AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

CONFIDENTIAL TREATMENT REQUESTED BY QLT INC.

AGREEMENT AND PLAN OF MERGER

QLT INC.

3088923, INC.

FORSIGHT NEWCO II, INC.

AND

THE STOCKHOLDERS REPRESENTATIVES

Dated as of October 8, 2007

TABLE OF CONTENTS

						Page
ARTICLE 1.     Definitions							1
	Section 1.1			Certain Definitions			1
	Section 1.2			Terms Defined Elsewhere			9
ARTICLE 2.     The Merger							11
	Section 2.1			The Merger			11
	Section 2.2			Closing			11
	Section 2.3			Effect of the Merger			11
	Section 2.4			Certificate of Incorporation; Bylaws			12
	Section 2.5			Directors and Officers of the Surviving Corporation			12
ARTICLE 3.     Conversion of Securities; Escrow; Exchange of Certificates							12
	Section 3.1			Conversion of Securities			12
	Section 3.2			Escrow			13
	Section 3.3			Exchange of Certificates			14
	Section 3.4			Stock Transfer Books			15
	Section 3.5			Development Obligations			15
	Section 3.6			Additional Payments			19
	Section 3.7			Closing Deliveries			26
ARTICLE 4.     Representations and Warranties of the Company							26
	Section 4.1			Organization, Standing and Corporate Power			26
	Section 4.2			Subsidiaries; Investments			26
	Section 4.3			Capital Structure; Stockholder List			26
	Section 4.4			Authority			27
	Section 4.5			Noncontravention			28
	Section 4.6			Corporate Records			28
	Section 4.7			Financial Statements			28
	Section 4.8			No Undisclosed Liabilities			29
	Section 4.9			Absence of Certain Changes or Events			29
	Section 4.10			Accounts Receivable			30
	Section 4.11			Indebtedness			31
	Section 4.12			Litigation			31

TABLE OF CONTENTS
(Continued)

						Page
	Section 4.13			Contracts			31
	Section 4.14			Compliance with Laws; Permits			32
	Section 4.15			Employee Benefit Plans			32
	Section 4.16			Labor and Other Employment Matters			33
	Section 4.17			Taxes			34
	Section 4.18			Environmental Matters			37
	Section 4.19			Properties			38
	Section 4.20			Intellectual Property			38
	Section 4.21			Regulatory Compliance			41
	Section 4.22			Insurance			42
	Section 4.23			Brokers; Advisory Fees			43
	Section 4.24			Disclosure			43
	Section 4.25			Certain Payments			43
ARTICLE 5.     Representations and Warranties of Parent and Merger Sub							43
	Section 5.1			Organization, Standing and Corporate Power			43
	Section 5.2			Authority			43
	Section 5.3			Noncontravention			44
	Section 5.4			Brokers			45
	Section 5.5			Financing			45
	Section 5.6			Performance			45
ARTICLE 6.     Covenants							45
	Section 6.1			Conduct of Business by the Company			45
ARTICLE 7.     Additional Agreements							49
	Section 7.1			Access to Information; Confidentiality			49
	Section 7.2			Appropriate Action; Consents; Filings			50
	Section 7.3			Certain Notices			52
	Section 7.4			Public Announcements			52
	Section 7.5			Transition Services			53
	Section 7.6			Facility Rental			53
	Section 7.7			Tax Matters			53
	Section 7.8			Continuing Employees’ Salary and Benefits			54
	Section 7.9			Indemnification of Directors and Officers			55

TABLE OF CONTENTS
(Continued)

						Page
	Section 7.10			Closing Date Financial Statements			55
	Section 7.11			Post-Closing Enforcement of IP-Related Agreements			55
ARTICLE 8.     Closing Conditions							56
	Section 8.1			Conditions to Each Party’s Obligation to Effect the Merger			56
	Section 8.2			Conditions to Obligations of Parent and Merger Sub			56
	Section 8.3			Conditions to Obligation of the Company			58
ARTICLE 9.     Termination, Amendment and Waiver							59
	Section 9.1			Termination			59
	Section 9.2			Effect of Termination			59
	Section 9.3			Amendment			60
	Section 9.4			Waiver			60
ARTICLE 10.     Indemnification							60
	Section 10.1			Indemnification.			60
	Section 10.2			Limitations on Indemnification			62
	Section 10.3			Method of Asserting Claims			62
	Section 10.4			Waiver			65
	Section 10.5			Exclusive Remedy			65
	Section 10.6			Survival of Representations and Covenants of the Closing Securityholders			65
	Section 10.7			Survival of Representations and Covenants of Parent, Merger Sub and the Surviving Corporation			65
ARTICLE 11.     The Stockholders Representatives							66
	Section 11.1			Appointment and Duties of the Stockholders Representatives			66
	Section 11.2			Resignation or Removal of the Stockholders Representatives			66
	Section 11.3			Representative Reimbursement Amount			67
ARTICLE 12.     General Provisions							68
	Section 12.1			Notices			68
	Section 12.2			Interpretation			69
	Section 12.3			Severability			69
	Section 12.4			Entire Agreement			70
	Section 12.5			Assignment			70
	Section 12.6			Parties in Interest			70
	Section 12.7			Mutual Drafting			70

TABLE OF CONTENTS
(Continued)

						Page
	Section 12.8			Governing Law			70
	Section 12.9			Enforcement			70
	Section 12.10			Third Party Beneficiary Rights			71
	Section 12.11			Force Majeure			71
	Section 12.12			Disclosure Schedules			72
	Section 12.13			Days			72
	Section 12.14			Reasonable Consent Required			72
	Section 12.15			Counterparts			72
EXHIBITS
	Exhibit A -			Form of Escrow Agreement			A-1
	Exhibit B -			Amended and Restated Certificate of Incorporation of the Company			B-1
	Exhibit C -			Amended and Restated Bylaws of the Company			C-1
	Exhibit D -			Form of Consulting Agreement			D-1
	Exhibit E -			Form of Assignment Agreement			E-1
SCHEDULES
	Schedule 1.1(a)
	Schedule 3.6(a)
	Schedule 6.1
	Company Disclosure Schedules
	Parent Disclosure Schedules

AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER, dated as of October 8, 2007 (this “ Agreement ”), is entered into by and among QLT Inc., a company incorporated under the laws of the Province of British Columbia (“ Parent ”), 3088923, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Parent (“ Merger Sub ”), ForSight Newco II, Inc., a Delaware corporation (the “ Company ”) and the individuals named in Section 11.1 as the Stockholders Representatives (the “ Stockholders Representatives ”), solely for purposes of the provisions hereof which specifically refer to the Stockholders Representatives. Parent, Merger Sub and the Company are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties .”

     WHEREAS, Parent (through Merger Sub) desires to acquire all of the businesses operated by the Company by the merger of Merger Sub with and into the Company, with the Company as the surviving corporation, pursuant to which each share of Company Stock (as defined herein) issued and outstanding immediately prior to the Effective Time (as defined herein) will be converted into the right to receive that portion of the Merger Consideration (as defined herein) and Additional Payments (as defined herein) distributable in respect of each such share as more fully set forth in this Agreement (the “ Merger ”); and

     WHEREAS, the Board of Directors (or a duly constituted and authorized committee thereof) of each of Parent, Merger Sub and the Company has determined that the Merger, in the manner set forth in this Agreement, is advisable and in the best interests of the stockholders of such corporation and, by resolutions duly adopted, has approved and adopted this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1.
DEFINITIONS

     Section 1.1      Certain Definitions . For purposes of this Agreement, the term:

     (a)     “ Additional Product ” means any product using a [**] that delivers an active pharmaceutical ingredient other than the active pharmaceutical ingredient identified in Schedule 1.1(a) hereto.

     (b)      “Affiliate ” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

     (c)     “ ANDA ” means abbreviated new drug application.

     (d)     “ BLA ” means biologics license application.

     (e)     “ Business Day ” means any day other than a Saturday, Sunday or any other day that is a legal holiday in the State of California or is a day on which banking institutions in such state are required or authorized by Law or other governmental action to close.

     (f)     “ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended as of the date hereof.

     (g)     “ Change of Control Bonus Agreements ” means those certain Change of Control Bonus Agreements, dated September 10, 2007, by and between the Company and each of [**] , which provide for the payment of [**] in the aggregate to such individuals out of the Initial Net Proceeds (as such term is defined in the Change of Control Bonus Agreement).

     (h)     “ Claims ” means any and all actions, losses, damages, liabilities, claims, obligations, awards, judgments, assessments, fines, sanctions, penalties, charges, costs, expenses and payments, all interest thereon, all costs and expenses of investigating any claim, lawsuit, arbitration, mediation or other proceeding and any appeal therefrom, all reasonable legal, accountants and witness fees incurred in connection therewith, whether or not such claim, lawsuit, arbitration, mediation or other proceeding is ultimately defeated and all amounts paid incident to any compromise or settlement of any such claim, lawsuit, arbitration, mediation or other proceeding.

     (i)     “ Code ” means the Internal Revenue Code of 1986, as amended.

     (j)     “ Commercialize ” includes, with respect to the licenses that may be granted as described in Section 3.5, the right to make and have made the applicable Company Product(s) and components thereof, but only to the extent such rights exist under the Company Intellectual Property.

     (k)     “ Commercially Reasonable Efforts ” means those efforts and resources normally devoted by a similarly situated biopharmaceutical company to its own programs and pharmaceutical products of similar potential and having similar commercial advantages and disadvantages as the Company Products, taking into account all relevant commercial, technical and medical factors such as (but not limited to): (i) the Intellectual Property landscape, including intellectual property rights of third parties, (ii) technical, scientific and clinical results and developments, (iii) the competitive landscape and maturity of the marketplace, including the dominant position of competing products (which may make it illogical or impracticable to develop or commercialize for a particular country or countries or for particular indications) and the effects of off-label sales of other formulations and products, (iv) the regulatory framework and hurdles, (v) pricing and reimbursement issues, and (vi) cost of goods.

     (l)     “ Company Patents ” means (i) all patent applications (including utility applications filed claiming inventions disclosed in invention disclosures and provisional applications) owned or controlled by the Company filed or generated on or before the Closing Date (including all those disclosed on Section 4.20(a) of the Company Disclosure Schedule), (ii) all divisionals, continuations, continuations in part (but, with respect to such continuations in part, only to the extent it claims and is entitled to the benefit of priority to any application or disclosure described in clause (i)), continued prosecution applications or patents of addition or substitution with respect to the foregoing, (iii) all foreign equivalents of the applications described in (i) or (ii), and (iv) all patents issuing on any of the applications described in clauses (i), (ii) or (iii) anywhere in the world, together with registrations, renewals, reissues, reexaminations or extensions of any kind with respect to any of such patents.

     (m)     “ Company Product ” means individually and collectively the First Product and/or any Additional Product.

     (n)     “ Company’s Technology ” means the sustained drug delivery methods and devices, including the New Plug, designed or developed by or for the Company, ForSight and/or Foundry that utilize a device to be placed in a punctum or tear duct from which one or more pharmaceutical preparations can be topically delivered to the tear film of the eye for the treatment of an ocular condition.

     (o)     “ Confidential Information ” means any and all information of a Party relating to any trade secret, specifications, testing, packaging, labeling, manufacturing, development, books and records, data, process, method, compound, research project, work in process, future development, scientific, engineering, marketing, sales, business plan, financial or personnel matter relating to the disclosing Party, its present or future products, sales, suppliers, customers, employees, investors, technology or business, whether in oral, written, graphic or electronic form, as well as the terms and conditions of this Agreement, including, without limitation, those set forth in Sections 3.5 and 3.6. Confidential Information shall not include any information that the receiving Party can prove by competent evidence:

          (i)     is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available;

          (ii)     is known by the receiving Party at the time of receiving such information, as evidenced by its written records maintained in the ordinary course of business;

          (iii)     is hereafter furnished to the receiving Party by an unaffiliated third party, as a matter of right and without restriction on disclosure;

          (iv)     is independently developed by the receiving Party, as evidenced by its written records maintained in the ordinary course of business, without knowledge of, and without the aid, application or use of, the disclosing Party’s Confidential Information; or

          (v)     is the subject of a written permission to disclose provided by the disclosing Party.

     (p)     “ Contracts ” means any of the agreements, contracts, leases, powers of attorney, notes, loans, evidence of Indebtedness, letters of credit, settlement agreements, franchise agreements, undertakings, covenants not to compete, employment agreements, licenses, instruments, obligations, commitments, binding purchase and sales orders and other executory commitments to which either Party is a party or to which any of the assets of either Party are subject, whether oral or written, express or implied.

     (q)     “ control ” (including the terms “controlled by” and “under common control with”) means, with respect to the relationship of one Person to another Person, the possession by the first Person, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of the second Person, whether through the ownership of securities or as trustee or executor, by Contract or credit arrangement or otherwise.

     (r)     “ cover ” means: (i) with respect to any Company Patent, the manufacture, use, sale, offering for sale, importation, exportation or other exploitation of the device, process or other product or service in question would infringe a Valid Claim at the time thereof, or (ii) with respect to any other patent or patent application, the manufacture, use, sale, offering for sale, importation, exportation or other exploitation of the device, process or other product or service in question would infringe a claim of such an issued patent (or of such a patent application if such claim were issued as such as then prosecuted) at the time thereof.

     (s)     “ delivered ” or “ made available ” (or words of similar import) shall include all documents and materials made available in the Company’s data room.

     (t)     “ Environmental Laws ” means any Law relating to the pollution, protection, investigation or restoration of the environment, health and safety as affected by the environment or natural resources, including those relating to the Release or threatened Release of Hazardous Materials or otherwise relating to the generation, manufacture, processing, distribution, use, handling, presence, transportation, treatment, storage, disposal or discharge of Hazardous Materials or noise, odor, wetlands, pollution or contamination.

     (u)     “ Environmental Permits ” means any permit, approval, identification number, license and other authorization required under any applicable Environmental Law.

     (v)     “ Escrow Account ” means the escrow established into which the Escrow Amount shall be deposited as security for the indemnification obligations set forth in Section 10.1(a).

     (w)     “ Escrow Agent ” means U.S. Bank, National Association.

     (x)     “ Escrow Agreement ” means the form of escrow agreement substantially in the form attached hereto as Exhibit A .

     (y)     “ Escrow Amount ” means Four Million Two Hundred Thousand Dollars ($4,200,000), together with earnings thereon.

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

     (aa)     “ FDA ” means the U.S. Federal Food and Drug Administration.

     (bb)     “ Filed Parent SEC Filings ” means all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) filed by Parent with the SEC and publicly available prior to the date of this Agreement.

     (cc)     “ First Commercial Sale ” means, with respect to the First Product or the Additional Product, as applicable, the first sale of such product following applicable and required governmental marketing approval or governmental clearance for marketing thereof to an unaffiliated third party in an arms’ length transaction.

     (dd)     “ First Product ” means any product using the [**] to deliver the active pharmaceutical ingredient identified in Schedule 1.1(a) hereto.

     (ee)     “ ForSight ” means ForSight Labs, LLC, a California limited liability company.

     (ff)     “ Foundry ” means The Foundry, Inc., a Delaware corporation.

     (gg)     “ group ” is defined as in the Exchange Act, except where the context otherwise requires.

     (hh)     “ Hazardous Materials ” means (i) any petroleum, petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical, material or other substance defined or regulated as toxic or hazardous or as a pollutant or contaminant or waste under any applicable Environmental Law.

     (ii)     “ Indebtedness ” means any and all indebtedness of the Company (including any accrued interest and any prepayment premiums or termination fees with respect thereto) for borrowed money, which shall include financial instruments of indenture or security interest (typically interest-bearing) such as notes, mortgages, loans and lines of credit (but not including letters of credit), capital lease obligations and deferred purchase price obligations or reimbursement obligations to lenders, less cash and cash equivalents.

     (jj)     “ Intellectual Property ” means collectively, all industrial and intellectual property rights anywhere in the world, including patents, patent applications, trademarks, trademark registrations and applications therefor, trade dress rights, trade names, service marks, service mark registrations and applications therefor, Internet domain names, Internet and World Wide Web URLs or addresses and registrations and applications therefor, copyrights, copyright registrations and applications therefor, trade secret rights, rights in know-how and Confidential Information and any rights in, to or under any of the foregoing.

     (kk)     “ Knowledge ” of (i) the Company means the actual knowledge of the persons listed in respect of the Company, ForSight and Foundry in Section 1.1(kk) of the Company Disclosure Schedule, in each case after having reviewed with Company counsel the representations and warranties set forth in Article 4 hereof and after having conferred with his or her direct reports who would reasonably be expected to have knowledge of the matters set forth in such representations and warranties, and (ii) Parent means the actual knowledge of persons listed in respect of Parent in Section 1.1(kk) of the Parent Disclosure Schedule, in each case after having reviewed with Parent counsel the representations and warranties set forth in Article 5 hereof and after having conferred with his or her direct reports who would reasonably be expected to have knowledge of the matters set forth in such representations and warranties.

     (ll)     “ Law ” means any federal, state, local, municipal, foreign (including Canadian, federal and provincial), international, multinational or other administrative order, constitution, law, ordinance, rule, guidance, principle of common law, regulation, statute or treaty, including the federal Food Drug and Cosmetic Act and its implementing regulations.

     (mm)     “ LIBOR ” means the British Bankers Association LIBOR Rates for deposits in United States dollars for ninety (90) days as reported as such on Telerate Page 3750 (or any successor page) published by Bridge Information Systems, Inc. on the last day of the calendar quarter in which LIBOR is required to be determined pursuant to this Agreement, or, if such day is not a Business Day, then on the next succeeding Business Day.

     (nn)     “ Losses ” means all damages, awards, judgments, assessments, fines, sanctions, penalties, charges, costs, expenses, payments, all interest thereon, all costs and expenses of investigating any claim, lawsuit or arbitration and any appeal therefrom, all reasonable attorneys’, accountants’, investment bankers’ and expert witness’ fees incurred in connection therewith, whether or not such claim, lawsuit or arbitration is ultimately defeated and all amounts paid incident to any compromise or settlement of any such claim, lawsuit or arbitration (less any insurance proceeds actually received by the Company or its successor from insurance policies maintained by the Company on or prior to Closing attributable to any of the foregoing, net of any related deductible paid by a Parent Indemnified Party and not otherwise reimbursed to such party by the Closing Securityholders pursuant to Article 10); provided , however , that notwithstanding anything herein to the contrary, in no event shall “Losses” include any punitive, special, exemplary or consequential damages (other than punitive, incidental, special, exemplary or consequential damages which are paid to third parties), damages for diminution in value of the Company, damages computed on a multiple of earning or damages computed on a similar basis, such as lost profits.

     (oo)     “ Major Market(s) ” means the [**] .

     (pp)     “ Material Adverse Effect ”, as used with respect to the Company or Parent, as the case may be, means any change, effect, event, occurrence, state of facts or development which individually or in the aggregate with all other adverse changes, effects, events, occurrences, states of facts or developments: (i) is materially adverse to the business, financial condition, assets, liabilities (contingent or otherwise) or results of operations of such entity, in each case taken as a whole, or (ii) is or would reasonably be expected to prevent or materially impede or delay the consummation by such entity of the Merger or the other transactions contemplated by this Agreement; provided , however , none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: any adverse change, effect, event, occurrence, state of facts or development (A)(1) in Canadian, United States or global financial or securities markets or the Canadian, United States or global economy in general, including any fluctuation, in and of itself, in the price of the common shares of Parent or the shares of Company Stock, as the case may be (it being understood that the facts or occurrences giving rise or contributing to such fluctuation may be deemed to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect), (2) in the biopharmaceutical industry in general, or (3) in Laws of general applicability (or interpretations thereof by Governmental Entities), in each case to the extent that the effects thereof do not materially disproportionately impact the Company or Parent, as the case may be; (B) relating to the execution or public announcement of this Agreement and the transactions contemplated hereby, or any actions or omissions taken as required in this Agreement; (C) arising from changes in GAAP or regulatory accounting requirements; and (D) resulting from actions, recommendations or decisions of the FDA with respect to NDAs, BLAs, ANDAs or sNDAs of the Company, Parent or any of their respective actual or potential competitors.

     (qq)     “ Nasdaq ” means the Nasdaq Stock Market.

     (rr)     “ NDA ” means new drug application.

     (ss)     “ Net Sales ” means the gross amount invoiced by or under the authority of Parent or its Affiliate (or by any of their respective licensees and sublicensees of Company Products) for the sale of Company Products to third parties, less amounts for the following customary deductions: (i) normal trade discounts, rebates, and government-required discounts and allowances (including Medicaid rebates, institutional rebates, quantity and volume discounts, chargebacks, retroactive price adjustments, inventory management fees and other reductions, concessions and allowances that effectively reduce the selling price), (ii) credits and allowances for returns, (iii) actual costs of insurance, transportation, storage and Taxes, and (iv) import and export duties. Amounts invoiced among Parent and its Affiliates or between them and any third-party licensees or distributors for quantities of Company Products for use in clinical trials, compassionate use, promotional purposes or (except with respect to distributors) for resale shall not be included in the calculation of Net Sales; provided in the event of resale (other than to distributors), amounts invoiced by such Affiliate or third-party licensee upon such resale to third parties shall be included in Net Sales.

     (tt)     “ New Plug ” means any device covered by a Valid Claim of the Company Patents which is placed in a punctum or a tear duct from which one or more pharmaceutical preparations can be topically delivered to the tear film of the eye, [**] ; provided, however , that “New Plug” includes any device covered by a Valid Claim of the Company Patents that is combined with the [**] .

     (uu)     “ Permitted Lien ” means (i) Liens for Taxes, assessments or similar charges incurred in the ordinary course of business consistent with past practice that are not yet due and payable or are being contested in good faith; (ii) pledges or deposits made in the ordinary course of business consistent with past practice; (iii) Liens of mechanics, materialmen, warehousemen or other like Liens securing obligations incurred in the ordinary course of business consistent with past practice that are not yet due and payable or are being contested in good faith; (iv) Liens incurred in connection with capital leases and purchase money financings solely with respect to properties so financed; and (v) similar Liens and encumbrances which are incurred in the ordinary course of business consistent with past practice and which do not in the aggregate materially detract from the value of such assets or properties or materially impair the use thereof in the operation of such business.

     (vv)     “ Person ” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

     (ww)     “ Release ” means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials (including without limitation, ambient air, surface water, ground water and surface or subsurface strata).

     (xx)     “ SEC ” means the United States Securities and Exchange Commission.

     (yy)     “ Securities Act ” means the Securities Act of 1933, as amended.

     (zz)     “ sNDA ” means supplemental new drug application.

     (aaa)     “ Subsidiary ” or “ Subsidiaries ” of any Person means, with respect to such Person, any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other subsidiary), owns, directly or indirectly, fifty percent (50%) or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the Board of Directors or other governing body of such corporation or other legal entity.

     (bbb)     “ Tax ” or “ Taxes ” means all taxes of whatever kind or nature, including those on or measured by or referred to as income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, value added, property or windfall profits taxes, customs, duties or other similar fees, assessments or charges of any kind whatsoever (together with any interest and any penalties, additions to tax or additional amounts with respect to the foregoing), whether disputed or not, imposed by any Governmental Entity.

     (ccc)     “ Tax Return ” means any report, return (including information return), claim for refund, or statement relating to Taxes filed or required to be filed with any Tax authority (domestic or foreign), including any schedule or attachment thereto, and including any amendments thereof.

     (ddd)     “ Treasury Regulations ” means the United States Treasury regulations promulgated under the Code.

     (eee)     “ Valid Claim ” means a claim of an issued and unexpired patent, or a pending claim of a patent application that is being prosecuted, that has not been held un-patentable, invalid or unenforceable by a court or other government agency of competent jurisdiction or has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise; provided , however , that if the holding of such court or agency is later reversed by a court or agency with overriding authority, the claim shall be reinstated as a Valid Claim after the date of such reversal; and further provided that such pending claim of a patent application has not been pending for more than [**] after the date on which it was first filed.

     Section 1.2      Terms Defined Elsewhere . The following terms are defined elsewhere in this Agreement, as indicated below:

“Additional Payments”		Section 3.6
“Agreement”		Preamble
“Appraisal Shares”		Section 3.1(d)
“Assignment Agreement”		Section 8.2(c)
“Biologic”		Section 4.21(a)
“California Code”		Section 3.1(d)
“Certificate”		Section 3.1(a)(ii)
“Certificate of Merger”		Section 2.2
“Claim Notice”		Section 10.3(d)(i)
“Closing”		Section 2.2
“Closing Date”		Section 2.2
“Closing Date Financial Statements”		Section 7.10
“Closing Securityholder Fraud”		Section 10.1(a)
“Closing Securityholders”		Section 3.2
“Company”		Preamble
“Company Benefit Plan”		Section 4.15
“Company Bylaws”		Section 4.1
“Company Certificate of Incorporation”		Section 4.1
“Company Common Stock”		Section 3.1(a)(i)
“Company Disclosure Schedule”		Article 4

“Company Fraud”		Section 10.1(a)
“Company Indemnified Parties”		Section 10.1(b)
“Company Intellectual Property”		Section 4.20(a)
“Company Material Contract”		Section 4.13(a)
“Company Preferred Stock”		Section 3.1(a)(i)
“Company Stock”		Section 3.1(a)(i)
“Company Survival Date”		Section 10.6
“Competitive Device”		Section 3.6(c)(iii)
“Conforming First Product”		Section 3.6(a)(ii)
“Consulting Agreement”		Section 7.5
“Continuing Employee”		Section 7.8
“D&O Policy”		Section 7.9(a)
“DGCL”		Section 2.1
“Dispute”		Section 12.9(a)
“Drug”		Section 4.21(a)
“Effective Time”		Section 2.2
“Excluded Shares”		Section 3.1(a)(i)
“FDCA”		Section 4.14
“Financial Statements”		Section 4.7
“GAAP”		Section 4.7
“Governmental Entity”		Section 4.5(b)
“Indemnified Party”		Section 10.3(a)
“Indemnifying Party”		Section 10.3(a)
“Independent Experts”		Section 12.9(b)
“Investors”		Section 8.2(m)
“Legal Expenses”		Section 3.6(e)
“License Payments”		Section 3.6(d)
“Liens”		Section 4.17(f)
“Medical Device”		Section 4.21(a)
“Merger”		Recitals
“Merger Consideration”		Section 3.1(a)(i)
“Merger Sub”		Preamble
“Minimum Coverage Patent”		Section 3.5(d)
“Notice Period”		Section 10.3(d)(ii)
“Outside Date”		Section 9.1(b)
“Parent”		Preamble
“Parent Disclosure Schedule”		Article 5
“Parent Indemnified Parties”		Section 10.1(a)
“Parent Survival Date”		Section 10.7
“Party” or “Parties”		Preamble
“Permits”		Section 4.14
“Prior Directors and Officers”		Section 7.9(a)
“Real Properties”		Section 4.19(c)
“Related IP”		Section 3.5(b)
“Representative Reimbursement Amount”		Section 11.3(a)
“Representatives”		Section 7.1(a)

“Requested Additional Product”		Section 3.5(b)
“Restraints”		Section 8.1(b)
“Special Representations”		Section 10.6
“Stockholders List”		Section 4.3(e)
“Stockholders Representatives”		Preamble
“Surviving Corporation”		Section 2.1
“Tax Liabilities”		Section 10.1(a)
“Technology Agreement”		Section 8.2(l)
“Total Outstanding Shares”		Section 3.1(a)(i)
[**]

ARTICLE 2.
THE MERGER

     Section 2.1      The Merger . Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the “ DGCL ”), at the Effective Time, Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation immediately following the Merger (the “ Surviving Corporation ”).

     Section 2.2      Closing . The closing of the Merger (the “ Closing ”) shall take place on October 15, 2007, unless this Agreement has been theretofore terminated pursuant to its terms or unless another time or date is agreed to in writing by the Parties (the actual date of the Closing being referred to herein as the “ Closing Date ”). The Closing shall be held at the offices of Morrison & Foerster LLP, 425 Market Street, San Francisco, California 94105, unless another place is agreed to in writing by the Parties. As soon as practicable after the Closing, the Parties shall cause the Merger to be consummated by filing a certificate of merger relating to the Merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing, or if another date and time is specified in such filing, such specified date and time, being the “ Effective Time ”).

     Section 2.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

     Section 2.4      Certificate of Incorporation; Bylaws .

     (a)      Certificate of Incorporation . At the Effective Time, the Certificate of Incorporation of the Company shall be amended and restated in its entirety to read as set forth in Exhibit B ; and

     (b)      Bylaws . At the Effective Time, the Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in its entirety to read as set forth in Exhibit C .

     Section 2.5 Directors and Officers of the Surviving Corporation . The officers and directors of Merger Sub immediately prior to the Effective Time shall become the officers and directors of the Surviving Corporation. From and after the Effective Time, the Merger will have all the effects set forth in Section 251 of the DGCL.

ARTICLE 3.
CONVERSION OF SECURITIES; ESCROW; EXCHANGE OF CERTIFICATES

     Section 3.1      Conversion of Securities . At the Effective Time, by virtue of the Merger and without any action on the part of the Company or the holders of any of the following securities:

     (a)      Conversion Generally .

          (i)     Each share of common stock, par value $0.001 per share, of the Company (“ Company Common Stock ”) and each share of preferred stock, $0.001 per share, of the Company (“ Company Preferred Stock ” and collectively with the Company Common Stock, the “ Company Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Stock to be canceled pursuant to Section 3.1(b) and Appraisal Shares referred to in Section 3.1(d) (“ Excluded Shares ”)), shall be converted into the right to receive (A) that amount equal to the quotient obtained by dividing (x) (i) Forty-Two Million Dollars ($42,000,000), minus (ii) the Escrow Amount, minus (iii) all amounts payable pursuant to the Change of Control Bonus Agreements out of the Initial Net Proceeds (as such term is defined in the Change of Control Bonus Agreements), by (y) the Total Outstanding Shares (and in the aggregate, the “ Merger Consideration ”) and (B) a portion of each Additional Payment as is provided for in Section 3.6 equal to the quotient obtained by dividing (x) (i) the amount of such Additional Payment minus (ii) all amounts payable pursuant to the Change of Control Bonus Agreements out of the Additional Net Proceeds (as such term is defined in the Change of Control Bonus Agreements), minus (iii) any amount deducted or setoff from such payment pursuant to Section 3.6 or Article 10 of this Agreement, by (y) the Total Outstanding Shares. “ Total Outstanding Shares ” shall mean the aggregate number of shares of Company Common Stock and Company Preferred Stock outstanding immediately prior to the Effective Time.

          (ii)     All such shares of Company Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each certificate (a “ Certificate ”) previously representing any such shares shall thereafter represent only the right to receive the Merger Consideration payable in respect of such shares of Company Stock and the right to receive each Additional Payment, if any, required to be made pursuant to Section 3.6 in respect of such shares of Company Stock.

     (b)      Cancellation of Shares . Each share of Company Stock, if any, either (i) owned by Parent or any of its Subsidiaries or (ii) held in the Company treasury immediately prior to the Effective Time shall be canceled and retired and shall cease to exist and no Merger Consideration or other consideration shall be delivered in exchange therefor.

     (c)      Merger Sub . Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and be exchanged for one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

     (d)      Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, shares of Company Stock outstanding immediately prior to the Effective Time and held by a Company stockholder who has not voted in favor of the Merger or consented thereto in writing and who has properly demanded appraisal for such shares in accordance with the Corporations Code of the State of California (the “ California Code ”) or the DGCL (the “ Appraisal Shares ”), shall not be converted into a right to receive the Merger Consideration as provided in Section 3.1(a)(i), until such time as such stockholder fails to perfect or withdraws or otherwise loses such stockholder’s right to appraisal. If after the Effective Time such stockholder fails to perfect or withdraws or loses such stockholder’s right to appraisal, such shares of Company Stock shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration as provided in Section 3.1(a)(i). The Company shall give Parent prompt notice of any demands received by the Company pursuant to the DGCL or the California Code for appraisal of shares of Company Stock, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not settle, make any payments with respect to, or offer to settle, any claim with respect to Appraisal Shares without the written consent of Parent or as required by applicable Law.

     Section 3.2      Escrow . At the Closing, Parent shall cause Merger Sub to deposit with the Escrow Agent the Escrow Amount. Subject to the terms and conditions set forth in this Agreement and in the Escrow Agreement, at the times set forth in the Escrow Agreement, Parent and the Stockholders Representatives shall direct the Escrow Agent to release the applicable portion of the Escrow Amount (except for amounts subject to an existing claim for indemnification pursuant to Section 10.1(a)) to the holders of record of Certificates which immediately prior to the Effective Time represented outstanding shares of Company Stock (other than holders of Excluded Shares) (the “ Closing Securityholders ”) pro rata, such that each installment of the Escrow Amount released as set forth in the Escrow Agreement is paid to each Closing Securityholder in the same proportion as the number of shares of Company Stock held by such Closing Securityholder immediately prior to the Effective Time bears to the Total Outstanding Shares.

     Section 3.3      Exchange of Certificates .

     (a)      Exchange Procedures . Merger Sub shall deliver to the Stockholders Representatives (or a payment agent designated by the Stockholders Representatives for delivery to the Closing Securityholders) the Merger Consideration contemplated to be paid for shares of Company Stock upon surrender of Certificates for cancellation to Merger Sub and such other documents as may be reasonably required by Merger Sub or Parent (including, without limitation, a Form W-9). Upon such surrender and in exchange therefore, Merger Sub shall deliver to the Stockholders Representatives (or the payment agent designated by the Stockholders Representatives, if any) and the holders of such Certificates, shall be entitled to receive from the Stockholders Representatives (or the payment agent designated by the Stockholders Representatives, if any), the Merger Consideration and any Additional Payment payable in respect of the shares represented by such Certificates, and the Certificates so surrendered shall forthwith be canceled. In the event of a transfer of ownership of shares of Company Stock which is not registered in the transfer records of the Company, the Merger Consideration and any Additional Payment payable in respect of such shares of Company Stock may be paid to a transferee if the Certificate representing such shares of Company Stock is presented to Parent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid. Until surrendered as contemplated by this Section 3.3, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration and any Additional Payment payable in respect of the shares of Company Stock represented by such Certificate.

     (b)      Further Rights in Company Stock . The Merger Consideration, together with the Additional Payments, if any, payable pursuant to Section 3.6, shall constitute the full consideration to be paid or to become payable to the Closing Securityholders in accordance with the terms hereof and from and after the Effective Time, the Closing Securityholders shall have no other rights as stockholders of the Company, except as otherwise provided herein or by Law.

     (c)      Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, Parent shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration or any Additional Payment payable in respect of the shares of Company Stock represented by such Certificate, without any interest thereon.

     (d)      Withholding . Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Stock such amounts as Parent is required to deduct and withhold under the Code, or any Tax Law, with respect to the making of such payment. To the extent that amounts are so withheld by Parent, Parent shall provide the applicable holder of Company Stock with notice of the reason for withholding such amounts and such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Stock in respect of whom such deduction and withholding was made by Parent.

     Section 3.4      Stock Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of shares of Company Stock theretofore outstanding on the records of the Company. On or after the Effective Time, any Certificates presented for any reason to Parent shall be converted into the Merger Consideration or Additional Payment payable in respect of the shares of Company Stock represented by such Certificates, without any interest thereon.

     Section 3.5      Development Obligations .

     (a)      Product Development and Commercialization . Surviving Corporation shall use Commercially Reasonable Efforts to develop (which development includes performance of applicable pre-clinical and clinical studies and obtaining applicable clearances or approvals) and thereafter, subject to receipt of applicable and required approvals and clearances, use Commercially Reasonable Efforts to commercialize in each of the Major Markets the Conforming First Product (if and to the extent the data, technical development and other factors listed in the definition of “Commercially Reasonable Efforts” support pursuing a First Product that meets the criteria for a Conforming First Product) and [**] Additional Products, which commitment (i) shall be binding upon any successor to Surviving Corporation or, as and if applicable, any licensee or sublicensee of such Conforming First Product and/or Additional Products, and (ii) may be fully satisfied by the efforts of one or more of the Surviving Corporation and/or any of its Affiliates, licensees or sublicensees. The foregoing obligation with respect to [**] Additional Products shall be limited to [**] . Furthermore, the foregoing obligations with respect to each of the Conforming First Product and the [**] Additional Products shall terminate as to each such Company Product upon the failure (if any) to meet the [**] after commencement of [**] for such Company Product; Surviving Corporation shall have no obligation to replace any such failed Company Product with another Company Product for development or commercialization. Notwithstanding anything else in this Agreement, but subject to the Commercially Reasonable Efforts obligations set forth in this Section 3.5, Surviving Corporation shall be solely responsible for, and shall have full discretion with respect to, the manner in which the New Plug, the First Product, Additional Products and the Company’s Technology are developed and commercialized. For the avoidance of doubt, although the obligations to use Commercially Reasonable Efforts to commercialize applicable Company Products in this Section 3.5 (including Section 3.5(b)) applies to all Major Markets, pricing, regulatory or other factors described in the definition of “Commercially Reasonable Efforts” in a given jurisdiction may cause commercialization in such jurisdiction to not be commercially reasonable (i.e., not be required by the Commercially Reasonable Efforts standard) with respect to a given Company Product. For clarity and without limiting Section 3.6(a) or (b), if, after exercising Commercially Reasonable Efforts to do so (itself or through one or more Affiliates, licensees or sublicensees), Surviving Corporation determines that the data, technical development and other factors listed in the definition of “Commercially Reasonable Efforts” no longer support pursuing a New Plug which is capable of being [**] for approximately [**] of patients, then Surviving Corporation shall be deemed to have met the requirements of this Section 3.5(a) and Section 3.5(b) below (notwithstanding anything in such Sections to the

contrary) with respect to all Company Products and Surviving Corporation, Parent and any of their Affiliates shall be thereupon fully and completely released from any of their obligations under this Section 3.5(a) and Section 3.5(b) below and such obligations shall thereupon terminate and be of no further force or effect. For further clarity, any Dispute regarding this Section 3.5(a) shall be subject to the provisions of Sections 3.5(e) and 12.9.

     (b)      Development of Requested Additional Product . During the period of time beginning on [**] and continuing until [**] , ForSight shall have the right to propose, by providing written notice to the Surviving Corporation, that the Surviving Corporation (or its successor or delegate as the Surviving Corporation may elect, including, any of Surviving Corporation’s Affiliates, licensees, and/or sublicensees, as and if applicable) initiate Commercially Reasonable Efforts to develop and, if development is successful, Commercially Reasonable Efforts to commercialize in each of the Major Markets [**] Additional Product meeting the following criteria below (such Additional Product that is the subject of such notice and that meets such criteria being a “ Requested Additional Product ”):

          (i)     such Requested Additional Product contains an [**] that is, at the time the notice is given, [**] ;

          (ii)     ForSight has, and demonstrates, a reasonable basis to believe that it would be commercially reasonable to develop such Requested Additional Product to treat [**] , taking into account the [**] ; and

          (iii)     such Requested Additional Product is [**] for which the Surviving Corporation or its Affiliates (or applicable licensees or sublicensees) is then [**] as of the date of such notice from ForSight.

If the Surviving Corporation (and/or its Affiliates or an applicable licensee or sublicensee) fails to initiate Commercially Reasonable Efforts to develop, with the goal — if development is successful — to commercialize in each of the Major Markets, the Requested Additional Product or [**] designated by the Surviving Corporation or Parent within [**] of ForSight’s proper notice therefor, then the Surviving Corporation shall use good faith efforts to [**] .

     (c)     [Intentionally omitted.]

     (d)      Patent Matters . Except as otherwise expressly provided herein, Surviving Corporation (itself or through a designee) shall have the right to conduct and be responsible for the preparation, filing, prosecution, maintenance and enforcement of the Company Patents and shall use Commercially Reasonable Efforts to obtain coverage under [**] under [**] in each such Major Market covering the Company Products (such Company Patent, the “ Minimum Coverage Patent ”). For clarity, the requirement for a Minimum Coverage Patent shall only exist where [**] .

     (e)      Limitation on Remedies . In the event that Surviving Corporation or Parent is found to be in breach of its obligations under Section 3.5 with respect to Company Products, the Company’s Technology or the Company Patents, neither the Surviving Corporation nor Parent shall be liable for damages of any kind or nature, any obligation to make payments or a mandatory reversion of rights (with respect to the Company Patents or any other technology or Intellectual Property of the Company or the Surviving Corporation). Notwithstanding anything to the contrary in this Agreement, the sole and exclusive liability of the Surviving Corporation and Parent, and the sole and exclusive remedy for any individual or entity entitled to enforce this Agreement against the Surviving Corporation or Parent, with respect to such obligations (including with respect to a breach of Section 3.5 (except this Section 3.5(e) for which the remedy of specific performance shall be available but for which no claim for damages or payments shall be available) or otherwise with respect to the development and/or commercialization of the Company’s Technology and the Company Products or any failure to adequately do so) shall be as follows:

          (i)     In the event that Surviving Corporation or Parent is found pursuant to the procedure set forth in Section 12.9 to have materially breached its obligation to exercise Commercially Reasonable Efforts as required under Section 3.5(d) with respect to the Minimum Coverage Patent, then Surviving Corporation or Parent shall continue to pursue the prosecution or maintenance of the Minimum Coverage Patent as required to comply with such finding at the sole cost of Surviving Corporation and Parent with respect to such Minimum Coverage Patent; or

          (ii)     In the event that Surviving Corporation or Parent is found pursuant to the procedure set forth in Section 12.9 to have materially breached its obligation to exercise Commercially Reasonable Efforts with respect to a Company Product or the Company’s Technology, then within [**] of the date such breach is found (either by express written acknowledgement of Surviving Corporation and Parent specifically referencing this Section 3.5(e)(ii) or pursuant to the procedure set forth in Section 12.9), at Surviving Corporation’s option in its sole discretion, Surviving Corporation shall either (A) follow the direction of the Independent Experts or, if the Dispute proceeds to arbitration, the arbitrator as provided for in Section 12.9 herein with respect to the matter in Dispute (it being understood that the measures intended to correct such breach in accordance with the findings and directions made pursuant to Section 12.9 must be initiated, to the extent reasonably practicable, but need not necessarily be completed, within such [**] , but in any event must be actively pursued until circumstances are such that it is no longer commercially reasonable (i.e., not required by the Commercially Reasonable Efforts standard) to do so, as determined pursuant to the procedure set forth in Section 12.9 if necessary), (B) use Commercially Reasonable Efforts to promptly [**] . For clarity, in the event that Surviving Corporation or Parent elects either of (A) or (B) above with respect to a particular Company Product and thereafter materially breaches (or in the case of (B) such licensee materially breaches) its obligation to exercise Commercially Reasonable Efforts with respect to such Company Product, then the

foregoing procedures and remedies described in this Section 3.5(e)(ii) shall thereupon apply in the same manner as before. For clarity and without limiting or expanding the provisions of Section 3.5(f), if the arbitrator finds pursuant to the procedure set forth in Section 12.9 that, despite the Surviving Corporation’s Commercially Reasonable Efforts to do so, the development or commercialization of any Company Product (or all Company Products) is technically or commercially impracticable (or that no further development or commercialization would otherwise be warranted under the Commercially Reasonable Efforts standard), then Surviving Corporation shall be permanently released from its obligations under Sections 3.5(a) and 3.5(b) above with respect to such Company Product (or all Company Products as the case may be) and the obligations of Parent, Surviving Corporation and any of their Affiliates under Sections 3.5(a) and 3.5(b) shall immediately terminate and be of no further force or effect with respect to such Company Product (or all Company Products as the case may be).

     (f)      Right to Terminate Program . In addition to its other rights under this Agreement, the Surviving Corporation shall have the right, but not the obligation, in its sole discretion to terminate all development and commercialization programs for First Products and Additional Products (including Requested Additional Products), even where Commercially Reasonable Efforts would otherwise be required, at any time beginning after the Closing Date in its sole discretion upon thirty (30) days prior written notice to ForSight by [**] . In the alternative, if the Surviving Corporation exercises its right pursuant to this Section 3.5(f) to terminate all development and commercialization programs for the First Products and the Additional Products, then Parent shall have the option, exercisable in its sole and absolute discretion, to [**] . At the end of such thirty (30) day period following such termination notice from Surviving Corporation, all obligations of Surviving Corporation and Parent under Articles 2 though 8 (including all development and payment obligations under Sections 3.5 and 3.6), shall terminate (except for the obligation to [**] ).

     (g)      [**] .

     (h)      Reports . In connection with Surviving Corporation’s obligations under Section 3.5(a), Surviving Corporation shall provide to the Stockholders Representatives within [**] of the Closing Date, [**] and on [**] of each year thereafter, a report of the development activities with respect to the First Product and each Additional Product that Surviving Corporation or Parent (or third parties acting under their authority) have taken since the last such report. The foregoing, reporting obligation shall continue on a Company Product-by-Company Product basis until the earlier of [**] . Similarly, in connection with Surviving Corporation’s obligations under Section 3.5(d), Surviving Corporation shall provide to Stockholders Representatives an update of the activities taken with respect to, and status of, each Company Patent at the same time as the development reports are provided above. The foregoing reporting obligation with respect to Company Patents shall continue until the earlier of when Parent has made all of the Additional Payments required under Section 3.6 or the reporting obligations under this Section 3.5(h) terminate overall as provided below. In the event Surviving Corporation fails to provide any of the foregoing reports when due, the sole and exclusive

liability of the Surviving Corporation and Parent, and the sole and exclusive remedy for any individual or entity entitled to enforce this Agreement against the Surviving Corporation or Parent, with respect to such obligations, shall be for Surviving Corporation or Parent to provide the required reports within [**] of written notice from Stockholders Representatives describing any such failure (except for the remedy of specific performance, which shall be available but no claim for damages or payments shall be available). All reports provided under this Section 3.5(h) shall be deemed to be the Confidential Information of Surviving Corporation and the Stockholders Representatives shall not have the right to provide copies of (or the contents of) such reports to the Closing Securityholders; provided, however, that, if requested by the Stockholders Representatives, Surviving Corporation or Parent will prepare a summary version of such reports (stripping out sensitive, competitive and material non-public information, as determined by Surviving Corporation or Parent in its reasonable discretion) for distribution to such Closing Securityholders subject to the Closing Securityholders being bound to standard and customary confidentiality provisions preventing such Closing Securityholders from any use or further disclosure thereof. The Surviving Corporation and Parent acknowledge that the purpose of the reports under this Section 3.5(h) is to allow the Stockholders Representatives to reasonably understand Surviving Corporation’s performance of its obligations under Sections 3.5(a) and 3.5(d) and will be appropriately detailed to allow such understanding (but in any event may exclude highly sensitive or highly competitive information of Surviving Corporation or Parent, as determined by Surviving Corporation or Parent in its reasonable discretion). All obligations of Surviving Corporation and Parent to provide information and reports under this Section 3.5(h) shall immediately terminate upon the earlier to occur of: (i) [**] from and after the Closing Date, or (ii) the date on which the obligations of Surviving Corporation to use Commercially Reasonable Efforts under Section 3.5(a) terminates.

     Section 3.6      Additional Payments . Parent shall pay, or shall cause its Affiliates to pay on behalf of the Surviving Corporation, to the Stockholders Representatives for distribution to the Closing Securityholders the following additional payments under the terms and conditions specified in this Section 3.6 (such payments to be made by or for Parent under this Section 3.6 being individually an “ Additional Payment ” and collectively, the “ Additional Payments ”), payable as set forth in Section 3.6(f). No Additional Payments shall be due or payable with respect to any New Plugs sold or otherwise exploited [**] .

     (a)      Milestone Merger Consideration . Parent shall pay, or shall cause its Affiliates to pay on behalf of the Surviving Corporation, to the Stockholders Representatives the following milestone payments within thirty (30) days after the occurrence of each of the following events (whether achieved by the Surviving Corporation or its Affiliate, or one of their licensees or sublicensees to the applicable Company Product):

          (i)     $5,000,000 upon the initiation (i.e., first dosing/implantation of the first patient) of a Phase III pivotal clinical trial for a First Product; and

          (ii)     $20,000,000 upon the First Commercial Sale in the United States of a First Product (A) that has achieved [**] ; and

          (iii)     $20,000,000 upon the First Commercial Sale in the United States of the first Additional Product, and $15,000,000 upon the First Commercial Sale in the United States of each subsequent Additional Product, in all such cases, solely where [**] .

The milestone payments in (i) and (ii) above shall be payable a maximum of only one time, regardless of how many additional times it may be achieved. The milestone payment in (iii) shall be payable a maximum of only one time with respect to each Additional Product, regardless of how many additional times it may be achieved for a particular Additional Product. For purposes of the milestone payments in (iii) above a given Additional Product will be deemed distinct from any other Additional Product for which such milestone has already been paid only if such new Additional Product contains [**] . Absent such distinction, no milestone shall be payable upon the First Commercial Sale of such new Additional Product.

     (b)      Contingent Merger Consideration . Parent shall pay, or shall cause its Affiliates to pay on behalf of the Surviving Corporation, to the Stockholders Representatives the following contingent payments, on a country-by-country and product-by-product basis, and on a calendar quarterly basis, within sixty (60) days after the end of each applicable calendar quarter, beginning with the First Commercial Sale of the applicable Company Product, until the maximum amount specified below is reached:

          (i)      [**] of Net Sales of the First Product the manufacture, use or sale of which would infringe, absent a license, a Valid Claim of the Company Patents in the country where (and at the time when) such First Product is sold commercially to a third-party customer (explicitly excluding sales in a country to an Affiliate who will resell elsewhere and sales for use in clinical trials), until an aggregate total of [**] (subject to adjustment as provided in Section 3.6(e)) in such payments (excluding, for the avoidance of doubt, payments made pursuant to Sections 3.6(a)(i) and 3.6(a)(ii)) and any and all License Payments made with respect to any First Products (calculated by combining all such amounts) are paid hereunder (at which point no further royalties under this clause (i) are due or payable); and

          (ii)      [**] of Net Sales of each Additional Product the manufacture, use or sale of which would infringe, absent a license, a Valid Claim of the Company Patents in the country where (and at the time when) such Additional Product is sold commercially to a third-party customer (explicitly excluding sales in a country to an Affiliate who will resell elsewhere and sales for use in clinical trials), until an aggregate total of [**] for the first such Additional Product and [**] for each subsequent Additional Product (in all such cases, subject to adjustment as provided in Section 3.6(e)) in such payments (excluding, for the avoidance of doubt, payments made pursuant to Section 3.6(a)(iii)) for each Additional Product and any and all License Payments made with respect to such Additional Product (calculated by combining all such amounts for each such Additional Product) are paid hereunder (at which point no further payments under this clause (ii) are due or payable with respect to such Additional Product). The foregoing shall be calculated using the same principles as described at the end of Section 3.6(a) above for purposes of determining whether or not [**] .

     (c)      Contingent Payment Reductions; Limitations .

          (i)     In the event Parent or its Affiliates, or their applicable licensees or sublicensees, is/are required to [**] for which amounts are due and unpaid pursuant to Section 3.6(b) above, then the rate to be applied in Section 3.6(b) above with respect to Net Sales of such Company Product for purposes of such payments shall be [**] by Parent (or its Affiliates, or their applicable licensees or sublicensees) [**] (unless and to the extent such [**] ); provided , however , that in no event shall such [**] .

          (ii)     In the event that any Additional Product for which payments are due and unpaid under Section 3.6(b)(ii) above [**] at the time the applicable payments are due and unpaid under Section 3.6(b)(ii) above, the payment rate to be applied under Section 3.6(b)(ii) above with respect to Net Sales of such Additional Product for purposes of such payments (after taking into account any [**] in Section 3.6(c)(i) above) shall be [**] .

          (iii)     In addition, for so long as an [**] is commercially selling in any country a device that is [**] (a “ Competitive Device ”), then the payment rate to be applied in Section 3.6(b)(ii) above with respect to Net Sales of any such Additional Product in such country (after taking into account any [**] in Sections 3.6(c)(i) and 3.6(c)(ii) above) for purposes of amounts due and unpaid pursuant to Section 3.6(b)(ii) above, shall be [**] for such Additional Products in such country. In the event that Parent, in its discretion, obtains an [**] .

          (iv)     Notwithstanding the foregoing, in no event shall the rates then due and unpaid pursuant to Section 3.6(b)(ii) be [**] of Net Sales of the applicable Additional Product on account of the application of [**] described in Section 3.6(c)(i)—(iii) above. No [**] as provided above shall serve to [**] (after which no such amounts are owed) specified in Section 3.6(b).

          (v)     No multiple payments under Section 3.6(b) on the same Net Sales shall be payable hereunder, regardless of whether the relevant Company Products are covered by more than one Valid Claim within the Company Patents or otherwise.

          (vi)     With respect to the contingent payments under Section 3.6(b), if the only Valid Claims of the Company Patents in the applicable countries covering the applicable Company Product at the time such payments accrue are [**] and with respect to the License Payments under Section 3.6(d), if the only Valid Claims of the Company Patents included in the license in consideration for which such License Payments are received are [**] , then [**] of such contingent payments or License Payments (as applicable, and in each case as they would otherwise become due) shall be paid by Parent into an interest-bearing escrow account with the Escrow Agent (rather than to the Stockholders Representatives) until such time as: (A) with

respect to contingent payments, [**] and (B) with respect to License Payments until a [**] . Upon [**], the applicable escrowed amount and interest thereon shall be paid over to the Stockholders Representatives. If no [**] , the applicable escrowed amount and interest thereon shall be released from the escrow account and paid to Parent or Surviving Corporation at such time.

     (d)      License Payments Received from Third Parties . In addition to the amounts payable under Sections 3.6(a) and 3.6(b) above, Parent shall pay, or shall cause its Affiliates to pay on behalf of the Surviving Corporation, to the Stockholders Representatives license payments (“ License Payments ”) equal to [**] Net Recoveries and amounts received by Parent or an Affiliate of Parent from an unaffiliated third party as consideration for a license (including any [**] ) granted to such third party under the Company Intellectual Property for a [**] , but excluding:

           (i)       [**] ;

          (ii)      [**] by Parent or such Affiliate of Parent, to the extent that such payments or reimbursements [**] ;

           (iii)       [**] ;

          (iv)     payments made to Parent or an Affiliate of Parent to the extent that such payments [**] ;

          (v)     amounts received expressly as [**] related to such license;

          (vi)      [**] ; and

          (vii)     amounts received in consideration for something other than [**] . For greater certainty, such exclusion from the obligations to make License Payments includes, without limitation, consideration for [**] .

For the avoidance of doubt, (I) License Payments shall not include amounts received by a [**] of Parent or its Affiliate [**] , but shall include amount received by Parent or its Affiliates in consideration of such amounts analogous to license revenues (applied mutatis mutandis to such licensee) and (II) notwithstanding anything above, in no event shall Merger Consideration or Additional Payments be deemed to be expenses of Parent or its Affiliates for purposes of the foregoing. Parent shall pay License Payment amounts within sixty (60) days of receipt of the revenue upon which such License Payments are based.

In the event consideration comprising an amount giving rise to License Payments is received in the form of [**] .

Without limiting or expanding the other provisions of this Agreement, Parent or its Affiliate shall provide, promptly following the execution of an agreement pursuant to which Parent or any Affiliate of Parent grants any unaffiliated third party a license under any Company Intellectual Property for which any License Payments are due hereunder, to the Stockholders Representatives a copy of such agreement (which may be redacted with respect to portions of such agreement that do not relate to the amount of License Payments owed).

For purposes of the foregoing, “ Net Recoveries ” means all [**] ; provided, however, that Net Recoveries in respect of a [**] .

     (e)      Legal Expense Deductions . In the event of any third party claims, suits, actions or proceedings involving or arising out of the Company Patents and any other Company Intellectual Property (including Intellectual Property comprising trade secrets and know how of Company), including those involving or arising out of any agreements relating thereto, but excluding claims, suits, actions or proceedings to the extent involving or arising out of improvements or developments [**] (except, for the avoidance of doubt, those [**] ), Parent shall be entitled to deduct from any [**] (as fully creditable toward such payments) the amount of reasonable legal costs and expenses, including attorneys fees, court costs, fees of experts and consultants, other out-of-pocket litigation costs, damages, judgments and settlements (collectively, “ Legal Expenses ”), but excluding any amounts constituting [**] incurred by Parent or an Affiliate of Parent in connection with any such claims, suits, actions or proceedings as follows:

          (i)     The first [**] in Legal Expenses shall be fully deductible from (and creditable against) up to [**] due and unpaid hereunder as of the date of the earliest claim, demand or other event leading to such Legal Expenses; and

          (ii)      [**] of any Legal Expenses in excess of [**] shall be deductible from (and creditable against) [**] due and unpaid hereunder as of the date of the earliest claim, demand or other event leading to such Legal Expenses; provided that in either case (i) or (ii) no such [**] shall be reduced by more than [**] .

In the event that any deductible Legal Expenses incurred in a given quarter are not able to be deducted from [**] due and unpaid with respect to such quarter (for example, due to [**] or because insufficient [**] are due for such quarter (but not including the [**] ), interest shall accrue thereon at the rate of [**] , beginning on the last day of the calendar quarter during which such deduction was to have been made, until such Legal Expenses can be deducted from [**] in a future quarter in accordance with this Section 3.6(e). In the event that Legal Expenses are not deducted during the calendar quarter immediately following the calendar quarter during which the such amounts were to have been made, then the [**] rate shall be

determined based on the average [**] rate in effect on the last day of each calendar quarter during which such Legal Expenses remain outstanding or, if such day is not a Business Day, then on the next succeeding Business Day. For the avoidance of doubt, any Legal Expenses deducted from [**] above shall also be credited toward (and effectively reduce) the payment caps in Section 3.6(b) above. The foregoing deductions (and credits) shall be in addition to any other deductions or reductions on payments provided for hereunder and shall apply notwithstanding any limitations or restrictions contained herein with respect to deductions or reductions on payments owed hereunder. Parent or one of its Affiliates shall keep the Stockholders Representatives reasonably informed with respect to any such claim, suit, action or proceeding giving rise to a deduction for Legal Expenses under this Section 3.6(e).

     (f)      Payment Terms . Parent shall pay, or shall cause its Affiliates to pay on behalf of the Surviving Corporation, to the Stockholders Representatives or a payment agent designated by the Stockholders Representatives in writing the amounts required under this Section 3.6 in accordance with the applicable payment terms and due dates expressly provided for herein in United States dollars (immediately available funds) to the bank account specified by the Stockholders Representatives therefor in writing. All payments hereunder shall be accompanied by a written statement identifying the applicable payment and describing how such payment was calculated in sufficient detail to allow the Stockholders Representatives to verify such calculation and payment. Payment of the required amounts to the Stockholders Representatives or a payment agent designated by the Stockholders Representatives in writing shall fully satisfy Parent’s obligations hereunder and neither Parent nor Company shall be liable to any Closing Securityholders for failure of such Closing Securityholder to receive their allocable amounts of such payments or otherwise in respect of such payments.

     (g)      Taxes . All Taxes levied on account of the payments made by or for Parent under this Section 3.6 shall be paid by the Stockholders Representatives and the Closing Securityholders, as applicable, for its and their own account, including Taxes levied thereon as income to such individuals and entities. If deduction or withholding from any payments under this Section 3.6 provision is required under applicable laws, such required amount shall be deducted from the payment made hereunder and a receipt of payment of such amount as tax shall be delivered to the Stockholders Representatives.

     (h)      Foreign Currency; Prohibited Payments . For purposes of determining the amount of payments under Section 3.6(b) above or License Payments due, the amount of Net Sales (or revenues from licenses if applicable) in any foreign currency shall be computed by converting such amount into United States dollars at the prevailing commercial rate of exchange for purchasing United States dollars with such foreign currency as published in The Wall Street Journal (Eastern edition) for the close of the last Business Day of the calendar quarter for which the relevant payment is to be made by Parent. Notwithstanding any other provision of this Agreement, if Parent (or its applicable Affiliate, licensee or sublicense) is prevented from converting any Net Sales amounts (or revenues from licenses if applicable) into United States dollars or otherwise prevented from making any payments under this Section 3.6 by virtue of the applicable laws of the country from which the Net Sales (or revenues from licenses if applicable) are earned or from which the payment is to be made, then such payment may be paid by depositing funds in the currency in which it accrued in a bank in the country whose currency is involved in an account designated by the Stockholders Representatives for such purposes.

     (i)      Records; Inspections . Parent and its Affiliates shall at all times keep [**] of historical records of all Net Sales and revenues underlying License Payments received by Parent or its Affiliates in sufficient detail to allow amounts owed under this Section 3.6 to be calculated. The Stockholders Representatives shall have the right, exercisable no more than once per calendar year, to appoint at its expense (provided that if the inspection and audit shows an underpayment of amounts payable hereunder of more than [**] of the amount due for the applicable period, then Parent shall promptly reimburse Stockholders Representatives for all out-of-pocket costs incurred by Stockholders Representatives to have the accountant conduct such inspection) an independent certified public accountant reasonably acceptable to Parent to inspect such records to verify the accuracy of all amounts due under Sections 3.6(b) and 3.6(d) above. Parent shall make its records available for inspection by such independent certified public accountant during regular business hours at such place or places where such records are customarily kept, upon at least thirty (30) days prior written notice from the Stockholders Representatives. If such accounting firm concludes that such amounts were underpaid for such time period, Parent shall pay the amount of any such underpayments within thirty (30) days of the date the Stockholders Representatives deliver to Parent such accounting firm’s written report, unless Parent disputes such results. In the case of such a dispute, the matter shall be referred to an independent firm of certified public accountants chosen by agreement of Parent and the Stockholders Representatives for resolution of such dispute (the costs of which shall initially be shared equally by Parent and the Stockholders Representatives and upon determination of the independent public accountant, the Party against which such determination is made shall reimburse the other for its share of any such out-of-pocket costs incurred), and the applicable payment, if any, determined thereby shall be made within thirty (30) days of the final determination by such independent certified public accountant. Any decision by said firm of independent certified public accountants shall be binding on the Parent and the Stockholders Representatives, absent clear error. The accounting firms, Stockholders Representatives and Closing Securityholders shall agree to hold in strict confidence all information learned in the course of any audit or inspection prior to the conduct thereof, except to the extent necessary for the Stockholders Representatives and Closing Securityholders to reveal such information (i) in order to enforce its rights under this Agreement (ii) to the extent required by Law, or (iii) to each other to the extent necessary for the Stockholders Representatives to fulfill its obligations to the Closing Securityholders (or their permitted assignees). The failure of the Stockholders Representatives to request inspection during any calendar year shall be deemed acceptance of the accuracy of all amounts paid under Sections 3.6(b) and 3.6(d) above during such year as being the amounts due for such period.

     Section 3.7      Closing Deliveries . At the Closing the following Parties shall deliver or cause to be delivered the following:

     (a)     the Company, Foundry, ForSight and/or the Closing Securityholders, as the case may be, shall deliver or cause to be delivered the documents listed in Sections 8.2(a), 8.2(b), 8.2(c), 8.2(e), 8.2(f), 8.2(g) and 8.2(h); and

     (b)     Parent or the Surviving Corporation shall deliver or cause to be delivered the documents listed in Sections 8.3(a), 8.3(b) and 8.3(c).

ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth on the disclosure schedule delivered by the Company to Parent upon the execution of this Agreement, which disclosure schedule specifies the section or subsection of this Agreement to which this exception relates (the “ Company Disclosure Schedule ”), and subject to Section 12.12, the Company represents and warrants to Parent and Merger Sub as follows:

     Section 4.1      Organization, Standing and Corporate Power . The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the jurisdiction in which it is organized and has all requisite corporate power and authority to own, lease or operate its properties and to carry on its business as presently conducted or presently planned to be conducted. Section 4.1 of the Company Disclosure Schedule contains a true and complete list of each jurisdiction where the Company is qualified to do business. The Company has corporate or equivalent qualification to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary. The Company has made available to Parent prior to the execution of this Agreement true and complete copies of its Certificate of Incorporation (the “ Company Certificate of Incorporation ”) and Bylaws (the “ Company Bylaws ”) as amended to date. The Company is not in violation of any of the provisions of the Company Certificate of Incorporation or the Company Bylaws. The Company has made available to Parent complete and accurate copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof (if available)) of all meetings of the stockholders of the Company, the Board of Directors of the Company and the committees of each of such Board of Directors, in each case held at any time from inception to the date of this Agreement.

     Section 4.2      Subsidiaries; Investments . The Company does not have any Subsidiaries and does not own, directly or indirectly, any capital stock of, or other voting securities or equity interests in, any Person.

     Section 4.3      Capital Structure; Stockholder List .

     (a) The authorized capital stock of the Company consists of 13,000,000 shares of Company Common Stock, of which 5,087,999 shares of Company Common Stock are issued and outstanding, and 6,200,000 shares of Company Preferred Stock, of which 5,000,001 shares of Company Preferred Stock are issued and outstanding.

     (b)     All outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other Indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote.

     (c)     Except as set forth above in Section 4.3(a), as of the close of business on September 30, 2007:

          (i)     there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities or equity interests of the Company, (B) any securities of the Company convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or equity interests of the Company or (C) any warrants, calls, options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company; and

          (ii)     there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities.

     There are no outstanding contractual obligations of the Company to make any loan or guarantees to, or any equity or other investment (in the form of a capital contribution or otherwise) in, any other Person.

     (d)     There are no outstanding contractual obligations of the Company (i) restricting the transfer of, (ii) affecting the voting rights of, or (iii) granting any preemptive, right of first refusal or antidilutive right with respect to, any Company Common Stock or Company Preferred Stock.

     (e)     Section 4.3(e) of the Company Disclosure Schedule is a list as set forth in the records of the Company (the “ Stockholders List ”) that sets forth the name of each holder of the Company Common Stock and Company Preferred Stock, exactly as such holder’s name is set forth on the stock certificate(s) representing such Company Common Stock or Company Preferred Stock. The Stockholders List also sets forth with respect to each such holder the stock certificate numbers held by such holder and the number of Company Common Stock or Company Preferred Stock evidenced by each such stock certificate.

     Section 4.4      Authority . The Company has all requisite corporate power and authority to execute and deliver this Agreement and, subject to receipt of the approval of the Company’s stockholders, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, other than obtaining the approval of the Company’s stockholders. This Agreement has been duly executed and delivered by the Company and,

assuming the due authorization, execution and delivery by each of the other Parties, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

     Section 4.5      Noncontravention .

     (a)     The execution and delivery of this Agreement do not, and (assuming receipt of the approval of the Company’s stockholders) the consummation of the Merger and the other transactions to be entered into by the Company contemplated by this Agreement and compliance by the Company with the provisions of this Agreement will not, (i) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, the Company Certificate of Incorporation or the Company Bylaws, (ii) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or alter the rights or obligations of any party under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company under, any Contract to which the Company is a party or any of its properties or other assets is subject or (iii) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, any Law applicable to the Company or its properties or other assets or the rules and regulations of any regulatory organization applicable to the Company.

     (b)     No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental self-regulatory agency, commission or authority (each, a “ Governmental Entity ”) is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or the consummation of the Merger or the other transactions contemplated by this Agreement by the Company, except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business.

     Section 4.6      Corporate Records . The copies or originals of the Company Certificate of Incorporation, the Company Bylaws, minute books and stock records of the Company previously delivered or made available to Parent are true, complete and correct in all respects. The Company has maintained complete and accurate books and records, including correct records of all its material corporate proceedings.

     Section 4.7      Financial Statements . The Company has furnished to Parent the unaudited balance sheets of the Company as at December 31, 2006, and the related unaudited statements of income, changes in stockholders’ equity and cash flows, including all notes thereto, for the fiscal year then ended December 31, 2006, and the unaudited balance sheet, income statement and statement of cash flows of the Company as at and for the nine (9) months ended September 30, 2007 (collectively, the “ Financial Statements ”). The Financial Statements fairly

present, in conformity with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis (except as may be indicated in the notes thereto and for the absence of footnotes and subject to normal year-end adjustments in the case of any interim financial statements), the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended.

     Section 4.8      No Undisclosed Liabilities . Except to the extent set forth or provided for in the Financial Statements or the notes thereto or as set forth in Section 4.8 of the Company Disclosure Schedule, the Company has no liabilities or obligations, whether accrued, absolute, contingent or otherwise (including, without limitations, unasserted claims).

     Section 4.9      Absence of Certain Changes or Events . Except for liabilities incurred in connection with this Agreement or as permitted pursuant to Section 6.1, since September 30, 2007, the Company has conducted its businesses in the ordinary course consistent with past practice (which for this purpose shall include past practice of ForSight) and from such date to the date hereof there has not been:

     (a)     any incurrence by the Company of any debts or liabilities (absolute, accrued, contingent or otherwise);

     (b)     any event or development that would, individually or in the aggregate, reasonable be expected to have a Material Adverse Effect on the Company;

     (c)     any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company, any issuance by the Company of shares of capital stock or other securities of, or other ownership interests in, the Company, or any repurchase, redemption or other acquisition, or any amendment of any term, by the Company of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company;

     (d)     any creation or assumption by the Company of any Lien on any material asset or any making of any loan, advance or capital contributions to or investment in any Person;

     (e)     any personal property damage, destruction or casualty loss or personal injury loss (whether or not covered by insurance) affecting the business or assets of the Company;

     (f)     paid or agreed to any increase in compensation, bonus or other equity-related benefits payable to directors, consultants, officers or employees of the Company;

     (g)     any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of the Company, or any lockouts, strikes, slowdowns, work stoppages or, to the Knowledge of the Company, threats thereof by or with respect to any employees of the Company;

     (h)     any sale, transfer, lease to others or other disposition of any of its material assets by the Company;

     (i)     any amendment to or termination of any Company Material Contract or adverse amendment to any license or permit, or receipt of any notice of termination of any of the same, or occurrence of a default under any Company Material Contract or any license or permit;

     (j)     any capital expenditures or capital additions by the Company or any leases of capital equipment or property, totaling in excess of $25,000 in the aggregate;

     (k)     any institution of litigation, settlement or agreement to settle any litigation, action, proceeding or investigation before any court or governmental body relating to the Company or its property or suffering of any actual or, to the Knowledge of the Company, threatened, litigation, action, pro