AGREEMENT AND PLAN OF MERGER

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

by and among

PEOPLESUPPORT, INC.,

ESSAR SERVICES, MAURITIUS

and

EASTER MERGER SUB, INC.

Dated as of August 3, 2008

Table of Contents

INDEX OF DEFINED TERMS

AGREEMENT AND PLAN OF MERGER

     AGREEMENT AND PLAN OF MERGER (hereinafter called this “ Agreement ”), dated as of August 3, 2008, by and among PeopleSupport, Inc., a Delaware corporation (“ Company ”), Essar Services, Mauritius, a company organized under the laws of Mauritius (“ Parent ”), and Easter Merger Sub Inc., Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”).

W I T N E S S E T H:

     WHEREAS, the respective Boards of Directors of Company, Parent and Merger Sub have unanimously approved the merger of Merger Sub with and into Company upon the terms and subject to the conditions set forth in this Agreement;

     WHEREAS, the respective Boards of Directors of Parent, Merger Sub and Company have each approved and declared advisable this Agreement and the merger of Merger Sub with and into Company, as set forth below (the “ Merger ”), in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”) upon the terms and subject to the conditions set forth in this Agreement;

     WHEREAS, Parent and Merger Sub have approved this Agreement and the consummation of the Merger and all of the covenants and agreements contained in this Agreement; and

     NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

THE MERGER

     1.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DGCL, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into Company, whereupon the separate corporate existence of Merger Sub shall cease, and Company shall continue as the surviving company in the Merger (the “ Surviving Corporation ”) and a wholly owned subsidiary of Parent.

     1.2 Closing . The closing of the Merger (the “ Closing ”) shall take place at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022 at 10:00 a.m., local time, on a date to be specified by the parties (the “ Closing Date ”), which shall be no later than the second Business Day after satisfaction or waiver (to the extent permitted by applicable Law (as defined in section 3.1(k)) of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or at such other place, date and time as Company and Parent may agree in writing. For purpose of this Agreement “ Business Day ” means any day other than (a) a Saturday or Sunday, (b) a federal holiday in the United States, (c) a national holiday in India or a state or regional holiday in Mumbai, India or (c) a day on which commercial banks in the state of New York or the city of Mumbai, India are authorized or required to be closed.

     1.3 Effective Time . On the Closing Date, immediately after the Closing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware and make all other filings or recordings required under the DGCL in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such later time as Parent and Company shall agree and shall specify in the Certificate of Merger (the time the Merger becomes effective being the “ Effective Time ”).

     1.4 Effects of the Merger . The effects of the Merger shall be as provided in this Agreement and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, all the property, rights, privileges, powers and franchises of Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation, all as provided under the applicable laws of the State of Delaware.

     1.5 Certificate of Incorporation of the Surviving Corporation . Subject to Section 5.9 of this Agreement, at the Effective Time, the amended and restated certificate of incorporation of Company, as in effect immediately prior to the Effective Time, shall be amended and restated to read in its entirety as set forth in Exhibit A attached hereto and incorporated by reference herein, and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable Law.

     1.6 By-Laws of the Surviving Corporation . Subject to Section 5.9 of this Agreement, at the Effective Time, the amended and restated by-laws of Company, as in effect immediately prior to the Effective Time, shall be amended and restated to read in their entirety as set forth in Exhibit B attached hereto and incorporated by reference herein, and, as so amended and restated, shall be the by-laws of the Surviving Corporation, until thereafter amended as provided therein, in the certificate of incorporation or in accordance with applicable Law.

     1.7 Directors . The Directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and the by-laws.

     1.8 Officers . The officers of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and the by-laws.

ARTICLE II

EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES

     2.1 Effect on Capital Stock . At the Effective Time, as a result of the Merger and without any further action on the part of Company, Parent, Merger Sub or any holder of any shares of capital stock of Company, Parent or Merger Sub:

     (a)  Merger Sub . Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.

     (b)  Cancellation of Treasury Stock and Parent-Owned Stock . Each Share that is owned directly or indirectly by Company as treasury stock or by Parent, Merger Sub or any other Subsidiary (as defined in Section 3.1(a)) of Parent or Company immediately prior to the Effective Time (the “ Cancelled Shares ”) shall, by virtue of the Merger and without any action on the part of the holder thereof, automatically be cancelled and retired and shall cease to exist, and no cash or other consideration shall be delivered in exchange therefore.

     (c)  Conversion of Company Common Shares . Subject to Section 2.1(b) and Section 2.3(a), each issued and outstanding share of common stock, par value $0.001 per share, of the Company, together with each associated Right (as hereinafter defined) under the Rights Agreement (as hereinafter defined) issued and outstanding immediately prior to the Effective Time (such shares collectively, “ Common Shares ” or “ Shares ” and each, a “ Share ”), other than any Cancelled Shares (as defined, and to the extent provided in Section 2.1(b)) and any Dissenting Shares (as defined, and to the extent provided in Section 2.3(a)), shall be cancelled and shall be converted automatically into the right to receive from the Surviving Corporation $12.25 per share in cash, without interest (the “ Merger Consideration ”) payable to the holder thereof upon surrender in the manner provided in Section 2.2(b) of the certificate or certificates (a “ Certificate ”) which immediately prior to the Effective Time evidenced such Shares.

     (d)  Stock Options; Restricted Stock Units . Company shall cause each option to purchase Common Shares (a “ Company Option ”), outstanding immediately prior to the Effective Time, whether vested or unvested, to be canceled at the Effective Time and shall thereafter represent the right to receive, at the Effective Time or as soon as practicable thereafter, in full satisfaction of the rights of the holder with respect thereto, an amount in cash equal to the product of (A) the number of Common Shares subject to such Company Option immediately prior to the Effective Time, multiplied by (B) the amount by which the Merger Consideration exceeds the exercise price per share of Company Shares previously subject to such Company Option. Company shall cause each restricted stock unit with respect to Common Shares (“ Company RSUs ”) outstanding immediately prior to the Effective Time, whether vested or unvested, to be canceled at the Effective Time, and shall thereafter represent the right to receive, at the Effective Time or as soon as practicable thereafter, in full satisfaction of the rights of the holder with respect thereto, an amount in cash equal to the product of (A) the number of Company Shares subject to such Company RSU immediately prior to the Effective Time, multiplied by (B) the Merger Consideration. In accordance with the terms of the 2004 Employee Stock Purchase Plan, immediately prior to the Effective Time, any “Accumulation Period” and/or “Offering Period” (as such terms are defined in the 2004 Employee Stock Purchase Plan) shall terminate and each participant thereunder shall receive Common Shares in accordance with the terms of the 2004 Employee Stock Purchase Plan.

     2.2 Exchange of Share Certificates . (a) Paying Agent . Prior to the Effective Time, Parent shall designate a bank or trust company to act as paying agent (the “ Paying Agent ”) for the payment of the Merger Consideration. At the Effective Time, Parent shall deposit, or cause Merger Sub to deposit, with the Paying Agent, for the benefit of the holders of Certificates, an amount equal to the aggregate Merger Consideration. The deposit made by Parent or Merger Sub, as the case may be, pursuant to this Section 2.2(a) is hereinafter referred to as the “ Exchange Fund .” Such funds shall be invested in Permitted Investments by the Paying Agent as directed by the Surviving Corporation. Any interest or other income resulting from such investment shall be paid to and be income of Parent. The Exchange Fund shall not be used for any purpose that is not expressly provided for in this Agreement. “ Permitted Investments ” shall mean (i) direct obligations of the United States, (ii) obligations for which the full faith and credit of the United States is pledged to provide for the payment of principal and interest, (iii) commercial paper rated the highest quality by Moody’s Investors Services, Inc. or Standard & Poor’s Ratings Group, (iv) certificates of deposit, money market funds, bank repurchase agreements or bankers’ acceptances of a commercial bank having at least $1 billion in assets and rated in one of two highest rating categories (without regard to refinements within such rating categories) by Moody’s Investors Services, Inc. or Standard & Poor’s Ratings Group, or (v) pooled or commingled investment vehicles administered by a bank meeting the requirements of (iv) above that is limited to investments as described in (i) through (iv) above.

     (b)  Exchange Procedures . Promptly after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of a Certificate (i) a letter of transmittal specifying that delivery of the Certificates shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates (or affidavits of loss reasonably satisfactory to the Surviving Corporation in lieu thereof) to the Paying Agent, such letter of transmittal to be in customary form and have such other provisions as Parent may reasonably specify and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration (such instructions shall include instructions for the payment of the Merger Consideration to a Person other than the Person in whose name the surrendered Certificate is registered on the transfer books of Company, subject to the receipt of appropriate documentation for such transfer). Upon surrender to the Paying Agent of a Certificate (or evidence reasonably satisfactory to the Surviving Corporation of loss in lieu thereof) for cancellation together with such letter of transmittal, duly completed and validly executed, and such other documents as may reasonably be requested by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefore the Merger Consideration that such holder is entitled to receive pursuant to this Article II, and the Certificate so surrendered shall forthwith be cancelled; provided that in no event will a holder of a Certificate be entitled to receive the Merger Consideration if Merger Consideration was already paid with respect to the Shares underlying such Certificate in connection with an affidavit of loss. No interest will be paid or accrued on any amount payable upon due surrender of the Certificates. In the event of a transfer of ownership of Common Shares that is not registered in the transfer records of Company, payment may be issued to such a transferee if the Certificate formerly representing such Common Shares is presented to the Paying Agent, accompanied by all documents reasonably satisfactory to the Surviving Corporation required to evidence and effect such transfer, and the Person requesting such issuance pays any transfer or other taxes required by reason of such payment to a Person other than the registered holder of such Certificate or establishes to the satisfaction of Parent and Company that such tax has been paid or is not applicable. All cash paid upon the surrender of a Certificate in accordance with the terms of this Section 2.2 shall be deemed to have been paid in full satisfaction of all rights pertaining to the Common Shares formerly represented by such Certificate.

     For the purposes of this Agreement, the term “ Person ” shall mean any individual, corporation (including not-for-profit corporations), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity (as defined in Section 3.1(d)) or other entity of any kind or nature.

     (c)  Transfers . At the close of business on the day of the Effective Time, the stock transfer books of Company shall be closed and thereafter there shall be no further registration of transfers on the stock transfer books of Company of Common Shares that were outstanding immediately prior to the Effective Time. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable Law.

     (d)  Termination of Exchange Fund . Any portion of the Exchange Fund relating to the Merger Consideration that remains unclaimed by the stockholders of Company one hundred and eighty (180) days after the Effective Time shall be returned to Parent or the Surviving Corporation. Any stockholders of Company who have not theretofore complied with this Article II shall thereafter look only to Parent for payment of the Merger Consideration upon due surrender of their Certificates (or affidavits of loss reasonably satisfactory to the Surviving Corporation in lieu thereof), without any interest thereon. Notwithstanding the foregoing, none of Parent, Merger Sub, the Surviving Corporation, the Paying Agent or any other Person shall be liable to any former holder of Common Shares or for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws. If any Certificate has not been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity) any such Shares, cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled hereto.

     (e)  Lost, Stolen or Destroyed Certificates . In the event that 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 reasonably satisfactory to the Surviving Corporation as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration upon due surrender of the Common Shares represented by such Certificate pursuant to this Agreement.

     (f)  Withholding Rights . Not withstanding anything to the contrary herein, each of Parent, Merger Sub, the Paying Agent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article II such amounts as it is required to deduct and withhold with respect to the making of such payment under provision of any federal, state, local or foreign tax law or under the Internal Revenue Code of 1986, as amended (the “ Code ”), and the rules and regulations promulgated thereunder. If Parent, Merger Sub, the Paying Agent or the Surviving Corporation, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Common Shares in respect of which Parent, Merger Sub, the Paying Agent or the Surviving Corporation, as the case may be, made such deduction and withholding.

     2.3 Dissenters’ Rights . (a) Notwithstanding anything in any other Section of this Agreement to the contrary, Common Shares, including any Rights attached thereto, outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded properly in writing appraisal for such Common Shares including any Rights attached thereto in accordance with Section 262 of the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into, or represent the right to receive, the Merger Consideration, unless such holder fails to perfect or withdraws or otherwise loses his right to appraisal. At the Effective Time, all Dissenting Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of Dissenting Shares shall cease to have any rights with respect thereto, except the right to receive, subject to and net of any applicable withholding of Taxes (as defined in Section 3.1(n)(ii)), payment of the appraised value of such Dissenting Shares held by them in accordance with the provisions of Section 262 of the DGCL. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to receive, subject to and net of any applicable withholding of Taxes, payment of the appraised value of such Dissenting Shares held by them in accordance with the provisions of Section 262 of the DGCL shall cease and such Dissenting Shares shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.2, of the Certificate or Certificates that formerly evidenced such Dissenting Shares.

     (b) Company shall give Parent prompt notice of any demands for appraisal received by Company, withdrawals of such demands and any other instruments served on or otherwise received by Company pursuant to the DGCL, and Parent shall have the right to direct all negotiations and proceedings with respect to demands for appraisal under DGCL. Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

     2.4 Adjustments to Prevent Dilution . In the event that Company changes the number of Common Shares or securities convertible or exchangeable into or exercisable for Common Shares issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the Merger Consideration shall be equitably adjusted to reflect such change.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of Company . Except as set forth in the disclosure schedules delivered to Parent by Company prior to the date of this Agreement (the “ Company Disclosure Schedules ”) or in Company Reports (as defined in Section 3.1(e)(i)) filed prior to the date hereof (and then (i) only to the extent reasonably apparent in the Company Reports that such disclosed item is an event, item or occurrence that constitutes a breach of a representation or warranty set forth in this Article III and (ii) excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” in such filings), Company hereby represents and warrants to Parent and Merger Sub that:

     (a)  Organization, Good Standing and Qualification . Each of Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as currently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties and assets or conduct of its business requires such qualification, except where the failure to be so qualified as a foreign corporation or be in good standing would not be reasonably likely to, either individually or in the aggregate, have a Company Material Adverse Effect (as defined herein). Company has heretofore made available to Parent complete and correct copies of Company’s and each of its Subsidiaries’ certificate of incorporation and by-laws (or comparable governing instruments), as amended. The certificate of incorporation and by-laws (or comparable governing instruments) of each of Company and its Subsidiaries so made available are in full force and effect. Section 3.1(a) of the Company Disclosure Schedules sets forth a list of all of the Subsidiaries of Company, the jurisdictions under which such Subsidiaries are incorporated, and the percent of the equity interest therein owned by Company and each other Subsidiary of Company, as applicable. Except as disclosed in Section 3.1(a) of the Company Disclosure Schedules, Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

     As used in this Agreement, the term “ Subsidiary ” means, with respect to Company, Parent or Merger Sub, as the case may be, any entity, whether incorporated or unincorporated, of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is directly or indirectly owned or controlled by such party or by one or more of its respective Subsidiaries or by such party and any one or more of its respective Subsidiaries.

     As used in this Agreement, the term “ Affiliate ” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person; provided that, for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

     As used in this Agreement, the term “ Company Material Adverse Effect ” means, any event, circumstance, change or effect that, individually or in the aggregate with any other events, circumstances, changes and effects, is or is reasonably likely to be materially adverse to (a) the business, condition (financial or otherwise), assets, liabilities or results of operations of the Company and its Subsidiaries taken as a whole or (b) the ability of the company to consummate the Merger and the other transactions contemplated hereby; provided, however , that any such effect resulting from or arising out of (i) any change in Law or United States generally accepted accounting principles (“ U.S. GAAP ”) or interpretations thereof, (ii) changes in general economic or business conditions, (iii) conditions generally affecting the business process outsourcing industry, (iv) acts of war (whether declared or undeclared), sabotage, terrorism, military action or any escalation or worsening thereof, (v) the Company or any of its Subsidiaries taking any action permitted hereby, (vi) the public announcement or the pendency of this Agreement ( provided , however , that this clause (vi) shall not diminish the effect of, and shall be disregarded for purposes of the representations and warranties relating to required consent, approvals, change in control provisions or similar rights of acceleration, termination, modification or waiver based upon the entering into of this Agreement or consummation of the Merger and the other transactions contemplated hereby), (vii) a decline in the trading price of Common Shares and any failure in and of itself by Company to meet analysts’ published revenue or earnings predictions or any internal or disseminated projections, forecasts or revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of this Agreement ( provided that, the underlying causes of such decline and failure may be considered in determining whether there has been a Company Material Adverse Effect), (viii) any costs or expenses associated with the Merger, and (ix) currency exchange rates or any fluctuations thereof shall not be considered when determining if a Company Material Adverse Effect has occurred; except with respect to subsections (i)-(iv) and (ix), in the event, that such occurrence, change, event or effect has had a materially disproportionate effect on Company and its Subsidiaries, taken as a whole, compared to other Persons engaged in the business process outsourcing industry in which case such effects shall be considered in determining whether a Company Material Adverse Effect has occurred.

     As used in this Agreement, the term “ knowledge ” or any similar formulation of knowledge shall mean the actual knowledge after reasonable investigation of, with respect to Company, those persons set forth in Section 3.1(a) of the Company Disclosure Schedules and, with respect to Parent, those persons set forth in Section 3.2(a) of the Parent Disclosure Schedules (as defined in Section 3.2).

     (b)  Capital Structure . (i) The authorized capital stock of Company consists of 91,000,000 shares of which (i) 87,000,000 shares are designated as Common Shares, of which 19,050,286 shares are outstanding as of the date of this Agreement and (ii) 4,000,000 shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”), of which 250,000 shares are designated Series A Junior Participating Preferred Stock (the “ Series A Junior Preferred Stock ”), and as of the Date of this Agreement no shares of Company Preferred Stock are outstanding. There are no Common Shares held in the treasury of Company and there are no Common Shares held by Subsidiaries of Company. 901,850 Common Shares are issuable upon exercise of Company RSUs pursuant to the Company Stock Plans and an additional 1,681,893 Common Shares are issuable upon exercise of Company Options. Pursuant to the Shareholder Rights Agreement dated August 28, 2007 between Registrant and Computershare Trust Company, N.A., as Rights Agent (the “ Rights Agreement ”), each Common Share has attached thereto a right (each a “ Right ” and collectively, the “ Rights ”) to purchase one one-hundredth of a share of Series A Junior Preferred Stock at a price of $65.00 per one one-hundredth of a share, subject to adjustment. All of the issued and outstanding Common Shares have been duly authorized and are validly issued, fully paid and nonassessable. Each of the outstanding shares of capital stock or other securities of each of Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and is owned by Company or a direct or indirect wholly-owned Subsidiary of Company, free and clear of any lien, pledge, security interest, claim or other encumbrance. Other than (A) Company Options and Company RSUs pursuant to Company’s 1998 Stock Incentive Plan, as amended and Company’s 2004 Stock Incentive Plan, as amended and (B) the Rights pursuant to the Rights Agreement (collectively, the “ Company Stock Plans ”), there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or to sell any shares of capital stock or other securities of Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Company on any matter (“ Voting Debt ”).

     (ii) Section 3.1(b)(ii) of the Company Disclosure Schedules sets forth the following information with respect to each Company Option outstanding on the date of this Agreement: (i) the name and address of the Company Option recipient; (ii) the particular plan pursuant to which such Company Option was granted; (iii) the number of Common Shares subject to such Company Option; (iv) the exercise or purchase price of such Company Option; (v) the date on which such Company Option was granted; (vi) the applicable vesting schedule; (vii) the date on which such Company Option expires; and (viii) whether the exercisability of or right to repurchase of such Company Option will be accelerated in any way by the Merger or the other transactions contemplated hereby. Company has made available to Parent accurate and complete copies of all Company Option Plans pursuant to which Company has granted the Company Options that are currently outstanding and the form of all stock award agreements evidencing such Company Options. All Common Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully paid and nonassessable. There are no

outstanding contractual obligations of Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or any capital stock of any of its Subsidiaries or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any of its Subsidiaries or any other Person. Except as set forth in Section 3.1(b) of the Disclosure Schedule, there are no commitments or agreements of any character to which Company is bound obligating Company to accelerate the vesting of any Company Option as a result of the Merger. All outstanding Common Shares, all outstanding Company Options and all outstanding shares of capital stock of each Subsidiary of Company have been issued and granted in compliance with (i) all applicable securities Laws and other applicable Laws and (ii) all requirements set forth in applicable contracts.

     (c)  Corporate Authority . Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate, on the terms and subject to the conditions of this Agreement, the Merger and the other transactions contemplated hereby, subject only to receipt of the Company Requisite Vote (as defined in Section 3.1(t)). This Agreement has been duly executed and delivered by Company and, assuming due authorization, execution and delivery by each of Parent and Merger Sub, is a valid and legally binding agreement of Company enforceable against Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “ Bankruptcy and Equity Exception ”).

     (d)  Governmental Filings; No Violations .

     (i) Other than any reports, filings, registrations, approvals and/or notices (A) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), the Securities Act of 1933, as amended (and the rules and regulations promulgated thereunder, the “ Securities Act ”), the Securities Exchange Act of 1934, as amended (and the rules and regulations promulgated thereunder, the “ Exchange Act ”) and state securities, takeover and “blue sky” laws, (B) the filings with or approvals from Governmental Entities required solely by virtue of the jurisdictions in which Company or its Subsidiaries conduct business or own any assets listed on Section 3.1(d) of the Company Disclosure Schedules (collectively, the “ Foreign Antitrust Filings ”) and (C) to comply with the rules and regulations of the Financial Industry Regulatory Authority (“ FINRA ”) (items (A) through (C) (inclusive)), the “ Company Required Statutory Approvals ”), no notices, reports, registrations or other filings are required to be made by Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Company from, any United States or non-United States federal, state, or local governmental or regulatory authority, agency, commission, body or other governmental entity (each a “ Governmental Entity ”), in connection with the execution and delivery of this Agreement and the consummation by Company of the Merger and the other transactions contemplated hereby, except for those that the failure to make or obtain are not reasonably likely to, either individually or in the aggregate, have a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of Company to consummate the Merger and the other transactions contemplated hereby.

     (ii) The execution, delivery and performance of this Agreement and the consummation by Company of the Merger and the other transactions contemplated hereby will not constitute or result in (A) a breach or violation of, or a default under, either the certificate of incorporation of Company or by-laws (or comparable governing instruments) of Company or of any Subsidiary of Company, (B) a breach or violation of, a default under, the acceleration of any obligations, the loss of any right or benefit, or the creation of a lien, pledge, security interest or other encumbrance on the assets of Company or any Subsidiary of Company (with or without notice, lapse of time or both) pursuant to, any agreement, lease, contract, note, mortgage, franchise, indenture, arrangement or other instrument or obligation (“ Contracts ”) to which Company or any Subsidiary of Company is a party or any Law or governmental or non-governmental permit or license to which Company or any Subsidiary of Company is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, creation or change that would not be reasonably likely to, either individually or in the aggregate, have a Company Material Adverse Effect or prevent, or materially impair the ability of Company to consummate the Merger and the other transactions contemplated hereby.

     (e)  Company Reports; Financial Statements . (i) The filings required to be made by Company since January 1, 2006 under the Securities Act and the Exchange Act have been filed with the U.S. Securities and Exchange Commission (the “ SEC ”), including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto, and complied, as of their respective dates or as of the date of final amendment, as applicable, and in the case of such filings made after the date hereof will comply, in all material respects with all applicable requirements of the appropriate statutes and the rules and regulations thereunder. Company has made available (except to the extent available through EDGAR) to Parent each registration statement, report, proxy statement and information statement filed by it with the SEC pursuant to the Securities Act or the Exchange Act (all such filings, including all amendments and supplements thereto, the “ Company Reports ”) since January 1, 2006, including (i) Company’s Annual Reports on Form 10-K, (ii) Company’s Quarterly Reports on Form 10-Q, and (iii) Company’s Current Reports on Form 8-K furnished pursuant to Item 12, Results of Operations and Financial Condition (or pursuant to Item 9 in accordance with SEC Release No. 33-8216), each in the form (including exhibits, annexes and any amendments thereto) required by the SEC under the Securities Act or the Exchange Act, as the case may be. None of the Company Reports (in the case of Company Reports filed pursuant to the Securities Act), as of their effective dates, contained, nor in the case of such Company Reports filed after the date hereof will contain, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. None of the Company Reports (in the case of Company Reports filed pursuant to the Exchange Act) as of the respective dates filed with the SEC or first mailed to stockholders, as applicable, contained, nor in the case of such Company Reports filed after the date hereof will contain, any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The consolidated financial statements of Company and its Subsidiaries included in or incorporated by reference into the Company Reports comply, and in the case of consolidated financial statements included in or incorporated by reference into the Company Reports filed after the date hereof will comply, in all material respects with the

applicable rules and regulations of the SEC with respect thereto. Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) present, and in the case of consolidated balance sheets included in or incorporated by reference into Company Reports filed after the date hereof will present fairly in all material respects, the financial position of Company and its Subsidiaries as of its date, and each of the consolidated statements of income and consolidated statements of cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) presents, and in the case of consolidated statements of income and consolidated statements of cash flows included in or incorporated by reference into Company Reports filed after the date hereof will present, fairly the results of operations, retained earnings and changes in financial position, as the case may be, of Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments), in each case in accordance with U.S. GAAP consistently applied during the periods involved, except as may be noted therein.

     (ii) Section 3.1(e)(ii) if the Company Disclosure Schedules sets forth, subject to the qualifications therein (a) Company’s current cash and cash equivalents, (b) the current value of Company’s marketable securities and (c) the estimated sale value of Company’s real property.

     (iii) Company has heretofore furnished to Parent complete and correct copies of all amendments and modifications that have not been filed by Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect.

     (iv) Company maintains and shall continue to maintain a standard system of accounting established and administered in accordance with U.S. GAAP. Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Section 3.1(e)(iv) of the Company Disclosure Schedules lists, and Company has made available to Parent complete and correct copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls.

     (v) Company has timely filed and made available to Parent all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) (the “ Sarbanes-Oxley Act ”) with respect to any Company Reports. Company’s disclosure controls and procedures (as defined in sections 13a-15(e) and 15d-15(e) of the Exchange Act) effectively enable Company to comply with, and the appropriate officers of Company to make all certifications required under, the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder. Section 3.1(e)(v) of the Company Disclosure Schedules lists, and Company has made available to Parent complete and correct copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such disclosure controls and procedures. As used in this Section 3.1(e), the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

     (f)  Disclosure Documents . None of the information provided by Company or its Subsidiaries to be included or incorporated by reference in (i) the Proxy Statement (as defined below) or (ii) any other document to be filed with the SEC or any other Governmental Entity in connection with the Merger and the other transactions contemplated hereby (the “ Other Filings ”) will, at the respective times filed with the SEC or other Governmental Entity and, in addition, in the case of the Proxy Statement, at the date it or any amendment or supplement is mailed to stockholders, and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder, except that no representation is made by Company with respect to statements made therein based on information supplied by Parent or Merger Sub in writing specifically for inclusion in the Proxy Statement. The letters to stockholders, notices of meeting, proxy statement and forms of proxies to be distributed to stockholders in connection with the Merger are collectively referred to herein as the “ Proxy Statement .”

     (g)  No Undisclosed Material Liabilities . There are no liabilities or obligations of Company or any of its Subsidiaries of any kind whatsoever in existence, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (i) liabilities or obligations disclosed and provided for in the Company balance sheet as of March 31, 2008 included in the Company Reports (the “ Company Balance Sheet ”) or in the notes thereto or in the Company Reports; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since March 31, 2008 and such classes of ordinary course expenses are listed in Section 3.1(g) of the Company Disclosure Schedule; and (iii) liabilities or obligations that would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect.

     (h)  Absence of Certain Changes . Since December 31, 2007 (the “ Audit Date ”), except as expressly contemplated by this Agreement, (i) Company and its Subsidiaries have conducted their business only in the ordinary course of such business consistent with past practice, (ii) there has been no Company Material Adverse Effect, and (iii) none of Company or any of its Subsidiaries has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 4.1. Since the Audit Date, except as provided for herein, there has not been any material increase in the compensation payable or that could become payable by Company or any of its Subsidiaries to officers or key employees or any material amendment of any of the Compensation and Benefit Plans (as defined in Section 3.1(j)) other than increases or amendments in the ordinary course of business consistent with past practice.

     (i)  Litigation . There are no civil, criminal or administrative actions, suits, claims, hearings, investigations, reviews or proceedings pending or, to the knowledge of Company, threatened against Company or any of its Subsidiaries, except for those that (i) do not involve, in any individual case, a claim for monetary damages in excess of $40,000 (forty thousand dollars), (ii) would not materially prohibit or restrict the Company and its Subsidiaries from operating the business as they have historically, or (iii) would not be reasonably likely, either individually or in the aggregate, to have a Company Material Adverse Effect. There is no (A) suit, action or proceeding pending, or, to the knowledge of Company, threatened, against Company or any of its Subsidiaries or (B) judgment, decree, injunction, ruling or order of any Governmental Entity or arbitrator outstanding against Company or any of its Subsidiaries, in either case that would be reasonably likely to have, individually or in the aggregate, a material and adverse effect on the ability of Company to perform its obligations hereunder or to consummate the Merger and the other transactions contemplated hereby. To the knowledge of Company, no officer or director of Company or any Subsidiary of Company is a defendant in any material suit, claim, action, proceeding, arbitration or mediation in connection with his or her status as an officer or director of Company or any Subsidiary of the Company. Neither Company nor any of its Subsidiaries nor any of their respective properties or assets is or are subject to any judgments, orders or decrees, except for those judgments, orders or decrees that would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect

     (j)  Employee Benefits . The term “ Compensation and Benefit Plan ” shall mean any compensation agreement, bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, change in control, retention, restricted stock, stock option, employment, termination, severance, compensation, medical, health or other compensation or benefit plan, policy agreement or arrangement including, without limitation, each “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), that covers employees or former employees (“ Employees ”), individual consultants or directors or former directors of Company or any of its Subsidiaries; and any trust agreement or insurance contract forming a part of such Compensation and Benefit Plan. Section 3.1(j) of the Company Disclosure Schedules lists all Compensation and Benefit Plans of Company and its Subsidiaries (“ Company Compensation and Benefit Plans ”), and any Company Compensation and Benefit Plans containing “change of control” or similar provisions therein are specifically identified in Section 3.1(j) of the Company Disclosure Schedules. Company has made available to Parent a copy of all Company Compensation and Benefit Plans, a copy of each material document, if any,

prepared in connection with each Company Compensation and Benefit Plan, and a copy of each agreement, policy, practice or arrangement that covers employees or former employees of Company and its Subsidiaries.

     (i) None of the Company Compensation and Benefit Plans is (i) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a “ Multiemployer Plan ”), (ii) a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary could incur liability under Section 4063 or 4064 of ERISA (a “ Multiple Employer Plan ”), or (iii) subject to Title IV or Section 302 of ERISA or Sections 412 or 4971 of the Code.

     (ii) All Company Compensation and Benefit Plans are now and have always been operated in all material respects in accordance with their terms and the requirements of all applicable Laws and, to the extent subject to ERISA and the Code, are in compliance in all material respects with the applicable provisions of ERISA, the Code and any other applicable Law. Each Company Compensation and Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “ Pension Plan ”) and that is intended to be qualified under Section 401(a) or Section 401(k) of the Code has timely received a favorable determination letter from the U.S. Department of the Treasury, Internal Revenue Service (the “ IRS ”), and each trust established in connection with any Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that it is so exempt, and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification or that would result in material costs to Company or any of its Subsidiaries under the Internal Revenue Service’s Employee Plans Compliance Resolution System. Each Company Compensation and Benefit Plan that is a “nonqualified deferred compensation plan” subject to Section 409A of the Code has been operated in all material respects in good faith compliance with Section 409A of the Code and the regulations and other guidance promulgated thereunder since January 1, 2005. There is no pending or, to the knowledge of Company, threatened litigation relating to the Company Compensation and Benefit Plans. Neither Company nor any of its Subsidiaries has engaged in a transaction with respect to any Pension Plan that, assuming the taxable period of such transaction expired, would subject Company or any of its Subsidiaries to a material tax or penalty imposed by either Section 4975 of the Code or Section 502(i) or Section 406 of ERISA.

     (iii) No liability under Title IV of ERISA has been or is expected to be incurred by Company or any of its Subsidiaries. Company and its Subsidiaries have not incurred and do not expect to incur any withdrawal liability with respect to a Multiple Employer Plan of Title IV of ERISA (regardless of whether based on contributions of any entity which is considered an employer with Company under Section 4001 0f ERISA or Section 414 of the Code (an “ ERISA Affiliate ”)). No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the thirty (30) day reporting requirement has not been waived or extended, other than an extension pursuant to Pension Benefit Guaranty Corporation Reg. Section 4043.66, has been required to be filed for any Pension Plan or by any ERISA Affiliate within the preceding twelve (12) month period.

     (iv) All contributions, premiums or payments required to be made under the terms of any Company Compensation and Benefit Plan have been timely made or have been reflected on the most recent consolidated balance sheet filed or incorporated by reference in Company Reports. Neither any Pension Plan nor any Multiple Employer Plan within the meaning of Section 431 and 432 of the Code or Section 305 of ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither Company nor any of its Subsidiaries has provided, or is required to provide, security to any Pension Plan or to Multiple Employer Plan pursuant to Section 401(a)(29) of the Code.

     (v) Neither Company nor its Subsidiaries have any obligations for, or liabilities with respect to, retiree health, disability or life benefits under any Company Compensation and Benefit Plan, except for benefits required to be provided under Section 4980B of the Code or any other applicable law requiring continuation of health coverage.

     (vi) Neither the negotiation and execution of this Agreement nor the consummation of the Merger and the other transactions contemplated hereby will (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Compensation and Benefit Plan that will or may result in any payment (whether of severance pay or otherwise), acceleration of payment, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee or former employee of Company or any of its Subsidiaries. There is no contract, agreement, plan or arrangement with an employee or former employee of Company or any of its Subsidiaries to which Company or any of its Subsidiaries is a party as of the date of this Agreement that, individually or collectively and as a result of the Merger and the other transactions contemplated hereby (whether alone or upon the occurrence of any additional or subsequent events) or otherwise, would reasonably be likely to give rise to the payment of any amount that would not be deductible pursuant to Sections 280G or 162(m) of the Code. No Company Compensation and Benefits Plan provides for a “gross-up” or similar payments in respect of any Taxes that may become payable under Section 409A or Section 4999(a) of the Code.

     (vii) In addition to the foregoing, with respect to each Company Compensation and Benefit Plan that is not subject to United States law (a “ Non-U.S. Benefit Plan ”):

     (A) all employer and employee contributions to each Non-U.S. Benefit Plan required by law or by the terms of such Non-U.S. Benefit Plan have been made, or, if applicable, accrued in accordance with normal accounting practices;

     (B) the fair market value of the assets of each funded Non-U.S. Benefit Plan, the liability of each insurer for any Non-U.S. Benefit Plan funded through insurance or the book reserve established for any Non-U.S. Benefit Plan, together with any accrued contributions, is sufficient to procure or provide for the benefits determined on any ongoing basis (actual or contingent) accrued to the date of this Agreement with respect to all current and former participants under such Non-U.S. Benefit Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Non-U.S. Benefit Plan; and

     (C) each Non-U.S. Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities. Each Non-U.S. Benefit Plan is now and always has been operated in all material respects in compliance with all applicable non-United States laws.

     (k)  Compliance with Laws . The business of Company and its Subsidiaries is not being conducted in violation of any United States or non-United States federal, state or local law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Entity (individually, “ Law ” and collectively, “ Laws ”), except for violations that would not be reasonably likely to, either individually or in the aggregate, have a Company Material Adverse Effect or prevent, or materially impair the ability of Company to consummate the Merger and the other transactions contemplated hereby. No investigation or review by any Governmental Entity with respect to Company or any of its Subsidiaries is pending or, to the knowledge of Company, threatened, nor has any Governmental Entity indicated in writing an intention to conduct the same, except for those the outcome of which would not be reasonably likely to, either individually or in the aggregate, have a Company Material Adverse Effect or prevent, or materially impair the ability of Company to consummate the Merger and the transactions contemplated hereby. Company and each of its Subsidiaries has, or has applied for, all permits, licenses, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals from Governmental Entities necessary to own, lease and operate its properties or to conduct its business as currently conducted, except for those the absence of which would not be reasonably likely to, either individually or in the aggregate, have a Company Material Adverse Effect. The provisions of this Section 3.1(k) shall not apply to Environmental Laws (as defined in Section 3.1(m)(iii)) which are covered exclusively in Section 3.1(m), tax Laws which are covered exclusively in Section 3.1(n), labor Laws which are covered exclusively in Section 3.1(o) or intellectual property Laws which are covered exclusively in Section 5.1(p).

     (l)  Anti-takeover Statutes and Rights Agreement .

     (i) Company and the Board of Directors of Company has taken all action necessary to exempt this Agreement, the Merger and the other transactions contemplated hereby from the provisions of Section 203 of the DGCL. No other state anti-takeover statute or regulation is applicable to this Agreement, the Merger or the other transactions contemplated hereby.

     (ii) Company Board of Directors has resolved to, and Company after execution of this Agreement will, take all action necessary to render the Rights issued

pursuant to the Rights Agreement inapplicable to the Merger, or the execution and consummation this Agreement and the transactions contemplated hereby and thereby and none of the execution or delivery of this Agreement and the consummation of the Merger will result in (a) the occurrence of the “flip-in” event described in Section 11 of the Rights Agreement, (b) the occurrence of the “flip-over” event described in Section 13 of the Rights Agreement, or (c) the Rights becoming evidenced by, and transferable pursuant to, certificates separate from the certificates representing Common Shares.

     (m)  Environmental Matters .

     (i) Except for such matters that would not, either individually or in the aggregate, be reasonably likely to cause a Company Material Adverse Effect: (A) the operations of Company and its Subsidiaries are in compliance with all applicable Environmental Laws; (B) each of Company and each of its Subsidiaries possesses and maintains in effect all environmental permits, licenses, authorizations and approvals required under applicable Environmental Laws with respect to the business of Company and its Subsidiaries as presently conducted; (C) neither Company nor any of its Subsidiaries has received any written environmental claim, notice or request for information during the past three (3) years concerning any violation or alleged violation of any applicable Environmental Law; and (D) there are no material writs, injunctions, decrees, orders or judgments outstanding, or any actions, suits or proceedings pending relating to compliance by Company or any of its Subsidiaries with any environmental permits, licenses, authorizations and approvals required under applicable Environmental Laws or liability of Company or any of its Subsidiaries under any applicable Environmental Law.

     (ii) Notwithstanding any other provision of this Agreement to the contrary (including, but not limited to, Section 3.1(k)), the representations and warranties of Company in this Section 3.1(m) constitute the sole representations and warranties of Company with respect to any Environmental Law or Hazardous Substance.

     (iii) As used herein, the term “ Environmental Law ” means any United States federal, non-United States, state or local Laws, regulations, codes, rules, ordinances, permits, authorizations, decrees, orders, injunctions or judgments and any binding administrative or judicial interpretations thereof relating to: (A) pollution; (B) the protection of the environment (including air, water, soil, subsurface strata and natural resources) or human health and safety from exposure to Hazardous Substances; and (C) the regulation of the generation, use, storage, handling, transportation, treatment, release, remediation or disposal of Hazardous Substances.

     (iv) As used herein, the term “ Hazardous Substance ” means (A) any substances, mixtures, chemicals, products, materials or wastes that, pursuant to Environmental Law, are defined by or regulated as or having the characteristics of “hazardous,” “toxic,” “pollutant,” “contaminant,” “flammable,” “corrosive,” “reactive,” “explosive” or “radioactive”; or (B) any petroleum, petroleum products or by-products, friable asbestos or any material or equipment containing regulated concentrations of polychlorinated biphenyls.

     (n)  Tax Matters .

     (i) Except as would not have a Company Material Adverse Effect, Company and each of its Subsidiaries; (A) have duly and timely filed (taking into account any extension of time within which to file) all Tax Returns (as defined in Section 3.1(n)(iii)) required to be filed by each of them and all such filed Tax Returns are true, correct and complete in all material respects; (B) (1) have timely paid all Taxes required to be paid by or with respect to each of them, except with respect to matters contested in good faith and by appropriate proceedings and as to which adequate reserves have been made on the applicable financial statements and (2) no penalties or charges have been asserted or are due with respect to the incorrect or late filing of any Tax Return required to be filed by or with respect to any of them on or before the Effective Time; and (C) with respect to all Tax Returns filed by or with respect to any of them have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

     (ii) Except for such matters as are identified in Section 3.1(n) of the Company Disclosure Schedules or that are in the aggregate not material, Company and each of its Subsidiaries does not have any deficiency, or any such audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters pending or proposed or threatened in writing.

     (iii) Company and each of its Subsidiaries maintains a transfer-pricing policy that is in compliance with all Tax Laws in each jurisdiction in which it is required to file a Tax Return. No penalties or charges have been asserted or are due with respect to any transfer-pricing matter.

     (iv) As used in this Agreement, (A) the term “ Tax ” (including, with correlative meaning, the terms “ Taxes ,” and “ Taxable ”) includes all United States federal, state, local and non-U.S. income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (B) the term “ Tax Return ” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates, claims for refund and information returns) supplied to a Tax authority relating to Taxes, including any schedule or attachment thereto or amendment therefor.

     (o)  Labor Matters . Neither Company nor any of its Subsidiaries is the subject of any material proceeding asserting that Company or any of its Subsidiaries has committed an unfair labor practice or any other violation of Law relating to employee matters, including those related to wages, hours, immigration and naturalization, collective bargaining, occupational safety or health standards, employment discrimination, and the payment and withholding of Taxes and other sums as required by the appropriate Governmental Entity, nor has there been any labor strike, dispute, walk-out, work stoppage, slow-down or lockout involving Company or any of its Subsidiaries. Neither Company nor any of its Subsidiaries is a party to any collective bargaining agreement, collective agreement or other labor union contract or works council agreement applicable to persons employed by Company or any of its Subsidiaries, nor, to the knowledge of Company, are there any activities or proceedings of any Person to organize any such employees and no consent of, consultation of, or the rendering of formal advice by the unions, works councils, and other similar organizations is required to consummate the Merger or any of the other transactions contemplated hereby.

     (p)  Intellectual Property .

     (i) Company or one of its Subsidiaries owns, or is licensed or otherwise possesses sufficient legally enforceable rights to use, all material Intellectual Property that is currently used in its business, including the businesses of its Subsidiaries, taken as a whole (collectively, “ Company Intellectual Property Rights ”).

     (ii) (A) to the knowledge of Company, the operation of the Company’s business and the use of Company Intellectual Property Rights by Company or its Subsidiaries therein does not conflict with, infringe upon, violate or interfere with or constitute an appropriation of any Intellectual Property of any other Person and (B) there have been no material claims made alleging the foregoing and neither Company nor any of its Significant Subsidiaries has received written notice of any material claim or otherwise knows that any Company Intellectual Property Right is invalid, or conflicts with the asserted right of any other Person.

     (iii) Company and its Subsidiaries have taken all reasonable measures to maintain the confidentiality of all confidential information used or held for use in the operation of Company’s business.

     (iv) To the knowledge of Company, no employee, independent contractor or agent of Company or any of its Subsidiaries is in default or breach of any term of any employment agreement, non-disclosure agreement, or agreement relating to the protection, ownership, development, use or transfer of Company Intellectual Property. To the extent that any Intellectual Property has been conceived, developed or created for Company or any of its Subsidiaries by any other Person, Company and/or such Subsidiary, as applicable, have executed written agreements with such Person with respect thereto transferring to Company and/or such Subsidiary sufficient legally enforceable rights to use such Intellectual Property.

     (v) All software, servers, systems, computers, networks, data communication lines, routers, hubs, switches and all other information technology equipment (and all associated documentation (“ Company IT Assets ”) are adequate for, and operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required in connection with, the operation of Company’s business.

     (vi) To the knowledge of Company the operation of Company IT Assets by or on behalf of Company and/or its Subsidiaries, the content thereof, and the use, collection, storage and dissemination of data in connection therewith or otherwise in connection with Company’s business, have not violated, and do not violate, any applicable Laws. There is no action or claim pending, asserted or threatened by or against Company or any of its Subsidiary alleging a violation of any Person’s privacy, personal or confidentiality rights under any such applicable Laws, rules, policies or procedures. The negotiation, execution and consummation of the Merger and the other transactions contemplated hereby, and any disclosure and/or transfer of information by Company or any of its Subsidiaries in connection therewith, will not breach or otherwise cause any violation of any such rules, policies or procedures or any applicable Laws relating to privacy, data protection or the collection and/or use of customer information or other personal or user data, or require the consent, waiver or authorization of, or declaration, filing or notification to, any Person under any such rules, policies, procedures or applicable Laws. With respect to all personal and user data gathered or accessed in the course of the operation of Company’s business, Company and its Subsidiaries have at all times taken reasonable measures to protect such data against loss and unauthorized access, use, modification, disclosure or other misuse, and to the knowledge of Company there has been no unauthorized access to or other misuse or unauthorized disclosure of such data. None of the products or services offered or made available on any Internet or intranet websites owned and/or operated by Company or any of its Subsidiaries constitute or incorporate any “spyware” or “adware.”

“ Intellectual Property ” means, in any and all jurisdictions throughout the world, all (i) inventions and discoveries, patents, invention disclosures, industrial designs and mask works, (ii) trademarks, service marks, domain names, uniform resource locators, trade dress, trade names and other identifiers of source or goodwill, including the goodwill symbolized thereby or associated therewith, (iii) works of authorship (including computer programs, models and methodologies, program interfaces, Internet and intranet websites, databases and compilations, including data and collections of data), and copyrights, moral rights, design rights and database rights therein and thereto, (iv) confidential and proprietary information, including trade secrets, know-how and invention rights, (v) rights of privacy and publicity, (vi) registrations, applications, renewals and extensions for any of the foregoing in (i)-(v), and (vii) any and all other proprietary rights.

     (q)  Title to Properties . Section 3.1(q)(i) of the Company Disclosure Schedules lists each parcel of real property currently or formerly owned by Company or any of its Subsidiaries. Company and each of its Subsidiaries has good and valid title to all of its owned real properties and assets, free and clear of all mortgages, liens, pledges, charges, security interests, encumbrances or other adverse claims of any kind in respect of such property or asset (collectively, “ Liens ”), except Liens for Taxes not yet due and payable and such Liens or other imperfections of title, if any, that, either individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect. Section 3.1(q)(ii) of the Company Disclosure Schedules lists each parcel of real property currently leased or subleased by Company or any of its Subsidiaries, with the name of the lessor and the date of the lease, sublease, assignment of the lease, any guaranty given or leasing commissions payable by Company or any Subsidiary in connection therewith and each amendment to any of the foregoing (collectively, the “ Lease Documents ”). True, correct and complete copies of all Lease Documents have been made available to Parent. All leases pursuant to which Company and each of its Subsidiaries leases from others real or personal property are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default of Company or any of its Subsidiaries or, to the knowledge of Company, any other party (or any event which with notice or lapse of time, or both, would constitute a material default) that, either individually or in the aggregate, is reasonably likely to have a Company Material Adverse Effect.

     (r)  Material Contracts . (i) Subsections (A) through (M) of Section 3.1(r) of the Company Disclosure Schedules lists the following types of contracts and agreements in effect as of the date hereof to which Company or any of its Subsidiaries is a party (such contracts and agreements as are required to be set forth in Section 3.1(r) of the Company Disclosure Schedules being the “ Material Contracts ”):

     (A) each “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to Company and its Subsidiaries;

     (B) all contracts and agreements with Company’s top ten (10) customers (based on the revenue from such customer during the twelve (12) month period ended June 30, 2008) (the “ Top Customers ”) and all contracts and agreements with Company’s top ten (10) vendors (based on amounts paid to such vendors during the twelve (12) month period ended June 30, 2008) (the “ Top Vendors ”);

     (C) each contract and agreement, whether or not made in the ordinary course of business, that contemplates an exchange of consideration with a value of more than $100,000 (one hundred thousand dollars), in the aggregate, over the remaining term of such contract or agreement;

     (D) all credit agreements, indentures and other agreements evidencing indebtedness for borrowed money of Company or any of its Subsidiaries;

     (E) all joint venture, partnership, strategic alliance and business acquisition or divestiture agreements (and all letters of intent, term sheets and draft agreements relating to any such pending transactions);

     (F) all contracts and agreements relating to issuances of securities of Company or any Subsidiary (and all letters of intent, term sheets and draft agreements relating to any such pending transactions);

     (G) all material leases of real property;

     (H) material agreements concerning Intellectual Property or Company IT Assets to which Company or any of its Subsidiaries is a party or beneficiary or by which Company or any of its Subsidiaries, or any of its properties or assets, may be bound;

     (I) each contract or agreement with any Governmental Entity to which the Company or any of its Subsidiaries is a party, except transcription contracts and captioning services contracts;

     (J) all contracts and agreements that limit, or purport to limit, the ability of Company or any Subsidiary to compete in any line of business or with any person or entity or in any geographic area or during any period of time;

     (K) all contracts and agreements providing for employee benefits under any Company Compensation and Benefit Plans;

     (L) all powers of attorney with respect to Company or any of its Subsidiaries;

     (M) all contracts for employment required to be listed in Section 3.1(j) of the Company Disclosure Schedules;

     (N) all contracts that contain a right of first refusal, right of first offer, right to negotiate or similar right with respect to a merger, consolidation, sale of all or substantially all of Company’s assets or other extraordinary corporate transaction; and

     (O) each other contract or agreement, whether or not made in the ordinary course of business, which is material to Company, any of its Subsidiaries or the conduct of their respective businesses, or the absence of which would have a Company Material Adverse Effect.

     (ii) (a) Each Material Contract is a legal, valid and binding agreement, (b) neither Company nor any of its Subsidiaries has breached, or received in writing any claim of default under or cancellation of any Material Contract to which it is a party or by which it is bound, (c) to the knowledge of Company, no other party is in breach or violation of, or default under, any Material Contract, and (d) neither the execution of this Agreement nor the consummation of the Merger or any of the other transactions contemplated hereby shall constitute a default under, give rise to cancellation rights under, or otherwise adversely affect any of the material rights of Company or any of its Subsidiaries under any Material Contract. Company has furnished or made available to Parent true and complete copies of all Material Contracts, including any amendments thereto.

     (s)  Insurance . Company maintains for itself and its Subsidiaries insurance policies covering the assets, business, equipment, properties, operations, employees, directors and officers, and product warranty and liability claims, and such other forms of insurance in such amounts, with such deductibles and against such risks and losses as are in accordance with normal industry practice and as are reasonable for the business and assets of Company and its Subsidiaries. All such insurance policies are in full force and effect, all premiums due and payable thereon have been paid, and Company and its Subsidiaries are otherwise in compliance with the terms and conditions of such policies and bonds.

     (t)  Vote Required . The affirmative vote of the holders of outstanding Common Shares, voting together as a single class, representing at least a majority of all the votes entitled to be cast thereon by holders of Common Shares, is the only vote of holders of any class or series of the capital stock of Company which is required to approve and adopt this Agreement and the consummation of the Merger or the other transactions contemplated hereby (the “ Company Requisite Vote ”).

     (u)  Customer and Suppliers . Section 3.11(u) of the Company Disclosure Schedules sets forth a true and complete list of the Top Customers. None of the Top Customers and no Top Vendors (i) have cancelled or otherwise terminated any contract with Company or any of its Subsidiaries prior to the expiration of the contract term, (ii) have returned, or to the knowledge of Company, threatened to return, a substantial amount of any of the products, equipment, goods and services purchased from Company or any of its Subsidiaries, or (iii) to the knowledge of Company, have threatened, or indicated their intention, to cancel or otherwise terminate their relationship with Company or its Subsidiaries or to reduce substantially their purchase from or sale to the Company or any Subsidiary of any products, equipment, goods or services.

     (v)  Certain Business Practices . None of Company, any Subsidiary of Company or, to Company’s knowledge, any directors or officers, agents or employees of Company or any of its Subsidiaries, has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA ”); or (iii) made any payment in the nature of criminal bribery. Company has established reasonable internal controls and procedures intended to ensure compliance with the FCPA.

     (w)  Brokers and Finders . Except for Credit Suisse, neither Company nor any of its officers, directors or employees has retained any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with this Agreement, the Merger or the other transactions contemplated hereby.

     (x)  Opinion of Financial Advisor . Company has received an opinion of Credit Suisse, dated as of the date hereof, to the effect that, as of such date, the Merger Consideration is fair from a financial point of view to holders of Common Shares. Section 3.1(x) of the Company Disclosure Schedules sets forth all amounts payable by Company to Credit Suisse pursuant to any arrangements under which such firm would be entitled to any payment relating to the Merger or the other transactions contemplated hereby.

     (y)  No Other Representations or Warranties . Except for the representations and warranties contained in this Section 3.1, neither Company nor any other Person makes any other express or implied representation or warranty on behalf of Company or any of its Subsidiaries.

     3.2 Representations and Warranties of Parent and Merger Sub . Except as set forth in the disclosure schedules delivered to Company by Parent on or prior to the date of this Agreement (the “ Parent Disclosure Schedules ”) or the Parent Reports filed prior to the date hereof, Parent and Merger Sub each represents and warrants to Company that:

     (a)  Organization, Good Standing and Qualification . Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization. Each of Parent and Merger Sub has all requisite corporate power to own and operate its material properties and assets and to carry on its business as currently conducted in all material respects and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties and assets or conduct of its business requires such qualification, except where the failure to be so qualified as a foreign corporation or be in good standing would not be reasonably likely, either individually or in the aggregate, to have a Parent Material Adverse Effect (as defined herein). Parent has made available to Company a complete and correct copy of the certificate of incorporation and by-laws of Parent and certificate of incorporation and by-laws of Merger Sub. Parent’s certificate of incorporation and by-laws and Merger Sub’s certificate of incorporation and by-laws so made available are in full force and effect.

     As used in this Agreement, the term “ Parent Material Adverse Effect ” means a material adverse effect on the ability of Parent to consummate the Merger and the other transactions contemplated hereby.

     (b)  Corporate Authority . Each of Parent and Merger Sub has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement, and to consummate the Merger and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery by Company, is a valid and legally binding agreement of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.

     (i) The Boards of Directors of Parent and Merger Sub have approved and adopted this Agreement and the Merger and the transactions contemplated hereby.

     (c)  Governmental Filings; No Violations .

     (i) Other than any reports, filings, registrations, approvals and/or notices (A) required to be made under the HSR Act, the Securities Act, the Exchange Act, state securities, takeover and “blue sky” laws, and (B) any filings under the provisions of Section 721 of Title VII of the U.S. Defense Production Act of 1950, as amended and the regulations promulgated thereunder (the “ Exon-Florio Provision ”) (items (A) through (B) (inclusive)), the “ Parent Required Statutory Approvals ”), no notices, reports, registrations or other filings are required to be made by Parent or Merger Sub with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent or Merger Sub from, any Governmental Entity, in connection with the execution and delivery by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, except for those that the failure to make or obtain would not be reasonably likely to, either individually or in the aggregate, have a Parent Material Adverse Effect or prevent, materially delay or materially impair the ability of Parent or Merger Sub to consummate the Merger or the other transactions contemplated hereby.

     (ii) The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, either the certificate of incorporation or by-laws of Parent or Merger Sub or any comparable governing instruments of any of Parent’s Subsidiaries, (B) a breach or violation of, or a default under, or the acceleration of, any obligations, the loss of any right or benefit or the creation of a lien, pledge, security interest or other encumbrance on the assets of Parent, Merger Sub or any of Parent’s Subsidiaries (with or without notice, lapse of time or both) pursuant to any Contracts binding upon Parent, Merger Sub or any of Parent’s Subsidiaries or any Law or governmental or non-governmental permit or license to which Parent, Merger