AGREEMENT AND PLAN OF MERGER

BY AND AMONG

SEITEL HOLDINGS, LLC,

SEITEL ACQUISITION CORP.

AND

SEITEL, INC.

DATED AS OF OCTOBER 31, 2006

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October31, 2006, is entered into by and among SEITEL HOLDINGS, LLC, a Delaware limited liability company ("Parent"), SEITEL ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and SEITEL, INC., a Delaware corporation (the "Company" and, collectively with Merger Sub and Parent, the "Parties"). Terms used herein and not defined have the meanings ascribed to them in Section8.12.

RECITALS

WHEREAS, the Board of Directors of the Company, based on the recommendation of the Strategic Financial Alternatives Committee of the Board of Directors of the Company (the "Special Committee"), has (i)determined that the merger of Merger Sub with and into the Company (the "Merger") in accordance with the DGCL, with the Company remaining as the surviving corporation, whereby shares of the common stock, par value $.01 per share, of the Company (the "Common Stock") (other than Excluded Shares) will, upon the terms and subject to the conditions set forth herein, be converted into the right to receive cash in an amount equal to $3.70 per share (the "Merger Consideration"), is fair to, and in the best interests of, holders of the shares of the Common Stock not owned by ValueAct Capital Master Fund, L.P. ("ValueAct Capital") and its Affiliates, (ii)adopted a resolution approving this Agreement and the transactions contemplated hereby, and declared their advisability, and (iii)recommended the adoption by the stockholders of the Company, subject to the terms and conditions set forth herein, of this Agreement; and

WHEREAS, the Board of Directors of each of Parent and Merger Sub has (i)deemed it advisable and in the best interests of their respective companies and stockholders to agree to the Merger, upon the terms and subject to the conditions set forth herein and (ii)adopted a resolution approving this Agreement and the transactions contemplated hereby, and declared their advisability;

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, conditions, and agreements set forth in this Agreement, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

THE MERGER

SECTION 1.1. The Merger. Upon the terms and subject to the conditions of this Agreement, and in accordance with the provisions of the DGCL, at the Effective Time (i)Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease, (ii)the Company shall continue to exist as the surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware, and (iii)all of the rights, properties, privileges, immunities, 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. When being referred to with respect to post-Merger periods, the Company is sometimes referred to herein as the "Surviving Corporation".

SECTION 1.2. Effective Time; Closing. The consummation of the Merger (the "Closing") shall take place as soon as practicable, and in any event no later than the fifth Business Day, after all of the conditions set forth in Article VI have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) (subject to applicable Law), unless this Agreement has been theretofore terminated and the Merger has been abandoned pursuant to Section7.1 or unless another date is agreed to in writing by the Parties (such date, the "Closing Date"). The Closing shall be held at the offices of Dechert LLP, 30 Rockefeller Plaza, New York, NY 10112, or at such other place as the Parties shall agree in writing. On the Closing Date, the Parties shall file a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, and the Merger shall become effective upon such filing or at such later time as is agreed to by the Parties and is specified in the Certificate of Merger (the "Effective Time").

SECTION 1.3. Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in the DGCL (including, without limitation, Sections 259, 260 and 261 thereof).

SECTION 1.4. Certificate of Incorporation and Bylaws. At the Effective Time, (i)the certificate of incorporation of the Company shall be amended and restated to read in its entirety as set forth in Exhibit A, and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with its terms and the DGCL, and (ii)the bylaws of the Company shall be amended in their entirety as set forth in Exhibit B, and, as so amended, shall be the bylaws of the Surviving Corporation until amended in accordance with their terms and the DGCL.

SECTION 1.5. 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 respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation and bylaws of the Surviving Corporation, or until their earlier death, resignation or removal, or otherwise as provided by applicable Law. The Company shall obtain and deliver to Merger Sub the valid resignations, effective as of the Effective Time, of each director of the Company and each Company Subsidiary (except those directors as may be designated by Merger Sub to the Company in writing prior to Closing).

SECTION 1.6. Officers. The officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation and bylaws of the Surviving Corporation, or until their earlier death, resignation or removal, or otherwise as provided by applicable Law.

SECTION 1.7. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the Parties hereto or any holder of Common Stock:

(a) Each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) shall be converted into the right to receive the Merger Consideration. At the Effective Time, all shares of Common Stock shall cease to be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any shares of Common Stock (a "Certificate") shall cease to have any rights with respect to such shares of Common Stock, except the right to receive the Merger Consideration to be paid in consideration therefor upon surrender of such Certificate in accordance with Section2.1(b), without interest.

(b) Each share of Common Stock that is owned by the Company or by any Company Subsidiary (the "Treasury Shares"), and each share of Common Stock that is owned by ValueAct Capital, Parent or any of their Subsidiaries or Affiliates immediately prior to the Effective Time (the "ValueAct Held Shares"), shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and no consideration or other payment shall be paid or delivered in respect therefor.

(c) Each share of common stock, $0.001 par value, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted automatically into one fully paid and nonassessable share of common stock, $0.001 par value, of the Surviving Corporation at the Effective Time.

SECTION 1.8. Treatment of Company Restricted Shares, Options, and Company Warrant.

(a) Restricted Shares. Pursuant to the Companys 2004 Stock Option Plan (the "Incentive Plan") or the Directors Inducement Awards, as the case may be, and the applicable agreement evidencing the grant of any Company Restricted Shares, at the Effective Time (i)the Company shall, to the extent necessary, waive any vesting conditions applicable to any outstanding Company Restricted Shares and (ii)each Company Restricted Share that vests at the Effective Time pursuant to clause (i)of this Section1.8(a) or pursuant to an applicable agreement evidencing the grant of any such Company Restricted Shares shall (A)automatically be converted into the right to receive the Merger Consideration at or after the Effective Time as provided in Section1.7(a) hereof and (B)shall be treated the same as other shares of Common Stock for purposes of this Agreement. Prior to the Effective Time, the Company shall take any and all actions necessary, if any, to effectuate this Section1.8(a).

(b) Options. At the Effective Time, the Company shall cause the Nonstatutory Stock Option Agreement, to the extent unexercised at the Effective Time, to be cancelled and to cease to exist solely in exchange for the right to receive a cash payment (less applicable withholding taxes) equal to the product of (i)the excess of (A)the Merger Consideration, over (B)$1.30, multiplied by (ii)100,000. The Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, pay any such cash payment as soon as practicable following, but in no event later than five Business Days after, the Effective Time. As of the Effective Time, the holder of the Nonstatutory Stock Option Agreement shall cease to have any rights in respect thereof except as described in this Section1.8(b). Prior to the Effective Time, the Company shall take any and all actions necessary, if any, to effectuate this Section1.8(b).

(c) Company Warrant. The warrant to purchase 15,037,568 shares of Common Stock pursuant to the Reorganization Plan and the Funding Agreement that is owned by ValueAct Capital (the "Company Warrant"), as of the Effective Time, shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and no consideration or other payment shall be paid or delivered in respect therefor. As of the Effective Time, the holder of the Company Warrant shall cease to have any rights in respect thereof, or under the Reorganization Plan and the Funding Agreement evidencing the grant of such Company Warrant. Prior to the Effective Time, the Company shall take any and all actions necessary, if any, to effectuate this Section1.8(c).

ARTICLE II

PAYMENT FOR SHARES

SECTION 2.1. Exchange of Certificates and Cash.

(a) Paying Agent. As soon as practicable after the execution of this Agreement, Merger Sub, Parent and the Company shall enter into an agreement providing for the matters set forth in this Section2.1 (the "Paying Agent Agreement") with the transfer agent and registrar of the Common Stock or such other Person as the Parties may determine (the "Paying Agent"), authorizing such Paying Agent to act as paying agent in connection with the Merger. Prior to or concurrent with the Effective Time, Merger Sub shall, and Parent shall cause Merger Sub to, deposit with or for the account of the Paying Agent, for the benefit of the holders of shares of Common Stock, funds in an amount necessary for payment of the aggregate Merger Consideration upon surrender of the Certificates, pursuant to Section1.7 and Section1.8(a). Cash deposited with the Paying Agent shall hereinafter be referred to as the "Merger Fund". The Paying Agent shall, pursuant to irrevocable instructions of the Surviving Corporation given on the Closing Date, make payments of the per share Merger Consideration out of the Merger Fund.

(b) Exchange Procedures. As soon as reasonably practicable, and in any event within five Business Days after the Effective Time, the Paying Agent will mail to each holder of record of a Certificate or Certificates that immediately prior to the Effective Time evidenced outstanding shares (other than Excluded Shares) of Common Stock (i)a form letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as the Surviving Corporation may reasonably specify) and (ii)instructions, return envelopes and other customary documents for use in effecting the surrender of the Certificates in exchange for the Merger Consideration pursuant to Section1.7 hereof. Upon surrender of a Certificate to the Paying Agent for cancellation, together with a letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions (collectively, the "Transmittal Documents") and acceptance thereof by the Paying Agent (or, if such shares are held in book-entry or other uncertificated form, upon the entry through a book-entry transfer agent of the surrender of such shares of Common Stock on a book-entry account statement (it being understood that any references herein to "Certificates" shall be deemed to include references to book-entry account statements relating to the ownership of shares of Common Stock)), the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each share of Common Stock (other than Excluded Shares) formerly represented by such Certificate, without any interest thereon, less any required withholding of taxes, and the Certificate so surrendered shall thereupon be cancelled. The Paying Agent shall accept such Certificates upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. In the event of a transfer of ownership of Common Stock that is not registered in the transfer records of the Company, the Merger Consideration may be issued and paid in accordance with this Article II to the transferee of such shares if the Certificate evidencing such shares is presented to the Paying Agent and is properly endorsed or otherwise in proper form for transfer. In such event, the signature on the Certificate or any related stock power must be properly guaranteed and the Person requesting payment of the Merger Consideration must either pay to the Paying Agent any transfer or other taxes required by reason of the payment to a Person other than the registered holder of the Certificate so surrendered or establish to the Surviving Corporation that such tax has been paid or is not applicable. The Merger Consideration will be delivered by the Paying Agent as promptly as practicable following surrender of a Certificate and the related Transmittal Documents to the Paying Agent and the acceptance thereof by the Paying Agent. Cash payments may be made by check unless otherwise required by a depositary institution in connection with the book-entry delivery of securities. No interest will be payable on, or will accrue on any cash payable as, Merger Consideration. Until surrendered in accordance with this Section2.1(b), each Certificate shall be deemed at any time after the Effective Time to evidence only the right to receive, upon such surrender, the Merger Consideration for each share of Common Stock (other than Excluded Shares) formerly represented by such Certificate. The Merger Fund is for the benefit of the holders of Certificates and shall not be used for any purpose other than as set forth in this Article II. Any interest, dividends or other income earned on the investment of cash held in the Merger Fund shall be for the account of the Surviving Corporation. The Merger Consideration delivered upon surrender of the Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares.

(c) Termination of Merger Fund. Any portion of the Merger Fund (including the proceeds of any permitted investments thereof) which remains undistributed to the holders of Common Stock after the expiration of one year following the Effective Time shall be delivered by the Paying Agent to the Surviving Corporation. Any holders of Common Stock who have not theretofore complied with this Article II shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration, subject to escheat and abandoned property and similar Laws. No Party shall be liable to any Person for any portion of cash from the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or other applicable Law.

(d) No Liability. None of the Surviving Corporation, Merger Sub, Parent, the Company or the Paying Agent shall be liable to any Person for any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar Laws. Any such amounts remaining unclaimed by any stockholder of the Company immediately prior to such time when such amounts would otherwise escheat to or become the property of any Governmental Entity, shall, to the extent permitted by applicable Laws, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.

(e) Investment of the Merger Fund. The Paying Agent shall invest any cash included in the Merger Fund in an interest bearing money market account as directed by the Surviving Corporation on a daily basis; provided, however, that no such gain or loss thereon shall affect the amounts payable to the stockholders of the Company pursuant to Article I or this Article II. Any interest and other income resulting from such investments shall promptly be paid to the Surviving Corporation. If for any reason (including as a result of losses) the cash in the Merger Fund shall be insufficient to fully satisfy all of the payment obligations to be made in cash by the Paying Agent hereunder, to the extent permitted under the Indenture, the Surviving Corporation shall promptly deposit cash into the Merger Fund in an amount which is equal to the deficiency in the amount of cash required to fully satisfy such cash payment obligations.

(f) Withholding Rights. Each of the Surviving Corporation, Merger Sub and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "Code"), or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Common Stock in respect of which such deduction and withholding was made.

(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate(s) has been lost, stolen or destroyed, the holder of such lost, stolen or destroyed Certificate(s) shall execute an affidavit of that fact upon request. If required by the Surviving Corporation, the holder of any such lost, stolen or destroyed Certificate(s) shall also execute and deliver an indemnity agreement in form and substance reasonably satisfactory to the Surviving Corporation or post a bond in such reasonable amount as the Surviving Corporation may require against any claim that may be made against Merger Sub, the Surviving Corporation or the Paying Agent with respect to the Certificate(s) alleged to have been lost, stolen or destroyed. The affidavit and any indemnity which may be required hereunder shall be delivered to the Paying Agent, who shall be responsible for making payment for such lost, stolen or destroyed Certificates(s) pursuant to the terms hereof.

SECTION 2.2. Stock Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Common Stock thereafter on the records of the Company. From and after the Effective Time, the holders of Certificates representing shares of Common Stock shall cease to have any rights with respect to such shares, except as provided in this Agreement or by applicable Law. Any Certificates presented to the Paying Agent or the Surviving Corporation for any reason at or after the Effective Time shall be cancelled and exchanged for the Merger Consideration pursuant to the terms in this Article II.

SECTION 2.3. Further Assurances. After the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Surviving Corporation or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Surviving Corporation or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

SECTION 2.4. Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Common Stock issued and outstanding immediately prior to the Effective Time that are held by stockholders of the Company (i)who have neither voted for approval and adoption of this Agreement or the Merger nor consented thereto in writing and (ii)who are entitled to and have properly demanded appraisal for such shares of Common Stock pursuant to, and in compliance with, the provisions of Section262 of the DGCL (collectively, the "Dissenting Shares"), shall not be converted into the right to receive the Merger Consideration at or after the Effective Time as provided in Section1.7(a) hereof unless and until the holder of such shares of Common Stock fails to perfect, withdraws or otherwise loses such holders right to appraisal, but, instead, the holder of such shares of Common Stock shall be entitled to such rights (but only such rights) as are granted by Section262 of the DGCL. If a holder of Dissenting Shares shall withdraw (in accordance with Section262(k) of the DGCL) his or her demand for such appraisal or shall become ineligible for such appraisal, then, as of the Effective Time or the occurrence of such event, whichever last occurs, such holders Dissenting Shares shall cease to be Dissenting Shares and shall be converted into the right to receive the Merger Consideration, without interest thereon in the manner provided in Section1.7(a) hereof. The Company shall give Merger Sub prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other instruments served pursuant to Section262 of the DGCL and received by the Company prior to the Effective Time. Prior to the Effective Time, the Company shall not, except with the prior written consent of Merger Sub, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as disclosed to Merger Sub in a letter (the "Company Disclosure Letter") delivered to it by the Company prior to the execution of this Agreement (with reference to the section numbers of the representations and warranties in this Article III to which the information in such letter relates, unless it is reasonably apparent from a reading of such disclosure that the disclosure is applicable to other representations and warranties), or as disclosed in the Companys annual report on Form 10-K for the fiscal year ended December31, 2005, the Companys Definitive Proxy Statement for the 2006 Annual Meeting of Stockholders of the Company and the quarterly reports on Form 10-Q of the Company for the periods ended March31, 2006 and June30, 2006 and any Current Reports on Form 8-K filed prior to the date hereof with respect to events occuring since December31, 2005 (collectively, the "Current SEC Reports") (it being understood that (i)nothing disclosed in the Current SEC Reports shall be deemed disclosed for purposes of any subsection of this Article III unless it is reasonably apparent that the matters so disclosed in such Current SEC Report are applicable to such subsection and (ii)disclosure in the "Risk Factors" Section in a Current SEC Report shall be ignored for purposes of this Agreement), the Company hereby represents and warrants to Parent and Merger Sub as follows:

SECTION 3.01. Corporate Organization. The Company and each Company Subsidiary is a corporation, partnership, limited liability company or other legal entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate, partnership, limited liability company or other power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except where such failures to be so organized, existing and in good standing or to have such power and authority do not constitute a Company Material Adverse Effect. The Company and each Company Subsidiary is duly qualified or licensed and in good standing to do business in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed does not constitute a Company Material Adverse Effect. Section3.1 of the Company Disclosure Letter sets forth the name of each Subsidiary of the Company (individually, a "Company Subsidiary" and collectively, the "Company Subsidiaries"), the state or other jurisdiction of its organization, the respective form of organization and the record owner(s) of its outstanding capital stock. The Company has heretofore made available to Parent and Merger Sub complete and correct copies of the Constituent Documents of the Company and the Company Subsidiaries. Neither the Company nor any of the Company Subsidiaries is in violation of, or default under, the provisions of any such Constituent Documents, except for any violations or defaults that do not constitute a Company Material Adverse Effect. All outstanding shares of capital stock of, or other equity interests in, the Company Subsidiaries are owned by the Company or another Company Subsidiary, free and clear of all Liens (other than Permitted Liens). No shares of capital stock of, or other equity interests in, any Subsidiary of the Company are reserved for issuance.

SECTION 3.02. Authority Relative to this Agreement.

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and subject to receipt of the Company Stockholder Approval, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby (other than the Company Stockholder Approval and the filing of the Certificate of Merger as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each other Party, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

(b) The Board of Directors of the Company, based on the recommendation of the Special Committee, has (i)determined that the Merger, upon the terms and subject to the conditions set forth herein, is fair to, and in the best interests of, holders of the shares of the Common Stock, (ii)approved this Agreement and the transactions contemplated hereby, and declared its and their advisability, and (iii)recommended the adoption of this Agreement by the stockholders of the Company, subject to the terms and conditions set forth herein.

(c) Under applicable Law and this Agreement, (i)the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote thereon outstanding on the record date established by the Board of Directors of the Company in accordance with the bylaws of the Company and applicable Law, at the Company Stockholders Meeting and (ii)the affirmative vote of the holders of a majority of the outstanding shares of Common Stock voted thereon (either for or against) at the Company Stockholders Meeting, excluding shares held by ValueAct Capital or any Affiliates thereof, (collectively, the "Company Stockholder Approval") shall be required to adopt this Agreement and the transactions contemplated hereby, including the Merger. The Company Stockholder Approval is the only vote of the holders of any class or series of the Companys capital stock or other securities necessary (under applicable Law or otherwise) to adopt this Agreement and approve the transactions contemplated hereby, including the Merger, and is the only remaining action required under the DGCL to authorize the Merger and the transactions contemplated by this Agreement.

SECTION 3.3. Capitalization.

(a) The authorized capital stock of the Company consists of 400,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, $.01 par value per share. As of the close of business on October31, 2006 (the "Capitalization Date"), (i)155,272,250 shares of Common Stock were issued and outstanding, (ii)no shares of Common Stock were issued and held in treasury by the Company, (iii)100,000 shares of Common Stock were reserved for issuance upon the exercise of options pursuant to the Nonstatutory Stock Option Agreement, (iv)7,500,000 shares of Common Stock were reserved for award under the Incentive Plan, of which 4,025,518 shares were outstanding Company Restricted Shares and 2,641,893 shares were available for award, (v)38,460 shares of Common Stock were reserved for award under the Directors Inducement Awards, of which 38,460 shares were outstanding Company Restricted Shares and no shares were available for award, (vi)15,037,568 shares of Common Stock were reserved for issuance under the Company Warrant, and (vii)no shares of preferred stock, $.01 par value per share, were issued and outstanding. All issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid and nonassessable and were not issued in violation of any preemptive rights.

(b) Section3.3(b) of the Company Disclosure Letter contains a schedule as of the date of this Agreement setting forth (as applicable) the number of, exercise or reference price, vesting date (or dates) and expiration date (or delivery date) of each outstanding Company Restricted Share, Company Warrant and option or award under the Nonstatutory Stock Option Agreement, Directors Inducement Awards or Incentive Plan, which includes all options issued or outstanding with respect to any Common Stock or other equity of the Company or any Company Subsidiary, including but not limited to pursuant to the Incentive Plan.

(c) There are no preemptive rights provided by statute or any contract to which the Company is a party in favor of any holder of any class of securities of the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary has outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable or exchangeable for securities having the right to vote) with the stockholders or other equity holders of the Company or any Company Subsidiary on any matter submitted to their respective stockholders or other equity holders. Other than shares of Common Stock issuable upon the exercise of Company stock options pursuant to the Nonstatutory Stock Option Agreement outstanding on the Capitalization Date, as of the Capitalization Date, there are no (1)outstanding shares of capital stock of the Company or other securities directly or indirectly convertible into, or exchangeable or exercisable for, shares of capital stock of the Company, or (2)"phantom" stock rights, stock appreciation rights, restricted stock awards (other than pursuant to the Incentive Plan and Directors Inducement Awards), dividend equivalent awards or other stock-based awards or rights, stock-based performance units, commitments, contracts, agreements, arrangements or undertakings of any kind to which the Company or any Company Subsidiary is a party or by which any of them is or may be bound (i)obligating the Company or any Company Subsidiary to issue, deliver, sell or transfer or repurchase, redeem or otherwise acquire, or cause to be issued, delivered, sold or transferred or repurchased, redeemed or otherwise acquired, any shares of the capital stock of, or other equity interests in, the Company or any Company Subsidiary, any additional shares of capital stock of, or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of, or other equity interest in, the Company or any Company Subsidiary, (ii)obligating the Company or any Company Subsidiary to issue, grant, extend or enter into any such agreement or arrangement as described in subsection (i)above or (iii)giving any Person the right to receive any payment, economic benefit or other consideration derived from, based upon, relating to or valued by reference to, the capital stock of the Company, the dividends paid on the capital stock of the Company, or the economic benefits and rights accruing to holders of capital stock of, or other equity interests in, the Company or any Company Subsidiary. As of the date of this Agreement, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary other than pursuant to the Incentive Plan.

(d) Except for this Agreement and the Support Agreement, there are not now, and at the Effective Time there will not be, any stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or is bound with respect to the voting of capital stock of the Company. All registration rights agreements, stockholders agreements and voting agreements to which the Company or any Company Subsidiary is a party are identified on Section3.3(d) of the Company Disclosure Letter.

(e) Except for the capital stock or other equity interests of the Company Subsidiaries, the Company does not own, directly or indirectly, (i)any shares of outstanding capital stock of any other corporation or securities convertible into or exchangeable for capital stock of any other corporation or (ii)any equity or other participating interest in the revenues or profits of any Person, and neither the Company nor any of the Company Subsidiaries is subject to any obligation to acquire any such interest.

SECTION 3.4. No Conflict; Required Filings and Consents. The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby will not:

(a) (i)conflict with or violate the Companys Constituent Documents, or the Constituent Documents of any of the Company Subsidiaries, (ii)provided that all consents, approvals, authorizations and other actions required under Section3.4(b) have been obtained and all filings and obligations described under Section3.4(b) have been made or fulfilled, conflict with or violate any Law applicable to the Company or any of the Company Subsidiaries or by which any property or asset of the Company or any of the Company Subsidiaries is bound or affected, or (iii)result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, result in the loss of a material benefit under or give to others any right of termination, amendment, acceleration, payment or cancellation of, or result in the creation of a Lien on any property or assets or under any contract, agreement, note, bond, mortgage, deed of trust, indenture, Company Benefit Plan, Company Permit, lease, license, franchise or other instrument or obligation to which the Company or any of the Company Subsidiaries is a party or by which the Company or any of the Company Subsidiaries or any of their properties or assets is bound or affected; or

(b) require any material consent, approval, franchise, license, certificate of need, Order, registration or authorization or permit of, or filing with or notification, application or declaration to, or permit, inspection, waiver or exemption from any court, tribunal, judicial body, governmental arbitrator, stock exchange, administrative or regulatory agency, self-regulatory organization, body or commission or other governmental or quasi-governmental authority or instrumentality, whether local, state or federal, domestic or foreign (each a "Governmental Entity") with respect to the Company or any Company Subsidiary, except for (i)the filing with the SEC of (1)a proxy statement in preliminary form and in definitive form for distribution to the stockholders of the Company in advance of the Company Stockholders Meeting in accordance with Regulation 14A promulgated under the Exchange Act (such proxy statement as amended or supplemented from time to time being hereinafter referred to as the "Proxy Statement"), (2)the Schedule 13E-3 to be filed with the SEC concurrently with the filing of the Proxy Statement (the "Schedule 13E-3") and (3)such other reports and filings under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (ii)the filing of appropriate documents as required by the DGCL in connection with the Merger and the transactions contemplated hereby, (iii)the approvals from other regulatory agencies set forth in Section3.4(b) of the Company Disclosure Letter (collectively, the "Governmental Approvals"), and (iv)such other items as may be required solely by reason of the business, ownership or identity of Merger Sub or Parent; except, in the case of Section3.4(a)(ii) and (iii)and Section3.4(b), for any of the foregoing that do not constitute a Company Material Adverse Effect.

SECTION 3.5. SEC Filings and Financial Statements. The Company has heretofore filed all forms, reports, registration statements, definitive proxy statements, schedules and other materials with the SEC required to be filed pursuant to the Exchange Act or other federal securities Laws since July2, 2004 (the "SEC Reports"). As of their respective dates, or, if applicable, the dates such SEC Reports were amended prior to the date hereof, the SEC Reports (including, without limitation, all financial statements included therein, exhibits and schedules thereto and documents incorporated by reference therein) complied in all material respects with all applicable requirements (including but not limited to the Sarbanes-Oxley Act to the extent then in effect and applicable) of the Securities Act or the Exchange Act, as applicable, and other federal securities laws as of the date thereof and did not 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; provided, however, that no representation is made as to the accuracy of any financial projections or forward looking statements, or the completeness of any information furnished by the Company to the SEC solely for purposes of complying with RegulationFD promulgated by the SEC under the Exchange Act or other information that is treated by SEC regulations as not being "filed" for the purposes of the Exchange Act. The financial statements of the Company included in the Companys Annual Report on Form 10-K for the fiscal year ended December31, 2005, including the related notes thereto (the "2005 Annual Financial Statements"), and the Companys Quarterly Report on Form 10-Q for the period ended June30, 2006, including the related notes thereto (the "2006 Interim Financial Statements" and, together with the 2005 Annual Financial Statements, the "Company Financial Statements"), when filed (i)were prepared from, and in accordance with, the books and records of the Company and the Company Subsidiaries, (ii)complied in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates, (iii)were prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods covered thereby (except as may be indicated in the notes thereto and subject, in the case of the 2006 Interim Financial Statements, to normal year-end adjustments as permitted by Form 10-Q or Rule 10-01 of Regulation S-X of the SEC) and (iv)fairly presented in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and the consolidated Company Subsidiaries as of the dates thereof or for the periods presented therein. The chief executive officer and chief financial officer of the Company have made all certifications required by the Sarbanes-Oxley Act, and the statements contained in any such certifications are, to the knowledge of the Company, complete and correct; and the Company is otherwise in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the applicable listing and corporate governance rules of the OTC Bulletin Board or NASDAQ, as applicable. The composition of all committees of the Companys Board of Directors is, and has at all times been, in compliance with such committees respective charters, and all proceedings and actions of such committees have been conducted in compliance with such charters in all material respects.

SECTION 3.6. Ordinary Course. Since December31, 2005, each of the Company and the Company Subsidiaries has conducted its business, in all material respects, only in the ordinary course and in a manner consistent with past practice (except in connection with activities of the Special Committee and the negotiation and execution and delivery of this Agreement).

SECTION 3.7. Company Material Adverse Effect. Since December31, 2005, there has not been a Company Material Adverse Effect.

SECTION 3.8. Litigation. There is no suit, action, audit, arbitration, proceeding, claim or investigation (whether at law or in equity, before or by any Governmental Entity or before any arbitrator) pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Company Subsidiaries, or any Person that the Company or any such Company Subsidiary has agreed to indemnify in respect thereof ("Company Litigation"), which has had or, if determined adversely to the Company and/or any Company Subsidiary or any Person that the Company or any Company Subsidiary has agreed to indemnify, would constitute a Company Material Adverse Effect. There is (x)no Order of any Governmental Entity or arbitrator outstanding against the Company or any Company Subsidiary which is material to the Company and the Company Subsidiaries, taken as a whole and (y)to the knowledge of the Company, no Order outstanding affecting the properties, assets or business operations of the Company and the Company Subsidiaries, the operation or effect of which constitutes a Company Material Adverse Effect.

SECTION 3.9. Compliance with Laws.

(a) Each of the Company and the Company Subsidiaries has been in compliance with all applicable Laws (including, to the extent applicable and effective, the Sarbanes-Oxley Act of 2002 (together with the rules and regulations promulgated thereunder, the "Sarbanes-Oxley Act")), except where such failures of compliance do not constitute a Company Material Adverse Effect. Since July21, 2003, to the knowledge of the Company, neither the Company nor any Company Subsidiary has been under investigation with respect to, and has not been threatened to be charged with or given written notice of, any material violation of any Law. The Company has made available to Parent all correspondence since July21, 2003 with Governmental Entities relating to material compliance issues.

(b) Except as permitted by the Exchange Act, including Sections 13(k)(2) and (3)thereof, since the enactment of the Sarbanes-Oxley Act, none of the Company, any Company Subsidiary or any of their respective Affiliates has directly or indirectly extended or maintained credit, arranged for the extension of credit, renewed an extension of credit or materially modified an extension of credit in the form of a personal loan to any executive officer or director (or equivalent thereof) of the Company or any Company Subsidiaries.

(c) The Company has (i)implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including the consolidated Company Subsidiaries, is made known to the management of the Company by others within those entities, (ii)has evaluated the effectiveness of its disclosure controls and procedures and internal control over financial reporting, each as required by Rule 13a-15 under the Exchange Act, and to the extent required by applicable law, presented in any applicable report on Form 10-K or Form 10-Q or any amendment thereto its conclusions about the effectiveness of its disclosure controls and procedures as of the end of the period covered by such report or amendment on such evaluation and (iii)has disclosed, based on its most recent evaluation, to the Companys outside auditors and the audit committee of the Board of Directors of the Company (A)all significant deficiencies in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that have materially adversely affected or are reasonably likely to materially adversely affect the Companys ability to record, process, summarize and report financial data and identified for the Companys outside auditors any material weaknesses in internal controls and (B)any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal controls over financial reporting. The Company has made available to Parent a summary of (x)any such disclosure described in clause (A)of the foregoing sentence made by management to the Companys auditors and audit committee since January1, 2005, and (y)any such disclosure described in clause (B)of the foregoing sentence made by management to the Companys auditors and audit committee since January1, 2005. There are no "off-balance sheet arrangements" (as defined in Item303(a)(4)(ii) of Regulation S-K under the Exchange Act) effected by any of the Company and the Company Subsidiaries since January1, 2005, which "off-balance sheet arrangements" would reasonably be expected to have a current or future material effect on the Companys financial condition, changes in financial condition, revenue or expense, results of operation, liquidity, capital expenditures or capital resources.

(d) Since December31, 2005, the Company has not received any written notification of a (i)"reportable condition" or (ii)"material weakness" in the Companys internal controls. For purposes of this Agreement, the terms "reportable condition" and "material weakness" shall have the meanings assigned to them in the Statement of Auditing Standards No.60, as in effect on the date hereof.

(e) The Company and the Company Subsidiaries hold all of the permits, licenses, variances, exemptions, orders, franchises, authorizations, rights, registrations, certifications, accreditations and approvals of Governmental Entities that are necessary for the lawful conduct of the Business (each a "Company Permit"), and are in compliance with the terms thereof, except where the failure to hold such Company Permit or to be in compliance with the terms thereof does not constitute a Company Material Adverse Effect. None of the Company or any of the Company Subsidiaries has received written notice of any action pending or threatened by any Governmental Entities to revoke, withdraw or suspend any Company Permit and no event has occurred or will occur in connection with the consummation of the transactions contemplated by this Agreement which, with or without the giving of notice, the passage of time, or both, has resulted in or could reasonably be expected to result in a violation, Order or deficiency with respect to or a revocation, withdrawal or suspension of any Company Permit, except for any such events that do not constitute a Company Material Adverse Effect. The consummation of the transactions contemplated by this Agreement does not require any consent, approval, license, certificate of need, authorization, registration, certification, permit or any other action of any Governmental Entity relating to any Company Permit other than such consent, approval, license, certificate of need, authorization, registration, certification, permit or any other action that if not received would not constitute a Company Material Adverse Effect.

SECTION 3.10. Taxes.

(a) The Company and each Company Subsidiary has (i)duly and timely filed, or had filed on its behalf, with the appropriate Taxing Authorities all Tax Returns required to be filed by it in respect of any Taxes, which Tax Returns were true, correct and complete in all material respects, (ii)duly and timely paid in full all Taxes shown due on such Tax Returns, and all other material Taxes due and payable by it, (iii)established reserves in accordance with GAAP that are adequate for the payment of all Taxes not yet due and payable with respect to the results of operations of the Company and each Company Subsidiary through the date of this Agreement and (iv)complied in all material respects with all laws applicable to the payment and withholding of Taxes and has timely withheld and paid over to the respective proper Taxing Authorities all amounts required to be so withheld and paid over.

(b) There (i)is no deficiency, claim, audit, suit, proceeding, request for information or investigation now pending, outstanding or asserted in writing against or with respect to the Company or any Company Subsidiary by any Taxing Authority in respect of any Taxes or Tax Returns, and (ii)are no requests for rulings or determinations in respect of any Taxes or Tax Returns pending between the Company or any Company Subsidiary and any Taxing Authority. No claim has been made in writing by a Taxing Authority in a jurisdiction in which the Company or a Company Subsidiary does not file Tax Returns that the Company or a Company Subsidiary is or may be subject to taxation in that jurisdiction. There are no Liens for Taxes (other than for real and personal property Taxes not yet due and payable) upon any of the material assets of the Company or any Company Subsidiary.

(c) The federal income Tax Returns of the Company and the Company Subsidiaries have been examined by the IRS (or the applicable statutes of limitation for the assessment of federal income Taxes have expired) for all periods through and including December31, 1999, and no material deficiencies were asserted as a result of such examinations that have not been resolved and, to the extent that such resolution resulted in a deficiency, fully paid. Neither the Company nor any of the Company Subsidiaries has granted any requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes with respect to any Tax Returns of the Company or any of the Company Subsidiaries.

(d) Neither the Company nor any Company Subsidiary (i)is a party to any material tax sharing, tax indemnity or other similar agreement or arrangement regarding Taxes with any entity not included in the Company Financial Statements or (ii)has any material liability for the Taxes of any other Person other than the Company and the Company Subsidiaries (x)under Treasury Regulation § 1.1502-6 (or similar provision of state, local or foreign Law), (y)as transferee or successor or (z)by contract.

(e) Within the past two years, neither the Company nor any Company Subsidiary has distributed stock of another Person in a transaction intended to be governed by Section355 of the Code, nor has the stock of the Company or any Company Subsidiary been distributed in a transaction intended to be governed by Section355 of the Code.

(f) Neither the Company nor any Company Subsidiary (i)has since July2, 2004 elected to change, or is required to change, a method of accounting for Tax purposes pursuant to Section481 of the Code or otherwise that will have a continuing effect following the Closing or (ii)is the subject of any closing agreement with respect to Taxes that will have continuing effect following the Closing.

(g) Neither the Company nor any Company Subsidiary will be required to include an item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any installment sale or open transaction disposition made on or prior to the Closing Date, prepaid amount received on or prior to the Closing Date, or any similar transaction that has occurred prior to the Closing Date.

(h) The Company has delivered or made available to Parent true, correct and complete copies of all federal income Tax Returns filed with respect to the Company and each Company Subsidiary since January1, 2004 and all examination reports and statements of deficiencies asserted against the Company or any Company Subsidiary and received since January1, 2004.

(i) The unpaid Taxes of the Company and the Company Subsidiaries did not, as of June30, 2006, exceed the reserve for Taxes (determined without regard to any reserve for any deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Companys interim balance sheet as of June30, 2006, and do not exceed that reserve as adjusted for the passage of time through the date of this Agreement in accordance with the past practice of the Company and the Company Subsidiaries in filing their Tax Returns.

SECTION 3.11. Title to Assets.

(a) The Company or one of the Company Subsidiaries has a good and valid leasehold interest in each parcel of real property leased by the Company or any Company Subsidiary (the "Company Leased Real Property"), which leasehold interest is free and clear of all Liens (other than Permitted Liens) and except for any failures or adverse interests which do not constitute a Company Material Adverse Effect. Section3.11(a) of the Company Disclosure Letter contains a complete and accurate list of all leases which the Company or a Company Subsidiary is a party relating to the Company Leased Real Property and all amendments thereto. Except as does not constitute a Company Material Adverse Effect, (i)the Company or one of the Company Subsidiaries has the right to use and occupancy of the Company Leased Real Property for the full term of the lease or sublease relating thereto, subject to the terms of the applicable lease or sublease, (ii)all leases for the Company Leased Real Property are in good standing, binding, valid, effective and enforceable agreements of the Company or a Company Subsidiary and, to the knowledge of the Company, of the other parties thereto in accordance with their respective terms, and neither the Company nor any Company Subsidiary has received written notice of any material default (or any condition or event, which, after notice or a lapse of time or both, would constitute a material default thereunder) and (ii)neither the Company nor any of the Company Subsidiaries has assigned its interest under any such lease or sublease or sublet any part of the premises covered thereby. To the knowledge of the Company, there are no pending or threatened condemnation proceedings with respect to the Company Leased Real Property.

(b) The Company or one of the Company Subsidiaries has good and valid title to all material tangible personal property used in the Business and reflected in the Companys consolidated balance sheet included in the 2006 Interim Financial Statements, free and clear of all Liens (other than Permitted Liens), other than (i)such assets as have been sold in the ordinary course of business since the date of such balance sheet or (ii)such assets which the Company or a Company Subsidiary holds under lease, contract or similar arrangement.

(c) Neither the Company nor any Company Subsidiary owns any real property (nor do any of them utilize, have legal or equitable title in, or have a leasehold interest in, any real property, other than the Company Leased Real Property) and have not owned any real property since January1, 2005.

SECTION 3.12. Employee Benefit Plans and Related Matters; ERISA.

(a) Section3.12(a) of the Company Disclosure Letter sets forth a list of all employee benefit, health, welfare, supplemental unemployment benefit, bonus, incentive, pension, profit sharing, deferred compensation, stock compensation, stock option, stock purchase, retirement, hospitalization insurance, medical, dental, legal, disability and similar plans or arrangements or practices, whether written or oral, which are sponsored, maintained or contributed to by the Company or any of its ERISA Affiliates (collectively referred to as the "Company Benefit Plans").

(b) No step has been taken, no event has occurred and no condition or circumstance exists that has resulted in or could be reasonably expected to result in any Company Benefit Plan being ordered or required to be terminated or wound up in whole or in part or having its registration under applicable Laws refused or revoked, or being placed under the administration of any trustee or receiver or regulatory authority or being required to pay any material amount of Taxes, fees, penalties or levies under applicable Laws. There are no material actions, suits, claims (other than routine claims for payment of benefits in the ordinary course), trials, demands, audits, investigations, arbitrations or other proceedings which are pending or, to the Companys knowledge, threatened in respect of any of the Company Benefit Plans or their assets. No Company Benefit Plan is now or at any time has been subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA.

(c) The Company has made available to Merger Sub true, correct and complete copies of all of the Company Benefit Plans, as amended, (or, in the case of any unwritten Company Benefit Plan, a description thereof) together with all related actuarial reports, and the Company has made available to Merger Sub all other related documentation including, without limitation, funding agreements, trust agreements, funding and financial information returns and statements with respect to each Company Benefit Plan, and current plan summaries, booklets and personnel manuals. The Company has made available to Merger Sub a true and complete copy of (i)the most recent annual report on Form 5500 filed with the United States Internal Revenue Service or Department of Labor with respect to each Company Benefit Plan in respect of which such a report was required, and (ii)the most recent annual information return filed with the Canada Revenue Agency with respect to each Company Benefit Plan in respect of which such a return was required.

(d) All of the Company Benefit Plans are and have been established, registered, qualified, invested and administered, in all material respects, in accordance with all applicable Laws, and in accordance with their terms (except that in any case in which any Company Benefit Plan is currently required to comply with a provision of ERISA or of the Code, but is not yet required to be amended to reflect such provision, it has been maintained, operated and administered in accordance with such provision) and the terms of agreements between the Company or a Company Subsidiary, as the case may be, and their respective employees.

(e) All obligations of the Company or a Company Subsidiary regarding the Company Benefit Plans have been satisfied in all material respects. All contributions or premiums required to be made by the Company or an ERISA Affiliate, as the case may be, under the terms of each Company Benefit Plan or by applicable Laws have been made in a timely fashion in accordance with applicable Laws and the terms of the Company Benefit Plans.

(f) Each Company Benefit Plan that is subject to insurance or funding requirements is fully insured or fully funded in accordance with the assumptions disclosed in the most recent applicable actuarial report and in good standing with such regulatory authorities as may be applicable and, as of the date of this Agreement, no notice of underfunding, noncompliance, failure to be in good standing or otherwise has been received by the Company or the Company Subsidiaries from any such regulatory authority.

(g) No commitments by the Company, any Company Subsidiary or ERISA Affiliate to improve or otherwise amend any Company Benefit Plan have been made except as required by applicable Laws.

(h) No insurance policy or any other contract or agreement affecting any Company Benefit Plan requires or permits a retroactive increase in premiums or payments due thereunder.

(i) All Company Benefit Plans intended to be tax-qualified in the United States have been the subject of determination letters from the IRS to the effect that such Company Benefit Plans and their related trusts are qualified and exempt from United States Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor, to the knowledge of the Company, has revocation been threatened, nor has any such Company Benefit Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs and nothing has occurred in operation of the Company Benefit Plan that could adversely affect the qualified status of such plan. As to any such Company Benefit Plan, there has been no termination or partial termination of such Company Benefit Plan within the meaning of Section411(d)(3) of the Code.

(j) Neither the Company Benefit Plans, any trusts created thereunder, the Company, any ERISA Affiliate, nor any employee of the foregoing, nor, to the Companys knowledge, any trustee, administrator or other fiduciary thereof, has engaged in a "prohibited transaction" (as such term is defined in section 4975 of the Code or section 406 of ERISA) or any other activity that could subject any thereof to any tax or penalty (including without limitation, the taxes or penalties on prohibited transactions imposed by Code section 4975) or any sanctions imposed under Title I of ERISA.

(k) No amount or benefit that could be received (whether in cash or property, the vesting of property or the acceleration of the exerciseability of stock options) as a result of or in connection with the transactions contemplated by this Agreement (whether or not some other subsequent action or event would be required to cause the receipt of such amount or benefit to occur) by any employee, officer or director of the Company or any of its Affiliates who is a "disqualified individual" (as such term is defined in United States Treasury Regulation Section1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Company Benefit Plan currently in effect will fail to be deductible for United States federal income tax purposes by virtue of Section280G of the Code; and no employee remuneration payable to a covered employee shall fail to be allowed as a deduction under Section162(m) of the Code.

(l) None of the Company Benefit Plans is now or ever has been a "multiemployer plan" within the meaning of Section4001(a)(3) of ERISA or any other applicable Law, nor has the Company or any ERISA Affiliate been obligated to contribute to any such multiemployer plan at any time within the past six years, or incurred any withdrawal liability.

(m) No employment, severance or termination agreement, other compensation arrangement or Company Benefit Plan provides for payment of a benefit, the increase of a benefit amount, the acceleration of contributions or funding, the payment of a contingent benefit or the acceleration of the payment or vesting of a benefit by reason of the execution of this Agreement or the consummation of the transactions contemplated by this Agreement (whether or not some other subsequent action or event would be required to cause such payment, increase, acceleration, or vesting to be triggered).

(n) To the extent that any Company Benefit Plan constitutes a "non-qualified deferred compensation plan" within the meaning of Section409A of the Code, such Company Benefit Plan has been operated in good faith compliance with Section409A of the Code and the official guidance thereunder.

(o) No awards (and no agreement or promise by the Company to make awards) under any Company Benefit Plan that provides for the granting of equity, equity-based rights, equity derivatives or options to purchase equity ("Equity Plans") have been backdated awards or awards granted with an effective grant date that is other than the date on which the committee or other administrator of such Equity Plans having authority thereunder to make such awards, (i)has taken all necessary corporate action to complete such awards (unless such committee or other administrator has specified a future grant date on the date it so acts and such action has been (or will be) completed prior to such future grant date) and (ii)has timely communicated all of the terms of the awards to the recipients in accordance with the Companys customary human resource practices and applicable accounting standards. In addition, no awards made under the Equity Plans have been (or will be) altered in a manner that would result in or have the effect of failing to comply with the foregoing sentence.

(p) No Company Benefit Plan other than the Company 401(k) Plan or the Canadian Group Plan invests in or is funded with Common Stock.

(q) In all material respects, the Company and all Company Subsidiaries have properly classified for all purposes (including, without limitation, for all Tax purposes and for purposes of determining eligibility to participate in any Company Benefit Plan) all employees, leased employees, consultants and independent contractors, and has withheld and paid all applicable Taxes and made all appropriate filings in connection with services provided by such persons to the Company and each Company Subsidiary.

SECTION 3.13. Employees; Labor Matters. Neither the Company nor any of the Company Subsidiaries is a party to, or is, as of the date hereof, in negotiation to become party to, any collective bargaining agreement. As of the Closing Date, any and all notices to, or filings or registrations with, any labor organizations, works council or any similar entity, council or organization, required to be made prior to the Effective Time by the Company Subsidiaries in connection with the execution of this Agreement will have been timely given or made. Since January1, 2005 there has not occurred nor, to the knowledge of the Company, has there been threatened any material strike, slowdown, picketing, work stoppage, concerted refusal to work overtime or other similar labor activity or organizing campaign with respect to any employees of the Company or any of the Company Subsidiaries. There are no labor disputes currently subject to any grievance procedure, arbitration or litigation and there is no representation petition pending or, to the knowledge of the Company, threatened with respect to any current or former employee, officer, director or contract worker of the Company or any of the Company Subsidiaries, except for such disputes or petitions which do not constitute a Company Material Adverse Effect. The Company and each of the Company Subsidiaries have complied with all Laws pertaining to the employment or termination of employment of their respective employees, including all such laws relating to labor relations, equal employment, fair employment practices, prohibited discrimination or distinction and other similar employment practices or acts, except for any failures so to comply which do not constitute a Company Material Adverse Effect.

SECTION 3.14. Intellectual Property Rights.

(a) Each of the Company and each Company Subsidiary owns, or is validly licensed or otherwise has the right to use, all Intellectual Property the use of which is material to the operation of the Business.

(b) Section3.14(b) of the Company Disclosure Letter sets forth a complete list of all current subsisting patents, registered trademarks, registered copyrights, domain name registrations, and all applications for issuance or registration of any of the foregoing anywhere in the world used in the conduct of the Business or filed on behalf of the Company or a Company Subsidiary for use in the conduct of the Business, setting forth as to each such item: (i)the item or title, (ii)the jurisdiction in which the item/title is registered, issued or pending, (iii)the registration, issuance or application number and (iv)the date of issuance, registration or application, as applicable. To the knowledge of the Company, all of the registered or issued items set forth in Section3.14(b) of the Company Disclosure Letter are valid and subsisting, and there is no opposition, cancellation, interference, reexamination or other proceeding challenging the extent or validity of any such items, or the Companys or any Company Subsidiarys ownership thereof.

(c) To the knowledge of the Company, the conduct of the Business does not infringe, misappropriate or otherwise conflict with the rights of any Intellectual Property of any third Person. To the knowledge of the Company, none of the Company Intellectual Property is being infringed, misappropriated or otherwise used or being made available for use by any Person without a license or permission from the Company to the extent of an occurrence of a Company Material Adverse Effect.

(d) No claims are pending or, to the knowledge of the Company, threatened that the Company or any of the Company Subsidiaries is infringing or misappropriating, or has infringed or misappropriated, the Intellectual Property of any third Person.

(e) Each of the Company and each Company Subsidiary has taken all actions reasonably necessary to maintain the secrecy of all non-public Company Intellectual Property, including Trade Secrets, used in the Business so that no Company Material Adverse Effect has occurred, and to the knowledge of the Company, there has been no unauthorized release, disclosure, or dedication to the public of any such non-public Company Intellectual Property.

(f) The Company owns rights in and to the seismic data contained within seismic databases of the Company ("Company Databases"), free and clear of all Liens (other than Permitted Liens), and subject to nonexclusive licenses granted to customers. To the knowledge of the Company, none of the Company Databases has been misappropriated by any Person.

(g) No Intellectual Property owned by the Company or any Company Subsidiary was developed, in whole or in part (i)pursuant to or in connection with the participation by the Company or any Company Subsidiary, or any officer, director, employee, agent, consultant or contractor of the Company or any Company Subsidiary, in the development of any professional, technical or industry standard, (ii)under contract with or to any Governmental Entity, or (iii)using any software, software development toolkits, databases, libraries, scripts, or other similar modules or components of software that are subject to "open source" or similar license terms, including by way of example and not limitation, the GNU General Public License or GNU Limited General Public License such that a Company Material Adverse Effect could reasonably be expected to occur.

(h) The information technology systems owned, licensed, leased, operated on behalf of, or otherwise held for use in the Business by the Company, including all computer hardware, software, firmware, process automation and telecommunications systems used in the Business of the Company, perform reliably and in material conformance with the appropriate specifications or documentation for such systems. The Company has taken commercially appropriate steps, in accordance with industry practice, (i)to mitigate the risk that the computer software and software systems used in the Business do not contain any viruses, "worms", trapdoors, or other disabling or malicious code and (ii)to provide reasonable means for the back up, archival and recovery of the critical Business data (including but not limited to the Company Databases) of the Business in the event of a disaster.

SECTION 3.15. Company Contracts.

(a) Subsections (1)through (11)of Section3.15(a) of the Company Disclosure Letter each contain, as of the date of this Agreement, a complete and accurate listing of the following contracts, agreements, commitments, leases, licenses, arrangements, instruments and obligations, whether written or oral (and, if oral, a complete and accurate summary thereof), to which the Company or any Company Subsidiary is a party and which are effective as of the date of this Agreement, together with all amendments, waivers or other changes thereto:

(1) (A)all seismic data licensing contracts (excluding any contract providing for (x)seismic data to be acquired, in whole or in part, at the ultimate expense of the customer and (y)an exclusive license of any or all of such newly acquired data to a customer for any period of time) entered into on or after January1, 2006 in the ordinary course of business pursuant to which the non-cancelable, non-refundable value of the contract to the Company and/or any Company Subsidiary is more than $2,000,000, (B)all seismic data licensing contracts which, among other things, provide for the acquisition of seismic data and an exclusive license thereof to a customer for any period of time entered into on or after January1, 2006 in the ordinary course of business pursuant to which the non-cancelable, non-refundable value of the contract to the Company and/or any Company Subsidiary (net of any seismic data acquisition costs underwritten by a customer that is party to such agreement) is more than $2,000,000 and (C)each contract, agreement, commitment, lease, license, arrangement, instrument and/or obligation to which the Company and/or any Company Subsidiary is currently a party which is reasonably likely to involve aggregate annual payments by the Company or any Company Subsidiary of more than $1,000,000;

(2) all employment, independent contractor, consulting, director or officer indemnification, executive compensation plans, bonus plans, deferred compensation, severance or similar agreements under which the Company or any of the Company Subsidiaries is or could become obligated to provide annual compensation or benefits in excess of $250,000 or that have rights triggered as a result of or in connection with this Agreement or the transactions contemplated hereby;

(3) all collective bargaining agreements, employee pension plans or retirement plans, employee profit sharing plans, employee stock purchase and similar plans, group life insurance, hospitalization insurance or other similar plans or arrangements maintained for or providing benefits to employees of, or independent contractors or other agents for, the Company or any Subsidiary of the Company;

(4) all contracts and agreements relating to Indebtedness and any Liens upon any properties or assets of the Company or any Subsidiary of the Company as security for such Indebtedness;

(5) all contracts and agreements with any Governmental Entity (not including any Company Permits);

(6) all contracts and agreements that (A)limit the ability of the Company and/or any Company Subsidiary or Affiliate of, or successor to, the Company, or, to the knowledge of the Company, any executive officer of the Company, to compete in any material respect in any line of business or with any Person or in any geographic area or during any period of time, (B)require the Company and/or any Company Subsidiary or Affiliate of, or successor to, the Company to use any supplier or third party for all or substantially all of its material requirements or needs, (C)limit or purport to limit in any material respect the ability of the Company and/or any Subsidiary or Affiliate of, or successor to, the Company to solicit any customers or clients of the other parties thereto, (D)require the Company and/or any Subsidiary or Affiliate of, or successor to, the Company to provide to the other parties thereto "most favored nations" pricing or (E)require the Company and/or any Subsidiary or Affiliate of, or successor to, the Company to market or co-market any products or services of a third party;

(7) all joint venture contracts, partnership arrangements or other agreements outside the ordinary course of business involving a sharing of profits, losses, costs or liabilities of any Person by the Company or any Subsidiary of the Company with any third Person;

(8) all contracts, agreements and arrangements entered into since July2, 2004 by the Company or any of the Company Subsidiaries and any other Person providing for the acquisition by the Company or such Company Subsidiary (including by merger, consolidation, acquisition of stock or assets or any other business combination) of any corporation, partnership, other business organization or division or unit thereof or any material amount of assets of such other Person in an amount in excess of $5,000,000, in the aggregate;

(9) all confidentiality, non-disclosure and/or standstill agreements entered into by the Company or any of the Company Subsidiaries (other than in the ordinary course of business) except those which have expired by their terms;

(10) all contracts, agreements and arrangements providing for the Company or any of the Company Subsidiaries to indemnify any other Person (other than in the ordinary course of business); and

(11) all other contracts, agreements, commitments, leases, licenses, arrangements, instruments and/or obligations entered into by the Company or any Subsidiary of the Company other than in the ordinary course of business a breach of or defalt under which by the Company or any other party thereto would constitute a Company Material Adverse Effect.

(b) True, correct and complete copies of each written contract and agreement required to be listed on Section3.15(a) of the Company Disclosure Letter (including all modifications and amendments thereto and waivers thereunder, the "Company Contracts") have been made available to Merger Sub, and there are no oral contracts entered into by the Company or any Company Subsidiary required to be listed on Section3.15(a) of the Company Disclosure Letter.

(c) All contracts, leases, licenses or other agreements or instruments to which the Company or any Company Subsidiary is a party as of the date hereof or to which any of their respective properties or assets is subject as of the date hereof that are required pursuant to Item601 of Regulation S-K under the Exchange Act to be filed as an exhibit to any SEC Reports or described therein have been filed as an exhibit to such SEC Reports and/or described therein. All the Company Contracts are valid and in full force and effect, except to the extent they have previously expired or terminated in accordance with their terms and except for any invalidity or failure to be in effect that does not constitute a Company Material Adverse Effect. None of the Company or any Company Subsidiary is in material violation of or in material breach or in default under (with or without the lapse of time or the giving of notice or both), and none of the Company, any Company Subsidiary or, to the knowledge of the Company, any other party thereto is in material default or material breach under (with or without the lapse of time or the giving of notice or both) the terms of, or has provided any notice of intention to terminate, any of the Company Contracts, and, to the knowledge of the Company, no event or circumstance has occurred or will occur by reason of this Agreement or the consummation of any of the transactions contemplated hereby, that with notice or lapse of time or both, would constitute an event of default thereunder or would result in a termination thereof, and except for such violations, defaults, notices or terminations that do not constitute a Company Material Adverse Effect.

SECTION 3.16. Environmental Matters.

(a) The Company and each Company Subsidiary have complied and are in compliance with all applicable Environmental Laws and have obtained and complied and are in compliance with all Environmental Permits, except where a failure to do so does not constitute a Company Material Adverse Effect.

(b) Neither the Company nor any Company Subsidiary has received in writing any notice of violation, notice of liability, demand, request for information, citation, summons or order, arising out of any Environmental Law, that could reasonably be expected to result in a Company Material Adverse Effect. No complaint has been filed, no penalty or fine has been assessed, and no investigation, claim, suit or proceeding is pending or, to the knowledge of the Company, threatened by any Person under any Environmental Law against the Company or any Company Subsidiary that could reasonably be expected to result in a Company Material Adverse Effect.

(c) Except as would not reasonably be expected to result in a Company Material Adverse Effect, (i)no Release of Hazardous Substances has occurred at any properties currently owned, leased, operated or used by the Company or any Company Subsidiary, (ii)no Release of Hazardous Substances occurred at or from any properties while formerly owned, leased, operated or used by the Company or any Company Subsidiary that requires notice, further investigation or response action under applicable Environmental Law, and (iii)no Release of Hazardous Substances occurred at or from any property at which the Company or any Company Subsidiary has performed services that is caused by the acts or omissions of the Company or any Company Subsidiary and that could reasonably be expected to result in any notice, investigation or remediation obligation of the Company or any Company Subsidiary under applicable Environmental Law.

(d) Neither the Company nor any Company Subsidiary, nor, to the knowledge of the Company, any other Person (including any predecessor in interest to the Company or any Company Subsidiary), has caused or taken any action that could reasonably be expected to result in any liability, investigation or remediation obligation of the Company or any Company Subsidiary that could reasonably be expected to result in a Company Material Adverse Effect, with regard to (i)the environmental conditions at, on, above, under, or about any properties or assets currently or formerly owned, leased, operated or used by the Company or any Company Subsidiary or any of their respective predecessors in interest, or (ii)the past or present use, management, handling, transport, treatment, generation, storage, disposal, Release or threatened Release of Hazardous Substances.

(e) The Company has made available to Merger Sub copies of all environmental site assessments, audits, investigations and reports in the possession, custody or control of the Company or any of the Companys Subsidiaries that (i)concern any properties or assets currently or formerly owned, leased, operated or used by the Company or any Company Subsidiary, and (ii)that discuss environmental matters that could reasonably be expected to result in material liability under Environmental Law.

(f) Except for the representations and warranties in Sections 3.4(b), 3.5, 3.7 and 3.9(a) (to the extent related to matters relating to Hazardous Substances or Environmental Laws), the representations and warranties given by the Company under this Section3.16 shall be the sole representations given by the Company with regard to Environmental Law, Hazardous Substances, Releases of Hazardous Substances, and Environmental Permits.

SECTION 3.17. Insurance Coverage. The Company and the Company Subsidiaries are covered by valid and currently effective insurance policies issued in favor of the Company and the Company Subsidiaries that are customary in all material respects for companies of similar size and financial condition in the Companys Business. All insurance policies carried by or covering the Company and the Company Subsidiaries (the "Insurance Policies") are in full force and effect, and, as of the date of this Agreement, no notice of cancellation or non-renewal or a material decrease in coverage or a material increase in deductible or self-insurance retention has been received by the Company or any of the Company Subsidiaries with respect to or in connection with any Insurance Policy which has not been cured by the payment of premiums that are due. All premiums due on the Insurance Policies have been paid in a timely manner and the Company and the Company Subsidiaries have complied in all material respects with the terms and provisions of the Insurance Policies. None of the Company or any of the Company Subsidiaries has been advised of any defense to coverage or reservation of rights in connection with any material claim to coverage asserted or noticed by the Company or any of the Company Subsidiaries under or in connection with any of their existing Insurance Policies.

SECTION 3.18. Related Party Transactions. Except for the Confidentiality Agreement, any other agreement to which ValueAct Capital is a party, this Agreement and the transactions as contemplated by this Agreement, as of the date of this Agreement, there are no contracts (other than expired contracts or contracts terminated in accordance with their terms), commitments, agreements, arrangements, leases, licenses, instruments, obligations, understandings or other transactions entered into other than in the ordinary course of business between the Company or any Company Subsidiary (or, whether or not the Company or a Company Subsidiary is a party, which are binding on any of the Companys or any Company Subsidiarys properties or assets), on the one hand, and any (i)present or former officer or director of the Company or any Company Subsidiary or any of their immediate family members (including their spouses), (ii)Person which has record and beneficial ownership of five percent or more of the voting securities of the Company or (iii)Affiliate of any such officer, director, family member or beneficial owner, on the other hand.

SECTION 3.19. Absence of Undisclosed Liabilities. There are no liabilities or obligations of the Company or the Company Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that are required to be reflected on the consolidated balance sheets of the Company and the Company Subsidiaries in accordance with GAAP, except liabilities and obligations incurred in the ordinary course of business consistent with past practice since December31, 2005 that, in the aggregate, do not constitute a Company Material Adverse Effect and liabilities reflected in the Companys financial statements (together with the related notes thereto) filed with the Companys annual report on Form 10-K for the fiscal year ended December31, 2005, filed with the SEC on March16, 2006, and liabilities incurred in connection with the transactions contemplated by this Agreement.

SECTION 3.20. Opinion of Independent Financial Advisor. The Special Committee and the Board of Directors have received the written opinion of William Blair& Company, dated the date hereof (a copy of which the Company has delivered to Parent), to the effect that, as of the date hereof and based upon and subject to the assumptions made, matters considered and qualifications and limitations set forth in such opinion, the Merger Consideration is fair from a financial point of view to the stockholders of the Company (other than ValueAct Capital and its Affiliates).

SECTION 3.21. Brokers. No broker, finder or investment banker (other than William Blair& Company) is entitled to any brokerage, finders or other fee or commission in connection with this Agreement, the Merger and the other transactions contemplated hereby based upon arrangements made by or on behalf of the Company. The Company has heretofor furnished to Merger Sub a complete and correct copy of all agreements between the Company and William Blair& Company pursuant to which such firm would be entitled to any payment relating to the transactions contemplated hereby.

SECTION 3.22. State Takeover Statutes. The Company has taken all action necessary to render the provisions of any anti-takeover statute, rule or regulation that to the Companys knowledge may be applicable to the Merger and the other transactions contemplated by this Agreement (including Section203 of the DGCL) inapplicable to Parent, Merger Sub and their respective Affiliates, and to the Merger, this Agreement and the transactions contemplated hereby. No "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under any state Law applicable to the Company is applicable to the Merger or the other transactions contemplated hereby.

SECTION 3.23. Parent and Merger Sub Representations and Warranties. The Company agrees that except for the representations and warranties contained in this Agreement, none of Parent, Merger Sub nor any other Person on behalf of Parent or Merger Sub makes any other express or implied representation or warranty with respect to Parent or Merger Sub or any other information provided to the Company by or on behalf of Parent or Merger Sub.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company as follows:

SECTION 4.1. Organization.

(a) Parent is duly organized, validly existing and in good standing under the laws of the State of Delaware.

(b) Merger Sub is duly organized, validly existing and in good standing under the laws of the State of Delaware.

(c) Parent beneficially owns and owns of record all of the outstanding capital stock of Merger Sub free and clear of all Liens (other than any Liens created pursuant to the Financing). Prior to the date hereof, Parent has provided to the Company the name of the "ultimate parent entity" for purposes of obtaining the Governmental Approvals.

SECTION 4.2. Authority Relative to this Agreement. Each of Parent and Merger Sub has all necessary limited liability company or corporate power and authority, as applicable, to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Merger Sub and the consummation by each of Parent and Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary action by the sole Manager of Parent or the Board of Directors of Merger Sub, as applicable, and, prior to the Effective Time, will be duly and validly authorized by all necessary action by Parent as the sole stockholder of Merger Sub, and no other limited liability company or corporate proceedings, as applicable, on the part of Parent or Merger Sub are necessary to authorize this Agreement, to perform their respective obligations hereunder, or to consummate the transactions contemplated hereby (other than the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL). This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub enforceable against each of Parent and Merger Sub in accordance with its terms.

SECTION 4.3. No Conflict; Required Filings and Consents.

(a) The execution and delivery of this Agreement by Parent do not, and the performance of this Agreement and the consummation of the transactions contemplated hereby will not, (i)conflict with or violate the Constituent Documents of Parent, (ii)conflict with or violate any Law applicable to Parent or by which any of its properties or assets are bound or affected, or (iii)result in any breach of or constitute a default (or an event which, with notice, lapse of time or both, would become a default) under, result in the loss of a material benefit under or give to others any right of termination, amendment, acceleration, payment or cancellation of, or result in the creation of a lien or other encumbrance on any property or under any contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent is a party or by which Parent or any of its properties or assets are bound or affected, except in the case of clauses (ii)and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not, or would not reasonably be expected to, individually or in the aggregate, prevent or materially delay the performance by Parent of any of its obligations under this Agreement or the consummation of any of the transactions contemplated hereby, including the Merger.

(b) The execution and delivery of this Agreement by Merger Sub do not, and the performance of this Agreement and the consummation of the transactions contemplated hereby will not, (i)conflict with or violate the Constituent Documents of Merger Sub, (ii)conflict with or violate any Law applicable to Merger Sub or by which any of its properties or assets are bound or affected, or (iii)result in any breach of or constitute a default (or an event which, with notice, lapse of time or both, would become a default) under, result in the loss of a material benefit under or give to others any right of termination, amendment, acceleration, payment or cancellation of, or result in the creation of a lien or other encumbrance on any property or under any contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Merger Sub is a party or by which Merger Sub or any of its properties or assets are bound or affected, except in the case of clauses (ii)and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not, or would not reasonably be expected to, individually or in the aggregate, prevent or materially delay the performance by Merger Sub of any of its obligations under this Agreement or the consummation of any of the transactions contemplated hereby, including the Merger.

(c) Assuming that all consents, approvals, authorizations and other actions required under Section3.4(b) have been obtained and all filings and obligations required under Section3.4(b) have been made or fulfilled, the execution and delivery of this Agreement by Parent do not, and the performance of this Agreement and the other transactions contemplated hereby by Parent will not, require any consent, approval, franchise, license, certificate of need, Order, registration or authorization or permit of, or filing with or notification to, any Governmental Entity, except (i)for the Governmental Approvals and (ii)where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have or reasonably be expected to have a Merger Sub Material Adverse Effect.

(d) Assuming that all consents, approvals, authorizations and other actions required under Section3.4(b) have been obtained and all filings and obligations required under Section3.4(b) have been made or fulfilled, the execution and delivery of this Agreement by Merger Sub do not, and the performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby by Merger Sub will not, require any consent, approval, franchise, license, certificate of need, Order, registration or authorization or permit of, or filing with or notification to, any Governmental Entity, except (i)for the Governmental Approvals and (ii)where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have or reasonably be expected to have a Merger Sub Material Adverse Effect.

(e) As of the date hereof, there are no suits, claims, actions, proceedings, arbitrations, mediations or investigations pending or, to the knowledge of Parent, threatened against Parent or any of its Subsidiaries, other than any such suit, claim, action, proceeding or investigation that does not constitute a Buyer Material Adverse Effect. As of the date hereof, neither Parent nor any of its Subsidiaries nor any of their respective properties is or are subject to any order, writ, judgment, injunction, decree or award that would, or would reasonably be expected to, prevent or materially delay the consummation of the transactions contemplated hereby, including the Merger.

SECTION 4.4. Vote/Approval Required. No vote or consent of the holders of any class or series of limited liability company interests of Parent is necessary to adopt this Agreement or the Merger or the transactions contemplated hereby. The vote or consent of Parent as the sole stockholder of Merger Sub (which shall have occurred prior to the Effective Time) is the only vote or consent of the holders of any class or series of capital stock of Merger Sub necessary to adopt this Agreement or the Merger or the transactions contemplated hereby.

SECTION 4.5. Broker. No broker, finder or investment banker (other than UBS Loan Finance LLC and UBS Securities LLC and/or Morgan Stanley Senior Funding, Inc. and/or such other financial institutions as might become entitled to fees pursuant to the application of Section5.6(c) and/or Section5.10) is entitled to any brokerage, finders or other fee or commission in connection with this Agreement, the Merger and the other transactions contemplated hereby based upon arrangements made by or on behalf of Parent or Merger Sub.

SECTION 4.6. Financing.

(a) Parent and Merger Sub have delivered to the Company correct and complete copies of (i)the commitment letter and related term sheet provided by Morgan Stanley Senior Funding, Inc. for the debt financing and bridge loan contemplated by Parent and Merger Sub in connection with this Agreement (the "Debt Financing Letter"), and (ii)a commitment letter from ValueAct Capital (the "Equity Investor") for the equity financings of the transaction contemplated by Parent in connection with this Agreement (the "Equity Financing Letter" and, collectively with the Debt Financing Letter, the "Financing Letters"). As of the date of this Agreement, the Financing Letters are valid and in full force and effect and have not been amended or modified, and the respective commitments contained in the Financing Letters have not been withdrawn or rescinded in any respect. The aggregate proceeds contemplated by the Financing Letters will be sufficient for Parent and Merger Sub to pay the aggregate Merger Consideration and to pay all related fees and expenses. The financing sources obligations to fund the commitments under the Financing Letters are not subject to any conditions or contingencies other than as set forth in the Financing Letters. No event has occurred that (with or without notice, lapse of time, or both) would constitute a default under the Financing Letters on the part of Parent or Merger Sub. Neither Parent nor Merger Sub is aware of any reason, fact or circumstance existing on the date of this Agreement that (A)has caused or is reasonably likely to cause any Financing Letter to not be in full force and effect or (B)precludes or is reasonably likely to preclude the satisfaction by Parent and Merger Sub of the conditions set forth in the Financing Letters to be satisfied by them. Parent has paid all commitment and other fees required to be paid under the Financing Letters on or prior to the date hereof (and will pay all such fees that are required to be paid after the date hereof).

(b) The execution and delivery of its Equity Financing Letter have been duly authorized by all requisite limited partnership action on the part of the Equity Investor, such Equity Financing Letter has been executed by a Person authorized to bind such Equity Investor and such Equity Financing Letter constitutes the valid and binding obligation of such Equity Investor, enforceable in accordance with its terms.

SECTION 4.7. Formation. Parent and Merger Sub each were formed specifically for the transactions contemplated by this Agreement and have conducted no operations and incurred no material obligations other than in connection with their organization or conversion and the transactions contemplated by this Agreement. As of the date hereof, all of the limited liability company interests of Parent are owned by ValueAct Capital.

SECTION 4.8. Company Representations and Warranties. Each of Parent and Merger Sub agrees that except for the representations and warranties contained in this Agreement, neither the Company nor any other Person on behalf of the Company makes any other express or implied representation or warranty with respect to the Company or any other information provided to Parent or Merger Sub by or on behalf of the Company.

ARTICLE V

COVENANTS AND OTHER AGREEMENTS

SECTION 5.01. Conduct of Business of the Company. From the date of this Agreement until the Effective Time, unless Parent shall otherwise consent in writing or except as set forth in Section5.1 of the Company Disclosure Letter or as otherwise expressly provided for in this Agreement, the Company shall, and shall cause each of the Company Subsidiaries to, conduct its business in the ordinary course consistent with past practice and shall use all of its reasonable best efforts to preserve intact its business organization and goodwill and relationships with customers, suppliers and others having business dealings with it and to keep available the services of its current officers and key employees on terms and conditions substantially comparable to those currently in effect and maintain its current rights and franchises, in each case, consistent with past practice. In addition to and without limiting the generality of the foregoing, except as expressly set forth in Section5.1 of the Company Disclosure Letter or as otherwise expressly provided for in this Agreement, from the date hereof until the Effective Time, without the prior written consent of Parent, not to be unreasonably withheld, conditioned or delayed, the Company shall not and shall not permit any Company Subsidiary to:

(a) amend or propose to amend or otherwise adopt or propose any change in its Constituent Documents;

(b) (i)declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property) in respect of any of its capital stock (other than cash dividends or distributions declared, set aside, made or paid by any Company Subsidiary wholly-owned by the Company or another Company Subsidiary wholly-owned by the Company to the Company or such other Company Subsidiary), (ii)adjust, split, combine or reclassify any of its capital stock or issue or propose or authorize the issuance of any other securities (including options, warrants or any similar security exercisable for, or convertible into, such other security) in respect of, in lieu of, or in substitution for, shares of its capital stock, or (iii)repurchase, redeem or otherwise acquire any shares of the capital stock or securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock of the Company or any Company Subsidiary, or any other equity interests or any rights, warrants or options to acquire any such shares or interests other than in connection with the surrender of shares of employees pursuant to tax withholding rights contained in the Incentive Plan;

(c) issue, deliver, hypothecate, sell, grant, pledge or otherwise encumber any shares of its capital stock or other securities (including any options, warrants or any other security directly or indirectly exercisable or exchangeable for or convertible into such capital stock or similar security) other than (i)pursuant to the exercise of the options granted under the Nonstatutory Stock Option Agreement in accordance with its present terms, (ii)pursuant to the exercise of the Company Warrant in accordance with its present terms, (iii)issuances by a wholly-owned Company Subsidiary of capital stock to such Company Subsidiarys parent or another wholly-owned Company Subsidiary, (iv)delivery of capital stock upon the vesting of any Company Restricted Shares, (v)matching grants under the Seitel, Inc. 401(k) Plan ("Company 401(k) Plan") to the extent provided by the Company 401(k) Plan as of the date hereof or (vi)issuances of not more than an aggregate 1,320,716 Company Restricted Shares to be granted to the executive officers, management employees or non-employee directors of the Company listed in an annex to Section3.3(c) of the Company Disclosure Letter;

(d) merge or consolidate with, or acquire any interest in, any Person or division or unit thereof or acquire or agree to acquire any assets, except for acquisitions of seismic data or equipment and software in the ordinary course of business and consistent with past practice;

(e) sell, lease, license (other than in the ordinary course of business, consistent with past practices), subject to a Lien (other than a Permitted Lien), encumber or otherwise surrender, relinquish or dispose of any assets, property or rights (including capital stock of a Company Subsidiary) except (i)pursuant to existing written contracts or commitments as listed in Section5.1 of the Company Disclosure Letter or (ii)in the ordinary course, consistent with past practice, so long as the value of all assets so disposed is not in excess of $500,000 in the aggregate;

(f) (i)make any loans, advances or capital contributions to, or otherwise make any investments in, any other Person other than (A)by the Company or any Company Subsidiary to or in the Company or any wholly-owned Company Subsidiary existing on the date of this Agreement or (B)advances to employees (provided that all such advances (1)are in the ordinary course of business consistent with past practice and (2)do not exceed $10,000 in the aggregate), (ii)(A)create, incur, guarantee or assume any Indebtedness, other than any Indebtedness created, incurred, guaranteed or assumed in an aggregate amount not exceeding $1,000,000 at any time outstanding (and excluding any such Indebtedness incurred in the ordinary course of business consistent with past practice for working capital and cash management purposes under the Credit Facilities), (B)issue or sell any debt securities or warrants or rights to acquire any debt securities, (C)guarantee any other obligations of any other Person or (D)enter into any "keep well" or other agreement to maintain the financial condition of any other Person or any other agreement having the same economic effect, or (iii)make any Capital Expenditure that, together with Capital Expenditures made to date in fiscal year 2006, would cause the aggregate amount of all Capital Expenditures during 2006 to exceed the amount of Capital Expenditures allowable under the Indenture for fiscal year 2006;

(g) materially amend or otherwise materially modify benefits under any Company Benefit Plan, materially accelerate the payment or vesting of benefits or amounts payable or to become payable under any Company Benefit Plan as currently in effect on the date hereof, fail to make any required contribution to any Company Benefit Plan, merge or transfer any Company Benefit Plan or the assets or liabilities of any Company Benefit Plan, change the sponsor of any Company Benefit Plan, or terminate or establish any Company Benefit Plan, in each case except as required by an existing agreement, plan or applicable Law or as contemplated by this Agreement;

(h) grant any increase in the compensation or benefits of directors, officers, employees, consultants, representatives or agents of the Company or any Company Subsidiary other than as required by any plan or arrangement in effect on the date hereof and payments and increases in the ordinary course of business consistent with past practice;

(i) enter into or amend or modify any change of control, severance, consulting, retention or employment agreement, plan, program or arrangement with any Senior Officer(s) or other employee(s) or consultant of the Company or any Company Subsidiary;

(j) hire or terminate the employment or contractual relationship of any officer or employee of the Company or any Company Subsidiary, as the case may be, other than hirings or terminations in the ordinary course of business consistent with past practice or that, individually and in the aggregate, would not result (i)in a material increase in the number of persons providing services to the Company and the Company Subsidiaries in all such capacities, (ii)in the case of hirings, a material increase in the aggregate payroll and other benefits costs to the Company or such Company Subsidiary (such increase to be determined, in the case of a hiring to replace an employee or other service provider in a pre-existing position based solely on the costs in excess of the costs associated with the replaced service provider), and (iii)in the case of terminations, a material liability to the Company or any of the Company Subsidiaries in excess of the costs savings, if any, directly derived from such terminations;

(k) settle or compromise any pending or threatened claims, liabilities or obligations in any action, suit, claim, litigation, proceeding, arbitration, investigation, audit or controversy (each a "Proceeding") (i)involving potential