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Agreement And Plan of Merger Dated May 25, 2006

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Exhibit 10.10

THE SYMBOL '***' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

E XECUTION C OPY


AGREEMENT AND PLAN OF MERGER

by and among

ANGIOTECH PHARMACEUTICALS, INC.,

ANGIOTECH PHARMACEUTICALS (US), INC.,

QUAICH ACQUISITION, INC.,

and

QUILL MEDICAL, INC.


Dated as of May 25, 2006


TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS 1 1.1 Defined Terms 1 ARTICLE 2. THE MERGER 19 2.1 The Merger 19 2.2 Effective Time 20 2.3 Escrow 20 2.4 Effect of the Merger 20 2.5 Certificate of Incorporation; Bylaws 20 2.6 Directors and Officers 20 2.7 The Merger Consideration; Effect on Outstanding Securities of the Company 21 2.8 Dissenting Shares 31 2.9 Surrender and Payment 32 2.10 Lost, Stolen or Destroyed Certificates 34 2.11 Taking of Necessary Action; Further Action 34 2.12 Tax Withholding 34 2.13 Permitted Distribution 34 2.14 Stockholder Representative 34 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 35 3.1 Organization of the Company 35 3.2 Capitalization of the Company 35 3.3 Stockholders' Agreements, etc 36 3.4 Authorization 36 3.5 Officers and Directors 37 3.6 Bank Accounts 37 3.7 Subsidiaries 37 3.8 Property and Equipment 37 3.9 Accounts Receivable 38 3.10 Environmental Matters 38 3.11 Contracts 39 3.12 No Conflict or Violation; Consents 40 3.13 Financial Statements; Books and Records 41 3.14 Absence of Certain Changes or Events 42 3.15 Liabilities 44 3.16 Litigation 44 3.17 Labor Matters 44 3.18 Employee Benefit Plans 45 3.19 Compliance with Laws 46 3.20 Intellectual Property 48 3.21 Tax Matters 51 3.22 Insurance 54 3.23 Product Warranty 55 3.24 Brokers' and Finders' Fees 55 3.25 No Other Agreements to Sell the Company or the Assets 55 3.26 Board Recommendation 55 3.27 Material Misstatements or Omissions 55 3.28 Hart-Scott-Rodino 55 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER, PARENT AND MERGER SUB 55 4.1 Organization 56


-i- 4.2 Authorization 56 4.3 No Conflicts 56 4.4 Merger Consideration 57 4.5 Brokers' and Finders' Fees 57 4.6 Approvals 57 4.7 Buyer' s Stock 57 4.8 SEC Filings; Financial Statements 57 4.9 Absence of Changes 58 4.10 Litigation 58 4.11 Compliance with Laws 58 ARTICLE 5. COVENANTS 59 5.1 Conduct of Business of the Company 59 5.2 No Solicitation 61 5.3 Proxy Statement; Company Board Recommendation 63 5.4 Expenses 64 5.5 Public Disclosure 64 5.6 Access to Information 64 5.7 Commercially Reasonable Efforts 64 5.8 Notification of Certain Matters 65 5.9 Proprietary Rights 65 5.10 FIRPTA Certificate 65 5.11 Voting Agreements 66 5.12 Enforcement of Company Proprietary Rights 66 5.13 Minimum Net Working Capital 66 ARTICLE 6. CONDITIONS TO THE MERGER 66 6.1 Conditions to Obligations of Each Party to Effect the Merger 66 6.2 Additional Conditions to Obligations of the Company 66 6.3 Additional Conditions to the Obligations of Buyer and Merger Sub 67 ARTICLE 7. INDEMNIFICATION 69 7.1 Indemnification by Parent, Buyer and Surviving Corporation 69 7.2 Indemnification by the Company Stockholders 69 7.3 Exclusive Remedy 70 7.4 No Contribution 70 7.5 Indemnification Claims 70 7.6 Third-Party Claims 71 7.7 Payment of Claims: Set Off Limitations 72 7.8 Limitations of Liability 73 ARTICLE 8. TERMINATION, AMENDMENT AND WAIVER 74 8.1 Termination 74 8.2 Procedure for Termination 75 8.3 Effect of Termination 75 8.4 Extension; Waiver 75 ARTICLE 9. MISCELLANEOUS PROVISIONS 76 9.1 Notices 76 9.2 Entire Agreement 77 9.3 Further Assurances; Post-Closing Cooperation 77 9.4 Amendment and Modification 77 9.5 Waiver of Compliance; Consents 78 9.6 Third-Party Beneficiaries 78 9.7 No Assignment; Binding Effect 78


-ii- 9.8 Headings 78 9.9 Invalid Provisions 78 9.10 Governing Law 78 9.11 Arbitration 79 9.12 Construction 80 9.13 Currency 80 9.14 Counterparts 80


-iii-

EXHIBITS AND SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER Exhibit A Form of Voting Agreement Exhibit B Form of Stockholder Representative Agreement


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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of May 25, 2006 (this " Agreement" ), is by and among Angiotech Pharmaceuticals, Inc., a corporation organized under the laws of British Columbia (" Parent" ), Angiotech Pharmaceuticals (US), Inc., a Washington corporation and wholly-owned subsidiary of Parent (" Buyer" ), Quaich Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Buyer (" Merger Sub" ), and Quill Medical, Inc., a Delaware corporation (the " Company" ).


RECITALS

A.

The respective Boards of Directors of Parent, Buyer, Merger Sub and the Company have determined that it is advisable and in the best interests of their respective stockholders to effect the acquisition of the Company pursuant to the terms and subject to the conditions set forth in this Agreement.

B.

In furtherance of such acquisition, the Boards of Directors of Parent, Buyer, Merger Sub and the Company have each approved and declared advisable the merger of Merger Sub with and into the Company (the " Merger" ), upon the terms and subject to the conditions set forth in this Agreement and in accordance with applicable law, including the applicable provisions of the General Corporation Law of the State of Delaware (the " DGCL" or " Delaware Law" ).

C.

In connection with the execution of this Agreement and as an inducement to Buyer and Merger Sub to enter into this Agreement, Matthew A. Megaro and Gregory L. Ruff (together, the " Major Stockholders" ) shall have executed and delivered to Buyer and Merger Sub, concurrently with the execution and delivery of this Agreement by the parties hereto, a Voting Agreement in the form attached hereto as Exhibit A .

D.

Pursuant to the Merger, each outstanding share of Company Stock (as defined herein) issued and outstanding immediately prior to the Effective Time (as defined herein), other than Dissenting Shares (as defined herein), shall be converted solely into the right to receive the consideration set forth in Section 2.7 hereof, upon the terms and subject to the conditions set forth in this Agreement.


AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Buyer, Merger Sub and the Company hereby agree as follows:

ARTICLE 1.

DEFINITIONS

1.1

Defined Terms . As used in this Agreement, the terms below shall have the following meanings:


" AAA" has the meaning set forth in Section 9.11(a).

" Acquisition Agreement" has the meaning set forth in Section 5.2(c).

" Acquisition Proposal" has the meaning set forth in Section 5.2(a).

" Actions" means, collectively, any action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, investigation or dispute as to which written notice has been provided to the applicable party.

" Additional Earnout Year" has the meaning set forth in Section 9.11(d).

" Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such Person. For the purposes of this definition, " control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the direct or indirect ownership of more than 50% of all voting securities, equity, or other ownership interests, by contract or otherwise; and the terms " controlling" and " controlled" have the meanings correlative to the foregoing.

" Aggregate Liquidation Preference" means the sum of (a) the Series A Preference multip lied by the aggregate number of shares of Series A Preferred Stock outstanding immediately prior to the Effective Time, (b) the Series B Preference multiplied by the aggregate number of shares of Series B Preferred Stock outstanding immediately prior to the Effective Time, (c) the Series C Preference multiplied by the aggregate number of shares of Series C Preferred Stock outstanding immediately prior to the Effective Time, and (d) the Series D Preference multiplied by the aggregate number of shares of Series D Preferred Stock outstanding immediately prior to the Effective Time. Shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock that are converted to Company Common Stock immediately prior to the Effective Ti me shall not be considered outstanding at the Effective Time.

" Agreement" has the meaning set forth in the preamble.

" Alternative Transaction Fee" means $5,000,000.00.

" Angiotech SEC Reports" has the meaning set forth in Section 4.8(a).

" Appraisal Claims" has the meaning set forth in Section 7.2(b).

" Assets" means the right, title and interest of any Person in its properties, assets and rights of any kind, whether tangible or intangible, real or personal, including without limitation the right, title and interest in the following: all Contracts and Contract Rights; all machinery, equipment and computer hardware; all inventory; all Books and Records; all Proprietary Rights; all Permits; all return and other rights under or pursuant to all warranties, representations and guarantees made by suppliers and other third parties in connection with the Assets or services furnished to such Person; all cash, accounts receivable, deposits and prepaid expenses; and all goodwill.


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" Balance Sheet" means the unaudited or audited, as the case may be, balance sheet of the Company as of the Balance Sheet Date which constitutes a portion of the Financial Statements.

" Balance Sheet Date" means December 31, 2005.

" Bankruptcy Event" means with respect to a Person: (a) an adjudication that it is bankrupt or insolvent, or the entry of an order for relief under applicable bankruptcy or any similar law; (b) the making by it of a general assignment for the benefit of creditors; (c) the commencement by it of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official over it or any substantial part of its property, or consent to any such relief or to the appointment of or taking of possession by any such official in an involuntary case or other proceeding commenced against it; or (d) the commencement against it of an involuntary case or other pr oceeding seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official over it or any substantial part of its property, such involuntary case or other proceeding remaining undismissed or unstayed for a period of 60 calendar days.

" Barbed Suture Products" means (whether in the form existing on the Closing Date or as later developed, modified or enhanced by Buyer or its Affiliates) self-anchoring sutures and devices for all fields of use, the manufacture, use, sale, offer for sale, or importation of which, if performed by a Person who did not own or have license to the Company Patent Rights and/or Company Know-How, would constitute misappropriation of Company Know-How and/or infringe a Valid Claim of at least one patent included in the Company Patent Rights, including without limitation Contour Threads99 and Quillae Barbed Sutures for tissue repair and wound closure to the extent they meet the foregoing test.

" Basket" has the meaning set forth in Section 7.8(a).

" Bonus Payments" means all bonus payments, retention payments, incentive compensation payments, service award payments or other similar payments payable by the Company to any of the Company' s current or past Employees or consultants, in connection with the transactions contemplated by this Agreement or otherwise.

" Books and Records" means all books, records, lists, ledgers, financial data, financial files, financial reports, Tax Returns and related work papers and letters from accountants relating to the Assets of the Company or the Business, minute books and stock transfer ledgers.


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" Business" means the business and operations of the Company, as conducted by the Company as of the date of this Agreement.

" Business Combination" means, with respect to any Person, (a) any merger, consolidation or other business combination to which such Person is a party, (b) any sale, dividend, split or other disposition of any capital stock or other equity interests of such Person (except for issuances of common stock upon conversion of preferred stock outstanding on the date hereof or the exercise of options or warrants outstanding on the date hereof or issued in accordance with the covenants of this Agreement), (c) any tender offer (including a self tender), exchange offer, recapitalization, restructuring, liquidation, dissolution or similar or extraordinary transaction, (d) any sale, dividend or other disposition of all or a material portion of the Assets of such Person (including by way of exclusive license or joint venture formation) or (e) the entering into of any agre ement or understanding, the granting of any rights or options, or the acquiescence of such Person, with respect to any of the foregoing.

" Business Day" means a day other than Saturday, Sunday or any day on which banks located in the State of New York are authorized or obligated to close.

" Buyer" has the meaning set forth in the preamble.

" Cash Pro-Rata Portion" means the dollar amount of the Initial Merger Consideration which each Company Holder is entitled to receive as set forth on the Merger Consideration Spreadsheet relative to the aggregate amount of the Initial Consideration that the Company Holders are entitled to receive in respect of their shares of Company Stock or pursuant to Section 2.7(c).

" CDAPCA" has the meaning set forth in Section 3.19(b).

" Certificate of Merger" has the meaning set forth in Section 2.2.

" Certificates" has the meaning set forth in Section 2.9(b).

" Claim Notice" has the meaning set forth in Section 7.5.

" Closing" has the meaning set forth in Section 2.1(b).

" Closing Date" has the meaning set forth in Section 2.1(b).

" Code" means the Internal Revenue Code of 1986, as amended.

" Combination Product" means any product of the Parent, Buyer, Surviving Corporation or their respective Affiliates that is comprised of one or more Barbed Suture Products and bundled with, packaged with or sold in connection with one or more other products of the Parent, Buyer, Surviving Corporation or their respective Affiliates.


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" Combination Product Adjustment" shall mean if, on a country-by-country basis, a Barbed Suture Product is sold as part of a Combination Product, Net Sales for such Combination Product shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction A/(A + B), where A is the average sales price of the Barbed Suture Product, if sold separately in finished form in such country, and B is the average sales price of all other products in the combination, if sold separately in finished form in such country. If, on a country-by-country basis, the Barbed Suture Product is sold separately in finished form in such country but the other product(s) in the Combination Product is not sold separately in finished form in such country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by the fra ction C/(C+D) where C is the average sales price of the Barbed Suture Product and D is the difference between the average sales price of the Combination Product and the average sales price of the Barbed Suture Product. If, on a country-by-country basis, the other product(s) in the Combination Product is sold separately in finished form in such country but the Barbed Suture Product is not sold separately in finished form in such country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction one (1) minus (E/(E+F)) where E is the average sales price of the other product(s) in the Combination Product and F is the difference between the average sales price of the Combination Product and the average sales price of the other product(s). If, on a country-byadcountry basis, neither the Barbed Suture Product nor the other product(s) is sold separately in finished form in such country, Net Sales for such Combination Product shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction G/(G + H), where G is the fair market value of the Barbed Suture Product determined in good faith by Parent based on available market information, and H is the fair market value of all the other products in the Combination Product determined in good faith by Parent based on available market information.

" Commercialization Efforts" shall mean efforts (a) to commercialize all Barbed Suture Products for the indications for which the requisite governmental approval, including FDA clearance, has been granted, (b) to develop and obtain the requisite governmental approval, including FDA clearance, of the orthopedic indication of a Barbed Suture Product for tendon repair and (c) to commercially exploit the Company' s existing Company Proprietary Rights.

" Commercially Reasonable Efforts" shall mean efforts and deployment of resources, consistent with the exercise of reasonable and prudent scientific and business judgment in good faith, normally used by a company in the medical device industry for a product owned by it or to which it has rights, which is of similar market potential at a similar stage in its development or product life, taking into account issues of safety and efficacy, product profile, product portfolio management, with consideration to the competitiveness of the marketplace, the proprietary position of the product, the regulatory and reimbursement structure involved, the cost of scaling up a manufacturing process (including facility costs), the profitability of the applicable products, and other relevant factors applicable to the medical device industry.

" Common Merger Consideration" means the dollar amount equal to a fraction,

(x) the numerator of which is equal to the Initial Merger Consideration minus the Aggregate Liquidation Preference, and (y) the denominator of which is equal to the number of shares of Company Common Stock outstanding immediately prior to the Effective Time, including such shares of Company Common Stock issued upon the conversion of Company Preferred Stock and the exercise of Company Options and Company Warrants prior to the Effective Time.


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" Common Warrants" means any warrants to purchase shares of Company Common Stock, whether exercisable or unexercisable, granted by the Company.

" Common Warrantholder" has the meaning set forth in Section 2.7(d).

" Company" has the meaning set forth in the preamble.

" Company Acquisition" shall mean any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Company pursuant to which Company' s stockholders immediately preceding such transaction hold less than 50% of the aggregate equity interests in the surviving or resulting entity of such transaction,

(ii) a sale or other disposition by Company of assets representing in excess of 50% of the aggregate fair market value of Company' s business immediately prior to such sale, or (iii) the acquisition by any Person (including by way of a tender offer or an exchange offer or issuance by Company), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 50% of the voting power of the then outstanding shares of capital stock of Company other than the sale of securities of the Company in connection with a bona fide financing transaction for capital raising purposes.

" Company Common Stock" means the common stock, par value $0.001 per share, of the Company.

" Company Disclosure Schedule" has the meaning set forth in Article 3.

" Company Holder" means the Company Stockholders together with the Company Optionholders entitled to Merger Consideration and included on the Merger Consideration Spreadsheet pursuant to Section 2.7(c).

" Company Holders Protection Payment" has the meaning set forth in Section 5.12(a).

" Company Know-How" means any and all proprietary information and know-how of the Company relating to the Company' s proprietary sutures, including without limitation methods for making and optimizing the performance of such sutures, and methods and devices for the delivery of such sutures, which information is licensed to, or owned or controlled by the Company, including but not limited to, all technical data, practices, plans, specifications, procedures and other information.


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" Company Material Adverse Effect" means any change, circumstance or effect that is materially adverse to the business, operations, assets, properties, liabilities, financial condition or results of operations of the Company, taken as a whole, or that materially impairs the ability of the Company to consummate any of the transactions contemplated by this Agreement; provided , however , that any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which the Company operates except to the extent the Company is affected in a disproportionate manner as compared to other similarly situated companies in the same industries; (ii) national or international political or social conditions, including terrorism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP or other similar accounting requirements in foreign countries which are not specific to the Company; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental or Regulatory Authority except to the extent the Company is affected in a materially disproportionate manner as compared to other similarly situated companies in the same industries; (vi) any action taken by Parent, Buyer or Merger Sub prior to or on the Closing Date; (vii) the public announcement, pendency or completion of the transactions contemplated by this Agreement; or (viii) any failure, in and of itself, by the Company to meet any internal or disseminated projections, forecasts or revenue or earnings predictions (previously supplied to Parent, Buyer or Merger Sub prior to Closing) for any period; or (x) any compliance by the Company with any request made by Buyer or its Affiliates, shall not be taken into account in determining whether a " Company Material Adverse Effect" has occurred or would reasonably be expected to occur. References in this Agreement to dollar amount thresholds shall not be deemed to be evidence of a Company Material Adverse Effect or materiality.

" Company Options" means any options to purchase shares of Company Common Stock, whether vested or unvested, granted by the Company pursuant to any Company Stock Plan.

" Company Patent Rights" means all of the following Proprietary Rights of the Company: (a) all United States and foreign patents, patent applications and provisional applications relating to the Barbed Suture Products and set forth on Section 3.20(b) of the Company Disclosure Schedule and (b) all United States and foreign patents issued with respect to the applications identified in clause (a) hereof including divisional applications, continuations, re examinations and re issues of such applications or patents.

" Company Permits" has the meaning set forth in Section 3.19(b).

" Company Preferred Stock" means the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.

" Company Proprietary Right" shall mean any Proprietary Right that (a) is owned by, (b) is licensed to the Company or (c) was developed or created by or for the Company.

" Company Stock" means the Company Common Stock and the Company Preferred Stock.

" Company Stock Plan" means the Quill Medical Stock Option Plan.


-7-


" Company Stockholder" means each holder of Company Stock immediately prior to the Effective Time.

" Company Stockholder Approval" means the adoption of this Agreement and the approval of the Merger by (a) the holders of at least a majority of the outstanding shares of Company Stock and Preferred Stock, voting together as a single class and on an as-converted basis, (b) the holders of a majority of the outstanding shares of Series B Preferred Stock, voting together as a single class, (c) the holders of a majority of the outstanding shares of Series C Preferred Stock, voting together as a single class and (d) the holders of a majority of the outstanding shares of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as a single class and on an as-converted basis.

" Company Stockholders' Meeting" has the meaning set forth in Section 5.3(a).

" Company Warrants" means the Common Warrants and the Preferred Warrants.

" Confidentiality Agreement" has the meaning set forth in Section 5.6.

" Contested Claim" has the meaning set forth in Section 7.5.

" Contract Rights" means all rights and obligations under the Contracts.

" Contracts" means all agreements, contracts, leases (whether for real or personal property), purchase orders, undertakings, covenants not to compete, employment agreements, confidentiality agreements, licenses, instruments, obligations and commitments to which a Person is a party or by which a Person or any of its Assets are bound or affected, whether written or oral.

" Cosmetic Indications" means use of the Barbed Suture Products for aesthetic correction of ptosis in aesthetic and cosmetic surgery, including breast and other non-facial applications.

" CSA" has the meaning set forth in Section 3.19(b).

" DEA" has the meaning set forth in Section 3.19(b).

" Deferred Compensation Plan" has the meaning set forth in Section 3.18(f).

" DGCL" or " Delaware Law" has the meaning set forth in the recitals.

" Dissenting Shares" has the meaning set forth in Section 2.8(a).

" Earnout Objection Statement" has the meaning set forth in Section 2.7(g)(viii).

" Earnout Paymen
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