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Angiotech Pharmaceuticals Inc – ‘PRE 14A’ for 9/5/08

On:  Tuesday, 7/22/08, at 5:22pm ET   ·   For:  9/5/08   ·   Accession #:  1193125-8-155387   ·   File #:  0-30334

2 References:   By:  SEC – ‘UPLOAD’ on 9/26/08 By:  SEC – ‘UPLOAD’ on 7/30/08 

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/22/08  Angiotech Pharmaceuticals Inc     PRE 14A     9/05/08    1:1.9M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14A     Preliminary Proxy Statement                         HTML   1.47M 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant x                            Filed by a Party other than the Registrant ¨

ANGIOTECH PHARMACEUTICALS, INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Dear Angiotech Shareholders:

On behalf of the Board of Directors, we are pleased to deliver our Proxy Statement for our annual and special general meeting of shareholders. At the meeting, shareholders are being asked to:

YOUR VOTE IS VERY IMPORTANT.

The transaction involves the transfer of certain of our assets and liabilities, which are more fully described in the Proxy Statement, to our newly formed wholly owned subsidiary, Angiotech Pharmaceutical Interventions, Inc., which we refer to as API. The transaction additionally involves a proposed investment by Ares Corporate Opportunities Fund III, L.P., New Leaf Ventures I, L.P. and New Leaf Ventures II, L.P., and/or their permitted assigns, whom we refer to as the Investors, of up to $300 million in the form of convertible notes to be issued by API.

The Investors will purchase a minimum of $200 million, and at our option up to $300 million, in convertible notes issued by API. The convertible notes bear interest at a blended annual rate of 7.75%, payable in kind, which payment in kind feature over time will increase the percentage of API’s common stock into which such notes are convertible, and are initially convertible into between approximately 32% and 48% of the common stock of API (excluding the effect of shares of common stock that may become issuable after the closing of the transaction). API will use the net proceeds to discharge its obligations to us under an intercompany promissory note.

Upon the consummation of an initial public offering of the common stock of API at specified values or the occurrence of certain other events described in the accompanying Proxy Statement, and the satisfaction of certain other conditions described in this Proxy Statement or, after September 30, 2009, at the election of the Investors (subject to certain restrictions), the convertible notes will be convertible into 50 shares of common stock of API per $1,000 principal amount of the convertible notes, subject to adjustment as described in the accompanying Proxy Statement.

In connection with the proposed transaction, we have commenced a tender offer to repurchase a portion of our Senior Floating Rate Notes due 2013, which we refer to as the 2013 Notes, and/or our 7.75% Senior Subordinated Notes due 2014, which we refer to as the 2014 Notes. Concurrently with the issuance of the convertible notes, we will use the net proceeds from the repayment of the intercompany promissory note by API

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to consummate such tender offer. API has the right to elect to raise up to $300 million in gross proceeds (or approximately $265 million in net proceeds) from the sale of the convertible notes. Consummation of the tender offer is contingent upon shareholder approval of the proposed transaction.

We expect that the transaction will provide our shareholders with a number of significant benefits, including:

For over nine months, the Company and our Board of Directors have evaluated potential strategic and financial alternatives. After evaluating alternatives available to us, the Company has determined to pursue the transaction. Our Board of Directors formed a Special Committee to evaluate the transaction and consider whether there are other strategic alternatives that are in the best interests of the Company and our shareholders. The Special Committee recommended that the Board of Directors approve the transaction. In connection with the recommendation of the Special Committee, Merrill Lynch Canada Inc., financial advisor to the Special Committee, provided an opinion stating that, as of the date of its opinion, the cash consideration received by API from the issuance of the convertible notes in the transaction is fair from a financial point of view to the Company.

After careful consideration, the Board of Directors has unanimously determined that the transaction is in the best interests of the Company and fair to its shareholders. The Board of Directors has approved the transaction and recommends that you vote in favor of the transaction and the other proposals set forth in the accompanying Proxy Statement.

Our common shares are listed on the NASDAQ Global Select Market under the trading symbol “ANPI” and on the Toronto Stock Exchange under the trading symbol “ANP”. On [—], 2008, the closing sale price of our common shares was $[—] per share on the NASDAQ and CDN$[—] per share on the TSX.

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The annual and special general meeting of shareholders will be held on [— ], 2008 at [—] a.m. local time at [location TBD].

The accompanying Proxy Statement provides you with detailed information concerning us, the transaction and other matters to be voted upon. Please pay careful attention to all of the information in the Proxy Statement. In particular, in connection with the transaction, you should carefully consider the discussion in “Risk Factors” beginning on page 14 of the Proxy Statement.

Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the annual and special general meeting of shareholders, please take the time to vote by completing and mailing the enclosed proxy card or voting instruction card and returning it in the pre-addressed envelope provided.

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ANGIOTECH PHARMACEUTICALS, INC.

1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN THAT the 2008 annual and special general meeting (the “Meeting”) of the shareholders of Angiotech Pharmaceuticals, Inc. (the “Company”) will be held at [—], Pacific Time, on, [—], 2008 at [location TBD] for the following purposes:

These items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors recommends shareholders vote “FOR” each of the proposals.

If you owned common shares of the Company on [—], 2008, the record date, you are entitled to attend and vote at the Meeting.

It is important that your shares be represented and that your wishes be made known. Whether or not you expect to attend the Meeting, please complete the enclosed form of proxy as indicated and return it by fax, mail or hand delivery to the office of Computershare Investor Services Inc., or provide voting instructions to Computershare Investor Services Inc. through its internet or telephone voting services, set out in the accompanying form of proxy. In order to be valid for use at the Meeting, the form of proxy must be duly completed, signed and deposited at the office of Computershare Investor Services Inc., as set out in the

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form of proxy, by 10:00 a.m. (Pacific Time) on [—], 2008 or, if the Meeting is adjourned or postponed, no later than 48 hours excluding Saturdays, Sundays and holidays before the time to which the Meeting is adjourned or postponed, in either case unless the Chair of the Meeting elects to exercise his or her discretion to accept proxies received subsequently. Your proxy is revocable and will not affect your right to vote in person at the Meeting. An undated proxy will be deemed to be dated the date the proxy is mailed by management or its agent to the registered shareholder.

Take notice that, if you are a registered holder of shares of the Company, you may deliver a notice of dissent with respect to the proposed resolutions to approve the Transaction. Dissenting shareholders must send any written notice of dissent to the Company, care of its legal counsel, Borden Ladner Gervais LLP, at 1200 Waterfront Centre, 200 Burrard Street, P.O. Box 48600, Vancouver, British Columbia, Canada V7X 1T2 (Facsimile: (604) 622-5824), Attention: Ian Webb, by no later than [—], 2008. Shareholders who validly exercise their dissent rights and do not withdraw their dissent will be entitled to receive the “fair value” of their common shares if the Transaction is consummated. Shareholders should be aware that simply voting against the resolutions being considered at the Meeting does not constitute the exercise of dissent rights.

DATED this [—]^th day of [—], 2008.

BY ORDER OF THE BOARD OF DIRECTORS

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ANGIOTECH PHARMACEUTICALS, INC.

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation by management of Angiotech Pharmaceuticals, Inc. (the “Company”) of proxies to be voted at the annual and special general meeting of shareholders of the Company to be held at [—], Pacific Time, on [—], 2008 at [location TBD], together with any adjournment or postponement of that meeting (the “Meeting”). Any registered shareholder of the Company holding common shares of the Company as at [—], 2008 will be entitled to vote at the Meeting.

The Company’s principal executive office of the Company is located at 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6. The Company’s website address is www.angiotech.com. The registered and records office of the Company is located at Suite 1200, 200 Burrard Street, Vancouver, British Columbia, Canada, V7X 1T2.

All references to currency in this Proxy Statement are in United States (U.S.) dollars, unless otherwise indicated.

The date of this Proxy Statement is [—], 2008, and it is first being sent to shareholders on or about [—], 2008.

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SUMMARY TERM SHEET

This section contains a summary of the proposed transaction, consisting of the Restructuring and the API Investment, each as defined below. As more fully described in this Proxy Statement, we refer to the Restructuring and the API Investment, the related ancillary agreements and the transactions contemplated thereby (including without limitation a potential future sale, from time to time, in one or a series of transactions, by the Company of its shares of common stock of API), collectively as the “Transaction”.

Prior to the consummation of the API Investment, the Company proposes to enter into agreements to transfer certain of its assets and liabilities, as more fully described below, to API, a newly formed wholly owned subsidiary of the Company in exchange for 100% of the common stock of API and an intercompany promissory note. Additionally, the Company and API will concurrently enter into agreements, including a management services agreement and a registration rights agreement, to govern the continuing relationship between the Company and API. We refer to the entry into these agreements and the consummation of the transactions contemplated thereby as the “Restructuring”. In connection with the Restructuring, all but two employees of the Company will become employed by API and its subsidiaries.

Immediately after the Restructuring, API will issue up to two series (senior and subordinated) of notes in aggregate principal amount between $200 million and $300 million, convertible into shares of its common stock, par value $0.01 per share (the “Convertible Notes”), to Ares Corporate Opportunities Fund III, L.P. (“Ares”), New Leaf Ventures I, L.P. and New Leaf Ventures II, L.P. (together, “New Leaf”, and together with Ares and their permitted assignees, the “Investors”), in exchange for between $200 million and $300 million in cash pursuant to a note purchase agreement, dated as of July 6, 2008, among the Company, API and the Investors (the “Note Purchase Agreement”), and such parties will enter into other related agreements, including a governance agreement (the “Governance Agreement”) and a registration rights agreement (the “Investor Registration Rights Agreement”), to govern their continuing relationships. At the time of the issuance of the Convertible Notes, the Convertible Notes would be convertible into between approximately 32% and 48% of the outstanding shares of common stock of API on a fully diluted basis (excluding the effect of shares of common stock that may become issuable after the closing of the Transaction). API will use the net proceeds from the sale of the Convertible Notes to discharge its obligations under the intercompany promissory note referred to above. We refer to the entry into these agreements and the consummation of the transactions contemplated thereby as the “API Investment”. We refer to the agreements described in this paragraph as the “Transaction Agreements”.

In connection with the Transaction, the Company has commenced a tender offer to repurchase a portion of the Company’s Senior Floating Rate Notes due 2013 (the “2013 Notes”) and/or the Company’s 7.75% Senior Subordinated Notes due 2014 (the “2014 Notes”, and together with the 2013 Notes, the “Existing Notes”). Immediately after the issuance of the Convertible Notes, the Company will use the net proceeds from the API Investment to consummate such tender offer. API has the right to elect to raise up to $300 million in gross proceeds (or approximately $265 million in net proceeds) from the sale of the Convertible Notes and will exercise that right to the extent the Company has the ability to repurchase additional outstanding 2013 Notes and 2014 Notes at attractive prices. We refer to the tender offer described above as the “Tender Offer”.

This term sheet is a summary and does not contain all of the information that may be important to you. You should carefully read this entire document, including the appendices and the other documents to which this document refers you, for a more complete understanding of the matters being considered at the Meeting. See the section of this Proxy Statement entitled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 137.

In order to implement the Restructuring, the Company and API will enter into a number of agreements to govern the continuing relationship between the companies. These agreements will be negotiated prior to the closing of the API Investment and are currently contemplated to include:

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For more information about the Restructuring, see the section of this Proxy Statement entitled “THE RESTRUCTURING”.

At the time of the consummation of the Restructuring, API will issue the Convertible Notes pursuant to the Note Purchase Agreement if the conditions to the respective parties’ obligations to close are met or waived. See “DESCRIPTION OF TRANSACTION AGREEMENTS—Note Purchase Agreement—Conditions to the Closing” beginning on page 62 for a more detailed discussion.

The terms of the Convertible Notes provide, among other things:

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In connection with the Transaction, the Company has commenced the Tender Offer to repurchase a portion of the 2013 Notes and/or the 2014 Notes. Immediately after the issuance of the Convertible Notes, the Company will use the net proceeds from the repayment of the intercompany promissory note by API to consummate the Tender Offer. API has the right to elect to raise up to $300 million in gross proceeds (or approximately $265 million in net proceeds) from the sale of the Convertible Notes and will exercise that right to the extent the Company has the ability to repurchase additional outstanding 2013 Notes and 2014 Notes at attractive prices. See “DESCRIPTION OF THE TENDER OFFER” beginning on page 82 for a more detailed discussion.

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QUESTIONS AND ANSWERS

What is being voted on at the Meeting?

The matters to be considered and voted upon at the Meeting are as follows:

At the time this Proxy Statement was printed, the Company was not aware of any other matters to come before the Meeting.

How do I vote?

Registered Shareholders

By Proxy. A registered shareholder has the right to appoint a person other than the persons designated in the accompanying form of proxy (and who need not be a shareholder) to attend and act for him or her and on his or her behalf at the Meeting. To exercise this right, the registered shareholder may insert the name of the desired person in the blank space provided in the form of proxy, or may submit another proxy in a form acceptable to the Chair in his or her discretion.

It is important that your shares be represented and that your wishes be made known. Whether or not you expect to attend the Meeting, please complete the enclosed form of proxy as indicated and return it by fax, mail or hand delivery to the office of Computershare Investor Services Inc., or provide voting instructions to Computershare Investor Services Inc. through its internet or telephone voting services, set out in the accompanying form of proxy. In order to be valid for use at the Meeting, the form of proxy must be duly completed, signed and deposited at the office of Computershare Investor Services Inc., as set out in the form of proxy, by 10:00 a.m. (Pacific Time) on [—], 2008 or, if the Meeting is adjourned or postponed, no later than 48 hours excluding Saturdays, Sundays and holidays before the time to which the Meeting is adjourned or postponed, in either case unless the Chair of the Meeting elects to exercise his or her discretion to accept proxies received subsequently. An undated proxy will be deemed to be dated the date the form of proxy is mailed by management or its agent to the registered shareholder.

In Person. A registered shareholder may attend the Meeting and vote in person. Attending the Meeting will not automatically revoke your prior proxy. You must comply with methods set forth below under “May I revoke my proxy?” in order to revoke your proxy.

Beneficial Shareholders

The information set out in this section is important to many shareholders as a substantial number of shareholders do not hold their common shares in their own name.

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Persons who hold common shares through their brokers, agents, trustees or other intermediaries (such persons, “Beneficial Shareholders”) should note that only proxies deposited by registered shareholders whose names appear on the share register of the Company may be recognized and acted upon at the Meeting. If common shares are shown on an account statement provided to a shareholder by a broker, then in almost all cases the name of such shareholder will not appear on the share register of the Company. Such common shares will most likely be registered in the name of the broker or an agent of the broker. In Canada, the vast majority of such shares will be registered in the name of “CDS & Co.”, the registration name of CDS Clearing and Depositary Services Inc., and in the United States, the vast majority will be registered in the name of “Cede & Co.”, the registration name of the Depository Trust Company, which entities act as nominees for many brokerage firms. Common shares held by brokers, agents, trustees or other intermediaries can only be voted by those brokers, agents, trustees or other intermediaries in accordance with instructions received from Beneficial Shareholders. As a result, Beneficial Shareholders should carefully review the voting instructions provided by their intermediary with this Proxy Statement and ensure they communicate how they would like their common shares voted in accordance with those instructions.

Beneficial Shareholders who have not objected to their intermediary disclosing certain ownership information about themselves to the Company are referred to as “NOBOs”. Those Beneficial Shareholders who have objected to their intermediary disclosing ownership information about themselves to the Company are referred to as “OBOs”. In accordance with National Instrument 54-101 of the Canadian Securities Administrators and Rule 14a-13(a) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company has distributed copies of the Notice of Meeting, this Proxy Statement and the form of proxy to the clearing agencies and intermediaries for onward distribution to Beneficial Shareholders.

Intermediaries will frequently use service companies to forward the Meeting materials to Beneficial Shareholders. Generally, a Beneficial Shareholder who has not waived the right to receive Meeting materials will either:

VIFs should be completed and returned in accordance with the specific instructions noted on the VIF. The purpose of this procedure is to permit Beneficial Shareholders to direct the voting of the common shares which they beneficially own.

Please return your voting instructions as specified in the VIF. Beneficial Shareholders should carefully follow the instructions set out in the VIF, including those regarding when and where the VIF is to be delivered.

Although Beneficial Shareholders may not be recognized directly at the Meeting for the purpose of voting common shares registered in the name of their broker, agent, trustee or other intermediary, a Beneficial Shareholder may attend the Meeting as a proxyholder for a registered shareholder and vote common shares in that capacity. Beneficial Shareholders who wish to attend the Meeting or have someone else attend on their behalf, and indirectly vote their common shares as proxyholder for the registered shareholder should contact their broker, agent, trustee or other intermediary well in advance of the Meeting to determine the steps necessary to permit them to indirectly vote their common shares as a proxyholder.

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The Meeting materials are being sent to both registered shareholders and Beneficial Shareholders of common shares. If you are a Beneficial Shareholder, and the Company or its agent has sent these materials to you, your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the intermediary on your behalf.

Who is soliciting proxies and who pays the cost of soliciting proxies?

This Proxy Statement is furnished in connection with the solicitation of proxies by the management of the Company for use at the Meeting. The solicitation will be conducted by mail and may be supplemented by telephone or other personal contact to be made without special compensation by officers and employees of the Company. Additionally, the Company has retained The Altman Group, Inc., a proxy solicitation firm. The cost of solicitation, which is not determinable at present, but in any event is not material to the Company, will be borne by the Company.

How will proxies be voted?

The persons named as proxyholders in the enclosed form of proxy are directors or officers of the Company.

A registered shareholder may direct the manner in which his or her common shares are to be voted or withheld from voting by marking the form of proxy accordingly. The proxyholders designated in the enclosed form of proxy will vote or withhold from voting the common shares represented by proxy in accordance with the instructions of the registered shareholder on any ballot that may be called for, and if the registered shareholder specifies a choice with respect to any matter to be acted upon, the common shares will be voted accordingly.

Where no instruction is specified by a registered shareholder on a resolution shown on the form of proxy, or where the instructions are uncertain, the proxyholders designated in the enclosed form of proxy will vote the common shares “FOR” the resolution.

May I revoke my proxy?

Any registered shareholder returning the enclosed form of proxy may revoke the same at any time insofar as it has not been exercised. In addition to revocation in any other manner permitted by law, a proxy may be revoked by instrument in writing executed by the registered shareholder or by his or her attorney authorized in writing or, if the registered shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized, and deposited at the registered office of the Company, at any time up to and including the last business day preceding the day of the Meeting or with the Chair of the Meeting prior to the commencement of the Meeting. The registered office of the Company is 1200—200 Burrard Street, Vancouver, British Columbia, Canada V7X 1T2.

How many votes may be cast at the Meeting?

Based on the number of common shares outstanding on the record date, up to [•] votes may be cast on any matter.

How many common shares must be represented at the Meeting to constitute a “quorum”?

Pursuant to Rule 4350(a)(1) of the NASDAQ Stock Market, Inc. Marketplace Rules, the Company previously relied on an exemption from Rule 4350(f) of the Marketplace Rules, requiring that each NASDAQ- quoted company have in place a minimum quorum requirement for shareholder meetings of 33 ¹/3% of the outstanding shares of the company’s voting common stock. The Company’s Articles currently provide that a quorum is met if two persons are present who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the Meeting. At the Company’s 2007 annual meeting of shareholders, holders of 60.13% of the common shares were present or represented by proxy at the meeting.

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As of March 31, 2008, the Company ceased to qualify as a foreign private issuer as a result of changes in the location of the holders of a majority of its outstanding common shares. At the Meeting, the Company will impose a 33 ¹/3% quorum requirement and will request that shareholders approve the Quorum Resolution to amend the Company’s articles to comply with the NASDAQ’s quorum requirements thereafter.

Abstentions will be counted as present for the purposes of determining the presence of quorum for purposes of the matters to be voted on, but will not be counted as votes cast. Broker non-votes (shares held by a broker or nominee as to which the broker or nominee does not have the authority to vote on a particular matter) will not be counted as present for purposes of determining the presence of a quorum for purposes of the matters to be voted on and will not be voted. Accordingly, neither abstentions nor broker non-votes will have any effect on the outcome of the votes on the matters to be acted upon at the Meeting.

How many votes do I have?

Every registered shareholder who is present in person and entitled to vote at the Meeting, shall have one vote on a show of hands, and on a poll shall have one vote for each common share of which the shareholder is the registered holder, and such shareholder may exercise such vote either in person or by proxy.

How many votes are required for each of the proposals?

Proposal 1: Authorization of the Transaction

The authorization of the Transaction requires the affirmative vote of 75% of the votes cast at the Meeting on this Proposal.

Proposal 2: Election of Directors

The size of the Board of Directors must be fixed, and directors must be elected, by an affirmative vote of a simple majority of the votes cast at the Meeting on this Proposal.

Proposal 3: Appointment of Auditors

The appointment of the auditors for the ensuing year and the authorization of the directors to fix the remuneration to be paid to the auditors requires the affirmative vote of a simple majority of the votes cast at the Meeting on this Proposal.

Proposal 4: Reconfirmation of the Shareholder Rights Plan

Reconfirmation of the Company’s Shareholder Rights Plan with minor technical amendments requires the affirmative vote of a simple majority of the votes cast at the Meeting on this Proposal.

Proposal 5: Amendment of Articles

The amendment of the Company’s articles to increase the quorum for meetings of shareholders to comply with NASDAQ’s quorum requirements requires the affirmative vote of 75% of the votes cast at the Meeting on this Proposal.

How does the Board of Directors recommend I vote?

The Board of Directors recommends you vote “FOR” each of the proposals.

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What are the anticipated benefits of the Transaction?

The Board of Directors anticipates that the Company will obtain a number of important benefits from the Transaction, including:

Has the Company received a fairness opinion in connection with the Transaction?

The Special Committee received an opinion from its financial advisor, Merrill Lynch Canada Inc., to the effect that, as of July 6, 2008 (the date as of which such opinion was rendered) and based on and subject to the matters described in its opinion, the cash consideration to be received by API pursuant to the issuance of the Convertible Notes was fair, from a financial point of view, to the Company. This opinion is attached as Appendix D to this Proxy Statement.

Merrill Lynch Canada Inc. provided its opinion for the information and assistance of the Special Committee in connection with its consideration of the Transaction, and the opinion of Merrill Lynch Canada Inc. is not a recommendation as to how any shareholder should vote or act with respect to any matter relating to the issuance of the Convertible Notes or any other aspect of the Transaction. We encourage you to read the opinion and the section entitled “THE TRANSACTION—Opinion of the Special Committee’s Financial Advisor” carefully and in their entirety.

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What are the consequences of the Transaction failing to receive shareholder approval?

If the shareholders of the Company do not approve the Transaction Resolution by the affirmative vote of 75% of the votes cast at the Meeting, the Transaction will not be consummated and the Company will not receive any of the anticipated benefits described in the section of this Proxy Statement entitled “THE TRANSACTION—The Company’s Reasons for the Transaction”. Additionally, the Tender Offer will not be consummated and $325 million aggregate principal amount of the 2013 Notes and $250 million aggregate principal amount of the 2014 Notes would remain outstanding, which would continue to leave a large cash interest burden on the Company ($52 million in 2007 and $12 million in the first quarter of 2008).

As described in the section of this Proxy Statement entitled “THE TRANSACTION—Background to the Transaction”, the Company evaluated a number of strategic and financial alternatives to the Transaction and determined that the Transaction was in the best interest of shareholders. Therefore, if the Transaction fails to receive the required shareholder approval, the Company would be forced to evaluate other strategic or financial transactions that management believes may generate less shareholder value than that provided under the Transaction. Whether we would be able to consummate any such alternative transaction on favorable terms, if at all, is uncertain. In addition, regardless of whether any such alternative transaction is consummated, it may be necessary for us to reduce certain expenditures, including investments in research and development and sales and marketing, that will impact both short- and long-term growth potential of our business. If, after the consummation of an alternative transaction and/or expenditure reduction noted above, for any reason we are unable to meet our obligations under the Existing Notes, a transaction with the holders of our Existing Notes may be necessary. However, if we were to pursue debt reduction alternatives directly with the holders of our Existing Notes (through an exchange offer or otherwise), we may not be able to complete such a transaction, if at all, on terms favorable to our shareholders.

In the event that shareholders of the Company do not approve the Transaction Resolution, (i) the Company would also be required to pay a commitment fee to the Investors in the amount of $3 million, plus expenses of the Investors up to an additional $3 million paid pursuant to the Note Purchase Agreement and (ii) if the Company agrees to an alternative transaction (as defined in the Note Purchase Agreement) within 12 months of termination of the Note Purchase Agreement, the Company would be required to pay $10 million plus expenses of the Investors up to an additional $4 million (less any commitment fee payable under clause (i)) at or prior to the time of agreeing to such alternative transaction. See the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Note Purchase Agreement—Fees and Expenses”.

What are the rights of shareholders who exercise dissent rights?

Shareholders of the Company will be entitled to exercise dissent rights with respect to the Transaction Resolution in accordance with the dissent rights in Sections 237 to 247 of the Business Corporations Act (British Columbia) (the “BCABC”). Shareholders who validly exercise their dissent rights and do not withdraw their dissent will be entitled to receive the “fair value” of their common shares determined in accordance with Sections 237 to 247 of the BCABC as at the day before the Transaction Resolution is adopted by shareholders. Unless this condition is waived by the Company and the Investors, the Transaction will not be consummated if more than 2.5% of the Company’s shares become dissenting shares through the exercise of the dissent rights described above. See the section of this Proxy Statement entitled “THE TRANSACTION—Dissenting Shareholders’ Rights” for a more detailed discussion.

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VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

The authorized capital of the Company consists of 250,000,000 shares without par value divided into 200,000,000 common shares and 50,000,000 Class I Preference shares.

As of [—], 2008, the record date, there were 85,121,983 common shares and no Class I Preference shares issued and outstanding.

Holders of common shares as at [—], 2008 are entitled to receive notice of the meeting of shareholders of the Company and to attend and vote thereat, but the failure of any shareholder to receive notice of the Meeting does not deprive the shareholder of the right to vote at the Meeting. Every shareholder who is present in person and entitled to vote at the Meeting shall have one vote on a show of hands, and on a poll shall have one vote for each common share of which the shareholder is the registered holder as at [— ], 2008, and such shareholder may exercise such vote either in person or by proxy. Accordingly, holders of common shares are the only class of the Company’s securities entitled to vote at the Meeting and are entitled to a total of [—] votes.

Beneficial Owners of More than Five Percent

As at [—], 2008, to the knowledge of the directors and executive officers of the Company, no person or group beneficially owns, directly or indirectly, or exercises control or direction over, greater than 5% of the voting rights attached to any class of voting securities of the Company other than the following:

NOTE:

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Beneficial Ownership of Directors and Named Executive Officers

As at [—], 2008, the number of common shares beneficially owned by each director and Named Executive Officer (defined below) of the Company, or over which each director and Named Executive Officer exercises control or direction, directly or indirectly, is set out in the following table:

NOTES:

As at [—], 2008, directors and executive officers of the Company beneficially owned or exercised control or direction over, directly or indirectly, 2,351,372 common shares representing approximately 2.76% of the outstanding common shares.

Section 16(a) Beneficial Ownership Reporting Compliance

As a result of the Company’s status as a “foreign private issuer”, none of our executive officers or directors was required to file reports under Section 16(a) of the Exchange Act at any point during the fiscal year ended December 31, 2007. As of March 31, 2008, the Company ceased to qualify as a foreign private issuer as a result of changes in the location of holders of a majority of its outstanding common shares.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Statements contained in this Proxy Statement that are not based on historical fact, including without limitation statements containing the words “believes”, “may”, “plans”, “will”, “estimate”, “continue”, “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 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 the second half of 2008 and beyond, our strategies or future actions, our targets, expectations for our financial condition and the results of, or outlook for, our operations, research, development, product and drug development and our plans and anticipated effects of the Transaction. 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 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: the inability to consummate the Transaction or that the Transaction will not provide the anticipated benefits described in this Proxy Statement; 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; 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 approval of our technology and products; the requirement for substantial funding to conduct research and development and to expand manufacturing and commercialization activities or consummate acquisitions; and any other factors that may affect performance. In addition, our business is subject to certain operating risks that may cause the actual results expressed or implied by the forward-looking statements in this Proxy Statement 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 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 continued availability of capital to finance our activities; and any other factors referenced in our other filings with the SEC. For a more thorough discussion of the risks associated with our business, see the section of this Proxy Statement entitled “RISK FACTORS” and the “Risk Factors” section in our annual report for the year ended December 31, 2007 filed with the SEC on Form 40-F and our quarterly report for the three months ended March 31, 2008 filed with the SEC on Form 10-Q.

Given these uncertainties, assumptions and risk factors, readers 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 Proxy Statement to reflect future results, events or developments.

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RISK FACTORS

In addition to the other information included or incorporated by reference in this Proxy Statement, you should carefully consider the matters described below relating to the Transaction in deciding whether to vote for approval of proposals presented in this Proxy Statement. Additional risks and uncertainties not presently known to the Company or that are not currently believed to be material, if they occur, also may adversely affect the Transaction and results of operations of the Company following the Transaction. Additional risk factors relating to our business can be found in our Annual Report on Form 40-F for the year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.

We will depend on our remaining cash on hand, royalty revenue related to the TAXUS coronary stent system and potential royalty and other income from certain other uses of paclitaxel and proceeds generated from future sales of shares of API common stock to pay interest and principal on the Existing Notes.

Upon the consummation of the Transaction, our assets will consist solely of shares of API common stock issued to us in connection with the Restructuring, $1 million in cash on hand and the other assets of the Retained Business. Although the majority of our operating expenses (other than intellectual property license fees and expenses to be incurred under the contemplated management services agreement) will also be incurred by API and no longer directly by us, we will continue to be materially dependent upon the royalty streams generated by our remaining wholly owned assets, as well as our ability to consummate future sales of shares of API common stock to make all payments of interest and principal on the Existing Notes when due.

We anticipate that, for the next several years, substantially all of our revenue will be derived from royalty revenues relating to sales of TAXUS paclitaxel-eluting coronary stent systems by our partner 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, the “1997 License Agreement”) 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 year ended December 31, 2007 and the quarter ended March 31, 2008 decreased by 31% and 15%, respectively, from the corresponding prior period, which BSC has attributed to a decline in the number of angioplasty procedures and drug-eluting stent procedures in the U.S. Additionally, on July 2, 2008, Abbott Laboratories announced the approval of its competing XIENCE V stent for use in the U.S., which could further reduce our stent-related royalty revenues. 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 could have a significant impact on our royalty revenue from sales of TAXUS. Additionally, BSC may terminate the 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 of which rights are sublicensed to BSC, terminates.

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 quarter ended March 31, 2008, the average gross royalty rate earned was 7.4% for sales in the U.S. and 7.7% for sales in other countries. The average gross royalty rate earned for the quarter ended March 31, 2007 was 7.7% for sales in the United States and 5.9% for sales in other countries. There is no guarantee that royalty payments under the 1997 License Agreement with BSC will continue, and demand for

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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 license agreement with BSC, in certain jurisdictions.

In the event that our available cash on hand, the royalty streams generated by our remaining wholly owned assets and our ability to consummate future sales of shares of API common stock are not sufficient to enable us to make all payments of interest and principal on the Existing Notes when due, we may be forced to cause API to lend us capital, to declare a cash dividend or to make a distribution of assets. In the event that we caused API to take any such actions, each Investor would have the right to receive an equivalent payment from API (in proportion to the number of shares of API common stock issuable upon conversion of such Investor’s Convertible Notes compared to the number of shares of API common stock owned by the Company) in the form, at such Investor’s election, of a cash distribution, an increase in the principal amount of such Investor’s Convertible Notes or an adjustment to the conversion price of the Convertible Notes. Any such payment to the Investors could have a potentially dilutive effect on our ownership interest in API and could otherwise be adverse to our interests and the interests of our shareholders.

We and our subsidiaries will be required to guarantee the Convertible Notes until such time as API and its subsidiaries are no longer required to guarantee our Existing Notes. In connection with this guarantee, we will be subject to certain restrictions in the operation of our business.

Under the terms of the Note Purchase Agreement, as API’s parent, we are required to guarantee the payment and performance obligations of API under the Convertible Notes until such time as API and its subsidiaries are no longer required to guarantee our payment and other obligations under the Existing Notes. This guarantee will restrict in certain respects actions we would usually be permitted to take in operating our business. These restrictions include:

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These restrictions may prohibit us from taking actions in the future that we consider to be desirable and in the best interests of our shareholders and which may adversely affect the market price of shares of our common stock.

Under the terms of the Convertible Notes, upon a Change of Control of the Company or other specified events, the holders of such Convertible Notes shall have the right to require API to repurchase the Convertible Notes, which may have the effect of deterring a change of control or similar transaction of the Company, which would otherwise be in the best interest of its shareholders.

Under the terms of the Convertible Notes, a “Parent Designated Event” means:

If a Parent Designated Event occurs, then the holders of the Convertible Notes shall have the right to require API to repurchase all or any portion of such Convertible Notes for an amount equal to the greater of (a) 100% of the principal amount of the Convertible Notes to be purchased, and (b) the fair market value (as defined) of the common stock issuable upon conversion of such Convertible Notes. Such provision in the Convertible Notes may tend to deter any takeover or other offer affecting control of the Company, which might otherwise be in the best interest of the shareholders of the Company.

The Investors will be entitled to appoint directors to API’s Board of Directors until such time as the Investors on a combined basis no longer hold Convertible Notes representing at least 7.5% of API’s common stock on an as-converted basis and during such time a majority of the directors appointed by the Investors must approve certain corporate actions that API may consider in the future. The exercise of this discretion may be adverse to the interests of the Company and its shareholders.

Pursuant to the Governance Agreement, upon the closing of the Transaction until the consummation of a Qualified Transaction, the Investors will have the right to appoint three members to API’s Board of Directors. After the consummation of a Qualified Transaction until such time as the Investors on a combined basis no longer hold Convertible Notes representing at least 7.5% of API’s common stock on an as-converted basis, Investors will have the right to appoint at least one director to API’s Board of Directors. Until such time as the Investors no longer have the right to appoint at least one director to API’s Board of Directors, a majority of the directors appointed by the Investors must approve certain corporate actions that API may consider in the future (provided that the approval rights in numbers (7) through (11) below will expire upon the closing date of a Qualified Transaction), including with respect to:

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API and its subsidiaries may take any of the actions identified in numbers (2), (3), (4), (6) or (14) above without the approval of a majority of the directors appointed by the Investors, to the extent that requiring such approval would contravene section 4.08 of the indentures governing the Existing Notes by constituting a consensual encumbrance or restriction on dividends or distributions, loans or advances or transfers (including sales or leases) of assets.

Accordingly, even though the Company will own 100% of the outstanding shares of common stock of API prior to conversion of the Convertible Notes, the Investors will have the ability to exert significant influence over API’s operations with respect to the above matters. Additionally, because the Investors will have the right, prior to the consummation of a Qualified Transaction, to designate three of the seven directors comprising the Board of Directors of API, the Investors will have the right to exert influence with respect to decisions other than those over which they have approval rights. The interests of the Investors may not always be aligned with the interests of the Company or its shareholders, and accordingly, exercise by the Investors of the voting rights described above could be adverse to the interests of the Company and its shareholders. For additional information relating to the control rights over API of the Investors, see the summary of the Governance Agreement in the section of

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this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Governance Agreement”.

Our ownership interest in API will be diluted upon any conversion of the Convertible Notes, including through interest payable in kind on the Convertible Notes. Interest payable in kind will continue to accrue until conversion of the Convertible Notes, and while it does, our ownership interest in API will continue to be diluted.

The Convertible Notes issued to the Investors will be convertible into 50 shares of common stock of API per $1,000 principal amount of the Convertible Notes. At the time of the issuance of the Convertible Notes, the Convertible Notes would be convertible into between approximately 32% and 48% of the outstanding shares of common stock of API on a fully diluted basis (excluding the effect of shares of common stock that may become issuable after the closing of the Transaction). Additionally, because interest on the Convertible Notes is payable in kind at a blended annual rate of 7.75%, accruing daily and payable semiannually, the number of shares of API common stock issuable upon conversion of the Convertible Notes will increase over time until any conversion of the Convertible Notes. See the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Convertible Notes—Interest Rate” for more information.

Interest payable in kind will continue to accrue until the occurrence of a Qualified Transaction, at which time the Convertible Notes will generally immediately convert, or an earlier election by the holders to convert the Convertible Notes (in each case, unless the conversion at such time would violate certain provisions of the indentures governing the Existing Notes, in which case pay-in-kind interest would continue to accrue). In the event that API consummates an initial public offering of shares of its common stock that does not meet the thresholds prescribed in the definition of Qualified Transaction, interest on the Convertible Notes will continue to accrue until such thresholds are met or the holders elect to convert their Convertible Notes (subject to the restrictions of the indentures governing the Existing Notes). Accordingly, even after an IPO of API’s common stock, our ownership interest in API may continue to be diluted, which may have an adverse effect on the market price of our common stock. See the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Convertible Notes—Conversion” for more information.

Upon the consummation of the Transaction, we will depend on API to provide us with certain management, financial, accounting, legal, public relations, human resources and other services related to our ongoing business and financial reporting obligations.

Upon the consummation of the Transaction, all but two of our employees at the time will become employees of API. As described in the section of this Proxy Statement entitled “THE RESTRUCTURING”, we will enter into a management services agreement with API and API Canada pursuant to which it is contemplated that API and API Canada will agree to provide us with certain management, financial, accounting, legal, public relations, human resources and other services related to our ongoing business and financial reporting obligations for a period of at least six months. In the event that API and API Canada elected to terminate the management services agreement, then we would be required to hire employees or contract with a third party to provide such services. If we were forced to do so, we may incur significant expenses beyond the annual management fee contemplated by the management services agreement. Any such incurrence of expenses could reduce our earnings and adversely affect the market price of our common stock.

Upon the occurrence of a Designated Event or a Parent Designated Event, API will be required to offer to repurchase the Convertible Notes from the Investors and if any such offer is accepted, the value of our shares of API common stock could be adversely affected, which in turn could adversely affect the market value of shares of our common stock.

Upon the occurrence of a Designated Event or a Parent Designated Event prior to the consummation of a Qualified Transaction, as each such term is defined in the Convertible Notes, API will be required to offer to

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repurchase the Convertible Notes from the Investors. For the definitions of Designated Event and Parent Designated Event, see the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Convertible Notes”.

Upon the occurrence of a Designated Event prior to the consummation of a Qualified Transaction, defined essentially as a change in control of or the dissolution of API, the repurchase price offered must be an amount equal to 100% of the principal amount of the Convertible Notes to be repurchased, including any increase in the aggregate principal amount of Convertible Notes outstanding due to the accrual of pay-in-kind interest.

Upon the occurrence of a Parent Designated Event prior to the consummation of a Qualified Transaction, defined essentially as a change in control of the Company, the sale by the Company of more than 50% of the shares of API common stock held by it upon the closing of the Transaction and certain other events, the repurchase price offered must be an amount equal to the greater of 100% of the principal amount of the Convertible Notes to be repurchased and the fair market value of the common stock of API issuable upon conversion of the Convertible Notes.

If API is required to repurchase all or a portion of the Convertible Notes, the value of the shares of API common stock owned by the Company could be adversely affected, which in turn could adversely affect the market value of shares of our common stock.

The Investors have the right to cause a sale of API or an initial public offering of API’s common stock after the fourth anniversary of the closing date of the Transaction. Any such sale of API or initial public offering of API’s common stock could be adverse to the interests of the Company and its shareholders.

Pursuant to the Governance Agreement, if a Qualified Transaction has not been effected prior to the fourth anniversary of the closing, Investors holding a majority of shares held by all Investors have the right to initiate and effect a Sale of API or an initial public offering of API’s common stock by giving notice to API’s board of directors. “Sale” means any liquidation, dissolution, winding up or sale of API or subsidiary of API (whether by merger, reorganization, stock sale or sale of all or substantially all of the assets, or otherwise, but excluding a reorganization effected solely to change API’s state of incorporation). Any such decision by the Investors to effect a Sale of API or an initial public offering of API’s common stock could be adverse to the interests of the Company and its shareholders. For a description of the rights of the Investors to cause a Sale of API or an initial public offering of API’s common stock, see the section of this Proxy Statement entitled “DESCRIPTION OF THE TRANSACTION AGREEMENTS—Governance Agreement—Rights of Exit”.

Our ability to sell or otherwise transfer the shares of API common stock held by us is subject to certain restrictions and approval rights of the Investors, which could be adverse to the interests of the Company and its shareholders.

Pursuant to the Governance Agreement, our ability to Transfer (as such term is defined in the Governance Agreement) the shares of API common stock held by us is restricted or otherwise subject to the approval of the members of API’s Board of Directors appointed by the Investors (the “Investor Directors”), such approval not to be unreasonably withheld. Notwithstanding such restriction, we are permitted to Transfer up to 49% of the common stock of API held by us on the closing date of the Transaction to a third party (other than a material competitor) in an amount not to exceed the aggregate outstanding principal amount of the Existing Notes plus any fees and expenses associated with the repayment or retirement of such Existing Notes provided that we use any and all net proceeds received in connection with any such Transfer to repay or otherwise retire the Existing Notes.

The restrictions on our ability to Transfer the shares of API common stock held by us could prevent our Board of Directors from consummating a Transfer of the shares of API common stock held by us and there can be no assurance that the Investor Directors would otherwise consent to any proposed Transfer our shares of API

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common stock notwithstanding the fact that our Board of Directors may have determined that such a Transfer would be in the best interests of our shareholders. Our inability to freely Transfer our shares of API common stock could be detrimental to the interests of the Company and its shareholders. For a description of the circumstances under which we are permitted to Transfer our shares of API common stock without the consent of the Investor Directors, see the section of this Proxy Statement entitled “DESCRIPTION OF THE TRANSACTION AGREEMENTS—Governance Agreement—Transfer Restrictions”.

Under the Governance Agreement, the Investors will have the right to tag-along with certain sales by the Company of its shares of common stock in API.

In general, and subject to our ability to Transfer up to 49% of our shares of API common stock as described in the preceding risk factor, such tag-along right will apply if the Company at any time proposes to transfer any shares of API common stock to a third party, other than in a registered public offering pursuant to a registration rights agreement between the Company and API or in connection with an initial public offering. The existence of the tag-along right for the benefit of the Investors may make it more difficult for the Company to reduce or liquidate its ownership position in API if that should become necessary or desirable in order to provide funds for the Company’s own needs. The Investors will have the right to participate proportionately in such a transfer and therefore may reduce the ability of the Company to sell the full number of shares of API common stock that it wishes to sell. For a description of the rights of the Investors to tag-along with certain sales by the Company of its shares of common stock of API, see the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Governance Agreement—Tag-Along Rights”.

Under the Note Purchase Agreement, the Company, along with API, may be liable to the Investors for losses caused by breaches of certain representations and warranties.

Under the Note Purchase Agreement, the Company will share responsibility with API for breaches of certain representations and warranties made to the Investors. These include, but are not limited to, the more important representations and warranties relating to intellectual property, title to properties, financial statements, taxes, full disclosures and liabilities. See “DESCRIPTION OF TRANSACTION AGREEMENTS—Note Purchase Agreement”. As a result, if there is a failure to make the correct disclosure of exceptions to such representations and warranties, the Company will be responsible along with API for losses suffered by Investors caused by such failure.

Transactions between the Company and its subsidiaries and API and its subsidiaries are subject to certain restrictions and approval rights of the Investors. Our inability to engage in certain transactions with API and its subsidiaries could be adverse to the interests of the Company and its shareholders.

The ability of the Company and its subsidiaries, on the one hand, and API and its subsidiaries, on the other hand, to engage in certain transactions is limited by the terms of the Convertible Notes and the Governance Agreement. Pursuant to the terms of the Convertible Notes, API and its subsidiaries are generally prohibited from engaging in any Affiliate Transaction (as defined in the Convertible Notes) unless such transaction is on terms that are no less favorable to API or its subsidiaries than would have been obtained in a comparable arms’ length transaction. Additionally, in the event that API proposes to engage in an Affiliate Transaction involving aggregate consideration in excess of $10 million, approval of a majority of the disinterested directors of API is required and, in the case of any proposed Affiliate Transaction involving aggregate consideration in excess of $25 million, a fairness opinion must be obtained. Pursuant to the terms of the Governance Agreement, any Affiliate Transaction (as such term is defined in the Governance Agreement) between API and its subsidiaries and the Company and its subsidiaries is subject to the approval of the Investor Directors. Additionally, the Investor Directors have the right to control the exercise of any rights and the conduct of any proceedings in respect of API and its subsidiaries against the Company and its subsidiaries under the Transaction Agreements and the Restructuring Agreements.

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Our inability to engage in related party transactions with API and its subsidiaries and our inability to control the exercise of rights or the conduct of proceedings by API under the Transaction Agreements and the Restructuring Agreements could be adverse to our interests or the interests of our shareholders.

Some of our directors and executive officers have interests in the Transaction that may differ from the interests of the Company’s shareholders, including the receipt of financial and other benefits.

Certain of our directors and executive officers will become directors and executive officers of API, as described in the section of this Proxy Statement entitled “THE TRANSACTION—Directors and Management of API Following the Transaction”. In connection with the consummation of the Transaction, certain members of our management will enter into transaction award and retention agreements with the Company, which provide incentives for these individuals to remain employed with the Company until the occurrence of the payment events (which are the latest to occur of 18 months from the date of closing of the Transaction and the repayment of the Existing Notes). Additionally, certain members of our management will be granted stock appreciation rights under the API 2008 Incentive Plan. For additional information, see the section of this Proxy Statement entitled “THE TRANSACTION—Interest of the Company’s Executive Officers and Directors in the Transaction”.

A factor having an adverse impact on API’s business, financial condition or results could adversely impact the value of the shares of API’s common stock owned by us, which in turn could adversely affect the market value of shares of our common stock.

Because the shares of common stock of API owned by us constitute a large portion of our assets, the market value of shares of our common stock is largely dependent on the value of these shares. API’s business, financial condition and results are subject to a variety of risks, including but not limited to (generally described in more detail in our Annual Report on Form 40-F for the year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008):

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We cannot be certain that the Tender Offer will be successful and if the Tender Offer is not successful we will not be able to consummate the Transaction.

As described in this Proxy Statement, we have commenced a Tender Offer to repurchase a portion of the 2013 Notes and/or the 2014 Notes. Pursuant to the Tender Offer, we are offering to purchase, for cash, an amount of Existing Notes that will result in an aggregate purchase price (including Accrued Interest and the Early Tender Premiums, each as defined in the section of this Proxy Statement entitled “DESCRIPTION OF THE TENDER OFFER”) of at least $165.0 million. The consummation of the Tender Offer is subject to the satisfaction of certain conditions, including the tender of an amount of 2013 Notes that will result in an aggregate purchase price (including Accrued Interest and Early Tender Premiums) of at least $85.8 million and the tender of an amount of Existing Notes that will result in an aggregate purchase price (including Accrued Interest and Early Tender Premiums) of $165.0 million. There can be no guarantee that holders of the Existing Notes will tender a sufficient amount of Existing Notes to satisfy the condition described above. If we are unable to consummate the

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Tender Offer and are, therefore, unable to consummate the Transaction, the consequences to the Company and its shareholders would be the same as those described in the risk factor contained in this Proxy Statement under the heading “—We have incurred and will incur certain costs in connection with the Transaction, whether or not we complete it. In the event that we complete the Transaction, we will incur substantial additional costs which will reduce the net proceeds available to us from the sale of the Convertible Notes.” and the section of this Proxy Statement entitled “QUESTIONS AND ANSWERS—What are the consequences of the Transaction failing to receive shareholder approval?”.

Interest expense on the Convertible Notes may not be deductible for U.S. federal income tax purposes.

Under Section 163(l) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), our deductions for interest on the Convertible Notes would be disallowed if they are found to be “disqualified debt instruments”. Disqualified debt instruments are debt instruments:

For these purposes, principal or interest on a debt instrument is treated as required to be paid in or converted into issuer equity if the payment or conversion may be required at the option of the holder and that option is substantially certain to be exercised. The application of Section 163(l) of the Code to the Convertible Notes is not certain. Furthermore, whether an instrument, such as the Convertible Notes, will be respected as indebtedness for U.S. federal income tax purposes generally is determined under all of the facts and circumstances and, if not, interest on the Convertible Notes would not be deductible for such purposes. Accordingly, no assurance can be given that interest on the Convertible Notes will be deductible for such purposes.

We have incurred and will incur certain costs in connection with the Transaction, whether or not we complete it. In the event that we complete the Transaction, we will incur substantial additional costs which will reduce the net proceeds available to us from the sale of the Convertible Notes.

We have incurred and expect to incur certain costs related to the Transaction. These expenses include financial advisory, legal and accounting fees and expenses, filing fees, proxy solicitation fees, public relations expenses, printing expenses, the Investors’ fees and expenses that we may be obligated to reimburse and other related charges. We may also incur additional unanticipated expenses in connection with the transaction. A significant portion of the costs related to the Transaction, such as legal and accounting fees and similar Investor expenses, will be incurred regardless of whether the Transaction is completed. Additionally, we will incur substantial further costs upon the closing of the Transaction based on the terms of our fee arrangements with our financial advisors, including Goldman, Sachs & Co. and other representatives. These expenses reduce the net proceeds available to repurchase Existing Notes upon the closing of the Transaction. If we fail to consummate the Transaction but later enter into an alternative transaction, we may be required under the terms of our existing agreements with certain of our advisors to pay fees to such advisors, whether or not such advisors participate in such alternative transaction. See the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS—Note Purchase Agreement—Fees and Expenses”.

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THE TRANSACTION

Background to the Transaction

Prior to 2006, we derived the majority of our revenue from royalties received from sales of TAXUS paclitaxel-eluting coronary stent systems by our partner BSC. Coronary stent systems are medical devices which are used to re-open the arteries of patients whose blood vessels to the heart have become narrower due to coronary artery disease. Our scientific team discovered, developed and patented the use of the drug paclitaxel together with stents to treat coronary artery disease, and we originally licensed our technology in this scientific area to BSC and Cook in 1997.

On March 23, 2006, we completed the acquisition of American Medical Instruments Holdings, Inc. (“AMI”). The AMI acquisition brought several important benefits to the Company, including a diverse product line of single-use medical device products and product components, and significant medical device manufacturing capabilities and commercial sales infrastructure. The AMI acquisition also represented a strategic step to diversify our business and reduce our dependence upon royalty revenue received from BSC relating to sales of TAXUS paclitaxel-eluting coronary stent systems, and established infrastructure enabling us to manufacture and commercialize certain of our product candidates under development without having to depend entirely upon corporate partners. We financed the AMI acquisition with a combination of cash on hand and through the issuance of $350 million of senior secured credit facilities and $250 million of 7.75% Senior Subordinated Notes due 2014 (the “2014 Notes”). For the year ended December 31, 2005 (the fiscal year ended immediately prior to the AMI acquisition), our royalty revenue derived from sales of TAXUS by BSC was $184 million.

Under our initial financing strategy, we anticipated we would reduce our $350 million senior secured credit facilities by between $20 million and $25 million per quarter for approximately eight to ten quarters subsequent to the acquisition’s close. Our objective was to utilize excess cash flows derived from royalty revenue received from BSC, which in the quarter ended March 31, 2006 was $39 million, to reduce our senior secured credit facilities approximately by those amounts, up until the time additional competition in the drug-eluting stent market in the United States was expected to potentially impact the market share of TAXUS, and thereby our revenue derived from BSC sales. In the first quarter following the AMI acquisition, we reduced our senior secured credit facilities by $25 million as planned, to a total of $325 million outstanding.

Beginning in approximately the third quarter of 2006, several developments in the market for drug-eluting stents began to negatively impact BSC’s sales of TAXUS and our royalty revenue. Specifically, during the second and third quarter of 2006, certain clinical data was released that indicated drug-eluting stents might lead to greater risk of a certain complication, known as late stent thrombosis, in patients receiving a drug-eluting stent as compared to patients that had received a non-drug-eluting, or bare metal, coronary stent. In addition, in approximately the same time frame, certain medical studies were released that indicated that alternative medical treatments, including drug therapy or lifestyle management, may be just as effective in preventing heart attack or death in coronary artery disease patients as treating these patients with balloon angioplasty or coronary stents. While scientifically not conclusive, the significant media attention received and the discussion generated among physicians and patients by these studies had a rapid and significant negative impact on BSC’s TAXUS sales levels. In the second quarter of 2006, BSC’s total sales of TAXUS coronary stent systems were $647 million. By the fourth quarter of 2006, BSC’s TAXUS sales had declined to $506 million, a decline of $141 million per quarter in only two quarterly periods. In the first quarter ended March 31, 2008, BSC’s sales of drug-eluting stents totaled $428 million, or $219 million below their peak level recorded during 2006.

The rapid decline in BSC’s TAXUS sales had a concurrent rapid negative impact on our royalty revenue, and hence our level of excess cash flow available to further reduce our senior secured credit facilities. As a result, in December 2006, we refinanced our senior secured credit facilities with an issuance of Senior Floating Rate Notes due 2013 (the “2013 Notes”). The 2013 Notes and the 2014 Notes remain outstanding today, accounting

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for our total debt outstanding of $575 million, or $25 million less than the original total principal amount borrowed in March of 2006.

In December 2006, we implemented processes to facilitate more frequent interim management and Board reviews of our business, strategic plans and budgets. Our objective was to allow time to evaluate additional financial and strategic alternatives as necessary, should our royalties derived from sales of TAXUS not stabilize, or should our operating businesses not indicate growth rapid enough to offset any future anticipated declines in royalty revenue, with the expectation that BSC would face added competition in the drug-eluting stent market from new products to be launched from Medtronic, Inc. (“Medtronic”) and Abbott Laboratories, Inc. (“Abbott”) in 2007 and 2008.

While in 2007 our operating initiatives continued to progress, the competitive positioning of TAXUS as compared to new drug-eluting stent market entrants became increasingly difficult to accurately forecast. The situation was further complicated by BSC’s decision in September 2006 to co-market the competitive Abbott drug-eluting stent product (under their own brand name of Promus™), making it difficult to forecast the amount of internal sales and marketing effort our partner BSC would apply to TAXUS in the future as compared to Promus, and the potential impact on our royalty revenue. Furthermore, regulatory problems BSC had encountered with its manufacturing activities delayed the likely U.S. launch date of BSC’s most advanced and competitive paclitaxel-eluting stent offering, the Liberté^®, such that it was uncertain when the Liberté might be available to compete against the new market entrants. In addition, while our management and Board of Directors continued to be optimistic about our various new product opportunities, the early stages of selected new product launches and the uncertain outcomes and timing of our new product development initiatives (as is typical in our industry) made forecasting of the exact timing of future product revenues subject to variability. Management and the Board of Directors also agreed that progress in our various operating and research and development initiatives may in any case never be adequately or fully realized for our shareholders, given the substantial investor focus on the drug-eluting stent market and the impact of TAXUS and BSC’s market position on the Company and its share price.

Given the above factors, it was determined in the fourth quarter of 2007 that we would begin a review and discussion of financial and strategic alternatives that could reduce risk related to the Company’s capital structure and that could potentially capture value for shareholders, with a view to our original March 2006 goal of achieving $200 million or more of debt reduction in advance of drug-eluting stent product launches from Abbott, BSC and Medtronic that had the potential to negatively impact BSC’s sales of TAXUS.

During the fourth quarter of 2007 and in early 2008, management worked with and interviewed various financial and legal advisors, and analyzed a broad range of financial and strategic alternatives. On January 18, 2008, a meeting was held with the Board of Directors to discuss the preliminary findings of those discussions, identify potential alternatives and evaluate and discuss the hiring of financial advisors.

On March 6, 2008, management entered into an engagement letter with Goldman, Sachs & Co. (“Goldman Sachs”) to assist in preparing for potential proposals relating to a sale of the Company, and on March 18, 2008, management entered into a second engagement letter with Goldman Sachs to assist in analyzing and considering various financial alternatives available with respect to a restructuring or similar transaction. Sullivan & Cromwell LLP and Borden Ladner Gervais LLP were engaged as the Company’s U.S. and Canadian legal advisors, respectively.

On March 5 and March 6, 2008, management and the Board of Directors held meetings during which the Company’s near-term and long-term financial and strategic plans were reviewed. In addition, management, Goldman Sachs and the Company’s legal advisors led a discussion of various strategic and financial alternatives for the Board of Directors. The range of alternatives reviewed or discussed included, among others: (i) pursuing the Company’s strategic plan as currently configured, with the capital structure as is; (ii) a sale of the Company to a strategic or financial buyer, or a merger with a strategic partner; (iii) a sale or sales of certain assets or

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businesses of the Company, including but not limited to a sale, monetization or securitization of future expected royalties derived from BSC’s sales of TAXUS; (iv) pursuing a convertible debt or common equity offering or other similar financing; (v) pursuing an exchange offer, debt for equity exchange or similar debt restructuring transaction; and (vi) pursuing an initial public offering, spin off, split off or similar privately financed transaction for certain of the Company’s businesses.

In reviewing the various alternatives, management, the Board and its advisors considered, among other factors: (i) the various risks and opportunities associated with each alternative; (ii) the impact any alternative might have on the strategic and budget flexibility that could be sustained at significantly lower levels of TAXUS royalty revenue and on risk of financial distress (i.e., a potential event of default under the Company’s debt obligations or other event requiring significant cost reductions) generally; (iii) the capital structures and competitive positions of comparable mid-sized companies in the life sciences sector; (iv) the amount of proceeds that could be raised or debt that could be reduced under each alternative; (v) the potential shareholder value implications of each alternative; (vi) the impact that current capital market conditions might have on success, including the condition of the market for initial public offerings; (vii) the certainty and speed of completing any process; (viii) important competitive or employee issues that may arise, either in general or through the conducting of due diligence necessary with respect to any process; (ix) any legal, fiduciary, confidentiality or related party transaction issues that might arise with any transaction; and (x) the view that much of the potential of the Company’s operating business and new product initiatives had yet to be fully realized. Upon evaluating the various alternatives and concluding discussions, the Board of Directors and management elected to pursue and evaluate private financing or private sale alternatives relating to certain of its operating businesses.

In March of 2008, with guidance provided by the Board of Directors and management, Goldman Sachs and the Company contacted approximately 26 financial sponsors or other prospective investors regarding a potential investment in API. Of the approximately 26 firms contacted, 13 entered into confidentiality agreements with the Company and were granted access to electronic diligence materials, and 12 of these subsequently met with management to evaluate the business of API and to discuss details of their potential investments in API. These 13 firms were instructed by Goldman Sachs to provide preliminary written first round proposals relating to an investment during the week of April 14.

On April 17, 2008, Goldman Sachs presented a summary to the Board of Directors of first round proposals received from eight of the 13 firms, consisting of four bids representing “change of control” transactions (acquisitions of greater than a 50% interest in API), one bid for a minority stake in API, two bids from venture capital firms indicating a desire to participate in any control or minority transaction ultimately consummated, and one bid to acquire a portfolio of product lines. These initial proposals valued the equity of API in the range of $350 million to $600 million. Ares at this stage provided an oral bid on April 17, indicating a proposed investment in API of $300 million, and valued the equity of API at $550 million to $600 million (implying ownership of 50% to 55% at close). The remaining five bidders who had entered into confidentiality agreements with the Company did not present proposals. Upon concluding their review, management and the Board of Directors determined to pursue further discussions with six of the eight parties that submitted first round proposals.

In response to the proposals presented at the April 17 meeting, which contemplated transactions that could result in majority control of API at closing, on May 7, 2008, the Company’s Board of Directors formed a Special Committee, consisting of Edward M. Brown (Chair), David T. Howard and Arthur H. Willms, all of whom are independent members of the Company’s Board of Directors under the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and the NASDAQ. The Special Committee retained Merrill Lynch Canada Inc. (“Merrill Lynch”) as its financial advisor to provide financial advisory and investment banking services, including, among other things, rendering an opinion regarding the fairness to the Company of a transaction involving a third-party investment in API. The Special Committee also retained Lawson Lundell LLP as its legal advisors.

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As discussed, four of the first round proposals received from potential financial sponsors proposed an acquisition of all or a majority of API’s common stock. The Board of Directors ultimately determined, in consultation with its financial advisors, that the proceeds of such a transaction might not be sufficient to repay all of the Existing Notes. In addition, certain of these proposals contemplated implementing a leveraged capital structure at API, increasing execution risk given uncertainties in the debt capital markets. Upon further discussion of the various proposals, the Board of Directors expressed a preference for an unleveraged transaction, and for transactions that did not contemplate an immediate change in control of API, within all other factors considered. On May 7, 2008, the Board of Directors held a meeting with management and the Company’s advisors to deliver its assessment and guidance as to next steps. The Special Committee subsequently held 15 separate meetings in connection with the evaluation of the Transaction and related matters over the period to July 6, 2008. For a more detailed discussion of the Special Committee’s formation and deliberative process, see the section of this Proxy Statement entitled “THE TRANSACTION—Deliberations and Recommendation of the Special Committee”.

During the week of May 5, 2008, the Company’s management conducted extensive in-person due diligence meetings with the six remaining parties selected at the previous Board meeting. On May 16, 2008, Goldman Sachs provided the firms who submitted first round proposals with a further process letter requesting that proposals for an unleveraged minority equity ownership interest in API be submitted on June 3, 2008.

On June 3, 2008, the Company received revised proposals from two potential financial sponsors (one being Ares), and one venture capital firm (New Leaf). At this time, Ares’ bid proposed an investment of $150 million to $300 million in convertible notes of API, assuming $100 million in cash and zero debt, including a payment-in-kind (“PIK”) interest rate of 8.0%, and valuing the equity of API at $615 million (implying ownership of API at close of 24.4% to 48.8%). The other bid, which was received from another large private equity firm, was for an investment of $275 million in convertible notes of API, including a PIK interest rate of 12.0%, and valuing the equity of API at $550 million (implying ownership of API of 49.9% at close). New Leaf’s proposal was for a joint investment with a larger investor, and indicated a contribution from New Leaf of between $30 million and $35 million, and valued the equity of API at $500 million. Ares and the other bidder each expressed a willingness to partner with a venture investor.

On June 6, 2008, the Board of Directors held a meeting with management and the Company’s advisors to review the second round proposals and discuss next steps. Upon concluding the review, it was determined to pursue further negotiations with each of the parties that had submitted proposals on June 3.

Throughout the remainder of June 2008, management and its advisors, with the advice and guidance of the Special Committee and their advisors, held conference calls and meetings with Ares and New Leaf (who had requested permission to submit a joint bid with Ares, which was approved by the Company) and the other bidder to negotiate the final terms and structure of the transaction. Both groups continued their due diligence during this time.

On June 20, 2008, Goldman Sachs provided both potential investors with a further process letter requesting that final proposals for the transaction be submitted on June 24, 2008. A Board meeting was also held on the same day to provide the Board of Directors with an update as to timing and open issues with respect to each potential bidder.

Ares and New Leaf (in a joint bid) and the other bidder submitted updated proposals on June 24, 2008. At this time, the Ares/New Leaf bid (including a post-bid revision), which assumed $75 million in cash and zero debt, was for an investment of $200 million to $285 million, including a PIK interest rate of 7.75%, and valuing the equity of API at $617 million (implying ownership of API at close of 32.4% to 46.2%). The other bid, which assumed $75 million in cash and contained no assumption regarding debt levels at API, was for an investment of $275 million, including a PIK interest rate of 10%, and valuing the equity of API at $600 million (implying 45.8% ownership of API at close).

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On June 26, 2008 the Board of Directors held a meeting with respect to the Transaction, at which its advisors and representatives, the Company’s advisors and representatives of management participated and made presentations and at which the Board of Directors continued to evaluate the proposals received from Ares/New Leaf and the other bidder. Following this meeting, at the direction of the Board of Directors, the Company and its advisors communicated with each bidder to seek further movement on key terms in their respective proposals. As a result of these discussions, Ares increased its bid to offer proceeds of $200 million to $290 million, at the Company’s option, and valued the equity of API at $625 million (implying ownership of 32.0% to 46.4% at close). The other bidder did not adjust its proposed equity valuation, but did indicate that it was willing to decrease its PIK interest rate from 10% to 9%, and proposed improved terms to the Company with respect to the timing and mechanism of conversion of the Convertible Notes into shares of API common stock. Additionally, the Company requested full markups of the Note Purchase Agreement, the Convertible Notes, the Governance Agreement and the Investor Registration Rights Agreement from each bidder. In response, Ares provided full markups of these agreements; while the other bidder responded with a revised term sheet only. New Leaf agreed to accept the terms of the agreements negotiated by Ares in connection with their joint bid.

On June 29, 2008, the Board of Directors held a meeting at which Goldman Sachs and Sullivan & Cromwell LLP made presentations with respect to the relative merits of the final proposals received on June 24, 2008 from the two potential financial sponsors. At that meeting, the Board of Directors resolved that the proposal of Ares/New Leaf represented the proposal most favorable to the Company, with the greatest certainty of reaching signing on the terms as proposed. In connection with this determination, the Company and Ares entered into an agreement granting Ares negotiating exclusivity through Sunday, July 6.

Between June 29 and July 6, the Company and Ares continued to negotiate and finalize the terms of the various agreements relating to the transaction. Ares increased the maximum amount of proceeds made available to the Company to $300 million, at the Company’s option.

On July 6, 2008, the Special Committee held a meeting at which Merrill Lynch presented the Special Committee with its opinion as to the fairness to the Company from a financial point of view of the cash consideration to be received by API from the issuance of the Convertible Notes as part of the Transaction. At the July 6 meeting, the Special Committee resolved to recommend to the Company’s Board of Directors that it approve the Transaction on the terms set forth in the Transaction Agreements and that they recommend that the shareholders of the Company vote in favor of the Transaction Resolution required to be passed to authorize the Transaction on the terms set forth in the Transaction Agreements. At a subsequent meeting on July 6, 2008 of the Board of Directors, the Board unanimously approved the Transaction and determined to recommend to the Company’s shareholders that they vote in favor of the Transaction Resolution approving the Transaction. API, the Company, the Investors and certain subsidiaries of the Company entered into the Note Purchase Agreement on July 6, 2008.

Deliberations and Recommendation of the Special Committee

Organization of the Special Committee

The Board of Directors formed the Special Committee, consisting of Edward M. Brown (Chair), David T. Howard and Arthur H. Willms, on May 7, 2008 to consider potential transactions involving the direct or indirect sale of all or a portion of the business assets and intellectual property relating to the Company’s medical products unit and the Company’s intellectual property relating to its pharmaceutical technologies segment, with the exception of certain royalties and intellectual property relating to paclitaxel-eluting stents. The Special Committee was also directed to report on, among other things, whether there are other strategic alternatives that are in the best interests of the Company and its shareholders and to advise the Board in connection therewith.

The Special Committee engaged Lawson Lundell LLP as its legal counsel. Lawson Lundell provided advice with respect to the organization of the Special Committee, the duties and the responsibilities of its members and the conduct of its affairs.

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Merrill Lynch was engaged as the financial advisor to the Special Committee as of May 14, 2008. The Special Committee, based in part on representations made to it by Merrill Lynch, concluded that Merrill Lynch was independent of management of the Company and the parties that had been identified to the date of its engagement to make a potential investment in the Company or certain businesses of the Company and was qualified to provide the financial advisory services required by the Special Committee. Under the terms of its engagement, Merrill Lynch will be paid a fixed fee of $3 million which is not contingent upon the closing of the Transaction. The Company also agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses and to indemnify Merrill Lynch and certain related parties against certain liabilities and expenses related to its engagement. As at July 3, 2008, Merrill Lynch beneficially owned less than 0.2% of the Company’s securities.

The scope of Merrill Lynch’s engagement included reviewing the process being conducted at the time of its engagement to identify a party or parties to make an investment in the Company or certain businesses of the Company, assisting the Special Committee in evaluating any proposals received in connection with such process and considering such proposals in the context of other potential shareholder value enhancement options available to the Company. In connection with its engagement, Merrill Lynch agreed to provide an opinion regarding the fairness to the Company of any potential transaction to be pursued by it.

Deliberations of the Special Committee

During the period from May 14, 2008 until July 6, 2008, the Special Committee met separately as a committee 15 times. In addition, between meetings, members of the Special Committee held numerous discussions among themselves and with the Special Committee’s financial and legal advisors in connection with potential transactions and other potential strategic alternatives.

Over this period, the Special Committee and its financial and legal advisors were regularly updated by the Company and its legal and financial advisors on the status of the solicitation process being conducted through Goldman Sachs. The Special Committee and its advisors participated in determining the instructions to be provided to potential investors to attempt to ensure that expressions of interest and proposals received from them would meet the objectives intended to be met by the Company in pursuing any strategic alternative of effecting a meaningful improvement in the Company’s leverage and liquidity position and enhancing value to the Company’s shareholders. The Special Committee provided oversight and guidance on the negotiation of the terms of a potential transaction with such investors.

Merrill Lynch assisted the Special Committee in identifying a range of strategic alternatives potentially available to the Company. The alternatives identified by Merrill Lynch included:

Merrill Lynch assisted the Special Committee in evaluating and assessing the Transaction and such alternatives. The Special Committee, with the assistance of Merrill Lynch, considered the Transaction and each alternative in terms of its viability and potential ability to meet the objectives of the Company in pursuing any potential transaction. The Special Committee reviewed and discussed in detail the advice and analysis provided by Merrill Lynch. Representatives of Merrill Lynch answered questions from members of the Special Committee

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regarding the advice and analysis and assisted the Special Committee to form judgments on financial matters with respect to the Transaction and other strategic alternatives.

At the request of the Special Committee, representatives of management and the legal and financial advisors to the Company were present at portions of certain meetings of the Special Committee to assist the Special Committee when requested to do so. Management and the legal and financial advisors to the Company did not participate in the deliberations of the Special Committee.

Once the final Investors were identified, the Transaction Agreements and certain other principal documents required to undertake and implement the Transaction were prepared and negotiated by management and the legal advisors to the Company and the Investors and their counsel, with high-level review by legal counsel to the Special Committee, and were reported upon to the Special Committee and the Board of Directors by management and the legal advisors to the Company.

During the course of its deliberations and in arriving at its recommendation, the Special Committee considered:

The Special Committee considered the potential for the Company to execute its current budget and long range business plan and effect an improvement in its liquidity and leverage position, but noted the potential for its operating and financial results to fall short of the levels required to achieve this. The Special Committee considered the consequent risk of the Company having to pursue options to address leverage and liquidity concerns in the future without the relative flexibility afforded by its current cash position and the potential unavailability of alternatives currently available to it. The Special Committee determined that the Transaction is the best of the strategic alternatives identified and considered by the Special Committee with its financial advisors. The Transaction will result in a significant reduction of the Company’s cash interest obligation. The Company will retain its TAXUS-related royalty stream and will retain, as a result of its initial 52% to 68% equity interest in API (assuming conversion of the Convertible Notes but excluding the effect of shares of common stock that may become issuable under the API 2008 Incentive Plan and shares issuable upon any conversion of additional Convertible Notes issued as a result of the accrual of interest in kind), the ability to participate in the successful continued development of the business to be transferred to API under the Transaction, including the Quill SRS and 5-FU CVC product lines, through an ongoing ownership interest in API and/or any potential initial public offering or sale of API.

The Special Committee concurred in the strategy of management and the financial advisors to the Company to advance discussions with more than one party along parallel tracks to maintain competitive pressure and facilitate negotiating the best transaction terms available to the Company. Such strategy ultimately resulted in the receipt by the Company of proposals from two potential investors, allowing a final negotiation that produced the Transaction representing enhanced value to the Company compared to earlier expressions of interest.

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At the meeting of the Special Committee on July 6, 2008, at which the Transaction was considered, Merrill Lynch rendered its oral opinion (the “Fairness Opinion”), which opinion was later confirmed by delivery of a written opinion as of the same date to the effect that, as of July 6, 2008 and based upon and subject to the various considerations, limitations and assumptions set forth in the Fairness Opinion, the cash consideration to be received by API pursuant to the issuance of the Convertible Notes as part of the Transaction is fair from a financial point of view to the Company.

The full text of the Fairness Opinion is attached as Appendix D to this Proxy Statement. The Fairness Opinion sets forth certain assumptions made, matters considered and limitations on the review undertaken by Merrill Lynch in connection with its preparation. See “—Opinion of the Special Committee’s Financial Advisor”.

The Special Committee also analyzed the proposed structure of the Transaction and noted the following aspects of the Transaction which provide protection to the shareholders of the Company:

In connection with its mandate, the Special Committee considered the potential implementation of compensation arrangements intended to retain and provide appropriate incentives to senior management of the Company through the period of potential uncertainty relating to the review of strategic alternatives available to the Company and the negotiation and implementation of any resulting transaction. The Special Committee engaged the human resources consulting firm Towers Perrin to provide advice in this regard, including with respect to any market precedents for compensation arrangements in comparable or analogous circumstances. The Special Committee determined to recommend to the Board of Directors that the Company adopt a transaction award and retention program totaling $10 million, representing 1.6% of the implied equity value resulting from the Transaction. Consistent with the retention element of the award, it would be payable 18 months after closing or later if certain thresholds are not then met. As a condition of the award, an employee must waive rights under existing employment contracts relative to a change of control on terms acceptable to the Company’s Compensation Committee. Towers Perrin provided advice to the Special Committee to the effect that the proposed program is within the range of competitive market practice, includes design features that enhance the value of the program to the Company and its shareholders, supports the retention of the senior executive team both through and following the Transaction, and rewards participants for successfully completing the Transaction. See “—Interest of the Company’s Executive Officers and Directors in the Transaction—Transaction Award and Retention Program”.

Conclusions and Recommendation of the Special Committee

The Special Committee concluded that the Transaction described in the Transaction Agreements is in the best interests of the Company and is fair to the shareholders of the Company. Accordingly, the Special Committee recommended that the Board of Directors: (i) approve the Transaction substantially on the terms and subject to the conditions set out in the Transaction Agreements and (ii) recommend that the shareholders of the Company vote in favor of the Transaction Resolution required to be passed to authorize such Transaction.

Opinion of the Special Committee’s Financial Advisor

The Special Committee retained Merrill Lynch to act as its financial advisor in connection with its consideration of the Transaction and various other strategic options that may be available to the Company. At the meeting of the Special Committee on July 6, 2008, at which the Transaction was considered, Merrill Lynch rendered its oral opinion, which opinion was later confirmed by delivery of a written opinion as of the same date,

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that as of that date, and subject to and based on the various assumptions made, procedures followed, matters considered and qualifications and limitations of the review set forth therein, the cash consideration to be received by API pursuant to the issuance of an aggregate principal amount of up to $300 million but not less than $200 million of Convertible Notes was fair, from a financial point of view, to the Company. We refer to such issuance as the “Convertible Notes Issuance”.

The full text of the written opinion of Merrill Lynch, dated July 6, 2008, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Merrill Lynch, is attached as Appendix D to this Proxy Statement. You should read the written opinion carefully and in its entirety. This summary is qualified in its entirety by reference to the full text of the written opinion.

The Merrill Lynch opinion is for the use and benefit of the Special Committee and addresses only the fairness, as of the date of the opinion, from a financial point of view, to the Company of the cash consideration to be received by API pursuant to the Convertible Notes Issuance.

The opinion of Merrill Lynch does not address any other aspect of the Transaction, including the merits of the underlying decision by the Company and API to engage in the Transaction, and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on the proposed issuance of the Convertible Notes or any aspect of the Transaction. In addition, the opinion does not address the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of the Company, other than the Company as the sole stockholder of API. Moreover, the opinion of Merrill Lynch does not address the fairness of the terms of the Convertible Notes, but Merrill Lynch did consider the conversion price and interest rate of the Convertible Notes in rendering its opinion. In rendering its opinion, Merrill Lynch expresses no view or opinion with respect to the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation payable to or to be received by any officers, directors, or employees of any parties to the Transaction, or any class of such persons, and has not incorporated such matters into its analysis.

In arriving at its opinion, Merrill Lynch, among other things:

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In preparing its opinion, Merrill Lynch assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available, and Merrill Lynch did not assume any responsibility for independently verifying such information or undertake an independent evaluation or appraisal of any of the assets or liabilities of the Company or API and was not furnished with any such evaluation or appraisal, nor did Merrill Lynch evaluate the solvency or fair value of the Company or API under any state, federal or other applicable laws relating to bankruptcy, insolvency or similar matters. In addition, Merrill Lynch did not assume any obligation to conduct any physical inspection of the properties or facilities of the Company or API. With respect to the financial forecast information furnished to or discussed with Merrill Lynch by the Company, Merrill Lynch assumed that they were reasonably prepared and reflected the best then currently available estimates and judgment of the Company as to the expected future financial performance of the Company and API. Merrill Lynch also confirmed with the Company the sensitivity analysis performed by it with respect to such financial forecast information. Merrill Lynch also assumed that the final form of the Note Purchase Agreement would be substantially similar to the last draft reviewed by it and that the Restructuring would be completed as contemplated in the last draft of the Note Purchase Agreement reviewed by it.

Merrill Lynch’s opinion is necessarily based upon market, economic and other conditions as they existed and could be evaluated on, and on the information made available to it as of, the date of the opinion, but in rendering its opinion Merrill Lynch has not made any specific assumptions relating to market, economic and other conditions except as disclosed in this Proxy Statement.

Financial Analyses

At the July 6, 2008 meeting of the Special Committee, and in connection with preparing its opinion for the Special Committee, Merrill Lynch made a presentation of certain financial analyses with respect to the Convertible Notes Issuance.

The following is a summary of the material analyses contained in the presentation that was delivered to the Special Committee related to the opinion. Some of the summaries of financial analyses which follow include information presented in tabular format. In order to understand fully the financial analyses performed by Merrill Lynch, the table must be read together with the accompanying text of each summary. The table alone does not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by Merrill Lynch.

The fact that any specific analysis has been referred to in the summary below and in this Proxy Statement is not meant to indicate that such analysis was given more weight by Merrill Lynch than any other analysis in reaching its conclusion. Merrill Lynch arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and believes the totality of the factors considered and performed by Merrill Lynch in connection with its opinion operated collectively to support its determinations as to the fairness, from a financial point of view, to the Company of the cash consideration to be received by API in the Convertible Notes Issuance. Merrill Lynch did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis.

In arriving at its opinion, Merrill Lynch made its determination as to the fairness to the Company, from a financial point of view, as of the date of the opinion, of the cash consideration to be received by API pursuant to the Convertible Notes Issuance on the basis of the multiple, financial and comparative analyses described below. The following summary is not a complete description of all of the analyses performed and factors considered by Merrill Lynch in connection with its opinion, but rather is a summary of the material financial analyses performed and factors considered by Merrill Lynch. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis.

With respect to the analysis of publicly traded companies and the analysis of transactions summarized below, such analyses reflect selected companies and transactions, and not necessarily all companies or

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transactions, that may be considered relevant in evaluating API or the Convertible Notes Issuance. In addition, no company or transaction used as a comparison is either identical or directly comparable to API or the Convertible Notes Issuance.

The estimates of future performance of API in or underlying Merrill Lynch’s analyses (those provided by the Company and those reflected in the sensitivity case) are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses, Merrill Lynch considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Estimates of the financial value of companies do not purport to be appraisals or reflect the prices at which such companies actually may be sold.

Merrill Lynch developed the sensitivity case with input from, and based on discussions with, management of the Company, taking into account, among other things, the Company’s historical financial performance, actual performance versus forecasted performance for that timeframe and API’s prospective opportunities and challenges, as well as the projected growth rates and respective performances of select public companies. The sensitivity case incorporates revised assumptions versus the base case for market share, revenue growth rates and gross margins for API’s business segments. Overall, the sensitivity case resulted in a six-year (2008 estimated to 2014 projected) compounded annual adjusted EBITDA growth rate of 19.0% for API, as compared to a six-year compounded annual adjusted EBITDA growth rate of 33.8% in the base case.

The cash consideration to be received by API pursuant to the Convertible Notes Issuance was determined through negotiation between management of the Company, and the Investors, with oversight and guidance on the negotiation of the terms of the transaction from the Special Committee, and the decision to enter into the Convertible Notes Issuance was solely that of the Investors, the Company and API. The opinion and financial analyses of Merrill Lynch were one of a number of factors considered by the Special Committee in its evaluation of the Convertible Notes Issuance.

Summary of Imputed Enterprise Values

Merrill Lynch assessed the fairness of the cash consideration to be received by API pursuant to the Convertible Notes Issuance by assessing the value of API using several methodologies, including a sum of the parts discounted cash flow analysis, a comparable acquisitions analysis, a comparable companies analysis using revenue valuation multiples from selected publicly traded companies and an imputed public market value analysis, each of which is described in more detail in the summaries set forth below. Each of these methodologies was used to generate imputed valuation ranges that were then compared to the $550 million enterprise value of API implied by the cash consideration with respect to the Convertible Notes Issuance.

The following tables show the ranges of imputed enterprise value of API derived under each of these methodologies and whether the valuation range is based on the base case or the sensitivity case where applicable. The tables should be read together with the more detailed summary of each of these valuation analyses as set forth below. The values in the analyses summarized below have been rounded to the nearest $1,000,000.

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Valuation Methodology

Sum of the Parts Discounted Cash Flow Analysis

Merrill Lynch performed a discounted cash flow analysis of API as a stand-alone entity. Merrill Lynch calculated the discounted cash flow values for API as the sum of the present values of:

The estimated future free cash flows were based on the base case as well as the estimates reflected in the sensitivity case for the years 2009 through 2013. The range of terminal values for API were calculated based on projected 2013 normalized free cash flow and a range of perpetual growth rates from 2.0% to 4.0%. Merrill Lynch used discount rates for API ranging from 11.5% to 13.5% for commodity medical products and promoted brands, 14.0% to 18.0% for new products and 12.5% to 13.5% for other cash flow, based on Merrill Lynch’s judgment of the estimated weighted average cost of capital of the Company taking into account, among other things, the significant debt of the Company.

Based on this analysis, Merrill Lynch derived ranges of implied enterprise values of API of $524 million to $889 million in the base case and $248 million to $396 million in the sensitivity case, as compared in each case to the enterprise value of $550 million implied by the cash consideration to be received by API pursuant to the Convertible Notes Issuance.

While discounted cash flow analysis is a widely accepted and practiced valuation methodology, it relies on a number of assumptions, including growth rates and discount rates. The valuation derived from the discounted cash flow analysis is not necessarily indicative of API’s present or future value or results.

Comparable Acquisitions Analysis

Using publicly available information, Merrill Lynch reviewed the multiples implied in certain change of control transactions involving companies participating in industries deemed to be comparable to API by Merrill Lynch. The review focused on selected transactions announced between January 2007 and the date of the opinion. The announced transactions not completed to date may not ultimately be consummated.

Merrill Lynch performed this analysis to understand the range of ratios of enterprise value to EBITDA in these comparable transactions and to estimate the comparable enterprise value of API. No company or transaction used as a comparison is either identical or directly comparable to API. Accordingly, an analysis of the resulting multiples of the selected transactions necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and the selected transactions and other factors that may have affected the selected transactions and/or affect the Convertible Notes Issuance.

Based in part on the multiples and qualitative judgments of selected acquisition comparables and considering the differences between the characteristics of these transactions and the Convertible Notes Issuance, Merrill Lynch derived indicative aggregate values of API by applying multiples ranging from 9.0x to 14.0x to API’s 2008 AMI EBITDA and then adding an estimated value for API’s development pipeline based on selected acquisition comparables. The resulting range of enterprise values based on the analysis of comparable transactions was $544 million to $891 million in the base case and $388 million to $640 million in the sensitivity case, as compared in each case to the enterprise value of $550 million implied by the cash consideration to be received by API pursuant to the Convertible Notes Issuance.

Comparable Public Companies Analysis

Merrill Lynch reviewed certain financial information of publicly traded companies that it deemed comparable to API.

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With regard to the comparable public companies analysis summarized below, Merrill Lynch selected publicly traded companies that operate in a similar industry to API and have similar lines of business to API, then analyzed their relevance/comparability based on various factors, including but not limited to the sizes of the companies, their industry sub-sector or product focuses, and their growth and profitability profiles. However, none of the companies selected is identical or directly comparable to API. There may have been other companies that met the criteria above but none were identified as comparable to API by Merrill Lynch. Accordingly, an analysis of the results of the comparable public companies necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the selected companies, as well as other factors that could affect the public trading value of the selected companies and API. Mathematical analysis, such as determining the average or median, is not in itself a meaningful method of using comparable company data. Merrill Lynch based its analysis in part on projections and estimates provided by the base case. Merrill Lynch performed this analysis to understand the range of enterprise value to estimated revenue ratios of these comparable public companies based upon market prices.

Based in part on the multiples described above, Merrill Lynch derived indications of the enterprise value of API by applying multiples ranging from 2.5x to 3.5x to API’s estimated 2008 revenue of $211.4 million based on the base case. Merrill Lynch utilized these selected multiples after considering the current market conditions and the size and diversification of operations of the comparable public companies, among other things. The resulting indicated range of enterprise value was $529 million to $740 million, as compared to the enterprise value of $550 million implied by the cash consideration to be received by API pursuant to the Convertible Notes Issuance.

Imputed Public Market Value Analysis

Merrill Lynch reviewed certain valuations by Wall Street equity research analysts of the TAXUS business in order to understand the valuation of API imputed by the public markets. Merrill Lynch derived indications of the imputed enterprise value of API by subtracting analyst valuations of the TAXUS business ranging from $200 million to $300 million from enterprise value of the Company as determined by public markets, based on the share price of $3.00 as of July 2, 2008 and net debt of $505 million as of March 31, 2008. The resulting indicated the imputed enterprise value of API was $461 million to $561 million, as compared in each case to the enterprise value of $550 million implied by the cash consideration to be received by API pursuant to the Convertible Notes Issuance.

Miscellaneous

Merrill Lynch is acting as financial advisor to the Special Committee of the Board of Directors of the Company in connection with the Transaction and received fees from the Company for its services, payable upon the delivery of the fairness opinion. In addition, the Company has agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses incurred in performing its services, including reasonable fees and disbursements of its legal counsel, and has agreed to indemnify Merrill Lynch for certain liabilities arising out of its engagement, including liabilities arising under the federal securities laws. Merrill Lynch has, in the past, provided financial advisory and financing services to the Company and its affiliates and affiliates of Ares and may continue to do so and has received, and may receive, fees for the rendering of such services. Those engagements included acting as Book Runner on a term loan facility, and as Co-Manager with respect to a senior notes offering, for GNC Corporation, an affiliate of Ares, each of which occurred in March 2007. Merrill Lynch also acted as Book Runner on several occasions between July 2006 and August 2007 in connection with equity offerings conducted by Ares Capital Corporation, an affiliate of Ares, as well as Book Runner in connection with a rights offering by Ares Capital Corporation in April 2008. In addition, in the ordinary course of its business, Merrill Lynch or its affiliates may actively trade shares and other securities of the Company for its own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.

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Description of the Transaction

Immediately prior to the consummation of the API Investment, the Company intends, pursuant to one or more asset transfer agreements and/or purchase agreements (collectively, the “Purchase Agreement”) to transfer to API the assets and liabilities of the Company, other than the Retained Business. In exchange for this transfer, API will issue to the Company shares of common stock, par value $0.01 per share, representing ownership of 100% of API, and a promissory note (the “Intercompany Promissory Note”). The amount of the Intercompany Promissory Note will be approximately the same as, and will be repayable from, the net proceeds of the API Investment. In connection with the Restructuring, William L. Hunter and K. Thomas Bailey will remain Chief Executive Officer and Chief Financial Officer of the Company, respectively, all but two of the employees of the Company at the time of the consummation of the Restructuring will become the employees of API and its subsidiaries, and API and the Company will enter into a number of agreements in order to define the relationship between the Company and API after the closing of the Transaction. These agreements are currently contemplated to consist of:

The terms of these agreements, which we refer to collectively as the “Restructuring Agreements”, remain subject to negotiation between the Company and the Investors prior to the consummation of the Transaction. For a description of certain of the terms of the API 2008 Incentive Plan, see the section of this Proxy Statement entitled “THE RESTRUCTURING—API 2008 Incentive Plan”.

Upon the completion of the Restructuring described above, and upon the satisfaction or waiver of the other conditions to closing contained in the Note Purchase Agreement, API will issue a minimum of $200 million, and at API’s option up to $300 million, in aggregate principal amount of Convertible Notes to the Investors in exchange for cash. At the time of issuance, the Convertible Notes will be convertible into between approximately 32% and 48% of the common stock of API (excluding the effect of shares of common stock that may become issuable after the closing of the Transaction). Subject to certain conditions, upon the occurrence of a Qualified Transaction, the Convertible Notes shall be automatically converted into shares of common stock, par value $0.01 per share, of API. In connection with the issuance by API of the Convertible Notes pursuant to the Note Purchase Agreement, API, the Company and the Investors will enter into:

For a description of certain of the terms of the Transaction Agreements, see the section of this Proxy Statement entitled “DESCRIPTION OF TRANSACTION AGREEMENTS”.

The net proceeds received by API (after the payment of all fees and expenses incurred in connection with the Transaction) from the issuance of the Convertible Notes will be paid to the Company in full satisfaction of the Intercompany Promissory Note. The Company, upon the repayment of the Intercompany Promissory Note by API, will use the proceeds received from API to reduce the Company’s outstanding indebtedness under the Existing Notes. Specifically, the Company will consummate the Tender Offer to repurchase a portion of the 2013

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Notes and/or the 2014 Notes. API has the right to elect to raise up to $300 million in gross proceeds (or approximately $265 million in net proceeds) from the sale of the Convertible Notes and API will exercise that right to the extent the Company has the ability to repurchase additional outstanding 2013 Notes and 2014 Notes at attractive prices. For more information about the Tender Offer, see the section of this Proxy Statement entitled “DESCRIPTION OF THE TENDER OFFER”.

Following the consummation of the Transaction, we may, from time to time, directly or directly, reduce our investment in API, whether through a sale of securities, merger involving API, dilution through additional issuances of securities by API (including the issuance of additional Convertible Notes due to accrual of pay-in-kind interest) or otherwise.

The Company’s Reasons for the Transaction

This proposed Transaction was selected after considering a broad range of potential strategic and financial alternatives, and is expected to provide important benefits to the Company’s shareholders, taking into account the Company’s obligations to the holders of its Existing Notes, the impact on the Company’s business plan as a result of its current interest obligations and the need to reduce such obligations, which we believe make the Transaction as proposed a potentially superior alternative to other courses of action that were considered by management and the Board of Directors.

We believe the Transaction offers meaningful benefits for all constituencies of the Company. The Transaction provides holders of the Existing Notes an opportunity to realize a premium over the current trading price of the Existing Notes with respect to a portion of the aggregate principal amount of Existing Notes held by any such holder. Additionally, we believe that the $200 million to $300 million range of proceeds contemplated in connection with the Transaction is sufficiently large to effectuate a reasonable capital structure change and risk mitigation while minimizing the dilution of our current shareholders as compared to other capital raising alternatives. The Transaction also minimizes the disruption of the Company’s strategy and human resources at a time when our various businesses and new product opportunities are beginning to grow, and preserves a substantial portion of the future upside potential from those businesses for our existing shareholders. A more detailed discussion of the benefits of the Transaction follows below.

Our proposed Transaction raises substantial proceeds, in the form of a convertible debt security with payment-in-kind features, the proceeds of which will be used to reduce cash pay debt. Our original strategy at the time of the AMI acquisition was to target cash pay debt (debt principal bearing interest payments in cash) reduction between March of 2006 and early 2008 of approximately $200 million principal amount or more. The amount of gross proceeds expected to be raised in the proposed Transaction of between $200 million and $300 million will allow for cash pay debt reduction of up to 46% of our current outstanding principal amounts, effectively achieving our original objective.

We believe that we need to raise a minimum of $200 million in gross proceeds to achieve our objective of reducing cash interest and substantially reducing or eliminating debt, and we believe that this goal was best accomplished through the issuance of an equity interest at a subsidiary level. Any alternative approach that might raise fewer proceeds, we believe, would not provide enough cash interest expense reduction to completely accommodate the range of reasonable potential TAXUS royalty revenue outcomes indicated by the range of current analyst estimates. By approaching large private equity firms and other substantial private sources of capital, we were able to capture substantial proceeds in this Transaction. We believe such an outcome would have been less likely to be achieved expediently, or would not likely have been possible to achieve, through alternative approaches.

Additionally, the convertible security structure as proposed will bear interest payable in kind that is not expected to result in cash outflow except upon maturity or the occurrence of a Designated Event or a Parent Designated Event, and will be convertible into shares of API. Utilizing such a security structure will improve our

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interest coverage ratio by replacing securities that bear interest in cash with securities that do not. A company’s interest coverage ratio is defined as the ratio of a company’s cash flow generated by its businesses to its cash interest expense during a specified time period, which is an indicator of a company’s financial flexibility and ability to withstand any sudden or unexpected negative changes to its business and not experience an event of default. Because the Convertible Notes will pay interest in kind, we anticipate that our annual cash interest expense will be reduced by approximately $21 million to $28 million (based on the interest rate of the 2013 Notes as the date hereof and assuming that the aggregate outstanding principal amounts of the Existing Notes are proportionately reduced), or by approximately 30% to 50% as compared to what we would pay annually if our current capital structure were to remain constituted as is.

Our proposed Transaction retains an initial majority API stake for the Company’s shareholders, retaining future value creation for current owners. Importantly, the Company’s existing shareholders will continue to participate meaningfully in the success of the various API businesses and product opportunities, including API’s proprietary Quill SRS technology, its recently approved 5-fluorouracil-eluting central venous catheter (“5-FU CVC”) and in the continued sales and operations progress that has been observed across all of API’s businesses during the last two quarters. Our proposed Transaction leaves a pro forma API initial ownership stake of between approximately 52% and 68% for the Company’s existing shareholders (measured accounting for the Convertible Notes on an “if converted” basis at closing).

The API businesses consist of a mix of established businesses and emerging products that are either early in their life cycles or have yet to commercially launch. Management and the Board of Directors determined that any alternative pursued should provide existing Company shareholders with the opportunity to participate in the future potential of these emerging products. Accordingly, an outright sale of the entire Company, or a 100% sale of one or more high-potential emerging products to a strategic buyer was determined to be less attractive. However, the Board of Directors also determined that unless a transaction was sizable, it would not afford the Company with the opportunity to meaningfully reduce its unsustainable cash interest burden, and therefore would not meet the desired goal of allowing the Company to invest in its current and future product lines.

The two primary assets of the Company (namely, API and the TAXUS royalty stream) are very distinct. We would not be able to maximize value if we required that they be sold together, given each asset appeals to a different subset of potential buyers. We also believe that the positive developments and growth of API in recent periods has been overshadowed to some degree by the negative publicity surrounding TAXUS and the drug-eluting stent market in general, making a sale of the entire Company even more challenging. Furthermore, the current uncertainty in the drug-eluting stent market resulting from the recent competitive product launches by Medtronic and Abbott makes it an inopportune time to consider monetizing the TAXUS royalty on its own as we believe prospective buyers would unfairly discount the prospects of TAXUS in their valuation up until such time as the drug-eluting stent market has stabilized. Accordingly, transactions that would involve selling any interest in TAXUS at a depressed level were determined to be less attractive.

To raise between $200 million and $300 million of capital utilizing securities of, or by selling an interest in, the Company, at our public stock price prior to the announcement of the Transaction ($2.95 as of July 3, 2008) we would have had to issue between approximately 67.8 and 101.7 million shares of our common stock. As a result, the Company’s public shareholders would have been diluted by 44% and 54%, respectively. Furthermore, given the size of the equity issuance relative to our market capitalization, we believed that any of the available public financing alternatives would have likely taken place at a significant discount to the current market price, thereby increasing the dilution to the Company’s shareholders. The proposed Transaction raises the same amount of capital, while keeping 100% of the value of TAXUS and initially maintains 52% to 68% of the value in the non-TAXUS assets for the Company’s current shareholders. Since we have only sold ownership in the API business (which represents only a portion of our total assets) on a pro forma basis the Company’s shareholders are able to keep a greater percentage ownership interest in all of the Company’s businesses relative to a public financing alternative.

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Our proposed Transaction mitigates risks related to the Company’s drug-eluting stent royalty revenue and cash flows by reducing, in magnitude, current high cash interest obligations. The cash interest expense reduction to be achieved by our proposed Transaction may enable us to sustain our current levels of investment in our business operations, sales and marketing and research and development initiatives through much lower levels of TAXUS royalties than would be possible under our current capital structure. Specifically, we believe that within the current drug-eluting stent market size, should TAXUS achieve a U.S. market share of less than 30% to 35% (a decline of 15 to 20 percentage points from current levels), we may have to implement further budget reductions to continue to meet our interest obligations under the 2013 Notes and the 2014 Notes. Should we complete the proposed Transaction, we believe we could potentially sustain our business investment levels at U.S. TAXUS market share levels of 15% to 20%.

Even with the diversification of revenue and cash flow sources achieved through the AMI acquisition, our ability to service our debt obligations and sustain our most critical business investments continue to be materially impacted by the levels of royalty revenue we receive from BSC. Every dollar of royalty revenue we receive from BSC generates in excess of 80 cents of operating profit, as very limited administrative resources are required to support collection of royalties, which contrasts with our operating businesses where our revenue generation is supported by significant sales, manufacturing and administrative resources and personnel. In the first quarter following the acquisition of AMI in March 2006, we received royalties from BSC of $41. In the most recent quarter ended March 31, 2008 we received $27 from BSC. This significant decline in royalty revenue has disproportionately impacted our operating profit and cash flows available to service debt and invest in our business, and has more than offset the recent improving contribution of our operating businesses. Future declines in our royalty revenue are expected starting in the fourth quarter of 2008, as BSC’s sales and U.S. market share of TAXUS are expected to be impacted by competitive product launches from Medtronic and Abbott. The market share achieved by these competitors and BSC’s market share, which have been the subject of much speculation and uncertainty, may have a material impact on our ability to sustain and execute our current business initiatives, to service our debt obligations as they stand today or both, which may materially impact shareholder value and increase the difficulty of implementing capital structure changes at a later date.

We believe the various investments we have made, and continue to make, in certain key areas are necessary if API is to realize revenue growth from new products, improved operating margins and continue its innovation and new product initiatives, all of which are important contributors to improved equity value for shareholders. The investment levels we have budgeted are also generally consistent with levels of spending in key areas observed at competing companies of our approximate size in our industry sector.

Our proposed Transaction unlocks and captures value embedded in our non-TAXUS assets, and provides visibility for the growth prospects of those assets. We believe utilizing API as a focal point for raising capital, as opposed to the Company as a whole, enables us to raise the amount of proceeds we believe are necessary to sufficiently reduce our debt while mitigating the dilutive impact of such a financing. The conversion ratio of the securities to be issued implies a total equity value for API of $625 million, and our Transaction value implies, at close calculated on an if converted basis, a sale of between a 32% and 48% interest in API. Importantly, API represents only a portion of the Company’s total assets. The revenue of API represented less than two-thirds of our total consolidated revenue for the year ended December 31, 2007. Yet, by focusing potential investors on the growth prospects of API alone, we were able to secure a Transaction that raises substantial proceeds while likely offering a more limited dilutive impact than other potential financing alternatives.

In addition, the value for API determined by this Transaction resulted from a competitive “auction”, and was negotiated with multiple potential capital partners up until the announcement of the Transaction. While other financing approaches were discussed that may have involved the Company’s existing constituents, it was determined that our fiduciary obligations would be best met by conducting a broad process with a number of parties that were not previously engaged with the Company, so as to increase the probability of achieving the maximum value potential for API and enhancing the probability of receiving multiple proposals.

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Our proposed Transaction optimizes the use of capital through a flexible transaction size. One of the Company’s objectives was to offer a financial or strategic alternative that balanced the benefits and costs across all of our capital structure constituents. As a result, we were able to construct a creative option with Ares and New Leaf, whereby we could elect to raise more or less total capital, and monetize a smaller or larger interest in API, depending on management’s and our Board’s view of market conditions, the Company’s financial condition and the outcome of our Tender Offer process prior to the Transaction’s closing. We expect to raise a minimum of $200 million in gross proceeds (or approximately $165 million in net proceeds) through the Transaction. The Company has the right to elect to raise up to $300 million in gross proceeds (or approximately $265 million in net proceeds) and will exercise that right to the extent we view the Tender Offer for the 2013 Notes and the 2014 Notes has delivered an attractive financial outcome, or based on other factors in the capital markets or our business that management and the Board deem appropriate.

Our proposed Transaction aligns our Company’s capital structure with business risk and business strategy. At the time of the AMI acquisition, our intention was to incur cash pay debt in our capital structure as a temporary choice in order to minimize up front costs and to maximize the speed and certainty of closing the AMI acquisition. We had planned at that time to utilize excess cash flows derived from royalties derived from BSC’s TAXUS sales to reduce debt to a level such that our operating flexibility or investments in innovation would not be competitively constrained by our capital structure. The rapid decline in TAXUS sales, only two quarters after completing the AMI acquisition, we believe has left our operating business with a capital structure that does not facilitate the flexibility and level of investment necessary for a business of our size to deliver material value to, or mitigate risk for, our shareholders.

By forming and capitalizing API, the Company has established a plan to achieve a more equity-oriented capital structure for the businesses to be transferred to API, more consistent with our original strategy. A debt-free or equity-oriented capital structure is also more consistent with the capital structure choices of the majority of our peer companies in the life sciences industry. With the opportunity to pursue an initial public offering of API in the future, or other financial and strategic alternatives together with Ares and New Leaf, API will have improved financial flexibility, enabling API to better capitalize on its various business and product development opportunities. In addition, by selectively reducing cash pay debt, the Company expects the remaining royalty revenue derived from its partners BSC and Cook may be adequate for interest service on any remaining debt. The assets owned by the Company, consisting of the Retained Business and API equity stake, will also allow continued exploration of additional financing and strategic alternatives to potentially further reduce or eliminate the Company’s remaining debt.

Our proposed Transaction allows us to partner with experienced healthcare investors who will be focused on growing the value of API. The Transaction provides API the opportunity to partner with Ares and New Leaf, each of which has a long track record of building value in their respective healthcare portfolio companies for both public and private shareholders. The Investors have expertise investing in mature public and private companies (in the case of Ares) and early stage, high-growth, entrepreneurial ventures (in the case of New Leaf). API will also have the opportunity to leverage the Investors’ significant healthcare investing experience and valuable industry relationships to drive continued growth. Furthermore, the Investors have access to additional capital that could be made available to fund future growth or expansion of API.

Description of the Business of the Company Following the Transaction

Prior to the Transaction, our business consisted of our Retained Business and the businesses being transferred to API. Our Retained Business consists primarily of the intellectual property and royalty revenue related to the TAXUS coronary stent system and potential royalty revenue and other income from certain other uses of paclitaxel licensed to BSC and Cook under the 1997 License Agreement and to Broncus under a 2005 license agreement (the “2005 License Agreement”). The businesses being transferred to API consists primarily of the sale of single-use medical device products and medical device components, and the related sales and marketing, manufacturing, research and development and general and administrative functions necessary to

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support the businesses to be transferred to API. For the year ended December 31, 2007, our combined business generated total revenue of approximately $288 million, $110 million of which was royalty revenue derived from sales of TAXUS by BSC, $170 million of which was product revenue and $7 million of which was royalty revenue derived from the operating assets to be transferred to API. For the quarter ended March 31, 2008, our combined business generated total revenue of approximately $77 million, $27 million of which was royalty revenue derived from sales of TAXUS by BSC, $48 million of which was product revenue and $2 million of which was royalty revenue derived from the operating assets to be transferred to API.

Upon completion of the Transaction, our business will consist of the Retained Business. In addition, we will also retain ownership of between approximately 52% and 68% of the common stock of API (assuming initial conversion of the Convertible Notes but excluding the effect of shares of common stock that may become issuable after the closing of the Transaction) and certain additional assets.

Current Royalty Streams

After the consummation of the Transaction, our primary direct revenue source will be royalty revenue derived from sales of TAXUS by BSC. The following describes certain information relating to our license agreement with BSC relating to the paclitaxel drug-eluting stent technology that will be retained by us. For additional information relating to the Company’s business, see our Annual Report on Form 40-F and other reports filed or furnished by the Company with the SEC pursuant to the Exchange Act.

Boston Scientific Corporation

In 1997, the Company entered the 1997 License Agreement with BSC, whereupon BSC became a coexclusive licensee (together with Cook) of our proprietary paclitaxel technology for use in certain coronary and peripheral vascular and gastrointestinal (“GI”) fields of use. This agreement provided for payment of certain product development milestones, as well as royalties to be derived from the sales of any products commercialized by BSC relating to the licensed technology. The technology licensed by BSC through this agreement is incorporated in BSC’s proprietary TAXUS coronary vascular stent product line.

In November 2004, the Company amended the 1997 License Agreement upon BSC’s election to allow BSC to become the exclusive worldwide licensee of the Company’s proprietary paclitaxel technology for use with coronary vascular products. Pursuant to the terms of the amendment to the 1997 License Agreement, the royalty rates payable to the Company by BSC were increased by one percentage point (1%) across all royalty tiers (ranging from 5% to 8%) as of November 23, 2004. The Company also granted BSC the right to sublicense the Company’s paclitaxel-eluting coronary vascular stent technology to third parties for cash consideration of $13.9 million, which was recognized as license revenue in 2004. If BSC exercises its sublicensing rights in the future, the Company will receive a percentage of any sublicensing consideration paid to BSC and a royalty rate payable on any third-party product sales.

The following lists the various TAXUS coronary stent systems currently sold or under development by BSC:

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Potential Future Royalty Streams

In addition to our current royalty streams, we also have the opportunity to realize royalty revenue from products currently being developed by other corporate licensing partners. A description of these license agreements with our other partners and a description of these technologies and stage of development are as follows:

Cook Group, Incorporated

In 1997, the Company entered into the 1997 License Agreement with Cook, whereupon Cook became a co-exclusive licensee of the Company’s proprietary paclitaxel technology for use in certain vascular and GI fields of use. This agreement provided for payment of certain product development milestones, as well as royalties to be derived from the sales of any products commercialized by Cook relating to the licensed technology. The technology licensed by Cook through this agreement is incorporated in Cook’s proprietary ZILVER PTX peripheral vascular stent product candidate, which is currently undergoing human clinical trials in the United States, Asia, Latin America, Canada and Europe.

In September 2004, the Company amended the 1997 License Agreement to accommodate Cook’s election to exit and return all licensed rights related to the coronary vascular field and to focus on the development of paclitaxel-eluting peripheral vascular and gastrointestinal stents. The 1997 License Agreement was amended to increase the royalty rate upon the commercial sale of paclitaxel-eluting peripheral vascular stent products, and to

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provide a multi-year extension to the 1997 License Agreement for Cook related to the peripheral vascular and gastrointestinal fields of use. In consideration for these amendments, the Company made a $25.0 million license payment to Cook upon execution of the amendment. The following lists the various paclitaxel-eluting peripheral vascular stent systems currently under development by Cook:

Broncus Technologies, Inc.

In June 2005, we entered into a non-exclusive License Agreement with Broncus, allowing Broncus to combine our paclitaxel technology with their Exhale system to treat emphysema. In connection with the license agreement, we received a warrant to purchase 2,280,328 shares of Broncus Series E Preferred Stock, exercisable at $0.01 per share. Under the terms and conditions of the warrant agreement, the warrant is exercisable for 760,110 shares as of the effective date, June 21, 2005. An additional 760,109 shares vested upon the approval of the IDE for the Exhale Drug-Eluting Stent, and the balance of 760,109 shares will vest upon the first commercial sale in any country of the world. We will also be entitled to royalties on future product sales by Broncus from products which use our technology. Currently, Broncus is conducting a pivotal human clinical trial for the Exhale stent system.

Company Strategy

Subsequent to the Transaction, our primary business purpose will be to utilize our remaining assets, including the TAXUS royalty and our ownership position in API, to service and further reduce our remaining debt obligations and maximize value to our shareholders. As part of the Transaction, we will enter into several agreements with API that will govern the relationship between our two companies. The intercompany agreements with API will have specific provisions with respect to governance, shared services, registration rights and other provisions between us and API. Some of these provisions may prohibit certain activities and limit activities that we are able to pursue that are not directly related to our Retained Business until we no longer guarantee the Convertible Notes or until we have completely retired our Existing Notes. For a summary of matters contemplated to be addressed by these agreements, see the section of this Proxy Statement entitled “THE RESTRUCTURING”. Specific elements of our strategy to satisfy our debt obligations will include the following:

The timing of any future equity offerings or dispositions of the Company’s ownership of API will be designed to maximize value to our shareholders and will depend in part upon market conditions, limitations contained in certain intercompany agreements between the Company and API and other factors.

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Company Corporate Information

At the close of this Transaction, our business will remain headquartered in Vancouver, British Columbia and the Company will employ a total of two employees. The executive officers of the Company will be William L. Hunter, MD (Chief Executive Officer) and K. Thomas Bailey (Chief Financial Officer). In addition, Dr. Hunter and Mr. Bailey will be employed by and will concurrently serve as Chief Executive Officer and Chief Financial Officer, respectively, of API.

The Company is incorporated under the laws of the Province of British Columbia. The Company’s principal executive offices are located at 1618 Station Street, Vancouver, BC, Canada V6A 1B6 and the Company’s telephone number is (604)  221-7676.

Description of the Business of API Following the Transaction

This section presents the business of API following the consummation of the Transaction as if the Transaction had previously been consummated.

API is a specialty pharmaceutical and medical technology company that discovers, develops and markets technologies and products primarily to treat local diseases or to address complications associated with medical device implants, surgery or acute injury. API’s business strategy is to develop and market proprietary, locally delivered drug formulations or drug-device combination products, together with a portfolio of selected proprietary medical device products, that are designed to reduce surgical procedure side effects, improve surgical outcomes, shorten hospital stays, or are easier or safer for a physician to use. API targets specialized medical markets that it believes can benefit from its technology and in which API can effectively market its products through its two specialized sales and marketing organizations, including selected general surgical markets and minimally invasive, or interventional, surgical markets. For the year ended December 31, 2007, API generated product and royalty revenues of approximately $170 million and $7 million, respectively. For the quarter ended March 31, 2008, API generated product and royalty revenues of approximately $48 million and $2 million, respectively.

API’s research and development efforts focus on understanding and characterizing biological conditions that often occur concurrently with medical device implantation, surgery or acute injury. These conditions may include scar formation, inflammation, cell proliferation, infection or bleeding. API’s product development approach involves screening known pharmaceutical agents for their usefulness in addressing these biological conditions. API then combines the pharmaceutical agents selected through its screening processes with its proprietary surgical drug delivery or medical device technologies to develop novel product candidates, including locally delivered drug formulations or drug-eluting medical devices.

API has a traditional medical device product line that consists of over 5,000 SKUs and includes proprietary manufacturing and direct sales capabilities. API’s product offerings contain certain proprietary branded products that it believes offer technical advantages over competing products. Several of these medical device products may also provide opportunities to develop novel combination product candidates that utilize certain of API’s local drug delivery capabilities and technologies. API believes the potential technology advances represented by such combination product candidates may provide it the opportunity for increased market share, revenue and gross margins as compared to API’s traditional medical device product lines.

API has significant manufacturing capabilities for its medical devices. It has 11 manufacturing facilities globally—seven in the United States and Puerto Rico, three in Denmark, and one in the United Kingdom. API’s medical device manufacturing capabilities include core competencies in each of the following areas: sutures, metals, plastics, textiles and assembly. API’s sutures manufacturing capabilities include the ability to make its Quill barbed suture with various approved polymer materials. API’s metal manufacturing capabilities include bending, grinding, drilling, polishing, chemical etching, thermal curing and wire winding. API’s plastics

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manufacturing capabilities include injection molding, insert molding and wire coating. API’s textiles manufacturing capabilities include braiding and embroidery of sutures. API’s assembly capabilities include small lot assembly, suture attachment, kit assembly and packaging.

API has a sales team comprised of over 100 individuals focused primarily on selling product lines to interventional radiologists, interventional cardiologists, vascular surgeons, general surgeons and aesthetic surgeons and ophthalmologists. This sales team is supplemented by a network of over 160 independent distributors. These sales forces target physician customers directly, as well as alternate site healthcare providers such as ambulatory surgery centers or urgent care centers. The primary goal of API’s sales teams is to increase market share of API’s highest margin products into markets that it believes are not well served by API’s larger competitors. These competitors sell their products primarily to larger hospitals or large group purchasing organizations based on contracts for a range of products and do not employ direct sales professionals targeting API’s key market segments.

Currently Marketed or Approved Products

API believes it has several innovative products that have the potential to be market leading brands. API markets and sells these brands primarily through its two specialized sales and marketing organizations, with its Surgical sales organization focused primarily on selected general surgical markets and its Interventional sales organization focused primarily on interventional radiology or minimally invasive surgical markets.

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API Pipeline

API’s discovery approach has yielded a number of proprietary product candidates that are in various stages of research and clinical development. Selected key product candidates include:

API Strategy

API’s strategy is to utilize its 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

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surgical procedure side effects, improve surgical outcomes, shorten hospital stays, or are easier or safer for a physician to use. API calls this its “Drugs for Surgeons” approach. Specific elements of API’s strategy include the following:

API Corporate Information

At the close of this Transaction, API’s consolidated business will be headquartered at 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6, where it will oversee over 1,500 employees in 18 facilities in five countries. API’s telephone number is (604) 221-7676. The executive officers of API will include William Hunter, M.D. (President and Chief Executive Officer) and Thomas Bailey (Chief Financial Officer).

API was incorporated under the laws of the State of Delaware on February 5, 2008.

Interest of the Company’s Executive Officers and Directors in the Transaction

The Company’s executive officers and directors have compensation arrangements that give them interests in the Transaction that may be different from, or in addition to, the interests of the Company’s other shareholders. The Special Committee and the Board of Directors were aware that these arrangements existed when they determined that the Transaction is in the best interests of the Company and fair to its shareholders and, in the case of the Board of Directors, when they approved the Transaction. These material interests are summarized below.

Transaction Award and Retention Program

In conjunction with entering into the Transaction, in order to encourage management to remain with the Company through the Transaction and thereafter, the Company will enter into transaction award and retention

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agreements with each of Dr. Hunter, Mr. Bailey, Dr. Avelar, Mr. McMasters and other executive officers. Under the transaction award and retention agreements, each of these executive officers will be entitled to receive the awards provided the Transaction closes and the executives remain employed by the Company as described below.

Under the transaction award and retention agreements, if the Transaction closes on or before December 31, 2008, each of the recipients will be eligible to receive a cash transaction award from the Company (but not from API or any of its subsidiaries) on the later of (a) the payment or satisfaction of all amounts owing under the Existing Notes (generally without any amounts being paid by API or any of its subsidiaries), and (b) the 18-month anniversary of the closing of the Transaction. A recipient who resigns without good reason or whose employment is terminated for cause will forfeit the award. The Company’s Named Executive Officers are eligible to receive the following awards: Mr. Hunter, $2,250,000; Mr. Bailey, $1,750,000; Mr. Avelar, $750,000; Mr. McMasters, $750,000; and other executive officers and employees as a group $4,500,000.

Assignment of Existing Employment Agreements

In conjunction with the transaction award and retention program, the respective employment agreements of participants (including each of the Company’s Named Executive Officers) will be assigned as of the closing of the Transaction as follows: (i) existing employment agreements with the Company will be amended and restated and assigned to API Canada and (ii) existing employment agreements with Angiotech Pharmaceuticals (US), Inc. will be assigned to API or one if its U.S. subsidiaries. Conforming changes will be made to the employment agreements, including obtaining the agreement of each participant that, following the closing of the Transaction, for the purposes of the employment agreement, references to a “change of control” of the Company will be deemed to mean a change of control of API and acknowledging that none of the Transaction, the events contemplated under the Transaction Agreements, or a future initial public offering of the stock of API will constitute a “change of control” under the participant’s employment agreement.

The employment agreements between the Company and the Named Executive Officers are described below under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION—Potential Payments Upon Termination or Change of Control”.

API 2008 Incentive Plan

If the Company’s shareholders approve the Transaction and the Transaction is consummated, each of Dr. Hunter, Mr. Bailey, Dr. Avelar, Mr. McMasters and other executive officers will be granted a stock appreciation right (“SAR”) award under the API 2008 Incentive Plan (the “2008 Plan”), provided he or she is still employed by the Company as of the consummation of the Transaction, in the following respective numbers of SARs: Dr. Hunter 937,500; Mr. Bailey 390,625; Dr. Avelar 281,250; Mr. McMasters 281,250; and other executive officers and key employees as a group 2,002,625. The initial SAR awards granted under the 2008 Plan will be granted at a base price of $20 per SAR. The maximum term of awards granted under the 2008 Plan is ten years from the date of grant and the term of the 2008 Plan is ten years from the closing of the Transaction. 4,981,884 shares of API’s common stock are reserved for issuance under the 2008 Plan. The 2008 Plan is described in the section of this Proxy Statement entitled “THE RESTRUCTURING—API 2008 Incentive Plan”.

Awards granted to the recipients who are a Vice President or above as of the date of grant will vest in equal annual installments on the 1^st, 2^nd, 3^rd, 4^th, and 5^th anniversaries of the date of grant; provided, however, that 33% of the award will be subject to additional vesting requirements and will only vest (assuming such award has met its time-based vesting) upon the first to occur of (A) the consummation of a Performance Transaction (as described below); or (B) if, following an initial public offering of API that is not a Qualified IPO (as defined below), the closing price per share of API common stock is equal to or greater than $35.00 for 20 consecutive trading days. Notwithstanding the five-year vesting provided for above, if (A) or (B) occurs, the five-year vesting schedule described above will be changed to a four-year vesting schedule, which will be retroactively effective as

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of the date of grant. A “Performance Transaction” means (i) a public offering of API common stock in which the gross proceeds are at least $100 million at a price per share of at least $35.00 (a “Qualified IPO”); (ii) a sale where the Investors receive at least $35.00 per share; or (iii) a series of transactions in which (1) all of the shares of API common stock owned by the Company are distributed to the shareholders of the Company, (2) API has a class of securities registered in the United States under Section 12 of the Exchange Act, (3) API common stock is listed in the United States on the New York Stock Exchange or the Nasdaq Global or Global Select Market and (4) the closing price per share of API common stock is equal to or greater than $35.00 for 20 consecutive trading days.

To the extent vested, SAR awards under the 2008 Plan will be exercisable upon the occurrence of an Exercisability Event. An “Exercisability Event” means the first to occur of (A) the termination of the guarantees provided by API or any of its subsidiaries with respect to the Company’s outstanding indentures and (B) any transaction or series of transactions (whether or not related) that results, directly or indirectly, in the sale, transfer or other disposition of (i) at least 80% of the voting securities (including, without limitation, the Convertible Notes) held by the Investors as of the closing date and with respect to which the Investors receive cash for 100% of their proportionate share of the proceeds received in connection with such sale, transfer or other disposition; or (ii) the sale of at least 80% of the assets of API determined by value as of the date or dates of such asset sale, in which the Investors receive distributions of cash for 100% of their proportionate share of the proceeds received in connection with such sale.

In addition to the SAR grants under the 2008 Plan, our Named Executive Officers also will retain their equity-based awards over Company common shares that are described below under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION—Outstanding Equity Awards at Fiscal Year End”. All NEO equity-based awards are currently underwater (i.e., the exercise price of each option exceeds the market price of such option as of the date hereof).

Directors and Management of the Company Following the Transaction

Immediately following the consummation of the Transaction, the Company’s Board of Directors shall continue to consist of the current directors of the Company. See the sections of this Proxy Statement entitled “PROPOSAL 2: ELECTION OF DIRECTORS” and “CORPORATE GOVERNANCE—The Board of Directors” for more information.

Immediately following the consummation of the Transaction, the officers of the Company shall be as follows:

Directors and Management of API Following the Transaction

Immediately following the consummation of the Transaction, API’s Board of Directors shall consist of three directors designated by the Company, which are currently contemplated to be William Hunter, Henry McKinnell and Edward Brown; three directors designated by the Investors, the identities of whom remain to be determined; and one independent director selected by the Company and subject to the reasonable approval of the Investors, the identity of whom remains to be determined. For more information about the directors to be designated by the Company, each of whom is a current member of the Company’s Board of Directors, see the sections of this Proxy Statement entitled “PROPOSAL 2: ELECTION OF DIRECTORS” and “CORPORATE GOVERNANCE—The Board of Directors”.

Immediately following the Consummation of the Transaction, the executive officers of API shall consist of the current executive officers of the Company as described in the section of this Proxy Statement entitled “CORPORATE GOVERNANCE—Executive Officers”.

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Regulatory Matters Related to the Transaction

Canada—Investment Canada Act

Under the Investment Canada Act (the “ICA”), certain proposed transactions by non-Canadians to acquire control of a Canadian business exceeding certain financial thresholds may be reviewable under the ICA and cannot be completed until an Application for Review has been submitted and the proposed transaction has been determined by the Minister of Industry to be of net benefit to Canada. Certain other proposed transactions by non-Canadians to acquire control of a Canadian business where the applicable financial thresholds are not exceeded may be subject to post-closing notification under the ICA. The Restructuring and issuance of the Convertible Notes under the Note Purchase Agreement are not notifiable or reviewable under the ICA. A conversion of the Convertible Notes into common stock of API may be notifiable or reviewable under the ICA upon conversion, but a definitive conclusion in that regard cannot be made until the time of any such conversion, based on, among other factors, the applicable financial thresholds in effect under the ICA at that time.

Canada—Competition Act

Under the Competition Act (the “CA”), certain types of proposed transactions involving Canadian entities which exceed certain financial thresholds cannot be completed until the Commissioner of Competition has been notified in advance of the proposed transaction and the applicable waiting period has thereafter expired. In some cases the notification requirement can be waived and/or the applicable waiting period shortened by applying for and obtaining an advance ruling certificate. Neither the Restructuring nor the issuance of the Convertible Notes under the Note Purchase Agreement is subject to these advance notification requirements under the CA. A conversion of the Convertible Notes into common stock of API may be notifiable under the CA upon such conversion, but a definitive conclusion in that regard cannot be made until the time of any such conversion, based on, among other factors, the applicable financial thresholds in effect under the CA at that time.

United States Antitrust

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules thereunder, certain transactions, including the Transaction, may not be completed unless certain waiting period requirements have been satisfied. The Company and the Investors expect to file a notification and report form pursuant to the HSR Act with the Antitrust Division of the Department of Justice and the Federal Trade Commission as a condition to and in advance of the closing of the Transaction, and may each receive additional requests for information. The requirements of the HSR Act will be satisfied if the closing of the Transaction is consummated within one year from the termination of the waiting period. Even if the waiting period is terminated, the Antitrust Division, the Federal Trade Commission or others could take action under the antitrust laws with respect to the Transaction, including seeking to enjoin the Transaction, to rescind the Transaction or to conditionally approve the Transaction. There can be no assurance that a challenge to the Transaction on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Dissenting Shareholders’ Rights

Shareholders of the Company will be entitled to exercise dissent rights (the “Dissent Rights”) with respect to the Transaction Resolution in accordance with the Dissent Rights in Sections 237 to 247 of the BCABC. Shareholders who validly exercise their Dissent Rights and do not withdraw their dissent (“Dissenting Shareholders”) will be entitled to receive the “fair value” of their common shares (“dissenting shares”) determined in accordance with Sections 237 to 247 of the BCABC as at the day before the Transaction Resolution is adopted by shareholders. Unless this condition is waived by the Investors and the Company, the Transaction will not be consummated if the dissenting shares represent more than 2.5% of the Company’s outstanding shares.

Shareholders should note that, even if the Company would be inclined to waive this condition respecting the number of dissenting shares, Ares may not be willing to do so, and in any event, there are conditions in the Note

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Purchase Agreement requiring a minimum amount of cash to be available at API, as well as contractual limitations under existing indentures respecting the payment on account of equity interests in the Company, that may prevent (as a practical or legal matter) any significant increase in the number of dissenting shares being waived by the Company.

The following summary of the Dissent Rights is not a comprehensive description of the procedures to be followed in connection with the exercise of these Dissent Rights. The summary is qualified in its entirety by reference to the full text of Sections 237 to 247 of the BCABC, which are set out in Appendix C to this Proxy Statement. Shareholders who intend to exercise Dissent Rights should seek legal advice and carefully consider and comply with the provisions of the Dissent Rights. Failure to comply with the applicable Dissent Rights provisions and to adhere to the procedures established therein may result in the loss of the Dissent Rights in respect of the Transaction Resolution. Dissenting Shareholders must send any written notice of dissent in respect of the Transaction Resolution pursuant to the Dissent Rights to the Company, care of its legal counsel, Borden Ladner Gervais LLP, at 1200 Waterfront Centre, 200 Burrard Street, P.O. Box 48600, Vancouver, British Columbia, Canada V7X 1T2 (Facsimile: (604) 622-5824), Attention: Ian Webb, by no later than [—], 2008. Shareholders should be aware that simply voting against the Transaction Resolution at the Meeting does not constitute the exercise of Dissent Rights.

Dissent Rights—Transaction Resolution

Each registered shareholder of the Company, the name of which appears on the central securities register of the Company, shall have the right to exercise Dissent Rights in respect of the Transaction Resolution. The Dissent Rights are effected in accordance with Sections 237 to 247 of the BCABC. In the event the Transaction is completed, any Dissenting Shareholder who dissents in the required manner from the Transaction Resolution will be entitled to be paid the fair value of their shares immediately before the approval by shareholders of the Transaction Resolution.

A shareholder of the Company intending to dissent in respect of the Transaction Resolution must send written notice of dissent to the Company at least two days before the Meeting and such written notice of dissent must otherwise strictly comply with the requirements of section 242 of the BCABC, including setting forth details of the ownership of shares of Company. A Dissenting Shareholder may only dissent with respect to all of the shares of the Company held on behalf of any one beneficial owner and registered in the Dissenting Shareholder’s name. Under the BCABC there is no right of partial dissent.

A vote against the Transaction Resolution does not constitute notice of dissent under the BCABC and a shareholder who votes in favor of the Transaction Resolution will not be considered a Dissenting Shareholder.

Promptly after the approval of the Transaction Resolution and after the date on which the Company forms the intention to proceed with the Transaction, the Company must send notice of such fact to each Dissenting Shareholder who has not withdrawn its objection and who has not voted in favor of the Transaction Resolution. Such Dissenting Shareholder has one month after receipt of such notice to send the Company or its transfer agent a written notice setting out such holder’s name, address, the number of the common shares of the Company that are subject to the objection and a demand for payment of the fair value of such common shares. The Dissenting Shareholder must send to the Company any certificates representing common shares subject to the objection with the notice containing the demand for payment.

Upon the sending of the notice to the Company containing the demand for payment, the Dissenting Shareholder is deemed to have sold its shares to the Company and the Company is deemed to have purchased such shares. Accordingly, after the sending of such notice, the Dissenting Shareholder ceases to have any further rights as a shareholder of the Company except the right to be paid the fair value for the Dissenting Shareholder’s common shares, unless (i) the shareholder withdraws the notice before the Company makes the offer to pay for the common shares, or (ii) the Company fails to make the offer to pay for the common shares and the Dissenting

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Shareholder withdraws the notice, or (iii) the directors of the Company revoke the Transaction Resolution, in which case the Dissenting Shareholder will be reinstated as a shareholder of the Company as of the date the notice was sent.

The Company and the Dissenting Shareholder may agree on the amount of the payout value on the common shares and in that event, the Company must promptly pay the agreed amount to the Dissenting Shareholder unless the Company has reasonable grounds to believe that the Company is insolvent or the payment would render the Company insolvent, in which case the Company must not make the payment and must send notice to the Dissenting Shareholder that the Company is unable to lawfully pay the Dissenting Shareholder for its common shares. In the event that the Company fails to make an offer to a Dissenting Shareholder, or in the event that such offer is not accepted, the Company or the Dissenting Shareholder may apply to court to fix a fair value for the common shares of the Dissenting Shareholder. The BCABC contains provisions governing such court application.

Subsection 244(4) and Section 246 of the BCABC outline certain events when Dissent Rights will cease to apply where such events occur before payment is made to the Dissenting Shareholder of the fair value of the shares, (including if the Transaction Resolution does not pass or is otherwise not proceeded with). In such events, the Dissenting Shareholder will be entitled to the return of the applicable share certificate(s), if any, and rights as a shareholder of the Company in respect of the applicable common shares will be regained.

Shareholders who are ultimately not entitled, for any reason, to be paid fair value for their common shares, in respect of which they dissent, may be deemed to have participated in the Transaction as though they were non-dissenting shareholders of the Company.

Certain Canadian Federal Income Tax Considerations for the Exercise of Dissent Rights

The following is a summary of Canadian federal income tax considerations relating to the exercise of Dissent Rights generally applicable to a Dissenting Shareholder who, for purposes of the Income Tax Act (Canada) (“ITA”) holds common shares of the Company (the “Shares”) as capital property and deals at arm’s length with, and is not affiliated, with the Company. Generally, the Shares will be capital property to a Dissenting Shareholder unless the Shares are held or were acquired in the course of carrying on business or as part of an adventure in the nature of trade. Dissenting Shareholders who are residents of Canada for purposes of the ITA may, in some circumstances, be entitled to make an irrevocable election in accordance with subsection 39(4) of the ITA to have such Shares and every other “Canadian security” (as defined in the ITA) owned by them deemed to be capital property in the taxation year of election and in all subsequent taxation years. Dissenting Shareholders should consult their own tax advisors for advice with respect to whether an election under subsection 39(4) of the ITA is available or advisable in their particular circumstances.

This summary is based on the current provisions of the ITA, the regulations thereunder (the “Regulations”) and the current administrative policies and assessing practices published in writing by the Canada Revenue Agency prior to the date hereof. This summary also takes into account all specific proposals to amend the ITA and the Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policies or assessing practices, whether by legislative, regulatory, administrative or judicial action or decision, nor does it take into account provincial, territorial or foreign tax legislation or considerations which may be different from those discussed in this summary.

This summary is not applicable to a Dissenting Shareholder (a) that is, for the purposes of certain rules in the ITA applicable to securities held by financial institutions, a “financial institution” (as defined in the ITA), (b) an interest in which is a “tax shelter investment” (as defined in the ITA), (c) that is a

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“specified financial institution” or “restricted financial institution” (as defined in the ITA), (d) who acquired his or her Shares upon exercise of an employee stock option, (e) to whom the functional currency reporting rules in subsection 261(4) of the ITA would apply or (f) to a Non-Resident Dissenting Shareholder (as defined below) that is an insurer carrying on business in Canada and elsewhere. Such Dissenting Shareholders should consult their own tax advisors with respect to their particular circumstances.

This summary is not, and is not intended to be, legal or tax advice to any particular Dissenting Shareholder. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, Dissenting Shareholders should consult with their own tax advisors with respect to the Canadian federal income tax consequences of the transactions described herein having regard to their own particular circumstances.

In general, a Dissenting Shareholder who receives from the Company a payment in the amount equal to the fair value of the Dissenting Shareholder’s Shares will be deemed to receive, in respect of each Share, a dividend equal to the amount, if any, by which the fair value of the Share exceeds the paid-up capital (as computed for purposes of the ITA) of the Share. To the extent the payment (other than interest) exceeds the amount of the deemed dividend, the excess will be treated as proceeds of disposition of the holder’s Share, and the holder will realize a capital gain (or capital loss) in respect of each Share to the extent that such proceeds, net of any reasonable disposition costs, exceed (or are less than) the adjusted cost base of the holder’s Share. In certain circumstances, the full amount of the payment (other than interest) received by a holder that is a corporation resident in Canada for purposes of the ITA may be treated as proceeds of disposition, rather than as a dividend. Corporations that are considering exercise of Dissent Rights should consult their own tax advisors for specific advice in this regard.

Deemed Dividends

A Dissenting Shareholder who is resident in Canada for purposes of the ITA (a “Resident Dissenting Shareholder”) will be required to include in the holder’s income, as a taxable dividend, the portion of the payment received from the Company that is deemed to be a dividend. The normal gross-up and dividend tax credit rules applicable to taxable dividends received from a taxable Canadian corporation will apply to such dividend received by a Resident Dissenting Shareholder who is an individual. The Company does not intend to designate any portion of such dividend as an “eligible dividend” for the purpose of the enhanced gross-up and dividend tax credit rules. A dividend deemed to be received by a Resident Dissenting Shareholder that is a corporation, to the extent not treated as proceeds of disposition, will generally be deductible in computing its taxable income. Certain corporations may be liable to pay a refundable tax of 33 ¹/3% under Part IV of the ITA on such dividends.

In the case of a Dissenting Shareholder who is not resident in Canada for purposes of the ITA (a “Non-Resident Dissenting Shareholder”), a dividend deemed to be received on the Shares will be subject to Canadian withholding tax at the rate of 25%, subject to reduction of such rate under an applicable income tax convention.

Capital Gains and Capital Losses

One-half of any capital gain realized by a Resident Dissenting Shareholder will be included in income as a taxable capital gain and one-half of any capital loss will normally be deducted as an allowable capital loss against taxable capital gains realized in the year of disposition. Any unused allowable capital losses may be applied to reduce net taxable capital gains realized in the three preceding taxation years or any subsequent taxation year, subject to the provisions of the ITA in that regard.

The amount of any capital loss realized on the disposition of Shares by a Resident Dissenting Shareholder that is a corporation may be reduced by the amount of dividends received or deemed to have been received by it

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on such Shares to the extent and in the circumstances prescribed by the ITA. Similar rules may apply where a corporation is a member of a partnership or beneficiary of a trust that owns Shares, or where a partnership or trust of which a corporation is a member or beneficiary is itself a member of a partnership or a beneficiary of a trust that owns such Shares.

A Resident Dissenting Shareholder that is throughout the relevant taxation year a “Canadian-controlled private corporation” (as defined in the ITA) also may be liable to pay an additional refundable tax of 6 ²/3% on its “aggregate investment income” (as defined in the ITA) for the year, which will include taxable capital gains.

A Non-Resident Dissenting Shareholder will not be subject to tax under the ITA on any capital gain realized on the disposition of Shares as a result of the Transaction unless the Shares are “taxable Canadian property” (within the meaning of the ITA) to the Non-Resident Dissenting Shareholder at the time they are acquired by the Company (the “Acquisition Time”) and such gain is not otherwise exempt from tax under the ITA pursuant to the provisions of an applicable income tax treaty.

Generally, Shares will not be taxable Canadian property to a Non-Resident Dissenting Shareholder at the Acquisition Time provided that:

Even if Shares are considered to be taxable Canadian property of a Non-Resident Dissenting Shareholder, the Non-Resident Dissenting Shareholder may be exempt from tax under the ITA on any gain on the disposition of Shares pursuant to the terms of an applicable income tax treaty. Non-Resident Dissenting Shareholders whose Shares may be taxable Canadian property should consult with their own tax advisors with respect to the availability of any relief under the terms of any applicable income tax treaty in their particular circumstances.

In the event that the Shares constitute taxable Canadian property to a Non-Resident Dissenting Shareholder and any capital gain realized by the Non-Resident Dissenting Shareholder on the disposition of Shares as a result of the Transaction is not exempt from tax under the ITA by virtue of an applicable income tax treaty, then the tax consequences described above under “Capital Gains and Capital Losses” will generally apply. Non-Resident Dissenting Shareholders should consult their own tax advisors regarding any Canadian reporting requirements applicable to them arising from the Transaction.

Interest

Interest awarded by a court to a Resident Dissenting Shareholder will be included in the holder’s income for purposes of the ITA. Interest awarded to a Non-Resident Dissenting Shareholder will not be subject to withholding tax under the ITA.

Certain United States Federal Income Tax Considerations for the Exercise of Dissent Rights

The following discussion is limited to the material U.S. federal income tax aspects of the exercise of Dissent Rights for a Dissenting Shareholder who is a citizen or resident of the United States for U.S. federal income tax

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purposes and who holds common shares as a capital asset. The following discussion does not address taxpayers subject to special treatment under the U.S. federal income tax laws, such as insurance companies, financial institutions, dealers in securities, tax-exempt organizations, S corporations, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, and taxpayers subject to the alternative minimum tax. In addition, the following discussion may not apply to stockholders who acquired their common shares upon the exercise of employee stock options or otherwise as compensation or who hold their shares as part of a hedge, straddle or conversion transaction.

A Dissenting Shareholder generally will recognize capital gain or loss equal to the difference between such shareholder’s adjusted tax basis in those common shares and the amount of cash received (or, in case of payments made in Canadian dollars, the U.S. dollar value of the amount received) pursuant to the exercise of such shareholder’s Dissent Rights. Capital gain of a noncorporate U.S. holder that is recognized in taxable years beginning before January 1, 2011 is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. Each shareholder who contemplates exercising Dissent Rights should consult its tax advisor as to the possibility that all or a portion of the payment received pursuant to the exercise of such rights will be treated as dividend income.

Backup withholding may apply to payments received by a Dissenting Shareholder unless a Dissenting Shareholder (i) is a corporation or comes within certain other exempt categories and demonstrates this fact, or (ii) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Dissenting Shareholders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such exemption. Backup withholding tax is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a Dissenting Shareholder’s U.S. federal income tax liability, if any, and a Dissenting Shareholder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service in a timely manner.

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PROPOSAL 1: AUTHORIZATION OF THE TRANSACTION

Our Board of Directors adopted resolutions authorizing the consummation of the Transaction, including the entry into the Restructuring Agreements and Transaction Agreements and the issuance of the Convertible Notes, and directing that the Transaction be submitted to the shareholders of the Company for their consideration and, if thought fit, approval by special resolution.

This Proposal 1 requests that the shareholders of the Company adopt, pursuant to Section 301 of the Business Corporations Act (British Columbia), the special resolution, referred to as the Transaction Resolution, included in Appendix A to this Proxy Statement approving, among other things, the consummation of the Transaction through the entry into the Restructuring Agreements and Transaction Agreements. The Transaction is described in the section of this Proxy Statement entitled “THE TRANSACTION”. For a summary of the Restructuring and the Transaction Agreements, see the sections of this Proxy Statements entitled “THE RESTRUCTURING” and “DESCRIPTION OF TRANSACTION AGREEMENTS”, respectively.

In order for the Transaction to be approved, the Transaction Resolution must be passed by 75% of the votes cast by the holders of common shares who vote in respect thereof. The full text of the Transaction Resolution approving the Transaction is set out in Appendix A to this Proxy Statement. In the event that the Company’s shareholders do not adopt the Transaction Resolution approving this Proposal 1, the Transaction will not be consummated.

THE BOARD OF DIRECTORS HAS CONCLUDED THAT THE TRANSACTION IS IN THE BEST INTERESTS OF THE COMPANY AND IS FAIR TO ITS SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE CONSUMMATION OF THE TRANSACTION.

In the absence of instructions to the contrary or where instructions are uncertain, the enclosed form of proxy will be voted “FOR” the Transaction Resolution.

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THE RESTRUCTURING

As described elsewhere in this Proxy Statement, prior to the consummation of the API Investment, the Company and API intend to enter into certain agreements to effectuate the Restructuring, which agreements are currently contemplated to include:

The terms of these agreements remain subject to ongoing negotiations between the Investors and the Company. Following the Restructuring, the assets and liabilities of the Company will consist of the Retained Business. The below assets/liabilities allocation table illustrates the division of assets and liabilities between the Company and API as if the Restructuring had occurred on March 31, 2008 and giving effect to the Restructuring as of as such date. For certain additional pro forma information relating to the Transaction, the Tender Offer and certain other matters, see the section of this Proxy Statement entitled “UNAUDITED SELECTED FINANCIAL INFORMATION AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS”.

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Angiotech Pharmaceutical Interventions, Inc.

Assets/Liabilities Allocation Table

As At March 31, 2008

The following table is intended to show the allocation of assets and liabilities between the Company and API assuming the Transaction had closed on March 31, 2008 and immediately prior to the consummation of the Tender Offer and the issuance of any of the Convertible Notes:

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API 2008 Incentive Plan

The 2008 Plan is designed to assist API in attracting, retaining and motivating directors, officers and employees of API and will be administered by API’s Board of Directors. The 2008 Plan will provide for grants of SARs to employees, officers, directors and consultants of API and its subsidiaries. Holders of SARs are not required to pay an exercise price, but rather, upon exercise of an SAR, the holder receives the difference (in cash or shares, at API’s discretion) between the base price of the SAR and the fair market value of a share of the Company’s common stock on the date of exercise.

Each SAR granted under the 2008 Plan is required to have a base price equal to at least fair market value of a share of API common stock on the date of grant. The maximum term of awards granted under the 2008 Plan is ten years from the date of grant and the term of the 2008 Plan is ten years from the closing of the Transaction. 4,981,884 shares of API’s common stock (which represents 13.75% of API’s common stock on a fully diluted basis) are reserved for issuance under the 2008 Plan.

Vesting. Awards granted to the recipients who are a Vice President or above as of the date of grant will vest in equal annual installments on the 1^st, 2^nd, 3^rd, 4^th, and 5^th anniversaries of the date of grant; provided, however, that 33% of the award will be subject to additional vesting requirements and will only vest (assuming such award has met its time based vesting) upon the first to occur of (A) the consummation of a Performance Transaction (as defined below); or (B) if, following an initial public offering of API that is not a Qualified IPO (as defined below), the closing price per share of API common stock is equal to or greater than $35.00 for 20 consecutive trading days. Notwithstanding the five-year vesting provided for above, if (A) or (B) occurs, the five-year vesting schedule described above will be changed to a four-year vesting schedule, which will be retroactively effective as of the date of grant. A “Performance Transaction” means (i) a public offering of API common stock in which the gross proceeds are at least $100 million at a price per share of at least $35.00 (a “Qualified IPO”); (ii) a sale where the Investors receive at least $35.00 per share; or (iii) a series of transactions in which (1) all of the shares of API common stock owned by the Company are distributed to the shareholders of the Company, (2) API has a class of securities registered in the United States under Section 12 of the Exchange Act, (3) API common stock is listed in the United States on the New York Stock Exchange or the Nasdaq Global or Global Select Market and (4) the closing price per share of API common stock is equal to or greater than $35.00 for 20 consecutive trading days. For SAR award recipients who are below Vice President on the date of grant, the award vests in equal annual installments on the 1^st, 2^nd, 3^rd and 4^th anniversaries of the date of grant, regardless of whether a Qualified IPO has occurred. Accordingly, the portion of the SAR subject to performance vesting will not vest until there has been a significant increase in the price per share of API common stock, thereby incentivizing holders of SARs to create additional value in API.

Exercisability. To the extent vested, SAR awards under the 2008 Plan will be exercisable upon the occurrence of an Exercisability Event. An “Exercisability Event” means the first to occur of (A) the termination of the guarantees provided by API or any of its subsidiaries with respect to the Company’s outstanding indentures and (B) any transaction or series of transactions (whether or not related) that results, directly or indirectly, in the sale, transfer or other disposition of (i) at least 80% of the voting securities (including, without limitation, the Convertible Notes) held by the Investors as of the closing date and with respect to which the Investors receive cash for 100% of their proportionate share of the proceeds received in connection with such sale, transfer or other disposition; or (ii) the sale of at least 80% of the assets of API, in which the Investors receive distributions of cash for 100% of their proportionate share of the proceeds received in connection with such sale.

Termination of Employment. If an award recipient’s employment is terminated by API for “cause” (as defined in the 2008 Plan or the recipient’s applicable employment agreement), vested and unvested awards will be cancelled as of date of termination. If a recipient terminates employment without “good reason” (as defined in the 2008 Plan or the recipient’s applicable employment agreement), 50% of vested awards and 100% of unvested awards will be cancelled as of date of termination. If an Exercisability Event has occurred on or prior to

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termination without good reason, vested awards that are not cancelled remain exercisable for 60 days after the date of termination, but in no event beyond the expiration date of the award. If an Exercisability Event has not occurred on or prior to termination without good reason, vested awards that are not cancelled remain exercisable until 60 days after the later of (i) the date of termination and (ii) an Exercisability Event, but in no event beyond the expiration date. If an award recipient’s employment is terminated by API without cause or is terminated by the recipient for good reason, all unvested awards will be cancelled. If an Exercisability Event has occurred on or prior to such termination, vested awards remain exercisable for 90 days. If a Exercisability Event has not occurred on or prior to such termination, vested awards remain exercisable until 90 days after the later of (i) the date of termination and (ii) an Exercisability Event, but in no event beyond the expiration date.

Certain U.S. Federal Income Tax Consequences

The following description of the tax consequences under the 2008 Plan is based on U.S. Federal income tax laws currently in effect and does not address non-U.S., state or local tax consequences.

There are no U.S. Federal income tax consequences either to the recipient or to API upon the grant of SARs. Upon exercise of a SAR, the recipient will generally recognize ordinary income on, and API will generally be entitled to a tax deduction equal to, the amount of money paid to the award holder or the fair market value of the shares on the date on which the shares are issued.

Certain Canadian Income Tax Consequences

The following description of the tax consequences under the 2008 Plan is based on Canadian federal income tax laws currently in effect and does not address foreign, provincial, territorial or local tax consequences. The description does not apply to a consultant who is not an employee, officer or director of API or a related entity. The Canadian federal income tax consequences to a consultant who is subject to Canadian income tax by reason of being resident, or carrying on business, in Canada will depend on the award holder’s specific circumstances.

There are no Canadian federal income tax consequences to a recipient who is an employee, officer or director of API or a related entity upon the grant of SARs. Upon exercise of a SAR, such a recipient who is subject to Canadian income tax by reason of being resident, or employed, in Canada will generally recognize a taxable benefit equal to the amount of money paid to the award holder or the fair market value of the shares on the date on which the shares are issued.

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DESCRIPTION OF TRANSACTION AGREEMENTS

The following is a summary of certain terms of the Transaction Agreements. This summary may not contain all of the information that is important to you. The summary of the Note Purchase Agreement is qualified in its entirety to the full text of the Note Purchase Agreement, including, without limitation, the forms of the Governance Agreement, Convertible Notes and Investor Registration Rights Agreement attached as Exhibits thereto, which is available on EDGAR and SEDAR. The Company urges you to read the full text of the Note Purchase Agreement carefully.

Note Purchase Agreement

As described under “THE TRANSACTION—Description of the Transaction”, the Company, API and the Investors will enter into the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, API will issue a minimum of $200 million, and at API’s option up to $300 million, in aggregate principal amount of Convertible Notes to the Investors in exchange for up to $300 million in cash. The net proceeds, after payment of all expenses in connection with the Transaction, are expected to be approximately $265 million, assuming the maximum number of Convertible Notes is issued.

Use of Proceeds

Upon closing, API will deliver to the Company the net proceeds from the sale of the Convertible Notes to repay the Intercompany Promissory Note. The Company will then use the net proceeds to complete the Tender Offer for the 2013 Notes and/or the 2014 Notes, as described under “DESCRIPTION OF THE TENDER OFFER”.

Closing

Unless the parties agree otherwise, the closing of the transactions contemplated by the Note Purchase Agreement will take place at the offices of Sullivan & Cromwell LLP located at 1888 Century Park East, Suite 2100, Los Angeles, California 90067, no later than the second business day after the satisfaction or waiver of the conditions to the closing. See “—Conditions to the Closing”.

Conditions to the Closing

The Note Purchase Agreement contains the following conditions of both parties to close:

The Note Purchase Agreement contains the following conditions to the obligation of the Investors to close:

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