Authorized Official	Date
Kennith A. Mellquist
Printed Name
V.P. Corporate Affairs
Title

Mailing Address for Notices:

Angiotech Pharmaceuticals, Inc.

6660 N.W. Marine Drive

Vancouver. British Columbia

CANADA V6T 1Z4

Model PHS Patent License Agreernent—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 18 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

APPENDIX A--Patent(s) or Patent Application(s)

Patent(s) or Patent Application(s):

a)

U.S. Patent Application Serial No. [***], filed [***]; U.S. Patent Application Serial No. [***], filed [***], now issued as U.S. Patent No. [***] on [***]; and U.S. Patent Application Serial No. [***], filed [***]; and all divisions and continuations of these applications, all patents issuing from such applications, divisions, and continuations, and any reissues, reexaminations, and extensions of all such patents;

b)

to the extent that the following contain one or more claims directed to the invention or inventions claimed in a) above: 1) continuations-in-part of a) above;  all divisions and continuations of these continuations-in-part; iii) all patents issuing from such continuations-in-part, divisions, and continuations; and iv) any reissues, reexaminations, and extensions of all such patents;

c)

to the extent that the following contain one or more claims directed to the invention or inventions claimed in a) above: all counterpart foreign applications and patents to a) and b) above.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 19 of 27 (L-103-96/0) (FINAL) CONFIDENTIAL 19971117

APPENDIX B--Licensed Fields of Use and Territory

Licensed Fields of Use:

Exclusively for [***]

Exclusively for [***]

Nonexclusively for [***]

Licensed Territory:

Worldwide

Model PHS Patent License Agreement—Exclusive--Angiotech Pharmaceuticals, Inc.

Form 121895 Page 20 of 27 (L-103.9610) (FINAL) CONFIDENTIAL 19971117

APPENDIX C--Royalties

Royalties:

Section I.

Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty in the amount of [***] (US$[***]) U.S. Dollars. This license issue royalty is payable according to the following schedule:

A.

[***] U.S. Dollars (US$[***]) by December 31, 1997.

B.

[***] U.S. Dollars (US$[***]) by June 30, 1998.

C.

[***] U.S. Dollars (US$[***]) by December 31, 1998.

D.

[***] U.S. Dollars (US$[***]) by June 30, 1999.

Section II.

Licensee agrees to pay to PHS a nonrefundable minimum annual royalty in the amount of [***] (US$[***]) U.S. Dollars.

The first minimum annual royalty shall be due and payable on January 1, 2000 for the period from January 1, 2000 to December 31, 2000 inclusive. Subsequent minimal annual royalty payments shall be due and payable as set forth in Paragraph 6.02.

Section III. Licensee agrees to pay PHS earned royalties on Net Sales as follows:

A)

[***] Percent ([***]%) of Net Sales by Licensee or a sublicensee on all Licensed Products manufactured and sold in the Licensed Territory for Net Sales equal to or less than [***] U.S. Dollars (US$[***]); and [***] Percent ([***]%) of Net Sales by Licensee or a sublicensee on all Licensed Products manufactured and sold in the Licensed Territory for Net Sales greater than [***] U.S. Dollars (US$[***]); and

B)

Licensee shall be entitled to a [***] percent ([***]%) credit against  earned royalty rate for each [***] percent ([***]%) of royalty in excess of [***] percent ([***]%) Licensee must pay to other unaffiliated third- party licensors for the manufacture and sale of Licensed Products. Said reduction, however, shall not reduce the royalty rate for Licensed Products below [***] the rate provided for under Paragraph A above.

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 21 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

Section IV.

Licensee agrees to pay PHS benchmark royalties as follows:

[***] Thousand (US$[***]) U.S. Dollars payable Twelve (12) months after [***] in a major market area ([***]) for each Disease Indication ("Disease Indication" being defined as [***], or any such other disease identified pursuant to the development plan to be prepared and submitted pursuant to Appendix E).

[***] (US$[***]) U.S. Dollars payable within ninety (90) days upon Licensee's or its sublicensee's [***] in a major market area ([***]) for each Disease Indication,

[***] (US$[***]) U.S. Dollars payable within Ninety (90) days after the [***] in any major market area ([***]) for each Disease Indication, said [***] obtained through Licensee or a specific sublicensee (hereinafter [***]). [***] (US$[***]) U.S. Dollars payable within Ninety (90) days for each subsequent [***] for the same Disease Indication in any major market area ([***]), said subsequent [***] being obtained by Licensee or any one of Licensee's sublicensees, if Licensee or such sublicensee has not previously obtained [***] for the same Disease Indication under this Agreement (a sublicensee other than the sublicensee which obtained the [***]). It should be noted that said [***] (US$[***]) benchmark royalty is only payable with respect to the major market area in which the product is first [***] by Licensee or each sublicensee which has not previously obtained [***] for this Disease Indication, not for each major market area in whi ch the product is [***].

Section V.

Licensee agrees to pay PHS sublicensing royalties as follows:

A)

For each subsequent sublicensing agreement by Licensee for the Licensed Patent Rights after the first two sublicense agreements (two sublicensees) (granted to Boston Scientific Corporation and Cook, Incorporated under the previous nonexclusive license identified under Paragraph 1.07 of this Agreement), Licensee agrees to pay PHS:

a minimum royalty of [***] (US$[***]) U.S. Dollars as a noncreditable, nonrefundable royalty within ninety (90) days of the execution of the sublicensing agreement; and

B)

For each sublicensing agreement by Licensee for the Licensed Patent Rights including the first two sublicense agreements, Licensee further agrees to pay PHS:

- [***] percent ([***] %) of the fair market value of any consideration received by Licensee under the sublicense less [***]

Model PHS Patent License Agreement--Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 22 of 27 (1,103-96/11) (FINAL) CONFIDENTIAL 19971117

[***] (US$[***]) U.S. Dollars, payable within ninety (90) days of receipt thereof, wherein "any consideration" includes:

All payments received by the Licensee from a sublicensee under the terms and conditions of the sublicense, excluding; (i) earned royalties, (ii) minimum annual royalties to the extent that the total of all minimum annual royalties collected from all subticensees total less than or equal to the corresponding minimum annual royalties payable to the PHS by the Licensee under this Appendix C and to the extent that the minimum annual royalties represent actual earned royalties (iii) reimbursements for research and development expenses and other direct costs incurred by the Licensee to the extent that Licensee has not previously received any consideration or reimbursement for such expenses, (iv) the fair market value of equity investments by the sublicensee in the Licensee; and (v) any payments from any sublicensee to Licensee that correspond with and to the extent such payments are equal to or less than any ro yalties payable by Licensee to PHS as set forth in Section IV above of this Appendix C.

For "any consideration" received by Licensee from its sublicensee(s) relating to any Combined Product, the percentage of such consideration that PHS shall be entitled to pursuant to this section shall be adjusted by multiplying [***] percent ([***] %) by the fraction (based on the sale price of the Combined Product) a/(a+b), where a is the total market price of the Licensed Product if sold separately and b is the total market price of any other active product or component in the Combined Product if sold separately. If the Licensed Product or any other active component or product in the Combined Product arc not sold separately, the "consideration" upon which a royalty is paid shall be: (a) the market price at which the Licensed Product reasonably could be sold as a separate item, which may be used as a in the above fraction in this paragraph to calculate earned royalty if the Licensed Product i s the only active component of the Combined Product not sold as a separate item; or (b) Net Sales price of the Combined Product multiplied by a factor of 1/x where x is the number of active components or ingredients contained in the Combined Product up to a maximum of [***].

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 23 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

APPENDIX D—Modifications

Modifications to the Articles and Paragraphs of this Agreement, as agreed to by PHS and Licensee, have been incorporated into the text of this Agreement.

Model PHS Patcnt License Agreement--Exclusivc—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 24 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

APPENDIX E--Benchmarks and Performance

Licensee agrees to the following Benchmarks for its performance under this Agreement and, within ten (10) days of achieving a Benchmark, shall notify PHS that the Benchmark has been achieved.

I) Under the exclusive fields of use:

A) For [***]:

1)

[***]

2)

[***]

3)

[***]

4)

[***]

B) For [***]:

1)

[***]

2)

[***]

3)

[***]

4)

[***]

4)

[***]

II) Under the nonexclusive fields of use:

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 25 of 27 (L-103-96/0) (FINAL) CONFIDENTIAL 19971117

1)

[***]

2)

[***]

Model PHS Patent License Agreement Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 26 of 27 (1,103-96/0) (FINAL) CONF1DENTIAI, 19971117

APPENDIX F--Commercial Development Plan

Model PHS Patent License Agreement—Exclusive—Angiotech Pharmaceuticals, Inc.

Form 121895 Page 27 of 27 (L-103-9610) (FINAL) CONFIDENTIAL 19971117

EX-10.12

Exhibit 10-12

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

United States Public Health Service
Amendment L-103-96/1

This first Amendment ("Amendment") to the License Agreement L-103-96/0 entered into on November 19, 1997 (the "Original Agreement") by the Public Health Service (hereinafter "PHS") through the Office of Technology Transfer, National Institutes of Health, 6011 Executive Boulevard, Suite 325, Rockville, Maryland, 20852-3804 and Angiotech Pharmaceuticals, Inc. (hereinafter "Licensee"), a Canadian corporation having its principal office at 6660 N.W. Marine Drive, Vancouver, B.C. CANADA, V6T 1 Z4, is effective as of the last signature date below.

WHEREAS,

A.

The Original Agreement by and between PHS and Licensee grants Licensee, among other things, an exclusive license under the Licensed Patent Rights in the Licensed Territory to make and have made, to use and have used, to sell and have sold, to offer to sell, and to import Licensed Products in the Licensed Fields of Use and to practice and have practiced any Licensed Processes in the Licensed Fields of Use.

B.

As Licensee made payments in lieu of an earned royalty to enter into a License Agreement with NeoRx Corporation ("NeoRx"), pursuant to which NeoRx granted Licensee an exclusive license to certain technology, patents and other intellectual property rights covering the manufacture, use and sale of Licensed Products, PHS and Licensee wish to adjust the earned royalty rates to reflect these additional intellectual property rights needed to practice the invention.

C.

PHS and Licensee wish to further define the active components of certain Combined Products.

D.

PHS and Licensee wish to expedite the ultimate clinical use of Licensed Products which are at a later stage of development by severing certain legal obligations from other Licensed Products which are at earlier stages of development.

E.

PHS and Licensee have determined the desirability of amending the Original Agreement to facilitate the development of Licensed Products under the Licensed Patent Rights.

NOW THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Licensee and PHS agree to amend the Original Agreement as follows:

1.

Section 2.13 (Combined Product). Licensee and PHS hereby agree to amend Section 2.13 (the definition of "Combined Product") of the Original Agreement by adding the following at the end of that section:

"For example, [***] and [***] are two-component Combined Products that each contain a Licensed Product and one other active component."

Amendment L-103-9611

PHS and Angiotech Pharmaceuticals, Inc.

March 4, 2002, Page 1 of 5, File: L103961FINAL

2.

Severable Obligations by Licensed Field of Use.

2.1

New Section 13.10. Licensee and PHS hereby agree to add the following as a new Section 13.10 to the Original Agreement:

"13.10 As set forth in Section 3.01 and Appendix B, in this Agreement PHS grants Licensee an exclusive license in two different Licensed Fields of Use and a nonexclusive license in a third Licensed Field of Use. All of Licensee's obligations under this Agreement except only those obligations pertaining to royalties and reimbursement under Article 6 (but including, without limitation, obligations pertaining to patent filing, prosecution and maintenance under Article 7, record keeping under Article 8, plans and reports under Article 9, performance under Article 10, infringement and patent enforcement under Article 11 and the obligations listed in Section 13.05) are severable obligations by Licensed Field of Use, not joint obligations of Licensee. Therefore, notwithstanding anything to the contrary set forth in this Agreement, Licensee's unremedied default in the performance of any material obligation under thi s Agreement (except royalty and reimbursement obligations under Article 6) that pertain to only one of the three Licensed Fields of Use shall be a basis for PHS, in accordance with this Article 13, to terminate or modify Licensee's rights under this Agreement as to such Licensed Field of Use, but shall not be a basis for PHS to terminate or modify Licensee's rights in the other Licensed Fields of Use, and all of Licensee's rights and obligations under this Agreement in the other Licensed Fields of Use shall survive, and remain unaffected by, such termination or modification of rights in one Licensed Field of Use."

2.2

Related Amendments to Sections 13.02, 13.04, 13.05 and 13.07.

Licensee and PHS hereby agree to add the phrase ", subject to Section 13.10" (i) in Section 13.02 (after "PHS may" in line 4 of Section 13.02), (ii) in Section 13.05 (both at the beginning of that section and after "PHS may" in the last full line of that section), and (iii) at the beginning of Section 13.07. Licensee and PHS hereby also agree to add the phrase ", on a Licensed Field of Use-by-Licensed Field of Use basis in accordance with Section 13.10," (i) at the end of Section 13.02, after "written notice," (ii) in Section 13.04 after "any licenses", (iii) at the end of Section 13.05, after "terminate this Agreement," and (iv) in Section 13.07 after "modify this Agreement."

3.

Appendix C, Section III (Royalties). Licensee and PBS hereby agree to amend Appendix C, Section III, Paragraph A of the Original Agreement by adding the following at the end of that Paragraph A, immediately prior to "; and":

"; provided that (a), notwithstanding the foregoing, in the case of two-component Combined Products as described in Section 1 of this Amendment that are [***], PHS and Licensee agree that the royalty rates on Net Sales of such Combined Products manufactured and sold in the Licensed Territory shall be (i) [***] percent ([***]%) on Net Sales equal to or less than US$[***] by Licensee or a sublicensee in a given year, and (ii) [***]

Amendment L-103-96/1

Public Health Service and Angiotech Pharmaceuticals, Inc.

March 4, 2002, Page 2 of 5, File: L103961FINAL

[***] percent ([***]%) on Net Sales greater than US$[***] by Licensee or that sublicensee that same year (Licensee shall be entitled to no further reduction of these [***]% and [***]% royalty rates under Paragraph B below, and such royalty rates shall apply to the Net Sales of such Combined Products without further reduction of the Net Sales price under Section 6.12 of this Agreement); provided further that (b), notwithstanding the foregoing, in the case of two-component Combined Products as described in Section 1 of this Amendment that are [***], PHS and Licensee agree that the royalty rates on Net Sales of such Combined Products manufactured and sold in the Licensed Territory shall be (x) [***] percent ([***]%) on Net Sales equal to or less than US $[***] by Licensee or a sublicensee in a given year, and (y) [***] percent ([***]%) on Net Sales greater than US $[***] by Licensee or that sub licensee that same year, and such [***]% and [***]% royalty rates shall apply to Net Sales of such Combined Products, without further reduction of the Net Sales price under Section 6.12 of this Agreement.

4.

Appendix E — Benchmarks and Performance. Licensee and PHS hereby agree to replace Appendix E of the Original Agreement in its entirety with the attached Amended Appendix E.

5.

This Amendment shall become effective immediately upon execution by PHS and Licensee.

6.

The Original Agreement shall continue in full force and effect, unchanged except as modified by this Amendment.

7.

This Amendment may be executed in multiple counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized representatives as of the last signature date below.

Amendment L-103-96/1

Public Health Service and Angiotech Pharmaceuticals, Inc.

March 4, 2002, Page 3 of 5, File: L10396IFINAL

FOR PUBLIC HEALTH SERVICE

/s/Jack Spiegel	03/21/2002
Jack Spiegel, Ph.D.	Date
Direct , Division of Technology Development and Transfer
Office of Technology Transfer
National Institutes of Health

Mailing Address for Notices:

Office of Technology Transfer

National Institutes of Health

6011 Executive Boulevard, Suite 325

Rockville, Maryland 20852-3804 U.S.A.

FOR LICENSEE:

ANGIOTECH  PHARMACEUTICALS, 1NC.

/s/William L. Hunter

	March 28, 2002
Signature	Date
William L. Hunter
Printed Name
Chairman & CEO
Title

Mailing Address for Notices:

Angiotech Pharmaceuticals, Inc.

6660 NW Marine Drive

Vancouver, British Columbia

Canada V6T 1Z4

Attention: Vice President and General Counsel

and Vice President, Corporate Development

Any false or misleading statements made, presented, or submitted to the Government, including any relevant omissions, under this Agreement and during the course of negotiation of this Agreement are subject to all applicable civil and criminal statutes including Federal statutes 31 U.S.C. §§ 3801-3812 (civil liability) and 18 U.S.C. § 1001 (criminal liability including fine(s) and/or imprisonment).

Amendment L-103-96/1

Public Health Service and Angiotech Pharmaceuticals, Inc.

March 4, 2002, Page 4 of 5, File: L103961FINAL

AMENDED APPENDIX E—Benchmarks and Performance

Licensee agrees to the following Benchmarks for its performance under this Agreement and, within ten (10) days of achieving a Benchmark, shall notify PHS that the Benchmark has been achieved.

I.

Under the exclusive Licensed Fields of Use for [***]:

1.

[***]

2.

[***]

II.

Under the exclusive Licensed Fields of Use for [***]:

1.

[***]

2.

[***]

3.

[***]

4.

 [***]

III. Under the nonexclusive Licensed Fields of Use:

1.

[***]

2.

[***]

Amendment L-103-96/1

Public Health Service and Angiotech Pharmaceuticals, Inc.

March 4, 2002, Page 5 of 5, File: L103961FINAL

EX-10.13

Exhibit 10.13

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL.

United States Public Health Service

Second Amendment L-103-96/2

This second amendment (“Second Amendment”) to the License Agreement L-103-96/0 entered into on November 19, 1997, as amended by Amendment L-103-96/1 entered into on March 28, 2002 (collectively, the “Original Agreement”) by the Public Health Service (hereinafter “PHS”) through the Office of Technology Transfer, National Institutes of Health, 6011 Executive Boulevard, Suite 325, Rockville, Maryland 20852-3804 and Angiotech Pharmaceuticals, Inc. (hereinafter “Licensee”), a Canadian corporation having its principal office at 1618 Station Street, Vancouver, B.C. CANADA, V6A 1B6, is effective as of the last signature date below.

WHEREAS,

A.

PHS and Licensee wish to allow Licensee additional time to submit royalty reports and royalty payments under the Original Agreement.

B.

PHS and Licensee wish to modify the method of measuring the value of access to the valid and enforceable Licensed Patent Rights with respect to certain Licensed Products.

C.

PHS and Licensee have determined the desirability of amending the Original Agreement to facilitate the development of Licensed Products under the Licensed Patent Rights.

NOW THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Licensee and PHS agree as follows:

1.

Section 9.04.  Licensee and PHS hereby agree to amend Section 9.04 of the Original Agreement by deleting in its entirety the first sentence of such section and replacing it with the following:

“Licensee shall submit to PHS within seventy-five (75) days after each calendar half-year ending June 30 and December 31 a royalty report setting forth for the preceding half-year period the amount of the Licensed Products sold or Licensed Processes practiced by or on behalf of Licensee in each country within the Licensed Territory, the Net Sales, and the amount of royalty accordingly due.”

2.

Section 2.07 (Licensed Processes).  Licensee and PHS hereby agree to amend Section 2.07 of the Original Agreement by deleting in its entirety the text of such section and replacing it with the following:

Amendment L-103-96/2

PHS and Angiotech Pharmaceuticals, Inc.

Page 1 of 5, File: L13962

“Licensed Process(es)” means processes which, in the course of being practiced in:

(a)

the [***] or [***] would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights in [***] that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction, where such activity is [***]; or

(b)

[***] would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights in [***] that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction.”

3.

Section 2.08 (Licensed Products).  Licensee and PHS hereby agree to amend Section 2.08 of the Original Agreement by deleting in its entirety the text of such section and replacing it with the following:

“Licensed Product(s)” means tangible materials the manufacture, use, or sale of which in:

(a)

the [***] or [***] would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights in [***] that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction, where such activity is [***]; or

(b)

[***] would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights in [***] that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction.”

4.

Appendix C, Section III (Royalties).  Licensee and PHS hereby agree to amend Appendix C, Section III, Paragraph A of the Original Agreement by deleting in its entirety the text added to the end of that Paragraph A pursuant to Amendment L-103-96/1 entered into on March 28, 2002, and replacing it with the following:

Amendment L-103-96/2

PHS and Angiotech Pharmaceuticals, Inc.

Page 2 of 5, File: L13962

“; provided that, notwithstanding the foregoing, in the case of two-component Combined Products as described in the second sentence of Section 2.13, the following shall apply:

(i)

the term “Licensed Product” with regard only to such two-component Combined Products shall mean tangible materials the manufacture, use, or sale of which [***] in the Licensed Territory would, in the absence of this Agreement, infringe one or more claims of the Licensed Patent Rights in [***] that have not been held invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction, where such activity is [***];  

(ii)

in the case of a Combined Product as described in the foregoing paragraph (i) that is [***], PHS and Licensee agree that the royalty rates on Net Sales of such Combined Products manufactured and sold in the Licensed Territory shall be (a) [***] percent ([***]%) on Net Sales equal to or less than US$[***] by Licensee or a sublicensee in a given year, and (b) [***] percent ([***]%) on Net Sales greater than US$[***]by Licensee or that sublicensee that same year (Licensee shall be entitled to no further reduction of these [***]% and [***]% royalty rates under Paragraph B below, and such royalty rates shall apply to the Net Sales of such Combined Product without further reduction of the Net Sales price under Section 6.12 of this Agreement );

(iii)

in the case of a Combined Product as described in the foregoing paragraph (i) that is [***], PHS and Licensee agree that the royalty rates on Net Sales of such Combined Products manufactured and sold in the Licensed Territory shall be (a) [***] percent ([***]%) on Net Sales equal to or less than US$[***] by Licensee or a sublicensee in a given year, and (b) [***] percent ([***]%) on Net Sales greater than US$[***] by Licensee or that sublicensee that same year, and such [***]% and [***]% royalty rates shall apply to Net Sales of such Combined Products without further reduction of the Net Sales price under Section 6.12 of this Agreement).

Amendment L-103-96/2

PHS and Angiotech Pharmaceuticals, Inc.

Page 3 of 5, File: L13962

5.

Performance of Benchmark.  PHS hereby acknowledges that Licensee has performed each of the Benchmarks described in  Sections I and II of Appendix E of the Original Agreement (as amended by  Amendment L-103-96/1).   Further, PHS hereby irrevocably waives the right to take any action against Licensee with respect to such Benchmarks, including without limitation any right to terminate or modify the Original Agreement in any way.

6.

This Second Amendment shall become effective immediately upon execution by PHS and Licensee.

7.

The Original Agreement shall continue in full force and effect, unchanged except as modified by this Second Amendment.

8.

This Second Amendment may be executed in multiple counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same Second Amendment.

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed and delivered by their duly authorized representatives as of the last signature date below.

Amendment L-103-96/2

PHS and Angiotech Pharmaceuticals, Inc.

Page 4 of 5, File: L13962

FOR PUBLIC HEALTH SERVICE:

/s/ Steven Ferguson

5/23/07

____________________________________

__________

Steven Ferguson

Date

Director, Division of Technology Development and Transfer

Office of Technology Transfer

National Institutes of Health

Mailing Address for Notices:

Office of Technology Transfer

National Institutes of Health

6011 Executive Boulevard, Suite 325

Rockville, Maryland 20852-3804 U.S.A.

FOR LICENSEE:

ANGIOTECH PHARMACEUTICALS, INC.

/s/ K. Thomas Bailey

May 21, 2007

____________________________________

__________

K. Thomas Bailey

Date

Chief Financial Officer

Mailing Address for Notices:

Angiotech Pharmaceuticals, Inc.

1618 Station Street

Vancouver, British Columbia

Canada V6A 1B6

Attention: General Counsel and Vice President, Business Development

Any false or misleading statements made, presented, or submitted to the Government, including any relevant omissions, under this Second Amendment and during the course of negotiation of this Second Amendment are subject to all applicable civil and criminal statutes including Federal statutes 31 U.S.C. §§ 3801-3812 (civil liability) and 18 U.S.C. § 1001 (criminal liability including fine(s) and/or imprisonment).

Amendment L-103-96/2

PHS and Angiotech Pharmaceuticals, Inc.

Page 5 of 5, File: L13962

EX-10.14

Exhibit 10.14

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

LICENCE AGREEMENT

BETWEEN:

THE UNIVERSITY OF BRITISH COLUMBIA, a corporation continued under the University Act of British Columbia and having its administrative offices at 2075 Wesbrook Mall, in the City of Vancouver, in the Province of British Columbia, V6T 1W5

(the "University")

AND:

ANGIOTECH PHARMACEUTICALS, INC., a corporation duly incorporated pursuant to the laws of British Columbia and having an office at 6660 N.W. Marine Drive, in the City of Vancouver, in the Province of British Columbia

(the "Licensee")

WHEREAS:

A.

The Licensee and the University have been engaged in research pursuant to a Research Agreement dated October 21, 1993, as amended from time to time, (the "Research Agreement") during the course of which they have jointly invented and/or developed certain technology relating to polymeric drug delivery methodologies incorporating paclitaxel and analogues and derivatives thereof;

B.

The University is desirous of entering into this Agreement with the objective of furthering society's use of its advanced technology, and in particular its rights in and to the technology referred to above, and to generate further research in a manner consistent with its status as a non-profit, tax exempt educational institution; and

C.

The Licensee is desirous of the University granting an exclusive worldwide license. to the Licensee to use or cause to be used its rights in and to such technology for any lawful purpose and to manufacture, distribute, market, sell, lease and/or license or sublicense products derived or developed from such technology and to sell the same to the general public during the term of this Agreement.

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and of the mutual covenants herein set forth, the parties hereto have covenanted and agreed as follows:

-2-

1.0

DEFINITIONS:

1.1

In this Agreement, unless a contrary intention appears, the following words and phrases shall mean:

(a)

"Accounting": an accounting statement setting out in reasonable detail how the amount of Revenue and sublicensing revenue was determined,

(b)

"Affiliated Company" or "Affiliated Companies": two or more corporations where the relationship between them is one in which one of them is a subsidiary of the other, or both are subsidiaries of the same corporation, or fifty percent (50%) or more of the voting shares of each of them is owned by the same person, corporation or other legal entity,

(c)

"Confidential Information": any part of the Information which is designated, by the University as confidential, whether orally or in writing, but excluding any part of the Information:

(i)

possessed by the Licensee prior to receipt from the University, other than through prior disclosure by the University, as evidenced by the Licensee's business records;

(ii)

published or available to the general public otherwise than through a breach of this Agreement;

(iii)

obtained by the Licensee from a third party with a valid right to disclose it, provided that said third party is not under a confidentiality obligation to the University, or

(iv)

independently developed by employees, agents or consultants of the Licensee who had no knowledge of or access to the University's Information as evidenced by the Licensee's business records,

(d)

"Date of Commencement" or "Commencement Date": this Agreement will be deemed to have come into force on the Date of Commencement which shall be the 1st day of August, 1997, and shall be read and construed accordingly,

(e)

"Effective Date of Termination": the date on which this Agreement is terminated pursuant to Article 17,

(f)

"Improvements": improvements, variations, updates, modifications, and enhancements made to the Technology at any time after the Commencement Date which are included in the Patents, which means such improvements shall claim priority to the Patents,

-3-

(g)

"Information": any and all Technology and any and all Improvements, the terms and conditions of this Agreement, and any and all oral, written, electronic or other communications and other information disclosed or provided by the parties including any and all analyses or conclusions drawn or derived therefrom regarding this Agreement and information developed or disclosed hereunder, or either party's raw materials, processes, formulations, analytical procedures, methodologies, products, samples and specimens or functions,

(h)

"Licensee New Technology": inventions, discoveries, improvements, variations, updates, modifications and/or enhancements relating to the Technology Applications developed at any time after the Date of Commencement which are developed solely by the Licensee, to the extent used in combination with the Technology or Improvements for the Technology Applications,

(i)

"Patent(s)": the Patent(s) and Patent applications set out on Schedule "A",

(j)

"Product(s)": goods manufactured in connection with the use of all or some of the Technology, Improvements, and Licensee New Technology,

(k)

"Revenue(s)": all revenues, receipts, monies, and the fair market value of all other consideration directly or indirectly collected or received whether by way of cash or credit or any barter, benefit, advantage, or concession received by the Licensee (including monies collected by the Licensee from any sublicensee of the Licensee, or any partner, joint venture or other agreement, relationship or arrangement with any third party) for the marketing, manufacturing, sale, distribution, sublicensing or leasing of the Technology, or Improvements, or Licensee New Technology and/or any Products for the Technology Applications, in any or all parts of the world where the Licensee is permitted by law to market, manufacture, sell, distribute, or lease the Technology, Improvements, Licensee New Technology and/or any Products, less the following deductions to the extent included in the amounts invoiced and thereafter actually allowed and taken:

(i)

credit, allowances or refunds given on account of returned goods,

(ii)

transportation charges invoiced separately and actually charged to third parties,

(iii)

taxes, duties and customs on all sales of Products,

(iv)

agents' commissions paid by the Licensee for the sale of Products, and

(v)

bona fide special rebates provided by the Licensee for Products purchased by third parties,

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(vi)

reimbursement for the direct costs of research and development undertaken by the Licensee;

(vii)

equity investments of a third party in the Licensee except to the extent such equity investment may reasonably be considered consideration for the license, sublicense, transfer or other use of the Technology; and

(viii)

transfers for compassionate use and emergency use, provided such uses are not for profit.

Where any Revenue is derived from a country other than Canada it shall be converted to the equivalent in Canadian dollars on the date the Licensee is required to make payment with respect to such Revenue pursuant to the terms hereof at the rate of exchange set by the Bank of Montreal for buying such currency. The amount of Canadian dollars pursuant to such conversion shall be included in the Revenue,

(l)

"Royalty Due Dates": Unless otherwise agreed the last working day of March, June, September and December of each and every year during which this Agreement remains in full force and effect,

(m)

"Technology": the Patents, and any and all knowledge, know-how and/or technique or techniques invented, developed and/or acquired, being invented, developed and/or acquired prior to the Date of Commencement by the University relating to the Patents , as amended from time to time, including, without limitation, all research, data, specifications, instructions, manuals, papers or other materials of any nature whatsoever, whether written or otherwise, relating to same,

(n)

"Technology Applications": means coated stents and other coated devices, (including stent grafts, vascular grafts, sweaty balloons and others), perivascular applications (films, pastes and beads), surgical paste applications and rheumatoid arthritis, but specifically does not include vanadium, psoriasis, multiple sclerosis and surgical adhesions (except to the extent surgical paste formulations developed with the University are used) at present and other new product applications conceived of or identified by the Company or its other collaborators in the future independent of the University,

(o)

“UBC Trade-marks": any mark, trade-mark, service mark, logo, insignia, seal, design, symbol, or device used by the University in any manner whatsoever,

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2.0

PROPERTY RIGHTS IN AND TO THE TECHNOLOGY:

2.1

The parties hereto hereby acknowledge and agree that the University and the Licensee jointly own any and all right, title and interest in and to the Technology, as well as any and all Improvements.

2.2

The Licensee shall, at the request of the University, enter into such further agreements and execute any and all documents as may be required to ensure that ownership of the Technology and any Improvements remains with the University and the Licensee.

2.3

All Improvements invented or developed will be owned jointly by the University and the Licensee. The Licensee agrees that its rights to use the Improvements which it jointly owns with the University shall be governed by the grant of license contained in Article 3.1 hereof. Any Licensee New Technology invented or developed solely by the Licensee will be owned solely by the Licensee, provided always that the University shall be entitled to receive a royalty on Revenues from all such Licensee New Technology on the terms as set out in Article 5 hereof. Any new technology invented or developed solely by the University will be owned solely by the University, subject to the terms of the Research Agreement.

2.4

On the last working day of December of each and every year during which this Agreement remains in full force and effect, the Licensee shall deliver in writing the details of any and all Improvements which the Licensee (and any sublicensees of the Licensee) has developed and or acquired during the previous twelve month period. Such information shall be maintained as confidential by the University and, subject to the terms of this Agreement, shall not be used for any purpose which is not expressly permitted herein.

3.0

GRANT OF LICENCE:

3.1

In consideration of the license fee payable hereunder and the royalty payments reserved herein, and the covenants on the part of the Licensee contained herein, the University hereby grants to the Licensee an exclusive worldwide licence to use and sublicense the University's rights in and to the Technology and any Improvements and to develop, manufacture, distribute, and sell Products on the terms and conditions hereinafter set forth during the term of this Agreement.

3.2

The licence granted herein is personal to the Licensee and is not granted to any Affiliated Company or Affiliated Companies.

3.3

The Licensee shall not cross-license the Technology without the prior written consent of the University.

3.4

Notwithstanding Article 3.1 herein, the parties acknowledge and agree that the University may use the Technology and Improvements without charge in any manner whatsoever for research, scholarly publication, educational or other non-commercial use.

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3.5

As part of the consideration for the rights granted by the University to the Licensee hereunder, the Licensee agrees to pay to the University as an initial licence fee the sum of $[***] (Canadian funds). The said sum shall be paid concurrently with the execution of this Agreement. Neither all nor any portion of the said sum shall be refundable to the Licensee under any circumstances.

4.0

SUBLICENSING:

4.1

The Licensee shall have the right to grant sublicences to Affiliated Companies and other third parties with respect to the Technology and Improvements with the prior written consent of the University, not to be unreasonably withheld or delayed. The University agrees to consider a request from any such proposed sublicensee for the right to be granted a license in the event this Agreement is terminated. The Licensee will furnish the University with a copy of each sublicence granted 30 days prior to execution. The University shall respond to the Licensee within 30 days of delivery of such sublicense, failing which the University shall be deemed to have consented to such sublicense. If required by the Licensee, the University will use its reasonable efforts to expedite a request for consent.

4.2

Any sublicence granted by the Licensee shall be personal to the sublicensee and shall not be assignable without the prior written consent of the University, such consent not to be unreasonably withheld or delayed. Such sublicences shall contain covenants by the sublicensee to observe and perform similar terms and conditions to those in this Agreement.

5.0

ROYALTIES AND CONSIDERATION:

5.1

In consideration of the license granted hereunder, the Licensee shall pay to the University [***] percent ([***]%) of the Revenues.

5.2

All payments of royalties made by the Licensee to the University hereunder shall be made in Canadian dollars without any reduction or deduction of any nature or kind whatsoever, except as may be prescribed by Canadian law.

5.3

Products shall be deemed to have been sold and included in the Revenue when the Licensee receives payment therefore.

.5 .4

The royalties shall be due and payable within thirty (30) days from each Royalty Due Date and shall be calculated with respect to the Revenue in the three month period immediately preceding applicable Royalty Due Date.

5.5

Excluding transactions that have been explicitly exempted from the definition of "Revenue" in this Agreement, the fair market value of any transaction, disposition, or other dealing involving the Technology, any Improvements and Licensee New Technology that occurs between the Licensee, its sublicensees or any other third party including joint venture partners and distributors shall be added to and deemed part of the Revenue even if such transactions were not made at fair market value. For greater certainty, this provision shall also apply to any shares, warrants, options or other consideration which the Licensee receives from a third party in

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connection with the marketing, distribution, sublicensing, or other transaction involving the Technology including any milestones or other performance or achievement based payments or obligations.

5.6

The University and the Licensee agree that the University may [***] of the royalty referred to in paragraph 5. hereof in exchange for [***]. For greater certainty, if the University elects to [***] of the royalty referred to in paragraph 5.1 for [***], thereafter the royalty shall be adjusted to [***] of Revenues. This right contained herein may be exercised at any time up to the date upon which the Licensee has been listed and called for trading on the Toronto Stock Exchange for a period of [***].

Neither all nor any portion of the Shares issued hereunder shall be refundable to the Licensee under any circumstances once such Shares have been issued to the University. Such Shares shall be free from any pooling, escrow or other trading restrictions placed upon such Shares by the Licensee, save and except as may be required by applicable legislation or in the event that any regulatory authority having jurisdiction over the Licensee requires there to be a pooling or escrow agreement with respect to such Shares. The Licensee acknowledges and agrees that the University shall have the right to transfer such Shares at any time to any Affiliated Company or to the University of British Columbia Foundation, and the Licensee shall take all such steps or do such acts as may be reasonably required to allow such transfer, subject to applicable securities legislation.

5.7

The Licensee agrees to pay an annual license maintenance fee to the University in the amount of $[***] on the anniversary date of the execution of this license agreement.

6.0

PATENTS:

6.1

That the Licensee has been and shall continue to pay all costs of filing, prosecuting and maintaining the Patents incurred after the Commencement Date, which Patents shall be in the name of the Licensee or the University, or both, as appropriate.

6.2

The Licensee shall have the right to identify any process, use or products arising out of such Technology or an Improvement that may be patentable and may take all steps to apply for a patent in the name of the Licensee and/or the University, as appropriate, provided that the Licensee pays all costs of applying for, registering, and maintaining the patent in those jurisdictions in which the Licensee might designate that a Patent is required.

6.3

Should the Licensee decide to:

(a)

 discontinue pursuing any patent application, patent prosecution or patent maintenance in relation of any patent or any continuation, continuation-in-part, division, reissue, re examination of extension of a patent application, or

(b)

not pursue Patent protection in relation to the Patents in any jurisdiction, or

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(c)

discontinue or not pursue patent protection in relation to any further process, use or products arising out of the Technology in any jurisdiction,

then the Licensee shall provide the University with notice of its decision to discontinue or not to pursue such patent protection in sufficient time, such time not to be less than 30 clear calendar days prior to the date the patent or patent application would become invalid or be deemed abandoned, for the University to file a Patent application or continue pursuing an existing Patent application at the University's own expense, and if the University takes such action the Licensee shall not have the right to use the Technology and Improvements claimed in any such Patent and/or Patent application in such jurisdiction. Upon receipt of such notice from the Licensee, Schedule "A" hereto will be deemed to be amended to exclude such Patent and/or Patent application from the grant of license contained herein and thereafter, the University shall be free to grant a license of such Patent and/or Patent application to a third party in such jurisdiction.

7.0

DISCLAIMER OF WARRANTY:

7.1

That the University makes no representations, conditions, or warranties, either express or implied, with respect to the Technology and Improvements or the Products. Without limiting the generality of the foregoing, the University specifically disclaims any implied warranty, condition, or representation that the Technology or the Products:

(a)

shall correspond with a particular description;

(b)

are of merchantable quality;

(c)

are fit for a particular purpose; or

(d)

are durable for a reasonable period of time.

That the University shall not be liable for any loss, whether direct, consequential, incidental, or special which the Licensee suffers arising from any defect, error, fault, or failure to perform with respect to the Technology or Products, even if the University has been advised of the possibility of such defect, error, fault, or failure. That the Licensee acknowledges that it has been advised by the University to undertake its own due diligence with respect to the Technology.

7.2

That the parties acknowledge and agree that the International Sale of Goods Act and the United Nations Convention on Contracts for the International Sale of goods have no application to this Agreement.

7.3

Nothing in this Agreement shall be construed as:

(a)

a warranty or representation by .the University as to title to the Technology or that anything made, used, sold or otherwise disposed of under the licence granted in this Agreement is or will be free from infringement of patents, copyrights, trade­marks, industrial design or other intellectual property rights,

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(b)

an obligation by the University to bring or prosecute or defend actions or suits against third parties for infringement of patents, copyrights, trade-marks, industrial designs or other intellectual property or contractual rights,

(c)

the conferring by the University of the right to use in advertising or publicity the name of the University or UBC Trade-marks.  

7.4

Notwithstanding Article 7.3, in the event of an alleged infringement of the Technology or any right with respect to the Technology, the Licensee shall have, upon receiving the prior written consent of the University, not to be unreasonably withheld or delayed, the right to prosecute litigation designed to enjoin infringers of the Technology. Provided that it has first granted its prior written consent, not to be unreasonably withheld or delayed, the University agrees to co-operate to the extent of executing all necessary documents and to vest in the Licensee the right to institute any such suits, so long as all the direct or indirect costs and expenses of bringing and conducting any such litigation or settlement shall be borne by the Licensee and in such event all recoveries shall enure to the Licensee.

7.5

In the event that any complaint alleging infringement or violation of any patent or other proprietary rights is made against the Licensee with respect to the use of the Technology or the manufacture, use or sale of the Products, the following procedure shall be adopted.

(a)

the Licensee shall promptly notify the University upon receipt of any such complaint and shall keep the University fully informed of the actions and positions taken by the complainant and taken or proposed to be taken by the Licensee (on behalf of itself or a sublicensee),

(b)

except as provided in Article 7 5(d), all costs and expenses incurred by the Licensee (or any sublicensee of the Licensee) in investigating, resisting, litigating and settling such a complaint, including the payment of any award of damages and/or costs to any third party, shall be paid by the Licensee (or any sublicensee of the Licensee, as the case may be),

(c)

no decision or action concerning or governing any final disposition of the complaint shall be taken without full consultation with and approval by the University, acting reasonably and in a timely manner,

(d)

the University may elect to participate formally in any litigation involving the complaint to the extent that the court may permit, but any additional expenses generated by such formal participation shall be paid by the University (subject to the possibility of recovery of some or all of such additional expenses from the complainant),

(e)

notwithstanding Article 7.3, if the complainant is willing to accept an offer of settlement and one of the parties to this Agreement is willing to make or accept such offer and the other is not, then the unwilling party shall conduct all further proceedings at its own expense, and shall be responsible for the full amount of any

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damages, costs, accounting of profits and settlement costs in excess of those provided in such offer, but shall be entitled to retain unto itself the benefit of any litigated or settled result entailing a lower payment of costs, damages, accounting of profits and settlement costs than that provided in such offer.

(f)

the royalties and other amounts payable pursuant to this Agreement shall be paid by the Licensee to the University in trust from the date the complaint is made until such time as a resolution of the complaint has been finalized. If the complainant prevails in the complaint, then the royalties paid to the University in trust pursuant to this Article shall be returned to the Licensee, provided that the amount returned to the Licensee hereunder shall not exceed the amount paid by the Licensee to the complainant in the settlement or other disposition of the complaint. If the complainant does not prevail in the complaint, then the University shall be entitled to retain all royalties and other amounts paid to it pursuant to this Article.

8.0

INDEMNITY AND LIMITATION OF LIABILITY:

8.1

That the Licensee hereby indemnifies, holds harmless and defends the University its Board of Governors, officers, employees, faculty, students, invitees, and agents against any and all claims (including all legal fees and disbursements incurred in association therewith) arising out of the exercise of any rights under this Agreement including, without limiting the generality of the foregoing, against any damages or losses, consequential or otherwise, arising from or out of the use of the Technology, Improvements or Products licensed under this Agreement by the Licensee or its sublicensees, or their customers or end-users howsoever the same may arise, with the exception of any costs and expenses specifically assumed by the University under this Agreement.

8.2

Subject to Article 8.3, the University's total liability, whether under the express or implied terms of this Agreement, in tort (including negligence), or at common law, for any loss or damage suffered by the Licensee, whether direct, indirect, special, or any other similar or like damage that may arise or does arise from any breaches of this Agreement by the University, its Board of Governors, officers, employees, faculty, students, or agents shall be limited to the amount of the initial licence fee paid to the University pursuant to Article 3.5.

8.3

In no event shall the University be liable for consequential or incidental damages arising from any breach or breaches of this Agreement.

8.4

No action, whether in contract or tort (including negligence), or otherwise arising out of or in connection with this Agreement may be brought by the Licensee more than six months after the cause of action has occurred.

9.0

PUBLICATION AND CONFIDENTIALITY:

9.1

That the Information shall be developed, received, and used by the Licensee solely in furtherance of the purposes set forth in this Agreement subject to the terms and conditions set forth in this Article 9.

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9.2

That the Licensee shall keep and use all of the Confidential Information in confidence and will not, without taking appropriate measures to protect the same, disclose any Confidential Information to any person or entity, except those of the Licensee's officers, employees, consultants, agents, sublicensees, and assigns who require said Confidential Information in performing their obligations under this Agreement and to the extent, required by any regulatory authorities having jurisdiction over the Licensee and for filing with health regulatory authorities. That the Licensee covenants and agrees that it will initiate and maintain an appropriate internal program limiting the internal distribution of the Confidential Information to its officers, servants or agents and to take the appropriate non-disclosure agreements from any and all persons who may have access to the Confidential Information.

9.3

That the Licensee shall not use, either directly or indirectly, any Confidential Information for any purpose other than as set forth herein without the University's prior written consent, such consent not to be unreasonably withheld or delayed.

9.4

In the event that the Licensee is required by judicial or administrative process to disclose any or all of the Confidential Information, the Licensee shall promptly notify the University and allow the University reasonable time to oppose such process before disclosing any Confidential Information.

9.5

Notwithstanding any termination or expiration of this Agreement, the obligations created in this Article 9 shall survive and be binding upon the Licensee, its successors and assigns for a period of five years from the date of disclosure.  

9.6

That the Licensee recognizes that under University policy, the results of research relating to the Technology must be publishable and agrees that the University researchers engaged in research related to the Technology, Improvements shall be permitted to present at symposia, international national, or regional professional meetings, and to publish in journals, theses, or dissertations, or otherwise of their own choosing, methods and results of the research, provided, however, that the Licensee shall have been furnished copies of any proposed publication or presentation 30 days prior to such publication or presentation . That the Licensee shall have 30 days, after receipt of said copies, to object to such proposed presentation or proposed publication because there is patentable subject matter which needs protection or because the proposed publication or presentation includes confidential information of the Licensee. In the event that the Licensee makes such objection, said University researcher(s) shall remove references to the License's confidential information and, if required by Licensee, refrain from making such publication or presentation for a maximum of 6 months from date of receipt of such objection in order for the University to file patent application(s) with the Canadian Patent and Trademark Office and/or foreign patent office(s) directed to the patentable subject matter contained in the proposed publication or presentation.

9.7

That the Licensee requires of the University, and the University agrees insofar as it may be permitted to do so at law, that this Agreement, and each part of it, is confidential and shall not be disclosed to third parties, as the Licensee claims that such disclosure would or could reveal commercial, scientific or technical information and would significantly harm the

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Licensee's competitive position and/or interfere with the Licensee's negotiations with prospective sublicensees. Notwithstanding anything contained in this Article, the parties hereto acknowledge and agree that the University may identify the title of this Agreement, the parties to this Agreement, the inventors of the Technology, the term of this Agreement, and the types of consideration granted to the University pursuant to this Agreement.

9.8

That the University shall use its reasonable efforts to maintain as confidential any business plans, business documents or other reports or Information prepared by the Licensee and delivered to the University pursuant to the terms of this license agreement and which are identified in writing by the Licensee as confidential. Such Information, and any other confidential information provided by the Licensee to the University pursuant to this Agreement, shall not be used by the University except for the purposes expressly permitted herein and to ensure the Licensee's compliance with the terms of this agreement.

10.0

PRODUCTION AND MARKETING:

10.1

That the Licensee shall not use any of the UBC Trade-marks or make reference to the University or its name in any advertising or publicity whatsoever, without the prior written consent of the University, except as required by law. Nothing herein shall prevent the Licensee from making or issuing factual statements to the public regarding its business, this Agreement or use of the Technology. Without limiting the generality of the foregoing, the Licensee shall not issue a press release with respect to this Agreement or any activity contemplated herein without the prior review and approval of same by the University, such approval not to be unreasonably withheld or delayed except as required by law. If the Licensee is required by law to act in contravention of this Article, the Licensee shall provide the University with sufficient advance notice in writing to permit the University to bring an applicatio n or other proceeding to contest the requirement.

10.2

That the Licensee shall use its reasonable efforts to develop, test, promote, market and sell the Products and utilize the Technology, and Improvements and to meet or cause to be met the market demand for the Products and the utilization of the Technology and Improvements. The Licensee shall not be in default of this paragraph 10.2 if it fails to develop, test, promote, market and sell any one Technology Application provided it has determined, acting reasonably, that there is no commercially viable market for such Technology Application.

10.3

In the event that the University is of the view that the Licensee is in breach of Article 10.2, the University shall notify the Licensee and provide the Licensee with a period of 90 days to remedy such breach. In the event the Licensee is of the opinion that it is not in breach of Article 10.2 or if the Licensee has not remedied such breach within the 90 day time period, then the parties hereto shall appoint a mutually acceptable person as an independent evaluator to conduct the evaluation set forth in Article 10.4. In the event that the parties cannot agree on such an evaluator, the appointing authority shall be the British Columbia International Commercial Arbitration Centre, or such similar body as may then exist.

10.4

That the evaluator described in Article 10.3 shall review the efforts made by the Licensee with respect to the promotion, marketing and sale of the Products and the Technology,

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and Improvements. That the Licensee and University shall cooperate with the evaluator and provide such documents and information as may reasonably be requested. If said evaluator determines that the Licensee is in breach of Article 10.2, then the University shall have the right to terminate this Agreement as provided in Article 17.2, or to continue the licence granted hereunder as a non-exclusive licence rather than an exclusive licence but with all other terms and conditions of this Agreement unchanged. If said evaluator determines that-the Licensee is not in breach of Article 10.2, then the University shall not terminate this Agreement for breach of Article 10.2, nor shall it change the nature of the licence granted hereunder from exclusive to non-exclusive.

10.5

That the University may not call for more than one evaluation pursuant to Article 11.4 in every two years. That the cost of an evaluation hereunder shall be borne 50% by the Licensee and 50% by the University.

10.6

Without limiting the generality of the foregoing, the Licensee agrees that it shall deliver to the University an annual report, due within sixty (60) days from December 31 of each year during the term of this Agreement, which documents the activities of the Licensee has undertaken in the course of the preceding 12 months to develop and commercialize and/or market the Technology. That the report will include an outline of action and goals for the following 12 months and a projection of royalty payment due to the University in the 12 month period as appropriate.

10.7

Without limiting the generality of the foregoing, the Licensee and the University snail meet once a year, on or before the anniversary of this Agreement and at the request of the University, to review the progress in achieving those goals set forth in the report referred to in paragraph 10.6 hereof.

11.0

ACCOUNTING RECORDS:

11.1

That the Licensee shall maintain at its principal place of business, or such other place as may be most convenient, accounts and records of business done pursuant to this Agreement, such accounts and records to be in sufficient detail to enable proper returns to be made under this Agreement.

11.2

That the Licensee shall deliver to the University on the date 30 days after each and Royalty Due Date, together with the royalty payable thereunder, the Accounting (and a report on all sublicensing activity, including an accounting statement setting out in reasonable how the amount of Revenue was determined).

11.3

That the calculation of royalties shall be carried out in accordance with generally accepted Canadian or United States accounting principles applied on a consistent basis.

11.4

That the Licensee shall retain the accounts and records referred to in Article 11.1 above for at least three years after the date upon which they were made and shall permit any duly authorized representative of the University to inspect such accounts and records upon reasonable notice during normal business hours of the Licensee at the University's expense. That the

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Licensee shall furnish such reasonable evidence as such representative will deem necessary to verify the Accounting and will permit such representative to make copies of or extracts from such accounts, records and agreements at the University's expense.

11.5

During the term of this Agreement and thereafter, the University shall us reasonable efforts to ensure that all information provided to the University or its representatives pursuant to this Article remains confidential and is treated as such by the University.

12.0

INSURANCE:

12.1

Unless satisfactory arrangements are made between the Licensee and the University with respect to a self-insurance program or the requirement for insurance hereunder is waived by the University sixty (60) days prior to the first sale of a Product, then the Licensee shall comply with the insurance provisions contained in Articles 12.2 and 12.3.

12.2

Three months prior to the first sale of a Product, the Licensee will give notice to the University of the terms and amount of the public liability, product liability and errors and omissions insurance which it has placed in respect of the same, which in no case shall be less than the insurance which a reasonable and prudent businessperson carrying on a similar line of business would acquire. This insurance shall be placed with a reputable and financially secure insurance carrier, shall include the University, its Board of Governors, faculty, officers, employees, students, and agents as additional insureds, and shall provide primary coverage with respect to the activities contemplated by this Agreement. Such policy shall include severability of interest and cross-liability clauses and shall provide that the policy shall not be cancelled or materially altered except upon at least 30 days written notic e to the University. That the University shall have the right to require reasonable amendments to the terms or the amount of coverage contained in the policy. Failing the parties agreeing on the appropriate terms or the amount of coverage, then the matter shall be determined by arbitration as provided for herein. That the Licensee shall provide the University with certificates of insurance evidencing such coverage thirty (30) days before commencement of sales of any Product and the Licensee covenants not to sell any Product before such certificate is provided and approved by the University.

12.3

That the Licensee shall require that each sublicensee under this Agreement shall procure and maintain, during the term of the sublicense, public liability, product liability and errors and omissions insurance in reasonable amounts, with a reputable and financially secure insurance carrier, which in no case shall be less than the insurance which a reasonable and prudent businessperson carrying on a similar line of business in the sublicensee's industry would require. That the Licensee shall use its reasonable efforts consistent with sound and reasonable business judgement in the industry to ensure that any and all such policies of insurance required pursuant to this clause shall contain a waiver of subrogation against the University, its Board of Governors, faculty, officers, employees, students, and agents.

12.4

That the Licensee shall be permitted to provide limited quantities of Product to third parties solely for the purposes of testing and evaluation of those Products and in any event, not for resale, and the Licensee shall not be obligated to obtain insurance for the transfer of such

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Products provided it first obtains from such third party in writing a complete release of all claims and possible claims against the Licensee and the University and an indemnity of the University in a form of which release and indemnity shall be approved by the University.

13.0

ASSIGNMENT:

13.1

That the Licensee will not assign, transfer, mortgage, charge or otherwise dispose of any or all of the rights, duties or obligations granted to it under this Agreement without the prior written consent of the University not to be unreasonably withheld or delayed. Notwithstanding the foregoing, this Agreement may be assigned or transferred as part of a sale or transfer of substantially all of the business of the Licensee relating to the operations which concern this Agreement provided the Licensee gives the University prior written notice and such assignee or transferee has the reasonable ability to comply with the terms of this Agreement.

13.2

That the University shall have the right to assign its rights, duties and obligations under this Agreement to a company or society of which it is the sole shareholder in the case of a company or of which it controls the membership, in the case of a society, and in either case such entity shall not be an operating biotech company. In the event of such an assignment, the Licensee will release, remise and forever discharge the University from any and all obligations or covenants, provided however that such company or society, as the case may be, executes a written agreement which provides that such company or society shall assume all such obligations or covenants from the University and that the Licensee shall retain all rights granted to the Licensee pursuant to this Agreement.

14.0

GOVERNING LAW AND ARBITRATION:

14.1

This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada in force therein without regard to its conflict of law rules. All parties agree that by executing this Agreement they have attorned to the jurisdiction of the Supreme Court of British Columbia. Subject to paragraphs 14.2 and 14.3, the British Columbia Supreme Court shall have exclusive jurisdiction over this Agreement.

14.2

In the event of any dispute arising between the parties concerning this Agreement, its enforceability or the interpretation thereof, the same shall be settled by a single arbitrator appointed pursuant to the provisions of the Commercial Arbitration Act of British Columbia, or any successor legislation then in force. That the place of arbitration shall be Vancouver, British Columbia. That the language to be used in the arbitration proceedings shall be English.

14.3

Clause 14.2 of this Article shall not prevent a party hereto from applying to a court of competent jurisdiction for interim protection such as, by way of example, an interim injunction.

15.0

NOTICES:

15.1

All payments, reports and notices or other documents that any of the parties hereto are required or may desire to deliver to any other party hereto may be delivered only by personal delivery or by registered or certified mail, telex or telecopy (receipt acknowledged), all postage

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and other charges prepaid, at the address for such party set forth below or at such other address as any party may hereinafter designate in writing to the others. Any notice personally delivered or sent by telex or telecopy shall be deemed to have been given or received at the time of delivery, telexing or telecopying. Any notice mailed as aforesaid shall be deemed to have been received on the expiration of five days after it is posted, provided that if there shall be at the time of mailing or between the time of mailing and the actual receipt of the notice a mail strike, slow down or labour dispute which might affect the delivery of the notice by the mails, then the notice shall only be effected if actually received.

If to the University:	That the Director
	University - Industry Liaison Office
	University of British Columbia
	IRC 331 — 2194 Health Sciences Mall
	Vancouver, British Columbia
	V6T 1Z3
	Telephone: (604)822-8580
	Telecopier: (604)822-8589
If to the Licensee:	That the President
	Angiotech Pharmaceuticals Inc.
	6660 N.W. Marine Drive
	Vancouver, British Columbia
	V6T 1Z4
	Telephone: (604) 221-7676
	Telecopier: (604) 221-2330

16.0

TERM:

16.1

This Agreement and the licence granted hereunder shall terminate on the later of the expiration of the last patent obtained pursuant to Article 6 herein and 15 years from the Date of Commencement, unless earlier terminated pursuant to Article 17 herein.

17.0

TERMINATION:

17.1

This Agreement shall automatically and immediately terminate without notice to the Licensee if any proceeding under the Bankruptcy and Insolvency Act of Canada, or any other statute of similar purport, is commenced by and relating to or against the Licensee.

17.2

That the University may, at its option, terminate this Agreement immediately on the happening of any one or more of the following events by delivering notice in writing to that effect to the Licensee:

(a)

if any execution, sequestration, or any other process of any court becomes enforceable against the Licensee or if any such process is levied on the rights under this Agreement or upon any of the monies due to the University and is not released or satisfied by the Licensee within 30 days thereafter,

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(b)

if any resolution is passed or order made or other steps taken for the winding up, liquidation or other termination of the existence of the Licensee, and the Licensee has not taken reasonable steps to reverse or revoke such resolution or order within ^-30 days thereafter,

(c)

if the Licensee, after having received written notice from the University is more than 30 days in arrears of royalties or other monies that are due to the University under the terms of this Agreement,

(d)

if the University's rights in and to the Technology or Improvements become subject to any security interest, lien, charge or encumbrance in favour of any third party claiming through the Licensee,

(e)

if the Licensee ceases or threatens to cease to carry on its business,

(f)

until the Licensee becomes a reporting issuer, if more than 25% of the issued and outstanding shares of the Licensee are transferred to any person or persons other than those having a controlling interest at the Date of Commencement, whether by reason of purchase of shares or otherwise, without the prior written consent of the University, such consent not to be withheld except as provided in Article 17.3,

(g)

if the Licensee commits any breach of Articles 4.1, 4.2, 10.1, 10.2 and 12 and such breach is not remedied within 15 days from receipt by the Licensee of Written notice from the University, or

(h)

if it is determined, pursuant to Article 11.5, that the Licensee is in breach of Article 10.3.

17.3

That the University shall not withhold its consent pursuant to Article 17.2(f) unless the granting of such consent would result in the University having a contractual relationship with an entity with whom the University is prohibited from contracting with pursuant to its then existing policies.

17.4

Other than as set out in- Articles 17.1 and 17.2, if either party shall be in default under or shall fail to comply with the terms of this Agreement then the non-defaulting party shall have the right to terminate this Agreement by written notice to that effect if:

(a)

such default is reasonably curable within 30 days after receipt of notice of such default and such default or failure to comply is not cured within 30 days after receipt of written notice thereof, or

(b)

such default is not reasonably curable within 30 days after receipt of written notice thereof, and such default or failure to comply is not cured within such further reasonable period of time as may be necessary for the curing of such default or failure to comply.

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17.5

If this Agreement is terminated pursuant to Articles 17.1, 17.2, or 17.4, the Licensee shall make royalty payments to the University in the manner specified in Article 5, and the University may proceed to enforce payment of all outstanding royalties or other monies owed to the University and to exercise any or all of the rights and remedies contained herein or otherwise available to the University by law or in equity, successively or concurrently at the option of the University. The termination or expiration of this Agreement shall in no way limit or affect the Licensee's own rights in and to the Technology and Improvements, it being acknowledged that the Licensee is a joint owner of the Technology and Improvements.

17.6

That the Licensee shall then deliver or cause to be delivered to the University an accounting within 30 clear days from the Effective Date of Termination. That the accounting will specify, in or on such terms as the University may in its sole discretion require, the inventory or stock of Products manufactured and remaining unsold on the Effective Date of Termination. That the University may instruct that the unsold Products be stored, destroyed, or sold under its direction, provided the Agreement was terminated pursuant to Article 17.2 or by the University pursuant to Article 17.4. That the Licensee will continue to make royalty payments to the University in the same manner specified in Article 5 on all unsold Products, notwithstanding anything contained in or any exercise of rights by the University under Article 17.5 herein.

17.7

Notwithstanding the termination of this Agreement, Article 11.4 shall remain in full force and effect until three years after

(a)

all payments of royalty required to be made by the Licensee to the University under this Agreement have been made by the Licensee to the University, and

(b)

any other claim or claims of any nature or kind whatsoever of the University against the Licensee has been settled.

17.8

In the event a sublicensee of the Licensee commits a default under its sublicense, and if that default also constitutes a default by the Licensee under this Agreement, then the University covenants and agrees that it shall be a sufficient remedy of the default, and the Licensee shall be deemed to have remedied the default by the sublicensee, if, within the applicable time period set out above:

(a)

the default is remedied by the sublicensee in default;

(b)

the default is remedied by the Licensee; or

(c)

upon receipt of notice from the University, the Licensee forthwith take action against the sublicensee to cause the same to remedy the default and diligently prosecutes such action, including the termination of the sublicensee of the sublicensee if the sublicensee is unwillingly or unable to remedy the default.

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18.0

MISCELLANEOUS COVENANTS OF LICENSEE:

18.1

That the Licensee hereby represents and warrants to the University that the Licensee is a corporation duly organized, existing, and in good standing under the laws of the Province of British Columbia and has the corporate power, authority, and capacity to enter into this Agreement and to carry out the transactions contemplated by this Agreement, all of which have been duly and validly authorized by all requisite corporate proceedings.

18.2

That the Licensee represents and warrants that it has the expertise necessary to handle the Technology (and any Improvements) with care and without danger to the Licensee, its employees, agents, or the public. That the Licensee shall not accept delivery of the Technology (or any Improvements) until it has requested and received from the University all necessary information and advice to ensure that it is capable of handling the Technology (and any Improvements) in a safe and prudent manner.

18.3

That the Licensee shall comply in all material respects with all laws, regulations and ordinances, whether Federal, Provincial, Municipal or otherwise with respect to the Technology (and any Improvements) and/or this Agreement.

18.4

Upon the presentation of itemized bills to the Licensee by the University, the Licensee shall pay all reasonable legal expenses and costs incurred by the University in respect of any consents and approvals requested by the Licensee and required from the University, including but not limited to expenses and costs in respect of the University's review of any sublicences to be granted by the Licensee.

18.5

That the Licensee shall pay all taxes and any related interest or penalty howsoever designated and imposed on the Licensee as a result of the .existence or operation of this Agreement, including, but not limited to, tax which the Licensee is required to withhold or deduct from payments to the University. That the Licensee will furnish to the University such evidence as may be required by Canadian authorities to establish that any such tax has been. paid. That the royalties specified in this Agreement are exclusive of taxes. If the University is required to collect a tax to be paid by the Licensee (or any of its sublicensees), the Licensee shall pay such tax to the University on demand.

18.6

That the Licensee shall not assign, transfer, mortgage, charge or otherwise dispose of any of its rights, dues or obligations under this License Agreement without the prior written .consent of the University, such consent not to be unreasonably withheld or delayed.

19.0

RESEARCH AGREEMENT:

19.1

Subject to the approval of the applicable approving authorities at the University, the University, the Licensee and the University shall enter into a research agreement (the "Research Agreement") with respect to the Research Project in the form attached as Schedule "D", with such amendments as may be negotiated by the parties for a period of three (3) years from the Date of Commencement. The budget under the Research Agreement, including overhead, shall be $[***] per year unless otherwise mutually agreed to by the parties.

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19.2

That the University shall prepare a work plan and budget for the Research Project.  That the Licensee shall review the work plan and budget proposed by the University based on the following criteria and may propose such amendments to the work plan and budget as it may determine are fair and reasonably necessary in light of the following criteria:

(a)

the work plan and budget shall not conflict with established University policies or guidelines. Without limiting the generality of the foregoing, the work plan and budget shall be subject to any applicable human ethics reviews, animal care reviews and biohazard reviews,

(b)

the work plan and budget shall include an allocation for overhead of 38% on total direct costs excluding capital, equipment and travel,

(c)

the work plan and budget shall be in accordance with the University's reputation for high standards of academic innovation and excellence,

(d)

the work plan shall compliment commercial research and development that has been undertaken by the Licensee,

(e)

the work plan shall be oriented to avenues of investigations which have the potential for commercial application.

That the University and the Licensee shall agree upon the final work plan and budget to be contained in the research agreement. That the work plan and budget shall be reviewed not less than 30 days prior to each anniversary date of the Commencement Date by the University and the Licensee and the work plan and budget shall be amended or modified as may be mutually agreed.

19.3

That the Licensee shall not have the right to terminate the research agreement except in the event the Principal Investigators (as defined in the research agreement) at the University are unwilling or unable to continue the research and a mutually acceptable replacement cannot be agreed upon by the parties to the research agreement or unless the University ceases to have available the appropriate expertise or ceases to be competitive. That the University shall have no right to terminate the research agreement except in the event that the Licensee has failed to meet its payment or other obligations pursuant to the research agreement or in the event that the Principal Investigators at the University are unwilling or unable to continue the research at a mutually acceptable replacement cannot be agreed upon by the parties to the research agreement or in the event this license agreement has been terminat ed.

19.4

Once commenced, if the Research Project is discontinued for any reason whatsoever, the Licensee shall be liable for all reasonable costs incurred by the University in relation to the discontinuance of the Research Project, including, without limitation, all costs incurred with respect to the dismissal of researchers, whether students, faculty or other employees, hired by the University to work on the Research Project.

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19.5

In the event there is a conflict between the provisions of this agreement and the provisions of the research agreement, the provisions of this agreement shall govern.

20.0

GENERAL:

20.1

That the Licensee shall permit any duly authorized representative of the University upon reasonable notice during normal business hours and at the University's sole risk and expense to enter upon and into any premises of the Licensee for the purpose of inspecting the Products and the manner of their manufacture and generally of ascertaining whether or not the provisions of this Agreement have been, are being, or will be complied with by the Licensee.

20.2

Nothing contained herein shall be deemed or construed to create between the parties hereto a partnership or joint venture. No party shall have the authority to act on behalf of any other party, or to commit any other party in any manner or cause whatsoever or to use any other party's name in any way not specifically authorized by this Agreement. No party shall be liable for any act, omission, representation, obligation or debt of any other party, even if informed of such act, omission, representation, obligation or debt.

20.3

Subject to the limitations hereinbefore expressed, this Agreement shall enure to the benefit of and be binding upon the parties, and their respective successors and permitted assigns.

20.4

No condoning, excusing or overlooking by any party of any default, breach or non-observance by any other party at any time or times in respect of any covenants, provisos, or conditions of this Agreement shall operate as a waiver of such party's rights tinder this Agreement in respect of any continuing or subsequent default, breach or non-observance, so as to defeat in any way the rights of such party in respect of any such continuing or subsequent default. or breach and no waiver shall be inferred from or implied by anything done or omitted by such party, save only an express waiver in writing.

20.5

No exercise of a specific right or remedy by any party precludes it from or prejudices it in exercising another right or pursuing another remedy or maintaining an action to which it may otherwise be entitled either at law or in equity.

20.6

Marginal headings as used in this Agreement are for the convenience of reference only and do not form a part of this Agreement and are not be used in the interpretation hereof.

20.7

That the terms and provisions, covenants and conditions contained in this Agreement which by the terms hereof require their performance by the parties hereto after the expiration or termination of this Agreement shall be and remain in force notwithstanding such expiration or other termination of this Agreement for any reason whatsoever.

20.8

In the event that any part, section, clause, paragraph or subparagraph of this Agreement shall be held to be indefinite, invalid, illegal or otherwise voidable or unenforceable, the entire agreement shall not fail on account thereof, and the balance of the Agreement shall continue in full force and effect.

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20.9

That the parties hereto acknowledge that the law firm of Richards Buell Sutton has acted solely for the University in connection with this Agreement and that all other parties hereto have been advised to seek independent legal advice.

20.10

This Agreement sets forth the entire understanding between the parties and no modifications hereof shall be binding unless executed in writing by the parties hereto.

20.11

Time shall be of the essence of this Agreement.

20.12

Whenever the singular or masculine or neuter is used throughout this Agreement the same shall be construed as meaning the plural or feminine or body corporate when the context or the parties hereto may require.

IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreement on the  7^th  day of November, 1997 but effective as of the Date of Commencement.

SIGNED FOR AND ON BEHALF of	)
THAT THE UNIVERSITY OF BRITISH	)
COLUMBIA by its duly authorized	)
Officers	)
	)
/signed/	)
Authorized Signatory	)
	)
/signed/	)
Authorized Signatory	)

THAT THE CORPORATE SEAL of	)
ANGIOTECH PHARMACEUTICALS	)
INC. was hereunto affected in the presence	)
of	)	c/s
	)
/signed/	)
Authorized Signatory	)
	)
/signed/	)
Authorized Signatory	)

SCHEDULE "A"

TECHNOLOGY

[***]

EX-10.15

Exhibit 10.15

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

AMENDMENT TO LICENSE AGREEMENT

This Amendment Agreement, dated as of February 27, 2004, is by and between THE UNIVERSITY OF BRITISH COLUMBIA (the "University") and ANGIOTECH PHARMACEUTICALS, INC. (the "Licensee").

WITNESSETH

WHEREAS pursuant to a license agreement having a Commencement Date of August 1, 1997 (the "License Agreement"), University granted to Licensee an exclusive worldwide license to use and to sublicense the University's rights in and to the Technology and any Improvements (as those capitalized terms are defined in the License Agreement);

WHEREAS University and Licensee are entering into this Amendment Agreement to set out. certain amendments to the License Agreement mutually agreed to between the parties.

NOW, THEREFORE, in consideration of the mutual promises and agreements set. forth herein,  and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, University and Licensee hereby agree as follows:

1.

Definitions

Capitalized terms not specifically' defined herein shall have the meanings set forth in the License Agreement. 'Capitalized terms defined herein shall have _.the meanings set forth in this Amendment Agreement.

2.

License Agreement Amendments

2.1

Amendments. The License Agreement shall be amended as set out with particularity in Schedule "1" to this Amendment Agreement, and each of University and Licensee covenant and agree to keep, Observe and perform each and every one of the terms, covenants, agreements and conditions On their part to be kept, observed or performed under the License Agreement, as supplemented and amended hereby.

2.2

Effect of Amendment Agreement. This Amendment Agreement supplements and amends the 'License Agreement, and the License Agreement and this Amendment Agreement shall henceforth be read 'together and shall have effect so far as practicable as though all the provisions thereof and hereof were contained in one instrument. The License Agreement, as supplemented and amended hereby, shall continue in full force and effect for the remainder of the term thereof in accordance with the terms thereof and hereof.

2

3.

Enurement

The License Agreement, as supplemented and amended hereby, shall enure to the benefit of the parties hereto and their respective successors and permitted assigns.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be executed by their duly authorized representatives.

SIGNED FOR AND ON BEHALF of THE

UNIVERSITY OF BRITISH COLUMBIA by

its duly ^-authorized Officers:

                                /Signed/

___________________________________

By:

___________________________________

Title:

___________________________________

___________________________________

By:

___________________________________

Title:

___________________________________

ANGIOTECH PHARMACEUTICALS,INC.

                    /s/Jeanne M. Bertonis/

___________________________________

By:                 Jeanne M. Bertonis

___________________________________

Title:           Chief  Business Officer

___________________________________

Schedule "1" to the Amendment Agreement, dated February 27, 2004

As of February 27, 2004, the following amendments are hereby made to the License Agreement . (all other provisions of the License Agreement shall remain unchanged and shall continue in full force and effect):

1.

The patent family entitled "ANGIOTECH PATENT APPLICATION FAMILY (1.40005), UBC File Reference No. 96-099" attached to this Schedule 1, shall be added to Schedule "A" ("TECHNOLOGY") of the License Agreement.

2.

Article 11.1 of the License Agreement is hereby amended by the addition of the underlined text as follows:

“That the Licensee shall maintain at its principal place of business, or such other place as may be most convenient, accounts and records of business done pursuant to this Agreement, such accounts and records to be in sufficient detail, to enable proper returns to the University to be made under this Agreement in the forms set out in Schedule B, C and D attached hereto.”

The remainder of Article 11 remains unchanged.

3.

The last sentence of Article 13.1 of the Agreement is hereby amended by the addition of the underlined text to that sentence as follows:

“Notwithstanding the foregoing, this Agreement may be assigned or transferred (a) to an Affiliated Company; or, (b) as part of a safe or transfer of substantially all of the business of the Licensee relating to the operations which concern this Agreement, provided the Licensee gives the University prior written notice and such assignee or transferee has the reasonable ability to comply with the terms of this Agreement and provided further that:

(a)

the Licensee acknowledges and agrees, in writing, that all of the rights of the University herein, and all of the obligations and covenants provided herein by Licensee, shall survive any assignment of this Agreement to each such successor, purchaser or Affiliate, and that such assignment shall not release Licensee from its obligations or covenants under this Agreement, even though, after such assignment, primary recourse for enforcement of such obligations and covenants shall be against the assignee, and Licensee shall remain secondarily liable; and

2

(b)

such successor, purchaser or Affiliate shall execute a written agreement which provides that it covenants and agrees with the University to assume, acknowledge and adopt as its own obligation every covenant, obligation, representation, warranty, or liability of Licensee contained in this Agreement,"

The remainder of Article 13.1 and Article 13 remains unchanged.

4.

Schedules B, C and D, as attached to this Amendment Agreement, shall hereby become Schedules B, C and D to the License Agreement, and shall be incorporated in their entirety into the License Agreement.

ANGIOTECH PATENT APPLICATION FAMILY (1.40005) 2/13/04

New
Angiotech
Docket No. Old
Docket No. Filing
Date Application
No. Title Status Issue/
Publ
Date Patent No. /
Publ. No.

[***]

SCHEDULE "B"

Payment Report for the Period dd/mm/yy to dd/mm/yy Instructions for

Instructions for Completing this Report

Please fill out each section in full, identifying in the Royalty Summary Table the unit sales and geographical sales areas. If the licence with the University involves several product lines, please prepare a separate Summary Table for each product line. For licences involving sublicencing revenue, please prepare an additional report for each sublicence.

PLEASE NOTE: An interest rate of 1% per month will be assessed against all payments in arrears.

Licensee  _____________________  Agreement #   ______________  UBC ID #  ________________________

UBC Technology  ___________________________________________________________________________

Report Type (check one and complete as appropriate)

Single Product Line

⃞

Product Line Trade Name  __________________________________________

Multiple Products

⃞

Page  ___  Of  ___  Product Line Trade Name  __________________________

Sublicence Report

⃞

Page  ___  Of  ___

Payments this Quarter (please complete separate tables for multiple product lines) Royalties on Product Sales

Country	Units Sold	Unit Price (domestic currency)	Gross sales	Less Allow-ances*	Net Sales	Royalty Rate	Conversion Rate (to Canadian $)	Period Royalty Amount (Canadian $)
								This yr	Last yr
Canada
US
Europe (specify Countries)
Other
Total Product Royalties

Additional Payments (complete all that apply)

Minimum Royalty Fee	Amount
Milestone Payment	Amount
Annual License Maintenance Fee	Amount
		This Year	Last Year
Total Payments for Period

*Please indicate the reasons for returns or other allowances, if significant. Please note any unusual occurrences that affected royalty amounts during the period.

Prepared by     ____________________     Date        Dd/mm/yy                    Phone     ____________________

I ________________ (print name), of ________________ (title) hereby certify the foregoing information as true and correct.

Signature Date Signed

SCHEDULE "C"

UBC License Agreement Annual Report

The information to be completed below shall constitute the annual report required pursuant to the University License Agreement. Any information or documents provided by the Licensee in this report shall not be interpreted as affecting the express rights and obligations of the Licensee contained in the License Agreement. This report is in addition to the Payment Report to accompany each royalty payment.

Date of Report:     ________________      Person Preparing This Report:     __________________

Name of Licensee:     _____________     UBC File Number:     ___________________________

Jurisdiction of Corporation:     ________________           Head Office Address:     _______________

Contact Person for Company     ______________________________________________

Licensed Technology:     _________________________________________________

Telephone Number:     _______________     E-mail Address:     ___________________________

1.

Please provide a brief report on the status of development of the UBC Technology, progress on creating a commercial Product or subsequent marketing of the Product as appropriate.

_________________________________________________________________________

_________________________________________________________________________

2.

Has the Licensee filed any patent applications for modifications or improvements relating to the original UBC Technology? Please provide details, and attach copies of all relevant documents.

_________________________________________________________________________

_________________________________________________________________________

3.

Has the Licensee become aware of any potential 3^rd party infringing on the UBC patents or related intellectual property? If so please provide details and outline what the Licensee is doing about this.

_________________________________________________________________________

_________________________________________________________________________

4.

Has the Licensee met any milestone or performance objectives in the past year as set forth in the license agreement? Please outline the past year's accomplishments.

_________________________________________________________________________

_________________________________________________________________________

5.

Does the Licensee expect to meet any milestone or performance objective in the coming year as set forth in the license agreement? If so please provide details.

_________________________________________________________________________

_________________________________________________________________________

6.

If applicable, has the Licensee granted sublicenses to 3^rd parties and if so have copies of the sublicense agreement been provided to the Technology Manager at UBC? If not, please enclose a copy of each sublicense agreement.

_________________________________________________________________________

7:

Has the licensee made any sales in the last 12 months?  Yes ______  No ______
If so please submit a completed Royalty Payment Report.

a)

Date of sales of Products utilizing the Technology;

b)

Date of any clinical trials.

_________________________________________________________________________

_________________________________________________________________________

8.

Does your company have public liability insurance. If so, please attach a copy of the insurance policy naming UBC as insured as required by the License Agreement.

_________________________________________________________________________

_________________________________________________________________________

9.

Is there any other information relating to this License that you think we should be aware of? Please summarize them below or contact us directly.

_________________________________________________________________________

_________________________________________________________________________

Prepared by     ____________________     Date        Dd/mm/yy                    Phone     ____________________

I ________________ (print name), of ________________ (title) hereby certify the foregoing information as true and correct.

Signature Date Signed

Once completed, please submit this report to:

Managing Director c/o Licensing Compliance Officer

University — Industry Liaison Office

#103 — 6190 Agronomy Road,

Vancouver, BC

V6T 1Z3

EX-10.16

Exhibit 10.16

INDEMNIFICATION AGREEMENT

This Agreement dated ●

BETWEEN:

● , of ●

(“Indemnitee”)

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

(“Angiotech”)

BACKGROUND

A.

The Indemnitee has agreed to continue to be employed by Angiotech’s US subsidiary, Angiotech Pharmaceuticals (US), Inc. (“Angiotech US”), in the position of ●, on and subject to the terms and conditions of an Executive Employment Agreement dated ●.

B.

As part of that employment relationship, the Indemnitee has agreed that Angiotech US may ask the Indemnitee to serve as an officer of Angiotech and/or as a director and/or officer of one or more of Angiotech’s affiliates or subsidiaries (in addition to serving in the position of ●).

C.

Subject to the Business Corporations Act (British Columbia), Angiotech’s articles authorize Angiotech to indemnify the Indemnitee for liabilities and expenses that may be incurred by the Indemnitee by reason of the Indemnitee being a director, officer, or employee of Angiotech, or of an affiliate or subsidiary of Angiotech, or of any other entity at Angiotech’s request.

D.

Angiotech wishes to indemnify the Indemnitee in certain circumstances for liabilities and expenses that the Indemnitee may incur by reason of the Indemnitee being a director, officer, or employee of Angiotech, or of an affiliate or subsidiary of Angiotech, or of any other entity at Angiotech’s request, in accordance with this Agreement.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

DEFINITIONS

1.1

In this Agreement:

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(a)

“Act” means the Business Corporations Act (British Columbia), as amended from time to time, or any successor legislation;

(b)

“Associated Corporation” means

(i)

a corporation that is or was an affiliate or subsidiary of Angiotech, at a time when the Indemnitee is or was a director, officer, or employee of the corporation,

(ii)

another corporation of which the Indemnitee is or has been, at Angiotech’s request, a director, officer, or employee, or

(iii)

a partnership, trust, joint venture, or other unincorporated entity of which the Indemnitee holds or has held, at Angiotech’s request, a position equivalent to that of a director or officer, or is or has been, at Angiotech’s request, an employee;

(c)

“Board” means the Board of Directors of Angiotech;

(d)

“Eligible Penalty” means a judgment, penalty, or fine awarded or imposed in, or an amount paid in settlement of, an Eligible Proceeding;

(e)

“Eligible Proceeding” means a Proceeding in which the Indemnitee, or any of the Indemnitee’s heirs, successors, or personal or other legal representatives

(i)

is or may be joined as a party, or

(ii)

is or may be liable for or in respect of a judgment, penalty, or fine in, or Expenses related to, the Proceeding,

by reason of the Indemnitee being or having been a director, officer, or employee of, or holding or having held a position equivalent to that of a director or officer of, Angiotech or an Associated Corporation;

(f)

“Expenses” includes costs, charges, and expenses, including legal and other fees, incurred in respect of a Proceeding, but does not include judgments, penalties, fines, or amounts paid in settlement of a Proceeding;

(g)

“Indemnitee” includes, except in paragraphs  and , ,  and , , and , both the Indemnitee and the Indemnitee’s heirs, successors, and personal or other legal representatives, but does not include anyone else;

(h)

“Proceeding” includes any legal proceeding or investigative action, whether current, threatened, pending, or completed.

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2.

INDEMNIFICATION

2.1

Subject to the provisions of this Agreement, Angiotech will, to the fullest extent permitted by law:

(a)

indemnify and save harmless the Indemnitee from and against any and all Eligible Penalties for which the Indemnitee is or may be liable, and

(b)

after the final disposition of an Eligible Proceeding, pay the Expenses actually and reasonably incurred by the Indemnitee in respect of that Eligible Proceeding.

2.2

Subject to paragraphs  and , at the request of the Indemnitee, Angiotech will pay Expenses referred to in paragraph  in advance, to the extent Angiotech determines it to be necessary or appropriate to do so to enable the Indemnitee to properly investigate, defend, or appeal the applicable Eligible Proceeding.

2.3

This Agreement is effective as of ●, and will continue in effect after the Indemnitee ceases to be a director, officer, or employee, or to hold a position equivalent to that of a director or officer, of Angiotech or any Associated Corporation.

3.

LIMITATIONS AND CONDITIONS

3.1

Despite any other provision of this Agreement, Angiotech will not indemnify the Indemnitee in respect of or in relation to any Eligible Proceeding or any Eligible Penalties incurred therein, or pay any Expenses of the Indemnitee in respect of or in relation to any Eligible Proceeding:

(a)

if Angiotech is prohibited under the Act or any other applicable law from making such payments;

(b)

if the Eligible Proceeding is or was brought against the Indemnitee by or on behalf of Angiotech or an Associated Corporation;

(c)

if, in relation to the subject matter of the Eligible Proceeding, the Indemnitee did not act honestly and in good faith, with a view to, or with sufficient regard for, the best interests of Angiotech and of any applicable Associated Corporation;

(d)

in the case of an Eligible Proceeding other than a civil proceeding, if the Indemnitee did not have reasonable grounds for believing that the Indemnitee’s conduct in respect of which the Eligible Proceeding was brought was lawful;

(e)

if the Indemnitee makes an admission of liability or guilt or enters into a settlement with respect to the Eligible Proceeding without Angiotech’s consent contrary to paragraph , to the extent any Eligible Penalties or Expenses are incurred as a result of that admission or settlement;

(f)

if, after Angiotech decides under paragraph  to assume and direct the carriage of the defence and handling of the Eligible Proceeding, the Indemnitee unreasonably withholds consent to a request by Angiotech to enter into a settlement with respect to the Eligible Proceeding under paragraph , to the extent that any Expenses are incurred thereafter, and to the extent that any Eligible Penalties, or any portion thereof, may not have been incurred if the Indemnitee had consented to such admission or settlement;

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(g)

if, after Angiotech decides under paragraph  to assume and direct the carriage of the defence and handling of the Eligible Proceeding, the Indemnitee incurs any Expenses in relation to the Eligible Proceeding that are not consented to or authorized by Angiotech or otherwise authorized under this Agreement, to the extent of such unauthorized Expenses;

(h)

to the extent that such indemnification has been provided, or payments made, to or on behalf of the Indemnitee by an insurer under a policy of insurance maintained by Angiotech or an Associated Corporation;

(i)

to the extent that the Indemnitee may have become disentitled from receiving such indemnification from, or having such payments made by, an insurer under a policy of insurance maintained by Angiotech or an Associated Corporation, as a result of the Indemnitee breaching any term or condition of the applicable policy of insurance contrary to paragraph , or exercising any right under the applicable policy of insurance without Angiotech’s consent contrary to paragraph ; or

(j)

to the extent that Angiotech or any Associated Corporation indemnifies or pays the Expenses of the Indemnitee in respect of or in relation to the Eligible Proceeding other than under this Agreement.

3.2

The Board will determine whether the Indemnitee is or will be disentitled under paragraph  from receiving any payment, or any portion thereof, under this Agreement.

3.3

The Board may make a determination under paragraph  before or after the disposition of the applicable Eligible Proceeding.

3.4

Despite any determination the Board may previously have made under paragraph , if, after making any payment to the Indemnitee under this Agreement, including any payment made under paragraph  or , the Board acquires information indicating that the Indemnitee was or ought to have been disentitled from receiving that payment, or any portion thereof, under paragraph  or any other provision of this Agreement, the Board may require the Indemnitee to repay Angiotech forthwith the amount of such payment, or the applicable portion thereof.

3.5

If the Board requires the Indemnitee to repay Angiotech any amount under paragraph , or if it is otherwise determined by an arbitrator under Part  that the Indemnitee is required to repay Angiotech any amount that the Indemnitee was not entitled to receive under this Agreement or otherwise by law:

(a)

the Indemnitee will repay that amount to Angiotech forthwith; and

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(b)

Angiotech will be entitled to set off any unpaid portion of that amount against any debt, liability, or amount that may be owing by Angiotech to the Indemnitee under this Agreement or otherwise.

4.

NOTICE, DEFENCE, AND SETTLEMENT OF ELIGIBLE PROCEEDING

4.1

The Indemnitee will cooperate fully with Angiotech, and provide any information that Angiotech may require from time to time, and act with the utmost good faith towards Angiotech, with respect to all matters under this Agreement.  In particular, the Indemnitee will notify Angiotech forthwith of:

(a)

receiving notice of, or becoming aware of, any Eligible Proceeding (including a threatened Eligible Proceeding);

(b)

being served with any writ, statement of claim, notice of motion, indictment, or other document commencing or continuing any Eligible Proceeding; and

(c)

all other steps taken in, or in relation to, any Eligible Proceeding.

4.2

The Indemnitee will not make any admission of liability or guilt, or enter into any settlement, with respect to any Eligible Proceeding without the prior written consent of Angiotech.

4.3

If Angiotech pays any Expenses referred to in paragraph  in advance under paragraph , or if the Board determines, before the disposition of an Eligible Proceeding, that the Indemnitee will be indemnified under this Agreement as to 50% or more of any Eligible Penalties referred to in paragraph  or Expenses referred to in paragraph , Angiotech may, at its option and subject to the provisions of any applicable policy of insurance, assume and direct the carriage of the defence and handling of such Eligible Proceeding, to determine whether and in what manner such Eligible Proceeding will be defended, appealed, compromised, or settled, and, subject to paragraph , to select legal counsel to represent the Indemnitee.

4.4

If Angiotech assumes and directs the carriage of the defence and handling of an Eligible Proceeding under paragraph :

(a)

the Indemnitee will cooperate fully with Angiotech and act with the utmost good faith towards Angiotech in all matters relating to such Eligible Proceeding;

(b)

the Indemnitee will disclose to Angiotech any facts, information, or documents in the Indemnitee’s knowledge, possession, or control that may be relevant to the defence and handling of the Eligible Proceeding, including, subject to paragraph , any legal or other professional advice obtained by the Indemnitee with respect to the defence and handling of the Eligible Proceeding; and

(c)

Angiotech will not make any admission of liability or guilt, or enter into any settlement on the Indemnitee’s behalf, without the Indemnitee’s consent, which will not be unreasonably withheld.

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4.5

In any Eligible Proceeding, the Indemnitee may retain legal counsel other than the counsel selected by Angiotech under paragraph  to represent the Indemnitee, provided that the fees and disbursements of such other counsel will be paid by the Indemnitee, unless:

(a)

the Indemnitee and Angiotech mutually agree to the retention of such other counsel; or

(b)

the parties to such Eligible Proceeding (including any added or interpleaded parties) include the Indemnitee and Angiotech (or any Associated Corporation), and representation of both the Indemnitee and Angiotech (or the applicable Associated Corporation) by the same legal counsel is inappropriate or impracticable due to an actual or potential conflict between the interests of the Indemnitee and Angiotech (or the applicable Associated Corporation).

5.

INSURANCE

5.1

Angiotech may purchase and maintain insurance for the benefit of the Indemnitee or the Indemnitee’s heirs, successors, or personal or other legal representatives, against any liability that may be incurred by reason of the Indemnitee being or having been a director, officer, or employee of, or holding or having held a position equivalent to that of a director or officer of, Angiotech or an Associated Corporation.

5.2

The nature and extent of the coverage of any insurance purchased and maintained under paragraph  will be determined from time to time by the Board.

5.3

The Indemnitee will comply with all applicable obligations under any policy of insurance that may be maintained by Angiotech or by any Associated Corporation under which coverage is provided or may be available for any Eligible Penalties or Expenses incurred with respect to an Eligible Proceeding.

5.4

The Indemnitee will not, without the prior written consent of Angiotech, exercise any right under any policy of insurance referred to in paragraph  in any manner that may affect the provision or availability of coverage under the policy for any Eligible Penalties or Expenses incurred with respect to an Eligible Proceeding.

6.

OTHER RIGHTS OF THE INDEMNITEE

6.1

The indemnification or payment of any Eligible Penalties or Expenses under this Agreement will not diminish any other rights to which the Indemnitee or the Indemnitee’s heirs, successors, or personal or other legal representatives may be entitled under any provision of the Act, Title 23B of the Revised Code of Washington, or any other enactment, Angiotech’s articles, Angiotech US’s articles of incorporation, any applicable policy of insurance, guarantee, or third party indemnity, any vote of the shareholders of Angiotech, or otherwise, whether as to any matter arising out of the Indemnitee’s capacity as a director, officer, or employee of Angiotech or an Associated Corporation, or as to any matter arising out of another capacity with Angiotech or an Associated Corporation while serving as a director, officer, or employee of Angiotech or an Associated Corporation.

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7.

NOTICES

7.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

___________________________

___________________________

___________________________

(b)

ANGIOTECH PHARMACEUTICALS, INC.
1618 Station Street
Vancouver, BC  V6A 1B6
Attention:        Tammy Neske,
                       Vice President, Human Resources

7.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

8.

SEVERABILITY AND WAIVER

8.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part  or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

8.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party’s rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

9.

DISPUTE RESOLUTION

9.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application, or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

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9.2

If a dispute referred to in paragraph  cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree to a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

9.3

A dispute that is referred to binding arbitration under paragraph  will be finally resolved by a single arbitrator under the International Commercial Arbitration Act (British Columbia) (“ICAA”).

9.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may make a request under the ICAA for the Chief Justice of the Supreme Court of British Columbia (“Supreme Court”) to appoint an arbitrator, who may be of any nationality, but must be a member of the Law Society of British Columbia.

9.5

The arbitration will be in Vancouver, British Columbia.

9.6

The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the International Commercial Arbitration Rules of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

9.7

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except in accordance with section 34 of the ICAA.

9.8

Despite paragraph , either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 9 of the ICAA.

9.9

For greater certainty, paragraphs  and  will not affect the arbitrator’s authority or jurisdiction under section 17 of the ICAA to order either party to take any interim measure of protection that the arbitrator may consider necessary.

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10.

GOVERNING LAW AND FORUM

10.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Columbia and laws of Canada applicable therein.

10.2

Subject to Part , if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Indemnitee will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

11.

INDEPENDENT LEGAL ADVICE

11.1

Angiotech’s lawyers prepared this Agreement. The Indemnitee was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

12.

ENUREMENT AND ASSIGNMENT

12.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, successors, personal or other legal representatives, and permitted assigns.

12.2

The Indemnitee will not assign this Agreement without Angiotech’s prior written consent.

13.

INTERPRETATION

13.1

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

13.2

If Angiotech is continued, incorporated, amalgamated, arranged under, or otherwise becomes governed by an enactment other than the Act, all references in this Agreement to the Act will be deemed to be references to such other enactment as it may be amended or replaced from time to time.

13.3

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

14.

ENTIRE AGREEMENT

14.1

This Agreement will supersede and replace any and all prior agreements and discussions between the parties respecting its subject matter, except the Executive Employment Agreement dated ●, and contains the entire agreement between the parties with respect to its subject matter.

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14.2

No amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by ● in the presence of: _______________________________
Signature of Witness

_______________________________
Print Name of Witness

_______________________________
Address of Witness

_______________________________
Occupation of Witness

_______________________________
Date )
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

__________________________________
●

ANGIOTECH PHARMACEUTICALS, INC.

By:
_________________________________________
Authorized Signatory

Date: ___________________________________

______________________________________________________

BETWEEN:

●

AND:

ANGIOTECH PHARMACEUTICALS, INC.

______________________________________________________

INDEMNIFICATION AGREEMENT

______________________________________________________

Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7

______________________________________________________

EX-10.17

Exhibit 10.17

INDEMNIFICATION AGREEMENT

This Agreement dated ●

BETWEEN:

●

(“Indemnitee”)

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

 (“Angiotech”)

BACKGROUND

A.

The Indemnitee has agreed to continue to be employed by Angiotech, in the position of ●, on and subject to the terms and conditions of an Executive Employment Agreement dated ●.

B.

As part of that employment relationship, the Indemnitee has agreed that Angiotech may ask the Indemnitee to serve as an officer of Angiotech and/or as a director and/or officer of one or more of Angiotech’s affiliates or subsidiaries (in addition to serving in the position of ●).

C.

Subject to the Business Corporations Act (British Columbia), Angiotech’s articles authorize Angiotech to indemnify the Indemnitee for liabilities and expenses that may be incurred by the Indemnitee by reason of the Indemnitee being a director, officer, or employee of Angiotech, or of an affiliate or subsidiary of Angiotech, or of any other entity at Angiotech’s request.

D.

Angiotech wishes to indemnify the Indemnitee in certain circumstances for liabilities and expenses that the Indemnitee may incur by reason of the Indemnitee being a director, officer, or employee of Angiotech, or of an affiliate or subsidiary of Angiotech, or of any other entity at Angiotech’s request, in accordance with this Agreement.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

DEFINITIONS

1.1

In this Agreement:

- 2 -

(a)

“Act” means the Business Corporations Act (British Columbia), as amended from time to time, or any successor legislation;

(b)

“Associated Corporation” means

(i)

a corporation that is or was an affiliate or subsidiary of Angiotech, at a time when the Indemnitee is or was a director, officer, or employee of the corporation,

(ii)

another corporation of which the Indemnitee is or has been, at Angiotech’s request, a director, officer, or employee, or

(iii)

a partnership, trust, joint venture, or other unincorporated entity of which the Indemnitee holds or has held, at Angiotech’s request, a position equivalent to that of a director or officer, or is or has been, at Angiotech’s request, an employee;

(c)

“Board” means the Board of Directors of Angiotech;

(d)

“Eligible Penalty” means a judgment, penalty, or fine awarded or imposed in, or an amount paid in settlement of, an Eligible Proceeding;

(e)

“Eligible Proceeding” means a Proceeding in which the Indemnitee, or any of the Indemnitee’s heirs, successors, or personal or other legal representatives

(i)

is or may be joined as a party, or

(ii)

is or may be liable for or in respect of a judgment, penalty, or fine in, or Expenses related to, the Proceeding,

by reason of the Indemnitee being or having been a director, officer, or employee of, or holding or having held a position equivalent to that of a director or officer of, Angiotech or an Associated Corporation;

(f)

“Expenses” includes costs, charges, and expenses, including legal and other fees, incurred in respect of a Proceeding, but does not include judgments, penalties, fines, or amounts paid in settlement of a Proceeding;

(g)

“Indemnitee” includes, except in paragraphs  and , ,  and , , and , both the Indemnitee and the Indemnitee’s heirs, successors, and personal or other legal representatives, but does not include anyone else;

(h)

“Proceeding” includes any legal proceeding or investigative action, whether current, threatened, pending, or completed.

- 3 -

2.

INDEMNIFICATION

2.1

Subject to the provisions of this Agreement, Angiotech will, to the fullest extent permitted by law:

(a)

indemnify and save harmless the Indemnitee from and against any and all Eligible Penalties for which the Indemnitee is or may be liable, and

(b)

after the final disposition of an Eligible Proceeding, pay the Expenses actually and reasonably incurred by the Indemnitee in respect of that Eligible Proceeding.

2.2

Subject to paragraphs  and , at the request of the Indemnitee, Angiotech will pay Expenses referred to in paragraph  in advance, to the extent Angiotech determines it to be necessary or appropriate to do so to enable the Indemnitee to properly investigate, defend, or appeal the applicable Eligible Proceeding.

2.3

This Agreement is effective as of ●, and will continue in effect after the Indemnitee ceases to be a director, officer, or employee, or to hold a position equivalent to that of a director or officer, of Angiotech or any Associated Corporation.

3.

LIMITATIONS AND CONDITIONS

3.1

Despite any other provision of this Agreement, Angiotech will not indemnify the Indemnitee in respect of or in relation to any Eligible Proceeding or any Eligible Penalties incurred therein, or pay any Expenses of the Indemnitee in respect of or in relation to any Eligible Proceeding:

(a)

if Angiotech is prohibited under the Act or any other applicable law from making such payments;

(b)

if the Eligible Proceeding is or was brought against the Indemnitee by or on behalf of Angiotech or an Associated Corporation;

(c)

if, in relation to the subject matter of the Eligible Proceeding, the Indemnitee did not act honestly and in good faith, with a view to, or with sufficient regard for, the best interests of Angiotech and of any applicable Associated Corporation;

(d)

in the case of an Eligible Proceeding other than a civil proceeding, if the Indemnitee did not have reasonable grounds for believing that the Indemnitee’s conduct in respect of which the Eligible Proceeding was brought was lawful;

(e)

if the Indemnitee makes an admission of liability or guilt or enters into a settlement with respect to the Eligible Proceeding without Angiotech’s consent contrary to paragraph , to the extent any Eligible Penalties or Expenses are incurred as a result of that admission or settlement;

(f)

if, after Angiotech decides under paragraph  to assume and direct the carriage of the defence and handling of the Eligible Proceeding, the Indemnitee unreasonably withholds consent to a request by Angiotech to enter into a settlement with respect to the Eligible Proceeding under paragraph , to the extent that any Expenses are incurred thereafter, and to the extent that any Eligible Penalties, or any portion thereof, may not have been incurred if the Indemnitee had consented to such admission or settlement;

- 4 -

(g)

if, after Angiotech decides under paragraph  to assume and direct the carriage of the defence and handling of the Eligible Proceeding, the Indemnitee incurs any Expenses in relation to the Eligible Proceeding that are not consented to or authorized by Angiotech or otherwise authorized under this Agreement, to the extent of such unauthorized Expenses;

(h)

to the extent that such indemnification has been provided, or payments made, to or on behalf of the Indemnitee by an insurer under a policy of insurance maintained by Angiotech or an Associated Corporation;

(i)

to the extent that the Indemnitee may have become disentitled from receiving such indemnification from, or having such payments made by, an insurer under a policy of insurance maintained by Angiotech or an Associated Corporation, as a result of the Indemnitee breaching any term or condition of the applicable policy of insurance contrary to paragraph , or exercising any right under the applicable policy of insurance without Angiotech’s consent contrary to paragraph ; or

(j)

to the extent that Angiotech or any Associated Corporation indemnifies or pays the Expenses of the Indemnitee in respect of or in relation to the Eligible Proceeding other than under this Agreement.

3.2

The Board will determine whether the Indemnitee is or will be disentitled under paragraph  from receiving any payment, or any portion thereof, under this Agreement.

3.3

The Board may make a determination under paragraph  before or after the disposition of the applicable Eligible Proceeding.

3.4

Despite any determination the Board may previously have made under paragraph , if, after making any payment to the Indemnitee under this Agreement, including any payment made under paragraph  or , the Board acquires information indicating that the Indemnitee was or ought to have been disentitled from receiving that payment, or any portion thereof, under paragraph  or any other provision of this Agreement, the Board may require the Indemnitee to repay Angiotech forthwith the amount of such payment, or the applicable portion thereof.

3.5

If the Board requires the Indemnitee to repay Angiotech any amount under paragraph , or if it is otherwise determined by an arbitrator under Part  that the Indemnitee is required to repay Angiotech any amount that the Indemnitee was not entitled to receive under this Agreement or otherwise by law:

(a)

the Indemnitee will repay that amount to Angiotech forthwith; and

- 5 -

(b)

Angiotech will be entitled to set off any unpaid portion of that amount against any debt, liability, or amount that may be owing by Angiotech to the Indemnitee under this Agreement or otherwise.

4.

NOTICE, DEFENCE, AND SETTLEMENT OF ELIGIBLE PROCEEDING

4.1

The Indemnitee will cooperate fully with Angiotech, and provide any information that Angiotech may require from time to time, and act with the utmost good faith towards Angiotech, with respect to all matters under this Agreement.  In particular, the Indemnitee will notify Angiotech forthwith of:

(a)

receiving notice of, or becoming aware of, any Eligible Proceeding (including a threatened Eligible Proceeding);

(b)

being served with any writ, statement of claim, notice of motion, indictment, or other document commencing or continuing any Eligible Proceeding; and

(c)

all other steps taken in, or in relation to, any Eligible Proceeding.

4.2

The Indemnitee will not make any admission of liability or guilt, or enter into any settlement, with respect to any Eligible Proceeding without the prior written consent of Angiotech.

4.3

If Angiotech pays any Expenses referred to in paragraph  in advance under paragraph , or if the Board determines, before the disposition of an Eligible Proceeding, that the Indemnitee will be indemnified under this Agreement as to 50% or more of any Eligible Penalties referred to in paragraph  or Expenses referred to in paragraph , Angiotech may, at its option and subject to the provisions of any applicable policy of insurance, assume and direct the carriage of the defence and handling of such Eligible Proceeding, to determine whether and in what manner such Eligible Proceeding will be defended, appealed, compromised, or settled, and, subject to paragraph , to select legal counsel to represent the Indemnitee.

4.4

If Angiotech assumes and directs the carriage of the defence and handling of an Eligible Proceeding under paragraph :

(a)

the Indemnitee will cooperate fully with Angiotech and act with the utmost good faith towards Angiotech in all matters relating to such Eligible Proceeding;

(b)

the Indemnitee will disclose to Angiotech any facts, information, or documents in the Indemnitee’s knowledge, possession, or control that may be relevant to the defence and handling of the Eligible Proceeding, including, subject to paragraph , any legal or other professional advice obtained by the Indemnitee with respect to the defence and handling of the Eligible Proceeding; and

(c)

Angiotech will not make any admission of liability or guilt, or enter into any settlement on the Indemnitee’s behalf, without the Indemnitee’s consent, which will not be unreasonably withheld.

- 6 -

4.5

In any Eligible Proceeding, the Indemnitee may retain legal counsel other than the counsel selected by Angiotech under paragraph  to represent the Indemnitee, provided that the fees and disbursements of such other counsel will be paid by the Indemnitee, unless:

(a)

the Indemnitee and Angiotech mutually agree to the retention of such other counsel; or

(b)

the parties to such Eligible Proceeding (including any added or interpleaded parties) include the Indemnitee and Angiotech (or any Associated Corporation), and representation of both the Indemnitee and Angiotech (or the applicable Associated Corporation) by the same legal counsel is inappropriate or impracticable due to an actual or potential conflict between the interests of the Indemnitee and Angiotech (or the applicable Associated Corporation).

5.

INSURANCE

5.1

Angiotech may purchase and maintain insurance for the benefit of the Indemnitee or the Indemnitee’s heirs, successors, or personal or other legal representatives, against any liability that may be incurred by reason of the Indemnitee being or having been a director, officer, or employee of, or holding or having held a position equivalent to that of a director or officer of, Angiotech or an Associated Corporation.

5.2

The nature and extent of the coverage of any insurance purchased and maintained under paragraph  will be determined from time to time by the Board.

5.3

The Indemnitee will comply with all applicable obligations under any policy of insurance that may be maintained by Angiotech or by any Associated Corporation under which coverage is provided or may be available for any Eligible Penalties or Expenses incurred with respect to an Eligible Proceeding.

5.4

The Indemnitee will not, without the prior written consent of Angiotech, exercise any right under any policy of insurance referred to in paragraph  in any manner that may affect the provision or availability of coverage under the policy for any Eligible Penalties or Expenses incurred with respect to an Eligible Proceeding.

6.

OTHER RIGHTS OF THE INDEMNITEE

6.1

The indemnification or payment of any Eligible Penalties or Expenses under this Agreement will not diminish any other rights to which the Indemnitee or the Indemnitee’s heirs, successors, or personal or other legal representatives may be entitled under any provision of the Act or any other enactment, Angiotech’s articles, any applicable policy of insurance, guarantee, or third party indemnity, any vote of the shareholders of Angiotech, or otherwise, whether as to any matter arising out of the Indemnitee’s capacity as a director, officer, or employee of Angiotech or an Associated Corporation, or as to any matter arising out of another capacity with Angiotech or an Associated Corporation while serving as a director, officer, or employee of Angiotech or an Associated Corporation.

- 7 -

7.

NOTICES

7.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

_______________________________

_______________________________

_______________________________

(b)

ANGIOTECH PHARMACEUTICALS, INC.
1618 Station Street
Vancouver, BC  V6A 1B6
Attention:        David D. McMasters,
                      General Counsel and Senior Vice President, Legal

7.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

8.

SEVERABILITY AND WAIVER

8.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part  or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

8.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party’s rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

9.

DISPUTE RESOLUTION

9.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application, or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

- 8 -

9.2

If a dispute referred to in paragraph  cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree to a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

9.3

A dispute that is referred to binding arbitration under paragraph  will be finally resolved by a single arbitrator under the Commercial Arbitration Act (British Columbia) (“CAA”).

9.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may apply to the Supreme Court of British Columbia (“Supreme Court”) for the appointment of a single arbitrator under the CAA.

9.5

Immediately after the arbitration has commenced, the parties will agree under section 35 of the CAA to exclude the jurisdiction of the Supreme Court under sections 31, 33, and 34 of the CAA.

9.6

The arbitration will be in Vancouver, British Columbia.

9.7

The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

9.8

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except for arbitral error under section 30 of the CAA.

9.9

Despite paragraph , either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 15(4) of the CAA.

- 9 -

10.

GOVERNING LAW AND FORUM

10.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Columbia and laws of Canada applicable therein.

10.2

Subject to Part , if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Indemnitee will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

11.

INDEPENDENT LEGAL ADVICE

11.1

Angiotech’s lawyers prepared this Agreement. The Indemnitee was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

12.

ENUREMENT AND ASSIGNMENT

12.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, successors, personal or other legal representatives, and permitted assigns.

12.2

The Indemnitee will not assign this Agreement without Angiotech’s prior written consent.

13.

INTERPRETATION

13.1

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

13.2

If Angiotech is continued, incorporated, amalgamated, arranged under, or otherwise becomes governed by an enactment other than the Act, all references in this Agreement to the Act will be deemed to be references to such other enactment as it may be amended or replaced from time to time.

13.3

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

14.

ENTIRE AGREEMENT

14.1

This Agreement will supersede and replace any and all prior agreements and discussions between the parties respecting its subject matter, except the Executive Employment Agreement dated ●, and contains the entire agreement between the parties with respect to its subject matter.

- 10 -

14.2

No amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by ● in the presence of: _______________________________
Signature of Witness

_______________________________
Print Name of Witness

_______________________________
Address of Witness

_______________________________
Occupation of Witness

_______________________________
Date )
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

__________________________________
●

ANGIOTECH PHARMACEUTICALS, INC.

By:
_________________________________________
Authorized Signatory

Date: ___________________________________

______________________________________________________

BETWEEN:

●

AND:

ANGIOTECH PHARMACEUTICALS, INC.

______________________________________________________

INDEMNIFICATION AGREEMENT

______________________________________________________

Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7

______________________________________________________

EX-10.18

Exhibit 10.18

INDEMNIFICATION AGREEMENT

This Agreement dated t

BETWEEN:

t, of t

(“Indemnitee”)

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

 (“Angiotech”)

BACKGROUND

A.

The Indemnitee is a director of Angiotech. [Alternatively: The Indemnitee has been elected, and has agreed to serve, as a director of Angiotech.]

B.

Subject to the Business Corporations Act (British Columbia), Angiotech’s articles:

(a)

require Angiotech to indemnify the Indemnitee for certain liabilities and expenses that may be incurred by the Indemnitee by reason of the Indemnitee being a director of Angiotech, as specified in Article 21.2, and deem the Indemnitee to have contracted with Angiotech on the terms of the indemnity contained in Article 21.2; and

(b)

authorize Angiotech to indemnify the Indemnitee for other liabilities and expenses that may be incurred by the Indemnitee by reason of the Indemnitee being a director, officer, or employee of Angiotech, or of an affiliate or subsidiary of Angiotech, or of any other entity at Angiotech’s request.

C.

Angiotech and the Indemnitee wish to enter into an agreement:

(a)

to better define their respective rights and obligations in relation to the requirement to indemnify the Indemnitee under Article 21.2, and under the contract that is deemed to exist between the Indemnitee and Angitoech under Article 21.2; and

(b)

to further require Angiotech to indemnify the Indemnitee in certain other circumstances for liabilities and expenses that the Indemnitee may incur by reason of the Indemnitee being a director, officer, or employee of Angiotech, or of an affiliate or subsidiary of Angiotech, or of any other entity at Angiotech’s request, in accordance with this Agreement.

- 2 -

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

DEFINITIONS

1.1

In this Agreement:

(a)

“Act” means the Business Corporations Act (British Columbia), as amended from time to time, or any successor legislation;

(b)

“Article 21.2” means Article 21.2 of Angiotech’s articles, as amended from time to time, or any successor provision of Angiotech’s articles, and includes the contract that is deemed to exist between the Indemnitee and Angitoech under Article 21.2;

(c)

“Associated Corporation” means

(i)

a corporation that is or was an affiliate or subsidiary of Angiotech, at a time when the Indemnitee is or was a director, officer, or employee of the corporation,

(ii)

another corporation of which the Indemnitee is or has been, at Angiotech’s request, a director, officer, or employee, or

(iii)

a partnership, trust, joint venture, or other unincorporated entity of which the Indemnitee holds or has held, at Angiotech’s request, a position equivalent to that of a director or officer, or is or has been, at Angiotech’s request, an employee;

(d)

“Board” means the Board of Directors of Angiotech;

(e)

“Eligible Penalty” means a judgment, penalty, or fine awarded or imposed in, or an amount paid in settlement of, an Eligible Proceeding;

(f)

“Eligible Proceeding” means a Proceeding in which the Indemnitee, or any of the Indemnitee’s heirs, successors, or personal or other legal representatives

(i)

is or may be joined as a party, or

(ii)

is or may be liable for or in respect of a judgment, penalty, or fine in, or Expenses related to, the Proceeding,

by reason of the Indemnitee being or having been a director, officer, or employee of, or holding or having held a position equivalent to that of a director or officer of, Angiotech or an Associated Corporation;

- 3 -

(g)

“Expenses” includes costs, charges, and expenses, including legal and other fees, incurred in respect of a Proceeding, but does not include judgments, penalties, fines, or amounts paid in settlement of a Proceeding;

(h)

“Indemnitee” includes, except in paragraphs  and , ,  and , , and , both the Indemnitee and the Indemnitee’s heirs, successors, and personal or other legal representatives, but does not include anyone else;

(i)

“Proceeding” includes any legal proceeding or investigative action, whether current, threatened, pending, or completed.

2.

INDEMNIFICATION

2.1

Subject to the provisions of this Agreement, Angiotech will, to the fullest extent permitted by law:

(a)

indemnify and save harmless the Indemnitee from and against any and all Eligible Penalties for which the Indemnitee is or may be liable, and

(b)

after the final disposition of an Eligible Proceeding, pay the Expenses actually and reasonably incurred by the Indemnitee in respect of that Eligible Proceeding.

2.2

Subject to paragraphs  and , at the request of the Indemnitee, Angiotech will pay Expenses referred to in paragraph  in advance, to the extent Angiotech determines it to be necessary or appropriate to do so to enable the Indemnitee to properly investigate, defend, or appeal the applicable Eligible Proceeding.

2.3

The discharge by Angiotech of its obligations under this Agreement (to the extent permitted by law) will fully satisfy any rights the Indemnitee may have under Article 21.2, and any obligations Angiotech may have under Article 21.2, with respect to any Proceeding, including any claim the Indemnitee may have under Article 21.2 for indemnification from and against, or payment of, any judgment, penalty, fine, costs, charges, or expenses, or any other liability whatsoever, that may be incurred in, or in relation to, any Proceeding.

2.4

This Agreement is effective as of t, and will continue in effect after the Indemnitee ceases to be a director, officer, or employee, or to hold a position equivalent to that of a director or officer, of Angiotech or any Associated Corporation.

3.

LIMITATIONS AND CONDITIONS

3.1

Despite any other provision of this Agreement, Angiotech will not indemnify the Indemnitee in respect of or in relation to any Eligible Proceeding or any Eligible Penalties incurred therein, or pay any Expenses of the Indemnitee in respect of or in relation to any Eligible Proceeding:

(a)

if Angiotech is prohibited under the Act or any other applicable law from making such payments;

- 4 -

(b)

if the Eligible Proceeding is or was brought against the Indemnitee by or on behalf of Angiotech or an Associated Corporation;

(c)

if, in relation to the subject matter of the Eligible Proceeding, the Indemnitee did not act honestly and in good faith, with a view to, or with sufficient regard for, the best interests of Angiotech and of any applicable Associated Corporation;

(d)

in the case of an Eligible Proceeding other than a civil proceeding, if the Indemnitee did not have reasonable grounds for believing that the Indemnitee’s conduct in respect of which the Eligible Proceeding was brought was lawful;

(e)

if the Indemnitee makes an admission of liability or guilt or enters into a settlement with respect to the Eligible Proceeding without Angiotech’s consent contrary to paragraph , to the extent any Eligible Penalties or Expenses are incurred as a result of that admission or settlement;

(f)

if, after Angiotech decides under paragraph  to assume and direct the carriage of the defence and handling of the Eligible Proceeding, the Indemnitee unreasonably withholds consent to a request by Angiotech to enter into a settlement with respect to the Eligible Proceeding under paragraph , to the extent that any Expenses are incurred thereafter, and to the extent that any Eligible Penalties, or any portion thereof, may not have been incurred if the Indemnitee had consented to such admission or settlement;

(g)

if, after Angiotech decides under paragraph  to assume and direct the carriage of the defence and handling of the Eligible Proceeding, the Indemnitee incurs any Expenses in relation to the Eligible Proceeding that are not consented to or authorized by Angiotech or otherwise authorized under this Agreement, to the extent of such unauthorized Expenses;

(h)

to the extent that such indemnification has been provided, or payments made, to or on behalf of the Indemnitee by an insurer under a policy of insurance maintained by Angiotech or an Associated Corporation;

(i)

to the extent that the Indemnitee may have become disentitled from receiving such indemnification from, or having such payments made by, an insurer under a policy of insurance maintained by Angiotech or an Associated Corporation, as a result of the Indemnitee breaching any term or condition of the applicable policy of insurance contrary to paragraph , or exercising any right under the applicable policy of insurance without Angiotech’s consent contrary to paragraph ; or

(j)

to the extent that Angiotech or any Associated Corporation indemnifies or pays the Expenses of the Indemnitee in respect of or in relation to the Eligible Proceeding other than under this Agreement.

- 5 -

3.2

The Board will determine whether the Indemnitee is or will be disentitled under paragraph  from receiving any payment, or any portion thereof, under this Agreement.

3.3

The Board may make a determination under paragraph  before or after the disposition of the applicable Eligible Proceeding.

3.4

Despite any determination the Board may previously have made under paragraph , if, after making any payment to the Indemnitee under this Agreement, including any payment made under paragraph  or , the Board acquires information indicating that the Indemnitee was or ought to have been disentitled from receiving that payment, or any portion thereof, under paragraph  or any other provision of this Agreement, the Board may require the Indemnitee to repay Angiotech forthwith the amount of such payment, or the applicable portion thereof.

3.5

If the Board requires the Indemnitee to repay Angiotech any amount under paragraph , or if it is otherwise determined by an arbitrator under Part  that the Indemnitee is required to repay Angiotech any amount that the Indemnitee was not entitled to receive under this Agreement or otherwise by law:

(a)

the Indemnitee will repay that amount to Angiotech forthwith; and

(b)

Angiotech will be entitled to set off any unpaid portion of that amount against any debt, liability, or amount that may be owing by Angiotech to the Indemnitee under this Agreement or otherwise.

4.

NOTICE, DEFENCE, AND SETTLEMENT OF ELIGIBLE PROCEEDING

4.1

The Indemnitee will cooperate fully with Angiotech, and provide any information that Angiotech may require from time to time, and act with the utmost good faith towards Angiotech, with respect to all matters under this Agreement.  In particular, the Indemnitee will notify Angiotech forthwith of:

(a)

receiving notice of, or becoming aware of, any Eligible Proceeding (including a threatened Eligible Proceeding);

(b)

being served with any writ, statement of claim, notice of motion, indictment, or other document commencing or continuing any Eligible Proceeding; and

(c)

all other steps taken in, or in relation to, any Eligible Proceeding.

4.2

The Indemnitee will not make any admission of liability or guilt, or enter into any settlement, with respect to any Eligible Proceeding without the prior written consent of Angiotech.

4.3

If Angiotech pays any Expenses referred to in paragraph  in advance under paragraph , or if the Board determines, before the disposition of an Eligible Proceeding, that the Indemnitee will be indemnified under this Agreement as to 50% or more of any Eligible Penalties referred to in paragraph  or Expenses referred to in paragraph , Angiotech may, at its option and subject to the provisions of any applicable policy of insurance, assume and direct the carriage of the defence and handling of such Eligible Proceeding, to determine whether and in what manner such Eligible Proceeding will be defended, appealed, compromised, or settled, and, subject to paragraph , to select legal counsel to represent the Indemnitee.

- 6 -

4.4

If Angiotech assumes and directs the carriage of the defence and handling of an Eligible Proceeding under paragraph :

(a)

the Indemnitee will cooperate fully with Angiotech and act with the utmost good faith towards Angiotech in all matters relating to such Eligible Proceeding;

(b)

the Indemnitee will disclose to Angiotech any facts, information, or documents in the Indemnitee’s knowledge, possession, or control that may be relevant to the defence and handling of the Eligible Proceeding, including, subject to paragraph , any legal or other professional advice obtained by the Indemnitee with respect to the defence and handling of the Eligible Proceeding; and

(c)

Angiotech will not make any admission of liability or guilt, or enter into any settlement on the Indemnitee’s behalf, without the Indemnitee’s consent, which will not be unreasonably withheld.

4.5

In any Eligible Proceeding, the Indemnitee may retain legal counsel other than the counsel selected by Angiotech under paragraph  to represent the Indemnitee, provided that the fees and disbursements of such other counsel will be paid by the Indemnitee, unless:

(a)

the Indemnitee and Angiotech mutually agree to the retention of such other counsel; or

(b)

the parties to such Eligible Proceeding (including any added or interpleaded parties) include the Indemnitee and Angiotech (or any Associated Corporation), and representation of both the Indemnitee and Angiotech (or the applicable Associated Corporation) by the same legal counsel is inappropriate or impracticable due to an actual or potential conflict between the interests of the Indemnitee and Angiotech (or the applicable Associated Corporation).

5.

INSURANCE

5.1

Angiotech may purchase and maintain insurance for the benefit of the Indemnitee or the Indemnitee’s heirs, successors, or personal or other legal representatives, against any liability that may be incurred by reason of the Indemnitee being or having been a director, officer, or employee of, or holding or having held a position equivalent to that of a director or officer of, Angiotech or an Associated Corporation.

5.2

The nature and extent of the coverage of any insurance purchased and maintained under paragraph  will be determined from time to time by the Board.

5.3

The Indemnitee will comply with all applicable obligations under any policy of insurance that may be maintained by Angiotech or by any Associated Corporation under which coverage is provided or may be available for any Eligible Penalties or Expenses incurred with respect to an Eligible Proceeding.

- 7 -

5.4

The Indemnitee will not, without the prior written consent of Angiotech, exercise any right under any policy of insurance referred to in paragraph  in any manner that may affect the provision or availability of coverage under the policy for any Eligible Penalties or Expenses incurred with respect to an Eligible Proceeding.

6.

OTHER RIGHTS OF THE INDEMNITEE

6.1

Subject to paragraph , the indemnification or payment of any Eligible Penalties or Expenses under this Agreement will not diminish any other rights to which the Indemnitee or the Indemnitee’s heirs, successors, or personal or other legal representatives may be entitled under any provision of the Act or any other enactment, Angiotech’s articles, any applicable policy of insurance, guarantee, or third party indemnity, any vote of the shareholders of Angiotech, or otherwise, whether as to any matter arising out of the Indemnitee’s capacity as a director, officer, or employee of Angiotech or an Associated Corporation, or as to any matter arising out of another capacity with Angiotech or an Associated Corporation while serving as a director, officer, or employee of Angiotech or an Associated Corporation.

7.

NOTICES

7.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

t
t
t

(b)

ANGIOTECH PHARMACEUTICALS, INC.
1618 Station Street
Vancouver, BC  V6A 1B6
Attention:        David D. McMasters,
                      General Counsel and Senior Vice President, Legal

7.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

8.

SEVERABILITY AND WAIVER

8.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part  or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

8.2

In this Agreement:

- 8 -

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party’s rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

9.

DISPUTE RESOLUTION

9.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application, or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

9.2

If a dispute referred to in paragraph  cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree to a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

9.3

A dispute that is referred to binding arbitration under paragraph  will be finally resolved by a single arbitrator under the Commercial Arbitration Act (British Columbia) (“CAA”).

9.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may apply to the Supreme Court of British Columbia (“Supreme Court”) for the appointment of a single arbitrator under the CAA.

9.5

Immediately after the arbitration has commenced, the parties will agree under section 35 of the CAA to exclude the jurisdiction of the Supreme Court under sections 31, 33, and 34 of the CAA.

9.6

The arbitration will be in Vancouver, British Columbia.

9.7

The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

- 9 -

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

9.8

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except for arbitral error under section 30 of the CAA.

9.9

Despite paragraph , either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 15(4) of the CAA.

10.

GOVERNING LAW AND FORUM

10.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Columbia and laws of Canada applicable therein.

10.2

Subject to Part , if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Indemnitee will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

11.

INDEPENDENT LEGAL ADVICE

11.1

Angiotech’s lawyers prepared this Agreement. The Indemnitee was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

12.

ENUREMENT AND ASSIGNMENT

12.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, successors, personal or other legal representatives, and permitted assigns.

12.2

The Indemnitee will not assign this Agreement without Angiotech’s prior written consent.

13.

INTERPRETATION

13.1

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

- 10 -

13.2

If Angiotech is continued, incorporated, amalgamated, arranged under, or otherwise becomes governed by an enactment other than the Act, all references in this Agreement to the Act will be deemed to be references to such other enactment as it may be amended or replaced from time to time.

13.3

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

14.

ENTIRE AGREEMENT

14.1

This Agreement will supersede and replace any and all prior agreements and discussions between the parties respecting its subject matter, and contains the entire agreement between the parties with respect to its subject matter.

14.2

No amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by t in the presence of: _______________________________
Signature of Witness

_______________________________
Print Name of Witness

_______________________________
Address of Witness

_______________________________
Occupation of Witness

_______________________________
Date )
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

__________________________________
t

- 11 -

ANGIOTECH PHARMACEUTICALS, INC.

By:
_________________________________________
Authorized Signatory

Date: ___________________________________

______________________________________________________

BETWEEN:

t

AND:

ANGIOTECH PHARMACEUTICALS, INC.

______________________________________________________

INDEMNIFICATION AGREEMENT

______________________________________________________

Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7

______________________________________________________

EX-10.19

Exhibit 10.19

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is made and entered into this 23^rd day of April, 2004, by Angiotech Pharmaceuticals, Inc., a British Columbia corporation (the Company"), and William L. Hunter, MD (the "Employee").

BACKGROUND

The Company desires to retain the services of the Employee in the capacity stated herein, and the Employee is willing to be employed by the Company in such capacity, on the terms and subject to the conditions set forth in this Agreement. Accordingly, in consideration of the mutual covenants contained herein, the parties agree as follows:

AGREEMENT

1.

Positions and Duties

1.1 Title. The Company hereby agrees to employ the Employee, and the Employee agrees to serve the Company as a member of the Board of Directors of the Company (the "Board") and as President and Chief Executive Officer, subject to the terms and conditions set forth in this Agreement.

1.2 Duties. The Employee shall report directly to the Board and perform those duties which are customary with the position of President and Chief Executive Officer, together with such additional duties as may be established by the Company's Board of Directors. The Employee shall devote all of his business time, energy, and skill to the affairs of the Company and shall discharge his duties honestly, faithfully and to the best of his ability. The Employee agrees that his hours of work will vary and may be irregular and will be those hours reasonably required to meet the objectives of his employment. The Employee agrees that the compensation described in Section 3 of this Agreement compensates him for all hours worked.

1.3 Avoidance of Conflicts of Interest. The Employee will comply with all policies and directives regarding conflicts of interest adopted from time to time by the Board. The Employee will not serve as a director, officer, employee or agent of or hold any position or office with any corporation, firm, person or entity other than the Company (the "Outside Interest") without obtaining prior written approval from the Board, such approval not to be unreasonably withheld The Board may in its sole discretion require the Employee to resign from any Outside Interest if the Board is of the opinion that the Outside Interest has resulted in or is reasonably likely to result in a conflict of interest.

1.4 Additional Board Membership. If and to the extent the Employee is requested to serve as an officer on a board of directors of any affiliate of the Company (other than the Company), the Employee agrees to serve in such capacity(ies) without additional compensation. If the Employee is so requested by the board of directors of such companies, to resign from a board or officer position, whether due to termination of employment or otherwise, the Employee agrees to so resign, and such resignation will not constitute a constructive dismissal or otherwise constitute a breach of this Agreement.

-2-

2.

Term of Agreement. The team of this Agreement shall begin on the date first noted above (the "Effective Date") and shall continue until terminated by either party at such party's sole discretion and in accordance with Section 4 herein.

3.

Compensation.

3.1

Base Salary. As payment for the services rendered by the Employee during the Term of this Agreement, the Company shall pay to the Employee an annualized base salary (the "Base Salary") of CDN $693,078 per year. The Base Salary, as earned, shall be payable on the Company's normal payroll schedule and is subject to lawfully required withholdings. Increases in the Base Salary shall be subject to the Board's discretion, exercised from time to time based on performance and other factors deemed relevant by the Board. The Base Salary shall be reviewed annually within 90 days of the end of the Company's fiscal year end.

3.2

Employee Benefits. The Employee shall be entitled to be enrolled in all employee benefits that the Company may make generally available from time to time for its comparably situated executive employees, including those available, if any, under any group health, dental, life or disability insurance plans. The benefits will be provided in accordance with the formal plan documents or policies and any issues with respect to entitlement or payment of benefits under the insurance benefits package will be governed by the terms of such documents or policies. The Company reserves the right to unilaterally modify, amend, and terminate any benefits and benefit plans.

3.3

Stock Options. The Employee shall be eligible to receive options to purchase shares of the common stock of the Company, as determined by the Board from time-to­ time. The terms and conditions of such stock options shall be governed by the stock option plan applicable to such stock options granted to the Employee (collectively all such stock option plans, the "Stock Option Plan") and the stock option agreements between the Company and the Employee in respect of such stock options (collectively the "Stock Option Agreements

3.4

Bonus. The Employee will be eligible for bonuses and/or additional stock options in accordance with any Incentive Plans established from time to time by the Board of Directors in its discretion.

3.5

Vacation. The Employee shall be entitled to paid vacation which shall accrue pro rata The Employee shall be entitled to paid vacation, accrued during the course of the year, of five weeks' vacation per year. Unused accrued vacation may be carried over to the following year in an amount equal to the annual vacation accrual hereunder, or, if different, the maximum amount allowable under the Company's standard policy for its employees in effect from time to time. Unused vacation in excess of the allowed carry over shall be forfeited. The Employee shall also be entitled to such holidays with full pay as the Company generally affords its employees.

3.6

Deductions from Compensation. The Company shall be entitled to deduct and withhold from all compensation payable to the Employee all amounts it reasonably determines are required to be deducted or withheld pursuant to any present or future law, ordinance, regulation, order, writ, judgment, or decree requiring such deduction and withholding.

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3.7

Travel and Other Expenses. The Company shall pay or promptly reimburse the Employee for those travel, promotional and similar expenditures incurred by Employee which the Company determines are reasonably necessary for the proper discharge of the Employee's duties under this Agreement and for which the Employee submits appropriate receipts and indicates the amount, date, location and business character. Travel and other expenses will be reviewed and approved by the Chair of the Board on a regular basis.

3.8

Additional Benefits. In addition to the benefits set forth above, the Employee shall also be entitled to receive during the term of employment those benefits set forth on Exhibit A hereto. The Employee shall be solely responsible for personal income tax liability, if any, arising from the Company's provision of such benefits; however, the Company may be required to withhold certain amounts as required by CCRA in the event that the benefits are determined to be taxable benefits.

4.

Termination.

4.1

Termination For Cause. The Company may terminate this Agreement at any time without prior notice for "cause" (as defined below) with no severance or other obligation to the Employee, other than payment of the amount of unpaid earned Base Salary accrued pursuant to Section 3.1 to the date of such termination.  For purposes of this Agreement "cause" shall consist of (a) any act or acts which at common law in the Province of British Columbia are just cause for dismissal; or (b) a material breach of the Code of Ethics adopted by the Board and agreed to by the Employee, as amended from time to time.  A resignation by the Employee at any time after the occurrence of an event which would constitute cause for termination by the Company shall be considered a termination by the Company for cause. In the event of termination of the Employee's employment under t his paragraph, the Employee's rights with respect to any and all stock options will be governed, in all respects, by the applicable stock option agreement under which such options were granted.

4.2

Termination Without Cause. Subject to the conditions stated in Sections 4.4 and 4.5, the Company may terminate this Agreement, without cause, at any time for any reason, or no reason, and with or without notice.

4.3

Voluntary Termination By Employee Upon Good Reason. Subject to the conditions stated in Sections 4.4 and 4 5, this Agreement may be terminated by the Employee for Good Reason. "Good Reason" means

(a)

a change in title of the Employee as set forth in Section 1.1;

(b)

a material reduction in the authority or responsibility of the Employee;

(c)

one or more reductions, in the cumulative amount of 5 percent or more, in the Base Salary of the Employee;

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(d)

any notification to the Employee that his principal place of work will be relocated by a distance of 80 kilometres or more; or

(e)

removal of the Employee from the Board of the Company for any reason other than termination of this Agreement for cause.

4.4

Severance. In the event the Employee's employment is terminated (a) by the Company without cause; or (b) by the Employee for Good Reason, subject to the conditions stated herein and if the Employee does not elect to enter into the Consulting Agreement referred to in Section 4.5 below, upon the date the written notice of termination is given to the Employee or the Company (the "Termination Date"), the Company shall provide the Employee with the following:

(a)

Severance. The Company shall pay the Employee a lump sum amount equivalent to 12 months' salary plus an amount equal to the average of annual bonus payments received by the Employee in the previous three years of employment, within five business days of such termination of employment. In addition, the Company shall pay the Employee a regular monthly payment equivalent to one- half Base Salary, for 24 months following the Termination Date (the "Severance Period"). Payment will be subject to the usual deductions and will be made from the Company payroll. If the Employee is entitled to compensation and benefits arising from termination of employment due to change of control under the Executive Change of Control Agreement between the parties, such compensation and benefits shall be in lieu of and not in addition to compensation under this Section 4.4.

(b)

Bonus. During the Severance Period, the Employee will be entitled to receive an amount equal to the average of annual bonus payments received by the Employee in the previous three years of employment. The bonus payment will be made in twenty-four equal regular monthly payments during the Severance Period, at the same time as the payment of monthly salary pursuant to paragraph 4.4(a) herein is made.

(c)

Benefits. The Company shall provide, or pay to the Employee an amount equal to the cost to the Company for 24 months for providing, the benefits set out in Section 3.2 and Exhibit "A" to this Agreement.

(d)

Stock Options. Any outstanding vested stock options held by the Employee on the Termination Date shall be exercised by the Employee within 30 days of the Termination Date, and if not so exercised, shall be cancelled, and any unvested options held by the Employee on the Termination Date shall be cancelled.

(e)

Notwithstanding the foregoing, the Company's obligation to make severance payments, pay bonus payments and provide benefits pursuant to this Section 4.4 is expressly conditioned upon the Employee's ongoing compliance with the provisions of the Confidentiality, Inventions and Non-Competition Agreement. In the event the Employee materially breaches the tern's of such agreement, the Company's obligations hereunder shall automatically terminate, without any notice to the Employee. The Employee agrees that severance as provided for in Sections 4.4 and 4.5 herein shall be the sole consideration to which he is entitled in the event of the termination of his employment without cause or for Good Reason, and that severance will not be paid in the event of termination with cause or resignation without Good Reason, except as set out in Sections 4.4 and 4.5 and the Employee expressly waives and relinquishes an y claim to other or further consideration. Severance pay, bonus pay and provision of benefits under this Section 4.4 are expressly conditioned upon the Employee's execution and delivery of a release of all claims against the Company in a form satisfactory to the Company, acting reasonably.

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4.5 Consulting Agreement. If the Employee wishes to retire or resign (provided that in connection with such retirement or resignation the Employee does not enter into any gainful employment for two years, other than the Consulting Agreement (as defined below)), terminates his employment for Good Reason or is terminated without cause (any of the foregoing hereinafter the "Event"), the Company shall offer the Employee a consulting agreement (the "Consulting Agreement"), to be effective the day prior to the Event, substantially on the terms set out on Exhibit B attached hereto, to allow the Employee to work on a part-time basis as a management consultant, for a period of 24 months after the date of the Event (the "Transitional Term"). Any outstanding and vested stock options held by the Employee on the day of the Event (the "Existing Options") shall remain unaffected by the Event and shall not be cancelled as a result of the Event, subject to the teens of the Consulting Agreement. Any outstanding but unvested stock options held by the Employee on the day prior to the Event shall be deemed to be immediately vested on such prior day, to the same extent such stock options would have vested on or before 24 months after the Event (the "Accelerated Options"), if the Event had not occurred, and the non-vested portion of any stock options which would have vested after such 24 month period shall be cancelled as of the Event. The Employee shall have the right to exercise the Existing Options and the Accelerated Options within the earlier of (i) 30 days of the end of the Transitional Term, (ii) 30 days after the termination of the Consulting Agreement by the Employee and (iii) the expiry dates of the respective Existing Options and Accelerated Options. The Company covenants to take all acts and execute all documents necessary to ensure that existin g and future stock option agreements between the Company and the Employee contain vesting provisions consistent with the terms set out in this paragraph.

Notwithstanding the foregoing, the Company's obligation in this Article 4.5 is expressly conditioned upon the Employee's ongoing compliance with the provisions of the Confidentiality, Inventions and Non-Competition Agreement. In the event the Employee materially breaches the terms of such agreement, the Company's obligations hereunder and the Consulting Agreement shall automatically terminate, without any notice to the Employee, provided that in the event the Company terminates the Consulting Agreement without cause, the Employee shall be automatically released from any and all obligations pertaining to the non- compete provisions under the Confidentiality, Inventions and Non-Competition Agreement, and any and all amounts payable under the Consulting Agreement shall become immediately payable. In the event the Company terminates the Consulting Agreement for cause or the Employee terminates the Consulting Agreement, the non-compete provisio ns under the Confidentiality, Inventions and Non-Competition Agreement shall continue to apply and be enforceable, and only those amounts payable by the Company under the Consulting Agreement until the date of termination of the Consulting Agreement shall become immediately payable.

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4.6 Return of Company Property. At the time of termination of this Agreement, or as earlier requested, the Employee shall return to the Company all products, books, records, forms, specifications, formulae, data, data processes, designs, papers and writings relating to the business of the Company, including without limitation Confidential Information, proprietary or licensed computer programs, customer lists and customer data and/or copies or duplicates thereof in the Employee's possession or under the Employee's control. The Employee shall not retain any copies or duplicates of such property and all licenses granted to him by the Company to use computer programs or software shall be revoked as of the date of such termination.

5.

Change of Control. Concurrently with the execution of this Agreement and as a condition precedent to the Employee's obligations hereunder, the Company shall execute and deliver to the Employee, the Executive Change of Control Agreement attached hereto as Exhibit C. The Employee is subject to a certain Executive Change of Control Agreement with the Company dated June 6, 2000, which agreement shall be deemed superseded in its entirety and of no further force and effect upon the Company's delivery to the Employee the agreement attached as Exhibit C fully executed by the Company.

6.

Confidentiality, Inventions, Information and Non-Competition Agreement.  Concurrently with the execution of this Agreement and as a condition precedent to the Company's obligations hereunder, the Employee shall execute and deliver to the Company the Confidentiality, Inventions and Non-Competition Agreement attached hereto as Exhibit D. Subject to Section 4.5 and the tends and conditions of the Consulting Agreement, the provisions of such Confidentiality, Inventions, Information and Non-Competition Agreement shall remain in full force and effect after termination of employment, whether for cause or without cause.

7.

Other Provisions.

7.1 Compliance With Other Agreements. The Employee represents and warrants to the Company that the execution, delivery and performance of this Agreement and the Confidentiality, Inventions and Non-Competition Agreement will not conflict with or result in the violation or breach of any term or provision of any order, judgment, injunction, contract, agreement, commitment or other arrangement to which the Employee is a party or by which he is bound. The Employee acknowledges that the Company is relying on his representation and warranty in entering into this Agreement, and agrees to indemnify the Company from and against all claims, demands, causes of action, damages, costs or expenses (including attorneys' fees) arising from any breach thereof.

7.2 Nondelegable Duties. This is a contract for the Employee's personal services. The duties of the Employee under this Agreement are personal and may not be delegated or transferred by the Employee in any manner whatsoever, and shall not be subject to involuntary alienation, assignment or transfer by the Employee during his life.

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7.3 Entire Agreement. This Agreement, the Confidentiality, Inventions and Non-competition Agreement, the Stock Option Plan, the Stock Option Agreements and the Executive Change of Control Agreement are the only agreements and understandings between the parties pertaining to the subject matter of said agreements, and supersede all prior agreements, summaries of agreements, descriptions of compensation packages, discussions, negotiations, understandings, representations or warranties, whether verbal or written, between the parties pertaining to such subject matter. This Agreement and any documents and agreements to be delivered pursuant to this Agreement supersede all previous invitations, proposals, letters, correspondence, negotiations, promises, agreements, covenants, conditions, representations and warranties with respect to the subject matter of this Agreement. There is no representation, warranty, collateral term or condition or collateral agreement affecting this Agreement, other than as expressed in writing in this Agreement. Without limiting the foregoing, the parties acknowledge and agree that the Employee Confidentiality Inventions and Non-Competition Agreement dated October 1992 between the parties (the "Proprietary Rights Agreement") is superseded by the terms of this Agreement with effect as of the date of this Agreement, except that all matters governed by the Proprietary Rights Agreement prior to the effective date of this Agreement and the parties' respective rights and obligations with respect thereto will continue to be governed by the Proprietary Rights Agreement as if that agreement remained in full force and effect.

7.4 Administrative Assistance. The Company hereby acknowledges that the Company does not restrict the Employee from choosing to hire one or more personal administrative assistants to assist him in performing some of the administrative duties set out in the Employment Agreement. However, while the Employee may hire one or more personal administrative assistants, the Employee shall be solely responsible for the payment of salary and benefits to such personal administrative assistants and the Company shall have no legal obligations owed to such personal administrative assistants or to the Employee relating to the employment of such personal administrative assistants. The Employee shall indemnify the Company for any costs directly or indirectly incurred by the Company with respect to the Employee's employment or personal administrative assistants.

7.5 Further Assurances. The Company shall take any and all steps necessary to implement the terms and conditions set out in this Agreement.

7.6 Governing Law, Venue. This Agreement shall be governed by and construed according to the laws of the Province of British Columbia. The prevailing party shall be entitled to reasonable lawyers' fees and costs incurred in connection with any litigation arising under or related to this Agreement.

7.7 Severability. If any provision of this Agreement is held to be invalid or unenforceable to any extent in any context, it shall nevertheless be enforced to the fullest extent allowed by law in that and other contexts, and the validity and force of the remainder of this Agreement shall not be affected thereby.

7.8 Amendment and Waiver. This Agreement may be amended, modified or supplemented only by a writing executed by each of the parties. Either party may in writing waive any provision of this Agreement to the extent such provision is for the benefit of the waiving party. No waiver by either party of a breach of any provision of this Agreement shall he construed as a waiver of any subsequent or different breach, and no forbearance by a party to seek a remedy for non-compliance or breach by the other party shall be construed as a waiver of any right or remedy with respect to such non-compliance or breach.

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7.9 Binding Effect. The provisions of this Agreement shall bind and inure to the benefit of the parties and their respective successors and permitted assigns.

7.10 Notice. All notices and other communications under this Agreement shall be in writing and shall be given by personal or courier delivery facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon receipt if personally delivered or delivered by courier, on the date of transmission if transmitted by facsimile, or three days after mailing if mailed, to the addresses of the Company and the Employee contained in the records of the Company at the time of such notice. Any party may change such party's address for notices by notice duly given pursuant to this Section 7.8.

7.11 Disputes. Subject to Article 4 of Exhibit D, all disputes arising out of or in connection with the employment relationship between the parties, including disputes arising out of or in connection with this Agreement, are to be referred to and finally resolved by arbitration administered by the British Columbia International Commercial Arbitration Centre, pursuant to its Rules. The place of arbitration will be Vancouver, British Columbia.

7.12 Headings, Pronouns. The Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any and all uses of masculine or feminine pronouns herein are solely to aid in the ease of reading this Agreement and any such pronoun usage shall have equal application to the members of the opposite gender.

7.13 Independent Legal Advice. The Employee agrees that the contents, terms and effect of this Agreement have been explained to him by a lawyer retained by him and are fully understood. The Employee further agrees that the consideration described aforesaid is accepted voluntarily for the purpose of employment with the Company under the terms and conditions described above.

7.14 Counterparts. This Agreement may be executed by the parties in counterpart, and may be delivered by fax. Notwithstanding the date of the execution of and delivery of any such counterparts, their date of execution shall be deemed to be the effective date of this Agreement as set out above.

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SO AGREED as of the date first entered above.

Angiotech Pharmaceuticals, Inc.	Employee
/s/ David T. Howard	/s/ William Hunter, MD
David T. Howard	William Hunter, MD
Chair of Compensation Committee	President and Chief Executive Officer
Board of Directors

EXHIBIT A TO EXECUTIVE EMPLOYMENT AGREEMENT
OF WILLIAM L. HUNTER, MD

Additional Benefits (if none are listed, there are no additional benefits)

		Initialled by Company Representative:
1.	The Company will pay for your monthly car lease to a maximum amount of CDN $3,000 per month.	/s/ DTH
2.	The Company will pay for your annual tax planning and tax preparation in an amount not to exceed CDN $20,000 per year.	/s/ DTH
3.	The Company will pay for expenses incurred for your spouse to accompany you on business travel once a quarter and for your entire family, including your nanny, to accompany you on business travel twice a year, to an amount not to exceed CDN $75,000 per year.	/s/ DTH
4.	The Company will pay for a CDN $5,000,000 term life insurance policy, with the beneficiary to be named by you, to cover any estate taxes and other expenses incurred by your beneficiary due to your death.	/s/ DTH
5.	Should private health care become available in Canada, the Company will pay the costs for insurance coverage for you and your dependent.	/s/ DTH
6.	The Company will make available to you and your dependents enrolment and coverage in the Angiotech Pharmaceuticals (US), Inc. employee medical plan or pay for the costs for you and your dependents to attain similar medical coverage in an individual plan in the USA.	/s/ DTH
7.	The Company will pay for the cost for you to have an executive medical once per year.	/s/ DTH

EXHIBIT B
CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT is made and entered into effective _____, 2004 (the "Effective Date") by Angiotech Pharmaceuticals, Inc., a British Columbia corporation (the "Company"), and Dr. William L. Hunter ("Consultant").

BACKGROUND

WHEREAS:

A.

the Consultant has been employed by the Company pursuant to a certain Executive Employment Agreement ("EEA") dated ________, 2004;

B.

the Consultant and the Company have agreed to enter into this Agreement whereas the Consultant wishes: to retire from the Company; to voluntarily terminate his employment as an employee for Good Reason (as defined in the EEA); or is being terminated without cause, and in any event such cessation as an employee of the Company is to be effective the first calendar day following the date of this Consulting Agreement; and

C.

the Company desires to retain the services of the Consultant to provide transitional services as described herein, and the Consultant desires to provide such services and thereby obtain consideration to which he is not otherwise entitled, on the terms and subject to the conditions set forth in this Consulting Agreement;

THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows:

AGREEMENT

1.

Termination of Existing Agreement.      The Executive Employment Agreement shall be deemed terminated and of no further force or effect as of 11:59 p.m., PDT, on the first calendar day following the date of this Consulting Agreement (the "Termination Date").The Consultant shall be deemed to have voluntarily retired and thereby resigned from his employment. The Consultant agrees that he shall not stand for re-election as a director of the Company after expiration of the Consultant's current term, unless so requested by the Company. Nothing herein shall be deemed to waive or impair the Consultant's duties, rights or entitlements arising under the Executive Employment Agreement prior to the Termination Date.

2.

New Position and Duties.

2.1 Title. The Company hereby agrees to employ the Consultant and the Consultant agrees to serve the Company as its Management Consultant, subject to the terms and conditions set forth in this Consulting Agreement.

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2.2 Duties. The Consultant shall report directly to the Board of Directors or any officer of the Company designated by the Board of Directors, assist the Company as reasonably requested in the transition of his job duties and responsibilities to his successor as designated by  the Company, and provide assistance to the Company in advancing its business interests. The Company in its sole discretion may alter the Consultant's job title and/or duties, provided that  any such alteration shall not require Consultant to devote time in excess of that specified in Section 2.3 below. The Consultant shall discharge his duties honestly, faithfully and to the best of his ability.

2.3 Efforts.

The Consultant shall devote an average of one hundred and twenty (120) hours per calendar quarter to his duties hereunder, or such lesser amount as may be requested by the Company. The Consultant shall maintain contemporaneous records of his time expenditures, tracked in hourly increments. The Consultant agrees to make himself available to perform his duties within three business days of being provided notice his services are needed unless Consultant is unavailable; the Consultant further agrees that he will not be unavailable for a period in excess of two weeks consecutively or twelve weeks cumulatively during the Term of this Consulting Agreement unless otherwise agreed in writing by the Company, acting reasonably. The parties agree that the Consultant generally will be able to fulfill his duties hereunder via telephone and electronic communications and will not be deemed unavailable if he is there by in communication with the Company, but the Consultant acknowledges his physical presence may be required on occasion at the offices of the Company or at other locations, upon reasonable advance notice. Notwithstanding the forgoing, the Consultant agrees to provide such services as necessary to qualify as a "Service Provider" as defined in the Company's stock option plans applicable to the Consultant immediately prior to the Termination Date.

3.

Term of Agreement. The term of this Consulting Agreement shall begin on the date of this Consulting Agreement and end on the second anniversary of the Termination Date, unless earlier terminated as provided herein (with the actual period of services provided hereunder referred to as the "Tenn."). The parties agree that the consulting services provided hereunder is at  will, meaning that either party can terminate the consulting relationship at any time, with or without cause or notice, with no further obligation to the other except as provided herein.

4.

Consideration.

4.1 Salary. Within five business days of the execution of this Agreement, the Company shall pay the Consultant a lump sum amount equivalent to the Consultant's salary as  an employee of the Company for the previous twelve months, without deduction (the "Salary  Lump Sum"). In addition, as payment for the services rendered by the Consultant during the  Term, the Company shall pay to the Consultant a regular monthly payment equivalent to one-  half of the monthly salary received by the Consultant immediately prior to the Termination Date ("Salary") throughout the Term of this Agreement. The Salary, as earned, shall be payable on  the Company's normal payroll schedule and shall not be subject to any withholdings.

4.2 Bonuses. In addition to the payment of the Salary Lump Sum and the Salary during the Term of this Consulting Agreement, the Consultant will be paid a lump sum signing  bonus in the amount of $         , being equal to the average annual bonus payments received by the Consultant as an employee of the Company during his previous three years of employment (the "Signing Bonus") with the Company. The Signing Bonus will be paid in lump sum, without withholdings, contemporaneously with the Salary Lump Sum payment. Furthermore, during the Term, the Company shall pay the Consultant an amount equal to the average of annual bonus payments received by the Consultant in the last three years prior to the Termination Date, in 24 equal regular monthly payments, payable with the Salary, and without withholdings.

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4.3 Consultant Benefits. The Consultant shall be entitled to continuation of employee benefits during the Term, to the extent provided immediately prior to the Termination Date. If any group insurance plan under which Consultant and his dependents are covered at the beginning of or during the Term does not permit Consultant's and/or his dependents' ongoing coverage during the Term, the Company will provide, or reimburse Consultant for the cost of maintaining comparable coverage, if Consultant desires such coverage, under an individual plan or policy. The Company will pay the Consultant a tax gross-up payment of forty percent (40%) of the costs of such benefits coverage to the extent the Company's payment of the same constitutes taxable income to the Consultant, which payment shall be made to the Consultant by February 28th of the year following that in which the taxable event occurred.

 4.4 Vested and Unrested Stock Options. The Consultant shall not, by operation of this Consulting Agreement lose any rights in and to any stock options held by him on the day prior to the Termination Date, except as provided herein. Any outstanding and vested stock options held by the Consultant on the day of the Termination Date (the "Existing Options") shall remain unaffected by the Termination Date and shall not be cancelled as a result of the Termination Date, subject to the terms of this Consulting Agreement. Any outstanding but unvested stock options held by the Employee on the day prior to the Termination Date shall be deemed to be immediately vested on such day prior to the Termination Date, to the same extent such stock options would have otherwise vested within 24 months after the Termination Date, if such termination had not occurred (the "Accelerate d Options"). Any other stock options (i.e. those which would have vested after such 24 month period) shall be cancelled on the Termination Date. With respect to Existing Options and Accelerated Options, the Consultant shall have until the earlier of (i) 30 days after the end of the Termination Date, (ii) 30 days after the Term if terminated by the Consultant and (iii) the expiry dates for the Consultant's respective Existing Options and Accelerated Options as set forth in the applicable Stock Option Agreement to exercise the Existing Options and Accelerated Options. Any Existing Options and Accelerated Options not exercised by such date shall terminate. Except as expressly set forth herein, the terms and conditions of the Existing Options and Accelerated Options shall be governed by the Company's stock option plan applicable to the Consultant's stock option agreements immediately prior to the Termination Date, which is incorporated herein by reference and which, together with any stock option agreements with the Consultant shall control such stock options in all respects. The Company covenants to take all acts and execute all documents necessary to ensure that existing and future stock option agreements between the Company and the Consultant contain vesting provisions consistent with the terms set out in this paragraph.

4.5 Deductions from Compensation. The Company shall not deduct or withhold from any compensation or consideration payable to the Consultant hereunder any amounts it would otherwise have lawfully deducted or withheld had the Consultant been an employee of the Company. The Consultant hereby agrees to indemnify the Company in the event that Canada Customs and Revenue Agency ("CCRA") makes a claim against the Company for failing to withhold any amounts from payments to the Consultant hereunder that the CCRA determines were to have been withheld or lawfully deducted by the Company.

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4.6 Travel and Other Expenses. The Company shall pay or promptly reimburse the Consultant for those travel, promotional and similar expenditures incurred by Consultant which the Company determines are reasonably necessary for the proper discharge of the Consultant's duties under this Consulting Agreement and for which the Consultant submits appropriate receipts indicating the amount, date, location and business character of the expenses.

5.

Termination.

5.1 Termination for Cause. The Company may terminate this Agreement at any time without prior notice for "cause" (as defined below) provided that it shall pay to the Consultant the full amount of unpaid earned Salary and bonus the Consultant would have been paid pursuant to Sections 4.1 and 4.2 through to the end of the Term. For purposes of this Agreement "cause" shall consist of any act or acts which at common law in the Province of British Columbia are just cause for dismissal as if the Consultant was an employee of the Company. A resignation by the Consultant at any time after the occurrence of an event which would constitute cause for termination by the Company shall be considered a termination by the Company for cause. In the event of the termination of the Consultant's retainer under this provision of this Agreement, the Consultant's rights with r espect to any and all stock options previously and hereafter vested or granted by the Company shall be governed in all respects by the applicable Stock Option Plan under which such options were granted.

5.2 Termination Without Cause. The Company may terminate this Agreement at any time without cause provided that it shall pay to the Consultant the full amount of unpaid earned Salary and bonus the Consultant would have been paid pursuant to Sections 4.1 and 4.2 through to the end of the Term had there been no termination, contemporaneously with such termination. In the event of the termination of the Consultant's employment under this provision of this Agreement, the Consultant's rights with respect to any and all stock options previously and hereafter vested or granted by the Company shall be governed in all respects by the applicable Stock Option Plan under which such options were granted. If the Company terminates this Agreement without cause, or for any reason other than cause, the Company expressly acknowledges and agrees that the Consultant shall be immediately releas ed from any and all non-compete provisions or covenants, under this or any other agreement, between the Company and the Consultant, without any further action, and whether or not the Company has made the payments required pursuant to this section in accordance with its terms.

6.

Confidentiality, Inventions and Non-Competition Agreement. The Consultant's Confidentiality, Inventions and Non-Competition Agreement dated             , 2004 shall remain in full force and effect during this Consulting Agreement, except as provided for in Section 5 herein.

7.

Other Provisions.

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7.1 Compliance with other Agreements. The Consultant represents and warrants to the Company that the execution, delivery and performance of this Consulting Agreement will not conflict with or result in the violation or breach of any term or provision of any order, judgment,  injunction, contract, agreement, commitment or other arrangement to which the Consultant is a party or by which he is bound. The Consultant acknowledges that the Company is relying on his representation and warranty in entering into this Consulting Agreement, and agrees to indemnify the Company from and against all claims, demands, causes of action, damages, costs or expenses (including legal fees) arising from any breach thereof.

7.2 Nondelegable Duties. This is a contract for the Consultant's personal services. The duties of the Consultant under this Consulting Agreement are personal and may not be delegated or transferred by the Consultant in a manner whatsoever, and shall not be subject to involuntary alienation, assignment or transfer by the Consultant during his life.

7.3 Entire Agreement As of the Effective Date, this Consulting Agreement, the Confidentiality, Inventions and Non-Competition Agreement, and the stock option agreements (and the stock option plans governing the stock options granted by such stock option agreements) will be the only agreements and understandings between the parties pertaining to the subject matter of said agreements, and supersede all prior agreements, summaries of agreements, descriptions of compensation packages, discussions, negotiations, understandings, representations or warranties, whether verbal or written, between the parties pertaining to such subject matter. This Agreement and any documents and agreements to be delivered pursuant to this Agreement supersede all previous invitations, proposals, letters, correspondence, negotiations, promises, agreements, covenants, conditions, representations and wa rranties with respect to the subject matter of this Agreement. There is no representation, warranty, collateral term or condition or collateral agreement affecting this Agreement, other than as expressed in writing in this Agreement.

7.4 Governing Law, Venue. This Consulting Agreement shall be governed by the laws of the Province of British Columbia without regard to its conflicts of laws/rules. The parties hereby agree the venue for all matters and actions arising under this Consulting Agreement shall be and remain exclusively in BC Supreme Court sitting in Vancouver, British Columbia and the parties hereby irrevocably consent to the personal jurisdiction of such courts. The prevailing party shall be entitled to reasonable legal fees and costs incurred in connection with any litigation arising under or related to this Consulting Agreement.

7.5 Severability. If any provision of this Consulting Agreement is held to be invalid or unenforceable to any extent in any context, it shall nevertheless be enforced to the fullest extent allowed by law in that and other contexts, and the validity and force of the remainder of this Consulting Agreement shall not be affected thereby.

7.6 Amendment and Waiver. This Consulting Agreement may be amended, modified or supplemented only by a writing executed by each of the parties. Either party may in writing waive any provision of this Consulting Agreement to the extent such provision is for the benefit of the waiving party. No waiver by either party of a breach of any provision of this Consulting Agreement shall be construed as a waiver of any subsequent or different breach, and no forbearance by a party to see a remedy for non-compliance or breach by the other party shall be construed as a waiver of any right or remedy with respect to such non-compliance or breach.

7.7 Binding Effect. The provisions of this Consulting Agreement shall bind and inure to the benefit of the parties and their respective successors and permitted assigns.

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7.8 Notice. All notices and other communications under this Consulting Agreement shall be in writing and shall be given by personal or courier delivery, facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon receipt if personally delivered or delivered by courier, on the date of transmission if transmitted by facsimile, or three days after mailing if mailed, to the addresses of the Company and the Consultant contained in the records of the Company at the time of such notice. Any party may change such party's address for notices by notice duly given pursuant to this Section 7.8.

 7.9 Headings, Pronouns, Presumption. The section and other headings contained in this Consulting Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Consulting Agreement. Any and all uses of masculine or feminine pronouns herein are solely to aid in the ease of reading this Consulting Agreement and any such pronoun usage shall have equal application to the members of the opposite gender. The parties have negotiated this Consulting Agreement at arm's length and have each had the opportunity to consult with counsel regarding the meaning and effect of this Consulting Agreement; accordingly, no presumption shall attach with respect to the identity of the party drafting any provision hereof.

7.10 Assumption of Agreement. In the event of the sale of the stock or substantially all of the assets of the Company, the Company shall cause the purchaser to assume the Company's obligations hereunder.

7.11 Execution. This Agreement may be executed by facsimile signature with the original signature to follow promptly, and/or in counterpart originals, which together shall constitute a single agreement.

Angiotech Pharmaceuticals, Inc.	Employee:
	By:
	William L. Hunter, MD
	President and Chief Executive Officer
Dated: _____, 2004	Dated: April 23, 2004

EXHIBIT C
EXECUTIVE CHANGE OF CONTROL AGREEMENT

This Agreement is made as of April 23, 2004, between Angiotech Pharmaceuticals, Inc., a British Columbia corporation ha mg an office at 6660 N.W. Marine Drive, Vancouver, British Columbia V6T 1Z4 (the "Company") and William L. Hunter, MD, of Vancouver, British Columbia ("the "Employee"). This Agreement supersedes all prior agreements between the parties with respect to the subject matter hereof, which prior agreements are hereafter deemed null and void.

THIS AGREEMENT WITNESSES:

1.

Definitions - In this Agreement, the following terms shall have the meanings ascribed below:

(a)

"Change of Control" means:

(i)

a change in the composition of the board of directors of the Company, as a result of which fewer than one-half of the incumbent directors are directors who had been directors of the Company 12 months prior to such change, with the exception of any such change in the composition of the board made with the approval of the board as it was constituted immediately prior to such change; or

(ii)

the acquisition or aggregation of securities by any Person pursuant to which such Person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding base capital stock (meaning the securities of the Company ordinarily, and apart from rights accruing under special circumstances, having the right to vote at elections of directors of the Company), except that any change in the relative beneficial ownership of the Company's securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of base capital stock, and any decrease thereafter in such Person's ownership of securities shall be disregarded until such Person increases in any manner, directly or indirectly, his, her or its beneficial ownership of any securities of the Company.

(b)

"Employee Benefit Plans" means such medical, dental, eye care, disability, life and other health insurance benefit plans maintained, in whole or in part, by the Company on behalf of employees generally or executive employees over a certain grade level.

(c)

"Employee Option Plans" means such stock option, stock appreciation rights, restricted stock, phantom stock or similar plans or agreements maintained, in whole or in part, by the Company on behalf of either employees generally or executive employees over a certain grade level.

(d)

"Executive Compensation Programs" means, any compensation programs maintained, in whole or in part, by the Company on behalf of executive employees over a certain grade level, including without limitation bonus or incentive programs tied to the performance of the Company.

(e)

"Good Reason" means a material reduction in the authority or responsibility of the Employee, one or more reductions, in the cumulative amount of 5 percent or more, in the Base Compensation of the Employee or any notification to the Employee that his or her principal place of work will be relocated by a distance of 80 kilometres or more.

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(e)

"Person" means any individual, partnership, unincorporated organization or association, trust, body corporate, government or government agency or authority, trustee, executor, administrator or other

legal representative or other legal entity whatsoever.

(f)

"Term" means the time period from the effective date of this Agreement until the employment of the Employee is terminated.

2.

Change of Control - If a Change of Control occurs during the Term, the Employee shall become fully vested under all Employee Option Plans and Executive Compensation Programs, regardless of any provision in such plans or agreements that do not provide for full vesting.

3.

Rights Upon Termination Due to Change of Control — In addition to any other rights the Employee may have against the Company, if at the time of a Change of Control or within twelve (12) months after the occurrence of a Change of Control, either:

(a)

the Employee voluntarily resigns his or her employment for Good Reason; or

(b)

the Company terminates the Employee's employment for any reason;

then the Employee shall be entitled to the following payments and benefits:

(c)

an amount equal to three times the Employee's base annual compensation, payable in one lump sum within five (5) business days from the termination of the Employee's employment unless the Company and the Employee agree otherwise in writing;

(d)

an amount equal to three time the average of the amounts paid annually to the Employee over the previous three years of employment, or if the Employee has been employed fewer than three years,  the average of the amounts paid annually to the Employee during his employment with the Company, under all Executive Incentive Compensation Programs or Executive Bonus Plans, pursuant to Section    2, payable in one lump sum within five (5) business days from the termination of the Employee's employment unless the Company and the Employee agree otherwise in writing; and

(e)         during the period commencing on the date when the termination of the Employee's employment is effective and ending on the date thirty-six (36) months after such date, the Employee (and, where applicable, the Employee's dependents) shall be entitled to continue participation in all Employee Benefit Plans maintained by the Company, including without limitation life, disability and health insurance programs, as if the Employee were still an employee of the Company. Where applicable, the Employee's salary for purposes of such plans shall be deemed to be equal to the Employee's base annual compensation and to the extent that the Company finds it impossible to cover the Employee under its Employee Benefit Plans during the period set out above, the Company shall provide the Employee with individual policies which offer at least the same level of coverage and which impose not more than the same c osts on the Employee. In the event the Employee becomes eligible for comparable coverage to that set out in the Employee Benefit Plans during the period set out above, the coverage provided under this Paragraph (e) shall terminate immediately.

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4.

Miscellaneous Provisions - The following miscellaneous provisions shall apply to this Agreement:

(a)

Company's Successors - The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets, by an agreement in substance and form satisfactory to the Employee, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. The Company's failure to obtain such agreement prior to the effectiveness of a succession shall be a breach of this Agreement and shall entitle the Employee to all of the compensation, benefits   and reimbursements to which he or she would have been entitled hereunder as if there had been a Change of Control and a term due to Change of Control. For all purposes under this Agreement, the    term " Company" shall include any successor to the Company's business and/or assets which executes   and delivers the assumption agreement described in this Subsection 4(a) or which becomes bound by   this Agreement by operation of law.

(b)

No Assignment - The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including without limitation by bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Subsection 4(b) shall be void.

(c)

Waiver - No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach   of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at    another time.

(d)

Employee's Successors - This Agreement and all rights of the Employee hereunder shall enure to the benefit of and be binding on the Employee's heirs and legal personal representatives.

(e)

Counterparts - This Agreement may be executed by the parties in counterpart, and may be delivered by fax. Notwithstanding the date of the execution of and delivery of any such counterparts, their date of execution shall be deemed to be the effective date of this Agreement as set out above.

IN WITNESS WHEREOF each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

Angiotech Pharmaceuticals, Inc.

/s/ David T.Howard	/s/ William L. Hunter
David T. Howard	William L. Hunter, MD
Chair of Compensation Committee	President and Chief Executive Officer
Board of Directors

EXHIBIT D
EMPLOYEE CONFIDENTIALITY, INVENTIONS, AND NON-COMPETITION AGREEMENT

This Agreement is made and entered into as of ____, 2004, by and between Angiotech Pharmaceuticals, Inc., a Canadian corporation, (the "Company") and William L. Hunter, MD of 444 West 15^th Avenue Vancouver, BC, V6R 3B2 (the "Employee"). This Agreement is in addition to the Employee Confidential, Inventions, and Non-Competition Agreement executed between the parties in October 1992, as set out in Article 7.3 of the Executive Employment Agreement. The Employee acknowledges that this Agreement is an express condition of him being employed by and/or his ongoing employment with Angiotech Pharmaceuticals, Inc. Therefore, in consideration of the Employee's initial and/or ongoing employment, and the special training and knowledge that the Employee will acquire through his employment with the Company, and of the covenants and conditions contained herein, the parties agre e as follows:

1.

Confidential Information.

1.1. Company Secrets. During and after the Employee's employment with the Company, the Employee will protect and hold in strictest confidence and not use nor disclose any Confidential Information of the Company and its subsidiaries, affiliates and business relations. Confidential Information includes, without limitation, Inventions (as defined below), ideas, discoveries, trade secrets, techniques, research, laboratory notes, data, analysis, manufacturing and production processes, plans, programs, software source and object codes, specifications, drawings, diagrams, schematics, formulae, algorithms, product designs and concepts, prototypes, devices, biological materials and their progeny and derivatives, drug formulations, reports, pre-clinical and clinical trials (abandoned or undertaken), studies, regulatory filings and correspondences, technical know-how, methods, patent portfolio, customer and supplier lists, custom er requirements, price lists and policies, budgets, projections, bids, costs, financial reports and information, financing materials, training programs and manuals, and sales and marketing programs, materials, plans, and strategies (jointly, "Confidential Information"), but excludes, with limitation, information and materials which the Employee can reasonably demonstrate: (i) were known by the Employee prior to the Company's disclosure to the Employee, (a) rightfully came into the Employee's possession from a third party who was not under any obligation, either directly or indirectly, to the Company to maintain the confidentiality, or (b) had become generally available to the public through no fault of the Employee. The Employee will not disclose, use, copy, publish, summarize or remove from the Company's premises any material containing or disclosing any portion of the Confidential Infoithation, except as necessary to carry out the Employee's assigned responsibilities as a Company employee. The Em ployee shall as appropriate mark all items containing any of the Confidential Information with prominent confidentiality notices acceptable to the Company. Upon termination of the Employee's employment or the earlier request of the Company, all material containing or disclosing any portion of the Confidential Information shall be returned to the Company.

1.2

Third Party Information. During and after the Employee's employment with the Company, the Employee will not (a) use any confidential and proprietary information of the Company's customers, vendors, consultants and other parties with whom the Company does business ("Third Party Information") or (b) disclose any Third Party Information to anyone other than the Company personnel   who need to know the same in connection with their work for the Company, without the prior written authorization of an officer of the Company.

2.

Inventions.

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2.1. Assignment. All ownership and other rights in all works, programs, know-how, techniques, formulas, data, manuals, methods, inventions, ideas, designs, improvements, discoveries, processes and other works of authorship developed, conceived or reduced to practice by the Employee, whether alone or with others, during the term of his employment by the Company, shall be the exclusive property of the Company ("Inventions"). This will be the case whether or not an Invention is: (a) capable of being protected by copyright, patent, trade secret, industrial design, trade mark or other similar legal protection, (b) conceived, developed or reduced to practice by the Employee during or outside his regular working hours, or (c) conceived, developed or reduced to practice by the Employee alone or jointly with others. However, it is acknowledged and agreed that the term "Invention" shall n ot include any invention developed by the Employee outside his regular working hours if such invention: (i) was not within the scope of the Employee s employment duties, and (ii) was conceived, developed and reduced to practice without the use of Confidential Information and the Company's corporate resources. The Employee hereby irrevocably agrees to and does hereby sell, assign and transfer to the Company or the Company's designee all rights, title and interest the Employee may now or in the future have in and to the Inventions, and any improvements thereon, and waive his moral rights to any and all copyrights subsisting in the Inventions. The Employee will assist the Company as reasonably requested, at the Company's expense but without additional compensation to the Employee, during and after the term of his employment to obtain, perfect, sustain, and enforce, the Company's rights in and ownership of the Inventions covered hereby, including without limitation, the execution of additional instruments of con veyance and assisting the Company with applications for patents or copyright or other registrations. If the Company, after reasonable efforts, is unable to obtain the Employee's signature to any such instruments (without regard to whether or not the Employee is at that time employed by the Company), the Employee hereby irrevocably designates and appoints the Company as the Employee's agent and attorney-in-fact, which appointment includes an interest, for and in the Employee's behalf to execute, verify and file any such instruments and such other lawfully permitted acts to further the purposes of this Section 2.1 with the same legal force and effect as if executed by the Employee.

2.2. Information on Inventions. During the Employee's employment by the Company and for six months after termination of such employment for any reason, the Employee will promptly disclose to the Company in writing all Inventions developed, conceived or reduced to practice by the Employee, whether alone or jointly. To the extent disclosure of such Inventions violates any obligations of confidentiality to a third party, the Employee will promptly disclose a brief description of such Inventions, a list of the parties to whom the Inventions belong, and the reason full disclosure is prohibited.

2.3. Prior Inventions. Any Inventions which the Employee alone or jointly developed, conceived or reduced to practice or caused to be developed, conceived or reduced to practice prior to employment by the Company which the Employee wishes to exclude from the scope of this Agreement are set forth in Exhibit 1 attached hereto ("Prior Inventions"). To the extent disclosure of any such Prior Inventions violates any prior obligations of confidentiality to a third party, Exhibit 1 must include a brief description of such Prior Invention, a list of the parties to whom such Prior Inventions belong and the reason full disclosure is prohibited. To the extent that no Prior Inventions are set forth in Exhibit 1, the Employee represents that no such Prior Inventions exist. Notwithstanding the foregoing, if the Employee incorporates, in the course of his employment by the Company, any Prior Inventions into a product, process, service or machine of the Company, the Employee hereby grants the Company a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license (with right to sublicense) to make, have made, use, sell, copy, distribute, modify, and otherwise to practice and exploit such Prior Inventions.

3. Non-competition and Non-solicitation.

Employee Confidentiality, Inventions, and Non-competition Agreement - 2

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3.1. The Employee agrees that during the Employee's employment by the Company and for one (1) year after termination of such employment for any reason (the "Noncompete Period"), the Employee will not in any capacity (including without limitation, as an employee, officer, agent, director, consultant, owner, shareholder, partner, member or joint venture) directly or indirectly, whether or not for compensation, engage in or assist others to engage in any business that is, or is preparing to be, in competition with any product or service developed, in development, distributed or offered by the Company up to the time of termination of the Employee's employment; provided, however, that nothing herein shall prevent the purchase or ownership by the Employee of shares which constitute less than one percent of the outstanding equity securities of a publicly-held company. The parties agree that the Company is in the business of delivering d rugs from medical devices and/or implants, as well as the delivery of anti-angiogenic agents, such as paclitaxel, for the treatment of inflammatory diseases (e.g., multiple sclerosis, arthritis, and psoriasis) (collectively, the "Business"). The parties acknowledge that the Business of the Company is worldwide in scope, and specifically that the Company's competitors and its actual and potential customers are located throughout the world.

3.2. The Employee further agrees that during his employment and during the Noncompete Period, the Employee will not for any purpose competitive to the Business of the Company call on, reveal the name of, solicit, accept business from or attempt to entice away any actual or identified potential customer of the Company, nor will he assist others in doing so. The Employee further agrees that during his employment and during the Noncompete Period, he will not encourage nor solicit nor assist others to encourage or solicit any other employee or consultant of the Company to leave such employment or business relationship for any reason.

3.3. The Employee acknowledges that the covenants in Sections 3.1, and 3.2 are reasonable in relation to the Business in which the Company is engaged, the position the Employee has been afforded with the Company, and the Employee's existing and to be acquired knowledge of the Company's business, and that compliance with such covenants will not prevent him from pursuing his livelihood. However, should any court of competent jurisdiction find that any provision of such covenants is unreasonable, whether in period of time, geographical area, or otherwise, then in that event the parties agree that such covenants shall be interpreted and enforced to the maximum extent which the court deems lawful.

4.

Remedies. The Employee acknowledges that the harm to the Company from any breach of the Employee's obligations under or related to this Agreement will be difficult to determine and will be wholly or partially irreparable, and such obligations may be enforced by injunctive relief and other available remedies at law or in equity. The parties further agree that the Company shall not be required to post any bond in connection with enforcement of the Employer's obligations hereunder (unless required by law or court rule, in which case the bond shall be $5,000), and that the Company in its sole discretion shall be entitled to inform third parties of the existence of this Agreement and of the Employee's obligations hereunder. Any amounts received by the Employee or by any other party through the Employee in breach of this Agreement shall be held in trust for the benefit of the Company.  In the event t he Employee breaches Section 3.1 or 3.2, the Noncompete Period shall be extended by the period of time during which the Employee is in breach of Section 3.1 or 3.2, as the case maybe. No term hereof shall be construed to limit or supersede any other right or remedy of the Company under applicable law with respect to the protection of confidential information (including trade secrets) or otherwise. No term of any agreement between the Employee and the Company requiring the arbitration of disputes shall apply to any actual or threatened breach of this Agreement.

5.

No Conflicting Agreements. The Employee represents that the Employee (a) has no conflicting obligations to assign any Invention and (b) has no other employment, consultancy nor undertakings that could restrict or impair the Employee's performance of this Agreement. The Employee warrants that any and all items, methods, technology, and Inventions of any nature developed or provided by the Employee to the Company that are in any way for or related to the Company's Business will be original to the Employee and will not, as provided to the Company or when used and exploited by the Company and its contractors, customers and their respective successors and assigns, infringe in any respect the rights or property of the Employee or any third party. The Employee will indemnify the Company for all losses, claims, and expenses (including reasonable attorneys' fees) arising from any breach of the Employee's warranties.

Employee Confidentiality, Inventions, and Non-competition Agreement - 3

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6. Miscellaneous.

6.1. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, representatives, executors and administrators of the parties. The phrase "an officer of the Company" as used herein shall refer to an officer of the Company other than the Employee. No waiver of or forbearance to enforce any right or provision hereof shall be binding unless in writing and signed by the party to be bound, and no such waiver or forbearance in any instance shall apply to any other instance or to any other right or provision.

6.2. Governing Law; Venue. This Agreement will be governed by the laws of the Province of British Columbia and the laws of Canada applicable therein, without regard to its conflicts of laws rules. The parties hereby agree the venue for all matters and actions arising under this Agreement shall be and remain in the court of competent authority situated in Vancouver, British Columbia, and the parties hereby irrevocably consent to the personal jurisdiction of such court. The prevailing party shall be entitled to reasonable attorneys' fees and costs incurred in connection with any such litigation arising under or related to this Agreement.

6.3. Entire Agreement; Severability. This Agreement represents the entire agreement between the Company and the Employee concerning the subject matter hereof and supersedes all prior agreements, correspondence and understandings, whether oral or written, with respect to that subject matter. If any provision of this Agreement is held to be invalid or unenforceable to any extent in any context, it shall nevertheless be enforced to the fullest extent allowed by law in that and other contexts, and the validity and force of the remainder of this Agreement shall not be affected thereby. Nothing herein shall be deemed to relieve the Employee of his obligations under any Non-competition, Confidentiality and Inventions Agreement between the Employee and Angiotech Pharmaceuticals, Inc.

6.4. Masculine/Feminine Pronouns. Any and all uses of masculine or feminine pronouns herein are solely to aid in the ease of reading this Agreement and any such pronoun usage shall have equal application to the members of the opposite gender.

6.5. Counterparts. This Agreement may be executed by the parties in counterpart, and may be delivered by fax. Notwithstanding the date of the execution of and delivery of any such counterparts, their date of execution shall be deemed to be the effective date of this Agreement as set out above.

BY SIGNING BELOW, THE EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT IN ITS ENTIRETY AND UNDERSTANDS IT. THE EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL WITH RESPECT TO THIS AGREEMENT.

Angiotech Pharmaceutical Inc.	Employee:
By: /s/ David T. Howard	/s/ William L. Hunter, MD
David T. Howard	William L. Hunter, MD
Chair of Compensation Committee	President and Chief Executive Officer
Board of Directors
Dated: 30 April, 2004	Dated: April 23, 2004

Employee Confidentiality, Inventions, and Non-competition Agreement - 4

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Exhibit 1

Employee's Prior Inventions

Employee Confidentiality, Inventions, and Non-competition Agreement 5

EX-10.20

Exhibit 10.20

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated August 8, 2007

BETWEEN:

KENNETH THOMAS BAILEY, of Seattle, WA

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS (US), INC.,

a corporation incorporated under the laws of the State of Washington

("Angiotech US")

BACKGROUND

A.

Angiotech US wishes to continue to employ the Executive in the position of Chief Financial Officer, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

C.

The terms and conditions of this Agreement were arrived at after negotiations between the patties.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech US will employ the Executive, and the Executive will serve Angiotech US, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of Chief Financial Officer at Angiotech's offices in North Bend, Washington;

(b)

will report solely and directly to Angiotech's Chief Executive Officer; and

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(c)

will perform:

(i)

such duties and responsibilities as are customarily performed by a person holding the position of Chief Financial Officer of a company of the size and nature of Angiotech; and

(ii)

such other duties and responsibilities reasonably assigned to the Executive by Angiotech, from time to time, that are not materially inconsistent with, and do not impair, the Executive's ability to discharge the Executive's duties and responsibilities under clause (i).

1.3

Angiotech may ask the Executive to serve as an officer of Angiotech Canada, and/or as a director and/or officer of Angiotech US or one or more of Angiotech US and Angiotech Canada's affiliates or subsidiaries.

1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech US, Angiotech Canada, or any of their affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, including a Code of Ethics for its Chief Financial Officer (a current copy of which is attached as Appendix A), which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures (other than the Code of Ethics) and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of January 1, 2007 ("Effective Date"), and will continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be January 15, 2004 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote substantially all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

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2.2

During the Executive's employment with Angiotech, the Executive will not, directly or indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, firm, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 12, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of, a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

BASE SALARY

3.1

Angiotech will pay the Executive an annual base salary of $350,000 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

3.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

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4.

SIGNING BONUS

4.1

Angiotech will pay the Executive a signing bonus of $50,000 ("Signing Bonus"), payable within 15 calendar days of the execution of this Agreement.

5.

BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 50% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the terms of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, Signing Bonus, any payments under the Bonus Plan or under Part 10, 11 or 15, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7.

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.4 and 7.5:

(a)

during the Executive's employment with Angiotech, the Executive will be eligible to participate in the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech US for its comparably situated executive employees, and any other employee benefit plans that Angiotech US may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

Angiotech US will pay 100% of the premium costs required under the group health, dental, life insurance, and short and long term disability plans under subparagraph (a).

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7.2

Subject to paragraphs 7.4 and 7.5:

(a)

during the Executive's employment with Angiotech, the Executive will be eligible to participate in the 401(k) plan made available by Angiotech US for its comparably situated executive employees, or in any other US tax-qualified retirement plan that Angiotech US may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

for each completed year of employment under this Agreement, Angiotech US will make contributions to the Executive's 401(k) plan or other US tax-qualified retirement plan under subparagraph (a) equivalent to the lesser of:

(i)

5% of Base Salary; and

(ii)

the maximum amount of such contributions that may be permitted under the plan and applicable law.

7.3

If the Executive is a director or officer of Angiotech US, Angiotech Canada, or any of their affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving.

7.4

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any 401(k) plan or other US tax-qualified retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies ("Policies"), and Angiotech's sole obligation in relation to such benefits will be:

(a)

to pay such premium costs as may be required under the Policies, excluding any premium costs to be paid by the Executive in respect of any Policies to which paragraph 7.1(b) may not apply; and

(b)

to make contributions to the Executive's 401(k) plan or other US tax-qualified retirement plan under paragraph 7.2(b).

7.5

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees generally, including the percentage of premium costs (if any) paid by Angiotech under paragraph 7.1(b), and the amount of Angiotech's contributions (if any) to the Executive's 401(k) plan or other US tax-qualified retirement plan under paragraph 7.2(b).

7.6

Any disputes relating directly to the Executive's right to receive any benefit under the Policies must be directed against the provider of the benefit and not against Angiotech.

7.7

Except as required by applicable law, the Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

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8.

STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will continue to hold any options to purchase common shares of Angiotech Canada held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs of Angiotech Canada, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Angiotech Canada Board and the shareholders of Angiotech Canada.

8.2

The Angiotech Canada Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or termination occurs solely as a result of a change in applicable laws or regulatory requirements).

8.3

Subject to paragraph 15.8(f), if Angiotech or the Executive terminates the Executive's employment for any reason, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 23 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

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9.2

The Executive may take vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations for its executive employees generally.

10.

TAX EQUALIZATION

10.1

In this Agreement:

(a)

"Actual Tax Liability" means the total of the Executive's actual US and foreign personal income tax liabilities payable in respect of the Executive's Gross Annual Income, as determined by the Tax Advisors;

(b)

"Gross Annual Income" means the total of:

(i)

the Base Salary,

(ii)

the Signing Bonus (if applicable),

(iii)

any payment under the Bonus Plan, and

(iv)

any Gross-Up Payment under this Part 10,

paid to the Executive in respect of a fiscal year, and, for greater certainty, does not include any other amounts or taxable benefits paid or provided to the Executive under this Agreement or otherwise, unless otherwise agreed to by Angiotech and the Executive;

(c)

"Gross-Up Payment" means an annual payment equal to:

(i)

the difference, if any, between the Actual Tax Liability and the Hypothetical Tax Liability in respect of a fiscal year, plus

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(ii)

the total of any additional US and foreign personal income tax liabilities payable in respect of the Gross-Up Payment, as determined by the Tax Advisors;

(d)

"Hypothetical Tax Liability" means the amount of the Executive's hypothetical US personal income tax liability that would have been payable in respect of the Executive's Gross Annual Income, if the Executive had performed all services under this Agreement in the United States during the applicable fiscal year, as determined by the Tax Advisors;

(e)

"Tax Advisors" means the tax advisors engaged by Angiotech, as agreed by Angiotech and the Executive, to determine the amount of the Gross-Up Payment, if any, payable to the Executive under this Part 10.

10.2

Angiotech will pay the Executive the Gross-Up Payment, if any, in the amount determined annually by the Tax Advisors in accordance with this Part 10.

10.3

Any determination made by the Tax Advisors under this Part 10 will be final and binding, and will not be questioned, reviewed, amended, or set aside by an arbitrator or arbitrators under Part 22 or by any Court.

10.4

Angiotech will pay any professional fees, disbursements, and applicable taxes the Tax Advisors may charge for determining of the amount of the Gross-Up Payment, if any, payable to the Executive under this Part 10.

11.

EXPENSES

11.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time;

(b)

professional fees, disbursements, and applicable taxes payable to the Tax Advisors with respect to the preparation and filing of any foreign personal income tax returns on behalf of the Executive if and to the extent any such returns are required as a result of, and relate to, the Executive's receipt of any payment or benefit under this Agreement, and provided that the Executive engages the Tax Advisors for that purpose;

(c)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of $15,000 for each fiscal year:

(i)

automobile lease;

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(ii)

financial or tax planning services (in addition to any amount reimbursed under subparagraph (b)); and

(iii)

health club membership; and

(d)

legal fees, disbursements, and applicable taxes actually and reasonably incurred by the Executive in relation to the negotiation and preparation of this Agreement, up to a combined maximum amount of $20,000.

11.2

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive, up to a combined total maximum amount of $250,000, for:

(a)

expenses incurred by the Executive after the Effective Date and before the Last Day of Employment, that Angiotech, in its sole discretion, determines are reasonably necessary for:

(i)

legal fees, real estate fees and commissions, and land transfer taxes in respect of the sale of the Executive's residence in [***]; and

(ii)

the interest portion of any mortgage carrying costs for the Executive's residence in [***]; and

(b)

any personal income tax liabilities payable by the Executive in respect of the amounts paid to the Executive under this paragraph 11.2, as determined by Angiotech in its sole discretion.

12.

RESTRICTIONS ON SOLICITATION AND COMPETITION

12.1

In this Agreement:

(a)

"Business of Angiotech" means the business of Angiotech through the Executive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self- retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;

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(c)

"Control Person" means a person, entity, or group of persons or entities acting jointly or in concert, that holds a sufficient number of the voting rights attached to all outstanding voting securities of a Competitor of Angiotech to affect materially the control of the Competitor of Angiotech, provided that, if a person, entity, or group of persons or entities, holds more than 20% of the voting rights attached to all outstanding voting securities of the Competitor of Angiotech, the person, entity, or group of persons or entities will be deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the Competitor of Angiotech;

(d)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(e)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

12.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

12.3

Subject to paragraph 12.4, while the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

(a)

carry on or engage in the Solicitation of any Customer of Angiotech in any manner that may reasonably be expected to interfere with, impair, damage, or otherwise detrimentally affect the Business of Angiotech, including, without limitation, the sale of any product or service provided by Angiotech to that Customer of Angiotech;

(b)

willfully interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

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(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in direct competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive's Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive's Last Day of Employment;

(e)

manage or supervise personnel of any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

(f)

subject to paragraphs 12.5 and 12.6, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

12.4

While the Executive is employed by Angiotech, paragraph 12.3 does not restrict the Executive from engaging in an activity, or owning an interest in an entity, as described in paragraph 2.3(a) to (d).

12.5

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, or, subject to paragraph 12.6, during the 12-month period after the Last Day of Employment:

(a)

the Executive will, within 90 days after the Executive knows, or should have known, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with paragraph 12.3(f), or

(ii)

notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Angiotech Canada Board decide whether the Executive must comply with paragraph 12.3(f);

(b)

if the Executive asks the Angiotech Canada Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 12.3(f), the Angiotech Canada Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 12.3(f), or to any lesser extent specified by the Angiotech Canada Board, and Angiotech will notify and the Executive of the Angiotech

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(c)

if the Angiotech Canada Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Angiotech Canada Board's decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Angiotech Canada Board under subparagraph (b) (provided, however, that if such interest is illiquid or if it is otherwise not reasonably practicable for the Executive to sell or transfer that interest, the Executive will use commercially reasonable efforts to dispose of such interest or to create a legal structure to ensure that such interest is passive); and

(ii)

if the Executive incurs a loss as a result of having to comply with the Angiotech Canada Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

12.6

Despite paragraphs 12.3 and 12.5, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

(a)

does not, on his own behalf, or in association with or on behalf of any other person, entity, or group of persons or entities acting jointly or in concert, become a Control Person; and

(b)

otherwise complies with paragraph 12.3(a) to (e).

12.7

If paragraph 12.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator or arbitrators under Part 22 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator(s) or the Court.

13.

WORK PRODUCT

13.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

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(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 13.8, is disclosed in Appendix C; or

(ii)

is determined by the Angiotech Canada Board to be a Non-Angiotech Invention under paragraph 13.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, plans, strategies, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, products, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

(i)

relating to the Business of Angiotech;

(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(iii)

resulting from any work performed by the Executive for Angiotech;

(iv)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(v)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech;

but excluding any Non-Angiotech Inventions.

13.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

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13.3

For greater certainty:

(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property;

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

13.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 13, including, without limitation, the actions contemplated in paragraph 13.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 13.

13.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

13.6

The Executive irrevocably waives in favor of Angiotech any and all moral lights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

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13.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 13 .1 (b)(ii) if:

(a)

subject to paragraph 13.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to both Angiotech's General Counsel and its Human Resources Department; and

(b)

the Angiotech Canada Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non­Angiotech Invention, provided that, for greater certainty, the Angiotech Canada Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non-Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, development, or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

(ii)

it relates to the Business of Angiotech or to Angiotech's current or anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech. 13.8 If the disclosure of any Non-Angiotech Invention in Appendix C would violate any obligation of confidentiality that the Executive owes to a third party, Appendix C must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

13.9

If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non­Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to Angiotech).

13.10

Subject to paragraph 13.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

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13.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 13.7 or 13.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

13.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such property will be imm ediately revoked on the Last Day of Employment.

14.

CONFIDENTIALITY

14.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budgets, projection s, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

14.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

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14.3

Unless and until any Confidential Information ceases to be confidential under paragraph 14.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, intentionally or knowingly use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law or legal process, but subject to paragraph 14.5;

(ii)

reasonably necessary for the purpose of any litigation, arbitration, or mediation between the Executive and Angiotech concerning this Agreement (provided that the Executive will take all lawful steps to ensure that any disclosure for such purpose is subject to a protective order of confidentiality);

(iii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iv)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

14.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law or legal process, but subject to paragraph 14.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

14.5

Subject to paragraph 14.6, if the Executive reasonably believes that the Executive is required by law or legal process to disclose anything otherwise prohibited under paragraphs 14.3 and 14.4:

(a)

the Executive will notify Angiotech in writing, as soon as it is practicable to do so, of all material particulars of the situation;

(b)

if, after notifying Angiotech under subparagraph (a), Angiotech notifies the Executive that it does not agree that disclosure is required by law or legal process, the Executive will not make any disclosure after being so notified by Angiotech unless an arbitrator or arbitrators under Part 22 or a Court of competent jurisdiction orders otherwise; and

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(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law or legal process is subject to a protective order of confidentiality.

14.6

Paragraph 14.5 does not apply to the Executive's responses to questions asked in cross-examination in any Court, regulatory, administrative, or arbitration proceeding, or in any other proceeding in which the Executive is required by law or legal process to respond to questions asked in such cross-examination.

14.7

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

15.

TERMINATION

15.1

In this Agreement:

(a)

"Cause" means the occurrence of any one or more of the following:

(i)

willful and material failure by the Executive to substantially perform the Executive's duties or responsibilities under this Agreement, after Angiotech has given a demand to the Executive identifying how the Executive has failed to perform such duties or responsibilities;

(ii)

willful misconduct by the Executive causing material financial, reputational, or other harm to Angiotech;

(iii)

the conviction of the Executive for, or a plea by the Executive of guilty or no contest to, any felony; or

(iv)

a willful and material breach by the Executive of this Agreement, Angiotech's Code of Ethics for its Chief Financial Officer, or any of Angiotech's other material written policies or procedures;

(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Angiotech Canada Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Angiotech Canada Board made with the approval of the Angiotech Canada Board as it was constituted immediately before the change;

(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securities (after whic h the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

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(iii)

the disposition of all or substantially all of the assets or business of Angiotech US or Angiotech Canada pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially owned or controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech US or Angiotech Canada; or

(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech US or Angiotech Canada, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

(c)

"Good Reason" means the occurrence of any one or more of the following without the Executive's written consent:

(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

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(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(iii)

a change in the Executive's principal place of employment by a distance of 50 miles or more, unless the new principal place of employment is within 50 miles of the Executive's then current residence;

(iv)

a material breach by Angiotech of a material term of this Agreement; or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be a basis to terminate the Executive's employment for Cause;

(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for Cause;

(ii)

the effective date of the Notice of Termination if the Executive's employment is terminated by the Executive without Good Reason; or

(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for Cause, or is terminated by the Executive for Good Reason;

or such later date as may otherwise be agreed between Angiotech and the Executive;

(e)

"Notice of Termination" means a written notice of termination of the Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that:

(i)

is recommended against to the Angiotech Canada Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Angiotech Canada Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech Canada and any other shares entitled to vote for the election of directors of Angiotech Canada.

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15.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

15.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

15.4

The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 30 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

15.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 15.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 11.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement, except as provided in paragraph 8.3. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

15.6

If the Executive's employment is terminated by Angiotech for Cause, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 11.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement, except as provided in paragraph 8.3. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

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15.7

If the Executive's employment is terminated by Angiotech for any reason other than for Cause or is terminated by the Executive for Good Reason, and paragraph 15.8 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

12 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any contributions to the Executive's 401(k) plan or other retirement plan, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$24,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or 11.1(a).

15.8

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for Cause or is terminated by the Executive for Good Reason, Angiotech will:

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(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any contributions to the Executive's 401(k) plan or other retirement plan, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$48,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

(ii)

the amount of the Executive's target bonus opportunity under the Bonus Plan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, of Angiotech Canada, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the Toronto Stock Exchange or NASDAQ as of the Last Day of Employment;

- 24 -

(g)

make any payments due to the Executive under paragraph 9.3(b) or 11.1(a); and

(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 15.8(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap") would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that:

(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 15.8(b); and

(ii)

if the reduction of the amounts payable would not result in a more beneficial after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 15.8(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 15.8(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Excise Tax Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Excise Tax Gross-Up Payment, the Excise Tax Gross-Up Payment will be the sum of:

(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Excise Tax Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Excise Tax Gross-Up Payment is made.

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15.9

If Angiotech Canada's shares cease to be listed on the Toronto Stock Exchange or NASDAQ, the reference to the Toronto Stock Exchange or NASDAQ in paragraph 15.8(f) will be deemed to be replaced with a reference to the stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech Canada's common shares occurs.

15.10

Before any payments are made to the Executive under

(a)

paragraph 15.7(b) or (c), or

(b)

paragraph 15.8(b), (c), (e), (f) or (i)

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix B or in a similar form prepared by Angiotech, and any applicable period to revoke such release will have expired. If the Executive fails to execute and deliver the release, or if the Executive revokes the release within any applicable revocation period, Angiotech will have no obligation to make any payments under paragraph 15.7(b) or (c) or paragraph 15.8(b), (c), (e), (f) or (i).

15.11

Angiotech's obligation to make any payments under

(a)

paragraph 15.7(b) to (d), or

(b)

paragraph 15.8(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 12, 13, and 14.

15.12

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

15.13

If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 11.1(a) as of the date of the Executive's death;

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(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

(c)

Angiotech will have no other or further obligation to the Executive or the Executive's estate.

15.14

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in Canada:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in Canada; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in Canada, the Executive will be entitled to receive payments under paragraph 15.7 as if the Executive's employment had been terminated by Angiotech without Cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in Canada.

15.15

The provisions of this Part 15 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without Cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater contractual obligation than spe cified in this Part 15 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

16.

ENFORCEMENT

16.1

The restrictions in Parts 12, 13, and 14 are necessary for the protection of Angiotech's interests and the Business of Angiotech, and are reasonable and valid.

16.2

In addition to any and all other rights and remedies available to Angiotech, an injunction may be the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 12, 13, and 14, and Angiotech may suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

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17.

SECTION 409A OF INTERNAL REVENUE CODE

17.1

Subject to paragraph 17.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death.

17.2

Paragraph 17.1 will apply:

(a)

only to the extent required to avoid causing the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

(b)

despite any other provision of this Agreement.

17.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

18.

EXECUTIVE'S REPRESENTATIONS

18.1

In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

18.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work both in the United States and in Canada;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

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(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix C, except as provided in paragraph 13.8, and all information disclosed in Appendix C is true and correct; and

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

18.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 18.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 18.2.

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18.4

The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

19.

GOVERNING LAW AND FORUM

19.1

This Agreement is deemed to be made in the State of Washington, and will be governed by and construed and interpreted in accordance with the laws of the State of Washington.

19.2

Subject to Part 22, if Angiotech commences a proceeding in the Courts of the State of Washington to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of the State of Washington in connection therewith, and the Courts of the State of Washington will have exclusive jurisdiction in connection therewith.

20.

NOTICES

20.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

KENNETH THOMAS BAILEY

_____________________________

_____________________________

with a copy to:

Thompson Wigdor & Gilly LLP

Attention: Andrew S. Goodstadt, Esq.

350 Fifth Avenue, Suite 5720

New York, NY 10118

(b)

ANGIOTECH PHARMACEUTICALS (US), INC.

P.O. Box 2840

101 W. North Bend Way, Suite 201

North Bend, WA 9804.5

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

20.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

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21.

SEVERABILITY AND WAIVER

21.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator or arbitrators under Part 22 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

21.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

22.

DISPUTE RESOLUTION

22.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application, or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment (collectively, an "Employment Matter"), by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any Employment Matter by mediation.

22.2

If an Employment Matter cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate such matter, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer such matter to binding arbitration.

22.3

An Employment Matter that is referred to binding arbitration under paragraph 22.2 will be finally resolved by arbitration in Seattle, Washington, administered by the American Arbitration Association ("AAA") under its Commercial Arbitration Rules then in effect, subject to the following:

(a)

the arbitration will be conducted by:

(i)

a single arbitrator, or

(ii)

if the Employment Matter involves a claim for damages or other compensation exceeding $1 million, a panel of three arbitrators;

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(b)

the arbitrator(s) will be selected as follows:

(i)

the party that gives notice under paragraph 22.2 of its intention to refer the Employment Matter to binding arbitration ("Initiating Party") will ask the AAA to provide a list of seven arbitrators who are knowledgeable and experienced in handling employment law matters; and

(ii)

the parties (beginning with the Initiating Party) will take turns striking one name from that list, until only one or three names remain, as the case may be;

(c)

the decision of the arbitrator(s) will not be a compromise, but will be the adoption of the submission made by either party;

(d)

the arbitrator(s) will treat as confidential all evidence and other information presented;

(e)

the arbitrator(s) will have no authority or jurisdiction to award punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury (and the Executive and Angiotech will not request any such award);

(f)

the Optional Rules for Emergency Measures of Protection will apply to the arbitration;

(g)

the arbitrator(s) will have no authority or jurisdiction to change the terms of this Agreement except as provided in paragraphs 12.7 and 21.1 (and the Executive and Angiotech will not request any such change);

(h)

a decision must be rendered within 30 days of the parties' closing statements or submission of post-hearing briefs; and

(i)

Angiotech will pay the fees and costs of the arbitrator(s), and the fees of any Court reporter or other service provider engaged to record the arbitration proceedings.

22.4

The Executive or Angiotech may bring an action or special proceeding in a state or federal court of competent jurisdiction sitting in Seattle, Washington, to enforce any arbitration award under paragraph 22.3.

23.

INDEPENDENT LEGAL ADVICE

23.1

Angiotech's attorneys prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such

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24.

ENUREMENT AND ASSIGNMENT

24.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

24.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

25.

INTERPRETATION

25.1

In this Agreement:

(a)

"Angiotech" means Angiotech US, and includes, as the context may require, Angiotech Canada and the other affiliates, subsidiaries, associated companies, successors, and assigns of Angiotech US and Angiotech Canada;

(b)

"Angiotech Canada" means Angiotech Pharmaceuticals, Inc., a corporation incorporated under the laws of British Columbia;

(c)

"Angiotech Canada Board" means the Board of Directors of Angiotech Canada;

(d)

"Board" means the Board of Directors of Angiotech US;

(e)

"Code" means United States Internal Revenue Code of 1986, as amended;

(f)

"day" means calendar day, unless otherwise specified;

(g)

"IRS" means Internal Revenue Service.

25.2

All monetary amounts expressed in this Agreement are in United States currency, unless otherwise specified.

25.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

25.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

26.

ENTIRE AGREEMENT

26.1

This document, including the Appendices hereto, contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

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26.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
KENNETH THOMAS BAILEY in the	)
presence of:	)
	)
/s/ Rui Avelar	)	/s/ Kenneth Thomas Bailey
(Signature of Witness)	)	KENNETH THOMAS BAILEY
	)
Rui Avelar	)
(Print Name of Witness)	)
	)
1989 King Edward, Vancouver, BC	)
(Address of Witness)	)
	)
Chief Medical Officer	)
(Occupation of Witness)	)
	)
August 8, 2007	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /s/ William L.Hunter

______________________________________________

Authorized Signatory

Date:  August 8, 2007                                                           

APPENDIX A

CODE OF ETHICS FOR THE CHIEF FINANCIAL OFFICER

The chief financial officer of Angiotech is expected to abide by the highest standards of ethical conduct and to act honestly and in good faith with a view to the best interests of Angiotech and its shareholders In so doing, as the chief financial officer, I acknowledge I am expected specifically to:

1.

Maintain integrity and credibility in my personal and professional life by carrying out the duties of the chief financial officer in accordance with the highest legal and ethical standards.

2.

Avoid in my personal and professional life the appearance of impropriety in the conduct of the duties of the chief financial officer

3.

Represent myself in my personal and professional life in a reputable and dignified manner that reflects the standard of ethical conduct required by Angiotech.

4..

Avoid in my personal and professional life any relationships that might affect, or be perceived to potentially affect, my ethical conduct in the course of carrying out the duties of the chief financial officer (including a relationship that may create, or create the appearance of, a conflict of interest).

5.

Not use confidential information acquired in the course of the duties of the chief financial officer either for my personal advantage or for the advantage of others

6.

Honour my obligation to serve the best interests of Angiotech and its shareholders by exercising the care, diligence and skill necessary to conduct its affairs appropriately.

7

Recognize that the integrity of the capital markets is based on consistently honest and just actions by its participants, the conformity to market regulation, and the transparency of credible financial and non-financial corporate information, and will to the best of my ability work to ensure that Angiotech acts in such a manner consistent with such principles.

8.

Take such action as is appropriate to confirm that Angiotech provides full, fair, accurate, timely, and understandable disclosure in reports and documents that it files with or submits to public regulatory bodies, and that Angiotech complies with applicable governmental laws, rules and r egulations .

9.

Maintain the confidentiality of information acquired in the course of carrying out the duties of the chief financial officer.

10.

Report promptly to the Independent Chairman of the Board of Directors of Angiotech if I become aware of fraudulent or illegal acts within Angiotech or a breach of this or any other Code of Ethics by any director or officer of Angiotech, including my own acts..

11.

Provide the leadership, supervision and support for the employees, collaborators and other agents of Angiotech to uphold the principles articulated in this Code of Ethics

- 2 -

I recognize that I will be deemed to have breached this Code of Ethics if I am sanctioned by a regulatory authority or judicial body for violating laws or regulations affecting the performance of my duties as the chief financial officer or by a finding of the Board of Directors of Angiotech. I am aware that I shall be deemed to have breached this Code of Ethics if I knew that a breach of any Code of Ethics approved by the Board of Directors of Angiotech for its directors, officers or employees was likely to occur and I failed to take appropriate steps to prevent such an act from occurring. If I am found breaching this Code of Ethics I acknowledge I may, in addition to any regulatory or judicial sanction, receive sanctions from the Company, including possible suspension or termination of employment.

APPENDIX B

Form of Release

FULL AND FINAL RELEASE

AND PROMISE NOT TO INITIATE LEGAL ACTION

Please confirm by returning to ¨ the enclosed copy of this agreement, signed in the place shown, indicating that you have voluntarily decided to accept and agree to its terms

I, Kenneth Thomas Bailey, in consideration of the gross sum of $¨ and other consideration of ¨ (less required statutory deductions and withholdings) (collectively, the "Consideration"), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Subject to paragraph 2, not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals (US), Inc., Angiotech Pharmaceuticals, Inc., and their affiliates, subsidiaries, successors, and assigns (collectively, "Angiotech"), and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages, costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against Angiotech or any of the other Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing arising out of or relating to my employment relationship, or the term ination of that relationship, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life insurance, share options, bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, contributions to my 401(k) plan or other retirement plan, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly orindirectly to such Claims; and

(d)

Claims arising under any federal, state, or local statute or decision, including without limitation, claims for wrongful or abusive discharge, for breach of contract, for misrepresentation, for breach of securities laws, or for discrimination based on race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful criterion or circumstance, including rights or claims under the U.S. Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act (collectively, "ADEA").

- 2 -

2.

That nothing in this document will release Angiotech from a Claim to enforce:

(a)

any right I may have to receive the Consideration, or otherwise arising out of any right that I may have to enforce my employment agreement with Angiotech Pharmaceuticals (US), Inc., dated August 8, 2007, or the provisions of this document;

(b)

any right that I may have to indemnification for liabilities or costs incurred by reason of my being a director, officer, or employee of Angiotech, under:

(i)

my Indemnification Agreement with Angiotech Pharmaceuticals, Inc., dated August 8, 2007;

(ii)

the articles of Angiotech Pharmaceuticals, Inc., the articles of incorporation of Angiotech Pharmaceuticals (US), Inc., or the articles, articles of incorporation, or by-laws (or the equivalent) of any of their affiliates or subsidiaries, as applicable; or

(iii)

any applicable laws;

(c)

any right that I may have to contribution from Angiotech, as permitted by law, for any liabilities arising under any judgment or order entered against me as a result of any act or omission for which Angiotech and I are jointly liable; or

(d)

any other right that may arise after the date I sign this document (including any ADEA rights or claims that may arise after the date I sign this document).

3.

That I will not publicly disparage Angiotech, and Angiotech and its officers will not publicly disparage me, except when making any truthful statement:

(a)

for the purpose of responding publicly to any incorrect, disparaging, or derogatory public statement by the other party to the extent necessary to correct or refute such statement;

(b)

to the extent necessary for the purpose of pursuing or defending any legal or regulatory proceedings; or

(c)

as otherwise required by law or legal process.

4.

That neither the settlement nor anything contained herein is an admission of any liability by me, Angiotech, any of the other Releasees, or any of them

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5.

That the payment and benefits described herein are in lieu of any and all other amounts to which I might or am now, or to which I and my personal representatives may become entitled, from Angiotech, and the Releasees in connection with my employment with Angiotech, or any of them, and, without limiting the generality of the foregoing, I hereby expressly waive any right or claim that I and my personal representatives may now or ever have or assert to payment for salary, bonuses, medical, dental, or hospitalization benefits, life insurance benefits, attorneys' fees, or any form of compensation whatsoever; provided that Angiotech will comply with any applicable obligations with respect to continuation coverage requirements under Section 4980B of the U.S. Internal Revenue Code of 1986, as amended (commonly referred to as "COBRA").

6.

That my signature below will also constitute confirmation that:

(a)

I have been given at least 21 days within which to consider this document and its meaning and consequences;

(b)

I have been advised before signing this release to consult, and have consulted (or have voluntarily decided not to consult), with an attorney of my choice; and

(c)

I have been advised that I may revoke this release at any time during the seven day period immediately following the date I sign this release.

7.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims (except the Claims described in paragraph 2).

8.

That the terms of this document are intended to be contractual and not a mere recital.

9.

That this document will be governed by and construed and interpreted in accordance with the laws of the State of Washington.

10.

Any controversy, dispute or claim arising out of or relating to this Agreement shall be resolved in the same manner as set forth in Part 22 of the Executive Employment dated August 8,

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11.

Angiotech agrees to continue to indemnify and hold me and my heirs and representatives harmless, to the maximum extent permitted by law or under the Indemnification Agreement dated August 8, 2007, and to provide me with coverage under its current directors' and officers' liability policy to the same extent as its other senior executives and former senior executives until such time as suits against me are no longer permitted by law.

SIGNED, SEALED AND DELIVERED by	)
KENNETH THOMAS BAILEY on	)
_____________, 20_____ in the	)
presence of:	)
	)
	)
Signature	)
	)
	)	KENNETH THOMAS BAILEY
Print Name	)
	)
	)
Address	)
	)
	)
Occupation	)
	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX C

Non-Angiotech Inventions

¨

BETWEEN:
KENNETH THOMAS BAILEY
AND:
ANGIOTECH PHARMACEUTICALS (US), INC.
EXECUTIVE EMPLOYMENT AGREEMENT
Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7
66216-00027	JKH/mef

EX-10.21

Exhibit 10.21

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated 30 October 2007

BETWEEN:

DAVID D. McMASTERS, of P.O. Box 2480, North Bend, Washington, 98045

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS (US), INC.,

a corporation incorporated under the laws of the State of Washington

("Angiotech US")

BACKGROUND

A.

Angiotech wishes to continue to employ the Executive in the position of General Counsel and Senior Vice President, Legal, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech US will employ the Executive, and the Executive will serve Angiotech US, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of General Counsel and Senior Vice President, Legal, at Angiotech's offices in North Bend, Washington;

(b)

will report to Angiotech Canada's Chief Executive Officer; and

(c)

will perform those duties and responsibilities assigned to the Executive by Angiotech from time to time..

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1.3

Angiotech may ask the Executive to serve as an officer of Angiotech Canada, and/or as a director and/or officer of Angiotech US or one or more of Angiotech US and Angiotech Canada's affiliates or subsidiaries.

1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech US, Angiotech Canada, or any of their affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of January 1, 2007 ("Effective Date"), and will continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be December 16, 2000 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

2.2

During the Executive's employment with Angiotech, the Executive will not, directly or indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, firm, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

- 3 -

2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 12, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of, a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

FIDUCIARY DUTY

3.1

The Executive has a fiduciary relationship with Angiotech, whereby the Executive has an absolute duty of trust, care, fidelity, and honesty to Angiotech, including a duty to avoid any conflict of interest, and to act with undivided loyalty to Angiotech and with the utmost good faith, exclusively and selflessly in the best interests of Angiotech.

4.

BASE SALARY

4.1

Angiotech will pay the Executive an annual base salary of $473,000 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

4.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

5.

BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 40% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

- 4 -

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the terms of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, any payments under the Bonus Plan or under Part 10, 11 or 15, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7.

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.4 and 7.5, during the Executive's employment with Angiotech, the Executive will be eligible to participate in:

(a)

the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech US for its comparably situated executive employees, and any other employee benefit plans that Angiotech US may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

the 401(k) plan made available by Angiotech US for its comparably situated executive employees, or in any other US tax-qualified retirement plan that Angiotech US may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan.

7.2

If the Executive is a director or officer of Angiotech US, Angiotech Canada, or any of their affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving..

7.3

If Angiotech requires the Executive to travel outside of the United States, Angiotech will provide medical travel insurance coverage for the Executive while the Executive is so travelling, and will pay the premium costs required for that insurance.

7.4

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any 401(k) plan or other US tax-qualified retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies, and Angiotech's sole obligation in relation to such benefits will be:

- 5 -

(a)

subject to paragraph 7.3, to pay premium costs, or a portion or percentage thereof, on behalf of or for the benefit of the Executive, to the extent that Angiotech US may generally make such payments on behalf of or for the benefit of its comparably situated executive employees; and

(b)

to make contributions to the Executive's 401(k) plan or other US tax-qualified retirement plan to the extent that Angiotech US may generally make such contributions for the benefit of its comparably situated executive employees..

7..5

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees, including the portion or percentage of premium costs (if any) paid by Angiotech under paragraph 7.4(a).

7.6

Any disputes concerning the Executive's rights under any employee benefit plan, retirement plan, or insurance policy must be directed against the provider of the benefit and not against Angiotech.

7.7

Except as required by applicable law, the Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

8.

STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will continue to hold any options to purchase common shares of Angiotech Canada held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs of Angiotech Canada, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Angiotech Canada Board and the shareholders of Angiotech Canada..

8.2

The Angiotech Canada Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or termination occurs solely as a result of a change in applicable laws or regulatory requirements).

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8.3

Subject to paragraph 15.8(f), if the Executive's employment is terminated, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 25 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

9.2

The Executive may take an annual vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations.

10.

TAX EQUALIZATION

10.1

In this Agreement:

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(a)

"Actual Tax Liability" means the total of the Executive's actual US and foreign personal income tax liabilities payable in respect of the Executive's Gross Annual Income, as determined by the Tax Advisors;

(b)

"Gross Annual Income" means the total of

(i)

the Base Salary,

(ii)

the Signing Bonus (if applicable),

(iii)

any payment under the Bonus Plan, and

(iv)

any Gross-Up Payment under this Part 10, paid to the Executive in respect of a fiscal year, and, for greater certainty, does not include any other amounts or taxable benefits paid or provided to the Executive under this Agreement or otherwise, unless otherwise agreed to by Angiotech and the Executive;

(c)

"Gross-Up Payment" means an annual payment equal to:

(i)

the difference, if any, between the Actual Tax Liability and the Hypothetical Tax Liability in respect of a fiscal year, plus

(ii)

the total of any additional US and foreign personal income tax liabilities payable in respect of the Gross-Up Payment, as determined by the Tax Advisors;

(d)

"Hypothetical Tax Liability" means the amount of the Executive's hypothetical US personal income tax liability that would have been payable in respect of the Executive's Gross Annual Income, if the Executive had performed all services under this Agreement in the United States during the applicable fiscal year, as determined by the Tax Advisors;

(e)

"Tax Advisors" means the tax advisors engaged by Angiotech, as agreed by Angiotech and the Executive, to determine the amount of the Gross-Up Payment, if any, payable to the Executive under this Part 10.

10.2

Angiotech will pay the Executive the Gross-Up Payment, if any, in the amount determined annually by the Tax Advisors in accordance with this Part 10.

10.3

Any determination made by the Tax Advisors under this Part 10 will be final and binding, and will not be questioned, reviewed, amended, or set aside by an arbitrator or arbitrators under Part 22 or by any Court.

- 8 -

10.4

Angiotech will pay any professional fees, disbursements, and applicable taxes the Tax Advisors may charge for determining of the amount of the Gross-Up Payment, if any, payable to the Executive under this Part 10.

11.

EXPENSES

11.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time;

(b)

reasonable expenses incurred by the Executive for furnished accommodation and automobile rental while the Executive is required by Angiotech to work in Vancouver, British Columbia;

(c)

dues paid or payable by the Executive for membership in the Washington State Bar Association (or for membership in another professional society or societies that Angiotech may determine, in its sole discretion, is reasonably necessary for the proper discharge of the Executive's duties and responsibilities); and

(d)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of $15,000 for each fiscal year:

(i)

automobile lease;

(ii)

financial or tax planning services; and

(iii)

health club membership.

12.

RESTRICTIONS ON SOLICITATION AND COMPETITION

12.1

In this Agreement:

(a)

"Business of Angiotech" means the business of Angiotech through theExecutive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self-retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;

- 9 -

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;

(c)

"Control Person" means a person, entity, or group of persons or entities acting jointly or in concert, that holds a sufficient number of the voting rights attached to all outstanding voting securities of a Competitor of Angiotech to affect materially the control of the Competitor of Angiotech, provided that, if a person, entity, or group of persons or entities, holds more than 20% of the voting rights attached to all outstanding voting securities of the Competitor of Angiotech, the person, entity, or group of persons or entities will be deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the Competitor of Angiotech;

(d)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(e)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

12.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

12.3

While the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

(a)

carry on or engage in the Solicitation of any Customer of Angiotech, except, while the Executive is employed by Angiotech, for a purpose consistent with the performance of the Executive's duties and responsibilities under this Agreement;

(b)

interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

- 10 -

(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive's Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive's Last Day of Employment;

(e)

advise, assist, lend money to, guarantee the debts or obligations of, or manage or supervise personnel of, any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

(f)

subject to paragraphs 12.4 and 12.5, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

12.4

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, OT, subject to paragraph 12.5, during the 12-month period after the Last Day of Employment:

(a)

the Executive will, within 90 days after the Executive knows, or should have nown, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with paragraph 12.3(f), or

(ii)

notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Angiotech Canada Board decide whether the Executive must comply with paragraph 12.3(f);

(b)

if the Executive asks the Angiotech Canada Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 12.3(f), the Angiotech Canada Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 12.3(f), or to any lesser extent specified by the Angiotech Canada Board, and Angiotech will notify the Executive of the Angiotech Canada Board's decision; and

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(c)

if the Angiotech Canada Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Angiotech Canada Board's decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Angiotech Canada Board under subparagraph (b), and

(ii)

if the Executive incurs a loss as a result of having to comply with the Angiotech Canada Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

12.5

Despite paragraphs 12.3 and 12.4, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

(a)

does not, on his own behalf, or in association with or on behalf of any other person, entity, or group of persons or entities acting jointly or in concert, become a Control Person; and

(b)

otherwise complies with paragraph 12.3(a) to (e)..

12.6

If paragraph 12.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator under Part 22 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator or the Court.

13.

WORK PRODUCT

13.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

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(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 13.8, is disclosed in Appendix B; or

(ii)

is determined by the Angiotech Canada Board to be a Non-Angiotech Invention under paragraph 13.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

(i)

relating to the Business of Angiotech;

(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(iii)

resulting from any work performed by the Executive for Angiotech;

(iv)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(v)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech;

but excluding any Non-Angiotech Inventions.

13.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

13.3

For greater certainty:

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(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property;

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

13.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 13, including, without limitation, the actions contemplated in paragraph 13.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 13.

13.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

13.6

The Executive irrevocably waives in favor of Angiotech any and all moral rights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

13.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 13.1(b)(ii) if

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(a)

subject to paragraph 13.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to Angiotech's Human Resources Department; and

(b)

the Angiotech Canada Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non-Angiotech Invention, provided that, for greater certainty, the Angiotech Canada Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non-Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, development, or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

(ii)

it relates to the Business of Angiotech or to Angiotech's current or anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech.

13.8

If the disclosure of any Non-Angiotech Invention in Appendix B would violate any obligation of confidentiality that the Executive owes to a third party, Appendix B must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

13.9

If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non-Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to Angiotech).

13.10

Subject to paragraph 13.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

13.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 13.7 or 13.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

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13.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such property will be imm ediately revoked on the Last Day of Employment.

14.

CONFIDENTIALITY

14.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budgets, projection s, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

14.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

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14.3

Unless and until any Confidential Information ceases to be confidential under paragraph 14.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law, but subject to paragraph 14.5;

(ii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iii) that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

14.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law, but subject to paragraph 14.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

14.5

If the Executive reasonably believes that the Executive is required by law to disclose anything otherwise prohibited under paragraphs 14.3 and 14.4:

(a)

the Executive will immediately notify Angiotech in writing of all material particulars of the situation;

(b)

if Angiotech does not agree that disclosure is required by law, the Executive will not make any disclosure unless an arbitrator under Part 22 or a Court of competent jurisdiction orders otherwise; and

(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law is subject to a protective order of confidentiality.

14.6

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

15.

TERMINATION

15.1

In this Agreement:

(a)

"Cause" means the occurrence of any one or more of the following:

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(i)

failure by the Executive to substantially perform the Executive's duties or responsibilities under this Agreement, after Angiotech has given a demand to the Executive identifying how the Executive has failed to perform such duties or responsibilities;

(ii)

misconduct or illegal conduct by the Executive causing or likely to cause financial, reputational, or other harm to Angiotech;

(iii)

the conviction of the Executive for, or a plea by the Executive of guilty or no contest to, any felony; or

(iv)

a material breach by the Executive of this Agreement, or of any of Angiotech's written policies or procedures;

(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Angiotech Canada Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Angiotech Canada Board made with the approval of the Angiotech Canada Board as it was constituted immediately before the change;

(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securities (after whic h the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

(iii)

the disposition of all or substantially all of the assets or business of Angiotech US or Angiotech Canada pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially owned or controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

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(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech US or Angiotech Canada; or

(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech US or Angiotech Canada, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

(c)

"Good Reason" means the occurrence of any one or more of the following without the Executive's written consent:

(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(iii)

a change in the Executive's principal place of employment by a distance of 50 miles or more, unless the new principal place of employment is within 50 miles of the Executive's then current residence;

(iv)

a material breach by Angiotech of a fundamental term of this Agreement;

or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be a basis to terminate the Executive's employment for Cause;

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(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for Cause;

(ii)

the effective date of the Notice of Termination if the Executive's employment is terminated by the Executive without Good Reason; or

(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for Cause, or is terminated by the Executive for Good Reason;

or such later date as may otherwise be agreed between Angiotech and the Executive;

(e)

"Notice of Termination" means a written notice of termination of the Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that:

(i)

is recommended against to the Angiotech Canada Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Angiotech Canada Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech Canada and any other shares entitled to vote for the election of directors of Angiotech Canada.

15.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

15.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period.. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

15.4

The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 60 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

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15.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 15.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the last day of the notice period; and

(c)

make any payments due under paragraph 9.3(b) or 11.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the last day of the notice period.

15.6

If the Executive's employment is terminated by Angiotech for Cause, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of

Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 11.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

15.7

If the Executive's employment is terminated by Angiotech for any reason other than for Cause or is terminated by the Executive for Good Reason, and paragraph 15.8 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

12 months of Base Salary, and

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(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any contributions to the Executive's 401(k) plan or other retirement plan, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$24,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or 11.1(a).

15.8

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for Cause or is terminated by the Executive for Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any contributions to the Executive's 401(k) plan or other retirement plan, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

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(i)

$48,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

(ii)

the amount of the Executive's target bonus opportunity under the Bonus Plan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, of Angiotech Canada, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the NASDAQ as of the Last Day of Employment;

(g)

make any payments due to the Executive under paragraph 9.3(b) or 11.1(a);

(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 15.8(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap") would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that:

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(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 15.8(b); and

(ii)

if the reduction of the amounts payable would not result in a more favourable after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 15.8(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 15.8(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Gross-Up Payment, the Gross-Up Payment will be the sum of:

(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is made..

15.9

If Angiotech Canada's shares cease to be listed on the NASDAQ, the reference to the NASDAQ in paragraph 15.8(f) will be deemed to be replaced with a reference to the Toronto Stock Exchange or to such other stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech Canada's common shares occurs.

15.10

Before any payments are made to the Executive under

(a)

paragraph 15.7(b) or (c), or

(b)

paragraph 15.8(b), (c), (e), (f) or (i)

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix A or in a similar form prepared by Angiotech, and any applicable period to revoke such release will have expired. If the Executive fails to execute and deliver the release, or if the Executive revokes the release within any applicable revocation period, Angiotech will have no obligation to make any payments under paragraph 15.7(b) or (c) or paragraph 15.8(b), (c), (e), (f) or (i).

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15.11

Angiotech's obligation to make any payments under

(a)

paragraph 15.7(b) to (d), or

(b)

paragraph 15.8(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 3, 12, 13, and 14.

15.12

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

15.13

If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 11.1(a) as of the date of the Executive's death;

(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

(c)

Angiotech will have no other or further obligation to the Executive or the Executive's estate.

15.14

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in the United States:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in the United States; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in the United States, the Executive will be entitled to receive payments under paragraph 15.7 as if the Executive's employment had been terminated by Angiotech without Cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in the United States.

- 25 -

15.15

The provisions of this Part 15 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without Cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater contractual obligation than spe cified in this Part 15 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

16.

ENFORCEMENT

16.1

The restrictions in Parts 12, 13, and 14 are necessary for the protection of Angiotech's interests and the Business of Angiotech, are reasonable and valid, and will not prevent the Executive from pursuing a livelihood, and the Executive irrevocably waives all defences to their enforcement.

16.2

In addition to any and all other rights and remedies available to Angiotech, an injunction is the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 3, 12, 13, and 14, and Angiotech would suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

17.

SECTION 409A OF INTERNAL REVENUE CODE

17.1

Subject to paragraph 17.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death.

17.2

Paragraph 17.1 will apply:

(a)

only to the extent required to avoid causing the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

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(b)

despite any other provision of this Agreement.

17.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

18.

EXECUTIVE'S REPRESENTATIONS

18.1

In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

18.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work in the United States;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

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(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix B, except as provided in paragraph 13.8, and all information disclosed in Appendix B is true and correct; and

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

18.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 18.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 18.2.

18.4

The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

19.

GOVERNING LAW AND FORUM

19.1

This Agreement is deemed to be made in the State of Washington, and will be governed by and construed and interpreted in accordance with the laws of the State of Washington.

19.2

Subject to Part 22, if Angiotech commences a proceeding in the Courts of the State of Washington to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of the State of Washington in connection therewith, and the Courts of the State of Washington will have exclusive jurisdiction in connection therewith.

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20.

NOTICES

20.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

DAVID D. McMASTERS

P.O. Box 2480

North Bend, WA 98045

(b)

ANGIOTECH PHARMACEUTICALS (US), INC.

P.O. Box 2840

101 W. North Bend Way, Suite 201

North Bend, WA 98045

Attention:

Tammy Neske,

Vice President, Human Resources

20.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

21.

SEVERABILITY AND WAIVER

21.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part 22 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

21.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

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22.

DISPUTE RESOLUTION

22.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment (collectively, an "Employment Matter"), by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any Employment Matter by mediation.

22.2

If an Employment Matter cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate such matter, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer such matter to binding arbitration..

22.3

An Employment Matter that is referred to binding arbitration under paragraph 22.2 will be finally resolved by arbitration in Seattle, Washington, administered by the American Arbitration Association ("AAA") under its Commercial Arbitration Rules then in effect, subject to the following:

(a)

the arbitration will be conducted by a single arbitrator;

(b)

the arbitrator's decision will not be a compromise, but will be the adoption of the submission made by either party;

(c)

the arbitrator will treat as confidential all evidence and other information presented;

(d)

the arbitrator will have no authority or jurisdiction to award punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury (and the Executive and Angiotech will not request any such award);

(e)

the Optional Rules for Emergency Measures of Protection will apply to the arbitration;

(f)

the arbitrator will have no authority or jurisdiction to change the terms of this Agreement except as provided in paragraphs 12.6 and 21.1 (and the Executive and Angiotech will not request any such change); and

(g)

a decision must be rendered within 30 days of the parties' closing statements or submission of post-hearing briefs.

22.4

The Executive or Angiotech may bring an action or special proceeding in a state or federal court of competent jurisdiction sitting in Seattle, Washington, to enforce any arbitration award under paragraph 22 3.

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23.

INDEPENDENT LEGAL ADVICE

23.1

Angiotech's attorneys prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

24.

ENUREMENT AND ASSIGNMENT

24.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

24.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

25.

INTERPRETATION

25.1

In this Agreement:

(a)

"Angiotech" means Angiotech US, and includes, as the context may require, Angiotech Canada and the other affiliates, subsidiaries, associated companies, successors, and assigns of Angiotech US and Angiotech Canada;

(b)

"Angiotech Canada" means Angiotech Pharmaceuticals, Inc., a corporation incorporated under the laws of British Columbia;

(c)

"Angiotech Canada Board" means the Board of Directors of Angiotech Canada;

(d)

"Board" means the Board of Directors of Angiotech US;

(e)

"Code" means United States Internal Revenue Code of 1986, as amended; "day" means calendar day, unless otherwise specified;

(f)

"day" means calendar day, unless otherwise specified;

(g)

"IRS" means Internal Revenue Service.

25.2

All monetary amounts expressed in this Agreement are in United States currency, unless otherwise specified.

25.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

25.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

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26.

ENTIRE AGREEMENT

26.1

This document contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

26.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
DAVID D. McMASTERS in the presence	)
presence of:	)
	)
/s/ Susan C. Clingerman	)	/s/ David D. McMasters
(Signature of Witness)	)	DAVID D. McMASTERS
	)
Susan C. Clingerman	)
(Print Name of Witness)	)
	)
[***]	)
(Address of Witness)	)
	)
[***]	)
(Occupation of Witness)	)
	)
December 20, 2007	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /s/ William L. Hunter

___________________________________

Authorized Signatory

Date:  January 15, 2008                                  

APPENDIX A

Form of Release

FULL AND FINAL RELEASE

AND PROMISE NOT TO INITIATE LEGAL ACTION

Please confirm by returning to ¨ the enclosed copy of this agreement, signed in the place shown, indicating that you have voluntarily decided to accept and agree to its terms.

I, DAVID D. McMASTERS, in consideration of the gross sum of $¨ (less required statutory deductions and withholdings), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals (US), Inc., Angiotech Pharmaceuticals, Inc., and their affiliates, subsidiaries, successors, and assigns (collectively, "Angiotech"), and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages, costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against Angiotech or any of the other Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life insurance, share options, bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, contributions to my 401(k) plan or other retirement plan, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any federal, state, or local statute or decision, including without limitation, claims for wrongful or abusive discharge, for breach of contract, for misrepresentation, for breach of securities laws, or for discrimination based on race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful criterion or circumstance, including rights or claims under the U.S. Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act (collectively, "ADEA") (except that I do not waive ADEA rights or claims that may arise after the date I executed this document).

- 2 -

2.

That neither the settlement nor anything contained herein is an admission of any liability by Angiotech, any of the other Releasees, or any of them, by whom liability is expressly denied.

3.

That the payment and benefits described herein are in lieu of any and all other amounts to which I might or am now, or to which I and my personal representatives may become entitled, from Angiotech and the Releasees, or any of them, and, without limiting the generality of the foregoing, I hereby expressly waive any right or claim that I and my personal representatives may now or ever have or assert to payment for salary, bonuses, medical, dental, or hospitalization benefits, life insurance benefits, attorneys' fees, or any form of compensation whatsoever; provided that Angiotech will comply with any applicable obligations with respect to continuation coverage requirements under Section 4980B of the U.S. Internal Revenue Code of 1986, as amended (commonly referred to as "COBRA").

4.

That my signature below will also constitute confirmation that:

(a)

I have been given at least 21 days within which to consider this document and its meaning and consequences;

(b)

I have been advised before signing this release to consult, and have consulted (or have voluntarily decided not to consult), with an attorney of my choice; and

(c)

I have been advised that I may revoke this release at any time during the seven day period immediately following the date I sign this release.

5.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

6.

That the terms of this document are intended to be contractual and not a mere recital.

- 3 -

7.

That this document will be governed by and construed and interpreted in accordance with the laws of the State of Washington.

SIGNED, SEALED AND DELIVERED by	)
DAVID D. McMASTERS on	)
December 20, 2007 in the	)
presence of:	)
	)
/s/ Susan C. Clingerman	)
Signature	)
	)	/s/ David D. McMasters
Susan C. Clingerman	)	DAVID D. McMASTERS
Print Name	)
	)
[***]	)
Address	)
	)
[***]	)
Occupation	)
	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX B

Non-Angiotech Inventions

¨

BETWEEN:
DAVID D. McMASTERS
AND:
ANGIOTECH PHARMACEUTICALS (US), INC.
EXECUTIVE EMPLOYMENT AGREEMENT
Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7
66216-00036	JKH/mef

EX-10.22

Exhibit 10.22

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated 15 October 2007

BETWEEN:

RUI AVELAR, of 1989 West King Edward Avenue, Vancouver,

British Columbia, V6J 2W7

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

("Angiotech")

BACKGROUND

A.

Angiotech wishes to continue to employ the Executive in the position of Chief Medical Officer, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech will employ the Executive, and the Executive will serve Angiotech, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of Chief Medical Officer at Angiotech's offices in Vancouver, British Columbia;

(b)

will report to Angiotech's Chief Executive Officer; and

(c)

will perform those duties and responsibilities assigned to the Executive by Angiotech from time to time.

1.3

Angiotech may ask the Executive to serve as an officer of Angiotech, and/or as a director and/or officer of one or more of Angiotech's affiliates or subsidiaries.

- 2 -

1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech or any of its affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of January 1, 2007 ("Effective Date"), and will continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be January 2, 2002 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

2.2

During the Executive's employment with Angiotech, the Executive will not, directly or indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, firm, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

- 3 -

2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 11, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

FIDUCIARY DUTY

3.1

The Executive has a fiduciary relationship with Angiotech, whereby the Executive has an absolute duty of trust, care, fidelity, and honesty to Angiotech, including a duty to avoid any conflict of interest, and to act with undivided loyalty to Angiotech and with the utmost good faith, exclusively and selflessly in the best interests of Angiotech.

4.

BASE SALARY

4.1

Angiotech will pay the Executive an annual base salary of $362,250 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

4.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

5. BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 40% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

- 4 -

5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the teems of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, any payments under the Bonus Plan or under Part 10 or 14, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7.

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.3 and 7.4, during the Executive's employment with Angiotech, the Executive will be eligible to participate in:

(a)

the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech for its comparably situated executive employees, and any other employee benefit plans that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

the group RRSP plan made available by Angiotech for its comparably situated executive employees, or in any other retirement plan that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan.

7.2

If the Executive is a director or officer of Angiotech or any of its affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving.

7.3

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any group RRSP plan or other retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies, and Angiotech's sole obligation in relation to such benefits will be:

(a)

to pay premium costs, or a portion or percentage thereof, on behalf of or for the benefit of the Executive, to the extent that Angiotech may generally make such payments on behalf of or for the benefit of its comparably situated executive employees; and

- 5 -

(b)

to make contributions to the group RRSP plan or other retirement plan, for the benefit of the Executive, to the extent that Angiotech may generally make such contributions for the benefit of its comparably situated executive employees.

7.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees, including the portion or percentage of premium costs (if any) paid by Angiotech under paragraph 7.3(a).

7.5

Any disputes concerning the Executive's rights under any employee benefit plan, retirement plan, or insurance policy must be directed against the provider of the benefit and not against Angiotech.

7.6

The Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof

8. STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will continue to hold any options to purchase common shares of Angiotech held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Board and the shareholders of Angiotech.

8.2

The Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or termination occurs solely as a result of a change in applicable laws or regulatory requirements).

8.3

Subject to paragraph 14.8(f), if the Executive's employment is terminated, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

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8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 25 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

9.2

The Executive may take an annual vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations.

10.

EXPENSES

10.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time; and

(b)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of US$15,000 for each fiscal year:

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(i)

automobile lease;

(ii)

financial or tax planning services; and

(iii)

health club membership.

11.

RESTRICTIONS ON SOLICITATION AND COMPETITION

11.1

In this Agreement:

(a)

"Business of Angiotech" means the business of Angiotech through the Executive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self- retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;

(c)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(d)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

11.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

11.3

While the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

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(a)

carry on or engage in the Solicitation of any Customer of Angiotech, except, while the Executive is employed by Angiotech, for a purpose consistent with the performance of the Executive's duties and responsibilities under this Agreement;

(b)

interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive's Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive's Last Day of Employment;

(e)

advise, assist, lend money to, guarantee the debts or obligations of, or manage or supervise personnel of, any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

(f)

subject to paragraphs 11.4 and 11.5, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

11.4

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, or, subject to paragraph 11.5, during the 12-month period after the Last Day of Employment:

(a)

the Executive will, within 90 days after the Executive knows, or should have known, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with paragraph 11.3(f), or

(ii)

notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Board decide whether the Executive must comply with paragraph 11.3(f);

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(b)

if the Executive asks the Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 11.3(f), the Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 11.3(f), or to any lesser extent specified by the Board, and Angiotech will notify the Executive of the Board's decision; and

(c)

if the Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Board's decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Board under subparagraph (b), and

(ii)

if the Executive incurs a loss as a result of having to comply with the Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

11.5

Despite paragraphs 11.3 and 11.4, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

(a)

does not, on his own behalf, or in association with or on behalf of any other person, entity, or group of persons or entities acting jointly or in concert, become a "control person" as defined under the Ontario Securities Act; and

(b)

otherwise complies with paragraph 11.3(a) to (e).

11.6

If paragraph 11.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator under Part 21 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator or the Court.

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12.

WORK PRODUCT

12.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 12.8, is disclosed in Appendix B; or

(ii)

is determined by the Board to be a Non-Angiotech Invention under paragraph 12.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

(i)

relating to the Business of Angiotech;

(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(iii)

resulting from any work performed by the Executive for Angiotech;

(iv)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(v)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech;

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but excluding any Non-Angiotech Inventions.

12.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

12.3

For greater certainty:

(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property;

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

12.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 12, including, without limitation, the actions contemplated in paragraph 12.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 12.

12.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

12.6

The Executive irrevocably waives in favour of Angiotech any and all moral rights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

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12.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 12.1(b)(ii) if:

(a)

subject to paragraph 12.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to both Angiotech's General Counsel and its Human Resources Department; and

(b)

the Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non-Angiotech Invention, provided that, for greater certainty, the Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non­Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, development, or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

(ii)

it relates to the Business of Angiotech or to Angiotech's current or anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech.

12.8

If the disclosure of any Non-Angiotech Invention in Appendix B would violate any obligation of confidentiality that the Executive owes to a third party, Appendix B must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

12.9

If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non­Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to Angiotech).

12.10

Subject to paragraph 12.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

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12.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 12.7 or 12.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

12.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such proper ty will be immediately revoked on the Last Day of Employment.

13.

CONFIDENTIALITY

13.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budge ts, projections, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

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13.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

13.3

Unless and until any Confidential Information ceases to be confidential under paragraph 13.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law, but subject to paragraph 13.5;

(ii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iii)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law, but subject to paragraph 13.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.5

If the Executive reasonably believes that the Executive is required by law to disclose anything otherwise prohibited under paragraphs 13.3 and 13.4:

(a)

the Executive will immediately notify Angiotech in writing of all material particulars of the situation;

(b)

if Angiotech does not agree that disclosure is required by law, the Executive will not make any disclosure unless an arbitrator under Part 21 or a Court of competent jurisdiction orders otherwise; and

(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law is subject to a protective order of confidentiality.

13.6

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

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14.

TERMINATION

14.1

In this Agreement:

(a)

"Angiotech US" means Angiotech Pharmaceuticals (US), Inc., a corporation incorporated under the laws of the State of Washington;

(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Board made with the approval of the Board as it was constituted immediately before the change;

(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securiti es (after which the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

(iii)

the disposition of all or substantially all of the assets or business of Angiotech or Angiotech US pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially owned or controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech or Angiotech US; or

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(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech or Angiotech US, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

(c)

"Good Reason" means the occurrence of any one or more of the following without the Executive's written consent:

(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(iii)

a change in the Executive's principal place of employment by a distance of 80 kilometers or more, unless the new principal place of employment is within 80 kilometers of the Executive's then current residence;

(iv)

a material breach by Angiotech of a fundamental term of this Agreement; or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be just cause to terminate the Executive's employment;

(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for just cause;

(ii)

the effective date of the Notice of Termination if the Executive's employment is terminated by the Executive without Good Reason; or

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(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for just cause, or is terminated by the Executive for Good Reason, except in circumstances where the Employment Standards Act (British Columbia) or other applicable employment standards legislation requires this to be at the end of the period of notice prescribed thereunder, in which case it will be at the end of the period of notice;

or such later date as may otherwise be agreed between Angiotech and the Executive;

(e)

"Notice of Termination" means a written notice of termination of the Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that:

(i)

is recommended against to the Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech and any other shares entitled to vote for the election of directors of Angiotech.

14.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

14.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

14.4

The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 60 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

14.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 14.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

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(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the last day of the notice period; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the last day of the notice period.

14.6

If the Executive's employment is terminated by Angiotech for just cause, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of

Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

14.7

If the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, and paragraph 14.8 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

12 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

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(i)

$24,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or 10.1(a).

14.8

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$48,000, plus

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(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

(ii)

the amount of the Executive's target bonus opportunity under the Bonus Plan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the Toronto Stock Exchange as of the Last Day of Employment;

(g)

make any payments due to the Executive under paragraph 9.3(b) or 10.1(a);

(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 14.8(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap") would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that

(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 14.8(b); and

- 21 -

(ii)

if the reduction of the amounts payable would not result in a more favourable after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 14.8(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 14.8(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Gross-Up Payment, the Gross-Up Payment will be the sum of:

(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is made.

14.9

If Angiotech's shares cease to be listed on the Toronto Stock Exchange, the reference to the Toronto Stock Exchange in paragraph 14.8(f) will be deemed to be replaced with a reference to the NASDAQ or to such other stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech's common shares occurs.

14.10

Before any payments are made to the Executive under

(a)

paragraph 14.7(b) or (c), or

(b)

paragraph 14.8(b), (c), (e), (f) or (i)

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix A or in a similar form prepared by Angiotech.

14.11

Angiotech's obligation to make any payments under

(a)

paragraph 14.7(b) to (d), or

(b)

paragraph 14.8(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 3, 11, 12, and 13.

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14.12

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

14.13

If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 10.1(a) as of the date of the Executive's death;

(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

(c)

Angiotech will have no other or further obligation to the Executive or the Executive's estate.

14.14

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in Canada:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in Canada; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in Canada, the Executive will be entitled to receive payments under paragraph 14.7 as if the Executive's employment had been terminated by Angiotech without just cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in Canada.

14.15

The provisions of this Part 14 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without just cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater obligation t han specified in this Part 14 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

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15.

ENFORCEMENT

15.1

The restrictions in Parts 11, 12, and 13 are necessary for the protection of Angiotech's interests and the Business of Angiotech, are reasonable and valid, and will not prevent the Executive from pursuing a livelihood, and the Executive irrevocably waives all defences to their enforcement.

15.2

In addition to any and all other rights and remedies available to Angiotech, an injunction is the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 3, 11, 12, and 13, and Angiotech would suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

16.

SECTION 409A OF INTERNAL REVENUE CODE

16.1

Subject to paragraph 16.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death;

except as may otherwise be required under the Employment Standards Act (British Columbia) or other applicable employment standards legislation.

16.2

Paragraph 16.1 will apply:

(a)

only to the extent required to avoid causing the Executive to incur any additional ncome tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

(b)

despite any other provision of this Agreement.

16.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

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(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

17.

EXECUTIVE'S REPRESENTATIONS

17.1

In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

17.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work in Canada;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

-25-

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix B, except as provided in paragraph 12.8, and all information disclosed in Appendix B is true and correct; and

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

17.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 17.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 17.2.

17.4

The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

18.

GOVERNING LAW AND FORUM

18.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Columbia and laws of Canada applicable therein.

18.2

Subject to Part 21, if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

- 26 -

19.

NOTICES

19.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

RUI AVELAR

1989 West King Edward Avenue

Vancouver, BC V6J 2W7

(b)

ANGIOTECH PHARMACEUTICALS, INC.

1618 Station Street

Vancouver, BC V6A 1B6

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

19.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

20.

SEVERABILITY AND WAIVER

20.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part 21 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

20.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

21.

DISPUTE RESOLUTION

21.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

- 27 -

21.2

If a dispute referred to in paragraph 21.1 cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

21.3

A dispute that is referred to binding arbitration under paragraph 21.2 will be finally resolved by a single arbitrator under the Commercial Arbitration Act (British Columbia) ("CAA").

21.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may apply to the Supreme Court of British Columbia ("Supreme Court") for the appointment of a single arbitrator under the CAA.

21.5

Immediately after the arbitration has commenced, the parties will agree under section 35 of the CAA to exclude the jurisdiction of the Supreme Court under sections 31, 33 and 34 of the CAA.

21.6

The arbitration will be in Vancouver, British Columbia. 21.7 The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

21.8

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except for arbitral error under section 30 of the CAA.

21.9

Despite paragraph 21.3:

- 28 -

(a)

either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 15(4) of the CAA; and

(b)

Angiotech may, before or after an arbitration has commenced, apply to any Court of competent jurisdiction for injunctive relief under paragraph 15.2.

22.

INDEPENDENT LEGAL ADVICE

22.1

Angiotech's lawyers prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

23.

ENUREMENT AND ASSIGNMENT

23.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

23.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

24.

INTERPRETATION

24.1

In this Agreement:

(a)

"Angiotech" includes, as the context may require, its affiliates, subsidiaries, associated companies, successors, and assigns;

(b)

"Board" means the Board of Directors of Angiotech;

(c)

"Code" means United States Internal Revenue Code of 1986, as amended;

(d)

"day" means calendar day, unless otherwise specified;

(e)

"IRS" means Internal Revenue Service.

24.2

All monetary amounts expressed in this Agreement are in Canadian currency, unless otherwise specified.

24.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

24.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

- 29 -

25.

ENTIRE AGREEMENT

25.1

This document contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

25.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
RUI AVELAR in the presence	)
presence of:	)
	)
/s/ T. Neske	)	/s/ Rui Avelar
(Signature of Witness)	)	RUI AVELAR
	)
T. Neske	)
(Print Name of Witness)	)
	)
1618 Station St.	)
(Address of Witness)	)
	)
VP HR	)
(Occupation of Witness)	)
	)
15 Oct 07	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /s/ William L. Hunter

___________________________________

Authorized Signatory

Date:  Oct. 25/07

APPENDIX A

Form of Release

FULL AND FINAL RELEASE

AND PROMISE NOT TO INITIATE LEGAL ACTION

I, RUI AVELAR, in consideration of the gross sum of $¨ (less required statutory deductions and withholdings), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals, Inc. ("Angiotech"), its affiliates and subsidiaries, its and their successors and assigns, and its and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages, costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against the Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life insurance, share options, bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, RRSP contributions, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any Federal or Provincial statute, including specifically claims under the [names of applicable statutes to be inserted by Angiotech when the employment relationship is terminated].

2.

That neither the settlement nor anything contained herein is an admission of any liability by the Releasees, or any of them, by whom liability is expressly denied.

3.

That I have carefully read and understand this document, and either received legal advice about it before I signed it, or voluntarily declined to obtain such advice.

- 2 -

4.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

5.

That the terms of this document are intended to be contractual and not a mere recital.

SIGNED, SEALED AND DELIVERED by	)
RUI AVELAR on October 15	)
20_____ in the presence of:	)
	)
	)
Signature	)
	)	/s/ Rui Avelar
	)	RUI AVELAR
Print Name	)
	)
	)
Address	)
	)
	)
Occupation	)
	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX B

Non-Angiotech Inventions

¨

BETWEEN:
RUI AVELAR
AND:
ANGIOTECH PHARMACEUTICALS (US), INC.
EXECUTIVE EMPLOYMENT AGREEMENT
Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7
66216-00033	JKH/mef

EX-10.23

Exhibit 10.23

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated 15 October 2007

BETWEEN:

JEFFREY WALKER, of [***]

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

("Angiotech")

BACKGROUND

A.

Angiotech wishes to continue to employ the Executive in the position of Senior Vice President, Research & Development, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech will employ the Executive, and the Executive will serve Angiotech, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of Senior Vice President, Research & Development, at Angiotech's offices in Vancouver, British Columbia;

(b)

will report to Angiotech's Chief Executive Officer; and

(c)

will perform those duties and responsibilities assigned to the Executive by Angiotech from time to time.

-2-

1.3

Angiotech may ask the Executive to serve as an officer of Angiotech, and/or as a director and/or officer of one or more of Angiotech's affiliates or subsidiaries.

1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech or any of its affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of January 1, 2007 ("Effective Date"), and will continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be May 24, 2006 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

2.2

During the Executive's employment with Angiotech, the Executive will not, directly or indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, firm, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

-3-

2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 11, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of, a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

FIDUCIARY DUTY

3.1

The Executive has a fiduciary relationship with Angiotech, whereby the Executive has an absolute duty of trust, care, fidelity, and honesty to Angiotech, including a duty to avoid any conflict of interest, and to act with undivided loyalty to Angiotech and with the utmost good faith, exclusively and selflessly in the best interests of Angiotech.

4.

BASE SALARY

4.1

Angiotech will pay the Executive an annual base salary of $340,500 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

4.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

5.

BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 40% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

-4-

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the terms of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, any payments under the Bonus Plan or under Part 10 or 14, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7.

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.3 and 7.4, during the Executive's employment with Angiotech, the Executive will be eligible to participate in:

(a)

the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech for its comparably situated executive employees, and any other employee benefit plans that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

the group RRSP plan made available by Angiotech for its comparably situated executive employees, or in any other retirement plan that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan.

7.2

If the Executive is a director or officer of Angiotech or any of its affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving.

7.3

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any group RRSP plan or other retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies, and Angiotech's sole obligation in relation to such benefits will be:

(a)

to pay premium costs, or a portion or percentage thereof, on behalf of or for the benefit of the Executive, to the extent that Angiotech may generally make such payments on behalf of or for the benefit of its comparably situated executive employees; and

-5-

(b)

to make contributions to the group RRSP plan or other retirement plan, for the benefit of the Executive, to the extent that Angiotech may generally make such contributions for the benefit of its comparably situated executive employees.

7.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees, including the portion or percentage of premium costs (if any) paid by Angiotech under paragraph 7.3(a).

7.5

Any disputes concerning the Executive's rights under any employee benefit plan, retirement plan, or insurance policy must be directed against the provider of the benefit and not against Angiotech.

7.6

The Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

8. STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will continue to hold any options to purchase common shares of Angiotech held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Board and the shareholders of Angiotech.

8.2

The Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or termination occurs solely as a result of a change in applicable laws or regulatory requirements).

8.3

Subject to paragraph 14.8(f), if the Executive's employment is terminated, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

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8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 21 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

9.2

The Executive may take an annual vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

 if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations.

10.

EXPENSES

10.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time; and

(b)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of US$15,000 for each fiscal year:

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(i)

automobile lease;

(ii)

financial or tax planning services; and

(iii)

health club membership.

10.2

Until the 2011 calendar year, Angiotech will, upon the submission by the Executive of appropriate receipts, provide annual mortgage assistance to the Executive, up to a maximum amount of $57,275 per year, for each calendar year of the Executive's employment under this Agreement, prorated for partial years of employment. For greater certainty, no mortgage assistance will be provided to the Executive in respect of any period after the last day of the month of the Executive's Last Day of Employment.

11.

RESTRICTIONS ON SOLICITATION AND COMPETITION

11.1

In this Agreement:

(a)

"Business of Angiotech" means the business of Angiotech through the Executive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self- retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;

(c)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(d)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

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11.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

11.3

While the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

(a)

carry on or engage in the Solicitation of any Customer of Angiotech, except, while the Executive is employed by Angiotech, for a purpose consistent with the performance of the Executive's duties and responsibilities under this Agreement;

(b)

interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive's Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive's Last Day of Employment;

(e)

advise, assist, lend money to, guarantee the debts or obligations of, or manage or supervise personnel of, any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

(f)

subject to paragraphs 11.4 and 11.5, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

11.4

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, or, subject to paragraph 11.5, during the 12-month period after the

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(a)

the Executive will, within 90 days after the Executive knows, or should have known, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with paragraph 11.3(f), or

(ii)

notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Board decide whether the Executive must comply with paragraph 11.3(f);

(b)

if the Executive asks the Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 11.3(f), the Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 11.3(f), or to any lesser extent specified by the Board, and Angiotech will notify the Executive of the Board's decision; and

(c)

if the Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Board's decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Board under subparagraph (b), and

(ii)

if the Executive incurs a loss as a result of having to comply with the Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

11.5

Despite paragraphs 11.3 and 11.4, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

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(a)

does not, on his own behalf, or in association with or on behalf of any other person, entity, or group of persons or entities acting jointly or in concert, become a "control person" as defined under the Ontario Securities Act; and

(b)

otherwise complies with paragraph 11.3(a) to (e).

11.6

If paragraph 11.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator under Part 21 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator or the Court.

12.

WORK PRODUCT

12.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 12.8, is disclosed in Appendix B; or

(ii)

is determined by the Board to be a Non-Angiotech Invention under paragraph 12.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

(i)

relating to the Business of Angiotech;

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(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(ii)

resulting from any work performed by the Executive for Angiotech;

(iii)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(iv)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech;

but excluding any Non-Angiotech Inventions.

12.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

12.3

For greater certainty:

(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property;

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

12.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 12, including, without limitation, the actions contemplated in paragraph 12.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 12.

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12.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

12.6

The Executive irrevocably waives in favour of Angiotech any and all moral rights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

12.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 12.1(b)(ii) if:

(a)

subject to paragraph 12.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to both Angiotech's General Counsel and its Human Resources Department; and

(b)

the Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non-Angiotech Invention, provided that, for greater certainty, the Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non­Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, development, or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

(ii)

it relates to the Business of Angiotech or to Angiotech's current or anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech.

12.8

If the disclosure of any Non-Angiotech Invention in Appendix B would violate any obligation of confidentiality that the Executive owes to a third party, Appendix B must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

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12.9

If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non­Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to Angiotech).

12.10

Subject to paragraph 12.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

12.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 12.7 or 12.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

12.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such proper ty will be immediately revoked on the Last Day of Employment.

13. CONFIDENTIALITY

13.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budge ts, projections, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

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(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

13.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

13.3

 Unless and until any Confidential Information ceases to be confidential under paragraph 13.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law, but subject to paragraph 13.5;

(ii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iii) that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law, but subject to paragraph 13.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.5

If the Executive reasonably believes that the Executive is required by law to disclose anything otherwise prohibited under paragraphs 13.3 and 13.4:

(a)

the Executive will immediately notify Angiotech in writing of all material particulars of the situation;

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(b)

if Angiotech does not agree that disclosure is required by law, the Executive will not make any disclosure unless an arbitrator under Part 21 or a Court of competent jurisdiction orders otherwise; and

(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law is subject to a protective order of confidentiality.

13.6

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

14.

TERMINATION

14.1

In this Agreement:

(a)

"Angiotech US" means Angiotech Pharmaceuticals (US), Inc., a corporation incorporated under the laws of the State of Washington;

(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Board made with the approval of the Board as it was constituted immediately before the change;

(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securiti es (after which the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

(iii)

the disposition of all or substantially all of the assets or business of Angiotech or Angiotech US pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

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(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech or Angiotech US; or

(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech or Angiotech US, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

(c)

"Good Reason" means the occurrence of any one or more of the following without the Executive's written consent:

(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(iii)

a change in the Executive's principal place of employment by a distance of 80 kilometers or more, unless the new principal place of employment is within 80 kilometers of the Executive's then current residence;

(iv)

a material breach by Angiotech of a fundamental term of this Agreement; or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be just cause

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(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for just cause;

(ii)

the effective date of the Notice of Termination if the Executive's employment is terminated by the Executive without Good Reason; or

(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for just cause, or is terminated by the Executive for Good Reason, except in circumstances where the Employment Standards Act (British Columbia) or other applicable employment standards legislation requires this to be at the end of the period of notice prescribed thereunder, in which case it will be at the end of the period of notice;

or such later date as may otherwise be agreed between Angiotech and the Executive;

(e)

"Notice of Termination" means a written notice of termination of the Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that:

(ii)

is recommended against to the Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech and any other shares entitled to vote for the election of directors of Angiotech.

14.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

14.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

14.4

 The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 60 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

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14.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 14.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the last day of the notice period; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the last day of the notice period.

14.6

If the Executive's employment is terminated by Angiotech for just cause, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

14.7

If the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, and paragraph 14.8 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

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(i)

12 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$24,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or 10.1(a).

14.8

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for, just cause or is terminated by the Executive for Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

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(i)

$48,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

(ii)

the amount of the Executive's target bonus opportunity under the BonusPlan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the Toronto Stock Exchange as of the Last Day of Employment;

(g)

make any payments due to the Executive under paragraph 9.3(b) or 10.1(a);

(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 14.8(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap") would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that:

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(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 14.8(b); and

(ii)

if the reduction of the amounts payable would not result in a more favourable after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 14.8(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 14.8(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Gross-Up Payment, the Gross-Up Payment will be the sum of:

(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is made.

14.9

If Angiotech's shares cease to be listed on the Toronto Stock Exchange, the reference to the Toronto Stock Exchange in paragraph 14.8(f) will be deemed to be replaced with a reference to the NASDAQ or to such other stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech's common shares occurs.

14.10

Before any payments are made to the Executive under

(a)

paragraph 14.7(b) or (c), or

(b)

paragraph 14.8(b), (c), (e), (f) or (i)

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix A or in a similar form prepared by Angiotech.

14.11

Angiotech's obligation to make any payments under

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(a)

paragraph 14.7(b) to (d), or

(b)

paragraph 14.8(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 3, 11, 12, and 13.

14.12

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

14.13

If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 10.1(a) as of the date of the Executive's death;

(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

(c)

Angiotech will have no other or further obligation to the Executive or the Executive's estate.

14.14

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in Canada:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in Canada; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in Canada, the Executive will be entitled to receive payments under paragraph 14.7 as if the Executive's employment had been terminated by Angiotech without just cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in Canada.

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14.15

The provisions of this Part 14 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without just cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater obligation t han specified in this Part 14 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

15.

ENFORCEMENT

15.1

The restrictions in Parts 11, 12, and 13 are necessary for the protection of Angiotech's interests and the Business of Angiotech, are reasonable and valid, and will not prevent the Executive from pursuing a livelihood, and the Executive irrevocably waives all defences to their enforcement.

15.2

In addition to any and all other rights and remedies available to Angiotech, an injunction is the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 3, 11, 12, and 13, and Angiotech would suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

16.

SECTION 409A OF INTERNAL REVENUE CODE

16.1

Subject to paragraph 16.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death;

except as may otherwise be required under the Employment Standards Act (British Columbia) or other applicable employment standards legislation.

16.2

Paragraph 16.1 will apply:

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(a)

only to the extent required to avoid causing the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

(b)

despite any other provision of this Agreement.

16.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

17.

EXECUTIVE'S REPRESENTATIONS

17.1

In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

17.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work in Canada;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

-25-

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix B, except as provided in paragraph 12.8, and all information disclosed in Appendix B is true and correct; and

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

17.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 17.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 17.2.

17.4

 The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

18.

GOVERNING LAW AND FORUM

18.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Columbia and laws of Canada applicable therein.

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18.2

Subject to Part 21, if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

19.

NOTICES

19.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

JEFFREY WALKER

[***]

(b)

ANGIOTECH PHARMACEUTICALS, INC.

1618 Station Street

Vancouver, BC V6A 1B6

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

19.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

20.

SEVERABILITY AND WAIVER

20.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part 21 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

20.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

-27-

21. DISPUTE RESOLUTION

21.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

21.2

If a dispute referred to in paragraph 21.1 cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

21.3

A dispute that is referred to binding arbitration under paragraph 21.2 will be finally resolved by a single arbitrator under the Commercial Arbitration Act (British Columbia) ("CAA").

21.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may apply to the Supreme Court of British Columbia ("Supreme Court") for the appointment of a single arbitrator under the CAA.

21.5

Immediately after the arbitration has commenced, the parties will agree under section 35 of the CAA to exclude the jurisdiction of the Supreme Court under sections 31, 33 and 34 of the CAA.

21.6

The arbitration will be in Vancouver, British Columbia. 21.7 The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

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21.8

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except for arbitral error under section 30 of the CAA.

21.9

Despite paragraph 21.3:

(a)

either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 15(4) of the CAA; and

(b)

Angiotech may, before or after an arbitration has commenced, apply to any Court of competent jurisdiction for injunctive relief under paragraph 15.2.

22.

INDEPENDENT LEGAL ADVICE

22.1

Angiotech's lawyers prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

23.

ENUREMENT AND ASSIGNMENT

23.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

23.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

24.

 INTERPRETATION

24.1

In this Agreement:

(a)

"Angiotech" includes, as the context may require, its affiliates, subsidiaries, associated companies, successors, and assigns;

(b)

"Board" means the Board of Directors of Angiotech;

(c)

"Code" means United States Internal Revenue Code of 1986, as amended;

(d)

"day" means calendar day, unless otherwise specified;

(e)

"IRS" means Internal Revenue Service.

24.2

All monetary amounts expressed in this Agreement are in Canadian currency, unless otherwise specified.

24.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

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24.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

25.

ENTIRE AGREEMENT

25.1

This document contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

25.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by JEFFREY WALKER in the presence of:	) ) )
/s/ T. Neske	)	/s/ Jeffrey Paul Walker
(Signature of Witness)	)	JEFFREY WALKER
	)
T. Neske	)
(Print Name of Witness)	)
	)
1618 Station St.	)
(Address of Witness)	)
	)
VP HR	)
(Occupation of Witness)	)
	)
15 Oct 07	)
(Date)	)

ANGIOTECH PHARMACEUTICALS, INC.
By: /s/ William L. Hunter
Authorized Signatory
Date:	October 25, 2007

APPENDIX A

Form of Release

FULL AND FINAL RELEASE

AND PROMISE NOT TO INITIATE LEGAL ACTION

I, JEFFREY WALKER, in consideration of the gross sum of $¨ (less required statutory deductions and withholdings), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals, Inc. ("Angiotech"), its affiliates and subsidiaries, its and their successors and assigns, and its and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages, costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against the Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life insurance, share options, bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, RRSP contributions, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any Federal or Provincial statute, including specifically claims under the [names of applicable statutes to be inserted by Angiotech when the employment relationship is terminated].

2.

That neither the settlement nor anything contained herein is an admission of any liability by the Releasees, or any of them, by whom liability is expressly denied.

3.

That I have carefully read and understand this document, and either received legal advice about it before I signed it, or voluntarily declined to obtain such advice.

- 2 -

4.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

5.

That the terms of this document are intended to be contractual and not a mere recital.

SIGNED, SEALED AND DELIVERED by JEFFREY WALKER on _______________, 20____in the presence of:	) ) ) )
	)
Signature	)	JEFFREY WALKER
	)
	)
Print Name	)
	)
	)
Address	)
	)
	)
Occupation	)
	)
	)
Date	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX B

Non-Angiotech Inventions

¨

BETWEEN:
JEFFREY WALKER
AND:
ANGIOTECH PHARMACEUTICALS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7
66216-00032	JKH/mef
Davis:2098411 1

EX-10.24

Exhibit 10.24

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated 17 December 2007

BETWEEN:

CHRIS J.W. DENNIS, of [***]

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

("Angiotech")

BACKGROUND

A.

Angiotech wishes to continue to employ the Executive in the position of Senior Vice President, Sales & Marketing, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech will employ the Executive, and the Executive will serve Angiotech, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of Senior Vice President, Sales & Marketing at Angiotech's offices in Vancouver, British Columbia;

(b)

will report to Angiotech's Chief Executive Officer; and

(c)

will perform those duties and responsibilities assigned to the Executive by Angiotech from time to time.

1.3

Angiotech may ask the Executive to serve as an officer of Angiotech, and/or as a director and/or officer of one or more of Angiotech's affiliates or subsidiaries.

-2-

1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech or any of its affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of 18 December 2007 ("Effective Date"), and will

continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be 2 April 2007 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

2.2

During the Executive's employment with Angiotech, the Executive will not, directly of indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, firm, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

-3-

2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 11, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of, a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

FIDUCIARY DUTY

3.1

The Executive has a fiduciary relationship with Angiotech, whereby the Executive has an absolute duty of trust, care, fidelity, and honesty to Angiotech, including a duty to avoid any conflict of interest, and to act with undivided loyalty to Angiotech and with the utmost good faith, exclusively and selflessly in the best interests of Angiotech.

4.

BASE SALARY

4.1

Angiotech will pay the Executive an annual base salary of $330,000.00 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

4.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

5.

BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 40% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that, no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

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5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the terms of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, any payments under the Bonus Plan or under Part 10 or 14, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7.

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.3 and 7.4, during the Executive's employment with Angiotech, the Executive will be eligible to participate in:

(a)

the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech for its comparably situated executive employees, and any other employee benefit plans that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

the group RRSP plan made available by Angiotech for its comparably situated executive employees, or in any other retirement plan that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan.

7.2

If the Executive is a director or officer of Angiotech or any of its affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving.

7.3

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any group RRSP plan or other retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies, and Angiotech's sole obligation in relation to such benefits will be:

(a)

to pay premium costs, or a portion or percentage thereof, on behalf of or for the benefit of the Executive, to the extent that Angiotech may generally make such payments on behalf of or for the benefit of its comparably situated executive employees; and

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(b)

to make contributions to the group RRSP plan or other retirement plan, for the benefit of the Executive, to the extent that Angiotech may generally make such contributions for the benefit of its comparably situated executive employees.

7.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees, including the portion or percentage of premium costs (if any) paid by Angiotech under paragraph 7.3(a).

7.5

Any disputes concerning the Executive's rights under any employee benefit plan,

retirement plan, or insurance policy must be directed against the provider of the benefit and not against Angiotech.

7.6

The Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

8.

STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will, continue to hold any options to purchase common shares of Angiotech held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Board and the shareholders of Angiotech.

8.2

The Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or termination occurs solely as a result of a change in applicable laws or regulatory requirements).

8.3

Subject to paragraph 14.9(f), if the Executive's employment is terminated, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

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8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 20 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

9.2

The Executive may take an annual vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations.

10.

EXPENSES

10.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time; and

(b)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of US$15,000.00 for each fiscal year:

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(i)

automobile lease;

(ii)

financial or tax planning services; and

(iii)

health club membership.

10.2

Angiotech will:

(a)

pay the Executive the total amount of $100,000 for the purpose of assisting the Executive in obtaining suitable housing in the Vancouver area, which will be paid in three instalments, as follows:

(i)

$50,000, upon the commencement of the Executive's employment with Angiotech;

(ii)

$25,000, on March 26, 2008; and

(iii)

$25,000, on March 26, 2009;

(b)

upon the submission by the Executive of appropriate receipts, reimburse the Executive for moving-related expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary in connection with the relocation of the Executive's household and immediate family to the Vancouver area, which will include all expenses that Angiotech determines are reasonably necessary for the following purposes:

(i)

a managed move of the Executive's household from Toronto to the

Vancouver area, including packing, insurance, and transportation of household goods and automobiles;

(ii)

legal fees, real estate fees and commissions, and land transfer taxes in respect of the sale of the Executive's residence in Toronto, and the purchase of a residence in the Vancouver area;

(iii)

travel for the Executive and the Executive's immediate family from

Toronto to Vancouver; and

(iv)

 rental of temporary accommodation in the Vancouver area for the Executive and the Executive's immediate family for up to a maximum of six months; and

(c)

upon or after the commencement of the Executive's commencement of employment with Angiotech, pay the Executive an allowance of $5,000 for miscellaneous additional moving-related expenses.

11.

RESTRICTIONS ON SOLICITATION AND COMPETITION

11.1

In this Agreement:

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(a)

"Business of Angiotech" means the business of Angiotech through the

Executive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self- retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;\

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;\

(c)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(d)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

11.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

11.3

While the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

(a)

carry on or engage in the Solicitation of any Customer of Angiotech, except, while the Executive is employed by Angiotech, for a purpose consistent with the performance of the Executive's duties and responsibilities under this Agreement;

(b)

interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

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(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive’s Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive’s Last Day of Employment;

(e)

advise, assist, lend money to, guarantee the debts or obligations of, or manage or supervise personnel of, any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

(f)

subject to paragraphs 1 L4 and 11.5, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

11.4

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, or, subject to paragraph 11.5, during the 12-month period after the Last Day of Employment:

(a)

the Executive will, within 90 days after the Executive knows, or should have known, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with

paragraph 11.3(f), or notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Board decide whether the Executive must comply with paragraph 11.3(f);

(b)

if the Executive asks the Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 11.3(f), the Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive’s legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 11.3(f), or to any lesser extent specified by the Board, and Angiotech will notify the Executive of the Board’s decision; and

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(c)

if the Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Board's

decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Board under subparagraph (b), and

(ii)

if the Executive incurs a loss as a result of having to comply with the Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

11.5

Despite paragraphs 11.3 and 11.4, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

(a)

does not, on his own behalf, or in association with or on behalf of any other

person, entity, or group of persons or entities acting jointly or in concert, become a "control person" as defined under the Ontario Securities Act; and

(b)

otherwise complies with paragraph 11.3(a) to (e).

11.6 If paragraph 11.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator under Part 21 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator or the Court.

12.

WORK PRODUCT

12.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or

associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

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(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 12.8, is disclosed in Appendix B; or

(ii)

is determined by the Board to be a Non-Angiotech Invention under

paragraph 12.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

(i)

relating to the Business of Angiotech;

(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(iii)

resulting from any work performed by the Executive for Angiotech;

(iv)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(v)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech; but excluding any Non-Angiotech Inventions.

12.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

12.3

For greater certainty:

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(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property,

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

12.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 12, including, without limitation, the actions contemplated in paragraph 12.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 12.

12.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

12.6

 The Executive irrevocably waives in favour of Angiotech any and all moral rights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

12.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 12.1(b)(ii) if:

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(a)

subject to paragraph 12.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to both Angiotech's General Counsel and its Human Resources Department; and

(b)

the Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non-Angiotech invention, provided that, for greater certainty, the Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non­Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, developments or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

(ii)

it relates to the Business of Angiotech or to Angiotech's current or

anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech.

12.8

If the disclosure of any Non-Angiotech Invention in Appendix B would violate any obligation of confidentiality that the Executive owes to a third party, Appendix B must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

12.9

 If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non­Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to. Angiotech).

12.10

Subject to paragraph 12.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

12.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 12.7 or 12.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

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12.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such proper ty will be immediately revoked on the Last Day of Employment.

13.

CONFIDENTIALITY

13.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budge ts, projections, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

13.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

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13.3

Unless and until any Confidential Information ceases to be confidential under paragraph 13.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law, but subject to paragraph 13.5;

(ii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iii)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law, but subject to paragraph 13.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.5

If the Executive reasonably believes that, the Executive is required by law to disclose anything otherwise prohibited under paragraphs 13.3 and 13.4:

(a)

the Executive will immediately notify Angiotech in writing of all material particulars of the situation;

(b)

if Angiotech does not agree that disclosure is required by law, the Executive will not make any disclosure unless an arbitrator under Part 21 or a Court of competent jurisdiction orders otherwise; and

(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law is subject to a protective order of confidentiality.

13.6

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

14.

TERMINATION

14.1

In this Agreement:

(a)

"Angiotech US" means Angiotech Pharmaceuticals (US), Inc, a corporation incorporated under the laws of the State of Washington;

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(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Board made with the approval of the Board as it was constituted immediately before the change;

(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securiti es (after which the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

(iii)

the disposition of all or substantially all of the assets or business of

Angiotech or Angiotech US pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially owned or controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech or Angiotech US; or

(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech or Angiotech US, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

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(c)

"Good Reason" means the occurrence of any one or more of the following

without the Executive's written consent:

(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(ii)

a change in the Executive's principal place of employment by a distance of 80 kilometers or more, unless the new principal place of employment is within 80 kilometers of the Executive's then current residence;

(iv)

a material breach by Angiotech of a fundamental term of this Agreement; or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be just cause to terminate the Executive's employment;

(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for just cause;

(ii)

the effective date of the Notice of Termination if the Executive's

employment is terminated by the Executive without Good Reason; or

(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for just cause, or is terminated by the Executive for Good Reason, except in circumstances where the Employment Standards Act (British Columbia) or other applicable employment standards legislation requires this to be at the end of the period of notice prescribed thereunder, in which case it will be at the end of the period of notice; or such later date as may otherwise be agreed between Angiotech and the Executive;

- 18 –

(e)

"Notice of Termination" means a written notice of termination of the

Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that;

(i)

is recommended against to the Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech and any other shares entitled to vote for the election of directors of Angiotech.

14.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

14.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

14.4

The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 60 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

14.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 14.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the last day of the notice period; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

-19-

and Angiotech will have no further obligation to the Executive under this. Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the last day of the notice period.

14.6

If the Executive's employment is terminated by Angiotech for just cause, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

14.7

If the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, and paragraph 14.9 and 14.9 do not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of

    Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

12 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$24,000, plus

-20-

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or 10.1(a).

14.8

If the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, and the Date of Notice is on or before March 26, 2008, and paragraph 14.9 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Date of Notice;

(b)

pay a lump sum amount as severance compensation, equivalent to 18 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RR.SP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the amount of $24,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan for the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or Error! Reference source not found.

14.9

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of

Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

-21-

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$48,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive, up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

(ii)

the amount of the Executive's target bonus opportunity under the Bonus Plan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the Toronto Stock Exchange as of the Last Day of Employment;

(g)

make any payments due to the Executive under paragraph 93(b) or 10.1(a);

-22-

(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 14.9(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap') would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that:

(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 14.9(b); and

(ii)

if the reduction of the amounts payable would not result in a more favourable after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 14.9(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 14.9(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Gross-Up Payment, the Gross-Up Payment will be the sum of:

(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is made.

14.10

If Angiotech's shares cease to be listed on the Toronto Stock Exchange, the reference to the Toronto Stock Exchange in paragraph 14.9(f) will be deemed to be replaced with a reference to the NASDAQ or to such other stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech's common shares occurs.

14.11

Before any payments are made to the Executive under

- 23 -

(a)

paragraph 14.7(b) or (c),

(b)

paragraph 14.8(b) or (c), or

(c)

paragraph 14.9(b), (c), (e), (D or (0

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix A or in a similar form prepared by Angiotech.

14.12

Angiotech's obligation to make any payments under

(a)

paragraph 14.7(b) to (d),

(b)

paragraph 14.8(b) or (c), or

(c)

paragraph 14.9(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 3, 11, 12, and 1.3. If the Executive breaches any such obligation, the Executive will immediately disgorge and repay Angiotech any such payments received and will be disentitled to any further such payments, without limiting, diminishing, or affecting any other damages, losses, costs, or expenses for which the Executive may be liable for any breach of this Agreement.

14.13

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

14.14

 If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 10.1(a) as of the date of the Executive's death;

(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

-24-

(c)

Angiotech will have no other or further obligation to the Executive or the

Executive's estate.

14.15

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in Canada:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in Canada; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in Canada, the Executive will be entitled to receive payments under paragraph 14.7 or 14.8 as if the Executive's employment had been terminated by Angiotech without just cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in Canada.

14.16

The provisions of this Part 14 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without just cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater obligation t han specified in this Part 14 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

15.

ENFORCEMENT

15.1

The restrictions in Parts 11, 12, and 13 are necessary for the protection of Angiotech's interests and the Business of Angiotech, are reasonable and valid, and will not prevent the Executive from pursuing a livelihood, and the Executive irrevocably waives all defences to their enforcement.

15.2

In addition to any and all other rights and remedies available to Angiotech, an injunction is the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 3, 11, 12, and 13, and Angiotech would suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

- 25 –

16.

SECTION 409A OF INTERNAL REVENUE CODE

16.1

Subject to paragraph 16.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death; except as may otherwise be required under the Employment Standards Act (British Columbia) or other applicable employment standards legislation.

16.2

Paragraph 16.1 will apply:

(a)

only to the extent required to avoid causing the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

(b)

despite any other provision of this Agreement.

16.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

17.

EXECUTIVE'S REPRESENTATIONS

17.1

 In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

17.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work in Canada;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

-26-

(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix B, except as provided in paragraph 12.8, and all information disclosed in Appendix B is true and correct; and

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

17.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 17.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 17.2.

-27-

17.4

The Executive will not be obligated under paragraph 17.3(b) to indernnify Angiotech for legal fees, taxes, or disbursements incurred by Angiotech in defending against any claim brought against Angiotech by a Previous Employer, in relation to any allegation that the Executive:

(a)

has breached the terms of any agreement with that Previous Employer;

(b)

has misused or made unauthorized disclosure of any confidential information of that Previous Employer; or

(c)

took or removed anything proprietary to that Previous Employer.

17.5

The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

18.

GOVERNING LAW AND FORUM

18.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Colurnbia and laws of Canada applicable therein.

18.2

Subject to Part 21, if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

19.

NOTICES

19.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

CHRIS DENNIS

[***]

(b)

ANGIOTECH PHARMACEUTICALS, INC.

1618 Station Street

Vancouver, BC V6A 1B6

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

- 28 –

19.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given,

20.

SEVERABILITY AND WAIVER

20.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part 21 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

20.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

21.

DISPUTE RESOLUTION

21.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

21.2

If a dispute referred to in paragraph 21.1 cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

21.3

A dispute that is referred to binding arbitration under paragraph 21.2 will be finally resolved by a single arbitrator under the Commercial Arbitration Act (British Columbia) ("CAA").

21.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may apply to the Supreme Court of British Columbia ("Supreme Court") for the appointment of a single arbitrator under the CAA.

-29-

21.5

Immediately after the arbitration has commenced, the parties will agree under section 35 of the CAA to exclude the jurisdiction of the Supreme Court under sections 31, 33 and 34 of the CAA.

21.6

The arbitration will be in Vancouver, British Columbia. 21.7 The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

21.8

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except for arbitral error under section 30 of the CAA.

21.9

Despite paragraph 21 3:

(a)

either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 15(4) of the CAA; and

(b)

Angiotech may, before or after an arbitration has commenced, apply to any Court of competent jurisdiction for injunctive relief under paragraph 15.2.

22.

INDEPENDENT LEGAL ADVICE

22.1

Angiotech's lawyers prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

23.

ENUREMENT AND ASSIGNMENT

23.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

-30-

23.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

24.

INTERPRETATION

24.1

In this Agreement:

(a)

"Angiotech" includes, as the context may require, its affiliates, subsidiaries, associated companies, successors, and assigns;

(b)

"Board" means the Board of Directors of Angiotech;

(c)

"Code" means United States Internal Revenue Code of 1986, as amended;

(d)

"day" means calendar day, unless otherwise specified;

(e)

"IRS" means Internal Revenue Service.

24.2

All monetary amounts expressed in this Agreement are in Canadian currency, unless otherwise specified.

24.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

24.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

25.

ENTIRE AGREEMENT

25.1

This document contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

- 31 –

25.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
CHRIS J.W. DENNIS in the presence	)
of:	)
	)
/s/ Alison Smith	)	/s/ Chris J.W. Dennis
(Signature of Witness)	)	CHRIS J.W. DENNIS
	)
Alison Smith	)
(Print Name of Witness)	)
	)
[***]	)
(Address of Witness)	)
	)
[***]	)
(Occupation of Witness)	)
	)
December 21, 2007	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /s/ William L. Hunter

___________________________________

Authorized Signatory

Date:  January 15, 2008

APPENDIX A

Form of Release

FULL AND FINAL RELEASE
AND PROMISE NOT TO INITIATE LEGAL ACTION

I, ¨, in consideration of the gross sum of $¨ (less required statutory deductions and withholdings), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals, Inc. ("Angiotech"), its affiliates and subsidiaries, its and their successors and assigns, and its and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages,. costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against the Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life

insurance, share options; bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, RRSP contributions, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any Federal or Provincial statute, including specifically claims under the [names of applicable statutes to be inserted by Angiotech when the employment relationship is terminated].

2.

That neither the settlement nor anything contained herein is an admission of any liability by the Releasees, or any of them, by whom liability is expressly denied.

3.

That I have carefully read and understand this document, and either received legal advice about it before I signed it, or voluntarily declined to obtain such advice.

-2-

4.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

5.

That the terms of this document are intended to be contractual and not a mere recital.

SIGNED, SEALED AND DELIVERED by	)
¨ on __, 20__ in the	)
presence of:	)
	)
	)
Signature	)	¨
	)
	)
Print Name	)
	)
	)
Address	)
	)
	)
Occupation	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX B

Non-Angiotech Inventions

¨

AGREEMENT

This Agreement dated December 31, 2008 is:

BETWEEN:

CHRIS J. W. DENNIS, of [***]

(the "Executive")

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

("Angiotech")

BACKGROUND

A.

The Executive has been employed by Angiotech since April 2, 2007 under the terms of the Employment Agreement attached hereto as Appendix "A" (the "Employment Agreement").

B.

Effective on December 31, 2008, the Executive's employment with Angiotech will be ended, by mutual agreement.

AGREEMENTS

For good and valuable consideration, including payment to the Executive of the gross sum of $345,000.00 (less required statutory deductions and withholdings), and other good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

ENDING OF EMPLOYMENT

1.1

The Executive's employment with Angiotech will end on December 31, 2008.

1.2

Angiotech will have no further obligation to the Executive after December 31, 2008, including under the terms of the Employment Agreement, except to the extent expressly provided for under this Agreement.

1.3

For greater certainty, the terms of this Agreement will fully satisfy and discharge any rights, entitlements, or claims that the Executive may have under or in connection with the Employment Agreement or the ending of the Executive's employment, including any right to receive any form of compensation, notice of termination of employment, payment in lieu of such notice, or benefit, whether under the Employment Standards Act (British Columbia), under the Employment Agreement, the common law, or otherwise.

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2.

PAYMENTS

2.1

On January 1, 2009, the Executive will be paid all salary and accrued vacation pay which may be owing to him as of December 31, 2008.

2.2

On January 15, 2009, the Executive will be paid $320,000.00 in full and final satisfaction of Angiotech's obligations under Part 14 of the Employment Agreement.

2.3

On March 26, 2009, the Executive will be paid $25,000.00, under paragraph 10.2(a)(iii) of the Employment Agreement.

2.4

As a condition of receiving the payments under paragraph 2.2 and 2.3, the Executive will first execute and deliver to Angiotech a Release in the form attached hereto as Appendix "B".

3.

BONUS COMPENSATION

3.1

The Executive will be eligible to be considered for a bonus payment under the Bonus Plan previously maintained by Angiotech, for the 2008 fiscal year, in respect of the Executive's employment under the Employment Agreement up to December 31, 2008, according the formula that is applied to other executives (base salary x bonus target x individual performance result x corporate performance result) as determined by the Board, paid at the same time and in the same way as other eligible executives.

3.2

The Executive will not be eligible to be considered for a bonus payment under the Bonus Plan previously maintained by Angiotech, or otherwise, for any period of time after December 31, 2008.

4.

STATUTORY DEDUCTIONS AND WITHHOLDINGS

4.1

Any payments made to the Executive or the Executive's estate under Parts 2 or 3 are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payments.

5.

CESSATION OF INSURANCE BENEFITS, RRSP CONTRIBUTIONS, AND OTHER BENEFITS

5.1

The Executive's eligibility for any health, dental, life insurance, disability, or other

insurance or employee benefits, including, without limitation, Angiotech's group RRSP plan, and the provision of automobile lease, financial or tax planning services, health clinic membership, moving expenses, or housing allowance by Angiotech will cease on December 31, 2008 (subject only to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

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6.

STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS OR PROGRAMS

6.1

After December 31, 2008, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive under any equity- based incentive plan or program will continue to be governed by the provisions of the applicable stock option agreement, plan, or program, as the case may be.

7.

 RETURN OF ANGIMECH'S WORK PRODUCT, PROPERTY, AND CONFIDENTIAL INFORMATION

7.1

On or before December 31, 2008, the Executive will return to Angiotech all Work

Product (as defined in the Employment Agreement) and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information (as defined in the Employment Agreement), proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech (as defined in the Employment Agreement), and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will provide Angiotech with all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such property will be revoked on December 31, 2008.

8.

CONTINUING OBLIGATIONS OF THE EXECUTIVE

8.1

After December 31, 2008, the Executive will continue to abide by all continuing obligations he owes to Angiotech under the Employment Agreement or the common law, including, without limitation, his obligations under paragraphs 3, 11, 12, and 13 of the Employment Agreement.

9.

GOVERNING LAW AND FORUM

9.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Columbia and laws of Canada applicable therein.

9.2

If Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

10.

NOTICES

10.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

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(a)

CHRIS J. W. DENNIS

[***]

(b)

ANGIOTECH PHARMACEUTICALS, INC.

1618 Station Street

Vancouver, BC V6A 1B6

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

10.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

11.

SEVERABILITY AND WAIVER

11.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

11.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other  any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

12.

INDEPENDENT LEGAL ADVICE

12.1

Angiotech's legal counsel prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

13.

ENUREMENT AND ASSIGNMENT

13.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

13.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

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14.

INTERPRETATION

14.1

All monetary amounts expressed in this Agreement are in Canadian currency.

14.2

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

14.3

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

15.

ENTIRE AGREEMENT

15.1

This document contains the entire agreement between the parties with respect to its subject matter, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment or the ending of the Executive's employment, save and except for the continuing obligations of the Executive under the Employment Agreement (as specified in paragraph 8.1 herein) and the provisions of Part 15 of the Employment Agreement.

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15.2

No amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
CHRIS J. W. DENNIS in the presence	)
of:	)
	)
/s/ Jacquie Dennis	)	/s/ Chris J.W. Dennis
(Signature of Witness)	)	CHRIS J.W. DENNIS
	)
Jacquie Dennis	)
(Print Name of Witness)	)
	)
[***]	)
(Address of Witness)	)
	)
[***]	)
(Occupation of Witness)	)
	)
Dec 31/08	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /signed/

___________________________________

Authorized Signatory

Date:  January 5, 2009

APPENDIX "A"

Employment Agreement

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated 17 December 2007

BETWEEN:

CHRIS J.W. DENNIS, of [***]

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS, INC.,

a corporation incorporated under the laws of British Columbia

("Angiotech")

BACKGROUND

A.

Angiotech wishes to continue to employ the Executive in the position of Senior Vice President, Sales & Marketing, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech will employ the Executive, and the Executive will serve Angiotech, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of Senior Vice President, Sales & Marketing at Angiotech's offices in Vancouver, British Columbia;

(b)

will report to Angiotech's Chief Executive Officer; and

(c)

will perform those duties and responsibilities assigned to the Executive by Angiotech from time to time.

1.3

Angiotech may ask the Executive to serve as an officer of Angiotech, and/or as a director and/or officer of one or more of Angiotech's affiliates or subsidiaries.

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1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech or any of its affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of 18 December 2007 ("Effective Date"), and will

continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be 2 April 2007 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

2.2

During the Executive's employment with Angiotech, the Executive will not, directly of indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, firm, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

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2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 11, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of, a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

FIDUCIARY DUTY

3.1

The Executive has a fiduciary relationship with Angiotech, whereby the Executive has an absolute duty of trust, care, fidelity, and honesty to Angiotech, including a duty to avoid any conflict of interest, and to act with undivided loyalty to Angiotech and with the utmost good faith, exclusively and selflessly in the best interests of Angiotech.

4.

BASE SALARY

4.1

Angiotech will pay the Executive an annual base salary of $330,000.00 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

4.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

5.

BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 40% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that, no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

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5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the terms of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, any payments under the Bonus Plan or under Part 10 or 14, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7.

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.3 and 7.4, during the Executive's employment with Angiotech, the Executive will be eligible to participate in:

(a)

the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech for its comparably situated executive employees, and any other employee benefit plans that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

the group RRSP plan made available by Angiotech for its comparably situated executive employees, or in any other retirement plan that Angiotech may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan.

7.2

If the Executive is a director or officer of Angiotech or any of its affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving.

7.3

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any group RRSP plan or other retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies, and Angiotech's sole obligation in relation to such benefits will be:

(a)

to pay premium costs, or a portion or percentage thereof, on behalf of or for the benefit of the Executive, to the extent that Angiotech may generally make such payments on behalf of or for the benefit of its comparably situated executive employees; and

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(b)

to make contributions to the group RRSP plan or other retirement plan, for the benefit of the Executive, to the extent that Angiotech may generally make such contributions for the benefit of its comparably situated executive employees.

7.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees, including the portion or percentage of premium costs (if any) paid by Angiotech under paragraph 7.3(a).

7.5

Any disputes concerning the Executive's rights under any employee benefit plan,

retirement plan, or insurance policy must be directed against the provider of the benefit and not against Angiotech.

7.6

The Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

8.

STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will, continue to hold any options to purchase common shares of Angiotech held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Board and the shareholders of Angiotech.

8.2

The Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or termination occurs solely as a result of a change in applicable laws or regulatory requirements).

8.3

Subject to paragraph 14.9(f), if the Executive's employment is terminated, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

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8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 20 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

9.2

The Executive may take an annual vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations.

10.

EXPENSES

10.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time; and

(b)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of US$15,000.00 for each fiscal year:

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(i)

automobile lease;

(ii)

financial or tax planning services; and

(iii)

health club membership.

10.2

Angiotech will:

(a)

pay the Executive the total amount of $100,000 for the purpose of assisting the Executive in obtaining suitable housing in the Vancouver area, which will be paid in three instalments, as follows:

(i)

$50,000, upon the commencement of the Executive's employment with Angiotech;

(ii)

$25,000, on March 26, 2008; and

(iii)

$25,000, on March 26, 2009;

(b)

upon the submission by the Executive of appropriate receipts, reimburse the Executive for moving-related expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary in connection with the relocation of the Executive's household and immediate family to the Vancouver area, which will include all expenses that Angiotech determines are reasonably necessary for the following purposes:

(i)

a managed move of the Executive's household from Toronto to the

Vancouver area, including packing, insurance, and transportation of household goods and automobiles;

(ii)

legal fees, real estate fees and commissions, and land transfer taxes in respect of the sale of the Executive's residence in Toronto, and the purchase of a residence in the Vancouver area;

(iii)

travel for the Executive and the Executive's immediate family from

Toronto to Vancouver; and

(iv)

 rental of temporary accommodation in the Vancouver area for the Executive and the Executive's immediate family for up to a maximum of six months; and

(c)

upon or after the commencement of the Executive's commencement of employment with Angiotech, pay the Executive an allowance of $5,000 for miscellaneous additional moving-related expenses.

11.

RESTRICTIONS ON SOLICITATION AND COMPETITION

11.1

In this Agreement:

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(a)

"Business of Angiotech" means the business of Angiotech through the

Executive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self- retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;\

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;\

(c)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(d)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

11.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

11.3

While the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

(a)

carry on or engage in the Solicitation of any Customer of Angiotech, except, while the Executive is employed by Angiotech, for a purpose consistent with the performance of the Executive's duties and responsibilities under this Agreement;

(b)

interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

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(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive’s Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive’s Last Day of Employment;

(e)

advise, assist, lend money to, guarantee the debts or obligations of, or manage or supervise personnel of, any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

(f)

subject to paragraphs 1 L4 and 11.5, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

11.4

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, or, subject to paragraph 11.5, during the 12-month period after the Last Day of Employment:

(a)

the Executive will, within 90 days after the Executive knows, or should have known, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with

paragraph 11.3(f), or notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Board decide whether the Executive must comply with paragraph 11.3(f);

(b)

if the Executive asks the Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 11.3(f), the Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive’s legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 11.3(f), or to any lesser extent specified by the Board, and Angiotech will notify the Executive of the Board’s decision; and

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(c)

if the Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Board's

decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Board under subparagraph (b), and

(ii)

if the Executive incurs a loss as a result of having to comply with the Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

11.5

Despite paragraphs 11.3 and 11.4, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

(a)

does not, on his own behalf, or in association with or on behalf of any other

person, entity, or group of persons or entities acting jointly or in concert, become a "control person" as defined under the Ontario Securities Act; and

(b)

otherwise complies with paragraph 11.3(a) to (e).

11.6 If paragraph 11.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator under Part 21 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator or the Court.

12.

WORK PRODUCT

12.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or

associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

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(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 12.8, is disclosed in Appendix B; or

(ii)

is determined by the Board to be a Non-Angiotech Invention under

paragraph 12.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

(i)

relating to the Business of Angiotech;

(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(iii)

resulting from any work performed by the Executive for Angiotech;

(iv)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(v)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech; but excluding any Non-Angiotech Inventions.

12.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

12.3

For greater certainty:

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(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property,

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

12.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 12, including, without limitation, the actions contemplated in paragraph 12.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 12.

12.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

12.6

 The Executive irrevocably waives in favour of Angiotech any and all moral rights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

12.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 12.1(b)(ii) if:

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(a)

subject to paragraph 12.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to both Angiotech's General Counsel and its Human Resources Department; and

(b)

the Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non-Angiotech invention, provided that, for greater certainty, the Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non­Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, developments or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

(ii)

it relates to the Business of Angiotech or to Angiotech's current or

anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech.

12.8

If the disclosure of any Non-Angiotech Invention in Appendix B would violate any obligation of confidentiality that the Executive owes to a third party, Appendix B must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

12.9

 If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non­Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to. Angiotech).

12.10

Subject to paragraph 12.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

12.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 12.7 or 12.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

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12.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such proper ty will be immediately revoked on the Last Day of Employment.

13.

CONFIDENTIALITY

13.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budge ts, projections, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

13.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

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13.3

Unless and until any Confidential Information ceases to be confidential under paragraph 13.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law, but subject to paragraph 13.5;

(ii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iii)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law, but subject to paragraph 13.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.5

If the Executive reasonably believes that, the Executive is required by law to disclose anything otherwise prohibited under paragraphs 13.3 and 13.4:

(a)

the Executive will immediately notify Angiotech in writing of all material particulars of the situation;

(b)

if Angiotech does not agree that disclosure is required by law, the Executive will not make any disclosure unless an arbitrator under Part 21 or a Court of competent jurisdiction orders otherwise; and

(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law is subject to a protective order of confidentiality.

13.6

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

14.

TERMINATION

14.1

In this Agreement:

(a)

"Angiotech US" means Angiotech Pharmaceuticals (US), Inc, a corporation incorporated under the laws of the State of Washington;

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(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Board made with the approval of the Board as it was constituted immediately before the change;

(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securiti es (after which the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

(iii)

the disposition of all or substantially all of the assets or business of

Angiotech or Angiotech US pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially owned or controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech or Angiotech US; or

(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech or Angiotech US, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

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(c)

"Good Reason" means the occurrence of any one or more of the following

without the Executive's written consent:

(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(ii)

a change in the Executive's principal place of employment by a distance of 80 kilometers or more, unless the new principal place of employment is within 80 kilometers of the Executive's then current residence;

(iv)

a material breach by Angiotech of a fundamental term of this Agreement; or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be just cause to terminate the Executive's employment;

(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for just cause;

(ii)

the effective date of the Notice of Termination if the Executive's

employment is terminated by the Executive without Good Reason; or

(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for just cause, or is terminated by the Executive for Good Reason, except in circumstances where the Employment Standards Act (British Columbia) or other applicable employment standards legislation requires this to be at the end of the period of notice prescribed thereunder, in which case it will be at the end of the period of notice; or such later date as may otherwise be agreed between Angiotech and the Executive;

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(e)

"Notice of Termination" means a written notice of termination of the

Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that;

(i)

is recommended against to the Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech and any other shares entitled to vote for the election of directors of Angiotech.

14.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

14.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

14.4

The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 60 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

14.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 14.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the last day of the notice period; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

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and Angiotech will have no further obligation to the Executive under this. Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the last day of the notice period.

14.6

If the Executive's employment is terminated by Angiotech for just cause, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

14.7

If the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, and paragraph 14.9 and 14.9 do not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of

    Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

12 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$24,000, plus

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(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or 10.1(a).

14.8

If the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, and the Date of Notice is on or before March 26, 2008, and paragraph 14.9 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Date of Notice;

(b)

pay a lump sum amount as severance compensation, equivalent to 18 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RR.SP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the amount of $24,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan for the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

(e)

make any payments due under paragraph 9.3(b) or Error! Reference source not found.

14.9

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for just cause or is terminated by the Executive for Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of

Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

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(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any RRSP contributions or other retirement benefits, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$48,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive, up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

(ii)

the amount of the Executive's target bonus opportunity under the Bonus Plan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the Toronto Stock Exchange as of the Last Day of Employment;

(g)

make any payments due to the Executive under paragraph 93(b) or 10.1(a);

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(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 14.9(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap') would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that:

(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 14.9(b); and

(ii)

if the reduction of the amounts payable would not result in a more favourable after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 14.9(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 14.9(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Gross-Up Payment, the Gross-Up Payment will be the sum of:

(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is made.

14.10

If Angiotech's shares cease to be listed on the Toronto Stock Exchange, the reference to the Toronto Stock Exchange in paragraph 14.9(f) will be deemed to be replaced with a reference to the NASDAQ or to such other stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech's common shares occurs.

14.11

Before any payments are made to the Executive under

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(a)

paragraph 14.7(b) or (c),

(b)

paragraph 14.8(b) or (c), or

(c)

paragraph 14.9(b), (c), (e), (D or (0

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix A or in a similar form prepared by Angiotech.

14.12

Angiotech's obligation to make any payments under

(a)

paragraph 14.7(b) to (d),

(b)

paragraph 14.8(b) or (c), or

(c)

paragraph 14.9(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 3, 11, 12, and 1.3. If the Executive breaches any such obligation, the Executive will immediately disgorge and repay Angiotech any such payments received and will be disentitled to any further such payments, without limiting, diminishing, or affecting any other damages, losses, costs, or expenses for which the Executive may be liable for any breach of this Agreement.

14.13

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

14.14

 If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 10.1(a) as of the date of the Executive's death;

(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

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(c)

Angiotech will have no other or further obligation to the Executive or the

Executive's estate.

14.15

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in Canada:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in Canada; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in Canada, the Executive will be entitled to receive payments under paragraph 14.7 or 14.8 as if the Executive's employment had been terminated by Angiotech without just cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in Canada.

14.16

The provisions of this Part 14 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without just cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater obligation t han specified in this Part 14 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

15.

ENFORCEMENT

15.1

The restrictions in Parts 11, 12, and 13 are necessary for the protection of Angiotech's interests and the Business of Angiotech, are reasonable and valid, and will not prevent the Executive from pursuing a livelihood, and the Executive irrevocably waives all defences to their enforcement.

15.2

In addition to any and all other rights and remedies available to Angiotech, an injunction is the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 3, 11, 12, and 13, and Angiotech would suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

- 25 –

16.

SECTION 409A OF INTERNAL REVENUE CODE

16.1

Subject to paragraph 16.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death; except as may otherwise be required under the Employment Standards Act (British Columbia) or other applicable employment standards legislation.

16.2

Paragraph 16.1 will apply:

(a)

only to the extent required to avoid causing the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

(b)

despite any other provision of this Agreement.

16.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

17.

EXECUTIVE'S REPRESENTATIONS

17.1

 In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

17.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work in Canada;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

-26-

(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix B, except as provided in paragraph 12.8, and all information disclosed in Appendix B is true and correct; and

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

17.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 17.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 17.2.

-27-

17.4

The Executive will not be obligated under paragraph 17.3(b) to indernnify Angiotech for legal fees, taxes, or disbursements incurred by Angiotech in defending against any claim brought against Angiotech by a Previous Employer, in relation to any allegation that the Executive:

(a)

has breached the terms of any agreement with that Previous Employer;

(b)

has misused or made unauthorized disclosure of any confidential information of that Previous Employer; or

(c)

took or removed anything proprietary to that Previous Employer.

17.5

The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

18.

GOVERNING LAW AND FORUM

18.1

This Agreement is deemed to be made in British Columbia, and will be governed by and construed and interpreted in accordance with the laws of British Colurnbia and laws of Canada applicable therein.

18.2

Subject to Part 21, if Angiotech commences a proceeding in the Courts of British Columbia to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of British Columbia in connection therewith, and the Courts of British Columbia will have exclusive jurisdiction in connection therewith.

19.

NOTICES

19.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

CHRIS DENNIS

[***]

(b)

ANGIOTECH PHARMACEUTICALS, INC.

1618 Station Street

Vancouver, BC V6A 1B6

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

- 28 –

19.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given,

20.

SEVERABILITY AND WAIVER

20.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part 21 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

20.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

21.

DISPUTE RESOLUTION

21.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment, by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any disputes by mediation.

21.2

If a dispute referred to in paragraph 21.1 cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate the dispute, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer the dispute to binding arbitration.

21.3

A dispute that is referred to binding arbitration under paragraph 21.2 will be finally resolved by a single arbitrator under the Commercial Arbitration Act (British Columbia) ("CAA").

21.4

If the parties are unable to agree to an arbitrator within 10 days of the notice referring the dispute to arbitration, either party may apply to the Supreme Court of British Columbia ("Supreme Court") for the appointment of a single arbitrator under the CAA.

-29-

21.5

Immediately after the arbitration has commenced, the parties will agree under section 35 of the CAA to exclude the jurisdiction of the Supreme Court under sections 31, 33 and 34 of the CAA.

21.6

The arbitration will be in Vancouver, British Columbia. 21.7 The arbitrator will:

(a)

subject to the provisions of this Agreement, apply the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre with any modifications as may be agreed to by the parties, or such other rules of procedure as may otherwise be agreed to by the parties;

(b)

not have the authority or jurisdiction to award:

(i)

punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury, or

(ii)

injunctive relief, specific performance, or any other equitable remedy;

(c)

conduct the arbitration proceeding within 30 days of being appointed; and

(d)

render a decision within 30 days of the completion of the arbitration proceeding.

21.8

The award of the arbitrator will be final and binding, and any order, ruling, or award made by the arbitrator will not be questioned, reviewed, restrained, amended, or set aside by the Supreme Court, except for arbitral error under section 30 of the CAA.

21.9

Despite paragraph 21 3:

(a)

either party may, before or after an arbitration has commenced, apply to the Supreme Court for interim relief under section 15(4) of the CAA; and

(b)

Angiotech may, before or after an arbitration has commenced, apply to any Court of competent jurisdiction for injunctive relief under paragraph 15.2.

22.

INDEPENDENT LEGAL ADVICE

22.1

Angiotech's lawyers prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

23.

ENUREMENT AND ASSIGNMENT

23.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

-30-

23.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

24.

INTERPRETATION

24.1

In this Agreement:

(a)

"Angiotech" includes, as the context may require, its affiliates, subsidiaries, associated companies, successors, and assigns;

(b)

"Board" means the Board of Directors of Angiotech;

(c)

"Code" means United States Internal Revenue Code of 1986, as amended;

(d)

"day" means calendar day, unless otherwise specified;

(e)

"IRS" means Internal Revenue Service.

24.2

All monetary amounts expressed in this Agreement are in Canadian currency, unless otherwise specified.

24.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

24.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

25.

ENTIRE AGREEMENT

25.1

This document contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

- 31 –

25.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
CHRIS J.W. DENNIS in the presence	)
of:	)
	)
/s/ Alison Smith	)	/s/ Chris J.W. Dennis
(Signature of Witness)	)	CHRIS J.W. DENNIS
	)
Alison Smith	)
(Print Name of Witness)	)
	)
[***]	)
(Address of Witness)	)
	)
[***]	)
(Occupation of Witness)	)
	)
December 21, 2007	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /s/ William L. Hunter

___________________________________

Authorized Signatory

Date:  January 15, 2008

APPENDIX A

Form of Release

FULL AND FINAL RELEASE
AND PROMISE NOT TO INITIATE LEGAL ACTION

I, ¨, in consideration of the gross sum of $¨ (less required statutory deductions and withholdings), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals, Inc. ("Angiotech"), its affiliates and subsidiaries, its and their successors and assigns, and its and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages,. costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against the Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life

insurance, share options; bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, RRSP contributions, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any Federal or Provincial statute, including specifically claims under the [names of applicable statutes to be inserted by Angiotech when the employment relationship is terminated].

2.

That neither the settlement nor anything contained herein is an admission of any liability by the Releasees, or any of them, by whom liability is expressly denied.

3.

That I have carefully read and understand this document, and either received legal advice about it before I signed it, or voluntarily declined to obtain such advice.

-2-

4.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

5.

That the terms of this document are intended to be contractual and not a mere recital.

SIGNED, SEALED AND DELIVERED by	)
¨ on __, 20__ in the	)
presence of:	)
	)
	)
Signature	)	¨
	)
	)
Print Name	)
	)
	)
Address	)
	)
	)
Occupation	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX B

Non-Angiotech Inventions

¨

APPENDIX "B"

FULL AND FINAL RELEASE
AND PROMISE NOT TO INITIATE LEGAL ACTION

I, CHRIS J.W. DENNIS, in consideration of the payment of the gross sum of $345,000.00 (less required statutory deductions and withholdings), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree:

1.

Not to ever initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals, Inc. ("Angiotech"), its affiliates and subsidiaries, its and their successors and assigns, and its and their present and former officers, directors, employees, shareholders, partners, contractors, consultants, advisors, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages, costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, the "Claims"), which as against the Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter, or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any way relating directly or indirectly to my employment with Angiotech; including Claims for severance compensation under my Employment Agreement dated December 17, 2007;

(b)

Claims relating directly or indirectly to the loss of medical insurance, extended

health insurance, disability insurance, life insurance, share options, bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, RRSP contributions, automobile lease, financial or tax planning services, health clinic membership, moving expenses, housing allowance, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for or relating to illness, sickness, disability, or death, or for insurance  benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any Federal or Provincial statute, including those arising under the British Columbia Employment Standards Act, Human Rights Code, and Workers Compensation Act.

2.

That I have carefully read and understand this document, and received legal advice about it before I signed it.

-2-

3.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

4.

That the terms of this document are intended to be contractual and not a mere recital.

SIGNED, SEALED AND DELIVERED by	)
CHRIS J.W. DENNIS on December 31, 2008 in the presence of:	)
	)
	)
/s/ Jacquie Dennis	)	/s/ Chris J.W. Dennis
(Signature of Witness)	)	CHRIS J.W. DENNIS
	)
Jacquie Dennis	)
(Print Name of Witness)	)
	)
[***]	)
(Address of Witness)	)
	)
[***]	)
(Occupation of Witness)	)
	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

BETWEEN:

CHRIS J. W. DENNIS

AND:

ANGIOTECH PHARMACEUTICALS, INC.

AGREEMENT

Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7

66216 00032 AAS/ejh

Davis:3921338.4

EX-10.25

Exhibit 10.25

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

EXECUTIVE EMPLOYMENT AGREEMENT

This Agreement dated 26 November 2007

BETWEEN:

GARY INGENITO, of [***]

("Executive")

AND:

ANGIOTECH PHARMACEUTICALS (US), INC.,

a corporation incorporated under the laws of the State of Washington

("Angiotech US")

BACKGROUND

A.

Angiotech US wishes to continue to employ the Executive in the position of Chief Clinical and Regulatory Affairs Officer, on and subject to the terms and conditions of this Agreement.

B.

The Executive wishes to continue to be so employed.

AGREEMENTS

For good and valuable consideration, the receipt and sufficiency of which each party acknowledges, the parties agree as follows:

1.

EMPLOYMENT

1.1

Angiotech US will employ the Executive, and the Executive will serve Angiotech US, subject to and in accordance with the terms of this Agreement.

1.2

The Executive:

(a)

will be employed in the position of Chief Clinical and Regulatory Affairs Officer at Angiotech's offices in Herndon, Virginia;

(b)

will report to Angiotech's Chief Executive Officer; and

(c)

will perform those duties and responsibilities assigned to the Executive by Angiotech from time to time.

- 2 -

1.3

Angiotech may ask the Executive to serve as an officer of Angiotech Canada, and/or as a director and/or officer of Angiotech US or one or more of Angiotech US and Angiotech Canada's affiliates or subsidiaries.

1.4

The Executive will be employed by Angiotech on a full-time basis, and agrees that:

(a)

the Executive's hours of work will vary, and will be those hours required to perform the Executive's duties and responsibilities under this Agreement; and

(b)

the remuneration paid to the Executive under this Agreement constitutes remuneration, compensation, and payment in full for all hours worked and all services provided by the Executive in connection with the Executive's employment with Angiotech or otherwise, including any work performed or services provided as a director or officer of Angiotech US, Angiotech Canada, or any of their affiliates or subsidiaries.

1.5

Angiotech may, from time to time, establish or change written policies and procedures concerning its business and the conduct of its employees, which will, upon publication to the Executive, be binding on the Executive as if incorporated into this Agreement, provided that if there is a conflict between the terms of such policies and procedures and the terms of this Agreement, the terms of this Agreement will prevail and govern.

1.6

This Agreement is effective as of January 1, 2007 ("Effective Date"), and will continue in effect until terminated by either party in accordance with its terms.

1.7

The first day of the Executive's employment continues to be February 1, 2005 for all purposes under this Agreement, which will also continue to be the anniversary date of the Executive's employment for all purposes under this Agreement.

2.

EXCLUSIVE SERVICE

2.1

The Executive will, to the best of the Executive's ability, diligently and faithfully devote all of the Executive's business time, attention, energies, and abilities exclusively to the Business of Angiotech and the performance of the Executive's duties and responsibilities under this Agreement, and will at all times use best efforts to promote the interests of Angiotech.

2.2

During the Executive's employment with Angiotech, the Executive will not, directly or

indirectly:

(a)

be employed by or render services of a business, professional, or commercial nature, including services as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, to any other person, film, entity, or business, whether for remuneration or otherwise, without the prior written authorization of Angiotech's Chief Executive Officer; or

(b)

otherwise engage in any activity that is competitive with the Business of Angiotech, or that negatively affects the performance of the Executive's duties and responsibilities under this Agreement, whether alone, or as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, or agent of any other person, firm, entity, or business.

- 3 -

2.3

For greater certainty, paragraph 2.2(b) does not, subject to Part 11, restrict the Executive from:

(a)

with Angiotech's prior written authorization under paragraph 2.2(a), rendering services to, or serving as an officer or director of, a person, firm, entity, or business that is not a Competitor of Angiotech;

(b)

investing in a firm, entity, or business that is not a Competitor of Angiotech;

(c)

owning a legal or beneficial interest not exceeding 1% in a Competitor of Angiotech; or

(d)

engaging in charitable activities with a social or philanthropic purpose that do not have a material negative effect on the performance of the Executive's duties and responsibilities under this Agreement or on the interests of Angiotech.

3.

FIDUCIARY DUTY

3.1

The Executive has a fiduciary relationship with Angiotech, whereby the Executive has an absolute duty of trust, care, fidelity, and honesty to Angiotech, including a duty to avoid any conflict of interest, and to act with undivided loyalty to Angiotech and with the utmost good faith, exclusively and selflessly in the best interests of Angiotech.

4.

BASE SALARY

4.1

Angiotech will pay the Executive an annual base salary of $400,400 per year or such other amount as the Board may determine, from time to time, in accordance with this Agreement ("Base Salary"), payable on Angiotech's normal payroll schedule.

4.2

The Board may, from time to time, in its sole discretion, review the Base Salary and determine if any increase is appropriate having regard to the Executive's performance and contributions, as assessed by the Board in its sole discretion, and any other factor or factors the Board may consider appropriate.

5.

BONUS PLAN

5.1

Subject to paragraph 5.3, the Executive will be eligible to participate in Angiotech's bonus plan for executive employees ("Bonus Plan"), which currently provides for bonuses based on a target bonus opportunity of 40% of the Base Salary earned by the Executive during a fiscal year, provided that the Board may determine, in its sole discretion, that the amount of the payment made to the Executive under the Bonus Plan in respect of a fiscal year may be greater or lesser than the target bonus opportunity, or that no payment will be made to the Executive from the Bonus Plan in respect of a fiscal year, having regard to individual and company performance and any other factor or factors the Board may consider appropriate.

- 4 -

5.2

Any one payment to the Executive under the Bonus Plan will not obligate Angiotech to make any other payment to the Executive under the Bonus Plan or otherwise.

5.3

The Board may, from time to time, in its sole discretion and without prior notice to the Executive, change or terminate the Bonus Plan. If there is a conflict between the Bonus Plan and the terms of this Agreement (other than paragraph 5.1), the terms of this Agreement (other than paragraph 5.1) will prevail and govern.

6.

STATUTORY DEDUCTIONS

6.1

The Base Salary, any payments under the Bonus Plan or under Part 10 or 14, and any other payment, award, or benefit made or provided to the Executive under this Agreement or otherwise are subject to all required statutory deductions and withholdings, and any other amount required by law to be deducted or withheld from such payment.

7

INSURANCE, RETIREMENT, AND OTHER EMPLOYEE BENEFITS

7.1

Subject to paragraphs 7.3 and 7.4, during the Executive's employment with Angiotech, the Executive will be eligible to participate in:

(a)

the group health, dental, life insurance, and short and long term disability plans made generally available by Angiotech US for its comparably situated executive employees, and any other employee benefit plans that Angiotech US may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan; and

(b)

the 401(k) plan made available by Angiotech US for its comparably situated executive employees, or in any other US tax-qualified retirement plan that Angiotech US may make generally available from time to time for its comparably situated executive employees, and, in each such instance, subject to and in accordance with the terms of the applicable plan.

7.2

If the Executive is a director or officer of Angiotech US, Angiotech Canada, or any of their affiliates or subsidiaries, Angiotech will maintain a policy of directors' and officers' liability insurance for the Executive while the Executive is so serving.

7.3

The Executive's eligibility for any benefits under any employee benefit plan, including any health, dental, life insurance, or disability plan, or under any retirement plan, including any 401(k) plan or other US tax-qualified retirement plan, or under any liability insurance policy, will be determined solely on the basis of the applicable plan or plans or insurance policy or policies, and Angiotech's sole obligation in relation to such benefits will be:

- 5 -

(a)

to pay premium costs, or a portion or percentage thereof, on behalf of or for the benefit of the Executive, to the extent that Angiotech US may generally make such payments on behalf of or for the benefit of its comparably situated executive employees; and

(b)

to make contributions to the Executive's 401(k) plan or other US tax-qualified retirement plan to the extent that Angiotech US may generally make such contributions for the benefit of its comparably situated executive employees.

7.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change or terminate any employee benefit or insurance coverage made available to its executive employees, including the portion or percentage of premium costs (if any) paid by Angiotech under paragraph 7.3(a).

7.5

Any disputes concerning the Executive's rights under any employee benefit plan, retirement plan, or insurance policy must be directed against the provider of the benefit and not against Angiotech.

7.6

Except as required by applicable law, the Executive's eligibility for any health, dental, life insurance, disability, or other insurance or employee benefits, or to participate in any retirement plan, under this Part 7 will cease on the Last Day of Employment (subject to any applicable conversion privileges), and Angiotech will not be liable for any sickness, injury, illness, disability, or death, or for any claims, damages, losses, costs, or expenses directly or indirectly suffered or incurred thereafter, or as a result thereof.

8.

STOCK OPTIONS AND OTHER EQUITY-BASED INCENTIVE PLANS

8.1

Subject to paragraph 8.2, the Executive:

(a)

will continue to hold any options to purchase common shares of Angiotech Canada held by the Executive as of the Effective Date, subject to the terms of any applicable stock option agreement, plan, or program; and

(b)

may, from time to time, be eligible to receive additional stock option grants, or grants or awards under other equity-based incentive plans or programs of Angiotech Canada, if and to the extent awarded to the Executive under the terms of any applicable stock option agreement, plan, or program, or other equity-based incentive plan or program, which may be approved by the Angiotech Canada Board and the shareholders of Angiotech Canada.

8.2

The Angiotech Canada Board may, in its sole discretion and without prior notice to the Executive, change or terminate any stock option plan or program or any equity-based incentive plan or program referred to in paragraph 8.1, subject to the terms of the applicable plan or program that govern such change or termination, and any applicable laws or regulatory requirements; provided that such change or termination will not, without the Executive's written consent, adversely affect any then outstanding stock options or other grants or awards held by the Executive (unless such change or tell  iination occurs solely as a result of a change in applicable

laws or regulatory requirements).

- 6 -

8.3

Subject to paragraph 14.8(f), if the Executive's employment is terminated, any rights and obligations of the Executive in respect of any then outstanding stock options or other grants or awards held by the Executive will continue to be governed by the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1.

8.4

If there is a conflict between the terms of this Agreement and the terms of any stock option agreement, plan, or program, or other equity-based incentive plan or program, referred to in paragraph 8.1, this Agreement will prevail and govern, unless applicable laws or regulatory requirements do not permit this, in which case the terms of such stock option agreement, plan, or program, or other equity-based incentive plan or program will prevail and govern to the extent required by such laws or regulatory requirements.

9.

VACATION

9.1

The Executive will receive an annual vacation of 22 working days for each fiscal year of employment under this Agreement, prorated for partial years of employment, in accordance with Angiotech's policies regarding vacations in effect from time to time.

9.2

The Executive may take an annual vacation at such times as are mutually convenient to the Executive and Angiotech, but subject to Angiotech's operational requirements.

9.3

Unless otherwise provided in Angiotech's policies regarding vacations,

(a)

if the Executive does not use all of the Executive's vacation entitlement in a given fiscal year, the vacation not taken will be available to be used in a later fiscal year; and

(b)

if the Executive's employment is terminated before the end of a given fiscal year, the Executive will be paid for:

(i)

any unused vacation days for previous fiscal years; and

(ii)

any unused vacation days for the fiscal year in which the Executive's employment is terminated, on a prorated basis.

9.4

Angiotech may, in its sole discretion and without prior notice to the Executive, change Angiotech's policies, plans, or practices regarding vacations.

10.

EXPENSES

10.1

Angiotech will, upon the submission by the Executive of appropriate receipts, reimburse the Executive for:

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(a)

business expenses incurred by the Executive that Angiotech, in its sole discretion, determines are reasonably necessary for the proper discharge of the Executive's duties and responsibilities, in accordance with Angiotech's policies in effect from time to time; and

(b)

the following perquisites, for so long as Angiotech may make such perquisites generally available for its comparably situated executive employees, and up to a combined maximum amount of $15,000 for each fiscal year:

(i)

automobile lease;

(ii)

financial or tax planning services; and

(iii)

health club membership.

11.

RESTRICTIONS ON SOLICITATION AND COMPETITION

11.1

In this Agreement:

(a)

"Business of Angiotech" means the business of Angiotech through the Executive's Last Day of Employment, including, without limitation, the business of researching, developing, manufacturing, and selling medical devices and/or medical implants, including, for example, stents, stent grafts, vascular grafts, vascular wraps, catheters, needles, blades, sutures (including barbed or self- retaining sutures), filters, vascular snares, biopsy devices, guidewires, ophthalmic implants, orthopedic devices and implants, hemostats and hemostatic pads, and tissue sealants, fillers, and glues, as well as drug-loaded and/or polymer-coated versions of these products;

(b)

"Competitor of Angiotech" means any person, persons, entity, firm, association, corporation, or other enterprise engaged in any business or activity, anywhere in the world, that is or is being prepared to be in competition with the Business of Angiotech, including, without limitation, the development, manufacture, or sale of any product or service in competition with a product or service developed, in development, manufactured, or sold by Angiotech through the Executive's Last Day of Employment;

(c)

"Control Person" means a person, entity, or group of persons or entities acting jointly or in concert, that holds a sufficient number of the voting rights attached to all outstanding voting securities of a Competitor of Angiotech to affect materially the control of the Competitor of Angiotech, provided that, if a person, entity, or group of persons or entities, holds more than 20% of the voting rights attached to all outstanding voting securities of the Competitor of Angiotech, the person, entity, or group of persons or entities will be deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the Competitor of Angiotech;

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(d)

"Customer of Angiotech" means any customer or client or prospective customer or client of Angiotech to whom the Executive provided services, or for whom the Executive transacted business, or whose identity became known to the Executive in connection with or as a consequence of the Executive's relationship with or employment by Angiotech;

(e)

"Solicitation" means any direct or indirect communication of any kind, regardless of who initiates the communication, that in any way invites, advises, encourages, or asks any person to take or refrain from taking any action.

11.2

Angiotech is engaged in the Business of Angiotech, the Business of Angiotech is worldwide in scope, and the current and potential Competitors of Angiotech and Customers of Angiotech are located throughout the world.

11.3

While the Executive is employed by Angiotech, and for a period of 12 months after the Last Day of Employment, the Executive will not, whether as an owner, shareholder, partner, joint venturer, officer, director, employee, advisor, contractor, consultant, agent, or otherwise, either on his own or in conjunction with any person, persons, entity, firm, association, corporation, or other business enterprise, or in any other manner whatsoever, directly or indirectly:

(a)

carry on or engage in the Solicitation of any Customer of Angiotech, except, while the Executive is employed by Angiotech, for a purpose consistent with the performance of the Executive's duties and responsibilities under this Agreement;

(b)

interfere with, impair, or damage any relationship between Angiotech and any Customer of Angiotech;

(c)

carry on or engage in the Solicitation of any employee or consultant of Angiotech (including any person who was an employee or consultant of Angiotech within a period of six months before the date of the Solicitation) to end his or her employment or consulting relationship with Angiotech, or to commence an employment or consulting relationship or any other relationship with any Competitor of Angiotech;

(d)

carry on or engage in any business or activity that is, will be, or is being prepared to be in competition with the Business of Angiotech, and that is substantially related to any business, activity, or services:

(i)

that the Executive engaged in or performed, directly or indirectly, for or on behalf of Angiotech through the Executive's Last Day of Employment; or

(ii)

for which the Executive had direct or indirect responsibility or oversight with Angiotech through the Executive's Last Day of Employment;

(e)

advise, assist, lend money to, guarantee the debts or obligations of, or manage or supervise personnel of, any Competitor of Angiotech engaged in any business or activity described in subparagraph (d)(i) or (ii); or

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(f)

subject to paragraphs 11.4 and 11.5, own more than a 1% legal or beneficial interest in any Competitor of Angiotech.

11.4

If the Executive owns or acquires more than a 1% legal or beneficial interest in any entity, firm, association, corporation, or other enterprise which is not a Competitor of Angiotech but which later becomes a Competitor of Angiotech while the Executive is employed by Angiotech, or, subject to paragraph 11.5, during the 12-month period after the Last Day of Employment:

(a)

the Executive will, within 90 days after the Executive knows, or should have known, that such entity, firm, association, corporation, or other enterprise has become a Competitor of Angiotech (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), either

(i)

dispose of that interest to the extent necessary to comply with paragraph 11.3(f), or

(ii)

notify Angiotech that the Executive owns more than a 1% legal or beneficial interest in such entity, firm, association, corporation, or other enterprise, and ask that the Angiotech Canada Board decide whether the Executive must comply with paragraph 11.3(f);

(b)

if the Executive asks the Angiotech Canada Board under subparagraph (a)(ii) to decide whether the Executive must comply with paragraph 11.3(f), the Angiotech Canada Board will decide, in its sole discretion, whether the Executive will be required to dispose of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech, to the extent necessary to comply with paragraph 11.3(f), or to any lesser extent specified by the Angiotech Canada Board, and Angiotech will notify the Executive of the Angiotech Canada Board's decision; and

(c)

if the Angiotech Canada Board decides under subparagraph (b) that the Executive must dispose of any portion of the Executive's legal or beneficial interest in the entity, firm, association, corporation, or other enterprise that has become a Competitor of Angiotech,

(i)

the Executive will, within 90 days of being notified of the Angiotech Canada Board's decision (or, if requested by the Executive, such longer time period as Angiotech may agree, such agreement not to be unreasonably withheld), dispose of that interest to the extent required by the Angiotech Canada Board under subparagraph (b), and

(ii)

if the Executive incurs a loss as a result of having to comply with the Angiotech Canada Board's decision under subparagraph (b), Angiotech will provide reasonable compensation to the Executive for that loss, which will not, in any event, exceed the difference, if any, between the acquisition cost of the interest and the proceeds of disposition of the interest (without regard for the tax consequences of the disposition).

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11.5

Despite paragraphs 11.3 and 11.4, during the 12-month period after the Last Day of Employment, the Executive may own or acquire more than 1% of the shares of any class of a Competitor of Angiotech that are publicly traded on a stock exchange or trade reporting system, provided that the Executive:

(a)

does not, on his own behalf, or in association with or on behalf of any other person, entity, or group of persons or entities acting jointly or in concert, become a Control Person; and

(b)

otherwise complies with paragraph 11.3(a) to (e).

11.6

If paragraph 11.3, or any portion thereof, is found to be unreasonable or unenforceable to any extent by an arbitrator under Part 21 or by a Court of competent jurisdiction determining its validity or enforceability, whether as to the subject matter or scope of the restriction or restrictions, the geographic area of the restriction or restrictions, or the duration of the restriction or restrictions, then the restriction or restrictions will be changed or reduced to that which is determined to be reasonable or enforceable by the arbitrator or the Court.

12.

WORK PRODUCT

12.1

In this Agreement:

(a)

"Intellectual Property" means all proprietary rights and interests in, to, or associated with Work Product, including, without limitation, all registered and unregistered copyrights, patents, industrial designs, trade-marks, trade names, trade secrets, goodwill, all applications and all rights to file applications for all of the foregoing, and all rights of action for infringement, misappropriation, or other misuse, and any other rights in and to the Work Product;

(b)

"Non-Angiotech Invention" means any concept, method, process, technology, invention, development, or other work which:

(i)

subject to paragraph 12.8, is disclosed in Appendix B; or

(ii)

is determined by the Angiotech Canada Board to be a Non-Angiotech Invention under paragraph 12.7;

(c)

"Work Product" means all work product of every kind, including, without limitation, all inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, software source and object codes, writings, formulas, algorithms, compilations, information, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, and other works of authorship, and all modifications and improvements to any of the foregoing, whether or not patented, registered, or otherwise protected, that is invented, made, created, authored, generated, compiled, conceived, developed, completed, reduced to practice, or worked on by the Executive, whether alone or with others, whether during or outside the Executive's working hours, and whether before or during the Executive's employment with Angiotech:

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(i)

relating to the Business of Angiotech;

(ii)

resulting from work performed by the Executive with the use of Angiotech's equipment, facilities, Confidential Information, materials, or personnel;

(iii)

resulting from any work performed by the Executive for Angiotech;

(iv)

resulting from, based on, or using any of Angiotech's assets, property, products, or research; or

(v)

relating to an opportunity that is identified by or presented to the Executive, or of which the Executive becomes aware, in whole or in part as a consequence of the Executive's employment with Angiotech, or the functions performed by the Executive on behalf of Angiotech;

but excluding any Non-Angiotech Inventions.

12.2

Angiotech is and will be the sole owner of all Work Product and Intellectual Property.

12.3

For greater certainty:

(a)

the Executive irrevocably assigns and transfers to Angiotech all rights, title, and interest in and to all Work Product and Intellectual Property, and all rights of action for infringement or other misuse, including all rights to file applications, and all pending applications, to patent, register, or record the Work Product and Intellectual Property;

(b)

to the extent the Executive holds or acquires legal title to any Work Product or Intellectual Property, the Executive holds it as trustee and agent for Angiotech; and

(c)

on request by Angiotech, the Executive will, during and after the Executive's employment with Angiotech, execute and deliver immediately to Angiotech all instruments that Angiotech considers necessary or helpful to effect, perfect, register, or record its interest in Work Product and Intellectual Property, or to patent, register, or record Work Product and Intellectual Property in Angiotech's name, or to obtain, maintain, or enforce its rights and interest in Work Product and Intellectual Property in connection with any interference, litigation, opposition, or other proceeding to which Work Product or Intellectual Property is relevant, provided that Angiotech reimburses the Executive for all reasonable expenses incurred to fulfill these obligations.

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12.4

The Executive irrevocably nominates, appoints, and constitutes Angiotech as the Executive's true and lawful attorney with power to do all things and execute all documents on the Executive's behalf as may be required to give effect to this Part 12, including, without limitation, the actions contemplated in paragraph 12.3. The attorney so appointed may exercise this power as the attorney deems appropriate to give effect to the intent of this Part 12.

12.5

The Executive will, during and after the Executive's employment with Angiotech, assist Angiotech as much as is reasonably necessary to establish, protect, and enforce Work Product and Intellectual Property, provided that Angiotech:

(a)

reimburses the Executive for all reasonable expenses thereby incurred; and

(b)

provides reasonable compensation to the Executive for efforts thereby expended after the end of the Executive's employment with Angiotech.

12.6

The Executive irrevocably waives in favor of Angiotech any and all moral rights that the Executive may have with respect to any Work Product, including, without limitation, the right to attribution of authorship, the right to restrain or claim damages for any distortion, mutilation, modification, or enhancement of any Work Product, and the right to retain, use, or reproduce any Work Product in any context and in connection with any product, service, or business, and Angiotech may use or alter any Work Product, as Angiotech sees fit, in its sole discretion.

12.7

A concept, method, process, technology, invention, development or other work developed by the Executive may be determined to be a Non-Angiotech Invention under paragraph 12.1(b)(ii) if:

(a)

subject to paragraph 12.11, the Executive immediately and fully discloses that concept, method, process, technology, invention, development, or other work, in writing, to both Angiotech's General Counsel and its Human Resources Department; and

(b)

the Angiotech Canada Board determines, in its sole discretion, that the concept, method, process, technology, invention, development, or other work is a Non­Angiotech Invention, provided that, for greater certainty, the Angiotech Canada Board may determine that a concept, method, process, technology, invention, development, or other work is not a Non-Angiotech Invention if one or more of the following apply to that concept, method, process, technology, invention, development, or other work:

(i)

it was developed by the Executive during the Executive's business time for Angiotech, or using any equipment, facilities, materials, personnel, trade secrets, or Confidential Information of Angiotech;

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(ii)

it relates to the Business of Angiotech or to Angiotech's current or anticipated research or development; or

(iii)

it is otherwise derived from any work performed by the Executive for Angiotech.

12.8

If the disclosure of any Non-Angiotech Invention in Appendix B would violate any obligation of confidentiality that the Executive owes to a third party, Appendix B must instead include (to the extent it does not violate that obligation of confidentiality) a brief description of such Non-Angiotech Invention, a list of all third parties to whom the Non-Angiotech Invention belongs, and the reason full disclosure is prohibited.

12.9

If, during the Executive's employment with Angiotech, the Executive incorporates any Non-Angiotech Invention into any product, process, service, equipment, or facilities of Angiotech, the Executive will grant Angiotech a non-exclusive, royalty-free, perpetual, and irrevocable worldwide licence (including the right to sublicense) to make, have made, use, offer to sell, sell, import, copy, distribute, modify, and otherwise practise and exploit such Non­Angiotech Invention as part of Angiotech's product, process, service, equipment, or facilities (to the extent the Executive is legally entitled to grant such licence or rights to Angiotech).

12.10

Subject to paragraph 12.11, while the Executive is employed by Angiotech, the Executive will, immediately, fully disclose to Angiotech, in writing, all items, methods, technologies, inventions, and other works, of any nature, developed, conceived, or reduced to practice by the Executive, whether alone or with others, that constitute Work Product or that otherwise relate to the Business of Angiotech.

12.11

If the disclosure of any item, concept, method, process, technology, invention, development, or other work under paragraph 12.7 or 12.10 would violate any obligation of confidentiality that the Executive may owe to a third party, the Executive will, instead, immediately disclose to Angiotech (to the extent it does not violate that obligation of confidentiality) a description of such item, method, technology, invention, or other work, a list of all third parties to whom it belongs, and full and complete reasons why full disclosure is prohibited.

12.12

At the end of the Executive's employment, the Executive will immediately return to Angiotech all Work Product and all other property of Angiotech, including, without limitation, all medical devices, medical implants, and other products, all computers, telephones, personal digital assistants, and other equipment, and all Confidential Information, proprietary or licensed computer programs, customer lists, customer data, books, records, forms, specifications, formulas, data, data processes, designs, papers, and writings relating to the Business of Angiotech, and any copies thereof, in the Executive's possession or under the Executive's control. For greater certainty, the Executive will not retain any copies of any such property, and will immediately provide to Angiotech all passwords and other security devices required to enable access to such property, and any licences granted to the Executive for the use of any such proper ty will be immediately revoked on the Last Day of Employment.

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13.

CONFIDENTIALITY

13.1

In this Agreement:

"Confidential Information" means all information and materials of Angiotech, and its customers, clients, vendors, consultants, and other parties with which Angiotech does business that is not generally known by or freely available to the public, including, without limitation, information pertaining to biological materials and their progeny and derivatives, drug formulations, pre-clinical and clinical trials (abandoned or undertaken), work product, inventions, discoveries, concepts, ideas, know-how, plans, strategies, developments, technologies, computer programs, formulas, algorithms, compilations, data, devices, designs, prototypes, drawings, diagrams, schematics, practices, processes, methods, products, procedures, manuals, techniques, customer and supplier lists and data, price lists, policies, records, forms, specifications, trade secrets, research, laboratory notes, analysis, reports, studies, budge ts, projections, bids, costs, financial reports and information, financing materials, training programs, sales and marketing programs, plans and strategies, regulatory filings, and correspondence, whether or not expressed in tangible form, and in any format:

(a)

relating to the Business of Angiotech; or

(b)

otherwise relating to Angiotech's past, present, or future businesses, properties, research, products, or services.

13.2

Unless the Executive can demonstrate that information or materials in issue (including Work Product) is generally known by or freely available to the public through no fault of the Executive or any person with whom the Executive is, directly or indirectly, affiliated or related, then the information or material will be presumed and deemed to be Confidential Information.

13.3

Unless and until any Confidential Information ceases to be confidential under paragraph 13.2, the Executive will forever:

(a)

keep private and maintain in strict confidence such Confidential Information; and

(b)

not, directly or indirectly, use, disseminate, disclose, lecture on, publish, duplicate, or summarize the Confidential Information, in whole or in part, except to the extent:

(i)

required by law, but subject to paragraph 13.5;

(ii)

required to enable the Executive to discharge the Executive's duties and responsibilities under this Agreement; or

(iii)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

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13.4

The Executive will forever observe the terms of all agreements regarding confidentiality between Angiotech and others, except to the extent:

(a)

required by law, but subject to paragraph 13.5; or

(b)

that Angiotech first consents in writing, and the Executive complies with all terms and conditions imposed by Angiotech in the consent.

13.5

If the Executive reasonably believes that the Executive is required by law to disclose anything otherwise prohibited under paragraphs 13.3 and 13.4:

(a)

the Executive will immediately notify Angiotech in writing of all material particulars of the situation;

(b)

if Angiotech does not agree that disclosure is required by law, the Executive will not make any disclosure unless an arbitrator under Part 21 or a Court of competent jurisdiction orders otherwise; and

(c)

in any event, the Executive will take all lawful steps to ensure that any disclosure required by law is subject to a protective order of confidentiality.

13.6

Nothing in this Agreement limits or supersedes any other right or remedy that Angiotech may have, under applicable law, with respect to the protection of Confidential Information.

14.

TERMINATION

14.1

In this Agreement:

(a)

"Cause" means the occurrence of any one or more of the following:

(i)

failure by the Executive to substantially perform the Executive's duties or responsibilities under this Agreement, after Angiotech has given a demand to the Executive identifying how the Executive has failed to perform such duties or responsibilities;

(ii)

misconduct or illegal conduct by the Executive causing or likely to causefinancial, reputational, or other harm to Angiotech;

(iii)

the conviction of the Executive for, or a plea by the Executive of guilty or no contest to, any felony; or

(iv)

a material breach by the Executive of this Agreement, or of any of Angiotech's written policies or procedures;

(b)

"Change of Control" means the occurrence of any one or more of the following:

(i)

a change in the composition of the Angiotech Canada Board as a result of which fewer than one-half of the incumbent directors are individuals who were directors 12 months before the change; but excluding any such change in the composition of the Angiotech Canada Board made with the approval of the Angiotech Canada Board as it was constituted immediately before the change;

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(ii)

the acquisition or aggregation by any person, entity, or group of persons or entities acting jointly or in concert ("Acquiror") of beneficial ownership or control of Voting Securities (including, without limitation, the power to vote or direct the voting thereof), as a result of which the Acquiror and/or associates and/or affiliates of the Acquiror become entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors (regardless of whether a meeting has been called to elect directors); but excluding a change in the relative beneficial ownership of the Acquiror in Voting Securities resulting solely from a reduction in the aggregate number of the outstanding Voting Securities, unless and until the Acquiror increases, in any manner, directly or indirectly, the Acquiror's beneficial ownership or control of Voting Securiti es (after which the Acquiror and/or associates and/or affiliates of the Acquiror are entitled to cast or direct the casting of 50% or more of the votes attached to all of the outstanding Voting Securities which may be cast to elect directors);

(iii)

the disposition of all or substantially all of the assets or business of Angiotech US or Angiotech Canada pursuant to a merger, consolidation, or other transaction, unless the common shares of the entity or entities that succeed to the business of Angiotech, and any other shares entitled to vote for the election of directors of such entity or entities, are beneficially owned or controlled by persons, entities, or groups of persons or entities acting jointly or in concert who held beneficial ownership or control of Voting Securities immediately before such merger, consolidation, or other transaction, in substantially the same proportion as they owned such Voting Securities;

(iv)

the adoption of a resolution to wind-up, dissolve, or liquidate Angiotech US or Angiotech Canada; or

(v)

a consolidation, merger, amalgamation, arrangement, or other reorganization or acquisition of Angiotech US or Angiotech Canada, as a result of which the holders of Voting Securities immediately before the completion of such transaction hold less than 50% of the outstanding common shares and other shares entitled to vote for the election of directors of the successor corporation after completion of the transaction;

(c)

"Good Reason" means the occurrence of any one or more of the following without the Executive's written consent:

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(i)

a material reduction in the Executive's title, office, authority, or duties or responsibilities of employment;

(ii)

one or more reductions in the Executive's Base Salary, or in the Executive's target bonus opportunity under the Bonus Plan, in the cumulative amount of 5% or more within a 12 month period, or a material reduction in the Executive's benefits or perquisites, if such reductions:

(A)

are not made in conjunction with similar reductions for comparably situated executive employees of Angiotech, or

(B)

are made in conjunction with similar reductions for comparably situated executive employees of Angiotech at the time of, or within 24 months after, a Change of Control;

(iii)

a change in the Executive's principal place of employment by a distance of 50 miles or more, unless the new principal place of employment is within 50 miles of the Executive's then current residence;

(iv)

a material breach by Angiotech of a fundamental term of this Agreement; or

(v)

an Unapproved Change of Control;

but does not include the Executive being placed on paid leave for up to 30 days pending the determination by Angiotech of whether there is or may be a basis to terminate the Executive's employment for Cause;

(d)

"Last Day of Employment" means:

(i)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for Cause;

(ii)

the effective date of the Notice of Termination if the Executive's employment is terminated by the Executive without Good Reason; or

(iii)

immediately on receipt of the Notice of Termination if the Executive's employment is terminated by Angiotech for any reason other than for Cause, or is terminated by the Executive for Good Reason;

or such later date as may otherwise be agreed between Angiotech and the Executive;

(e)

"Notice of Termination" means a written notice of termination of the Executive's employment with Angiotech;

(f)

"Unapproved Change of Control" means a Change of Control that:

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(i)

is recommended against to the Angiotech Canada Board by Angiotech's Chief Executive Officer in office immediately before the Change of Control; or

(ii)

is not approved, supported, or recommended by the Angiotech Canada Board as it was constituted immediately before the Change of Control;

(g)

"Voting Securities" means common shares of Angiotech Canada and any other shares entitled to vote for the election of directors of Angiotech Canada.

14.2

Angiotech may terminate the Executive's employment at any time by giving a Notice of Termination to the Executive.

14.3

The Executive may terminate the Executive's employment for Good Reason if Angiotech fails to cure the circumstances which gave the Executive Good Reason within 20 days of the Executive giving Angiotech written notice identifying those circumstances (provided that such notice must be given within 90 days after the Executive knows, or should have known, of those circumstances), by the Executive giving a Notice of Termination to Angiotech after the expiration of that 20-day period. Except in accordance with this paragraph, the Executive may not otherwise terminate the Executive's employment for Good Reason.

14.4

The Executive may terminate the Executive's employment at any time without Good Reason by giving a Notice of Termination to Angiotech, providing Angiotech with 60 days' notice of the termination of the Executive's employment, which Angiotech may waive in whole or in part.

14.5

If the Executive's employment is terminated by the Executive without Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment, and, if Angiotech has waived the notice period or any part of it under paragraph 14.4, the equivalent Base Salary the Executive would otherwise have earned during the notice period;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the last day of the notice period; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the last day of the notice period.

14.6

If the Executive's employment is terminated by Angiotech for Cause, Angiotech will:

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(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay the balance of any outstanding payments under the Bonus Plan that are or were payable to the Executive on or before the Last Day of Employment; and

(c)

make any payments due under paragraph 9.3(b) or 10.1(a);

and Angiotech will have no further obligation to the Executive under this Agreement. In particular, the Executive will be deemed not to have earned any payment under the Bonus Plan either in regard to the fiscal year in which the termination of employment occurs, or in regard to any previous fiscal year, to the extent such payment has not become payable to the Executive as of the Last Day of Employment.

14.7

If the Executive's employment is terminated by Angiotech for any reason other than for Cause or is terminated by the Executive for Good Reason, and paragraph 14.8 does not apply, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

12 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 24 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any contributions to the Executive's 401(k) plan or other retirement plan, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$24,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $48,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board; and

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(e)

make any payments due under paragraph 9.3(b) or 10.1(a).

14.8

If, at the time of, or within 24 months after, a Change of Control, the Executive's employment is terminated by Angiotech for any reason other than for Cause or is terminated by the Executive for Good Reason, Angiotech will:

(a)

pay any unpaid Base Salary earned by the Executive up to the Last Day of Employment;

(b)

pay a lump sum amount as severance compensation, equivalent to the total of:

(i)

24 months of Base Salary, and

(ii)

an additional two months of Base Salary for each full year of employment completed by the Executive,

up to a combined maximum of 36 months of Base Salary;

(c)

pay a further lump sum amount as compensation for loss of any benefits made available to the Executive or the Executive's immediate family, including any benefit coverage under any health, dental, life insurance, disability, or other insurance or employee benefits plan, any contributions to the Executive's 401(k) plan or other retirement plan, and any other perquisites of employment, including any automobile allowance, automobile lease, financial or tax planning services, memberships, or otherwise, in the total amount of:

(i)

$48,000, plus

(ii)

an additional $2,000 for each full year of employment completed by the Executive,

up to a combined maximum of $72,000;

(d)

pay the balance of any payments which may be due to the Executive under the Bonus Plan, including, if applicable, a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's employment is terminated, as and when determined by the Board;

(e)

pay a further lump sum amount, equal to two times the greater of:

(i)

the average of the payments made to the Executive under the Bonus Plan in each of the two immediately preceding fiscal years, and

- 21 -

(ii)

the amount of the Executive's target bonus opportunity under the Bonus Plan for the fiscal year in which the Executive's employment is terminated;

(f)

if the Executive holds any stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, of Angiotech Canada, which are not vested as of the Last Day of Employment in accordance with the provisions of the applicable agreement, plan, or program referred to in paragraph 8.1 (and if vesting does not accelerate under those provisions), pay a further lump sum amount equivalent to the amount the Executive would have received if the Executive had been able to exercise those stock options, securities, grants, or awards under the applicable agreement, plan, or program, and sell the shares or underlying securities resulting from their exercise at a price equal to the closing price of such shares or underlying securities on the NASDAQ as of the Last Day of Employment;

(g)

make any payments due to the Executive under paragraph 9.3(b) or 10.1(a);

(h)

in the case of a Change of Control that is not an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive is subject to excise tax under Section 4999 of the Code (referred to in this paragraph 14.8(h) as the "Excise Tax"), and the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without triggering the Excise Tax ("Safe Harbor Cap") would provide the Executive with a greater after tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement will be reduced to the Safe Harbor Cap (but not below zero), provided that:

(i)

the reduction of the amounts payable hereunder, if applicable, will be made by reducing the payments under paragraph 14.8(b); and

(ii)

if the reduction of the amounts payable would not result in a more favourable after tax consequence to the Executive, no amounts payable under this Agreement will be reduced; and

(i)

in the case of a Change of Control that is an Unapproved Change of Control, if any payment, award, benefit, or distribution (or any acceleration of any payment, award, benefit, or distribution) made by Angiotech under this Agreement or otherwise to or for the benefit of the Executive (but without regard to any additional payments required under this paragraph 14.8(i)), is subject to excise tax under Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with regard to such excise tax (such excise tax, together with any such interest and penalties, being collectively referred to in this paragraph 14.8(i) as the "Excise Tax"), Angiotech will pay the Executive an additional payment ("Gross-Up Payment") such that after payment by the Executive of all taxes (including any Excise Tax) imposed on the Gross-Up Payment, the Gross-Up Payment will be the sum of:

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(i)

the Excise Tax, and

(ii)

the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is made.

14.9

If Angiotech Canada's shares cease to be listed on the NASDAQ, the reference to the NASDAQ in paragraph 14.8(f) will be deemed to be replaced with a reference to the Toronto Stock Exchange or to such other stock exchange or quotation and trade reporting system, if any, on which the greatest trading volume in Angiotech Canada's common shares occurs.

14.10

Before any payments are made to the Executive under

(a)

paragraph 14.7(b) or (c), or

(b)

paragraph 14.8(b), (c), (e), (f) or (i)

the Executive will execute and deliver to Angiotech a release in the form attached as Appendix A or in a similar form prepared by Angiotech, and any applicable period to revoke such release will have expired. If the Executive fails to execute and deliver the release, or if the Executive revokes the release within any applicable revocation period, Angiotech will have no obligation to make any payments under paragraph 14.7(b) or (c) or paragraph 14.8(b), (c), (e), (f) or (i).

14.11

Angiotech's obligation to make any payments under

(a)

paragraph 14.7(b) to (d), or

(b)

paragraph 14.8(b) to (f) and (i)

is conditional on the Executive's ongoing compliance with all applicable post-employment obligations of the Executive under this Agreement, including, without limitation, the Executive's obligations under Parts 3, 11, 12, and 13.

14.12

The Executive will not be required to seek other employment to be eligible to receive any payments payable under this Agreement after termination of the Executive's employment, and no amount will be set-off against any such payments on account of any remuneration or benefit that the Executive may receive as a result of any other employment the Executive may obtain.

14.13

If the Executive dies,

(a)

the Executive's estate will be entitled to receive:

(i)

any unpaid Base Salary earned up to the date of the Executive's death;

- 23 -

(ii)

the balance of any payments which may be due to the Executive under the Bonus Plan as of the date of the Executive's death, including a prorated payment under the Bonus Plan earned in respect of the fiscal year in which the Executive's death occurs, if applicable, as and when determined by the Board; and

(iii)

any amounts due to the Executive under paragraph 9.3(b) or 10.1(a) as of the date of the Executive's death;

(b)

any outstanding stock options or other grants or awards held by the Executive, as of the date of the Executive's death, under any stock option agreement, plan, or program, or other equity-based incentive plan or program, will continue to be governed by the provisions of the applicable agreement, plan, or program; and

(c)

Angiotech will have no other or further obligation to the Executive or the Executive's estate.

14.14

If, through no fault of the Executive, the Executive ceases to be legally eligible to work in the United States:

(a)

the Executive will cooperate with Angiotech and use best efforts to attempt to restore the Executive's eligibility to work in the United States; and

(b)

if, after taking the steps under subparagraph (a), the Executive and Angiotech are unable to restore the Executive's eligibility to work in the United States, the Executive will be entitled to receive payments under paragraph 14.7 as if the Executive's employment had been terminated by Angiotech without Cause, and the Last Day of Employment will be deemed to be the date on which the Executive ceased to be eligible to work in the United States.

14.15

The provisions of this Part 14 are fair and reasonable and constitute Angiotech's only obligation to provide notice of termination, severance pay, compensation under employment standards legislation, and related compensation upon the termination of the Executive's employment without Cause, including, without limitation, damages in lieu of reasonable notice of termination, loss of opportunity to exercise or acquire stock options, securities, grants, or awards under any stock option agreement, plan, or program, or other equity-based incentive plan or program, damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, psychological damage or injury, loss of opportunity to receive payments under the Bonus Plan or any other incentive compensation, lost insurance benefits, negligence or other tort claims, or otherwise. In particular, Angiotech will have no greater contractual oblig ation than specified in this Part 14 if, after the Last Day of Employment, the Executive becomes sick, ill, disabled, or otherwise unable to work, or dies.

15. ENFORCEMENT

15.1

The restrictions in Parts 11, 12, and 13 are necessary for the protection of Angiotech's interests and the Business of Angiotech, are reasonable and valid, and will not prevent the Executive from pursuing a livelihood, and the Executive irrevocably waives all defences to their enforcement.

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15.2

In addition to any and all other rights and remedies available to Angiotech, an injunction is the only effective and meaningful remedy for any breach of the Executive's obligations under Parts 3, 11, 12, and 13, and Angiotech would suffer irreparable harm and injury in the event of any such breach. Accordingly, Angiotech may, without having to prove actual or potential damages, loss, injury, or harm, apply for and obtain injunctive relief from any Court of competent jurisdiction, including, without limitation, an interim, interlocutory, or permanent injunction, to enforce any of these provisions upon their breach or threatened breach.

16.

SECTION 409A OF INTERNAL REVENUE CODE

16.1

Subject to paragraph 16.2, if, on the Executive's Last Day of Employment, the Executive is a "specified employee" as defined in Section 409A of the Code, no payment or benefit will be provided under this Agreement until the earlier of:

(a)

six months after the Last Day of Employment; or

(b)

the date of the Executive's death.

16.2

Paragraph 16.1 will apply:

(a)

only to the extent required to avoid causing the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder; and

(b)

despite any other provision of this Agreement.

16.3

If any provision of this Agreement (or any award of compensation hereunder) would cause the Executive to incur any additional income tax or interest under Section 409A of the Code or any regulation or US Treasury Department guidelines promulgated thereunder:

(a)

Angiotech will propose any changes to this Agreement that Angiotech may determine to be necessary to avoid causing the Executive to incur such additional income tax or interest, provided that any such changes will give effect, to the extent practicable, to the intent of the provisions of this Agreement without violating the provisions of Section 409A of the Code; and

(b)

the Executive's agreement to any such changes proposed by Angiotech will not be unreasonably withheld.

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17.

EXECUTIVE'S REPRESENTATIONS

17.1

In this Agreement:

"Previous Employer" means any previous employer of the Executive, or any entity for which the Executive has worked or to which the Executive has provided services.

17.2

The Executive represents and warrants that:

(a)

the Executive is legally eligible to work in the United States;

(b)

the Executive has no obligation to assign any rights, title, or interest in or to any Work Product or Intellectual Property to any third party that conflicts or is inconsistent with the Executive's obligations under this Agreement;

(c)

the Executive has no other employment, work, consultancy, engagements, undertakings, or other relationship that could restrict or impair the performance of the Executive's duties and responsibilities under this Agreement;

(d)

the Executive has complied and is in compliance with any enforceable covenants in any agreement with any Previous Employer;

(e)

the Executive has kept confidential and not disclosed or made available to Angiotech any confidential information of any Previous Employer;

(f)

upon ending the Executive's employment with, or ceasing to work for or provide services to, any Previous Employer, the Executive did not take or remove anything proprietary to that Previous Employer;

(g)

the Executive is not aware of any outstanding or potential claims or demands which have been or may be brought against the Executive in relation to the Executive's employment or other work for, or services provided to, any Previous Employer;

(h)

all items, methods, technology, inventions, and other works of any nature developed or provided by the Executive to Angiotech:

(i)

are or will be original to the Executive, except to the extent otherwise disclosed to Angiotech, and

(ii)

do not, and will not when used or exploited by Angiotech or its contractors or customers, infringe any rights of the Executive or any third party;

(i)

all Non-Angiotech Inventions as of the date of this Agreement are fully disclosed in Appendix B, except as provided in paragraph 12.8, and all information disclosed in Appendix B is true and correct; and

- 26 -

(j)

the execution, delivery, and performance of this Agreement does not and will not otherwise conflict with or result in the violation or breach of any order, judgment, injunction, contract, agreement, commitment, or other arrangement to which the Executive is a party or by which the Executive is bound.

17.3

The Executive:

(a)

agrees that Angiotech has entered into this Agreement relying on the representations and warranties in paragraph 17.2; and

(b)

will indemnify and save harmless Angiotech from and against any and all claims, causes of action, damages, losses, costs, and expenses, including reasonable legal fees, taxes, and disbursements, arising from the incorrectness of, or any breach of, any representation or warranty in paragraph 17.2.

17.4

The Executive:

(a)

will continue to comply with any enforceable covenants in any agreement with any Previous Employer; and

(b)

will continue to maintain in confidence any confidential information of any Previous Employer, and will not disclose or make available to Angiotech any such confidential information of a Previous Employer.

18.

GOVERNING LAW AND FORUM

18.1

This Agreement is deemed to be made in the State of Washington, and will be governed by and construed and interpreted in accordance with the laws of the State of Washington.

18.2

Subject to Part 21, if Angiotech commences a proceeding in the Courts of the State of Washington to interpret or enforce any term of this Agreement or to resolve any dispute under it, the Executive will irrevocably attorn to the jurisdiction of the Courts of the State of Washington in connection therewith, and the Courts of the State of Washington will have exclusive jurisdiction in connection therewith.

19.

NOTICES

19.1

All notices and other communications required or permitted to be given under this Agreement will be in writing, and will be delivered or sent by registered mail to the party entitled to receive them, as follows:

(a)

GARY INGENITO

[***]

(b)

ANGIOTECH PHARMACEUTICALS (US), INC

P.O. Box 2840

- 27 -

101 W. North Bend Way, Suite 201

North Bend, WA 98045

Attention:

David D. McMasters,

General Counsel and Senior Vice President, Legal

19.2

Either party may notify the other in writing of a change of address to which notices will thereafter be given.

20.

SEVERABILITY AND WAIVER

20.1

Each provision of this Agreement is a separate obligation and is severable from all other such obligations, and if any of them is held by an arbitrator under Part 21 or by a Court to be invalid or unenforceable, this Agreement will be construed by limiting, restricting, or reducing the application or scope of the applicable provision or provisions, to the extent necessary to comply with applicable law then in effect.

20.2

In this Agreement:

(a)

a waiver of any provision of this Agreement will not be binding unless in writing and signed by both parties;

(b)

a failure to exercise or a delay in exercising any right or remedy under this Agreement will not be deemed to be a waiver of that right or remedy; and

(c)

a waiver or excuse by either party of any default or breach by the other party of any provision of this Agreement will not waive that party's rights in respect of any continuing or subsequent default or breach, or affect the rights of that party in respect of any such continuing or subsequent default or breach.

21.

DISPUTE RESOLUTION

21.1

Before initiating any legal proceedings, the parties will attempt to resolve all disputes concerning the interpretation, application or enforcement of any term of this Agreement, any alleged breach of or non-compliance with this Agreement, or otherwise arising out of or in connection with this Agreement or any aspect of the Executive's employment with Angiotech or the termination of that employment (collectively, an "Employment Matter"), by mediated negotiation, and will use their best efforts to agree on a mediator and to resolve any Employment Matter by mediation.

21.2

If an Employment Matter cannot be resolved by mediation within 15 days after one of the parties notifies the other of an intention to mediate such matter, or if the parties are unable to agree on a mediator within 10 days of such notice, either party may give notice to the other party of its intention to refer such matter to binding arbitration.

21.3

An Employment Matter that is referred to binding arbitration under paragraph 21.2 will be finally resolved by arbitration in Seattle, Washington, administered by the American Arbitration Association ("AAA") under its Commercial Arbitration Rules then in effect, subject to the following:

- 28 -

(a)

the arbitration will be conducted by a single arbitrator;

(b)

the arbitrator's decision will not be a compromise, but will be the adoption of the submission made by either party;

(c)

the arbitrator will treat as confidential all evidence and other information presented;

(d)

the arbitrator will have no authority or jurisdiction to award punitive or aggravated damages, or damages for any intangible loss or injury, including damage or injury to reputation, damages for bad faith or otherwise pertaining to the manner of dismissal, or psychological damage or injury (and the Executive and Angiotech will not request any such award);

(e)

the Optional Rules for Emergency Measures of Protection will apply to the arbitration;

(f)

the arbitrator will have no authority or jurisdiction to change the terms of this Agreement except as provided in paragraphs 11.6 and 20.1 (and the Executive and Angiotech will not request any such change); and

(g)

a decision must be rendered within 30 days of the parties' closing statements or submission of post-hearing briefs.

21.4

The Executive or Angiotech may bring an action or special proceeding in a state or federal court of competent jurisdiction sitting in Seattle, Washington, to enforce any arbitration award under paragraph 21.3.

22.

INDEPENDENT LEGAL ADVICE

22.1

Angiotech's attorneys prepared this Agreement. The Executive was asked to obtain independent legal advice before signing this Agreement, and represents by signing it that such advice has been obtained.

23.

ENUREMENT AND ASSIGNMENT

23.1

This Agreement will enure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

23.2

The Executive will not assign this Agreement without Angiotech's prior written consent.

24.

INTERPRETATION

24.1

In this Agreement:

- 29 -

(a)

"Angiotech" means Angiotech US, and includes, as the context may require, Angiotech Canada and the other affiliates, subsidiaries, associated companies, successors, and assigns of Angiotech US and Angiotech Canada;

(b)

"Angiotech Canada" means Angiotech Pharmaceuticals, Inc., a corporation incorporated under the laws of British Columbia;

(c)

"Angiotech Canada Board" means the Board of Directors of Angiotech Canada;

(d)

"Board" means the Board of Directors of Angiotech US;

(e)

"Code" means United States Internal Revenue Code of 1986, as amended;

(f)

"day" means calendar day, unless otherwise specified;

(g)

"IRS" means Internal Revenue Service.

24.2

All monetary amounts expressed in this Agreement are in United States currency, unless otherwise specified.

24.3

Any reference in this Agreement to an enactment will be deemed to be a reference to such enactment as it may be amended or replaced from time to time, and any reference to a particular provision of an enactment will include a reference to an equivalent provision, if the enactment is amended or replaced.

24.4

Any rule of interpretation that any ambiguity is to be resolved against the drafting party is not applicable to this Agreement.

25.

ENTIRE AGREEMENT

25.1

This document contains the entire agreement between the parties with respect to the Executive's employment, and cancels and supersedes all prior agreements and discussions between them relating to the Executive's employment.

- 30 -

25.2

Except as provided in this Agreement, no amendment or variation of the terms of this Agreement will be effective or binding unless in writing and signed by both parties.

TO EVIDENCE THEIR AGREEMENT the parties have executed this Agreement on the dates appearing below.

SIGNED, SEALED AND DELIVERED by	)
GARY INGENITO in the presence	)
presence of:	)
	)
/s/ Sue Crouse	)	/s/ Gary Ingenito
(Signature of Witness)	)	GARY INGENITO
	)
Sue Crouse	)
(Print Name of Witness)	)
	)
[***]	)
(Address of Witness)	)
	)
Office Manager	)
(Occupation of Witness)	)
	)
26 November 2007	)
(Date)	)

ANGIOTECH PHARMACEUTICALS (US), INC.

By:  /s/ William L. Hunter

___________________________________

Authorized Signatory

Date:  November 29, 2007

APPENDIX A

Form of Release

FULL AND FINAL RELEASE

AND PROMISE NOT TO INITIATE LEGAL ACTION

Please confirm by returning to ¨ the enclosed copy of this agreement, signed in the place shown, indicating that you have voluntarily decided to accept and agree to its terms.

I, GARY INGENITO, in consideration of the gross sum of $¨ (less required statutory deductions and withholdings), the receipt and sufficiency of which is hereby acknowledged, voluntarily agree:

1.

Not to initiate any type of legal or regulatory action, and to release and forever discharge Angiotech Pharmaceuticals (US), Inc., Angiotech Pharmaceuticals, Inc., and their affiliates, subsidiaries, successors, and assigns (collectively, "Angiotech"), and their present and former officers, directors, employees, shareholders, partners, agents, and otherwise, as the case may be (collectively, the "Releasees"), of and from any and all causes of action, suits, contracts, complaints, claims, damages, costs, and expenses of any nature or kind whatsoever, known or unknown (collectively, "Claims"), which as against Angiotech or any of the other Releasees, and any of them, I have ever had, now have, or at any time hereafter I and my personal representatives can, shall or may have, arising out of any cause, matter or thing, including, without limiting the generality of the foregoing:

(a)

Claims arising directly or indirectly out of my hiring or the termination of my employment with Angiotech, or in any other way relating directly or indirectly to my employment with Angiotech;

(b)

Claims relating directly or indirectly to the loss of disability insurance, life insurance, share options, bonuses, incentive compensation, shares, equity-based compensation or incentives, pension, contributions to my 401(k) plan or other retirement plan, and any other form of compensation, benefit, or perquisite of my employment with Angiotech;

(c)

Claims for disability or sickness, or for insurance benefits relating directly or indirectly to such Claims; and

(d)

Claims arising under any federal, state, or local statute or decision, including without limitation, claims for wrongful or abusive discharge, for breach of contract, for misrepresentation, for breach of securities laws, or for discrimination based on race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful criterion or circumstance, including rights or claims under the U.S. Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act (collectively, "ADEA") (except that I do not waive ADEA rights or claims that may arise after the date I executed this document).

- 2 -

2.

That neither the settlement nor anything contained herein is an admission of any liability by Angiotech, any of the other Releasees, or any of them, by whom liability is expressly denied.

3.

That the payment and benefits described herein are in lieu of any and all other amounts to which I might or am now, or to which I and my personal representatives may become entitled, from Angiotech and the Releasees, or any of them, and, without limiting the generality of the foregoing, I hereby expressly waive any right or claim that I and my personal representatives may now or ever have or assert to payment for salary, bonuses, medical, dental, or hospitalization benefits, life insurance benefits, attorneys' fees, or any form of compensation whatsoever; provided that Angiotech will comply with any applicable obligations with respect to continuation coverage requirements under Section 4980B of the U.S. Internal Revenue Code of 1986, as amended (commonly referred to as "COBRA").

4.

That my signature below will also constitute confirmation that:

(a)

I have been given at least 21 days within which to consider this document and its meaning and consequences;

(b)

I have been advised before signing this release to consult, and have consulted (or have voluntarily decided not to consult), with an attorney of my choice; and

(c)

I have been advised that I may revoke this release at any time during the seven day period immediately following the date I sign this release.

5.

That the foregoing consideration is accepted voluntarily, for the purpose of making a full and final settlement of all Claims.

6.

That the terms of this document are intended to be contractual and not a mere recital.

- 3 -

7.

That this document will be governed by and construed and interpreted in accordance with the laws of the State of Washington.

SIGNED, SEALED AND DELIVERED by	)
GARY INGENITO on	)
_____________, 20_____ in the	)
presence of:	)
	)
	)
Signature	)
	)
	)	GARY INGENITO
Print Name	)
	)
	)
Address	)
	)
	)
Occupation	)
	)

* * PLEASE READ CAREFULLY BEFORE SIGNING * *

APPENDIX B

Non-Angiotech Inventions

¨

BETWEEN:
GARY INGENITO
AND:
ANGIOTECH PHARMACEUTICALS (US), INC.
EXECUTIVE EMPLOYMENT AGREEMENT
Davis LLP
2800 Park Place
666 Burrard Street
Vancouver, BC V6C 2Z7
66216-00035	JKH/mef

EX-10.27

Exhibit 10.27

ANGIOTECH PHARMACEUTICALS, INC.

2004 STOCK OPTION PLAN

1.

PURPOSE OF THE PLAN

Angiotech Pharmaceuticals, Inc. (the “Company”) hereby establishes a stock option plan for directors, officers and Service Providers (as defined below) of the Company and its subsidiaries, to be known as the “Angiotech Stock Option Plan” (the “Plan”). The purpose of the Plan is to give to directors, officers and Service Providers the opportunity to participate in the profitability of the Company by granting to such individuals options, exercisable over periods of up to five years as determined by the Board, to buy shares of the Company at a price at least equal to the market price prevailing on the date the option is granted.

2.

DEFINITIONS

In this Plan, the following terms shall have the following meanings:

2.1

“Associate” means an associate as defined in the Securities Act.

2.2

“Board” means the board of directors of the Company and any committees of the board of directors to which any or all authority, rights, powers, and discretion with respect to the Plan has been delegated.

2.3

“Change of Control” means the acquisition by any person or by any person and a Joint Actor, whether directly or indirectly, of voting securities of the Company, which, when added to all other voting securities of the Company at the time held by such person or by such person and a Joint Actor, totals for the first time not less than twenty percent (20%) of the outstanding voting securities of the Company.

2.4

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

2.5

“Company” means Angiotech Pharmaceuticals, Inc. and its successors.

2.6

“Disability” means any disability with respect to an Optionee which the Board, in its sole and unfettered discretion, considers likely to prevent permanently the Optionee from:

(a)

being employed or engaged by the Company, its subsidiaries or another employer, in a position the same as or similar to that in which he was last employed or engaged by the Company or its subsidiaries; or

(b)

acting as a director or officer of the Company or its subsidiaries, or

(c)

engaging in any substantial gainful activity by reason of any medically determinable mental or physical impairment that can be expected to result in death or which has lasted or can be expected to last a continual period of not less than 12 months.

IRWIN,WHITE & JENNINGS – ANGIOTECH 2004 STOCK OPTION PLAN

-2-

2.7

“Employee” means any person, including officers and directors, who is or is deemed to be an employee of the Company or any parent or subsidiary corporation of the Company.

2.8

“Exchange” means The Toronto Stock Exchange or, if the Shares are not listed on The Toronto Stock Exchange, on such other stock exchange on which the Shares are listed.

2.9

“Expiry Date” means the date set by the Board under Section 3.1 of the Plan, as the last date on which an Option may be exercised.

2.10

“Good Reason” means a situation where a Service Provider:

(a)

has incurred a material reduction in his or her authority or responsibility;

(b)

has incurred one or more reductions in his or her base compensation in the cumulative amount of five percent (5%) or more; or

(c)

has been notified that his principal place of work will be relocated by a distance of 80 kilometers or more, unless such new principal place of work is within 80 kilometers from his or her then current residence.

2.11

“Grant Date” means the date specified in an Option Agreement as the date on which an Option is granted.

2.12

“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

2.13

“Insider” means:

(a)

an insider as defined in the Securities Act, other than a person who is an insider solely by virtue of being a director or senior officer of a subsidiary of the Company; and

(b)

an Associate of any person who is an insider under Subsection 2.13(a).

2.14

“Involuntary Termination” means:

(a)

the termination of a Service Provider’s employment or engagement by the Company, for any reason other than Cause or Disability, within the first 12 month period following a Change of Control; or

(b)

the voluntary resignation of a Service Provider for Good Reason within the first 12 month period following a Change of Control.

2.15

“Joint Actor” means a person acting jointly or in concert with an offeror, as defined in Section 91 of the Securities Act.

2.16

“Market Price” of Shares at any Grant Date means (i) the closing price per Share on The Toronto Stock Exchange for the last day Shares were traded prior to the Grant Date; or (ii) if the Shares are not listed on The Toronto Stock Exchange, the closing price per Share on such stock exchange on which the Shares are listed for the last day Shares were traded prior to the Grant Date, or (iii) if the Shares are not listed on any stock exchange, the price per Share on the over-the-counter market determined by dividing the aggregate sale price of the Shares sold by the total number of such Shares so sold on the applicable market for the last day prior to the Grant Date.

IRWIN,WHITE & JENNINGS – ANGIOTECH 2004 STOCK OPTION PLAN

-3-

2.17

“Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

2.18

“Option” means an option to purchase Shares granted pursuant to this Plan.

2.19

“Option Agreement” means an agreement, in the form attached hereto as Schedule “A”, whereby the Company grants to an Optionee an Option.

2.20

“Option Price” means the price per Share specified in an Option Agreement, adjusted from time to time in accordance with the provisions of Section 5.

2.21

“Option Shares” means the aggregate number of Shares which an Optionee may purchase under an Option.

2.22

“Optionee” means each of the directors, officers and Service Providers granted an Option pursuant to this Plan and their heirs, executors and administrators and, subject to the policies of the Exchange, an Optionee may also be a corporation wholly-owned by an individual eligible for an Option grant pursuant to this Plan.

2.23

“Plan” means this Angiotech 2004 Stock Option Plan.

2.24

“Securities Act” means the Securities Act, R.S.O. 1990, c.S.5, as amended, as at the date hereof.

2.25

“Service Provider” means:

(a)

an employee or Insider of the Company or any of its subsidiaries;

(b)

any other person or company engaged to provide ongoing management or consulting services for the Company, or for any entity controlled by the Company; and

(c)

any person who is providing ongoing management or consulting services to the Company or to any entity controlled by the Company indirectly through a company that is a Service Provider under Subsection 2.25(b); and

“Service Providers” means more than one (1) Service Provider.

2.26

“Shares” means the Common shares in the capital stock of the Company as constituted on the date of this Plan provided that, in the event of any adjustment pursuant to Section 5, “Shares” shall thereafter mean the shares or other property resulting from the events giving rise to the adjustment.

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2.27

“Unissued Option Shares” means the number of Shares, at a particular time, which have been allotted for issuance upon the exercise of an Option but which have not been issued, as adjusted from time to time in accordance with the provisions of Section 5, such adjustments to be cumulative.

2.28

“Vested” means that an Option has become exercisable in respect of a number of Option Shares by the Optionee pursuant to the terms of the Option Agreement.

2.29

“2001 Plan” means the Company’s 2001 Stock Option Plan adopted by the shareholders of the Company on March 6, 2001.

3.

GRANT OF OPTIONS

3.1

Option Terms

The Board may from time to time authorize the issue of Options to directors, officers and Service Providers of the Company and its subsidiaries on the terms and subject to the conditions set out in this Plan and any additional terms and conditions imposed by the Company and set out in the Option Agreement. Notwithstanding any terms imposed by the Company, the Option Price under each Option shall be not less than the Market Price on the Grant Date, the Expiry Date for each Option shall be set by the Board at the time of issue of the Option and shall not be more than five years after the Grant Date, and Options shall not be assignable (or transferable) by the Optionee. For greater clarity, the Board shall not be permitted to amend the Option Price except as set out in Section 5 of this Plan.

3.2

Limits on Shares Issuable on Exercise of Options

The maximum number of Shares which may be issuable pursuant to options granted under the Plan and the 2001 Plan shall be 4,980,135, subject to section 5.1, or such additional amount as may be approved from time to time by the shareholders of the Company. The number of shares issuable to any one Optionee under the Plan, together with all of the Company's other previously established or proposed share compensation arrangements, shall not exceed 5% of the total number of issued and outstanding shares on a non-diluted basis. The number of Shares which may be reserved for issue pursuant to options granted to Insiders under the Plan, together with all of the Company's other previously established and outstanding or proposed share compensation arrangements, in aggregate, shall not exceed 20% of the total number of issued and outstanding Shares on a non-diluted basis. The number of Shares which may b e issuable under the Plan, together with all of the Company's other previously established and outstanding or proposed share compensation arrangements, within a one-year period:

(a)

in aggregate shall not exceed 20% of the outstanding issue; and

(b)

to any one Optionee who is an Insider and any Associates of such Insider, shall not exceed 5% of the outstanding issue.

For the purposes of this section, Shares issued pursuant to an entitlement granted prior to the grantee becoming an Insider may be excluded in determining the number of Shares issuable to Insiders. For the purposes of Subsections 3.2(a) and 3.2(b) above, “outstanding issue” is determined on the basis of the number of Shares that are outstanding immediately prior to the Share issuance in question, excluding Shares issued pursuant to Share compensation arrangements over the preceding one-year period.

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3.3

Option Agreements

Each Option shall be confirmed by the execution of an Option Agreement. Each Optionee shall have the option to purchase from the Company the Option Shares at the time and in the manner set out in the Plan and in the Option Agreement applicable to that Optionee. The execution of an Option Agreement shall constitute conclusive evidence that it has been completed in compliance with this Plan.

3.4

Accelerated Vesting

If at any time there is an Involuntary Termination of a Service Provider, the terms of Vesting applicable to any Options granted to the Service Provider shall be deemed to be satisfied and the Options shall be deemed to have been Vested. The Company may, by resolution of the Board, reduce or eliminate the terms of Vesting on any existing Options.

3.5

Certain Limitations Regarding Incentive Stock Options.

Incentive Stock Options shall be granted only to an individual who is an Employee and shall be subject to the following special limitations:

(a)

Limitation on Amount of Grants. As to all Incentive Stock Options granted under the terms of this Plan, to the extent that the aggregate fair market value of the stock (determined at the time the Incentive Stock Option is granted) with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under this Plan and all other incentive stock option plans of the Company, a related corporation or a predecessor corporation) exceeds $100,000, such options shall be treated as Nonstatutory Stock Options. The previous sentence shall not apply if the US Internal Revenue Service issues a public rule, issues a private ruling to the Company, any Optionee or any legatee, personal representative or distributee of an Optionee or issues regulations changing or eliminating such annual limit. No such limitation shall apply to Nonstatutory Stock Options.

(b)

Grants to Ten Percent Shareholders. Incentive Stock Options may be granted a person owning more than 10% of the total combined voting power of all classes of stock of the Company and any parent or subsidiary corporation only if (i) the exercise price is at least 110% of the fair market value of the stock at the time of grant, and (ii) the option is not exercisable after the expiration of five years from the date of grant.

(c)

Notice of Disposition. Any Option which is issued as an Incentive Stock Option under this Plan, shall, notwithstanding any other provisions of this Plan or the terms of the Option to the contrary, contain all of the terms, conditions, restrictions, rights and limitations required to be an Incentive Stock Option, and any provision to the contrary shall be disregarded. The Board of Directors may require an Optionee to give the Company prompt notice of any disposition of Shares acquired by the exercise of an Incentive Stock Option prior to the expiration of two years after the Grant Date and one year from the date of exercise.

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(d)

Taxation of Incentive Stock Options. In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Optionee must hold the shares issued upon the exercise of an Incentive Stock Option for a minimum of two years after the date of grant of the Incentive Stock Option and one year from the date of exercise. An Optionee may be subject to U.S. alternative minimum tax at the time of exercise of an Incentive Stock Option.

3.6

Automatic Grants to non-Employee Directors

(a)

Each person who is or becomes a non-Employee director of the Company will automatically be granted, as of the date of such appointment or election, an option to purchase 10,000 Shares (the “Base Option”), provided that, within the one year prior to the date he or she became a non-Employee director, he or she had not been granted any other stock option by the Company (or an affiliate). On a semi annual basis thereafter, occurring at the time of the annual general meeting of the Company and December 1 each year, if he or she continues to be a non-Employee director of the Company, he or she will automatically be granted on each occurrence a further option to purchase 5,000 Shares. All options granted under this section shall be exercisable for a period of five years from the Grant Date (except as reduced in accordance with this Plan).

(b)

Notwithstanding the provisions for automatic grants of options set forth in section (a) above, if any particular automatic grant of an option would violate the requirements of Section 3.2 hereof, then the grant of such option shall be postponed until such time as the option can be granted without any violation of the provisions of this Plan.

4.

EXERCISE OF OPTION

4.1

 When Options May be Exercised

Subject to Sections 4.3 and 4.4, an Option may be exercised to purchase any number of Shares up to the number of Unissued Option Shares that have Vested at any time after the Grant Date up to 5:00 p.m. Vancouver time on the Expiry Date and shall not be exerciseable thereafter.

4.2

Manner of Exercise

The Option shall be exercisable by delivering to the Company a notice specifying the number of Shares in respect of which the Option is exercised together with payment in full of the Option Price for each such Share. Upon notice and payment there will be a binding contract for the issue of the Shares in respect of which the Option is exercised, upon and subject to the provisions of the Plan. Delivery of the Optionee's cheque payable to the Company in the amount of the Option Price shall constitute payment of the Option Price unless the cheque is not honoured upon presentation in which case the Option shall not have been validly exercised.

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4.3

Vesting of Option Shares

The Board may determine and impose terms upon which each Option shall become Vested in respect of Option Shares.

4.4

Termination of Employment or Affiliation

If an Optionee ceases to be a director, officer or Service Provider of the Company, his or her Option shall be exercisable as follows:

(a)

Death, Disability or Retirement. If the Optionee ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company, due to his or her death, Disability or retirement in accordance with the Company’s retirement policy in force from time to time, or, in the case of an Optionee that is a company, the death, Disability or retirement of the person who provides management or consulting services to the Company or to any entity controlled by the Company, the Option then held by the Optionee shall be exercisable to acquire Unissued Option Shares that have Vested at any time up to but not after the earlier of:

(i)

365 days after the date of death, Disability or retirement; and

(ii)

the Expiry Date;

(b)

Termination For Cause. If the Optionee, or the Optionee’s employer in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in Subsection 2.25(c), ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company as a result of termination for cause, as that term is interpreted by the courts of the jurisdiction in which the Optionee, any outstanding Option held by such Optionee on the date of such termination, whether in respect of Option Shares that are Vested or not, shall be cancelled as of the date of delivery of written notice of termination (and specifically without regard to the date any period of reasonable notice, if any, would expire).

(c)

Early Retirement, Voluntary Resignation or Termination Other than For Cause. If the Optionee, or the Optionee’s employer in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in Subsection 2.25(c), ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company due to his or her retirement at the request of his or her employer earlier than the normal retirement date under the Company’s retirement policy then in force, or due to his or her termination by the Company other than for cause, or due to his or her voluntary resignation, the Option then held by the Optionee shall be exercisable, subject to paragraph (d), to acquire Unissued Option Shares that have Vested at any time up to but not after the earlier of (i) the Expiry Date (ii) the date which is 30 days after the Optionee, or the Optionee’s employer in the ca se of an Option granted to an Optionee who falls under the definition of Service Provider set out in Subsection 2.25(c), the Optionee’s employer, ceases active employment as a director, officer or Service Provider of the Company or a subsidiary of the Company, and (iii) 30 days after the date of delivery of written notice of retirement, resignation or termination (and specifically without regard to the date any period of reasonable notice, if any, would expire).

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(d)

Blackout Period Allowance. For greater certainty, if at the time the Optionee ceases to be a director, officer or Service Provider due to early retirement, voluntary resignation or termination by the Company other than for cause there is a Blackout Period, or if at any time during the 30 day period set out in paragraphs 4.4(c)(ii) and (iii), there is a Blackout Period, then in calculating the time that the Option then held by the Optionee shall be exercisable to acquire any Unissed Option Shares that have Vested, the 30 days shall be in addition to any such Blackout Period. For the purposes of this Subsection 4.4 (d), “Blackout Period” means an interval of time during which the Company has determined that no Service Provider may trade any securities of the Company because they may be in possession of confidential information.

For greater certainty, an Option that had not become Vested in respect of certain Unissued Option Shares at the time that the relevant events referred to in Subsections 4.4 (a), (b), (c) or (d) occurred, shall not be or become exercisable in respect of such Unissued Option Shares and shall be cancelled.

Optionees who wish to rely on Subsection 4.4(a) upon retirement are alerted to the fact that in order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Optionee must, nothwithstanding the time period provided herein, exercise their Options not later than three months after ceasing active employment with the Company or a subsidiary of the Company.

4.5

Effect of a Take-Over Bid

If a bona fide offer (an “Offer”) for Shares is made to the Optionee or to shareholders of the Company generally or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in part, would result in the offeror becoming a control person of the Company, within the meaning of Subsection 1(1) of the Securities Act, the Company shall, immediately upon receipt of notice of the Offer, notify each Optionee of full particulars of the Offer, whereupon all Option Shares subject to such Option will become Vested and the Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to tender the Option Shares received upon such exercise pursuant to the Offer. However, if:

(a)

the Offer is not completed within the time specified therein; or

(b)

all of the Option Shares tendered by the Optionee pursuant to the Offer are not taken up or paid for by the offeror in respect thereof,

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then the Option Shares received upon such exercise, or in the case of Subsection 4.5(b) above the Option Shares that are not taken up and paid for, shall be returned by the Optionee to the Company and reinstated as authorized but unissued Shares and, with respect to such returned Option Shares, the Option shall be reinstated as if it had not been exercised and the terms for such Option Shares becoming Vested shall be reinstated pursuant to Section 4.3. If any Option Share are returned to the Company under this Section 4.5, the Company shall immediately refund the exercise price to the Optionee for such Option Shares.

4.6

Acceleration of Expiry Date

If at any time when an Option granted under the Plan remains unexercised with respect to any Unissued Option Shares, an Offer is made by an offeror, the Board may, upon notifying each Optionee of full particulars of the Offer, declare that all Option Shares issuable upon the exercise of Options granted under the Plan be Vested and accelerate the Expiry Date for the exercise of all unexercised Options granted under the Plan so that all Options will either be exercised or expire prior to the date upon which Shares must be tendered pursuant to the Offer.

4.7

Effect of a Change of Control

If a Change of Control occurs, all Option Shares subject to each outstanding Option will become Vested, whereupon such Option may be exercised in whole or in part by the Optionee.

4.8

Exclusion From Severance Allowance, Retirement Allowance or Termination Settlement

If the Optionee, or the Optionee’s employer in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in Subsection 2.25(c), retires, resigns or is terminated from employment or engagement with the Company or any subsidiary of the Company, the loss or limitation, if any, pursuant to the Option Agreement with respect to the right to purchase Option Shares which were not Vested at that time or which, if Vested, were cancelled, shall not give rise to any right to damages and shall not be included in the calculation of nor form any part of any severance allowance, retiring allowance or termination settlement of any kind whatsoever in respect of such Optionee.

4.9

Shares Not Acquired

Any Unissued Option Shares not acquired by an Optionee under an Option which has expired may be made the subject of a further Option pursuant to the provisions of the Plan.

5.

ADJUSTMENT OF OPTION PRICE AND NUMBER OF OPTION SHARES

5.1

Share Reorganization

Whenever the Company issues Shares to all or substantially all holders of Shares by way of a stock dividend or other distribution, or subdivides all outstanding Shares into a greater number of Shares, or combines or consolidates all outstanding Shares into a lesser number of Shares (each of such events being herein called a “Share Reorganization”), then effective immediately after the record date for such dividend or other distribution or the effective date of such subdivision, combination or consolidation, for each Option:

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(a)

the Option Price will be adjusted to a price per Share which is the product of:

(i)

the Option Price in effect immediately before that effective date or record date; and

(ii)

a fraction the numerator of which is the total number of Shares outstanding on that effective date or record date before giving effect to the Share Reorganization, and the denominator of which is the total number of Shares that are or would be outstanding immediately after such effective date or record date after giving effect to the Share Reorganization; and

(b)

the number of Unissued Option Shares will be adjusted by multiplying (i) the number of Unissued Option Shares immediately before such effective date or record date by (ii) a fraction which is the reciprocal of the fraction described in paragraph 5.1 (a)(ii).

5.2

Special Distribution

Subject to the prior approval of the Exchange, whenever the Company issues by way of a dividend or otherwise distributes to all or substantially all holders of Shares;

(a)

shares of the Company, other than the Shares;

(b)

evidences of indebtedness;

(c)

any cash or other assets, excluding cash dividends (other than cash dividends which the Board has determined to be outside the normal course); or

(d)

rights, options or warrants;

then to the extent that such dividend or distribution does not constitute a Share Reorganization (any of such non-excluded events being herein called a “Special Distribution”), and effective immediately after the record date at which holders of Shares are determined for purposes of the Special Distribution, for each Option the Option Price will be reduced, and the number of Unissued Option Shares will be correspondingly increased, by such amount, if any, as is determined by the Board in its sole and unfettered discretion to be appropriate in order to properly reflect any diminution in value of the Shares as a result of such Special Distribution.

5.3

Corporate Organization

Whenever there is:

(a)

a reclassification of outstanding Shares, a change of Shares into other shares or securities, or any other capital reorganization of the Company, other than as described in Sections 5.1 or 5.2;

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(b)

a consolidation, merger or amalgamation of the Company with or into another corporation resulting in a reclassification of outstanding Shares into other shares or securities or a change of Shares into other shares or securities; or

(c)

a transaction whereby all or substantially all of the Company's undertaking and assets become the property of another corporation;

(any such event being herein called a “Corporate Reorganization”) the Optionee will have an option to purchase (at the times, for the consideration and subject to the terms and conditions set out in the Plan) and will accept on the exercise of such option, in lieu of the Unissued Option Shares which he or she would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that he or she would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, he or she had been the holder of all Unissued Option Shares or, if appropriate, as otherwise determined by the Board.

5.4

Determination of Option Price and Number of Unissued Option Shares

If any questions arise at any time with respect to the Option Price or number of Unissued Option Shares deliverable upon exercise of an Option following a Share Reorganization, Special Distribution or Corporate Reorganization, such questions shall be conclusively determined by the Company’s auditors or, if the Company’s auditors decline to so act, any other firm of Chartered Accountants in Vancouver, British Columbia that the Board may designate and who will have access to all appropriate records, and such determination will be binding upon the Company and all Optionees.

5.5

Regulatory Approval

Any adjustment to the Option Price or the number of unissued Option Shares purchasable under the Plan pursuant to the operation of any one of Sections 5.1, 5.2 or 5.3 is subject to the approval of the Exchange and any other governmental authority having jurisdiction. The Company acknowledges that, for the pupose of certain Optionees obtaining certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, no adjustments provided in this Section 5 will result in the excess aggregate value of the outstanding Incentive Stock Options under Section 422 of the Code, after the adjustments provided for in this Section 5 having occurred, being greater than the excess aggregate value of the outstanding Incentive Stock Options before the adjustments provided for in this Section 5 are made, and the adjustments provided for in this Section 5 do not give the Optionee any addition al benefits that he or she did not have before the adjustments provided for in this Section 5 were made.

6.

MISCELLANEOUS

6.1

Right to Employment

Neither this Plan nor any of the provisions hereof shall confer upon any Optionee any right with respect to employment, engagement or appointment or continued employment, engagement or appointment with the Company or any subsidiary of the Company or interfere in any way with the right of the Company or any subsidiary of the Company to terminate such employment, engagement or appointment.

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6.2

Necessary Approvals

The Plan shall be effective only upon the approval of the shareholders of the Company at the extraordinary general meeting of the Company’s shareholders on January 20, 2004. The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to the approval of the Exchange and any governmental authority having jurisdiction. If any Shares cannot be issued to any Optionee for any reason, including, without limitation, the failure to obtain such approval, then the obligation of the Company to issue such Shares shall terminate and any Option Price paid by an Optionee to the Company shall be immediately refunded to the Optionee by the Company.

6.3

Administration of the Plan

The Board shall, without limitation, have full and final authority in its discretion, but subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and to make all other determinations deemed necessary or advisable in respect of the Plan. Except as set forth in Section 5.4, the interpretation and construction of any provision of the Plan by the Board shall be final and conclusive. Administration of the Plan shall be the responsibility of the appropriate officers of the Company and all costs in respect thereof shall be paid by the Company.

6.4

Income Taxes

As a condition of and prior to participation in the Plan, any Optionee shall on request authorize the Company in writing to withhold from any remuneration otherwise payable to him or her any amounts required by any taxing authority to be withheld for taxes of any kind as a consequence of his or her participation in the Plan.

6.5

Amendments to the Plan

The Board may from time to time, subject to applicable law and to the prior approval, if required, of the Exchange or any other regulatory body having authority over the Company or the Plan, suspend, terminate or discontinue the Plan at any time, or amend or revise the terms of the Plan or of any Option granted under the Plan and the Option Agreement relating thereto, provided that no such amendment, revision, suspension, termination or discontinuance shall in any manner adversely affect any Option previously granted to an Optionee under the Plan without the consent of that Optionee. Nothwithstanding this Section 6.5, the Board shall not be permitted to amend the Option Price except as set out in Section 5 of this Plan.

6.6

2001 Stock Option Plan

All option agreements entered into under the 2001 Plan shall continue to be governed by the terms of the 2001 Plan. Under the 2001 Plan, 3,827,200 Shares were issuable upon exercise of the options granted under the 2001 Plan as at the time grants under the 2001 Plan ceased, being the effective date of this Plan.

6.7

Form of Notice

A notice given to the Company shall be in writing, signed by the Optionee and delivered to the Secretary of the Company.

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6.8

No Representation or Warranty

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

6.9

Compliance with Applicable Law

If any provision of the Plan or any Option Agreement contravenes any law or any order, policy, by-law or regulation of any regulatory body or Exchange having authority over the Company or the Plan, then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

6.10

No Assignment

No Optionee may assign any of his or her rights under the Plan.

6.11

Rights of Optionees

An Optionee shall have no rights whatsoever as a shareholder of the Company in respect of any of the Unissued Option Shares (including, without limitation, voting rights or any right to receive dividends, warrants or rights under any rights offering).

6.12

Conflict

In the event of any conflict between the provisions of this Plan and an Option Agreement, the provisions of this Plan shall govern.

6.13

Governing Law

The Plan and each Option Agreement issued pursuant to the Plan shall be governed by the laws of the Province of British Columbia.

6.14

Time of Essence

Time is of the essence of this Plan and of each Option Agreement. No extension of time will be deemed to be, or to operate as, a waiver that time is to be of the essence.

6.15

Entire Agreement

This Plan and the Option Agreement sets out the entire agreement between the Company and the Optionees relative to the subject matter hereof and supersedes all prior agreements, undertakings and understandings, whether oral or written.

Approved at the Extraordinary General Meeting of the Company on January 20, 2004.

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SCHEDULE “A”

ANGIOTECH PHARMACEUTICALS, INC.

2004 STOCK OPTION PLAN

OPTION AGREEMENT

This Option Agreement is entered into between Angiotech Pharmaceuticals, Inc. (“the Company”) and the Optionee named below pursuant to the Company 2004 Stock Option Plan (the “Plan”), a copy of which is attached hereto, and confirms that:

1.

on _________________, ______ (the “Grant Date”);

2.

________________________________ (the “Optionee”);

3.

was granted the option (the “Option”) to purchase ____________ Common Shares (the “Option Shares”) of the Company;

4.

for the price (the “Option Price”) of $__________ per share;

5.

which shall be exercisable (“Vested”) in whole or in part in the following amounts on or after the following dates:

_________________________________________________________________.

6.

terminating on the ______________________, ________ (the “Expiry Date”);

7.

on the terms and subject to the conditions set out in the Plan and the following conditions imposed by the Board:

_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

For greater certainty, once Option Shares have become Vested, they continue to be exercisable until the termination or cancellation thereof as provided in this Option Agreement and the Plan.

The Optionee acknowledges that while the Plan does not permit Options representing more than 5% of the issued and outstanding shares of the Company on a non-diluted basis be granted to an Insider, the Insider may, because of other shareholdings, hold more than 10% of the Company’s issued and outstanding shares. The Optionee further acknowledges that in the event the Optionee owns more than 10% of the Company’s issued and outstanding shares, the Optionee may be a “specified shareholder” as defined in the Income Tax Act (Canada) R.S.C. 1985, c.1 (5th Supp.) (the “Act”) and that one consequence of “specified shareholder” status is that the Optionee will not be able to defer tax on the employee stock option benefit upon the exercise of his or her Options, as otherwise provided by draft amendments to the Act released on December 21, 2000.

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By signing this Option Agreement, the Optionee acknowledges that the Optionee has read and understands the Plan and agrees to the terms and conditions of the Plan and this Option Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Option Agreement as of the _____ day of ______________, ___________.

________________________________	ANGIOTECH PHARMACEUTICALS, INC.
OPTIONEE
	By:_______________________________
	Authorized Signatory
	By: ____________________________
	Authorized Signatory

IRWIN,WHITE & JENNINGS – ANGIOTECH 2004 STOCK OPTION PLAN

EX-10.28

Exhibit 10.28

ANGIOTECH PHARMACEUTICALS, INC. 2006

STOCK INCENTIVE PLAN

1.

PURPOSE OF THE PLAN

Angiotech Pharmaceuticals, Inc. (the “Company”) hereby establishes a stock incentive plan for directors, officers and Service Providers (as defined below) of the Company and its Related Entities, to be known as the “Angiotech Stock Incentive Plan” (the “Plan”). The purpose of the Plan is to promote the long-term success of the Company by providing Participants a proprietary interest in the Company and thereby encourage those people to perform their duties to the best of their abilities and to devote their business time and efforts to further the growth and development of the Company. The Plan is also intended to assist the Company in attracting and retaining individuals with superior experience and ability.

2.

DEFINITIONS

In this Plan, the following terms shall have the following meanings:

2.1

“Associate” means an associate as defined in the Securities Act.

2.2

“Award” means an award of Options or Tandem SARs granted to a Participant under the Plan.

2.3

“Award Agreement” means an agreement, in the form attached hereto as Schedule “A”, whereby the Company grants to a Participant an Option and a Tandem SAR.

2.4

“Award Shares” means the aggregate number of Shares which a Participant may purchase under an Award.

2.5

“Blackout Period” means an interval of time during which the Company has determined that one or more Participants may not trade any securities of the Company because they may be in possession of confidential information pertaining to the Company.

2.6

“Board” means the board of directors of the Company and any committees of the board of directors to which any or all authority, rights, powers, and discretion with respect to the Plan has been delegated.

2.7

“Change of Control” means the acquisition by any person or by any person and a Joint Actor, whether directly or indirectly, of voting securities of the Company, which, when added to all other voting securities of the Company at the time held by such person or by such person and a Joint Actor, totals for the first time not less than twenty percent (20%) of the outstanding voting securities of the Company.

2.8

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

2.9

“Company” means Angiotech Pharmaceuticals, Inc. and its successors.

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2.10

“Disability” means any disability with respect to a Participant which the Board, in its sole and unfettered discretion, considers likely to prevent permanently the Participant from:

(a)

being employed or engaged by the Company, its Related Entities or another employer, in a position the same as or similar to that in which he was last employed or engaged by the Company or its Related Entities; or

(b)

acting as a director or officer of the Company or its Related Entities, or

(c)

engaging in any substantial gainful activity by reason of any medically determinable mental or physical impairment that can be expected to result in death or which has lasted or can be expected to last a continual period of not less than 12 months.

2.11

“Effective Date” means the date specified in an Award Agreement as the date on which an Award shall take effect, provided that the Effective Date shall not be a date prior to the date the Board determines an Award shall be made and, unless otherwise specified by the board, the Effective Date shall be the date the board determines an Award shall be made.

2.12

“Employee” means any person, including officers and directors, who is or is deemed to be an employee of the Company or any parent or subsidiary corporation of the Company.

2.13

“Expiry Date” means the date set by the Board under Section 5.2 of the Plan as the last date on which an Option may be exercised.

2.14

“Good Reason” means a situation where a Participant:

(a)

has incurred a material reduction in his or her authority or responsibility;

(b)

has incurred one or more reductions in his or her base compensation in the cumulative amount of five percent (5%) or more; or

(c)

has been notified that his principal place of work will be relocated by a distance of 80 kilometers or more, unless such new principal place of work is within 80 kilometers from his or her then current residence.

2.15

“Incentive Stock Option” means an Option intended to qualify as an incentive stock Option within the meaning of Section 422 of the Code (or any successor provision).

2.16

“Insider” means:

(a)

an insider as defined in the Securities Act, other than a person who is an insider solely by virtue of being a director or senior officer of a subsidiary of the Company; and

(b)

an Associate of any person who is an insider under Subsection 2.16(a).

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2.17

“Involuntary Termination” means:

(a)

the termination of a Participant’s employment or engagement by the Company, for any reason other than Cause or Disability, within the first 12 month period following a Change of Control; or

(b)

the voluntary resignation of a Participant for Good Reason within the first 12 month period following a Change of Control.

2.18

“Joint Actor” means a person acting jointly or in concert with an offeror, as defined in Section 91 of the Securities Act.

2.19

“Market Price” of Shares at any relevant date means, at the election of the Board (i) the Canadian dollar closing price per Share on the TSX for the last day Shares were traded prior to that relevant date; or (ii) the United States dollar closing price per Share on NASDAQ for the last day Shares were traded prior to that relevant date. If the Shares are not listed on the TSX or NASDAQ, the closing price per Share on such stock exchange with the largest trading volume of Shares on the relevant date for the last day Shares were traded prior to that relevant date.

2.20

“NASDAQ” means The Nasdaq Stock Market.

2.21

“Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

2.22

“Option” means an incentive stock option to purchase a Share granted pursuant to this Plan.

2.23

“Participant” means each of the directors, officers and Service Providers granted an Award pursuant to this Plan and their heirs, executors and administrators and, subject to the policies of the TSX, a Participant may also be a corporation wholly-owned by an individual eligible for an Award grant pursuant to this Plan.

2.24

“Plan” means this Angiotech 2006 Stock Incentive Plan, as it may be amended and in effect from time to time.

2.25

“Prior Plans” means the Company’s 2001 Stock Option Plan adopted by the shareholders of the Company on March 6, 2001 and the Company’s 2004 Stock Option Plan adopted by the shareholders of the Company on January 20, 2004.

2.26

“Prior Plans Available Shares” means the 8,937,756 Shares issued and issuable as at April 28, 2006 under the Prior Plans.

2.27

“Related Entities” means those persons that control or are controlled by the Company or that are controlled by the same person that controls the Company;

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2.28

“Securities Act” means the Securities Act, R.S.O. 1990, c.S.5, as amended, as at the date hereof.

2.29

“Service Provider” means:

(a)

an employee or Insider of the Company or any of its Related Entities;

(b)

any other person or company engaged to provide ongoing management or consulting services for the Company, or for any entity controlled by the Company; and

(c)

any person who is providing ongoing management or consulting services to the Company or to any entity controlled by the Company indirectly through a company that is a Service Provider under Subsection 2.29(b); and

“Service Providers” means more than one (1) Service Provider.

2.30

“Shares” means the Common shares in the capital stock of the Company as constituted on the date of this Plan provided that, in the event of any adjustment pursuant to Section 7, “Shares” shall thereafter mean the shares or other property resulting from the events giving rise to the adjustment.

2.31

“Subscription Price” means, (i) with respect to an Option, the price payable by a Participant to purchase one Share on exercise of such Option, which shall not be less than 100 percent of the Market Price of a Share on the Effective Date of the grant of the Option and (ii) with respect to a Tandem SAR, the Subscription Price applicable to the Option to which the Tandem SAR relates, in each such case, subject to adjustment pursuant to Section 7.

2.32

“Tandem SAR” means a right, granted pursuant to Section 6, representing the right, granted in tandem with an Option, to receive upon the exercise thereof payment Shares or a portion thereof on the terms and conditions and calculated in accordance with the provisions of Section 6.

2.33

“TSX” means The Toronto Stock Exchange.

2.34

“Unissued Award Shares” means the number of Shares, at a particular time, which has been allotted for issuance upon the exercise of an Award but which have not been issued, as adjusted from time to time in accordance with the provisions of Section 7, such adjustments to be cumulative.

2.35

“Vested” means that an Option has become exercisable in respect of a number of Award Shares by the Participant pursuant to the terms of the Award Agreement, subject to any confidentiality, non-competition or non-solicitation obligations or severance agreements.

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3.

SHARES SUBJECT TO THE PLAN

3.1

Aggregate Plan Limits

The maximum number of Shares which may be issuable pursuant to Awards granted under the Plan shall be the sum of (i) 5,000,000 and (ii) the Prior Plan Available Shares (being 8,937,756 Shares), subject to adjustment pursuant to Section 7, or such additional amount as may be approved from time to time by the shareholders of the Company. Any adjustment pursuant to Section 7 to the limitation on the number of Shares available for Awards of Incentive Stock Options shall be consistent with the requirements of Section 425 of the Code (or any successor provision).

3.2

Certain Additional Limits

The number of Shares issuable to any one Participant under the Plan, together with all of the Company's other previously established or proposed share compensation arrangements, shall not exceed 5% of the total number of issued and outstanding shares on a non-diluted basis. The number of Shares which may be reserved for issue pursuant to Options granted to Insiders under the Plan, together with all of the Company's other previously established and outstanding or proposed share compensation arrangements, in aggregate, shall not exceed 20 % of the total number of issued and outstanding Shares on a non-diluted basis. The number of Shares which may be issuable under the Plan, together with all of the Company's other previously established and outstanding or proposed share compensation arrangements, within a one-year period:

(a)

in aggregate shall not exceed 20 % of the outstanding issue; and

(b)

to any one Participant who is an Insider and any Associates of such Insider, shall not exceed 5% of the outstanding issue.

For the purposes of this Section 3.2, Shares issued pursuant to an entitlement granted prior to the grantee becoming an Insider may be excluded in determining the number of Shares issuable to Insiders. For the purposes of Subsections 3.1(a) and 3.1(b) above, “outstanding issue” is determined on the basis of the number of Shares that are outstanding immediately prior to the Share issuance in question, excluding Shares issued pursuant to Share compensation arrangements over the preceding one-year period.

3.3

Computation of Available Shares.

For purposes of computing the total number of Shares available for grant under the Plan, Shares subject to any Award (or any portion thereof) that has expired or is forfeited, surrendered, cancelled or otherwise terminated prior to the issuance or transfer of such Shares and Shares subject to an Award (or any portion thereof) that is settled in cash in lieu of settlement in Shares shall again be available for grant under the Plan. Notwithstanding the foregoing, any Shares subject to an Award that are withheld or otherwise not issued (upon either an exercise of any Option or Tandem SAR or any settlement of any Award) in order to satisfy the Participant’s withholding obligations or in payment of any Subscription Price shall reduce the number of Shares available for grant under the limitations set forth in this Section 3.

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3.4

Source of Shares.

Shares delivered to Participants in connection with the exercise or settlement of Awards shall be Shares allotted but unissued by the Board. From time to time, the Board shall allot for issuance such number of Shares as may be necessary to permit the Company to meet its obligations under the Plan.

4.

TERMS OF AWARDS IN GENERAL

4.1

Award Agreements

Each Award shall be confirmed by the execution of an Award Agreement, substantially in the form attached as Schedule “A” to this Plan, as amended by the Board from time to time. Each Participant shall have the right to purchase from the Company the Award Shares at the time and in the manner set out in the Plan and in the Award Agreement applicable to that Participant. The execution of an Award Agreement shall constitute conclusive evidence that it has been completed in compliance with this Plan.

4.2

Vesting Conditions

The Board may determine and impose terms upon which each Award shall become Vested. If at any time there is an Involuntary Termination of a Participant, the terms of Vesting applicable to any Awards granted to the Participant shall be deemed to be satisfied and the Awards shall be deemed to have been Vested. The Company may, by resolution of the Board, reduce or eliminate the terms of Vesting on any existing Awards.

4.3

No Repricing.

The Subscription Price for Shares subject to any Award of Options and any related Tandem SARs may not be reduced after the Effective Date of the Award thereof, either directly or indirectly, without prior shareholder approval, except for adjustments pursuant to Section 7 of the Plan.

4.4

Exclusion From Severance Allowance, Retirement Allowance or Termination Settlement

If the Participant, or the Participant’s employer in the case of an Award granted to a Participant who falls under the definition of Service Provider set out in Subsection 2.29(c), retires, resigns or is terminated from employment or engagement with the Company or any subsidiary of the Company, the loss or limitation, if any, pursuant to the Award Agreement with respect to the right to purchase Award Shares which were not Vested at that time or which, if Vested, were cancelled, shall not give rise to any right to damages and shall not be included in the calculation of nor form any part of any severance allowance, retiring allowance or termination settlement of any kind whatsoever in respect of such Participant.

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4.5

Deferral of Payment or Other Settlement of Vested Awards.

The terms and conditions applicable to any Award (or portion thereof) granted to a Participant who is subject to taxation under the Code and that constitutes “deferred compensation” subject to Section 409A of the Code are intended to comply with Section 409A of the Code (or any successor provision). The terms of any such Award (or portion thereof) permitting the deferral of payment or other settlement thereof or providing for settlement in cash in lieu of Shares shall be subject to such requirements and shall be administered in such manner as the Board may determine to be necessary or appropriate to comply with the applicable provisions of Code Section 409A (or any successor provision) as in effect from time to time.

4.6

No Financial Assistance

Neither the Company nor any Related Entity will lend any money or provide any financial assistance to Participants to assist them to exercise their Awards.

5

STOCK OPTIONS

5.1

Grant of Options

The Board may from time to time grant Awards of Options to directors, officers, employees and other Service Providers of the Company and its Related Entities on the terms and subject to the conditions set out in this Plan and any additional terms and conditions imposed by the Company and set out in the Award Agreement.

5.2

Expiry Date

The Expiry Date for each Option shall be set by the Board at or before the Effective Date of the Option and shall not be more than five years after the Effective Date.

5.3

Subscription Price

Notwithstanding any terms imposed by the Company, the Subscription Price under each Option shall be not less than the Market Price on the Effective Date. The Subscription Price shall be stated and payable in Canadian dollars or in United States dollars, as determined by the Board.

5.4

Exercise of Options

Subject to Sections 5.5 and 5.6, Options may be exercised to purchase any number of Shares up to the number of Unissued Award Shares that have Vested at any time after the Effective Date up to 5:00 p.m. Vancouver time on the Expiry Date and shall not be exercisable thereafter.

5.5

Manner of Exercise

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Options shall be exercisable at the election of the Participant by delivering to the Company a notice specifying the number of Shares in respect of which the Options are exercised. The Participant must pay or satisfy, in accordance with the terms of this Section 5.5 and Section 8.4, the full amount of the Subscription Price for each such Share and withholding amounts with respect to such exercise. Upon notice and payment there will be a binding contract for the issue of the Shares in respect of which the Options are exercised, subject to the provisions of the Plan. The Subscription Price and withholding amounts shall be payable on exercise of a Vested Option in the applicable currency by delivery of the Participant's cheque payable to the Company or by wire transfer, certified cheque, banker’s cheque or bank draft or other similar methods of cash equivalent payment acceptable to the Board in the amount of the Sub scription Price and withholding amounts.

5.6

Termination of Employment or Affiliation

If a Participant ceases to be a director, officer or Service Provider of the Company, his or her Option shall be exercisable as follows:

(a)

Death, Disability or Retirement. If the Participant ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company, due to his or her death, Disability or retirement in accordance with the Company’s retirement policy in force from time to time, or, in the case of a Participant that is a company, the death, Disability or retirement of the person who provides management or consulting services to the Company or to any entity controlled by the Company, the Option then held by the Participant shall be exercisable to acquire Unissued Award Shares that have Vested at any time up to but not after the earlier of:

(i)

365 days after the date of death, Disability or retirement; and

(ii)

the Expiry Date;

(b)

Termination For Cause. If the Participant, or the Participant’s employer in the case of an Option granted to a Participant who falls under the definition of Service Provider set out in Subsection 2.29(c), ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company as a result of termination for cause, as that term is interpreted by the courts of the jurisdiction in which the Participant, any outstanding Option held by such Participant on the date of such termination, whether in respect of Award Shares that are Vested or not, shall be cancelled as of the date of delivery of written notice of termination (and specifically without regard to the date any period of reasonable notice, if any, would expire).

(c)

Early Retirement, Voluntary Resignation or Termination Other than For Cause. If the Participant, or the Participant’s employer in the case of an Option granted to a Participant who falls under the definition of Service Provider set out in Subsection 2.29(c), ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company due to his or her retirement at the request of his or her employer earlier than the normal retirement date under the Company’s retirement policy then in force, or due to his or her termination by the Company other than for cause, or due to his or her voluntary resignation, the Option then held by the Participant shall be exercisable, subject to Subsections 5.6(d) and 5.6(e), to acquire Unissued Award Shares that have Vested at any time up to but not after the earlier of (i) the Expiry Date (ii) the date which is 30 days after the Participant, or the Participant’s employer in the case of an Option granted to a Participant who falls under the definition of Service Provider set out in Subsection 2.29(c), the Participant’s employer, ceases active employment as a director, officer or Service Provider of the Company or a subsidiary of the Company, and (iii) 30 days after the date of delivery of written notice of retirement, resignation or termination (and specifically without regard to the date any period of reasonable notice, if any, would expire).

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(d)

Blackout Period Allowance. For greater certainty, if at the time the Participant ceases to be a director, officer or Service Provider due to early retirement, voluntary resignation or termination by the Company other than for cause there is a Blackout Period, or if at any time during the 30 day period set out in Paragraphs 5.6(c)(i),(ii) and (iii), there is a Blackout Period, then the time that the Option then held by the Participant has to acquire any Unissued Award Shares that have Vested, shall be extended to the earlier of (i) 30 days in addition to any such Blackout Period and (ii) the Expiry Date.

(e)

Severance Package Allowance. Notwithstanding Subsection 5.6(c), if a Participant, or the Participant’s employer in the case of an Option granted to a Participant who falls under the definition of Service Provider set out in Subsection 2.29(c), ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company due to his or her retirement at the request of his or her employer earlier than the normal retirement date under the Company’s retirement policy then in force, or due to his or her termination by the Company other than for cause, or due to his or her voluntary resignation, the Company can elect to have any Option then held by the Participant exercisable for a period of time not exceeding the earlier of (i) the date the last payment is made to the Participant under an agreement between the Company and the Participant with respect to such early retirement or termina tion other than for cause, and (ii) the Expiry Date.

For greater certainty, an Option that had not become Vested in respect of certain Unissued Award Shares at the time that the relevant events referred to in Subsections 5.6 (a), (b),

(c) or (d) occurred, shall not be or become exercisable in respect of such Unissued Award Shares and shall be cancelled.

Participants who wish to rely on Subsection 5.6(a) upon retirement are alerted to the fact that in order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code (or any successor provision), the Participant must, notwithstanding the time period provided herein, exercise their Options not later than three months after ceasing active employment with the Company or a subsidiary of the Company.

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5.7

Code Limitations on Incentive Stock Options.

Incentive Stock Options shall be granted only to an individual who is an Employee and shall be subject to the following special limitations:

(a) Limitation on Amount of Grants. As to all Incentive Stock Options granted under the terms of this Plan, to the extent that the aggregate Subscription Price of Options with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under this Plan and all other incentive stock option plans of the Company, a related corporation or a predecessor corporation) exceeds the $100,000 limitation of Section 422 of the Code, such Options shall be treated as Nonstatutory Stock Options. The previous sentence shall not apply if the US Internal Revenue Service issues a public rule, issues a private ruling to the Company, any Participant or any legatee, personal representative or distributee of a Participant or issues regulations changing or eliminating such annual limit. No such limitation shall apply to Nonstatutory Stock Options.

(b)

Grants to Ten Percent Shareholders. Incentive Stock Options may be granted a person owning more than 10% of the total combined voting power of all classes of stock of the Company and any parent or subsidiary corporation only if (i) the exercise price is at least 110% of the fair market value of the stock at the time of grant, and (ii) the Option is not exercisable after the expiration of five years from the date of grant.

(c)

Notice of Disposition. Any Option which is issued as an Incentive Stock Option under this Plan, shall, notwithstanding any other provisions of this Plan or the terms of the Option to the contrary, contain all of the terms, conditions, restrictions, rights and limitations required to be an Incentive Stock Option, and any provision to the contrary shall be disregarded. However, the designation of any Option as an Incentive Stock Option shall not be interpreted as a representation, guarantee or other undertaking on the part of the Company or the Board that the Option is or will be determined to qualify as an Incentive Stock Option. The Board may require a Participant to give the Company prompt notice of any disposition of Shares acquired by the exercise of an Incentive Stock Option prior to the expiration of two years after the Effective Date and one year from the date of exercise.

(d)

Taxation of Incentive Stock Options. In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code (or any successor provision), the Participant must hold the Shares issued upon the exercise of an Incentive Stock Option for a minimum of two years after the date of grant of the Incentive Stock Option and one year from the date of exercise. A Participant may be subject to U.S. alternative minimum tax at the time of exercise of an Incentive Stock Option.

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5.8

Effect of a Take-Over Bid

If a bona fide offer (an “Offer”) for Shares is made to the Participant or to shareholders of the Company generally or to a class of shareholders which includes the Participant, which Offer, if accepted in whole or in part, would result in the offeror becoming a control person of the Company, within the meaning of Subsection 1(1) of the Securities Act, the Company shall, immediately upon receipt of notice of the Offer, notify each Participant of full particulars of the Offer, whereupon all Award Shares subject to such Option will become Vested and the Option may be exercised in whole or in part by the Participant so as to permit the Participant to tender the Award Shares received upon such exercise pursuant to the Offer. However, if:

(a)

the Offer is not completed within the time specified therein; or

(b)

all of the Award Shares tendered by the Participant pursuant to the Offer are not taken up or paid for by the offeror in respect thereof,

then the Award Shares received upon such exercise, or in the case of Subsection 5.8(b) above the Award Shares that are not taken up and paid for, shall be returned by the Participant to the Company and reinstated as authorized but unissued Shares and, with respect to such returned Award Shares, the Option shall be reinstated as if it had not been exercised and the terms for such Award Shares becoming Vested shall be reinstated pursuant to Section 4.2. If any Award Shares are returned to the Company under this Section 5.8, the Company shall immediately refund the Subscription Price to the Participant for such Award Shares.

5.9 Acceleration of Expiry Date

If at any time when an Option granted under the Plan remains unexercised with respect to any Unissued Award Shares, an Offer is made by an offeror, the Board may, upon notifying each Participant of full particulars of the Offer, declare that all Award Shares issuable upon the exercise of Options granted under the Plan be Vested and accelerate the Expiry Date for the exercise of all unexercised Options granted under the Plan so that all Options will either be exercised or expire prior to the date upon which Shares must be tendered pursuant to the Offer.

5.10

Effect of a Change of Control

If a Change of Control occurs, all Award Shares subject to each outstanding Option will become Vested, whereupon such Option may be exercised in whole or in part by the Participant.

5.11

Automatic Grants to non-Employee Directors

(a)

Each person who is or becomes a non-Employee director of the Company will automatically be granted, as of the date of such appointment or election, an Award of Options and Tandem SARs to purchase 10,000 Award Shares, provided that, within the one year prior to the date he or she became a non-Employee director, he or she had not been granted any other Award by the Company (or an affiliate). On a semi annual basis thereafter, occurring at the time of the annual general meeting of the Company and December 1 each year, if he or she continues to be a non-Employee director of the Company, he or she will automatically be granted on each occurrence a further Award of Options and Tandem SARs to purchase 5,000 Award Shares. All Awards granted under this Subsection 5.11(a) shall be exercisable for a period of five years from the Effective Date (except as reduced in accordance with this Plan).

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(b)

Notwithstanding the provisions for automatic grants of Awards set forth in Subsection 5.11(a), if any particular automatic grant of an Award would violate the requirements of Sections 3.1 or 3.2, then the grant of such Award shall be postponed until such time as the Award can be granted without any violation of the provisions of this Plan.

6.

TANDEM SARS

6.1 Grant of Tandem SARs

The Board may from time to time grant up to one Award of Tandem SARs to each director, officer and Service Provider of the Company and its Related Entities for each Option issued on or after October 1, 2002 held by such person (as such number may be adjusted by Section 7) on such terms and conditions, consistent with the Plan, as the Board shall determine.

6.2

Terms of Tandem SARs

Tandem SARs may be granted at or after the Effective Date of the related Award of Options, and each Tandem SAR shall be subject to the same terms and conditions and denominated in the same currency as the Option to which it relates and the additional terms and conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4.

6.3

Exercise of Tandem SARs

The Participant shall have the right to elect to exercise either an Option or a Tandem SAR. If the Participant elects to exercise a Tandem SAR, the related Option shall be cancelled and the Participant shall be entitled to a Share or portion thereof in settlement of such Tandem SAR calculated and in such form as provided in Section 6.4. Tandem SARs may be exercised only if and to the extent the Options related thereto are then Vested. Tandem SARs shall be exercisable at the election of Participant by delivering to the Company a notice specifying the number of Shares in respect of which the Tandem SARs are exercised. The Participant shall not pay the Subscription Price attributable to the Option to which the Tandem SAR is related, but must pay or satisfy, in accordance with the terms of Section 8.4, any withholding amounts with respect to such exercise. Upon notice and payment there will be a binding contract for the i ssue of the Shares in respect of which the Tandem SARs are exercised, subject to the provisions of the Plan.

6.4

Settlement of Tandem SARs

Upon exercise of a Tandem SAR, and subject to payment or other satisfaction of all related withholding obligations in accordance with Section 8.4, the Option to which the Tandem SAR is related shall be settled by delivery of a Share or portion thereof with an aggregate value equal to the product of (a) the excess of the Market Price of a Share on the date of exercise over the Subscription Price for a Share, multiplied by (b) the number of Tandem SARs exercised. All Tandem SARs shall be settled in Shares, and such settlement shall be made by delivery of the aggregate number of Shares having a Market Price on the date of exercise equal to the amount so settled.

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7.

ADJUSTMENT OF AWARD PRICE AND NUMBER OF AWARD SHARES

7.1

Share Reorganization

Whenever the Company issues Shares to all or substantially all holders of Shares by way of a stock dividend or other distribution, or subdivides all outstanding Shares into a greater number of Shares, or combines or consolidates all outstanding Shares into a lesser number of Shares (each of such events being herein called a “Share Reorganization”), then effective immediately after the record date for such dividend or other distribution or the effective date of such subdivision, combination or consolidation, for each Option:

(a)

the Subscription Price will be adjusted to a price per Share which is the product of:

(i)

the Subscription Price in effect immediately before that effective date or record date; and

(ii)

a fraction the numerator of which is the total number of Shares outstanding on that effective date or record date before giving effect to the Share Reorganization, and the denominator of which is the total number of Shares that are or would be outstanding immediately after such effective date or record date after giving effect to the Share Reorganization; and

(b)

the number of Unissued Award Shares will be adjusted by multiplying (i) the number of Unissued Award Shares immediately before such effective date or record date by (ii) a fraction which is the reciprocal of the fraction described in Paragraph 7.1 (a)(ii).

7.2

Special Distribution

Subject to the prior approval of the TSX, whenever the Company issues by way of a dividend or otherwise distributes to all or substantially all holders of Shares;

(a)

shares of the Company, other than the Shares;

(b)

evidences of indebtedness;

(c)

any cash or other assets, excluding cash dividends (other than cash dividends which the Board has determined to be outside the normal course); or

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(d)

rights, options or warrants;

then to the extent that such dividend or distribution does not constitute a Share Reorganization (any of such non-excluded events being herein called a “Special Distribution”), and effective immediately after the record date at which holders of Shares are determined for purposes of the Special Distribution, for each Option the Subscription Price will be reduced, and the number of Unissued Award Shares will be correspondingly increased, by such amount, if any, as is determined by the Board in its sole and unfettered discretion to be appropriate in order to properly reflect any diminution in value of the Shares as a result of such Special Distribution.

7.3

Corporate Organization

Whenever there is:

(a)

a reclassification of outstanding Shares, a change of Shares into other shares or securities, or any other capital reorganization of the Company, other than as described in Sections 7.1 or 7.2;

(b)

a consolidation, merger or amalgamation of the Company with or into another corporation resulting in a reclassification of outstanding Shares into other shares or securities or a change of Shares into other shares or securities; or

(c)

a transaction whereby all or substantially all of the Company's undertaking and assets become the property of another corporation;

(any such event being herein called a “Corporate Reorganization”) the Participant will have an Option to purchase (at the times, for the consideration and subject to the terms and conditions set out in the Plan) and will accept on the exercise of such Option, in lieu of the Unissued Award Shares which he or she would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that he or she would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, he or she had been the holder of all Unissued Award Shares or, if appropriate, as otherwise determined by the Board.

7.4

Determination of Subscription Price and Number of Unissued Award Shares

If any questions arise at any time with respect to the Subscription Price or number of Unissued Award Shares deliverable upon exercise of an Option or Tandem SAR following a Share Reorganization, Special Distribution or Corporate Reorganization, such questions shall be conclusively determined by the Company’s auditors or, if the Company’s auditors decline to so act, any other firm of Chartered Accountants in Vancouver, British Columbia that the Board may designate and who will have access to all appropriate records, and such determination will be binding upon the Company and all Participants.

7.5

Regulatory Approval

Any adjustment to the Subscription Price or the number of unissued Award Shares purchasable under the Plan pursuant to the operation of any one of Sections 7.1, 7.2 or 7.3 is subject to the approval of the TSX and any other governmental authority having jurisdiction. The Company acknowledges that, for the purpose of certain Participants obtaining certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code (or any successor provision) , no adjustments provided in this Section 7 will result in the excess aggregate value of the outstanding Incentive Stock Options under Section 422 of the Code (or any successor provision) , after the adjustments provided for in this Section 7 having occurred, being greater than the excess aggregate value of the outstanding Incentive Stock Options before the adjustments provided for in this Section 7 are made, and the adjustments provided for in this Section 7 do not give the Participant any additional benefits that he or she did not have before the adjustments provided for in this Section 7 were made.

IRWIN,WHITE &JENNINGS – ANGIOTECH 2006 STOCK INCENTIVE PLAN

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8.

MISCELLANEOUS

8.1

Right to Employment

Neither this Plan nor any of the provisions hereof shall confer upon any Participant any right with respect to employment, engagement or appointment or continued employment, engagement or appointment with the Company or any subsidiary of the Company or interfere in any way with the right of the Company or any subsidiary of the Company to terminate such employment, engagement or appointment.

8.2

Necessary Approvals

The Plan shall be effective only upon the approval of the shareholders of the Company at the annual general meeting of the Company’s shareholders on June 8, 2006. The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to the approval of the TSX and any governmental authority having jurisdiction. If any Shares cannot be issued to any Participant for any reason, including, without limitation, the failure to obtain such approval, then the obligation of the Company to issue such Shares shall terminate and any Subscription Price paid by a Participant to the Company shall be immediately refunded to the Participant by the Company.

8.3

Administration of the Plan

The Board shall, without limitation, have full and final authority in its discretion, but subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and to make all other determinations deemed necessary or advisable in respect of the Plan. Except as set forth in Section 7.4, the interpretation and construction of any provision of the Plan by the Board shall be final and conclusive. Administration of the Plan shall be the responsibility of the appropriate officers of the Company and all costs in respect thereof shall be paid by the Company.

8.4

Withholdings.

As a condition of and prior to participation in the Plan, each Participant authorizes the Company to withhold from any amount otherwise payable to him or her any amounts required by any taxing authority to be withheld for taxes of any kind as a consequence of his or her participation in the Plan. The Company shall also have the right in its discretion to satisfy any such liability for withholding or other required deduction amounts by retaining or acquiring any Shares, or retaining any amount payable, which would otherwise be issued or delivered, provided or paid to a Participant under the Plan. The Company may require a Participant, as a condition to exercise of an Option or Tandem SARs to pay or reimburse the Company for any such withholding or other required deduction amounts related to the exercise of Options or Tandem SARs.

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8.5

Amendments to the Plan

The Board may from time to time, subject to applicable law and to the prior approval, if required, of the TSX or any other regulatory body having authority over the Company or the Plan, suspend, terminate or discontinue the Plan at any time, or amend or revise the terms of the Plan or of any Award granted under the Plan and the Award Agreement relating thereto, provided that no such amendment, revision, suspension, termination or discontinuance shall in any manner adversely affect any Award previously granted to a Participant under the Plan without the consent of that Participant. Notwithstanding this Section 8.5, the Board shall not be permitted to amend the Subscription Price except as set out in Section 7 of this Plan.

8.6

Prior Plans

All Award Agreements entered into under the Prior Plans shall continue to be governed by the terms of the Prior Plans, under which 8,742,482 Shares were issuable upon exercise of the Options granted under the Prior Plans as at the time grants under the Prior Plans ceased.

8.7

Form of Notice

Any notice given to the Company shall be in writing, signed by the Participant and delivered to the Secretary of the Company.

8.8

No Representation or Warranty

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

8.9 Compliance with Applicable Law

If any provision of the Plan or any Award Agreement contravenes any law or any order, policy, by-law or regulation of any regulatory body or TSX having authority over the Company or the Plan, then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

8.10

No Assignment

No Participant may assign any of his or her rights under the Plan.

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8.11

Rights of Participants

A Participant shall have no rights whatsoever as a shareholder of the Company in respect of any of the Unissued Award Shares (including, without limitation, voting rights or any right to receive dividends, warrants or rights under any rights offering) until and only to the extent the relevant Awards are duly exercised and Award Shares are issued. To the extent a Participant exercising Tandem SARs receives a cash payment, no rights as a shareholder shall be deemed to have been received by the Participant.

8.12 Conflict

In the event of any conflict between the provisions of this Plan and an Award Agreement, the provisions of this Plan shall govern.

8.13

Governing Law

The Plan and each Award Agreement issued pursuant to the Plan shall be governed by the laws of the Province of British Columbia.

8.14

Time of Essence

Time is of the essence of this Plan and of each Award Agreement. No extension of time will be deemed to be, or to operate as, a waiver that time is to be of the essence.

8.15

Entire Agreement

This Plan and the Award Agreement sets out the entire agreement between the Company and the Participants relative to the subject matter hereof and supersedes all prior agreements, undertakings and understandings, whether oral or written.

Approved at the Annual General Meeting of the Company on June 8, 2006.

IRWIN,WHITE &JENNINGS – ANGIOTECH 2006 STOCK INCENTIVE PLAN

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SCHEDULE “A”

ANGIOTECH PHARMACEUTICALS, INC.

2006 STOCK INCENTIVE PLAN

AWARD AGREEMENT

This Award Agreement is entered into between Angiotech Pharmaceuticals, Inc. (“the Company”) and the Participant named below pursuant to the Company 2006 Stock Incentive Plan (the “Plan”), a copy of which is attached hereto, and confirms that:

1.

on _________________, ______ (the “Effective Date”);

2.

________________________________ (the “Participant”);

3.

was granted the an award of ________________Options and ________________ Tandem SARs (the “Award”) to purchase _______________ Common Shares (the “Award Shares”) of the Company;

4.

for the price (the “Subscription Price”) of $__________ per share;

5.

which shall be exercisable (“Vested”) in whole or in part in the following amounts on or after the following dates:

 _________________________________________________________________.

6.

terminating on the ______________________, ________ (the “Expiry Date”);

7.

on the terms and subject to the conditions set out in the Plan and the following conditions imposed by the Board:

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

For greater certainty, once Award Shares have become Vested, they continue to be exercisable until the termination or cancellation thereof as provided in this Award Agreement and the Plan.

The Participant acknowledges that while the Plan does not permit Awards representing more than 5% of the issued and outstanding shares of the Company on a non-diluted basis be granted to an Insider, the Insider may, because of other shareholdings, hold more than 10% of the Company’s issued and outstanding shares. The Participant further acknowledges that in the event the Participant owns more than 10% of the Company’s issued and outstanding shares, the Participant may be a “specified shareholder” as defined in the Income Tax Act (Canada) R.S.C. 1985, c.1 (5th Supp.) (the “Act”) and that one consequence of “specified shareholder” status is that the Participant will not be able to defer tax on the employee stock award benefit upon the exercise of his or her Awards.

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By signing this Award Agreement, the Participant acknowledges that the Participant has read and understands the Plan and agrees to the terms and conditions of the Plan and this Award Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Award Agreement as of the _____ day of ______________, ___________.

________________________________	ANGIOTECH PHARMACEUTICALS, INC.
PARTICIPANT
	By:_______________________________
	Authorized Signatory
	By:____________________________
	Authorized Signatory

IRWIN,WHITE &JENNINGS – ANGIOTECH 2006 STOCK INCENTIVE PLAN

EX-10.29

Exhibit 10.29

AMERICAN MEDICAL INSTRUMENTS HOLDINGS, INC.

2003 STOCK OPTION PLAN

TABLE OF CONTENTS

ARTICLE I		ESTABLISHMENT AND PURPOSE
1.1	Establishment		1
1.2	Purpose		1
1.3	Type of Plan		1
1.4	Term of Plan		1
ARTICLE II		DEFINITIONS
2.1	"Affiliate"		2
2.2	"Agreement"		2
2.3	"Beneficiary"		2
2.4	"Board"		2
2.5	"Cause"		2
2.6	"Change in Control"		2
2.7	"Code"		2
2.8	"Commission"		2
2.9	"Committee"		2
2.10	"Common Stock"		3
2.11	"Company"		3
2.12	"Disability"		3
2.13	"Exchange Act"		3
2.14	"Fair Market Value"		3
2.15	"Grant Date"		4
2.16	"Option"		4
2.17	"Option Period"		4
2.18	"Option Price"		4
2.19	"Participant"		4
2.20	"Plan"		4
2.21	"Representative"		4
2.22	"Retirement"		4
2.23	"Rule 16b-3"		5
2.24	"Securities Act"		5
2.25	"Termination of Employment"		5
2.26	"Transfer"		5
ARTICLE III		ADMINISTRATION
3.1	Structure		5
3.2	Authority		6
3.3	Liability and Indemnification		8

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ARTICLE IV		STOCK SUBJECT TO PLAN
4.1	Number of Shares Available		9
4.2	Release of Shares		9
4.3	Conditions on Issuance of Shares		9
4.4	Shareholder Rights		10
4.5	Adjustment for Corporate Changes		10
ARTICLE V		ELIGIBILITY AND SELECTION
5.1	Eligibility.		11
5.2	Selection of Participants		11
5.3	Options in Substitution		11
ARTICLE VI		STOCK OPTIONS
6.1	General		12
6.2	Grant of Options		12
6.3	Terms and Conditions		12
6.4	Effect of Termination of Employment		14
6.5	Information Available to Participants		15
6.6	Exercise of Options		15
6.7	Withholding on Exercise		15
6.8	Cash-Out of Option		16
ARTICLE VII		PROVISIONS APPLICABLE TO ACQUIRED STOCK
7.1	General Restriction on Transfer		16
7.2	Transfer On Change in Control		16
7.3	Estate Planning Transfers		16
7.4	Binding Effect of Plan		16
7.5	Limited Transfer Dining Offering		17
ARTICLE VIII		CHANGE IN CONTROL PROVISIONS
8.1	Consent to Board Action		17
8.2	Transfer of Shares		17
8.3	Accelerated Vesting		17
8.4	Definition of Change in Control		17
ARTICLE IX		MISCELLANEOUS
9.1	Amendment and Termination		18
9.2	Fail-Safe for Rule. 16b-3		18
9.3	Fail-Safe for Mitigation of Excise Tax		18
9.4	No Creditor Rights		19
9.5	No Rights with Respect to Employment		19
9.6	Relationship to Other Benefits		19
9.7	Controlling Law		19

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9.8	Waiver, Cumulative Rights	20
9.9	Notices	20
9.10	Successors and Assigns	20
9.11	Headings	20
9.12	Severability.	20
9.13	Entire Agreement	20

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AMERICAN MEDICAL INSTRUMENTS HOLDINGS, INC.
2003 STOCK OPTION PLAN

ARTICLE I
ESTABLISHMENT AND PURPOSE

1.1

Establishment. This instrument, and the plan of compensation hereby established, shall be known as the American Medical Instruments Holdings, Inc. 2003 Stock Option Plan and shall be hereinafter referred to as the "Plan." The Plan is hereby promulgated by American Medical Instruments Holdings, Inc. (hereinafter referred to as the "Company"), effective as of April ___, 2003, as adopted by the Board of Directors of the Company.

1.2

Purpose. The purpose of the Plan is to provide additional incentive to persons who can make or are making, and can continue to make, substantial contributions to the growth and success of the Company, in order to attract and retain the employment and services of such persons and to encourage and reward such contributions, by providing these individuals with the opportunity to directly, on a long-tern basis, participate in the Company's growth and success through stock ownership; it being the judgment of the Board of Directors of the Company that so providing such additional incentive to such persons advances the overall interests of the Company's business and enhances the value of the Company for all of its shareholders.

1.3

Type of Plan. Options granted under the Plan shall be nonqualified stock options, meaning options to purchase Common Stock in the Company which do not qualify as incentive stock options within the meaning of Section 422(b) of the Code. The Plan is intended to be an "unfunded" plan of compensation; and shall not constitute any type of "employee benefit plan" subject to the Employee Retirement Income Security Act of 1974 ("ERISA").

1.4

Term of Plan. The Plan shall continue in effect from the effective date set forth in Section 1.1 hereof until the earlier of the Plan's termination by the Board of Directors of the Company, as provided in Section 9.1 hereof, or the date on which all shares of Common Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan have lapsed.

ARTICLE II

DEFINITIONS

For purposes of the Plan, the following terms shall be defined as set forth below:

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2.1.

"Affiliate" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company including, without limitation, any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Code.

2.2

"Agreement" shall mean, individually or collectively, any agreement entered into pursuant to Section 6.2 hereof, pursuant to which an Option is granted to a Participant, including any amendments thereto made pursuant to Section 9.1 hereof.

2.3

"Beneficiary" shall mean the person, persons, trust or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under the Plan upon such Participant's death or to which Options or other rights are transferred if and to the extent permitted hereunder. If, upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

2.4

"Board" shall mean the Board of Directors of the Company.

2.5

"Cause" shall mean, for purposes of whether and when a Participant has incurred a Termination of Employment for Cause, any act or omission which permits the Company to terminate the written agreement or arrangement between the Participant and the Company for "cause" as defined in such agreement or arrangement, or in the event there is no such agreement or arrangement or the agreement or arrangement does not define the term "cause" or a substantially equivalent term, then Cause shall mean (a) any act or omission which, constitutes cause under the Company's established practices, policies or guidelines applicable to the Participant; (b) the material breach of a fiduciary duty owing to the Company, including without limitation, fraud and embezzlement or (c) conduct or the omission of conduct on the part of the Participant which constitutes a material breach of any statutory or common-la w duty of loyalty to the Company.

2.6

"Change in Control" shall have the meaning set forth in Section 8.4.

2.7

"Code" shall mean the Internal Revenue Code of 1986, as amended or replaced from time to time, and the regulations thereunder..

2.8

"Commission" shall mean the Securities and Exchange Commission orany successor thereto.

2.9

"Committee" shall mean any person or persons who may be appointed or designated by the Board to administer the Plan, as described in Section 3.1 below.

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2.10

"Common Stock" shall mean the shares of the Company's regular voting common stock, no par value, whether presently or hereafter issued, and any other stock or security resulting from adjustment thereof as described hereinafter or the common stock of any successor to the Company which is designated for the purposes of the Plan.

2.11

"Company" shall mean American Medical Instruments Holdings, Inc., a StateplaceDelaware corporation, and includes any successor or assignee corporation or corporations into which the Company may be merged, changed or consolidated.

2.12

"Disability" shall mean a mental or physical illness that entitles the Participant to receive benefits under the long-term disability plan of the Company, or if the Participant is not covered by such a plan or the Participant is not an employee of the Company, a mental or physical illness that renders a Participant totally and permanently incapable of performing the Participant's duties for the Company. Notwithstanding the foregoing, a Disability shall not qualify under this Plan if it is the result of (i) a willfully self-inflicted injury or willfully self-induced sickness; or (ii) an injury or disease contracted, suffered, or incurred while participating in a felony criminal offense. The determination of Disability shall be made by the Board. The determination of Disability for purposes of this Plan shall not be construed to be an admission of disability by any entity or person for any other purpose.< /P>

2.13

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

2.14

"Fair Market Value" shall mean, as of any date, the value of one share of Common Stock, determined pursuant to the applicable method described below:

(a)

if the Common Stock is listed on a national securities exchange or quoted on NASDAQ, the closing price of the Common Stock on the relevant date (or, if such date is not a business day or a day on which quotations are reported, then on the immediately preceding date on which quotations were reported), as reported by the principal national exchange on which such shares are traded (in the case of an exchange) or by NASDAQ, as the case may be;

(b)

if the Common Stock is not listed on a national securities exchange or quoted 'on NASDAQ, but is actively traded in the over-the-counter market, the average of the closing bid and asked prices for the Common Stock on the relevant date (or, if such date is not a business day or a day on which quotations are reported, then on the immediately preceding date on which quotations were reported), or the most recent preceding date for which such quotations are reported; and

(c)

if, on the relevant date, the Common Stock is not publicly traded or reported as described in (a) or (b) above, the value determined in good faith by the Board.

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2.15

"Grant Date" shall mean the date as of which the Board makes a grant of an Option to a person eligible to participate in the Plan, or any other date determined by the Board.

2.16 "Option" shall mean a right, granted to a Participant under Section 6.1 hereof, to purchase Common Stock at a specified price during specified time periods.

2.17

"Option Period" shall mean the period during which an Option shall be exercisable in accordance with the related Agreement and Article VI.

2.18

"Option Price" shall mean the price at which the Common Stock may be purchased under an Option as provided in Section 6.3(b).

2.19

"Participant" shall mean a person who satisfies the eligibility conditions of Article V and with whom an Agreement has been entered into and remains effective under the Plan, and in the event a Representative is appointed for a Participant or another person becomes a Representative, then the term "Participant" shall mean such Representative. The term shall also include a trust for the benefit of the Participant, the Participant's parents, spouse or descendants, or a custodian under a uniform gifts to minors act or similar statute for the benefit of the Participant's descendants, to the extent permitted by the Board and not inconsistent with Rule 16b-3. Notwithstanding the foregoing, the term "Termination of Employment" shall mean the Termination of Employment of the person to whom the Option was originally granted.

2.20

"Plan" shall mean this American Medical Instruments Holdings, Inc. 2003 Stock Option Plan, as herein set forth and as may be amended from time to time.

2.21

"Representative" shall mean (a) the person or entity acting as the executor or administrator of a Participant's estate pursuant to the last will and testament of a Participant or pursuant to the laws of the jurisdiction in which the Participant had the Participant's primary residence at the date of the Participant's death; (b) the person or entity acting as the guardian or temporary guardian of a Participant subject to court supervision; (c) the person or entity which is the Beneficiary of the Participant upon or following the Participant's death; or (d) any person to whom an Option has been permissibly transferred; provided that only one of the foregoing shall be the Representative at any point in time as determined under applicable law and recognized by the Board. Any Representative shall be subject to all terms and conditions applicable to the Participant.

2.22

"Retirement" shall mean the Participant's Termination of Employment after attaining either the normal retirement age or the early retirement age as defined in the principal (as determined by the Board) tax-qualified plan of the Company, if the Participant is covered by such a plan, or if the Participant is not covered by such a plan, then age sixty-five (65).

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2.23

"Rule 16b-3" shall mean Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Commission under Section 16 of the Exchange Act.

2.24

"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

2.25

"Termination of Employment" shall mean the occurrence of any act or event that actually or effectively causes or results in a person, ceasing, for whatever reason, to be an employee, officer, director, consultant or other service provider of the Company, including, without limitation, Retirement, death, Disability, cessation at the election of the Participant, or dismissal by the Company. A transfer of employment from the Company to an entity which is an Affiliate as defined in Section 2.1 or from such an entity to the Company, shall not be a Termination of Employment, unless expressly determined by the Board. With, respect to any person who is not an employee of the Company, the Board may determine and include in such person's Agreement more detailed or particular provisions concerning what act or event shall constitute a Termination of Employment with respect to that person.

2.26

"Transfer" shall mean any sale, gift, assignment, distribution, conveyance, pledge, hypothecation, encumbrance or other transfer of title, whether by operation of law or otherwise.

In addition, certain other terms used herein shall have the definitions given to such terms in the first place in which the terms are used.

ARTICLE III
ADMINISTRATION

3.1

Structure. The Plan shall be administered by the Board. The Board may appoint a committee (the "Committee") comprised of one or more members of the Board to exercise designated functions of the Board under the Plan.

In the event that the Board appoints a Committee, the term "Board" shall be deemed to refer to the Committee to the extent required and consistent with the specific terms' of the Board's appointment of the Committee. A majority of the members of an appointed Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all of the members, shall be the acts of the. Committee. A member of the Committee shall not exercise any discretion respecting himself or herself under the Plan. The Board shall have the authority to remove, replace or fill any vacancy of any member of the Committee upon notice to the Committee and the affected member. Any member of the Committee may resign upon notice to the Board. The Committee may allocate among one or more of its members, or may delegate to one or more of its agents, such du ties and responsibilities as it determines.

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Notwithstanding anything herein to the contrary, with respect to grants of Options to individuals who are "Officers" and "Directors" (as such terms are defined for purposes of Section 16 of the Exchange Act) of the Company, at such time or in such circumstances as such individuals are subject to Section 16 of the Exchange Act, such grants shall be made and administered by a "Rule 16b-3 Committee" appointed by the Board. Such Rule 16b-3 Committee shall consist solely of two. (2) or more "Non-Employee Directors" (as defined for purposes of Rule 16b-3) and shall otherwise be constituted and act in such manner as to permit such grants to Officers and Directors and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3.

Further notwithstanding anything herein to the contrary, with respect to grants of Options to individuals who are "Covered Employees" (as defined for purposes of Section 162(m) of the Code), at such time or in such circumstances as Section 162(m) of the Code may be applicable to the Company as a 'Publicly Held Company" (as defined for purposes of Section 162(m) of the Code), such grants shall be made and administered by a "Section 162(m) Committee" appointed by the Board. Such Section 162(m) Committee shall consist solely of two (2) or more "Outside Directors" and shall otherwise be constituted and act in such manner as to permit such grants to Covered Employees to qualify as "Performance-Based Compensation" excludable from "Applicable Employee Remuneration" (as said terms are defined for purposes of Section 162(m) of the Code) in order that the Company not be subje ct to the limitation on deductions allowed for Applicable Employee Remuneration set forth in Section 162(m) of the Code.

Any Rule 16b-3 Committee or Section 162(m) Committee appointed by the Board shall function and have authority, and be subject to the constitutional and procedural provisions, as herein provided with respect to any Committee appointed by the Board, applicable to the making and administration of the grants of Options with .respect to which the Committee is appointed. A Rule 16-b Committee or Section 162(m) Committee may be a subcommittee of a Committee otherwise appointed by the Board.

3.2

Authority. Subject to the terms of the Plan, the Board, and any Committee appointed by the Board subject to the specific terms of the Board's appointment of the Committee, shall have the authority:

(a)

to select those persons to whom Options may be granted from time to tune; to determine whether and to what extent Options are to be granted hereunder; and to determine the number of shares of Common Stock to be covered by each Option granted hereunder;

(b)

to determine the terms and conditions of any Option granted hereunder (including, but not limited to, the Option Price, the Option Period, any exercise restriction or limitation and any exercise acceleration, forfeiture or waiver regarding any Option or any shares of Common Stock relating thereto, any performance criteria and the satisfaction of such criteria);

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(c)

to determine the Fair Market Value of one share of Common Stock as of any date;

(d)

to adjust the terms and conditions, at any time or from time to time, of any Option, subject to the limitations of Section 9.1;

(e)

to provide for the forms of Agreements to be utilized in connection with the Plan;

(f)

to prescribe the manner in which and the form on which Participants may designate a Beneficiary;

(g)

to• determine the• identity of a Participant's. Beneficiary or Representative for purposes of the Plan;

(h)

to determine whether a Participant has a Disability or a Retirement; and to determine whether and with what effect a Participant has incurred a Termination of Employment;

(i)

to determine what securities law requirements are applicable to the Plan, Options and the issuance of shares of Common Stock under the Plan and to require of a Participant that appropriate action be taken with respect to such requirements;

(j)

to cancel, with the consent of the Participant or as otherwise provided in the Plan or an Agreement, outstanding Options;

(k)

to interpret and make final determinations with respect to the remaining number of shares of Common Stock available under the Plan;

(l)

to determine the restrictions or limitations on the transfer of Common Stock; and to determine whether the Company or any other person has a right or obligation to purchase Common Stock from a Participant and, if so, the terms and conditions on which such Common Stock is to be purchased;

(m)

to determine whether an Option is to be adjusted, modified or purchased, or is to become fully exercisable, under the Plan or the terms of an Agreement;

(n)

to determine the permissible methods of Option exercise and. payment;

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(o)

to adopt, amend and rescind such rules, guidelines, procedures and practices as, in its opinion, may be advisable in the administration of the Plan (and which may differ with respect to Options granted at different times or to different Participants);

(p)

to suspend or delay any time period described in the Plan or any Agreement if the Board (or, as the case may be, Committee) determines the applicable action may constitute a violation of any law, or result in liability under any law to the Company or a shareholder of the Company, until such time as the action required or permitted shall not constitute such violation of law or result in such liability;

(q)

to appoint and compensate agents, counsel, auditors or other specialists to aid it in the discharge of its duties; and

(r)

to otherwise interpret and apply the terms and provisions of the Plan and any Option issued under the Plan (and any Agreement), and to otherwise supervise the administration of the Plan.

Any determination made by the Board (or, as the case may be, Committee) pursuant to the provisions of the Plan shall be made in its sole discretion, and in the case of any determination relating to an Option, may be made at the time of the grant of the Option or, unless in contravention of any express term of the Plan or an Agreement, at any time thereafter. All determinations and decisions made, and actions undertaken, by the Board (or, as the case may be, Committee) pursuant to the provisions of the Plan shall be final and binding for all purposes and on all persons, including the Company and Participants. No determination shall be subject to de novo review if challenged in court.

3.3

Liability and Indemnification. No member of the Board or any Committee shall be liable for any action or determination made or taken by the member, or the Board or Committee, in good faith with respect to the Plan. Each member of the Board or any Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company, and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have. been a member of the Board or any Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information, or for any action taken, including the furnishing of information, or failure to act, if in good faith.

Each person who is or at any time serves as a member of the Board or any Committee shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or, resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan, and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its expense, to handle and defend such claim, action, suit or proceeding before such person undertakes to handle and defend the same on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other ri ghts or indemnification to which such persons may be entitled under the articles or certificate of incorporation or by-laws of the Company, as a matter of law or otherwise, or any power that the Company may have to indemnify such persons or hold such persons harmless.

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ARTICLE IV
STOCK SUBJECT TO PLAN

4.1

Number of Shares Available. Subject to adjustment under Section 4.5, the total number of shares of Common Stock reserved and available for distribution pursuant to the exercise of Options under the Plan shall be 1,200,000 shares of Common Stock. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.

4.2

Release of Shares. Subject to Section 6.3(e), if any shares of Common Stock that are subject to any Option cease to be subject to an Option or are forfeited or repurchased, if any Option otherwise terminates without issuance of shares of Common Stock being made to the Participant, or if any shares (whether or not restricted) of Common Stock are received by the Company in connection with the exercise of an Option, including the satisfaction of tax withholding, such shares, in the discretion of the Board, may again be available for distribution in connection with Options under the Plan.

4.3

Conditions on Issuance of Shares. Shares of Common Stock issued in conjunction with an Option shall be subject to the terms and conditions specified herein and to such other terms, conditions and restrictions as the Board in its discretion may determine or provide in an Agreement.

The Company shall not be required to issue or deliver any certificates for shares of Common Stock, cash or other property prior to (i) the listing of such shares on any stock exchange or The NASDAQ Stock Market (or other public market) on which the Common Stock may then be listed (or regularly traded), (ii) the completion of any registration or qualification of such shares under Federal or state law, or any ruling or regulation of any government body which the Board determines to be necessary or advisable, and (iii) the satisfaction of any applicable withholding obligation.

The Board may require any person exercising an Option to make such representations, furnish such information and execute such other documents as it may consider appropriate in connection with the issuance or delivery of the shares of Common Stock in compliance with applicable law or otherwise; including, but not limited to, requiring each person purchasing shares to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof.

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The Company may cause any certificate for any share of Common Stock to be delivered on exercise of an Option to be properly marked with a legend or other notation reflecting the limitations on Transfer of such Common Stock as provided in this Plan or as the Board may otherwise require.

Fractional shares shall not be delivered, but shall be rounded to the next lower whole number of shares. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

Any amounts owed to the Company by the Participant of whatever nature may be offset by the Company from the value of any shares of Common Stock, cash or other thing of value under this Plan or an Agreement to be transferred to the Participant, and no shares of Common Stock, cash or, other thing of value under this Plan or an Agreement shall be transferred unless and until all disputes between the Company and the Participant have been fully and finally resolved and the Participant has waived all claims to such against the Company.

4.4

Shareholder Rights. No person shall have any rights of a shareholder as to shares of Common Stock subject to an Option until (i) after proper exercise of the Option, (ii) after such other action is taken by the person as may be required pursuant to the Agreement evidencing such Option, and (iii) such shares shall have been recorded on the Company's official shareholder records as having been issued or transferred. Upon exercise of an Option or any portion thereof, the Company shall have thirty (30) days in which to issue the shares, and the Participant will not be treated as a shareholder for any purpose prior to such issuance. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date such shares are recorded as issued or transferred in the Company's official shareholder records, except as provided herein or in an Agreement.

4.5

Adjustment for Corporate Changes. In the event of any Company stock dividend, stock split, combination or exchange of shares, recapitalization or other change in the' capital structure of the Company, corporate separation or division of the Company (including, but not limited to, a split-up, spin-off, split-off or distribution to Company shareholders other than a normal cash dividend), sale by the Company of all or a substantial portion of its assets, reorganization, rights offering, a partial or complete liquidation, or any other corporate transaction or event involving the Company, then the Board shall determine whether (and the extent to which) or not to adjust or substitute, as the case may be, the number of shares of Common Stock available for Options under the Plan, the number of shares of. Common Stock covered by outstanding Options, the exercise price per share of outstanding Options, and performance cond itions and any other characteristics or terms of the Options as the Board shall deem necessary or appropriate to reflect equitably the effects of such changes to the Participants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated by rounding to the next lower whole number of shares (and no cash settlements shall be made with respect to fractional shares eliminated by rounding).

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ARTICLE V
ELIGIBILITY AND SELECTION

5.1

Eligibility. The persons eligible to participate in the Plan and be granted Options shall be employees, officers, directors, consultants or other service providers of the Company or any Affiliate.

For purposes of this Section 5.1, prospective employees, officers, directors, consultants or other service providers of the Company or any Affiliate shall be eligible to participate in the Plan and be granted Options in connection with and in furtherance of written offers of employment, retention or engagement, prior to the date any such person commences employment or first performs services for the Company or the Affiliate; provided that any Option granted to such person shall be granted contingent on such person commencing employment or performance of services for the Company or the Affiliate, and shall be exercisable no earlier than the date on which such person commences employment or first performs service for the Company or the Affiliate.

5.2

Selection of Participants. Of those persons eligible to participate in the Plan as described in Section 5.1, the Board shall, from time to time and in its sole discretion, select the persons to be granted Options and shall determine the terms and conditions with respect thereto. The Board may give consideration to such factors as deemed relevant by the Board to making such selection and determination.

5.3

Options in Substitution. Options (including cash in respect of fractional shares) may be granted under the Plan from time to time in substitution for options held by employees, officers, directors, consultants or service providers of other corporations who are about to become employees, officers, directors, consultants or service providers of the Company or an Affiliate as the result of a merger or consolidation of the employing corporation with the Company or an Affiliate, or the acquisition by the Company or an Affiliate of the assets of the employing corporation, or the acquisition by the Company or an Affiliate of the stock of the employing corporation, as the result of which it becomes an Affiliate. The terms and conditions of the Options so granted may vary from the terms and conditions set forth in this Plan at the time of such grant as the Board may deem appropriate to conform, in whole or in part, to the provisions of the options in substitution for which they are granted.

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ARTICLE VI
STOCK OPTIONS

6.1

General. The Board shall have authority to grant Options under the Plan at any time or from time to time. An Option shall entitle the Participant to receive shares of Common Stock upon exercise of such Option, subject to the Participant's satisfaction in full of the conditions, restrictions or limitations imposed in accordance with the Plan and an Agreement (which may differ from other Agreements), including, without limitation, payment of the Option Price.

6.2

Grant of Options. The grant of an Option shall occur as of the date the

Board determines. Each Option granted under the Plan shall be evidenced by an Agreement, in a form prescribed or approved by the Board, which shall embody the terms and conditions of such Option and which shall be subject to the express terms and conditions set forth in the Plan. A person selected by the Board to receive an Option shall not become a Participant and have any rights with respect to such Option unless and until such person has executed such Agreement, has delivered a fully executed copy thereof to the person or office designated by the Board and has otherwise complied with any applicable requirements set forth by the Board as part of the grant of the Option.

6.3

Terms and Conditions. Options shall be subject to such terms and conditions as shall be determined by the Board, including the following:

(a)

Option Period. The Option Period of each Option shall be fixed by the Board. Notwithstanding anything herein to the contrary, unless otherwise determined by the Board and provided in an Agreement, the Option Period of each Option shall be ten (10) years from the Grant Date of the Option.

(b)

Option Price. The Option Price per share of the Common Stock. purchasable under an Option shall be determined by the Board.

(c)

Execution of Related Documents. A Participant shall be required to enter into such non-competition, non-solicitation and confidentiality agreement or agreements as the Board shall specify.

(d)

Vesting and Exercisability. Options shall become vested and be exercisable as determined by the Board and set forth in each Agreement. An Agreement shall state, with respect to all or designated portions of the shares of Common Stock subject thereto, the time at which or the installments in which the Option shall become vested and be exercisable during the Option Period. The Board may establish requirements for vesting and exercisability based on (i) periods of employment or rendering of services, (ii) the satisfaction of performance criteria with respect to the Company or the Participant (or both), or (iii) both periods of employment or rendering of services and satisfaction of performance criteria.

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Notwithstanding anything herein to the contrary, unless otherwise determined by the Board and provided in an Agreement, each Option shall become vested and be exercisable according to the following provisions:

(1)

Prior to the second anniversary of the Grant Date, no portion of the Option shall be vested and the Option shall be forfeitable in its entirety.

(2)

On the second anniversary of the Grant Date, 25% of the Option shall be vested and nonforfeitable.

(3)

On the third anniversary of the Grant Date, 50% of the Option shall be vested and nonforfeitable.

(4)

On the fourth anniversary of the Grant Date, 75% of the Option shall be vested and nonforfeitable.

(5)

On the fifth anniversary of the Grant Date, the entire Option shall be vested and nonforfeitable.

In the case of any Option which, at the Grant Date; is granted with provisions for vesting and exercisability at a later date or in installments, whether by determination of the Board or by operation of the preceding paragraph, the Board may thereafter, at any time and in its sole discretion, waive or modify such vesting requirements with respect to such Option, in whole or in part, and accelerate the exercisability of all or a portion of the Option.

(e)

Method of Payment. Unless otherwise determined by the Board and provided in an Agreement, payment of the Option Price under each Option shall be made in full or in part by cash or by check. No shares of Common Stock shall be issued on exercise of an Option until full payment therefor, as determined by the Board, has been made.

(f)

Nontransferability of Options. Except as specifically provided herein or in an Agreement, no Option or interest therein shall be transferable by the Participant other than by will or by the laws of descent and distribution, and an Option shall be exercisable during the Participant's lifetime only by the Participant.

(g)

Designation of Beneficiary. A Participant may designate a Beneficiary who may exercise the Participant's Option after the Participant's death, subject to the provisions of the Plan. Such designation shall be made in such manner and on such form as shall be prescribed by the Company.

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6.4

Effect of Termination of Employment. Except as otherwise determined by the Board and set forth in an Agreement, if a Participant incurs a Termination of Employment, for any reason, prior to the expiration of the Option Period of any Option, the Option, if not vested and exercisable on the date of Termination of Employment, or any portion of the Option that is not vested and exercisable on the date of the Termination of Employment, shall expire and be forfeited, and shall be void for all purposes, immediately on the date of Termination of Employment.

Except as otherwise determined by the Board and set forth in an Agreement, in the case of a Participant who incurs a Termination of Employment prior to the expiration of the Option Period of any Option, the Option, if vested and exercisable on the date of Termination of Employment, or any portion of the Option that is vested and exercisable on the date of Termination of Employment, shall continue to be exercisable only for the applicable extended time period following such Termination of Employment set forth hereinafter and shall otherwise cease to be exercisable as of the close of business on the date of Termination of Employment.

(a)

In the event of Termination of Employment constituting Retirement, such Option or such portion thereof may be exercised by the Participant until the end of the ninety (90) day period commencing with the date of Retirement or, if earlier, the expiration of the Option Period.

(b)

In the event of Termination of Employment due to death, such Option or such portion thereof may be exercised by the Participant's Representative until the end of the twelve (12) month period commencing with the date of the Participant's death or, if earlier, the expiration of the Option Period.

(c)

In the event of Termination of Employment due to Disability, such Option or such portion thereof may be exercised by the Participant or, in the event the Participant is legally incompetent, the Participant's Representative until the' end, of the six (6) month period commencing with the date of Disability or, if earlier, the expiration of the Option Period.

(d)

In the event of Termination of Employment at the election of the Participant, other than on account of Retirement, death or disability, such Option or such portion thereof may be exercised by the Participant until the end of the ninety (90) day period commencing with the date of Termination of Employment or, if earlier, the expiration of the Option Period; provided that if a Participant elects such Termination of Employment without appropriate or agreed notice and agreed termination terms, such Option or such portion thereof shall cease to be exercisable automatically upon first notification to the Company by the Participant of such termination, with no extended time period for any exercise of the Option or any portion thereof.

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(e)

In the event of Termination of Employment due to dismissal by the Company, such Option or such portion thereof may be exercised by the Participant until the end of the ninety (90) day period commencing with the date of Termination of Employment or, if earlier, the expiration of the Option Period.

(f)

Notwithstanding anything in the preceding subparagraphs (a) through (e) to the contrary, in the event of Termination of Employment of a Participant by the Company for Cause, such Option or such portion thereof shall cease to be exercisable automatically upon first notification to the Participant by the Company of such termination, with no extended time period for any exercise of the Option or any portion thereof. If a Participant's employment or services are suspended pending an investigation of whether the Participant's employment or services should be terminated for Cause, all of the Participant's rights under any Option shall likewise be suspended during the period of such investigation.

Notwithstanding anything herein to the contrary, the Board may, at any time and in its sole discretion, further extend or modify the extended time periods for exercisability set forth in this Section 6.4, or waive or modify the operation of the provisions of this Section 6.4 as regards elective Termination of Employment without appropriate or agreed notice and agreed termination terms or Termination of Employment for Cause.

6.5

Information Available to Participants. At least annually, the Company shall make available to all Participants copies of the Company's financial statements for its most recently completed fiscal year. Except as may be required by applicable law, neither the Company nor the Board shall have any duty or obligation to provide or make available to any Participant any other disclosures .or information regarding the Company, and no Participant shall have any right to obtain any other disclosures or to receive any other information regarding the Company, in connection with the grant or exercise of any Option.

6.6

Exercise of Options. An Option which is vested and exercisable shall be exercised by a Participant (or a Representative), in whole or in part at any time during the Option Period, by giving written notice to the Company, in such form and manner as the Board may prescribe, specifying the number of shares of Common Stock attributable to the Option to be purchased. Such notice of exercise given to the Company shall be accompanied by payment in full of the Option Price and any other executed documents required by the Board.

6.7

Withholding on Exercise. No later than the date as of which an amount first becomes includible in the gross income of the Participant for Federal income tax purposes with respect to any Option, the Participant shall pay to the Company (or other entity identified by the Board), or make arrangements satisfactory to the Company or other entity identified by the Board regarding the payment of, any Federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant.

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6.8

Cash-Out of Option. On receipt of written notice of exercise of an Option at any time prior to a Change in Control, the Board may elect, at any time, to cash-out all or any portion of the Option by paying to the Participant an amount, in cash, equal to the excess of the Fair Market Value of a share of Common Stock as of the date of exercise over the Option Price, multiplied by the number of shares of Common Stock subject to the Option elected to be cashed-out by the Board. Cash-outs relating to Options held by Participants who are actually or potentially subject to Section 16 of the Exchange Act shall comply with Rule 16b-3, to the extent applicable.

ARTICLE VII
PROVISIONS APPLICABLE TO ACQUIRED STOCK

7.1

General Restriction on Transfer. Except as provided in Section 7.3, a Participant may not Transfer any shares of Common Stock acquired pursuant to the exercise of an Option until the effective date of a Change in Control. Notwithstanding anything herein to the contrary, the Board may, at any time and in its sole discretion, waive or modify the restriction on Transfer set forth in this Section 7.1 with respect to any or all shares of Common Stock acquired by a Participant pursuant to the exercise of an Option.

7.2

Transfer On Change in Control. A Participant may Transfer, or may be required to sell, shares of Common Stock acquired pursuant to the exercise of an Option upon the effective date of a Change in Control, as provided in Section 8.2. Notwithstanding anything herein to the contrary, the Board may, at any time and in its sole discretion, provide that corporate transactions in addition to those specified in Section 8.4, as constituting a Change in Control, shall constitute events upon the effective date of which a Participant may Transfer any or all of the Shares of Common Stock acquired by the Participant pursuant to the exercise of an Option.

7.3

Estate Planning Transfers. Notwithstanding anything herein to the contrary, a Participant may at any time make a Transfer of shares of Common Stock received pursuant to the exercise of an Option to his or her parents, spouse or descendants or to any trust for the benefit of the foregoing or to a custodian under a uniform gifts to minors act or similar statute for the benefit of any of the Participant's descendants.

7.4

Binding Effect of Plan. Any otherwise permitted Transfer of shares acquired pursuant to the exercise of an Option shall not be permitted or valid unless and until the transferee agrees to be bound by the provisions of this Plan, and any provision restricting Common Stock under the Agreement; provided that "Termination of Employment" shall continue to refer to the Termination of Employment of the Participant.

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7.5

Limited Transfer During Offering. In the event there is an effective registration statement under the Securities Act pursuant to which shares of Common Stock shall be offered for sale in an underwritten offering, a Participant shall not, during the period requested by the underwriters managing the registered offering, effect any public sale or distribution of shares received directly or indirectly pursuant to an exercise of an Option.

ARTICLE VIII

CHANGE IN CONTROL PROVISIONS

8.1

Consent to Board Action. A Participant, in the course of and as a condition to exercising an Option to acquire shares of Common Stock, shall waive all rights to object to or dissent from a proposed Change in Control which is approved by the Board, and shall agree to consent and raise no objection to such approved Change in Control; and, without limiting the generality of the foregoing, the Participant shall agree to (a) vote the Participant's shares to approve the terms of such approved Change in Control and (b) waive any appraisal rights that the Participant would have with respect to such approved Change in Control.

8.2

Transfer of Shares. On and after the effective date of a Change in Control, a Participant may Transfer shares of Common Stock acquired pursuant to the exercise of an Option; provided that in the event of a Change in Control approved by the Board, structured as a sale of shares of Common Stock, a Participant shall Transfer all shares of Common Stock acquired by the Participant, pursuant to the exercise of an Option, on the same terms as the other holders of Common Stock of the Company.

8.3

Accelerated Vesting. Notwithstanding any other provision of the Plan or in an Agreement to the contrary, in the event of a Change in Control (as defined in Section 8.4), the Board shall have full discretion to provide that any Options outstanding as of the date of the Change in Control which are not then fully vested and exercisable become fully vested and exercisable to the full extent of the original grant

8.4

Definition of Change in Control. For purposes of this Plan, a "Change in Control" shall be deemed to have occurred at such time as (a) a person or a group (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act), other than a person who is an existing holder of capital stock of the Company or a group consisting solely of existing holders of capital stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act) of more than fifty (50%) percent of the Company's total outstanding capital stock; (b) a sale, lease or exchange of substantially all of the Company's assets and related business to a third party unaffiliated with an existing holder of capital stock of the Company; or (c) a merger of the Company into or consolidation with another corporation which is unaffiliated with the stockholders or management of the Company and, afte r giving effect to such merger or consolidation, the existing holders of capital stock of the. Company immediately prior to such merger or consolidation own less than fifty-one percent (51%) of the capital stock of the surviving entity.

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ARTICLE IX
MISCELLANEOUS

9.1

Amendment and Termination. The Board may amend or terminate the Plan at any time, but no amendment or termination shall be made which would impair the rights of a Participant under an Option theretofore granted without the Participant's consent, except to the extent such amendment or termination is made pursuant to express provisions of the Plan or an Agreement or is necessary for the Plan or an Option to comply with any applicable law, regulation or rule.

The Board may amend the terms of any Option theretofore granted as set forth in an Agreement, prospectively or retroactively, but no such amendment shall be made which would impair the rights of any Participant without the Participant's consent, except to the extent such an amendment is made pursuant to express provisions of the Plan or an Agreement or is necessary for the Plan or an Option to comply with any applicable law, regulation or rule.

9.2

Fail-Safe for Rule 16b-3. With respect to persons subject to Section 16 of

the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any provision of the Plan or action by the Board fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board. In the event the Plan does not include a provision required by Rule 16b-3 to be stated herein, such provision (other than one relating to eligibility requirements or the price and amount of Options) shall be deemed to be incorporated by reference into the Plan with respect to Participants subject to Section 16.

If at the time a Participant incurs a Termination of Employment (other than due to Cause) or if at the time of a Change in Control, the Participant is subject to "short-swing" liability under Section 16 of the Exchange Act, any time period provided for under the Plan or an Agreement, to the extent necessary to avoid the imposition of such liability, shall be suspended and delayed during the period the Participant would be subject to such liability, but such suspension and delay shall not be for more than six (6) months and one (1) day and not to exceed the Option Period, whichever is shorter.

9.3

Fail-Safe for Mitigation of Excise Tax. Except as otherwise provided in an Agreement, if any payment or right accruing to a Participant under this Plan (without the application of this provision), either alone or together with other payments or rights accruing to the Participant from the Company ("Total Payments"), would constitute a "parachute payment" (as defined in Section 280G of the Code), such payment or right shall be reduced to the largest amount or greatest right that will result in no portion of the amount payable or right accruing under the Plan being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code. The determination of the amount of any potential reduction in the rights or payments shall be made by the Board in good faith after consultation with the Participant and shall be communicated to the Participant. Th e Participant shall cooperate in good faith with the Board in making such determination and providing the necessary information for this purpose. The foregoing provisions of this paragraph shall apply with respect to any person only if, after reduction for any applicable Federal excise tax imposed by Section 4999 of the Code and Federal income tax imposed by the Code, the Total Payments accruing to such person would be less than the amount of the Total Payments as reduced, if applicable, under the foregoing provisions of the Plan and after reduction for only Federal income taxes.

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9.4

No Creditor Rights. Unless otherwise provided in this Plan or in an Agreement, no Option shall be subject to the claims of Participant's creditors and no Option may be transferred, assigned, alienated or encumbered in any way other than by will or the laws of descent and distribution or to a Representative upon the death of the Participant.

9.5

No Rights with Respect to Employment. Nothing contained herein shall be deemed to alter the employment relationship between the Company and a Participant, or the contractual relationship between the Company and a Participant if there is a written contract regarding such relationship. Nothing contained herein shall be construed to constitute a contract of employment or a contract for services between the Company and a Participant. The Company and each of the Participants shall continue to have the right to terminate the employment or service relationship at any time for any reason, except as provided in a written contract.

9.6

Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any retirement or welfare benefit plan of the Company, unless otherwise specifically provided in such plan of the Company.

The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Company or the Board to adopt such other incentive arrangements as the Company or the Board may deem desirable, including, without limitation, any stock appreciation right, phantom stock or restricted stock arrangement and the granting of stock options otherwise than under the Plan, and such arrangements may be applicable either generally or only in specific cases.

9.7

Controlling Law. The Plan, all Agreements and all Options granted and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of placeStateDelaware (other than its law respecting choice of law). The Plan and all Agreements shall be construed to comply with all applicable law and to avoid liability to the Company or a Participant, including, without limitation, liability under Section 16(b) of the Exchange Act.

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9.8

Waiver, Cumulative Rights. The failure or delay of either the Company or a Participant to require performance by the other party under any provision of the Plan or an Agreement shall not affect the Company's or the Participant's right to require such performance, unless and until such performance has been waived in writing. Each and every right provided by the Plan and an Agreement shall be cumulative and may be exercised from time to time in whole or in part (unless otherwise specifically provided).

9.9

Notices. Any notice which either the Company or a Participant may be required or permitted to provide to the other party under the Plan or an Agreement shall be in writing and shall be deemed sufficiently given if personally delivered or sent by either facsimile, overnight courier or postage paid first class mail. Notices sent by mail shall be deemed received three (3) business days after mailed, but in no event later than the date of actual receipt. Notices shall be directed, if to a Participant, to the Participant's address indicated in the Company's business records or as otherwise designated in writing delivered by the Participant to the Company to apply for purposes of the Plan; and, if to the Company, to the Secretary of the Company at the Company's principal executive office or to such other officer of the Company at such address as may be designated in an Agreement or otherwise in writing delivered by the Company to the Participant.

9.10

Successors and Assigns. This Plan and an Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon a Participant, and all rights granted to the Company under this Plan and an Agreement, shall be binding upon the Participant's heirs, legal representatives and successors.

9.11

Headings. The headings contained in this Plan or in an Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Plan or an Agreement.

9.12

Severability. If any provision of this Plan and an Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not effect any other provision hereby or thereof, and this Plan and the Agreement shall be construed as if such invalid or unenforceable provision were omitted.

9.13

Entire Agreement. This Plan and, with respect to any Participant, the Agreement entered into with the Participant pursuant to which an Option is granted, including any Exhibits thereto, shall constitute the entire agreement with respect to the subject matter hereof and thereof; provided that in the event of any inconsistency between the Plan and the Agreement, the terms and conditions of the Plan shall control.

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IN WITNESS WHEREOF, the Company has caused this instrument to be executed on its behalf by the undersigned officer of the Company, as duly authorized by its Board of Directors, as of the ___ day of April, 2003.

		AMERICAN MEDICAL INSTRUMENTS
		HOLDINGS, INC.,
	By:
		(signature)
	Title:
ATTEST:
Secretary

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EX-13

Exhibit 13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, statements of shareholders’ (deficit) equity, and statements of cash flows present fairly, in all material respects, the financial position of Angiotech Pharmaceuticals, Inc and its subsidiaries at December 31, 2008 and December 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting under Item 9A.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estima tes made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 15 to the consolidated financial statements, the Company changed the manner in which it accounted for uncertain tax positions in 2007.

As discussed under Liquidity risk in Note 1 to the consolidated financial statements, the Company faces a number of material risks and uncertainties that affect the Company’s liquidity.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthor ized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Vancouver, Canada

March 13, 2009

- 13-1 -

 Angiotech Pharmaceuticals, Inc.

CONSOLIDATED BALANCE SHEETS

(All amounts expressed in thousands of U.S. dollars)

		December 31,			December 31,
		2008			2007
ASSETS
Current assets
Cash and cash equivalents [note 6]	$	38,952		$	91,326
Short-term investments [note 7]		848			17,899
Accounts receivable		25,524			22,678
Inventories [note 8]		38,594			33,647
Deferred income taxes, current portion [note 14]		3,820			5,964
Prepaid expenses and other current assets		5,234			7,070
Total current assets		112,972			178,584
Long-term investments [note 7]		1,561			6,557
Assets held for sale [note 9]		8,422			-
Property, plant and equipment [note 10]		49,108			59,187
Intangible assets [note 11]		195,477			225,889
Goodwill [note 11]		-			659,511
Deferred financing costs [note 16]		11,363			13,600
Other assets		6,294			6,780
Total assets	$	385,197		$	1,150,108
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities
Accounts payable and accrued liabilities [note 12]	$	46,620		$	47,489
Income taxes payable		8,071			7,914
Interest payable on long-term debt		6,514			7,327
Deferred revenue, current portion		210			210
Total current liabilities		61,415			62,940
Deferred revenue		999			1,211
Deferred leasehold inducement [note 13]		2,780			2,794
Deferred income taxes [note 14]		40,577			59,368
Other tax liability [note 15]		3,145			4,693
Long-term debt [note 16]		575,000			575,000
Other liabilities		1,154			2,030
Total non-current liabilities	$	623,655		$	645,096
Commitments and contingencies [note 19]
Shareholders’ (deficit) equity
Share capital [note 17]
Authorized:
200,000,000 Common shares, without par value
50,000,000 Class I Preference shares, without par value
Common shares issued and outstanding:
December 31, 2008 – 85,121,983
December 31, 2007 – 85,073,983		472,739			472,618
Additional paid-in capital		32,107			29,669
Accumulated deficit		(843,673	)		(102,497	)
Accumulated other comprehensive income		38,954			42,282
Total shareholders’ (deficit) equity		(299,873	)		442,072
	$	385,197		$	1,150,108

See accompanying notes to the consolidated financial statements

- 13-2 -

Angiotech Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts expressed in thousands of U.S. dollars, except share and per share data)

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
REVENUE
Royalty revenue	$	91,546		$	116,659		$	175,254
Product sales, net		190,816			170,193			138,590
License fees		910			842			1,231
		283,272			287,694			315,075
EXPENSES
License and royalty fees		14,258			18,652			25,986
Cost of products sold		101,052			94,949			69,543
Research and development		53,192			53,963			45,393
Selling, general and administration		98,483			99,315			78,933
Depreciation and amortization		33,998			33,429			36,014
In-process research and development [note 18]		2,500			8,125			1,042
		303,483			308,433			256,911
Operating (loss) income		(20,211	)		(20,739	)		58,164
Other (expenses) income:
Foreign exchange gain (loss)		540			(341	)		515
Investment and other income		1,192			10,393			6,235
Interest expense on long-term debt		(44,490	)		(51,748	)		(35,502	)
Write-down and other deferred financing charges [note 16]		(16,544	)		-			(9,297	)
Write-down / loss on redemption of investments [note 7]		(23,587	)		(8,157	)		-
Write-down of assets held for sale [note 9]		(1,283	)		-			-
Write-down of goodwill [note 11]		(649,685	)		-			-
Total other (expenses) income		(733,857	)		(49,853	)		(38,049	)
(Loss) income from continuing operations before income taxes and cumulative effect of change in accounting policy		(754,068	)		(70,592	)		20,115
Income tax (recovery) expense [note 14]		(12,892	)		(14,545	)		2,092
(Loss) income from continuing operations before cumulative effect of change in accounting policy		(741,176	)		(56,047	)		18,023
Loss from discontinued operations, net of income taxes [note 3]		-			(9,893	)		(7,708	)
Cumulative effect of change in accounting policy [note 17]		-			-			399
Net (loss) income	$	(741,176	)	$	(65,940	)	$	10,714
Basic net (loss) income per common share [note 23]:
Continuing operations	$	(8.71	)	$	(0.66	)	$	0.21
Discontinued operations		-			(0.12	)		(0.09	)
Total	$	(8.71	)	$	(0.78	)	$	0.12
Diluted net (loss) income per common share [note 23]:
Continuing operations	$	(8.71	)	$	(0.66	)	$	0.21
Discontinued operations		-			(0.12	)		(0.09	)
Total	$	(8.71	)	$	(0.78	)	$	0.12
Basic weighted average number of common shares outstanding (in thousands)		85,118			85,015			84,752
Diluted weighted average number of common shares outstanding (in thousands)		85,118			85,015			85,437

See accompanying notes to the consolidated financial statements

- 13-3 -

Angiotech Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

(All amounts expressed in thousands of U.S. dollars, except share data)

	Common		Shares
											Accumulated
					Additional						other			Comprehensive			Total
					paid-in			Accumulated			comprehensive			income			shareholders'
	Shares		Amount		capital			deficit			income			(loss)			equity (deficit)
Balance at December 31, 2005	84,291,517	$	463,639	$	21,929		$	(45,607	)	$	22,719					$	462,680
Exercise of stock options for cash	692,218		8,751		(2,266	)											6,485
Stock-based compensation					5,818												5,818
Cumulative effect of change in accounting principle					(399	)											(399	)
Net unrealized gain on available-for-sale securities, net of taxes (nil)											1,543		$	1,543			1,543
Reclassification of net unrealized gain on available-for-sale securities, net of taxes (nil)											(66	)		(66	)		(66	)
Cumulative translation adjustment											11,917			11,917			11,917
Net loss								10,714						10,714			10,714
Comprehensive income													$	24,108
Balance at December 31, 2006	84,983,735	$	472,390	$	25,082		$	(34,893	)	$	36,113					$	498,692
Adjustment for the adoption of FASB interpretation No. (FIN) 48								(1,664	)								(1,664	)
Exercise of stock options for cash	90,248		228														228
Stock-based compensation					4,587												4,587
Net unrealized loss on available-for-sale securities, net of taxes (nil)											(9,567	)	$	(9,567	)		(9,567	)
Reclassification of net unrealized loss on available-for-sale securities, net of taxes (nil)											3,097			3,097			3,097
Cumulative translation adjustment											12,639			12,639			12,639
Net loss								(65,940	)					(65,940	)		(65,940	)
Comprehensive loss													$	(59,771	)
Balance at December 31, 2007	85,073,983	$	472,618	$	29,669		$	(102,497	)	$	42,282					$	442,072
Exercise of stock options for cash	48,000		121														121
Stock-based compensation					2,438												2,438
Net unrealized loss on available-for-sale securities, net of taxes (nil)											(9,572	)	$	(9,572	)		(9,572	)
Reclassification of realized loss on available- for-sale securities, net of taxes (nil)											13,860			13,860			13,860
Cumulative translation adjustment											(7,616	)		(7,616	)		(7,616	)
Net loss								(741,176	)					(741,176	)		(741,176	)
Comprehensive loss													$	(744,504	)
Balance at December 31, 2008	85,121,983	$	472,739	$	32,107		$	(843,673	)	$	38,954					$	(299,873	)

See accompanying notes to the consolidated financial statements

- 13-4 -

Angiotech Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts expressed in thousands of U.S. dollars)

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
OPERATING ACTIVITIES
Net (loss) income	$	(741,176	)	$	(65,940	)	$	10,714
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		38,171			37,892			40,399
Unrealized foreign exchange gain (loss)		126			(742	)		-
Gain on disposition of subsidiary		-			-			(47	)
Loss on disposition of intangible assets		113			32			-
Write-down / loss (gain) on disposition of assets held for sale		1,837			1,156			(681	)
Write-down / loss on redemption of investments		23,584			647			287
Write-down and other deferred financing charges		16,544			-			9,297
Write-down of goodwill		649,685			-			-
Impairment of assets from discontinued operations		-			8,879			7,700
Deferred income taxes		(12,464	)		(10,386	)		(17,989	)
Stock-based compensation expense		2,438			4,587			5,818
Deferred revenue		(211	)		(630	)		(1,211	)
Non-cash interest expense		2,237			2,245			2,019
In-process research and development		2,500			8,125			1,042
Other		(250	)		(562	)		1,713
Cumulative effect of change in accounting principle		-			-			(399	)
Net change in non-cash working capital items relating to operating activities [note 24]		(21,141	)		9,135			(2,791	)
Cash (used in) provided by operating activities		(38,007	)		(5,562	)		55,871
INVESTING ACTIVITIES
Purchase of short-term investments		-			-			(132,763	)
Proceeds from short-term investments		2,756			9,285			264,927
Purchase of long-term investments		-			(15,000	)		(10,147	)
Proceeds from long-term investments		-			22,965			129,670
Purchase of property, plant and equipment		(7,669	)		(7,131	)		(10,851	)
Acquisition of businesses, net of cash acquired		-			-			(820,953	)
Purchase of intangible assets		(1,000	)		(6,466	)		(285	)
Proceeds from sale of intangible asset		-			-			3,400
Proceeds from sale of assets held for sale		-			4,832			6,442
In-process research and development		(2,500	)		(8,125	)		(1,042	)
Other assets		174			(101	)		(3,606	)
Cash (used in) provided by investing activities		(8,239	)		259			(575,208	)
FINANCING ACTIVITIES
Principal repayment of long-term obligations		-			-			(350,000	)
Proceeds from long-term obligations		-			-			925,000
Deferred financing charges and costs		(4,499	)		(1,865	)		(24,559	)
Proceeds from stock options exercised		121			228			6,485
Cash (used in) provided by financing activities		(4,378	)		(1,637	)		556,926
Effect of exchange rate changes on cash		(1,750	)		(1,066	)		(420	)
Net (decrease) increase in cash and cash equivalents		(52,374	)		(8,006	)		37,169
Cash and cash equivalents, beginning of year		91,326			99,332			62,163
Cash and cash equivalents, end of year	$	38,952		$	91,326		$	99,332

Supplemental note disclosure [note 24]

See accompanying notes to the consolidated financial statements

- 13-5 -

Angiotech Pharmaceuticals, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Angiotech Pharmaceuticals, Inc. (the “Company”), is incorporated under the Business Corporations Act (British Columbia). The Company is a specialty pharmaceutical and medical device company that discovers, develops and markets innovative technologies primarily focused on acute and surgical applications.

1.

BASIS OF PRESENTATION

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).  All amounts herein are expressed in U.S. dollars unless otherwise noted. All tabular amounts are expressed in thousands of U.S. dollars, except share and per share data, unless otherwise noted.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities and other contractual obligations. The Company monitors and manages liquidity risk by preparing rolling cash flow forecasts, monitoring the condition and value of assets available to be used as security in financing arrangements, seeking flexibility in financing arrangements and establishing programs to monitor and maintain compliance with terms of financing agreements. A key component of managing liquidity risk is also ensuring that operating cash flows are optimized. The Company’s principal objective in managing liquidity risk is to maintain cash and access to cash at levels sufficient to meet its day-to-day operating requirements.

For the year ended December 31, 2008, the Company reported a balance of cash and cash equivalents (“cash resources”) of $39.0 million, which represented a net decrease in cash resources of $52.4 million as compared to December 31, 2007. During 2008, the Company used $38.0 million to fund its operating activities and $11.2 million to fund capital expenditures (property, plant and equipment, intangible assets and in-process research and development).  The Company’s cash resources are used to support clinical studies, research and development initiatives, sales and marketing initiatives, working capital requirements, debt servicing requirements and for general corporate costs. The Company’s cash resources may also be used to fund acquisitions of, or investments in, businesses, products or technologies that expand, complement or are otherwise related to the Company’s business.

During 2008 and continuing in 2009, the Company undertook various initiatives and developed a plan to manage its operating and liquidity risks including:

·

Reduction of research and development activities and reduction in staffing within the clinical and research departments.

·

Gross margin improvement initiatives including the transfer of certain manufacturing operations to lower cost regions and the closure of the Syracuse, NY operations.

·

Cost containment initiatives including staffing reductions in general and administrative departments, a supplier concession program and other cost reduction initiatives.

·

Selective reduction in certain sales and marketing investments and investments in medical affairs.

·

Postponement of selected planned capital expenditures.

·

Obtained a financing commitment from Wells Fargo Foothill, LLC (“Wells Fargo”) as described below and in Note 27.

The Company faces a number of risks and uncertainties that may significantly impact its ability to generate cash flows from its operations and to fund its capital expenditures and future opportunities that might be available to the Company.  These risks and uncertainties may materially impact the Company’s liquidity position in 2009 and future years. The more significant risks and uncertainties that have and may continue to impact the Company’s future operating results, cash flows and liquidity position are as follows:

o

Revenue in the Company’s Pharmaceutical Technologies segment declined $25.0 million for the year ended December 31, 2008 compared to 2007, primarily as a result of lower than expected royalties derived from sales by Boston Scientific Corporation (“BSC”) of TAXUS® coronary stent systems primarily due to new competitive entrants into the U.S. drug-eluting stent market at various times during 2008. Under the royalty agreements with BSC, management does not control the direct or indirect sales of the TAXUS products. Management expects the impact of new competitive conditions to be reflected through the full year 2009 and in subsequent years, which, accordingly, is expected to result in lower revenues and cash flows derived from sales of TAXUS in 2009 and subsequent years as compared to 2008.

o

Revenue from the Medical Products segment for the year ended December 31, 2008 was $190.8 million compared to $170.2 million in 2007. The current economic environment and increasingly difficult credit markets and liquidity environment may have an impact on the Company's customers and therefore on the Company’s product sales in 2009 and future years. In light of these conditions, management is continuously monitoring and managing the Company’s sales activities; however, several factors that may affect the Company’s revenues are not within its control. In addition, the Company continues to implement its marketing plans for its newer promoted brand products such as the Quill SRS product line with the expectation of strong growth during 2009.  It is possible that the expected growth in revenue in 2009 for these newer product lines may not be achieved and revenues for other products may decline.

- 13-6 -

o

Gross margins for the Company’s product sales were 47.1% for the year ended December 31, 2008 compared to 44.2% for the year ended December 31, 2007. These improvements are due primarily to improved product mix and sales of higher margin products, the impact of higher sales volumes on the absorption of fixed overhead and labour costs and the transfer of manufacturing to lower cost regions. During 2009, it is possible the Company will have further changes in the mix or volume of products to be purchased by its customers.  In addition, the new manufacturing facilities will be completing their initial full cycles of production.  There can be no assurance that these gross margin improvements will continue into 2009 or thereafter.

o

The Company has implemented initiatives to reduce its research and development costs, selling, general and administrative costs and capital expenditures for 2009.  Management continues to closely monitor costs in relation to sales activity and forecasted revenues.  Management expects that some limited future costs reductions could be achieved if forecasted revenues are not achieved.  However, such cost reductions may affect future opportunities for the Company.  In addition, as reported in note 19, the Company has entered into certain commitments and is exposed to certain contingencies for which the outcome is not necessarily within the control of the Company.  Acceleration of research and development activities under collaboration agreements by counterparties and any unexpected outcomes in respect of contingencies may require payments earlier than they are currently expected to be required by the Company& #146;s management.

o

On March 2, 2009 the Company announced it had obtained financing from Wells Fargo. The financing includes a delayed draw secured term loan facility of up to $10 million and a secured revolving credit facility, with a borrowing base comprised of certain of the Company's finished goods inventory and accounts receivable, providing up to an additional $22.5 million, subject to certain terms and conditions. At any time, the amount of financing available under the revolving credit facility may be significantly less than $22.5 million and is expected to fluctuate from month to month with changes in levels of finished goods and accounts receivable.  As of February 23, 2009, the amount of financing available under the revolving credit facility was approximately (unaudited) $9.5 million. Any borrowings outstanding under the term loan and revolving credit facility bear interest ranging from LIBOR + 3.25% to LIBOR + 3. 75%, with a minimum Base LIBOR Rate of 2.25%. At December 31, 2008, interest rates on the term loan facility and revolving credit facility would have been between 5.5% and 6.0%, based on LIBOR rates at that time. The term loan and the revolving credit facility include certain covenants and restrictions with respect to the Company’s operations and require us to maintain certain levels of EBITDA and interest coverage ratios, among other terms and conditions. As described in note 27, the Company has available credit relating to the term loan and the revolving credit facility that is expected to be drawn in future months. However, the term loan and the revolving credit facility have restrictions on availability and significant covenants which may limit the amount, if any, that may be borrowed by the Company during the year or may require repayments. While management expects to be able to maintain these covenants during 2009, it is possible that events and circumstan ces may occur that may affect the ability of the Company to operate its business within the restrictions proposed by the financial covenants and other restrictions relating to the term loan and the revolving credit facility.

o

The Company’s future interest payments related to its existing long-term debt continues to be significant (See Note 16). During the year ended December 31, 2008, the Company incurred interest expense of $44.5 million on the outstanding long-term debt obligations, as compared to $51.7 million for 2007. Additional interest expense is expected to be incurred when the term loan and the revolving credit facility described above are utilized. The Senior Floating Rate Notes due 2013 reset quarterly to an interest rate of 3-month LIBOR plus 3.75% and bear an interest rate of 5.18% at December 31, 2008 compared to 8.45% at December 31, 2007. Volatility in the LIBOR rates has been high in fiscal 2008 and interest rates are outside of the control of the Company. The Company does not use derivatives to hedge against this interest rate risk and it is possible that volatility in the LIBOR rate will continue into fiscal 2009. Changes in the LIBOR rate will affect interest costs (See Notes 16 and 27).

o

The Company is significantly leveraged and has significant future interest payments.  Management is continuing to evaluate a range of financial and strategic alternatives with its financial and legal advisors with respect to its capital structure. There can be no assurance that the Company will be able to consummate any new financing or other transaction that would be favourable to the Company. During 2008, the Company incurred significant costs related to proposed transactions that were not able to be completed. Actions to pursue alternative financing structures may require the Company to incur additional costs, which may impact the Company’s cash and liquidity position.

While management believes it has developed planned courses of action and identified other opportunities to mitigate the operating and liquidity risks outlined above, there can be no assurance that management will be able to achieve any or all of the opportunities it has identified or obtain sufficient liquidity to execute its business plan. Furthermore, there may be other material risks and uncertainties that may impact the Company’s liquidity position that have not yet been identified by the Company.

- 13-7 -

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All intercompany transactions and balances have been eliminated on consolidation.

(b) Use of estimates

The Company’s preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ materially from these estimates.

(c) Foreign currency translation

The Company’s functional and reporting currency is the U.S. dollar.  The assets and liabilities of foreign subsidiaries using the local currency as their functional currency are translated to U.S. dollars based on current exchange rates and any resulting translation adjustment is included in accumulated other comprehensive income/(loss). Revenues and expenses denominated in other than U.S. dollars are translated at average monthly rates.

The functional currency of the Company’s other foreign operations is the U.S. dollar.  For these foreign operations, assets and liabilities denominated in other than U.S. dollars are translated at the period-end rates for monetary assets and liabilities and historical rates for non-monetary assets and liabilities.  Revenues and expenses denominated in other than U.S. dollars are translated at average monthly rates.  Gains and losses from this translation are recognized in the current consolidated statement of operations.

(d) Cash equivalents

The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.  Cash equivalents are recorded at cost plus accrued interest.  The carrying value of these cash equivalents approximates its fair value.

(e) Short and long-term investments

The Company considers all highly liquid financial instruments with an original maturity greater than three months and less than one year to be short-term investments.  Short-term and long-term investments that are classified as available-for-sale are carried at fair value with unrealized gains or losses, net of tax, reflected in accumulated other comprehensive income (loss). When the Company believes that the unrealized losses are other than temporary, these losses are included in the determination of income for the period and reclassified out of accumulated other comprehensive income (loss). The Company bases the cost of available-for-sale securities on the specific identification method.

Long-term investments where the Company exercises significant influence are accounted for using the equity method and long-term investments for which fair value is not readily determinable are recorded at cost. The Company reviews its long-term investments for indications of impairment by reference to quoted market prices, the results of operations, financial position of the investee and other evidence supporting the net realizable value of the investment.  Whenever events or changes in circumstances indicate the carrying amount may not be recoverable and the impact of these events is determined to be other than temporary, the investment is written down to its estimated fair value and the resulting losses are included in the determination of income for the period.

(f) Allowance for doubtful accounts

Accounts receivable are presented net of an allowance for doubtful accounts.  In determining the allowance for doubtful accounts, which includes specific reserves, the Company reviews accounts receivable agings, customer financial strength, credit standing and payment history to assess the probability of collection.  The Company continually monitors the collectibility of the receivables. Receivables are written off when management determines they are uncollectible.

(g) Inventories

Raw materials are recorded at the lower of cost, determined on a specific item basis, and net realizable value.  Work-in-process, which includes inventory stored at a stage preceding final assembly and packaging, and finished goods are recorded at the lower of cost, determined on a standard cost basis which approximates average cost, and net realizable value.

- 13-8 -

(h) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation.  Depreciation is provided using the straight-line method over the following terms:

Buildings	40 years
Leasehold improvements	Term of the lease
Manufacturing equipment	3 – 10 years
Research equipment	5 years
Office furniture and equipment	3 – 10 years
Computer equipment	3 – 5 years

(i) Goodwill and intangible assets

Goodwill represents the difference between the purchase price and the estimated fair value of the net assets acquired when accounted for by the purchase method of accounting. In accordance with FAS 142, Goodwill and Intangible Assets, goodwill is not amortized and is pushed-down to the reporting entities. The Company tests goodwill for impairment annually in all of the Company’s reporting units. The latest impairment test was conducted on December 31, 2008 and an impairment charge has been recorded. See note 11.

Intangible assets with finite lives are amortized based on their estimated useful lives. Amortization of intangible assets with finite lives is provided using the straight-line method over the following terms:

Acquired technologies	2 - 10 years
Customer relationships	10 years
In-licensed technologies	5 - 10 years
Trade name and other	2 - 12 years

(j) Impairment of long-lived assets

Goodwill and indefinite life intangible assets acquired in a business combination are tested for impairment on an annual basis and at any other time if an event occurs or circumstances change that would indicate that an impairment may exist.  When the carrying value of a reporting unit’s goodwill or indefinite life intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.

The Company reviews the carrying value of intangible assets with finite lives, property, plant and equipment and other long-lived assets and asset groups for the existence or changes in facts or in circumstances that might indicate a condition of impairment.  If estimates of undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than the carrying amount, then the carrying amount of the asset is written down to its fair value.

(k) Revenue recognition

(i) Royalty revenue

Royalty revenue is recognized when the Company has fulfilled the terms in accordance with the contractual agreement, has no future obligations, the amount of the royalty fee is determinable and collection is reasonably assured.  The Company records royalty revenue from Boston Scientific Corporation (“BSC”) on a cash basis due to the inability to accurately estimate the BSC royalty before the reports and payments are received by the Company.

(ii) Product sales

Revenue from product sales, including shipments to distributors, is recognized when the product is shipped from the Company’s facilities to the customer provided that the Company has not retained any significant risks of ownership or future obligations with respect to products shipped.  Revenue from product sales is recognized net of provisions for future returns.  These provisions are established in the same period as the related product sales are recorded and are based on estimates derived from historical experience and adjusted to actual returns when determinable.

Revenue is considered to be realized or realizable and earned when all of the following criteria are met: persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. These criteria are generally met at the time of shipment when the risk of loss and title passes to the customer or distributor.

Amounts billed to customers for shipping and handling are included in revenue. Where applicable, revenue is recorded net of sales taxes. The corresponding costs for shipping and handling are included in cost of products sold.

(iii) License fees

License fees are comprised of initial fees and milestone payments derived from collaborative and other licensing arrangements. Non-refundable milestone payments are recognized upon the achievement of specified milestones when the milestone payment is substantive in nature, the achievement of the milestone was not reasonably assured at the inception of the agreement and the Company has no further significant involvement or obligation to perform under the arrangement. Initial fees and non-refundable milestone payments received which require the ongoing involvement of the Company are deferred and amortized into income on a straight-line basis over the period of the ongoing involvement of the Company if no other objectively measurable performance exist that indicates another method of recognition is more appropriate.

- 13-9 -

(l) Income taxes

Income taxes are accounted for under the liability method.  Deferred tax assets and liabilities are recognized for the temporary differences between the financial statement and income tax bases of assets and liabilities, and for operating losses and tax credit carry forwards.  Investment tax credits for qualified research and development expenditures are recognized as a reduction of income tax expense in the period in which the Company becomes entitled to the tax credits. A valuation allowance is provided for the portion of deferred tax assets that is more likely than not to be unrealized.  Deferred tax assets and liabilities are measured using the enacted tax rates and laws.

(m) Accounting for Uncertainty in Income Taxes

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109, or FIN 48. FIN 48 requires the recognition of the effect of uncertain tax positions where it is more likely than not based on technical merits that the position would be sustained. The Company recognizes the amount of the tax benefit that has a greater than 50 percent likelihood of being realized upon settlement. FIN 48 further requires that a change in judgment related to the expected resolution of uncertain tax positions be recognized in the year of such change. Accrued interest and penalties related to unrecognized tax benefits are recorded in income tax expense in the current year.

(n) Research and development costs

Research and development expenses are comprised of costs incurred in performing research and development activities including salaries and benefits, clinical trial and related clinical manufacturing costs, contract research costs, patent procurement costs, materials and supplies, and other operating and occupancy costs. Amounts paid for medical technologies used solely in research and development activities and with no alternative future use are expensed in the year incurred.

Payments made in advance for non-refundable portion of research and development activities are deferred and capitalized until the related goods are delivered or related services are performed.

(o) In-process research and development costs

In-process research and development costs, including upfront fees, and milestones paid to collaborators are expensed in the year incurred if the technology has not demonstrated technological feasibility and does not have any alternative future use.

(p) Net (loss) income per common share

Net (loss) income per common share is calculated using the weighted average number of common shares outstanding during the period, excluding contingently issuable shares, if any. Diluted net income per common share is calculated using the treasury stock method which uses the weighted average number of common shares outstanding during the period and also includes the dilutive effect of potentially issuable common shares from outstanding stock options.

(q) Stock-based compensation

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards Board (“SFAS”) No. 123(R) “Stock-Based Payment”, a revision to SFAS 123 “Accounting for Stock-Based Compensation”.  SFAS 123(R) requires the Company to recognize the grant date fair value of stock-based compensation awards granted to employees over the requisite service period.  The compensation expense recognized reflects estimates of award forfeitures at the time of grant and revised in subsequent periods, if necessary when forfeitures rates are expected to change. The Company uses yield rates on U.S. Treasury or Canadian Government securities for a period approximating the expected term of the award to estimate the risk-free interest rate in the Company's grant-date fair value assessment. The Company used its historical volatility as a basis to estimate the expected volatility assumpt ion used in the Black-Scholes model. The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. Generally, the stock options granted have a maximum term of five years and vest over a four-year period from the date of the grant. When an employee ceases employment at the Company, any unexercised vested options granted will expire either immediately, within 365 days from the last date of service or on the original expiration date at the time the option was granted, as defined in the Company’s Stock Incentive Plan. The expected life of employee stock options is based on a number of factors, including historic exercise patterns, cancellations and forfeiture rates, and the vesting period and contractual term of the options.

(r) Deferred leasehold inducement

Leasehold inducements are deferred and amortized to reduce rent expense on a straight line basis over the term of the lease.

- 13-10 -

(s) Deferred financing costs

Financing costs for long-term debt are capitalized and amortized on a straight-line basis, which approximates the effective-interest rate method to interest expense over the life of the debt instruments.

(t) Costs for patent litigation and legal proceedings

Costs for patent litigation or other legal proceedings are expensed as incurred and included in selling, general and administration expenses.

(u) Recently adopted accounting policies

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS 157, and on January 1, 2008, the Company adopted SFAS No. 157 as it relates to financial assets and financial liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year-end entities. Also in February 2008, the FASB issued FSP No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which states that SFAS No. 13, Accounting for Leases, or SFAS 13, and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13 are excluded from the provisions of SFAS 157, except for assets and liabilities related to leases assumed in a business combination that are required to be measured at fair value under SFAS No. 141, Business Combinations, SFAS 141, or SFAS No. 141 (revised 2007), Business Combinations, or SFAS 141(R).

SFAS 157 defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. The adoption of SFAS 157, as it relates to financial assets, had no impact on the consolidated financial statements. The Company has determined that the adoption of SFAS 157, as it relates to nonfinancial assets and nonfinancial liabilities, is not expected to have an impact on the consolidated financial statements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in U.S. GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS 157 are described below:

•

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

•

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level 3 – Inputs that are both significant to the fair value measurement and unobservable.

Notes 5 and 7 describe the valuation methodologies used by the Company to measure financial instruments at fair value, including the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models, and any significant assumptions.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS 159. The fair value option established by SFAS 159 permits, but does not require, all entities to choose to measure eligible items at fair value at specified election dates. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. At December 31, 2008, the Company has not elected the fair value option for any items and as such, adoption of SFAS 159 effective January 1, 2008 has not impacted the Company’s consolidated balance sheets and results of operations.

Effective January 1, 2008, the Company adopted FSP No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48, or FSP FIN 48-1, which was issued on May 2, 2007. FSP FIN 48-1 amends FIN 48 to provide guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term “effectively settled” replaces the term “ultimately settled” when used to describe recognition, and the terms “settlement” or “settled” replace the terms “ultimate settlement” or “ultimately settled” when used to describe measurement of a tax position under FIN 48. FSP FIN 48-1 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.

- 13-11 -

The adoption of FIN 48 and FSP FIN 48-1 did not have an impact on the Company’s consolidated balance sheets and results of operations.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, or SFAS No. 162. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. This statement was effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The standard was effective as of November 13, 2008 and adoption of this standard did not have a material impact on the Company’s consolidated balance sheets, results of operations or cash flows.

In June 2007, the Emerging Issues Task Force issued EITF Issue 07-03, Accounting for Advance Payments for Goods or Services to Be Used in Future Research and Development, or EITF No. 07-03. EITF No. 07-03 addresses the diversity which exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. Under EITF No. 07-03, an entity would defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF No. 07-03 is effective for fiscal years beginning after December 15, 2007 and interim periods within those years. Adoption of this standard did not have a material impact on the Company’s consolidated balance sheets, results of operations or cash flows.

(v) Recent accounting pronouncements

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations, or SFAS No. 141(R). SFAS No. 141(R) will change the accounting for business combinations. Under SFAS No. 141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, any business combinations the Company engages in has been recorded and disclosed following existing GAAP until December 31, 2008. The Company expects SFAS No. 141(R) will have an impact on accounting for business co mbinations once adopted but the effect is dependent upon acquisitions at that time.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51, or SFAS No. 160. SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its consolidated balance sheets, results of operations or cash flows.

In November 2007, the Emerging Issues Task Force issued EITF Issue 07-01, Accounting for Collaborative Arrangements or EITF No. 07-01. EITF No. 07-01 requires collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further, EITF No. 07-01 clarified that the determination of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship subject to Issue 01-9, Accounting for Consideration Given by a Vendor to a Customer. EITF No. 07-01 is effective for fiscal years beginning December 15, 2008. The Company is still assessing the impact of this pronouncement.  

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, or SFAS No. 161. SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is still assessing the impact of this pronouncement.

In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets, or FSP FAS 142-3. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of the position is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the intangible asset. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is assessing the potential impact that the adoption of FSP FAS 142-3 may have on its consolidated financial position, results of operations or cash flows.

In June 2008, the Emerging Issues Task Force issued EITF 08-3, Accounting for Lessees for Maintenance Deposits Under Lease Arrangements, or EITF 08-3. EITF 08-3 provides guidance for accounting for nonrefundable maintenance deposits. It also provides revenue recognition accounting guidance for the lessor. EITF 08-3 is effective for fiscal years beginning after December 15, 2008. The Company has not yet completed its evaluation of EITF 8-03, but does not believe that it will have a material impact on its consolidated financial position, results of operations or cash flows.

In November 2008, the Emerging Issues Task Force issued EITF 08-6, Equity method Investment Accounting Considerations, or EITF 08-6. EITF 08-6 addresses a number of matters associated with the impact of SFAS No. 141R and SFAS No. 160 on the accounting for equity method investments including initial recognition and measurement and subsequent measurement issues. EITF 08-6 is effective, on a prospective basis, for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The Company has not yet completed its evaluation of EITF 8-03, but does not believe that it will have a material impact on its consolidated financial position, results of operations or cash flows.

- 13-12 -

In November 2008, the Emerging Issues Task Force issued EITF 08-07, Accounting for Defensive Intangible Assets, or EITF 08-7. EITF 08-7 provides guidance for accounting for defensive intangible assets subsequent to their acquisition in accordance with SFAS No. 141R and SFAS No. 157 including the estimated useful life that should be assigned to such assets. EITF 08-7 is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect EITF 08-7 will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time.

3.

DISCONTINUED OPERATIONS

In the third quarter of 2006, the Company determined that certain operating subsidiaries in the Medical Products segment acquired through the American Medical Instruments Holdings, Inc. (“AMI”), acquisition were not aligned with the Company’s current business strategy and, consequently, began actively looking to dispose of these operations. These operations were categorized as discontinued and included the following AMI subsidiaries: American Medical Instruments, Inc. located in Dartmouth, Massachusetts; Point Technologies, Inc. located in Boulder, Colorado; and Point Technologies S.A. located in Costa Rica. On July 31, 2007, the Company completed the sale of 100% of the issued and outstanding shares of Point Technologies, Inc. for proceeds of $2.6 million and on August 30, 2007, the Company sold all of the assets and liabilities of the Dartmouth operations for proceeds of $2.2 million. Prior to the d isposal of these operations, the assets and liabilities of these operations were shown separately on the balance sheet as current and long-term assets and current and long-term liabilities from discontinued operations and the net losses for these operations were shown separately on the statements of operations.

Management reviewed the carrying value of the discontinued operations and recorded impairment charges of $8.9 million and $7.7 million for the years ended December 31, 2007 and 2006, respectively. The impairment charges were determined based on management’s best estimates of net proceeds on ultimate disposition and has been allocated proportionately to the assets from discontinued operations.

The operating results of discontinued operations are included in the Consolidated Statements of Operations as “Loss from discontinued operations, net of income taxes.”  The amounts for the years ended December 31, 2007 and 2006 are summarized as follows:

		Year ended			Year ended
		December 31,			December 31,
		2007			2006
Revenues	$	7,580		$	10,092
Operating loss		(632	)		(4,045	)
Other income (expense)		2			4
Loss on disposal of subsidiary		(1,993	)		-
Impairment charge		(8,879	)		(7,700	)
Loss before income taxes		(11,502	)		(11,741	)
Income tax recovery		(1,609	)		(4,033	)
Loss from discontinued operations	$	(9,893	)	$	(7,708	)
Loss per common share:
Basic	$	(0.12	)	$	(0.09	)
Diluted	$	(0.12	)	$	(0.09	)
Shares used in computing loss per share:
Basic		85,015			84,752
Diluted		85,015			85,437

4.

BUSINESS ACQUISITIONS

(a) American Medical Instruments Holdings, Inc.

On March 23, 2006, the Company completed the acquisition of 100% of the outstanding shares of privately held AMI, a leading independent manufacturer of specialty, single-use medical devices, for $796.1 million. The primary purposes of this acquisition were to provide a commercial pipeline for the Company’s current platform, to significantly diversify the Company’s revenue base and to add global manufacturing, marketing and sales capabilities. The cost of the acquisition includes cash consideration of $787.9 million and direct and incremental third-party acquisition costs of $8.2 million.  Included in cash consideration is the cash cost of $35.9 million and $34.0 million to settle outstanding vested options and warrants, respectively, of AMI at the closing date of the acquisition. The AMI acquisition was financed utilizing funds from a Credit Facility and Senior Subordinated Notes offering (note ) and cash on hand.

The acquisition was accounted for under the purchase method of accounting. Accordingly, the assets, liabilities, revenues and expenses of AMI are consolidated with those of the Company from March 23, 2006. Total fair value of the consideration given, determined at that date of acquisition and updated based on subsequent valuation procedures, was allocated to the assets acquired and liabilities assumed based upon their estimated fair values, as follows:

- 13-13 -

		March 23, 2006
Cash	$	14,686
Accounts receivable, net		25,151
Income tax receivable		2,664
Inventory		29,243
Other receivables and current assets		18,227
Property, plant and equipment		48,500
Identifiable intangible assets		191,600
Goodwill		586,246
Deferred income tax asset		5,711
Current liabilities		(39,090	)
Deferred income tax liability		(86,810	)
	$	796,128
Consideration:
Cash consideration	$	787,925
Direct acquisition costs		8,203
	$	796,128

Excluded from the consideration allocated to the net assets acquired is the fair value of AMI stock options issued in March 2006 which were contingent upon the completion of the acquisition.  These AMI stock options are exercisable into Angiotech common shares and vest in future periods. The fair value of the AMI stock options was determined to be $6.9 million at the time of acquisition and will be recognized as compensation expense over the post acquisition requisite service period (note 17(b)).

The Company used the income approach to determine the fair value of AMI’s property, plant and equipment, identifiable intangible assets and amortizable intangible assets. The excess price of $586.2 million over the fair value of the net identifiable assets acquired was allocated to goodwill.

Various factors contributed to the establishment of goodwill, including: access to established manufacturing facilities and distribution centers for pipeline products; the value of AMI’s trained assembled work force as of the acquisition date; the expected revenue growth over time that is attributable to expanded indications and increased market penetration from future products and customers; the incremental value from drug coating existing medical devices; and the synergies expected to result from combining infrastructures, reducing combined operational spend and program reprioritization. Goodwill deductible for tax purposes approximates $14.0 million.

The identifiable intangible assets acquired primarily include customer relationships, licenses, intellectual property and trade names. These intangibles are amortized over their estimated lives, which are between five and twelve years.

Pursuant to the Purchase Agreement, $20.0 million of the original purchase price related to the seller’s representations and warranties was placed in escrow at the time of the acquisition. In 2007, the Company filed a claim to recover the escrow amount and the seller filed a notice of objection. As of December 31, 2008, the litigation is ongoing. Any recovery of this escrow will be recorded as other income when realized.

(b) Quill Medical, Inc.

On June 26, 2006, the Company completed the acquisition of 100% of the outstanding share of privately held Quill Medical, Inc. (“Quill”), a provider of specialized, minimally invasive aesthetic surgery and wound closure technology for $40.3 million.  The purpose of this acquisition was to acquire all of Quill's technology and intellectual property, including the self-anchoring suture technology product line, which under its current license agreement is marketed and sold for use in wound closure, aesthetic and cosmetic surgery.  The cost of the acquisition included initial cash consideration of $40.0 million plus direct and incremental third-party acquisition costs of $0.3 million.  The Company is required to make additional contingent payments of up to $150 million payable in cash or common shares of the Company upon the achievement of certain revenue growth and development milestones.   ;These payments are primarily contingent upon the achievement of significant incremental revenue growth over a five year period, subject to certain conditions.  During 2007, the Company recorded an additional $10.0 million in goodwill relating to the achievement of certain of these milestones (Note 11(b)).

The acquisition was accounted for under the purchase method of accounting. Accordingly, the assets, liabilities, revenues and expenses of Quill are consolidated with those of the Company from June 26, 2006. Total fair value of the consideration given, determined at that date of acquisition and updated based on subsequent valuation procedures, was allocated to the assets acquired and liabilities assumed based upon their estimated fair values.

A valuation of Quill’s intangible assets was completed and the purchase price allocation was considered final as of March 31, 2007. The Company used the income approach to determine the fair value of the amortizable intangible assets. The excess price of $66.9 million was allocated to identifiable intangible assets and goodwill.

		June 26, 2006
Accounts receivable	$	92
Other current assets		43
Equipment		323
Identifiable intangible assets		50,000
Goodwill		16,973
Deferred income tax asset		2,557
Current liabilities		(104	)
Deferred income tax liability		(19,584	)
	$	50,300
Consideration:
Cash consideration	$	50,000
Direct acquisition costs		300
	$	50,300

- 13-14 -

The primary factors that contributed to the establishment of goodwill included: the expected revenue growth over time that is attributable to expanded indications and increased market penetration from future products and customers and the synergies expected to result from combining infrastructures, reducing combined operational spend and program reprioritization. The goodwill acquired in the Quill acquisition is not deductible for tax purposes.

The identifiable intangible assets are comprised of the technology and intellectual property acquired. These intangibles will be amortized over their estimated lives of eight to nine years.

The Company had a pre-existing relationship with Quill at the time of the acquisition through an Exclusive Development, License and Distribution Agreement between Quill and a subsidiary of AMI.  This relationship was settled at fair value of $nil when compared to pricing for other current market transactions for similar arrangements and consequently did not result in any gain or loss.

(c) Pro forma information (unaudited)

The following unaudited pro forma information is provided for the acquisitions assuming they occurred at the beginning of January 1, 2006. The historical results for 2006 combine the results of the Company with the historical results of AMI from March 23, 2006 and of Quill from June 26, 2006.

		Year ended
		December 31,
		2006
Revenue	$	350,026
Net income (loss) from continuing operations, net of income taxes		8,007
Net income (loss) before change in accounting policy		324
Net income (loss)	$	723
Net income (loss) per share:
Basic	$	0.01
Diluted	$	0.01

The information presented above is for illustrative purposes only and is not indicative of the results that would have been achieved had the acquisition taken place as of the beginning of January 1, 2006.

The unaudited pro forma information reflects interest on the purchase price calculated at the Company’s borrowing rate under its Credit Facility and Senior Subordinated Notes for the respective period. The pro forma net earnings for the years ended December 31, 2006 include $24.4 million of depreciation and amortization for purchased property and equipment and identifiable intangible assets.

5.

FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK

For certain of the Company’s financial assets, and liabilities, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, income taxes payable, and interest payable, the carrying amounts approximate fair value due to their short-term nature. The fair value of the short-term investments approximates $0.8 million as at December 31, 2008 (December 31, 2007 - $17.9 million). The total fair value of the long-term debt approximates $224.2 million (December 31, 2007 - $516.9 million) and has a carrying value of $575.0 million as at December 31, 2008 and 2007.

The fair values of the short-term investments and long-term debt is based primarily on quoted market prices at December 31, 2008 and 2007.

Financial risk includes interest rate risk, exchange rate risk and credit risk.  Interest rate risk arises due to the Company’s long-term debt bearing fixed and variable interest rates. The interest rate on the Senior Floating Rate Notes due 2013 is reset quarterly to 3-month LIBOR plus 3.75%. The Floating Rate Notes currently bear interest at a rate of 5.97%. The Company does not use derivatives to hedge against interest rate risks.

Foreign exchange rate risk arises as a portion of the Company’s investments, revenues and expenses are denominated in other than U.S. dollars. The Company’s financial results are subject to the variability that arises from exchange rate movements in relation to the US dollar, and is primarily limited to the Canadian dollar, the Swiss franc, the Euro, the Danish kroner and the UK pound sterling. Foreign exchange risk is primarily managed by satisfying foreign denominated expenditures with cash flows or assets denominated in the same currency.

- 13-15 -

Credit risk arises as the Company provides credit to its customers in the normal course of business. The Company performs credit evaluations of its customers on a continuing basis and the majority of its trade receivables are unsecured. The maximum credit risk loss that the Company could face is limited to the carrying amount of accounts receivable. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. However, a significant amount of trade accounts receivable is with the national healthcare systems of several countries. Although the Company does not currently foresee a credit risk associated with these receivables, payment is dependent upon the financial stability of those countries’ national economies. At December 31, 2008, accounts receivable is net of an allowance f or uncollectible accounts of $270,000 (2007 - $214,000).

- 13-16 -

6.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes the following:

		December 31,		December 31,
		2008		2007
U.S. dollars	$	21,866	$	68,817
Canadian dollars		3,942		15,488
Swiss francs		3,053		3,870
Euros		5,263		1,395
Danish krones		2,022		1,756
Other		2,806		-
	$	38,952	$	91,326

7.

SHORT AND LONG-TERM INVESTMENTS

				Gross Unrealized
December 31, 2008		Cost		Losses			Carrying value
Short-term investments:
Available-for-sale equity securities	$	848	$	-		$	848
Long-term investments:
Investments recorded at cost	$	1,561	$	-		$	1,561
				Gross Unrealized
December 31, 2007		Cost		Losses			Carrying value
Short-term investments:
Available-for-sale equity securities	$	22,188	$	(4,289	)	$	17,899
Long-term investments:
Investments recorded at cost	$	6,557	$	-		$	6,557

Short and long-term investments as at December 31, 2008 and December 31, 2007 include investments in biotechnology companies.

During year ended December 31, 2008, the Company disposed of a short-term available for sale investment for $2.8 million in proceeds and realized a loss of $8.8 million.

The Company regularly reviews its investments for impairment indicators. During the year ended December 31, 2008, the Company recorded an other than temporary impairment of $9.7 million associated with a publicly traded investment classified as short-term available for sale.

For investments carried at cost, when an impairment indicator is identified that is other than temporary, the fair value of these investments is determined primarily using level 3 inputs. A valuation model is developed for each investment using key assumptions for future cash flows, and discount rates. These assumptions are based on historical experience, market trends and anticipated return for each investment. Accordingly, the Company updated its return of investment outlook on a long-term investment and determined that the expected return on this investment had been impaired. Accordingly, the Company wrote-down the carrying value of this investment from $5.0 million to nil and recorded the impairment charge against income from continuing operations.

8.

INVENTORIES

		December 31,		December 31,
		2008		2007
Raw materials	$	10,357	$	8,357
Work in process		12,232		12,772
Finished goods		16,005		12,518
	$	38,594	$	33,647

- 13-17 -

9.

ASSETS HELD FOR SALE

During the year ended December 31, 2008 and in connection with the Company’s plans for capacity rationalization and consolidation in the Medical Products segment, the Company reclassified two of its long-lived assets as held for sale in accordance with guidance in SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The carrying value of these properties, after a write-down of $1.3 million, is approximately $3.1 million which represents the lower of cost and fair value less cost to sell.

In addition, and also in connection with the Company capacity rationalization in the Pharmaceutical Technologies segment, the Company reclassified a property that is no longer used and has a carrying value of approximately $5.3 million as held for sale.

10.

PROPERTY, PLANT AND EQUIPMENT

				Accumulated		Net book
December 31, 2008		Cost		depreciation		Value
Land	$	4,755	$	-	$	4,755
Buildings		14,200		1,257		12,943
Leasehold improvements		17,944		5,108		13,836
Manufacturing equipment		18,815		6,302		12,513
Research equipment		7,316		4,363		2,953
Office furniture and equipment		3,698		2,486		1,212
Computer equipment		9,000		7,104		1,896
	$	75,728	$	26,620	$	49,108
				Accumulated		Net book
December 31, 2007		Cost		depreciation		Value
Land	$	10,692	$	-	$	10,692
Buildings		19,783		1,441		18,342
Leasehold improvements		10,647		3,722		6,925
Manufacturing equipment		21,041		5,246		15,795
Research equipment		6,804		3,511		3,293
Office furniture and equipment		3,703		1,995		1,708
Computer equipment		8,342		5,910		2,432
	$	81,012	$	21,825	$	59,187

Depreciation expense, including depreciation expense allocated to cost of goods sold was $7.9 million for the year ended December 31, 2008 (December 31, 2007 - $7.9 million, December 31, 2006 - $6.4 million).

11.

INTANGIBLE ASSETS AND GOODWILL

(a) Intangible Assets

				Accumulated
December 31, 2008		Cost		Amortization		Net book value
Acquired technologies	$	128,061	$	52,303	$	75,758
Customer relationships		110,509		32,426		78,083
In-licensed technologies		55,829		24,104		31,725
Trade names and other		14,410		4,499		9,911
	$	308,809	$	113,332	$	195,477
				Accumulated
December 31, 2007		Cost		Amortization		Net book value
Acquired technologies	$	127,316	$	39,952	$	87,364
Customer relationships		110,953		23,052		87,901
In-licensed technologies		56,042		17,341		38,701
Trade names and other		15,257		3,334		11,923
	$	309,568	$	83,679	$	225,889

Amortization expense for the year ended December 31, 2008 was $30.2 million (year ended December 31, 2007 - $29.4 million; year ended December 31, 2006 - $32.7 million).

- 13-18 -

The following table summarizes the estimated amortization expense for each of the five succeeding fiscal years for intangible assets held as of December 31, 2008:

2009	$	29,845
2010		29,143
2011		29,005
2012		29,005
2013		29,005

In December 2006, the Company entered into a definitive agreement with Orthovita, Inc. (“Orthovita”) where Orthovita purchased the profit-sharing royalty rights for its VITAGEL surgical hemostat and CELLPAKER® Collection Device products under the Company’s license agreement for $9.0 million in cash. Consequently, the Company fully amortized the unamortized balance of the underlying intangible assets relating to these products.

(b) Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the two years ended December 31, 2008, in total and by reportable segment:

		Pharmaceutical			Medical
		Technologies			Products			Total
Balance, December 31, 2006	$	46,071		$	592,284		$	638,355
Goodwill acquired upon milestone payment (note 4(b))		-			10,000			10,000
Goodwill related to FIN 48 accrual (note 15)		-			1,173			1,173
Goodwill transferred to Medical Products segment (i)		(22,578	)		22,578			-
Foreign currency revaluation adjustments for goodwill denominated in foreign currencies		-			9,983			9,983
Balance, December 31, 2007	$	23,493		$	636,018		$	659,511
Adjustment related to tax positions and basis		-			(5,674	)		(5,674	)
Foreign currency revaluation adjustments for goodwill denominated in foreign currencies		-			(4,152	)		(4,152	)
Impairment		(23,493	)		(626,192	)		(649,685	)
Balance, December 31, 2008	$	-		$	-		$	-

i)

During 2007, the Company reclassified goodwill related to certain technology programs, previously allocated in the Pharmaceutical Technologies segment, to the Medical Products segment.

ii)

Goodwill is tested for possible impairment at least annually and whenever changes in circumstances occur that would indicate an impairment in the value of goodwill. When the carrying value of a reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. Circumstances that could trigger an impairment include adverse changes or outcomes in legal or regulatory matters, technological advances, decreases in anticipated demand, unanticipated competition, and significant declines in the Company’s share price. The Company estimates fair value based on a discounted projection of future cash flows which are subject to significant uncertainty and estimates.

In the third quarter ended September 30, 2008, the Company tested goodwill for impairment and determined that due to a significant and sustained decline in the Company’s public share price and market capitalization, reorganization activities, suspension of certain products, uncertainties about future cash flows and implied risk premiums used by market participants, the Company recorded an impairment charge of $599.4 million.

Given the continued decline in the Company's market value in the fourth quarter of 2008 and the further negative indicators of the economy as a whole, the Company updated its impairment tests of goodwill and acquired intangible assets and concluded a further impairment had occurred in the carrying amounts of goodwill associated with the Medical Products segment as well as an impairment in the carrying amounts of goodwill associated with the Pharmaceutical Technologies segment. Accordingly, the Company recorded a further impairment charge of $50.3 million in the fourth quarter of 2008 leaving no goodwill on the Company's books as of December 31, 2008.

- 13-19 -

12.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

		December 31,		December 31,
		2008		2007
Trade accounts payable	$	4,700	$	7,130
Accrued license and royalty fees		4,196		5,697
Employee-related accruals		17,382		14,897
Accrued professional fees		9,888		8,530
Accrued contract research		2,121		834
Other accrued liabilities		8,333		10,401
	$	46,620	$	47,489

13.

DEFERRED LEASEHOLD INDUCEMENT

The deferred leasehold inducement is comprised of a tenant improvement allowance and is being amortized to reduce rental expense on a straight line basis over the term of the lease from October 2002 to July 2019.

14.

INCOME TAXES

(a)  The components of the provision for (recovery of) income taxes from continuing operations are as follows:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
Current income tax expense (recovery):
Canada	$	(4,281	)	$	(7,062	)	$	13,818
Foreign		5,138			5,061			12,513
		857			(2,001	)		26,331
Deferred income tax expense (recovery):
Canada		(1,897	)		2,951			(1,259	)
Foreign		(11,852	)		(15,495	)		(22,980	)
		(13,749	)		(12,544	)		(24,239	)
Income tax expense (recovery)	$	(12,892	)	$	(14,545	)	$	2,092

(b)  The provision for income taxes is based on net income (loss) from continuing operations before income taxes as follows:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
Canada	$	(20,510	)	$	(48,018	)	$	27,445
Foreign		(733,558	)		(22,574	)		(7,330	)
	$	(754,068	)	$	(70,592	)	$	20,115

- 13-20 -

(c)  The reconciliation of income tax attributable to continuing operations computed at the statutory tax rates to income tax expense (recovery), using a combined Canadian federal and provincial tax rate, is as follows:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
Canada	$	(20,510	)	$	(48,018	)	$	27,445
Foreign		(733,558	)		(22,574	)		(7,330	)
	$	(754,068	)	$	(70,592	)	$	20,115

(d)  The tax effect of temporary differences that give rise to significant components of the deferred income tax assets and deferred income tax liabilities are presented below:

		December 31,			December 31,
		2008			2007
Deferred income tax assets
Property, plant and equipment	$	1,797		$	2,803
Operating loss carry forwards		28,154			29,331
Capital loss carry forwards		59,344			16,443
Tax credits		16,118			9,200
Accrued liabilities		4,941			5,964
Intangible assets		16,676			11,006
Unrealized foreign exchange losses		3,431			10,959
Other assets		5,889			3,696
Total gross deferred income tax assets		136,350			89,402
Less: valuation allowance		(96,940	)		(42,005	)
Total deferred income tax assets	$	39,410		$	47,397
Deferred income tax liabilities
Identifiable intangible assets	$	72,410		$	85,783
Property, plant and equipment		1,725			2,811
Unrealized foreign exchange gains		-			9,951
Undistributed earnings of foreign subsidiaries [see paragraph (f)]		1,506			1,702
Other liabilities		526			554
Total deferred tax liabilities		76,167			100,801
Net deferred income tax assets (liabilities)	$	( 36,757	)	$	(53,404	)

The realization of deferred income tax assets is dependent upon the generation of sufficient taxable income during future periods in which the temporary differences are expected to reverse.  The valuation allowance is reviewed on a quarterly basis and if the assessment of the “more likely than not” criteria changes, the valuation allowance is adjusted accordingly.  The valuation allowance continues to be applied against certain deferred income tax assets where the Company has assessed that the realization of such assets does not meet the “more likely than not” criteria.  During 2008, the Company increased the valuation allowance by $54.9 million related primarily to the Company’s Canadian operations.

(e) The Company has unclaimed U.S. federal and state research and development investment tax credits of approximately $4.4 million (December 31, 2007 - $4.4 million) available to reduce future U.S. income taxes otherwise payable.  The Company also has Canadian federal and provincial investment tax credits of approximately $12.2 million (December 31, 2007 - $5.6 million) available.

The Company has a net operating loss carry forward balance of approximately $144.2 million (December 31, 2007 - $120.6 million) available to offset future taxable income in Canada ($15.0 million), the U.S. ($69.5 million) and Switzerland ($58.6 million) and other European countries ($1.1 million).  A portion of the losses in the U.S. are subjected to limitation but the Company does not expect the limitation will impair the use of any of the losses.

- 13-21 -

The Company has foreign tax credits in the U.S. of approximately $2.1 million available to use against foreign-source income.

The Company has a capital loss carry forward balance of approximately $448.2 million (December 31, 2007 - $203.1million) available to offset future capital gains in the U.S. ($4.4 million) and Canada ($443.8 million).  The capital losses can be carried forward indefinitely for Canada and five years for the U.S.

(f) The Company has not recognized a deferred income tax liability for the undistributed earnings of foreign subsidiaries which are essentially investments in the foreign subsidiaries and are permanent in duration.  It is not practical to determine the amount of these liabilities.

The investment tax credits and loss carry forwards expire as follows:

		Federal		Provincial/state		Loss
		tax		tax		Carry forwards
		credits		credits
2009		-		-		46
2010		-		-		5,049
2011		-		-		15,411
2012		1,197		-		16,143
2013		2,093		72		6,912
2014		1,412		-		-
2015		1,478		-		256
2016		-		-		-
2017		-		-		-
2018		436		27		-
2019		573		-		-
2020		464		19		414
2021		278		-		3,104
2022		189		-		2,299
2023		232		-		11,011
2024		457		-		6,675
2025		276		-		13,525
2026		2,405		-		7,964
2027 (or later)		3,597		1,415		55,439
	$	15,087	$	1,533	$	144,248

(g) In September 2006, the Quebec National Assembly enacted legislation (Bill 15) that retroactively changed certain tax laws that subject the Company to additional taxes for the 2004 and 2005 taxation years.  As a result of the Quebec income tax assessment, a total of $14.4 million had been accrued as of December 31, 2007.  Of that amount, $1.8 million and $10.2 million relate to the 2004 and 2005 taxation years respectively and $2.4 million relates to interest.  During 2008, the Company settled with the Canada Revenue Agency and Revenu Quebec and recognized a recovery of $3.8 million.

15.

OTHER TAX LIABILITY

Effective January 1, 2007, the Company adopted FIN 48.  As a result, the Company increased its reserves for uncertain tax positions by $2.9 million. Approximately $1.7 million of this increase was recorded as a cumulative effect adjustment to the Company’s opening deficit balance and $1.2 million to goodwill.

During the year, the Company increased its reserves for uncertain tax positions by $5.7 million (December 31, 2007 - $1.0 million).  If recognized in future periods, the unrecognized tax benefits of $9.7 million (December 31, 2007 - $4.7 million) will have a favourable effect on the effective income tax rate in those periods.  The reserve for uncertain tax positions includes accrued interest and penalties of $0.7 million (December 31, 2007 - $0.7 million).  In accordance with the Company’s accounting policies, accrued interest and penalties, if incurred, relating to unrecognized tax benefits are recognized as a component of income tax expense.

The taxation years 2002 - 2008 remain open to examination by the Canada Revenue Agency and by the Swiss Federal Tax Administration and taxation years 2005 - 2008 remain open to examination by the Internal Revenue Service.  The Company files income tax returns in Canada, the U.S. and various foreign jurisdictions.

A reconciliation of the change in the reserves for an uncertain tax position from January 1, 2007 – December 31, 2008 is as follows:

Balance, January 1, 2007	$	3,653
Tax positions related to current year:
Additions		1,867
Reductions		(1,394	)
Tax positions related to prior years
Additions		567
Reductions		-
Settlements		-
Lapses in statutes of limitations		-
Balance, December 31, 2007	$	4,693
Tax positions related to current year:
Additions		6,744
Reductions		-
Tax positions related to prior years
Additions		356
Reductions		(360	)
Settlements		(667	)
Lapses in statutes of limitations		(350	)
Balance, December 31, 2008	$	10,416

- 13-22 -

16.

LONG-TERM DEBT

		December 31, 2008		December 31, 2007
Senior Floating Rate Notes (a)	$	325,000	$	325,000
7.75% Senior Subordinated Notes (b)		250,000		250,000
	$	575,000	$	575,000

(a)

Senior Floating Rate Notes

On December 11, 2006, the Company issued Senior Floating Rate Notes due December 1, 2013, (the "Senior Floating Rate Notes") in the aggregate principal amount of $325 million.  The Senior Floating Rate Notes are unsecured senior obligations, are guaranteed by certain of the Company’s subsidiaries and rank equally in right of payment to all of the Company’s existing and future senior unsubordinated indebtedness.  The guarantees of its guarantor subsidiaries are unconditional, joint and several.  The Company has provided condensed consolidating guarantor financial information as at December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 (note 26).

The Company may redeem all or a part of the Senior Floating Rate Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable redemption date, if redeemed during the period beginning on the dates indicated below:

Year	Percentage (%)
December 1, 2009	102
December 1, 2010	101
December 1, 2011	100

In certain change of control situations, the Company is required to make an offer to purchase the then-outstanding Senior Floating Rate Notes at a price equal to 101% of their stated principal amount, plus accrued and unpaid interest to the applicable repurchase date, if any.

(b)

Senior Subordinated Notes

On March 23, 2006, the Company issued 7.75% Senior Subordinated Notes due April 1, 2014, (the "Senior Subordinated Notes") in the aggregate principal amount of $250 million.  The Senior Subordinated Notes were used to fund the Company's acquisition of AMI.  The Senior Subordinated Notes and related Note guarantees provided by the Company and certain of its subsidiaries are subordinated to senior indebtedness.  The Company has provided condensed consolidating guarantor financial information as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 (note 26).

At any time prior to April 1, 2009, the Company may redeem up to 35% of the aggregate principal amount of the Senior Subordinated Notes at 107.75% of the principal amount plus accrued and unpaid interest with the net cash proceeds of one or more offerings of the Company’s equity securities or convertible debt. The Company may also choose to redeem the Notes at any time prior to April 1, 2009, in whole or in part by paying a redemption price equal to the sum of:

(1)

100% of the principal amount of the notes to be redeemed; plus

(2)

the Applicable Premium, being the greater of:

a.

1.0% of the principal amount of a note at such time; or

b.

the excess of the present value at such time of the redemption price of such note at April 1, 2009 plus any required interest payments due on such note through April 1, 2009 over the principal amount of the Note.

On or after April 1, 2009, the Company may redeem all or a part of the Senior Subordinated Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 1 of the years indicated below:

Year	Percentage (%)
2009	105.813
2010	103.875
2011	101.938
2012 and thereafter	100.000

- 13-23 -

In certain change of control situations, the Company is required to make an offer to purchase the then-outstanding Senior Subordinated Notes at a price equal to 101% of their stated principal amount, plus accrued and unpaid interest to the applicable repurchase date, if any.

(c)

Covenants

Material covenants in the indentures governing the Senior Subordinated Notes and Senior Floating Rate Notes (the “Indentures”) specify maximum or permitted amounts for certain types of capital transactions and restrict, and under specified circumstances prohibit, the payment of dividends by the Company.  If the Senior Subordinated Notes or Senior Floating Rate Notes are rated investment grade and no event of default exists, certain covenants will no longer apply. At December 31, 2008, the Senior Subordinated Notes and Senior Floating Rate Notes are not rated investment grade. Outstanding principal amounts and interest accrued and unpaid may become immediately due and payable upon the occurrence of events of default specified in the Indentures.  There are also certain limitations on asset sales and subsequent use of proceeds pursuant to the Indentures.  As of December 31, 2008, the Company wa s in compliance with all covenants and was not in breach of any provision of the Indentures governing the Senior Subordinated Notes and Senior Floating Rate Notes that would cause an event of default to occur.

(d)

Deferred Financing Costs

Deferred financing costs are capitalized and amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the life of the debt instruments.

				Accumulated		Net Book
December 31, 2008		Cost		Amortization		Value
Debt issuance costs relating to:
Senior floating rate notes	$	8,000	$	2,358	$	5,642
Senior subordinated notes		8,718		2,997		5,721
	$	16,718	$	5,355	$	11,363
				Accumulated		Net Book
December 31, 2007		Cost		amortization		Value
Debt issuance costs relating to:
Senior floating rate notes	$	8,000	$	1,211	$	6,789
Senior subordinated notes		8,718		1,907		6,811
	$	16,718	$	3,118	$	13,600

(e)

Interest

The Senior Floating Rate Notes bear interest at an annual rate of LIBOR (London Interbank Offered Rate), which is reset quarterly, plus 3.75%.  The effective interest rate on these notes for the year ended December 31, 2008 was 6.92% (December 31, 2007 – 9.14%). Interest is payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year through to maturity.

The Senior Subordinated Notes bear interest at 7.75% annually payable in arrears on April 1, and October 1, of each year through to maturity.

The following table (unaudited) shows the estimated interest payable for both the Senior Floating Rate Notes and the Senior Subordinated Notes over the next five years, assuming a December 31, 2008 base LIBOR rate of 1.425% as well as the impact on the estimated interest payable of a 0.5% increase or decrease in the base LIBOR rate:

	(unaudited)
Year	Base LIBOR	0.5% Increase in base LIBOR	0.5% Decrease in base LIBOR
2009	$36,851	$38,232	$35,470
2010	36,427	38,075	34,780
2011	36,427	38,075	34,780
2012	36,427	38,075	34,780
2013	34,979	36,487	33,471
Thereafter	4,844	4,844	4,844

(f)

Write-down and other deferred financing charges

On July 7, 2008, the Company entered into a note purchase agreement with Ares Management (“Ares”) and New Leaf Venture Partners (“New Leaf”) under which Ares and New Leaf agreed to purchase between $200 and $300 million, at the Company’s option, of convertible notes to be issued by the newly formed subsidiary of the Company. The transaction was subject to the approval of the Company’s shareholders and other closing conditions. In addition, during the year ended December 31, 2008, the Company made a tender offer for its Senior Floating Rate Notes and Senior Subordinated Notes for an aggregate purchase price of $165 million including accrued and unpaid interest and certain premiums.

- 13-24 -

On September 23, 2008, the Company announced that the termination of the tender offer for its outstanding Senior Floating Rate Notes and its outstanding Senior Subordinated Notes, and the transaction was abandoned. For the year ended December 31, 2008, the Company had accrued approximately $16.5 million for potential expenses relating to its various activities relating to its exploration of financial and strategic alternatives.

17.

SHARE CAPITAL

(a)  

Authorized

200,000,000 Common shares without par value

50,000,000 Class I Preference shares without par value

The Class I Preference shares are issuable in Series. The directors may, by resolution, fix the number of shares in a series of Class I Preference shares and create, define and attach special rights and restrictions as required.  None of these shares are currently issued and outstanding.

During the year ended December 31, 2008, the Company issued 48,000 common shares upon exercises of stock options (year ended December 31, 2007 – 90,248, year ended December 31, 2006 – 692,218).  The Company issues new shares to satisfy stock option exercises.

(b)

Stock Options

Angiotech Pharmaceuticals, Inc.

In June 2006, the shareholders approved the adoption of the 2006 Stock Incentive Plan (“2006 Plan”) which superseded the previous stock option plans. The 2006 Plan incorporated all of the options granted under the previous stock option plans and, in total, provides for the company's issuance of non-transferable stock-based awards to purchase up to 13,937,756 common shares to employees, officers, directors of the Company, and persons providing ongoing management or consulting services to the Company.  The Plan provides for, but does not require, the granting of tandem stock appreciation rights that at the option of the holder may be exercised instead of the underlying option. When the tandem stock appreciation right is exercised, the underlying option is cancelled. The tandem stock appreciation rights are settled in equity and the optionee receives common shares with a fair market value equal to the ex cess of the fair value of the shares subject to the option at the time of exercise (or the portion thereof so exercised) over the aggregate option price of the shares set forth in the option agreement. The exercise of tandem stock appreciation rights is treated as the exercise of the underlying option.  The exercise price of the options is fixed by the Board of Directors, but will generally be at least equal to the market price of the common shares at the date of grant, and for options issued under the 2006 Plan and the Company's 2004 Stock Incentive Plan (“2004 Plan”), the term may not exceed five years.  For options grandfathered from the stock option plans prior to the 2004 Plan, the term did not exceed 10 years.  Options granted are also subject to certain vesting provisions.  Options generally vest monthly after being granted over varying terms from 2 to 4 years.  

In October 2006, pursuant to the 2006 Plan, the Company issued to all optionees under the 2006 Plan, one tandem stock appreciation right for each option granted on or after October 1, 2002 that remains outstanding.  The modification of the stock options did not result in a change in fair value.

A summary of CDN$ stock option transactions is as follows:

					Weighted average		Aggregate
	No. of			Weighted average	remaining		intrinsic
	Optioned			exercise price	contractual		value
	Shares			(in CDN$)	term (years)		(in CDN$)
Outstanding at December 31, 2006	7,307,576		$	16.98
Granted	1,290,000			8.56
Exercised	(90,248	)		2.69
Forfeited	(831,384	)		18.61
Outstanding at December 31, 2007	7,675,944		$	15.55	3.16	$	177
Granted	1,355,300			0.22
Exercised	(48,000	)		2.50
Forfeited	(1,338,612	)		16.12
Outstanding at December 31, 2008	7,644,632		$	12.82	2.67	$	196
Exercisable and expected to vest at December 31, 2008	1,440,645		$	12.82	2.12	$	3

These options expire at various dates from March 15, 2009 to December 7, 2013.

On March 10, 2009, the Company granted 1,434,000 CDN$ stock options to certain executive officers and other employees at an exercise price of CDN$0.38, expiring on March 9, 2014.

- 13-25 -

A summary of U.S.$ stock option transactions is as follows:

					Weighted average		Aggregate
	No. of			Weighted average	remaining		intrinsic
	Optioned			exercise price	contractual		value
	Shares			(in U.S.$)	term (years)		(in U.S.$)
Outstanding at December 31, 2006	211,968		$	17.18			-
Granted	890,000			7.46
Forfeited	(50,750	)		7.90
Outstanding at December 31, 2007	1,051,218		$	9.39	3.73	$	-
Granted	1,160,500			0.21
Forfeited	(420,750	)		10.42
Outstanding at December 31, 2008	1,790,968		$	3.19	4.19	$	64
Exercisable and expected to vest at December 31, 2008	1,365,878		$	3.19	2.98	$	3

These options expire at various dates from January 26, 2010 to December 7, 2013.

On March 10, 2009, the Company granted 1,228,500 U.S.$ stock options to certain executive officers, employees and consultants at an exercise price of $0.27, expiring March 9, 2014.

American Medical Instruments Holdings, Inc. (“AMI”)

On March 9, 2006, AMI granted 304 stock options under AMI’s 2003 Stock Option Plan (the “AMI Stock Option Plan”), each of which is exercisable for approximately 3,852 common shares of the Company upon exercise. All outstanding options and warrants granted prior to the March 9, 2006 grant were settled and cancelled upon the acquisition of AMI. No further options to acquire common shares of the Company can be issued pursuant to the AMI Stock Option Plan. Approximately 1,171,092 of the Company’s common shares were reserved in March 2006 to accommodate future exercises of the AMI options.

					Weighted average		Aggregate
	No. of			Weighted average	remaining		intrinsic
	Optioned			exercise price	contractual		value
	Shares			(in U.S.$)	term (years)		(in U.S.$)
Outstanding at December 31, 2006	874,468		$	15.44
Forfeited	(431,456	)		15.44
Outstanding at December 31, 2007	443,012		$	15.44	8.2	$	-
Forfeited	(79,935	)		15.44
Outstanding at December 31, 2008	363,077		$	15.44	7.19	$	-
Exercisable and expected to vest at December 31, 2008	261,594		$	15.44	7.19	$	-

These options expire on March 8, 2016.

(c)

Stock-based compensation expense

When the Company adopted SFAS No 123(R), a revision to SFAS 123, Accounting for Stock-Based Compensation, the Company applied the modified-prospective transition method.  Under this method, the fair value provisions of SFAS 123(R) are applied to new employee stock-based payment awards granted or awards modified, repurchased, or cancelled after January 1, 2006.  Measurement and attribution of compensation costs for unvested awards at January 1, 2006, granted prior to the adoption of SFAS 123(R) were recognized based upon the provisions of SFAS 123(R), after adjustment for estimated forfeitures. Accordingly, SFAS 123(R) no longer permits pro-forma disclosure for income statement periods after January 1, 2006 and compensation expense will be recognized for all stock-based payments on grant-date fair value, including those granted, modified or settled prior to October 1, 2002, the date that the Company adopted SFAS 123.

Since the Company did not previously estimate forfeitures in the calculation of employee compensation expense under SFAS 123, upon adoption of SFAS 123(R), the Company recognized the cumulative effect of a change in accounting principle to reflect forfeitures for prior periods which resulted in an increase in net income of $399,000 in fiscal 2006. This cumulative effect had no impact on basic and diluted earnings per share.

For the year ended December 31, 2008, the Company recorded stock-based compensation expense of $2.4 million ($4.6 million for the year ended December 31, 2007, $5.8 million for the year ended December 31, 2006) relating to awards granted under its stock option plan, modified or settled subsequent to October 1, 2002.  The Company expenses the compensation cost of stock-based payments over the service period using the straight-line method over the vesting period and is estimated using the Black-Scholes option pricing model using the following weighted average assumptions for grants in the respective periods:

- 13-26 -

	Year Ended December 31, 2008	Year Ended December 31, 2007	Year Ended December 31, 2006
Dividend Yield	Nil	Nil	Nil
Expected Volatility	81.8% - 95.9%	36.3% - 50.7%	40.4% - 43.3%
Weighted Average Volatility	90.6%	41.9%	42.9%
Risk-free Interest Rate	1.11% - 2.25%	2.93% - 5.05%	4.01% - 4.50%
Expected Term (Years)	3	3	3 - 5

The weighted average fair value of stock options granted in the years ended December 31, 2008, 2007 and 2006 are presented below:

	Year Ended December 31, 2008	Year Ended December 31, 2007	Year Ended December 31, 2006
CDN$ options	CDN$0.14	CDN$2.95	CDN$5.29
U.S.$ options	$0.11	$2.31	$6.48

A summary of the status of the Company’s nonvested options as of December 31, 2008 (excluding the AMI stock options) and changes during the year ended December 31, 2008, is presented below:

Nonvested CDN$ options	No. of Optioned Shares	Weighted average grant-date fair value (in CDN$)
Nonvested at December 31, 2007	1,429,134	$4.53
Granted	1,355,300	0.15
Vested	(503,861)	4.07
Forfeited	(312,570)	3.73
Nonvested at December 31, 2008	1,968,003	$1.24

Nonvested U.S.$ options	No. of Optioned Shares	Weighted average grant-date fair value (in U.S.$)
Nonvested at December 31, 2007	732,285	$2.68
Granted	1,160,500	0.14
Vested	(236,723)	2.36
Forfeited	(235,572)	2.54
Nonvested at December 31, 2008	1,420,490	$0.60

Nonvested AMI options	No. of Optioned Shares	Weighted average grant-date fair value (in U.S.$)
Nonvested at December 31, 2007	443,012	$6.51
Vested	(94,859)	6.51
Forfeited	(34,675)	6.51
Nonvested at December 31, 2008	313,478	$6.51

As of December 31, 2008, there was $1.9 million of total unrecognized compensation cost related to nonvested stock options granted under the 2006 Plan.  These costs are expected to be recognized over a weighted average period of 3.36 years.

As of December 31, 2008, there was $1.1 million of total unrecognized compensation cost related to the nonvested AMI stock options.  These costs are expected to be recognized over a period of 3.25 years on a straight-line basis as a charge to income.  The total fair value of options vested during the year ended December 31, 2008 was $360,000 (December 31, 2007 - $nil).

- 13-27 -

During the years ended December 31, 2008, 2007 and 2006 the following activity occurred:

		Year Ended		Year Ended		Year Ended
		December 31,		December 31,		December 31,
(in thousands)		2008		2007		2006
Total intrinsic value of stock options exercised:
CDN dollar options	$	33	$	257	$	2,282
U.S. dollar options	$	n/a	$	n/a	$	361
Total fair value of stock awards vested	$	2,367	$	4,401	$	5,386

Cash received and income tax benefit from stock option exercises for the year ended December 31, 2008 were $121,000 and $ nil, respectively ($228,000 and $ nil, respectively for the year ended December 31, 2007 and $6.4 million and $0.6 million, respectively for the year ended December 31, 2006).

The Black-Scholes pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimate.

(d)

Shareholder rights plan

The Company adopted a shareholder’s rights plan (“the Plan”) on February 10, 1999, amended and restated March 5, 2002, June 9, 2005 and October 30, 2008. According to the Plan, each shareholder is issued one right. Each right will entitle the holder to acquire common shares of the Company at a 50% discount to the market upon certain specified events, including upon a person or group of persons acquiring 20% or more of the total common shares of the Company.  The rights are not exercisable in the event of a Permitted Bid as defined in the Plan.  The Plan must be reconfirmed by the Company's shareholders every three years.

18.

IN-PROCESS RESEARCH AND DEVELOPMENT

The Company made in-process research and development payments as follows:

		Year ended		Year ended		Year ended
		December 31,		December 31,		December 31,
		2008		2007		2006
CombinatoRx Incorporated	$	-	$	7,000	$	-
Rex Medical LP		2,500		1,000		-
Lipose Corporation		-		125		-
Poly-Med, Inc.		-		-		1,000
Other		-		-		42
Total	$	2,500	$	8,125	$	1,042

19.

COMMITMENTS AND CONTINGENCIES

(a) Commitments

i) Lease commitments

The Company has entered into operating lease agreements for office, laboratory and manufacturing space which expire through July 2019. Future minimum annual lease payments under these leases are as follows:

2009	$	3,271
2010		3,003
2011		2,602
2012		2,443
2013		2,553
Thereafter		10,836
	$	24,708

Rent expense for the year ended December 31, 2008 amounted to $3.5 million (year ended December 31, 2007 - $2.4 million, year ended December 31, 2006 - $2.1 million).

- 13-28 -

ii) Contractual commitments

The Company has entered into research and development collaboration agreements that involve joint research efforts. Certain collaboration costs and any eventual profits will be shared as per terms provided for in the agreements. The Company may also be required to make milestone, royalty, and other research and development funding payments under research and development collaboration and other agreements with third parties. These payments are contingent upon the achievement of specific development, regulatory and/or commercial milestones. The Company accrues for these payments when it is probable that a liability has been incurred and the amount can be reasonably estimated. The Company does not accrue for these payments if the outcome of achieving these milestones is not determinable. The Company’s significant contingent milestone, royalty and other research and development commitments are as follows:

Quill Medical, Inc. (“Quill”)

In connection with the acquisition of Quill in June 2006, the Company may be required to make additional contingent payments of up to $150 million upon the achievement of certain revenue growth and development milestones. These payments are primarily contingent upon the achievement of significant incremental revenue growth over a five-year period from July 1, 2006, subject to certain conditions. The Company is also committed to minimum commercialization expenditures, including sales and marketing, research and development and corporate support on the technology acquired of $10.0 million between July 1, 2008 and June 30, 2009, of which $1.6 million remains between January 1, 2009 and June 30, 2009.

National Institutes of Health (“NIH”)

In November 1997, the Company entered into an exclusive license agreement with the Public Health Service of the United States, through the NIH, whereby the Company was granted an exclusive, worldwide license to certain technologies of the NIH relating to the use of paclitaxel. Pursuant to this license agreement, the Company agreed to pay NIH milestone payments upon achievement of certain clinical and commercial development milestones and pay royalties on net Taxus sales by BSC. At December 31, 2008 the Company has accrued royalties of $2.7 million payable to NIH under this agreement.

Biopsy Sciences LLC (“Biopsy Sciences”)

In connection with the acquisition of certain assets from Biopsy Sciences in January 2007, the Company may be required to make certain contingent payments of up to $2.7 million upon the achievement of certain clinical and regulatory milestones and up to $10.7 million for achieving certain commercialization milestones. As of December 31, 2008, the Company has paid $0.7 million towards the successful completion of the U.S. clinical trial enrollment for the Bio-Seal lung biopsy track plug.

Rex Medical LP (“Rex Medical”)

In March 2008, the Company entered into an agreement with Rex Medical to manufacture and distribute the Option^TM Vena Cava Filter. Under terms of this agreement, the Company may be required to make contingent payments of up to $7.5 million upon achievement of certain regulatory and commercialization milestones. In addition, the Company has committed to making escalating royalty payments of 30% to 47.5% based on annual net sales of these products.

(b) Contingencies

i)

The Company may, from time to time, be subject to claims and legal proceedings brought against it in the normal course of business. Such matters are subject to many uncertainties. Management believes that adequate provisions have been made in the accounts where required. However, management is not able to determine the outcome or estimate potential losses of the pending legal proceedings listed below, or other legal proceedings, to which the Company may become subject in the normal course of business or estimate the amount or range of any possible loss the Company might incur if it does not prevail in the final, non-appealable determinations of such matters. The Company cannot provide assurance that the legal proceedings listed here, or other legal proceedings not listed here, will not have a material adverse impact on the Company's financial condition or results of operations.

ii)

BSC, a licensee, is often involved in legal proceedings (to which the Company is not a party) concerning challenges to its stent business. If a party opposing BSC is successful, and if a court were to issue an injunction against BSC, royalty revenue would likely be significantly reduced. The ultimate outcome of any such proceedings is uncertain at this time.

iii)

On April 4, 2005, the Company together with BSC commenced a legal action in the Netherlands against Sahajanand Medical Technologies Pvt. Ltd. for patent infringement.  On May 3, 2006, the Dutch trial court ruled in favor of Angiotech, finding that Angiotech’s EP (NL) 0 706 376 patent was valid, and that SMT’s Infinnium™ stent infringed the patent. On March 13, 2008, a Dutch Court of Appeal held a hearing to review the correctness of the trial court’s decision.  The Court of Appeal released their judgment on January 27, 2009, ruling against Sahajanand (finding the Angiotech patent novel, inventive, and sufficiently disclosed).  The Court of Appeal however requested amendment of claim 12 before rendering their decision on infringement.  This amendment is due to the court on April 7^th, 2009.  A date for the court’s decision on infringement has not yet b een set.  The decision of the Court of Appeal is appealable to the Supreme Court of the Netherlands.

iv)

On March 23, 2006, RoundTable Healthcare Partners, LP as Seller Representative, Angiotech as Buyer, and LaSalle Bank as Escrow Agent, executed an Escrow Agreement for certain representations and warranties under which Angiotech deposited $20 million with LaSalle.  On April 4, 2007, LaSalle Bank received an Escrow Claim Notice issued by Angiotech, which directed LaSalle to remit the $20 million to Angiotech as Buyer. On or about Apri1 16, 2007, LaSalle received from RoundTable a Notice of Objection to Angiotech's Escrow Claim Notice. On July 3, 2007, LaSalle filed an action in the Circuit Court of Cook County, Illinois, asking the court to resolve this dispute. After various hearings and discussions, Angiotech executed a Joint Letter of Direction allowing the release of $6.5 million to RoundTable, thereby leaving the amount in dispute being approximately $13.5 million. On March 21, 2008, this action was move d to the US District Court Southern District of New York. The Company is now in the discovery phase of this litigation. The escrow amounts have been included in the acquisition cost related to the AMI acquisition and amounts held in escrow are not reflected as financial assets in the consolidated financial statements.

- 13-29 -

v)

In July 2004, Dr. Gregory Baran initiated legal action, alleging infringement by Medical Device Technologies (“MDT”) of two U.S. patents owned by Dr. Baran. These patents allegedly cover MDT’s BioPince™ automated biopsy device. On September 25, 2007, the judge issued her decision pursuant to the Markman hearing of December 2005. The Company has submitted a Motion for Summary Judgment to the court based upon the judges’ Markman decision.  No hearing date has yet been set by the court.

vi)

At the European Patent Office (“EPO”), various patents either owned or licensed by or to the Company are in opposition proceedings including the following:

o

In EP0774964 (which is licensed from the Massachusetts Institute of Technology) the patent was revoked after a hearing held July 17, 2007. An appeal was filed on October 2, 2007. The parties have been summoned to attend Oral Proceedings at the EPO on March 19, 2009.

o

In EP0784490, the proceedings are ongoing and the parties are awaiting communication from the EPO.

o

In EP0809515 (which is licensed from (and to) BSC), the EPO held an oral hearing on January 30, 2008 and thereafter revoked this patent. An appeal was filed on April 22, 2008. The parties have been summoned to attend Oral Proceedings at the EPO on June 19, 2009.

o

In EP0830110 (which is licensed from Edwards LifeSciences Corporation) an amended form of this patent was found valid after an oral hearing on September 28, 2006; however, the opponent appealed the decision on December 21, 2006 and briefs are being exchanged.

o

In EP0876166 the EPO held an oral hearing on September 24, 2008, and thereafter revoked this patent. The deadline to file an appeal is March 23, 2009 and the Company has determined that it will not file an appeal.

o

In EP0975340 (which is licensed from (and to) BSC), Oral Proceedings were held on December 4, 2008. The EPO issued an Interlocutory Decision on December 23, 2008 stating the patent was found to have met the requirements of the convention. The decision may be appealed, but no appeal has yet been filed.

o

In EP1118325 (which is licensed from the NIH), the EPO has set a hearing date of April 7, 2009.

o

In EP1155689, briefs are being exchanged.  

o

In EP1407786 (which is licensed from (and to) BSC), the patent was revoked in a decision from the EPO on December 9, 2008. An appeal was filed on January 30, 2009.

o

In EP1429664, briefs are being exchanged.  

o

In EP1159974, briefs are being exchanged.  

o

In EP1075843, a response to the Notice of Appeal was filed. The Company is awaiting further action from the EPO.  

o

In EP0991359, The Company's response to the opposition is to be filed prior to the deadline.

o

In EP1322235, briefs have been filed and the Company is awaiting further action from the EPO.  

o

In EP1216042, an oral hearing has been scheduled for April 23, 2009.

o

In EP00876165, the parties have been summoned to attend an Oral Proceeding at the EPO on June 24, 2009.

vii)

The Company may incur fees and expenses in connection with transactions referred to in note 16(f) that are not dependent on completion of such transactions. If the Company agrees to an Alternative Transaction, as defined in the note purchase agreement with Ares and New Leaf, within 12 months of termination of the note purchase agreement, the Company may be required to pay Ares and New Leaf $10 million plus reimburse Ares and New Leaf for transaction-related expenses of up to an additional $4 million upon the Company's agreement to such alternative transaction. In connection with certain types of alternative transactions, the Company may also be required under the terms of agreements with certain advisors to pay fees to such advisors, whether or not such advisors participate in such alternative transaction.  

20.

SEGMENTED INFORMATION

The Company operates in two reportable segments: (i) Pharmaceutical Technologies and (ii) Medical Products.  Prior to the acquisition of AMI, the Company reported its operations under one segment, drug-eluting medical devices and biomaterials.

The Pharmaceutical Technologies segment includes royalty revenue generated from out-licensing technology related to the drug-eluting stent and other technologies.

The Medical Products segment includes revenues and gross margins of single use, specialty medical devices including suture needles, biopsy needles / devices, micro surgical ophthalmic knives, drainage catheters, self-anchoring sutures, other specialty devices, biomaterials and other technologies.

- 13-30 -

The Company reports segmented information on each of these segments to the gross margin level. All other income and expenses are not allocated to segments as they are not considered in evaluating the segment’s operating performance. The following tables represent reportable segment information for the years ended December 31, 2008, 2007 and 2006:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
Revenue
Pharmaceutical Technologies	$	92,457		$	117,501		$	176,485
Medical Products		190,816			170,193			138,590
Total revenue	$	283,272		$	287,694		$	315,075
Licence and royalty fees – Pharmaceutical Technologies		14,258			18,652			25,986
Cost of products sold – Medical Products		101,052			94,949			69,543
Gross margin
Pharmaceutical Technologies		78,199			98,849			150,499
Medical Products		89,764			75,244			69,047
Total gross margin	$	167,963		$	174,093		$	219,546
Research and development		53,192			53,963			45,393
Selling, general and administration		98,483			99,315			78,933
Depreciation and amortization		33,998			33,429			36,014
In-process research and development		2,500			8,125			1,042
Operating (loss) income	$	(20,211	)	$	(20,739	)	$	58,164
Other expense		(733,857	)		(49,853	)		(38,049	)
(Loss) income from continuing operations before income taxes and cumulative effect of change in accounting policy	$	(754,068	)	$	(70,592	)	$	20,115

The Company allocates its assets to the two reportable segments; however, as noted above, depreciation, income taxes and other expense and income are not allocated to segment operating units. The following tables represent total assets and capital expenditures for each reportable segment at December 31, 2008 and 2007:

		December 31,		December 31,
		2008		2007
Total assets
Pharmaceutical Technologies	$	67,506	$	214,030
Medical Products		317,691		936,078
Total assets	$	385,197	$	1,150,108
Capital expenditures
Pharmaceutical Technologies	$	902	$	3,743
Medical Products		7,855		4,245
Total capital expenditures	$	8,757	$	7,988

Geographic information

Revenues are attributable to countries based on the location of the Company’s customers or, for revenue from collaborators, the location of the collaborator’s customers. Except for revenues derived from United States, it is impracticable to disclose revenues derived from each individual country.

		For the year ended December 31,
		2008		2007		2006
United States	$	169,181	$	166,748	$	211,529
Europe		65,166		71,021		62,728
Others		48,925		49,925		40,818
Total	$	283,272	$	287,694	$	315,075

During the year, the Company reclassified $8.4 million of property, plant and equipment as held for sale (note 9). These assets are included in the table below for net long lived assets by country:

		For the year ended December 31,
		2008		2007
United States	$	36,627	$	31,400
Canada		14,588		15,767
Other		6,315		12,020
Total	$	57,530	$	59,187

- 13-31 -

During the year ended December 31, 2008, revenue from one licensee represented approximately 30% of total revenue (38% and 51%, respectively, for the years ended December 31, 2007 and December 31, 2006).

21.

RESTRUCTURING CHARGES

During the year ended December 31, 2008, the Company recorded charges of $4.9 million ($5.2 million for the year ended December 31, 2007) for plant closure and relocation activities associated with capacity rationalization and consolidation in the Medical Products segment. The restructuring charges during the year ended December 31, 2008 included $1.8 million ($3.2 million for the year ended December 31, 2007) related to employee severance benefits at the Company’s Syracuse location and $3.1 million ($2.0 million for the year ended December 31, 2007) related to various relocation activities at both the Company’s Syracuse and Puerto Rico locations. Only expenses related to the Syracuse and Puerto Rico locations are recorded as restructuring charges.

The severance charges were recorded in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities, or SFAS 146. SFAS 146 requires that a liability be recorded for a cost associated with an exit or disposal activity at its fair value in the period in which the liability is incurred. In connection with the restructuring plan, as at December 31, 2008, the Company has terminated substantially all of the employees from the Syracuse location (representing approximately 10% of the Company’s workforce). The estimated total severance obligation is $5.0 million. The estimated total severance obligation was calculated using forecasted cash flows, discounted as prescribed by SFAS 146, using a credit-adjusted risk-free rate of 9%. The terms of the severance require that employees continue to provide services throughout the transition period in order to be eligib le to receive the severance benefits. As the employees are required to continue to provide services in order to receive the severance, in June 2007, the Company accrued severance costs of $1.3 million representing the minimum severance benefits the employees are legally entitled to receive at that time. The remaining estimated total severance obligation of $3.7 million was recorded monthly over the estimated retention period being the 15-month period ending September 2008. The total monthly severance charge for the year ended December 31, 2008 was $1.8 million, including accretion expense of $0.2 million ($1.9 million for the year ended December 31, 2007, including accretion expense of $0.1 million).

The charges related to relocation activities are being expensed as incurred.

The charges are recorded to selling, general and administration costs in the statement of operations. The Company expects to satisfy the severance obligations through salary continuance. The expense and accrual recorded in accordance with SFAS 146 require the Company to make significant estimates and assumptions. These estimates and assumptions will be evaluated and adjusted as appropriate on at least a quarterly basis for changes in circumstances. It is possible that such estimates could change in the future resulting in additional adjustments, and the effect of any such adjustments could be material.

Changes in the Company’s accrual for restructuring charges for the years ended December 31, 2008 and 2007 were as follows:

		Severance Benefits
Balance, December 31, 2006	$	-
Severances charged		3,075
Accretion expense		152
Balance, December 31, 2007		3,227
Severances charged		1,664
Accretion expense		156
Severances paid		(973	)
Balance, December 31, 2008	$	4,074

22.

CONTOUR THREADS PRODUCT RETURNS

During the year ended December 31, 2007, the Company elected to discontinue its Contour Threads branded product line for selected aesthetic surgical applications and to focus marketing and branding efforts on the launch of its Quill SRS barbed suture product in a broader range of general surgery and aesthetic surgery applications. As part of this decision, the Company communicated an offer to its customers to refund, at the customer’s sole election, any unused inventory of Contour Threads product returned to the Company by June 1, 2007. The returned product was written off. The deadline was later extended indefinitely to meet customer demands and maintain strong customer relations. In connection with this decision, the Company recorded a pre-tax charge of approximately $3.0 million, which was recorded as an adjustment to revenue in the Medical Products segment in the second quarter of 2007. Actual returns during the year ended De cember 31, 2007 were $2.4 million and the Company determined that an accrual of $0.2 million for estimated future returns was appropriate at December 31, 2007. As such, a recovery of $0.4 million was recorded as an adjustment to revenue in the Medical Products segment in the fourth quarter of 2007.

- 13-32 -

23.

(LOSS) INCOME PER SHARE

(Loss) income per share was calculated as follows:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
Numerator:
Net (loss) income from continuing operations	$	(741,176	)	$	(56,047	)	$	18,023
Net loss from discontinued operations, net of income
taxes		-			(9,893	)		(7,708	)
Cumulative effect of change in accounting policy		-			-			399
Net (loss) income	$	(741,176	)	$	(65,940	)	$	10,714
Denominator:
Basic weighted average common shares outstanding		85,118			85,015			84,752
Dilutive effect of stock options		-			-			685
Diluted weighted average common shares outstanding		85,118			85,015			85,437
Basic net income (loss) per common share:
Continuing operations	$	(8.71	)	$	(0.66	)	$	0.21
Discontinued operations		-		$	(0.12	)	$	(0.09	)
Total	$	(8.71	)	$	(0.78	)	$	0.12
Diluted net income (loss) per common share:
Continuing operations	$	(8.71	)	$	(0.66	)	$	0.21
Discontinued operations		-		$	(0.12	)	$	(0.09	)
Total	$	(8.71	)	$	(0.78	)	$	0.12

For the year ended December 31, 2008, 9,798,677 stock options were excluded from the calculation of diluted net income (loss) per common share, as the effect of including them would have been anti-dilutive (8,171,921 for the year ended December 31, 2007; 6,301,054 for the year ended December 31, 2006).

24.

CHANGE IN NON-CASH WORKING CAPITAL ITEMS RELATING TO OPERATING ACTIVITIES AND SUPPLEMENTAL CASH FLOW INFORMATION

The change in non-cash working capital items relating to operations was as follows:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2008			2007			2006
Accrued interest on short-term and long-term investments	$	-		$	-		$	3,235
Accounts receivable		(5,524	)		2,297			3,019
Inventories		(5,156	)		(344	)		(4,274	)
Prepaid expenses and other assets		2,038			536			(8,337	)
Accounts payable and accrued liabilities		(11,843	)		2,912			(4,592	)
Income taxes payable		156			3,021			1,544
Interest payable		(812	)		713			6,614
	$	(21,141	)	$	9,135		$	(2,791	)

Supplemental disclosure:

		Year ended		Year ended		Year ended
		December 31,		December 31,		December 31,
		2008		2007		2006
Short-term investments received as consideration	$	-	$	-	$	8,000
Interest paid		43,066		48,790		26,865
Income taxes paid		3,720		5,512		15,207
Income tax refund		7,373		8,691		-
Investments not yet paid		-		-		5,000
Financing activities not yet paid		7,745		-		-

25.

COMPARATIVE FIGURES

Certain prior period figures have been reclassified to conform to current period presentation.

- 13-33 -

26.

CONDENSED CONSOLIDATING GUARANTOR FINANCIAL INFORMATION

The following presents the condensed consolidating guarantor financial information as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006 for the direct and indirect subsidiaries of the Company that serve as guarantors of the Senior Subordinated Notes and the Senior Floating Rate Notes and for the Company’s subsidiaries that do not serve as guarantors. Non-guarantor subsidiaries include the Swiss subsidiaries and a Canadian Trust that cannot guarantee the debt of the Company.  All of the Company’s subsidiaries are 100% owned, and all guarantees are full and unconditional, joint and several.

- 13-34 -

Condensed Consolidating Balance Sheet
As at December 31, 2008
USD (in '000s)
		Parent Company
		Angiotech
		Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Total
ASSETS
Current assets
Cash and cash equivalents	$	10,180		$	6,572		$	22,200		$	-		$	38,952
Short term investments		848			-			-			-			848
Accounts receivable		397,846			73,663			258,349			(704,334	)		25,524
Inventories		-			31,939			7,824			(1,169	)		38,594
Deferred income taxes, current portion		-			3,820			-			-			3,820
Prepaid expenses and other current assets		1,674			3,074			486			-			5,234
Total Current Assets		410,548			119,068			288,859			(705,503	)		112,972
Long term investments		825			-			736			-			1,561
Investment in subsidiaries		60,204			292,438			0			(352,642	)		0
Assets held for sale		5,322			3,100			-						8,422
Property, plant and equipment		9,194			30,326			9,588			-			49,108
Intangible assets		15,112			158,097			22,268			-			195,477
Goodwill		-			-			-			-			-
Deferred financing costs		11,363			-			-			-			11,363
Deferred income taxes		-			-			-			-			-
Other assets		271			5,911			112			-			6,294
Total Assets	$	512,839		$	608,940		$	321,563		-$	1,058,145		$	385,197
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	232,391		$	418,529		$	100,057		-$	704,357		$	46,620
Income taxes payable		(1,260	)		6,974			2,357			-			8,071
Interest payable on long-term debt		6,514			-			-			-			6,514
Deferred revenue, current portion		-			-			210			-			210
Total Current Liabilities		237,645			425,503			102,624			(704,357	)		61,415
Deferred revenue		-			-			999			-			999
Deferred leasehold inducement		2,768			12			-			-			2,780
Deferred income taxes		(1,959	)		42,010			526			-			40,577
Other tax liabilities		2,292			585			268			-			3,145
Long-term debt		575,000			-			-			-			575,000
Other liabilities		-			272			882			-			1,154
Total Non-current Liabilities		578,101			42,879			2,675			-			623,655
Shareholders' (Deficit) Equity
Share capital		472,739			917,189			262,209			(1,179,398	)		472,739
Additional paid in capital		32,108			91,405			18,059			(109,465	)		32,107
Accumulated deficit		(827,794	)		(866,180	)		(83,019	)		933,319			(843,674	)
Accumulated other comprehensive income		20,040			(1,856	)		19,014			1,756			38,954
Total Shareholders' (Deficit) Equity		(302,907	)		140,558			216,264			(353,788	)		(299,874	)
Total Liabilities and Shareholders' (Deficit) Equity	$	512,839		$	608,940		$	321,563		$	(1,058,145	)	$	385,197

- 13-35 -

Condensed Consolidating Balance Sheet
As at December 31, 2007
USD (in '000s)
		Parent Company
		Angiotech
		Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Total
ASSETS
Current assets
Cash and cash equivalents	$	23,790		$	20,334		$	47,202			-		$	91,326
Short term investments		17,899												17,899
Accounts receivable		391,066			69,059			302,607			(740,054	)		22,678
Inventories		-			26,563			7,821			(737	)		33,647
Deferred income taxes, current portion		-			5,964			-			-			5,964
Prepaid expenses and other current assets		2,331			4,041			698			-			7,070
Total Current Assets		435,086			125,961			358,328			(740,791	)		178,584
Long term investments		5,825			-			732			-			6,557
Investment in subsidiaries		518,304			438,673			-			(956,977	)		-
Property, plant and equipment		15,464			35,168			8,555			-			59,187
Intangible assets		17,931			185,199			22,759			-			225,889
Goodwill		-			561,883			97,628			-			659,511
Deferred financing costs		13,600			-			-			-			13,600
Other assets		81			6,699			-			-			6,780
Total Assets	$	1,006,291		$	1,353,583		$	488,002		$	(1,697,768	)	$	1,150,108
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	15,939		$	675,801		$	95,795		$	(740,046	)	$	47,489
Income taxes payable		(15,242	)		7,232			15,924			-			7,914
Interest payable on long-term debt		7,327			-			-			-			7,327
Deferred revenue, current portion		-			-			210			-			210
Total Current Liabilities		8,024			683,033			111,929			(740,046	)		62,940
Deferred revenue		-			-			1,211			-			1,211
Deferred leasehold inducement		2,782			12			-			-			2,794
Deferred income taxes		2,472			55,810			6,031			(4,945	)		59,368
Other taxliabilities		2,472			2,221			-			-			4,693
Long-term debt		575,000			-			-			-			575,000
Other liabilities		-			609			1,421			-			2,030
Total Non-current Liabilities		582,726			58,652			8,663			(4,945	)		645,096
Shareholders' Equity
Share capital		472,618			651,995			262,208			(914,203	)		472,618
Additional paid in capital		29,669			139,234			110,670			(249,904	)		29,669
Accumulated deficit		(102,497	)		(200,391	)		(9,183	)		209,574			(102,497	)
Accumulated other comprehensive income		15,751			21,060			3,715			1,756			42,282
Total Shareholders' Equity		415,541			611,898			367,410			(952,777	)		442,072
Total Liabilities and Shareholders' Equity	$	1,006,291		$	1,353,583		$	488,002		$	(1,697,768	)	$	1,150,108

- 13-36 -

Condensed Consolidating Statement of Operations
Year ended December 31, 2008
USD (in '000s)
		Parent Company
		Angiotech
		Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Total
REVENUE
Royalty revenue	$	84,079		$	2,426		$	5,041		$	-		$	91,546
Product sales, net		-			143,578			79,012			(31,774	)		190,816
License fees		-			389			1,000			(479	)		910
		84,079			146,393			85,053			(32,253	)		283,272
EXPENSES
License and royalty fees		14,250			8			-			-			14,258
Cost of products sold		-			75,631			56,505			(31,084	)		101,052
Research & development		32,442			19,621			1,129			-			53,192
Intercompany R&D charges		5,329			(6,405	)		753			323			-
Selling, general and administration		22,969			57,764			17,750			-			98,483
Depreciation and amortization		4,806			25,445			3,747			-			33,998
In-process research and development		-			2,500			-			-			2,500
		79,796			174,564			79,884			(30,761	)		303,483
Operating loss		4,283			(28,171	)		5,169			(1,492	)		(20,211	)
Other income (expense)
Foreign exchange gain (loss)		49,985			2,284			(51,729	)		-			540
Investment and other income		(9,419	)		(438	)		11,049			-			1,192
Interest expense on long-term debt		(32,251	)		(20,302	)		8,063			-			(44,490	)
Write-down and other deferred financing charges		(16,531	)		-			(13	)		-			(16,544	)
Write-down/loss on redemption of investments		(23,583	)		-			(4	)		-			(23,587	)
Write-down of assets held for sale		-			(1,283	)		-			-			(1,283	)
Write-down of goodwill		-			(537,531	)		(112,154	)		-			(649,685	)
Management fees		(2,597	)		2,384			(109	)		322			-
Dividend income		20,000			12,344			-			(32,344	)		-
Total other expenses		(14,396	)		(542,542	)		(144,897	)		(32,022	)		(733,857	)
Loss from continuing operations before income taxes		(10,113	)		(570,713	)		(139,728	)		(33,514	)		(754,068	)
Income tax expense (recovery)		(3,176	)		(11,088	)		1,498			(126	)		(12,892	)
Loss from continuing operations		(6,937	)		(559,625	)		(141,226	)		(33,388	)		(741,176	)
Equity in subsidiaries		(630,144	)		(52,869	)		-			683,013			-
Net income (loss)	$	(637,081	)	$	(612,494	)	$	(141,226	)	$	649,625		$	(741,176	)

- 13-37 -

Condensed Consolidating Income Statement
Year Ended December 31, 2007		Parent Company
		Angiotech						Non-
		Pharmaceuticals,			Guarantor			Guarantor			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Totals
REVENUE
Royalty revenue	$	110,477		$	1,827		$	4,355		$	-		$	116,659
Product sales, net		-			150,801			50,540			(31,148	)		170,193
License fees		-			(181	)		1,023			-			842
Intercompany R&D charges		(4,091	)		7,481			(2,910	)		(480	)		-
		106,386			159,928			53,008			(31,628	)		287,694
EXPENSES
License and royalty fees		18,821			8			3			(180	)		18,652
Cost of products sold		-			94,236			31,068			(30,355	)		94,949
Research and development		32,637			20,153			1,173			-			53,963
Selling, general and administration		31,311			55,990			12,014			-			99,315
Depreciation and amortization		4,680			25,518			3,231			-			33,429
In-process research and development		7,125			1,000			-			-			8,125
		94,574			196,905			47,489			(30,535	)		308,433
Operating income		11,812			(36,977	)		5,519			(1,093	)		(20,739	)
Other income (expenses) :
Foreign exchange gain (loss)		4,879			2,371			(7,588	)		(3	)		(341	)
Investment and other income		3,696			4,145			2,552			-			10,393
Interest income (expense)		(10,129	)		(66,296	)		24,677			-			(51,748	)
Management fees		(2,568	)		2,455			(367	)		480			-
Loss on redemption of available for sale securities		-			(8,157	)		-			-			(8,157	)
Total other income (expenses)		(4,122	)		(65,482	)		19,274			477			(49,853	)
Income (loss) from continuing operations before income taxes		7,690			(102,459	)		24,793			(616	)		(70,592	)
Income tax expense (recovery)		(5,242	)		(14,212	)		4,909			-			(14,545	)
Income (loss) from continuing operations		12,932			(88,247	)		19,884			(616	)		(56,047	)
Subsidiaries income (loss)		(78,872	)		34,096			-			44,776			-
Income (loss) from discontinued operations, net of income taxes		-			(9,893	)		537			(537	)		(9,893	)
Net (loss) income	$	(65,940	)	$	(64,044	)	$	20,421		$	43,623		$	(65,940	)

- 13-38 -

Condensed Consolidating Income Statement
Year Ended December 31, 2006
		Parent Company
		Angiotech						Non-
		Pharmaceuticals,			Guarantor			Guarantor			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Totals
REVENUE
Royalty revenue	$	159,487		$	11,725		$	4,042		$	-		$	175,254
Product sales, net		-			113,778			36,046			(11,234	)		138,590
License fees		-			1,403			489			(661	)		1,231
Intercompany R&D charges		1,685			6,248			-			(7,933	)		-
		161,172			133,154			40,577			(19,828	)		315,075
EXPENSES
License and royalty fees		25,977			668			2			(661	)		25,986
Cost of products sold		-			58,528			22,123			(11,108	)		69,543
Research and development		28,327			16,490			576			-			45,393
Intercompany R&D charges		-			-			7,713			(7,713	)		-
Selling, general and administration		35,341			36,672			6,849			71			78,933
Depreciation and amortization		4,608			27,944			3,461			-			36,014
In-process research and development		1,025			17			-			-			1,042
		95,278			140,319			40,725			(19,411	)		256,911
Operating income (loss)		65,894			(7,165	)		(148	)		(417	)		58,164
Other income (expenses) :
Foreign exchange gain (loss)		1,350			2,081			(2,916	)		-			515
Investment and other income		3,218			1,586			1,431			-			6,235
Gain (loss) on wind-up of subsidiary		(2,354	)		(2,815	)		5,169			-			-
Interest income (expense)		(25,429	)		(45,887	)		35,814			-			(35,502	)
Write-down of deferred financing costs		(7,714	)		(1,583	)		-			-			(9,297	)
Management fees		(1,877	)		1,952			(295	)		220			-
Dividend income		-			13,382			-			(13,382	)		-
Total other income (expenses)		(32,806	)		(31,284	)		39,203			(13,162	)		(38,049	)
Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting policy		33,088			(38,449	)		39,055			(13,579	)		20,115
Income tax expense (recovery)		(2,827	)		(5,665	)		10,584			-			2,092
Income (loss) from continuing operations before cumulative effect of change in accounting policy		35,915			(32,784	)		28,471			(13,579	)		18,023
Subsidiaries income (loss)		(25,600	)		34,742			-			(9,142	)		-
Income (loss) from discontinued operations, net of income taxes		-			(7,848	)		140			-			(7,708	)
Cumulative effect of change in accounting policy		399			-			-			-			399
Net income (loss)	$	10,714		$	(5,890	)	$	28,611		$	(22,721	)	$	10,714

- 13-39 -

Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2008
USD (in '000s)
		Parent Company
		Angiotech						Non-
		Pharmaceuticals,			Guarantors			Guarantors			Consolidating		Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments		Total
OPERATING ACTIVITIES:
Cash (used in) provided by operating activities	$	(55,123	)	$	(15,046	)	$	32,162		$	-	$	(38,007	)
INVESTING ACTIVITIES:
Proceeds from short-term investments		2,756			-			-			-		2,756
Purchase of property, plant and equipment		(1,005	)		(4,942	)		(1,722	)		-		(7,669	)
Purchase of intangible assets		-			(1,000	)		-			-		(1,000	)
In-process research and development		-			(2,500	)		-			-		(2,500	)
Other		236			28			(90	)		-		174
Cash provided by (used in) financing activities		1,987			(8,414	)		(1,812	)		-		(8,239	)
FINANCING ACTIVITIES:
Deferred financing costs on long-term obligations		(4,485	)		-			(14	)		-		(4,499	)
Proceeds from stock options exercised		121			-			-			-		121
Dividends received / (paid)		20,000			12,344			(32,344	)		-		-
Intercompany notes payable/receivable		23,891			(2,596	)		(21,295	)		-		-
Cash provided by (used in) investing activities		39,527			9,748			(53,653	)		-		(4,378	)
Effect of exchange rate changes on cash and cash equivalents		-			(51	)		(1,699	)		-		(1,750	)
Net decrease in cash and cash equivalents		(13,609	)		(13,763	)		(25,002	)		-		(52,374	)
Cash and cash equivalents, beginning of year		23,790			20,334			47,202			-		91,326
Cash and cash equivalents, end of year	$	10,181		$	6,571		$	22,200		$	-	$	38,952

- 13-40 -

Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2007
		Parent Company
		Angiotech						Non-
		Pharmaceuticals,			Guarantor			Guarantor			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Totals
OPERATING ACTIVITIES:
Cash provided by (used in) operating activities	$	(8,352	)	$	26,570		$	40,185		$	(63,965	)	$	(5,562	)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(3,145	)		(3,300	)		(686	)		-			(7,131	)
Proceeds from short-term investments		-			9,285			-			-			9,285
Purchase of long-term investments		(15,000	)		10,000			-			(10,000	)		(15,000	)
Proceeds from long-term investments		-			22,965			-			-			22,965
Investment in subs		-			(28,735	)		(2,511	)		31,246			-
Purchase of intangibles assets		-			(6,466	)		-			-			(6,466	)
Proceeds from sale of assets held for sale		-			4,832			-			-			4,832
Other assets		399			(500	)		-			-			(101	)
In-process research and development		(7,125	)		(1,000	)		-			-			(8,125	)
Cash (used in) provided by investing activities		(24,871	)		7,081			(3,197	)		21,246			259
FINANCING ACTIVITIES:
Share capital issued		-			-			332			(332	)		-
Deferred financing costs on long-term obligations		(1,865	)		-			-			-			(1,865	)
Dividends paid		-			(28,434	)		(14,617	)		43,051			-
Notes receivable / payable		(845	)		2,808			(1,963	)		-			-
Proceeds from stock options exercised and share capital issued		228			-			-			-			228
Cash (used in) provided by financing activities		(2,482	)		(25,626	)		(16,248	)		42,719			(1,637	)
Effect of exchange rate changes on cash		-			-			(1,066	)		-			(1,066	)
Net increase (decrease) in cash and cash equivalents		(35,705	)		8,025			19,674			-			(8,006	)
Cash and cash equivalents, beginning of year		59,495			12,309			27,528			-			99,332
Cash and cash equivalents, end of year	$	23,790		$	20,334		$	47,202		$	-		$	91,326

- 13-41 -

Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2006
		Parent Company
		Angiotech						Non-
		Pharmaceuticals,			Guarantor			Guarantor			Consolidating			Consolidated
		Inc.			Subsidiaries			Subsidiaries			Adjustments			Totals
OPERATING ACTIVITIES:
Cash provided by (used in) operating activities	$	61,192		$	(6,476	)	$	20,263		$	(19,108	)	$	55,871
INVESTING ACTIVITIES:
Purchase of short-term investments		(92,509	)		(40,254	)		-			-			(132,763	)
Proceeds from short-term investments		154,062			110,865			-			-			264,927
Purchase of long-term investments		(10,134	)		-			(13	)		-			(10,147	)
Proceeds from long-term investments		3,581			124,161			1,928			-			129,670
Purchase of property, plant and equipment		(7,027	)		(2,765	)		(1,059	)		-			(10,851	)
Proceeds from sale of subsidiary		-			47			-			-			47
Acquisition of businesses, net of cash acquired		-			(820,953	)		-			-			(820,953	)
Purchase of intangible assets		-			(285	)		-			-			(285	)
Proceeds from sale of intangible assets		-			-			3,400			-			3,400
Proceeds from sale of assets held for sale		-			6,395			-			-			6,395
Investment in subsidiaries		(631,447	)		(258,715	)		-			890,162			-
In-process research and development		(1,025	)		(17	)		-			-			(1,042	)
Other assets		(1,559	)		(10,647	)		8,600			-			(3,606	)
Cash provided by (used in) investing activities		(586,058	)		(892,168	)		12,856			890,162			(575,208	)
FINANCING ACTIVITIES:
Principal repayment of long-term obligations		(350,000	)		-			-			-			(350,000	)
Proceeds from long-term obligations		925,000			-			-			-			925,000
Deferred financing costs on long-term obligations		(22,717	)		(1,842	)		-			-			(24,559	)
Proceeds from stock options exercised and share capital issued		6,485			631,400			258,691			(890,091	)		6,485
Dividends paid		-			(9,551	)		(9,486	)		19,037			-
Notes receivable / payable		(3,810	)		266,118			(262,308	)		-			-
Cash provided by (used in) financing activities		554,958			886,125			(13,103	)		(871,054	)		556,926
Effect of exchange rate changes on cash		-			-			(420	)		-			(420	)
Net increase (decrease) in cash and cash equivalents		30,092			(12,519	)		19,596			-			37,169
Cash and cash equivalents, beginning of year		29,403			24,828			7,932			-			62,163
Cash and cash equivalents, end of year	$	59,495		$	12,309		$	27,528		$	-		$	99,332

- 13-42 -

27.

SUBSEQUENT EVENTS

On March 2, 2009, the Company announced it had completed a financing transaction with Wells Fargo.  The financing includes a delayed draw secured term loan facility of up to $10 million and a secured revolving credit facility, with a borrowing base comprised of certain of the Company’s finished goods inventory and accounts receivable, providing up to an additional $22.5 million in available credit, subject to certain terms and conditions.  At any time, the amount of financing available under the revolving credit facility may be significantly less than $22.5 million and is expected to fluctuate from month to month with changes in levels of finished goods and accounts receivable.  As of February 23, 2009, the amount of financing available under the revolving credit facility was approximately (unaudited) $9.5 million.  Any borrowings outstanding under the term loan and revolving credit facility bear interest rang ing from LIBOR + 3.25% to LIBOR +3.75%, with a minimum Base LIBOR Rate of 2.25%.  The term loan and revolving credit facility include certain covenants and restrictions with respect to the Company’s operations and require the Company to maintain certain levels of EBITDA and interest coverage ratios, among other terms and conditions. Repayment of any amounts drawn under the term loan and revolving credit facility can be made at certain points in time with ultimate maturity being February 27, 2013. Amounts repaid under the secured term loan, and prepayments made under the revolving credit facility in certain circumstances, cannot be re-borrowed by the Company.  The purpose of this financing is to provide additional liquidity and capital resources for working capital and general corporate purposes.

As the minimum Base LIBOR Rate under the term loan and revolving credit facility is 2.25% and the LIBOR rate was 1.425% on December 31, 2008, a .5% increase or decrease in the LIBOR rate as of December 31, 2008 would have no impact on interest payable under the credit facilities.

- 13-43 -

Report of Independent Registered Public Accounting Firm

Financial Statement Schedule

To the Board of Directors and Shareholders

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated March 13, 2009 appearing in the 2008 Annual Report to Shareholders of Angiotech Pharmaceuticals, Inc (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Vancouver, Canada
March 13, 2009

- 13-44 -

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2008, 2007 and 2006

(in thousands of U.S. dollars)

				Additions
		Balance at		Charged to		Charged					Balance at
		Beginning		Costs and		to Other			Deductions		End of
		of Year		Expenses		accounts					Year
Deferred Income Tax Valuation Allowance:
Year ended December 31, 2008	$	42,005	$	55,514	$	(579	)	$	-	$	96,940
Year ended December 31, 2007		19,293		22,133		579			-		42,005
Year ended December 31, 2006		26,483		-		-			7,190		19,293
		Balance at		Balance
		Beginning		at End of
		of Year		Year
Accounts Receivable Allowance:
Year ended December 31, 2008	$	214	$	270
Year ended December 31, 2007		546		214
Year ended December 31, 2006		nil		546

- 13-45 -

EX-14.1

Exhibit 14.1

    CODE OF ETHICS FOR THE CHIEF EXECUTIVE OFFICER

The Chief Executive Officer of Angiotech will at all times abide by the standards of conduct expected of a fiduciary employee, including, without limitation, a duty to act honestly and in good faith, exclusively and selflessly in the best interests of Angiotech Pharmaceuticals Inc., and its affiliates and subsidiaries (collectively, “Angiotech”), to which he or she owes a duty of undivided loyalty. In particular, the Chief Executive Officer is expected to:

1.	act at all times with the highest level of integrity in his or her personal and professional life;
2.	avoid any impropriety or appearance of impropriety in the conduct of his or her duties and responsibilities as CEO or as a director of Angiotech;
3.	avoid any actual or potential conflicts of interest;
4.	within the sphere of his or her duties and responsibilities, be accountable for and use best efforts to provide full, accurate, and timely disclosure of information that Angiotech files with or submits to governmental or regulatory authorities;
5.	within the sphere of his or her duties and responsibilities, be accountable for and use best efforts to ensure that Angiotech complies with all applicable laws, rules and regulations;
6.	respect and protect Angiotech’s assets;
7.	safeguard investor trust and confidence by maintaining accurate financial records and effective internal controls;
8.	manifestly adhere to and promote not only the letter but also the spirit of this Code of Ethics, and
9.	promptly disclose to Angiotech’s Audit Committee if he or she becomes aware of illegal acts within or by Angiotech or by any director, officer or employee of Angiotech, or a breach of any other code of ethics by any director, officer, or employee of Angiotech.

If I am found breaching this Code of Ethics I acknowledge I may, in addition to any regulatory or judicial sanction, receive sanctions from the Company, including possible termination of employment.

EX-14.2

Exhibit 14.2

 

CODE OF ETHICS FOR THE CHIEF FINANCIAL OFFICER

The Chief Financial Officer of Angiotech will at all times abide by the standards of conduct expected of a fiduciary employee, including, without limitation, a duty to act honestly and in good faith, exclusively and selflessly in the best interests of Angiotech Pharmaceuticals Inc., and its affiliates and subsidiaries (collectively, “Angiotech”), to which he or she owes a duty of undivided loyalty. In particular, the Chief Financial Officer is expected to:

1.	act at all times with the highest level of integrity in his or her personal and professional life;
2.	avoid any impropriety or appearance of impropriety in the conduct of his or her duties and responsibilities as CFO or as a director of Angiotech;
3.	avoid any actual or potential conflicts of interest;
4.	within the sphere of his or her duties and responsibilities, be accountable for and use best efforts to provide full, accurate, and timely disclosure of information that Angiotech files with or submits to governmental or regulatory authorities;
5.	within the sphere of his or her duties and responsibilities, be accountable for and use best efforts to ensure that Angiotech complies with all applicable laws, rules and regulations;
6.	respect and protect Angiotech’s assets;
7.	safeguard investor trust and confidence by maintaining accurate financial records and effective internal controls;
8.	manifestly adhere to and promote not only the letter but also the spirit of this Code of Ethics, and
9.	promptly disclose to Angiotech’s Audit Committee if he or she becomes aware of illegal acts within or by Angiotech or by any director, officer or employee of Angiotech, or a breach of any other code of ethics by any director, officer, or employee of Angiotech.

If I am found breaching this Code of Ethics I acknowledge I may, in addition to any regulatory or judicial sanction, receive sanctions from the Company, including possible termination of employment.

EX-14.3

Exhibit 14.3

 

CODE OF ETHICS FOR DIRECTORS AND OFFICERS

Officers and directors of Angiotech are expected to abide by the highest standards of ethical conduct and to act honestly and in good faith with a view to the best interests of Angiotech and its shareholders. In so doing, as an officer or director I acknowledge I am expected specifically to:

1. Maintain integrity and credibility in my personal and professional life by carrying out the duties of my office in accordance with the highest legal and ethical standards.

2. Avoid in my personal and professional life the appearance of impropriety in the conduct of the duties of my office.

3. Represent myself in my personal and professional life in a reputable and dignified manner that reflects the standard of ethical conduct required by Angiotech.

4. Avoid in my personal and professional life any relationships that might affect, or be perceived as potentially affecting, my ethical conduct in the course of carrying out the duties of my office (including a relationship that may create, or create the appearance of, a conflict of interest).

5. Not use confidential information acquired in the course of the duties of my office either for my personal advantage or for the advantage of others.

6. Honour my obligation to serve the best interests of Angiotech and its shareholders by exercising the care, diligence and skill necessary to conduct its affairs appropriately, including, if a director, upholding the guidelines set out in the Company’s Charter of Director Governance and Expectations.

7. Recognize that the integrity of the capital markets is based on consistently honest and just actions by its participants, the conformity to market regulation, and the transparency of credible financial and non-financial corporate information, and will to the best of my ability work to ensure that Angiotech acts in such a manner consistent with such principles.

8. Take such action as is appropriate to confirm that Angiotech provides full, fair, accurate, timely, and understandable disclosure in reports and documents that it files with or submits to public regulatory bodies, and that Angiotech complies with applicable governmental laws, rules and regulations.

9. Maintain the confidentiality of information acquired in the course of carrying out the duties of my office.

10. Report promptly to the Independent Chairman of the Board of Directors of Angiotech if I become aware of fraudulent or illegal acts within Angiotech or a breach of this Code of Ethics by any director or officer of Angiotech, including my own acts.

11. Provide the leadership, supervision and support for the employees, collaborators and other agents of Angiotech to uphold the principles articulated in this Code of Ethics.

This Code of Ethics applies to all directors and officers of Angiotech. A person to whom this Code of Ethics applies will be deemed to have breached it by way of being sanctioned by a governmental agency or judicial body for violating laws or regulations affecting the performance of his or her duties of office or by a finding of the Board of Directors of Angiotech. Any person with power to influence or control the direction or management, policies or activities of the sanctioned person, who was aware that a breach of the Code of Ethics was likely to occur and failed to take appropriate steps to prevent such an act from occurring, will be deemed to have also breached the Code of Ethics. Any person found breaching the Code of Ethics will, in addition to any regulatory or judicial sanction, receive sanctions from the Company, including possible suspension or termination of employment.

EX-21

Exhibit 21

List of Worldwide Subsidiaries of Angiotech Pharmaceuticals, Inc. as of March 12, 2009

Structure of ownership and control:

Angiotech Pharmaceuticals, Inc. wholly owns all of the below mentioned entities.

Subsidiary Name	Jurisdiction of Organization
0741693 B.C. Ltd.	British Columbia
0761717 B.C. Ltd.	British Columbia
3091796 Nova Scotia Company	Nova Scotia
3091798 Nova Scotia Company	Nova Scotia
3091799 Nova Scotia Company	Nova Scotia
Afmedica, Inc.	Delaware
American Medical Instruments Holdings, Inc.	Delaware
Angiodevice International GmbH	Switzerland
Angiotech America, Inc.	Illinois
Angiotech BioCoatings Corp. d/b/a Angiotech	New York
Angiotech Capital, LLC	Nevada
Angiotech Danmark A/S	Denmark
Angiotech Delaware, Inc.	Delaware
Angiotech GmbH	Germany
Angiotech International AG	Switzerland
Angiotech International Holdings, Corp.	Nova Scotia
Angiotech Investment Partnership	British Columbia
Angiotech Italy S.r.l.	Italy
Angiotech Participações do Brasil Ltda.	Brazil
Angiotech Pharmaceuticals (US), Inc. d/b/a Angiotech	Washington
Angiotech Pharmaceutical Interventions, Inc.	Delaware
Angiotech Puerto Rico, Inc.	Puerto Rico
Angiotech SARL	France
Angiotech S.L.	Spain
Angiotech Switzerland SA	Switzerland
Angiotech Tender Holdings, Inc.	British Columbia
Angiotech UK Ltd.	United Kingdom
API Canada Holdings, Inc.	British Columbia
B.G. Sulzle, Inc. d/b/a Angiotech	Delaware
Bifos AB	Sweden
Crimson Cardinal Capital, LLC	Nevada
DOS Trust	British Columbia
Manan Medical Products, Inc. d/b/a Angiotech	Delaware
Medical Device Technologies, Inc. d/b/a Angiotech	Delaware
NeuColl, Inc.	Delaware
PBN Medicals Denmark A/S	Denmark
Pearsalls Development Limited	United Kingdom
Pearsalls Limited	United Kingdom
Quill Medical, Inc.	Delaware
Soldiers Field Liquidity Management LLC	Hungary
Surgical Specialties Corporation d/b/a Angiotech	Delaware
Surgical Specialties Puerto Rico, Inc.	Puerto Rico
Surgical Specialties UK Holdings Limited	United Kingdom

EX-31.1

Exhibit 31.1

Certification of CEO Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, William L. Hunter, M.D., certify that:

1.

I have reviewed this annual report on Form 10-K of Angiotech Pharmaceuticals, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2009	/s/ William L. Hunter
	William L. Hunter, M.D.
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of CFO Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, K. Thomas Bailey, certify that:

1.

I have reviewed this annual report on Form 10-K of Angiotech Pharmaceuticals, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2009	/s/ K. Thomas Bailey
	K. Thomas Bailey
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of CEO and CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer and the Chief Financial Officer of Angiotech Pharmaceuticals, Inc. (the “Company”), each hereby certifies that to his knowledge on the date hereof:

(a) The Form 10-K of the Company for the year-ended December 31, 2008, filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2009	/s/ William L. Hunter
	William L. Hunter, M.D.
	Chief Executive Officer
Date: March 16, 2009	/s/ K. Thomas Bailey
	K. Thomas Bailey
	Chief Financial Officer