Document:

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                                                                     EXHIBIT 4.2

                               PEOPLESUPPORT, INC.

                AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

         THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"AGREEMENT") is made and entered into as of the 12th day of April, 2000, by and
among PEOPLESUPPORT, INC., a Delaware corporation (the "COMPANY"), and the
persons identified on Schedule A, Schedule B, Schedule C, and Schedule D
attached hereto (collectively, the "INVESTORS").

                                    RECITALS

         WHEREAS, the Company previously entered into that certain Investors'
Rights Agreement dated as of August 14, 1998 by and among the Company and the
parties named therein, which was superceded by that certain Amended and Restated
Investors' Rights Agreement dated May 14, 1999 by and among the parties named
therein, which was superceded by that certain Amended and Restated Investors'
Rights Agreement dated June 30, 1999 by and among the parties named therein,
which was superceded by that certain Amended and Restated Investors' Rights
Agreement dated November 19, 1999 by and among the parties named therein
(collectively, the "PRIOR RIGHTS AGREEMENT").

         WHEREAS, the Company and the Investors named in Schedule D (the "SERIES
D INVESTORS") have entered into a Series D Preferred Stock Purchase Agreement
dated as of the date first written above pursuant to which the Company desires
to sell to such Series D Investors, and such Series D Investors desire to
purchase from the Company, shares of the Company's Series D Preferred Stock. A
condition to the Series D Investors' obligations under the Series D Agreement,
as defined below, is that the Company and the Investors enter into this
Agreement.

         WHEREAS, the Company and the Investors named in Schedule A, Schedule B
and Schedule C desire to induce the Series D Investors to purchase shares of
Series D Preferred Stock pursuant to the Series D Agreement by agreeing to the
terms and conditions set forth herein.

         WHEREAS, the Company and the Investors named in Schedule A, Schedule B
and Schedule C desire to amend and restate the Prior Rights Agreement in full as
set forth below, pursuant to Section 4.3 of the Prior Rights Agreement.

         WHEREAS, the Prior Rights Agreement permits such an amendment provided
that (a) the Company and (b) holders of at least a majority of the Registrable
Securities (as such term is defined in the Prior Rights Agreement) approve such
amendment.

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:

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                                    SECTION 1

                               Registration Rights

         1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:

         (a) "ACCEL" shall mean Accel VII L.P., Accel Internet Fund III L.P.,
and Accel Investors '99 L.P.

         (b) "BENCHMARK" shall mean Benchmark Capital Partners IV, L.P.

         (c) "CLOSING" shall mean the date of the initial sale of shares of the
Company's Series D Preferred Stock.

         (d) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

         (e) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

         (f) "HOLDER" shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with Section
1.11 hereof.

         (g) "ICP" shall mean idealab! Capital Partners I-A, LP and idealab!
Capital Partners I-B, LP.

         (h) "INITIATING HOLDERS" shall mean any Holder or Holders who in the
aggregate hold not less than fifty percent (50%) of the outstanding Registrable
Securities.

         (i) "IPO" shall mean the effective date of the first registration
statement filed by the Company under the Securities Act covering an offering of
its Common Stock to the general public.

         (j) "MAJOR INVESTORS" shall mean ICP, TMCT, Accel, Benchmark, Siebel
and Meritech.

         (k) "MERITECH" shall mean Meritech Capital Partners L.P. and Meritech
Capital Affiliates L.P.

         (1) "OTHER STOCKHOLDERS" shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.

         (m) "QUALIFIED PUBLIC OFFERING" shall mean the effective date of the
registration statement filed by the Company under the Securities Act covering an
offering of its Common Stock to the general public in which the aggregate
proceeds of such offering exceed $40 million

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at a price per share which exceeds $7.137 (as adjusted for stock dividends,
stock splits, recapitalizations and the like).

         (n) "REGISTRABLE SECURITIES" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares sold pursuant to the
Series A Agreement, the Series B Agreement, the Series C Agreement, and the
Series D Agreement, (ii) shares of Common Stock issued or issuable pursuant to
the conversion of the Shares issued upon the exercise of warrants to purchase
Series B Preferred Stock of the Company (the "SERIES B WARRANTS") or upon the
exercise of the Strategic Warrants, and (iii) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (i) and (ii) above, provided, however,
that Registrable Securities shall not include any shares of Common Stock which
have previously been registered or which have been sold to the public.

         (o) The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

         (p) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses and
fees and disbursements of counsel for the Holders (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).

         (q) "RULE 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.

         (r) "RULE 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.

         (s) "SECURITIES Act" shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

         (t) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and fees
and disbursements of counsel for any Holder (other than the as set forth in
Section 1.4 below).

         (u) "SERIES A AGREEMENT" shall mean the Series A Preferred Stock
Purchase Agreement dated as of August 14, 1998 between the Company and the
parties named therein.

         (v) "SERIES B AGREEMENT" shall mean that certain Series B Preferred
Stock Purchase Agreement dated May 14, 1999 by and among the Company and the
parties named therein, as

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superceded by that certain Amended and Restated Series B Preferred Stock
Purchase Agreement dated June 28,1999 by and among the Company and the parties
named therein.

         (w) "SERIES C AGREEMENT" shall mean that certain Series C Preferred
Stock Purchase Agreement dated November 19,1999 by and among the Company and the
parties named therein.

         (x) "SERIES D AGREEMENT" shall mean that certain Series D Preferred
Stock Purchase Agreement dated as of the date hereof by and among the Company
and the parties named therein.

         (y) "SHARES" shall mean the Company's Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

         (z) "SIEBEL" shall mean Siebel Systems, Inc.

         (aa) "STRATEGIC WARRANTS" shall mean those certain warrants to purchase
either Common Stock or Series D Preferred Stock issued in connection with
certain strategic, vendor or customer relationships and debt financings.

         (bb) "TMCT" shall mean TMCT Ventures, L.P.

         1.2 Demand Registration.

         (a) Request for Registration. If the Company shall receive from
Initiating Holders at any time or times not earlier than six (6) months after
the effective date of the IPO, a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities with
aggregate proceeds to the Company (after deduction for underwriter's discounts
and expenses related to the issuance) of greater than $5,000,000 the Company
will:

                  (i) promptly give written notice of the proposed registration
         to all other Holders; and

                  (ii) as soon as practicable, use its best efforts to effect
         such registration (including, without limitation, filing post-effective
         amendments, appropriate qualifications under applicable blue sky or
         other state securities laws, and appropriate compliance with the
         Securities Act) and as would permit or facilitate the sale and
         distribution of all or such portion of such Registrable Securities as
         are specified in such request, together with all or such portion of the
         Registrable Securities of any Holder or Holders joining in such request
         as are specified in a written request received by the Company within
         twenty (20) days after such written notice from the Company is mailed
         or delivered.

         (b) Limitations. The Company shall not be obligated to effect, or to
take any action to effect, any such registration pursuant to this Section 1.2:

                  (i) In any particular jurisdiction in which the Company would
         be required to execute a general consent to service of process in
         effecting such registration,

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         qualification, or compliance, unless the Company is already subject to
         service in such jurisdiction and except as may be required by the
         Securities Act;

                  (ii) After the Company has initiated two such registrations
         pursuant to this Section 1.2(a) (counting for these purposes only (i)
         registrations which have been declared or ordered effective and
         pursuant to which the Holders are able to sell at least fifty percent
         (50%) of the Registrable Securities sought to be included in such
         registration and (ii) registrations which have been withdrawn by the
         Holders as to which the Holders have not elected to bear the
         Registration Expenses pursuant to Section 1.4 hereof and would, absent
         such election, have been required to bear such expenses);

                  (iii) During the period starting with the date sixty (60) days
         prior to the Company's good faith estimate of the date of filing of,
         and ending on a date one hundred eighty (180) days (or in the case of a
         second or any subsequent Company-initiated registered offering of the
         Company's securities to the general public, ninety (90) days) after the
         effective date of, a Company-initiated registration; provided that the
         Company is actively employing in good faith all reasonable efforts to
         cause such registration statement to become effective;

                  (iv) If the Initiating Holders propose to dispose of shares of
         Registrable Securities which may be immediately registered on Form S-3
         pursuant to a request made under Section 1.5 hereof;

                  (v) If the Initiating Holders do not request that such
         offering be firmly underwritten by underwriters selected by the
         Initiating Holders (subject to the consent of the Company, which
         consent will not be unreasonably withheld); or

                  (vi) If the Company and the Initiating Holders are unable to
         obtain the commitment of the underwriter described in clause (v) above
         to firmly underwrite the offer.

         (c) Deferral Right. Subject to the foregoing clauses (i) through (vi)
of Section l(b) above, the Company shall file a registration statement covering
the Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders; provided,
however, that if (i) in the good faith judgment of the Board of Directors of the
Company, such registration would be seriously detrimental to the Company and the
Board of Directors of the Company concludes, as a result, that it is essential
to defer the filing of such registration statement at such time, and (ii) the
Company shall furnish to such Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company for such
registration statement to be filed in the near future and that it is, therefore,
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for the period during which such
disclosure would be seriously detrimental, provided that (except as provided in
Section l(b)(iii) above) the Company may not defer the filing for a period of
more than one hundred eighty (180) days after receipt of the request of the

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Initiating Holders and, provided further, that the Company shall not defer its
obligation in this manner more than once in any twelve (12) month period.

         (d) Inclusion of Company Securities. The registration statement filed
pursuant to the request of the Initiating Holders may, subject to the provisions
of Sections 1.2(c) and 1.13 hereof, include other securities of the Company,
with respect to which registration rights have been granted; provided, however,
that in the event the Company includes securities being sold for the account of
the Company, such registration shall count as a registration pursuant to Section
1.3 and shall not count as a registration pursuant to this Section 1.2.

         (e) Underwriting. The right of any Holder to registration pursuant to
Section 1.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.

         (f) Procedures. If other persons shall request inclusion in any
registration pursuant to Section 1.2, the Initiating Holders shall, on behalf of
all Holders, offer to include such securities in the underwriting and may
condition such offer on their acceptance of the further applicable provisions of
this Section 1 (including Section 1.12). The Company shall (together with all
Holders and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Initiating Holders, which underwriters are
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 1.2, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 1.13
hereof. If a person who has requested inclusion in such registration as provided
above does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or the
Initiating Holders. The securities so excluded shall also be withdrawn from
registration. Any Registrable Securities or other securities excluded shall also
be withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
1.2(f), then the Company shall offer to all Holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among such Holders
requesting additional inclusion in accordance with Section 1.13.

         1.3 Company Registration.

         (a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights (other than pursuant to
Section 1.2 or 1.5 hereof), other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Rule 145

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transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:

                  (i) promptly give to each Holder written notice thereof; and

                  (ii) use its best efforts to include in such registration (and
         any related qualification under blue sky laws or other compliance),
         except as set forth in Section 1.3(b) below, and in any underwriting
         involved therein, all the Registrable Securities specified in a written
         request or requests, made by any Holder and received by the Company
         within twenty (20) days after the written notice from the Company
         described in clause (i) above is delivered by the Company. Such written
         request may specify all or a part of a Holder's Registrable Securities.

         (b) UNDERWRITING. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
1.3(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 1.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company.

         (c) UNDERWRITERS CUTBACK. Notwithstanding any other provision of this
Section 1.3, if the representative of the underwriters advises the Company in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. If
the registration is the first Company-initiated registered offering of the
Company's securities to the general public, the Company may limit, to the extent
so advised by the underwriters, the amount of securities (including Registrable
Securities) to be included in the registration by the Company's stock holders
(including the Holders), or may exclude, to the extent so advised by the
underwriters, such underwritten securities entirely from such registration. If
such registration is the second or any subsequent Company-initiated registered
offering of the Company's securities to the general public, the Company may
limit, to the extent so advised by the underwriters, the amount of securities to
be included in the registration by the Company's stockholders (including the
Holders); provided, however, that the aggregate value of securities (including
Registrable Securities) to be included in such registration by the Company's
stockholders (including the Holders) may not be so reduced to less than twenty
percent (20%) of the total value of all securities included in such
registration. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for its own account and thereafter as set
forth in Section 1.13. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.

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         If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.13 hereof.

         1.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.2,1.3 and 1.5 hereof, and the reasonable fees and expenses of one
counsel for the selling stockholders (up to an aggregate of $15,000 per
registration) in the case of the first two registrations pursuant to Section 1.5
hereof, shall be borne by the Company; provided, however, that if the Holders
bear the Registration Expenses for any registration proceeding begun pursuant to
Section 1.2 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2 hereof, except in the event that such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 1.2, in which event such
registration shall not be treated as a counted registration for purposes of
Section 1.2 hereof, even though the Holders do not bear the Registration
Expenses for such registration. All Selling Expenses relating to securities so
registered shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered on their behalf.

         1.5 Registration on Form S-3.

         (a) After its initial public offering, the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 1,
the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders); provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $1,000,000, or (ii) in the event that the Company
shall furnish the certification described in para graph 1.2(c) (but subject to
the limitations set forth therein) or (iii) in a given twelve (12) month period,
after the Company has effected one (1) such registration in any such period, or
(iv) it is to be effected more than four (4) years after a Qualified Public
Offering.

         (b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and
(ii), 1.2(b) and Section 1.2(c) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Sections 1.2(e)
and 1.2(f) hereof shall apply to such registration.

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         1.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 1, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:

         (a) Keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such one hundred twenty (120) day period
shall be extended for a period of time equal to the period the Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such one hundred twenty
(120) day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and provided further that applicable
rules under the Securities Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment that (I) includes
any prospectus required by Section 10(a)(3) of the Securities Act or (II)
reflects facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation by
reference of information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement;

         (b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;

         (c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a Holder
from time to time may reasonably request;

         (d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;

         (e) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed;

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         (f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and

         (g) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.

         1.7 Indemnification.

         (a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred, as incurred, in connection with
investigating and defending or settling any such claim, loss, damage, liability,
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability, or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 1.7(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent has not been
unreasonably withheld).

         (b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or Other Stockholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on

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any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Stockholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld). Notwithstanding the foregoing, in no event shall
the liability of a Holder hereunder exceed the aggregate amount of proceeds
received by such Holder in the offering to which such registration statement
relates.

         (c) Each party entitled to indemnification under this Section 1.7 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.

         (d) If the indemnification provided for in this Section 1.7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied

                                       11

<PAGE>

by the Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, in no event shall the
liability of a Holder hereunder exceed the aggregate amount of proceeds received
by such Holder in the offering to which such registration statement relates.

         (e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.

         1.8 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.

         1.9 Limitations on Registration of Issues of Securities. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder.

         1.10 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to use its best efforts to:

         (a) Make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ninety (90) days following the effective date of the
first registration under the Securities Act filed by the Company for an offering
of its securities to the general public;

         (b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;

         (c) So long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.

         1.11 Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 1 may be transferred or assigned by a Holder only to a transferee or
assignee (a "QUALIFIED TRANSFEREE") who

                                       12

<PAGE>

acquires at least twenty-five percent (25%) of any Investor's initial
Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like), provided that the Company is given written notice at the time of or
within a reasonable time after such transfer or assignment, stating the name and
address of the Qualified Transferee and identifying the securities with respect
to which such registration rights are being transferred or assigned, and,
provided further, that the Qualified Transferee of such rights assumes the
obligations of such Holder under this Section 1.

         1.12 "Market Stand-Off" Agreement. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Holder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the
registration) during the one hundred eighty (180) day period following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that such agreement shall only apply to the first such
registration statement of the Company, including securities to be sold on its
behalf to the public in an underwritten offering. In any such offering, the
Company shall use its best efforts to ensure that each officer, director, and
holder of one percent (1%) or more of the outstanding shares of Common Stock of
the Company agrees to comply with the obligations described in this Section
1.12. Any discretionary waiver or termination by the underwriters and the
Company of the restrictions of this Section 1.12 or of any similar agreement
shall apply to all Investors, and the aggregate amount of securities with
respect to which such restrictions are waived or terminated shall be apportioned
among all such persons and the Investors in a pro-rata manner based on the
amount of securities subject to such agreements.

         The obligations described in this Section 1.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-l or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such one hundred eighty (180) day
period.

         1.13 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated, first, among the Holders requesting inclusion of Registrable
Securities pro rata on the basis of the number of shares of Registrable
Securities that would be held by such Holders, assuming conversion, and, second,
among the other selling stockholders requesting inclusion of Other Shares pro
rata on the basis of the number of Other Shares that would be held by such other
selling stockholders, assuming conversion; provided, however, so that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, if any Holder
or other selling stockholder does not request inclusion of the maximum number of
shares of Registrable Securities and Other Shares allocated to him pursuant to
the above-described procedure, the

                                       13

<PAGE>

remaining portion of his allocation shall be reallocated among those requesting
Holders and other selling stockholders whose allocations did not satisfy their
requests pro rata on the basis of the number of shares of Registrable Securities
and Other Shares which would be held by such Holders and other selling
stockholders, assuming conversion, and this procedure shall be repeated until
all of the shares of Registrable Securities and Other Shares which may be
included in the registration on behalf of the Holders and other selling
stockholders have been so allocated. The Company shall not limit the number of
Registrable Securities to be included in a registration pursuant to this
Agreement in order to include shares held by stockholders with no registration
rights or to include founder's stock or any other shares of stock issued to
employees, officers, directors, or consultants pursuant to the Company's 1998
Incentive Stock Plan, or with respect to registrations under Sections 1.2 or 1.5
hereof, in order to include in such registration securities registered for the
Company's own account.

         1.14 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.

         1.15 Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to Section 1.2,
1.3 or 1.5 shall be suspended upon such date after the closing of the IPO as all
shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during any ninety (90) day
period, and shall terminate in their entirety four (4) years after the closing
of the Qualified Public Offering.

                                    SECTION 2

                            Covenants of the Company

         2.1 Basic Financial Information.

         (a) Subject to Section 2.1 (b) below, the Company will furnish the
following reports to each Holder:

                  (i) As soon as practicable after the end of each fiscal year
         of the Company, and in any event within ninety (90) days thereafter, an
         audited consolidated balance sheet of the Company and its subsidiaries,
         if any, as at the end of such fiscal year, and audited consolidated
         statements of income and cash flows of the Company and its
         subsidiaries, if any, for such year, prepared in accordance with
         generally accepted accounting principles consistently applied and
         setting forth in each case in comparative form the figures for the
         previous fiscal year, all in reasonable detail.

                  (ii) As soon as practicable after the end of the first,
         second, and third quarterly accounting periods in each fiscal year of
         the Company, and in any event within forty-five (45) days thereafter, a
         consolidated balance sheet of the Company and its subsidiaries, if any,
         as of the end of each such quarterly period, and consolidated
         statements of income and cash flows of the Company and its

                                       14

<PAGE>

         subsidiaries for such period and for the current fiscal year to date,
         prepared in accordance with generally accepted accounting principles
         consistently applied and setting forth in comparative form the figures
         for the corresponding periods of the previous fiscal year, all in
         reasonable detail, except that such financial statements need not
         contain the notes required by generally accepted accounting principles.

                  (iii) As soon as practicable before the beginning of each
         fiscal year, and in any event no later than thirty (30) days prior to
         each fiscal year, a plan of the Company's annual operating budget for
         the approaching fiscal year.

                  (iv) To the extent available, monthly unaudited financial
         statements (including income statements, balance sheets, cash flow
         statements and summaries of bookings), annual and long-term budgets and
         other customary information such as reports of adverse developments,
         management letters, communications with stockholders, press releases
         and registration statements.

                  (v) From the date the Company becomes subject to the reporting
         requirements of the Exchange Act (which shall include any successor
         federal statute), and in lieu of the financial information required
         pursuant to Section 2.1 (a) hereof, copies of its annual reports on
         Form 10-K and its quarterly reports on Form 10-Q.

         (b) The rights of any Holder pursuant to Section 2.1 (a) above shall
terminate on the date such Holder owns less than thirty-three percent (33%) of
such Holder's initial Registrable Securities (as presently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits and the like).

         2.2 Board of Directors. The Board of Directors of the Company shall
consist of seven (7) members and shall meet a minimum of eight (8) times per
year. Three (3) directors shall be nominated by the holders of Common Stock, one
(1) director shall be nominated by the holders of the Series A Preferred Stock,
two (2) directors shall be nominated by the holders of the Series B Preferred
Stock, and one (1) director shall be nominated by the holders of the Series C
Preferred Stock. The covenants set forth in this Section 2.2 shall terminate
upon the closing of a Qualified Public Offering or, with respect to the rights
hereunder of holders of the Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock, upon the prior conversion of all shares of such
Series into Common Stock.

         2.3 Right of First Refusal. The Company hereby grants to each Major
Investor who owns any Shares or shares of Common Stock issued upon conversion of
such Shares the right of first refusal to purchase a pro rata share of New
Securities (as defined in this Section 2.3) which the Company may, from time to
time, propose to sell and issue. A Major Investor's pro rata share, for purposes
of this right of first refusal, is the ratio of the number of shares of Common
Stock owned by such Major Investor immediately following the effective date of
this Agreement and the closing of the Series D Agreement, assuming full
conversion of the Shares then owned by such Major Investor, to the total number
of shares of Common Stock outstanding immediately following the effective date
of this Agreement and the closing of the Series D Agreement, assuming full
conversion of the Shares and exercise of all outstanding rights, options and

                                       15

<PAGE>

warrants to acquire Common Stock of the Company. This right of first refusal
shall be subject to the following provisions:

         (a) "NEW SECURITIES" shall mean any capital stock (including Common
Stock and/or Preferred Stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase such capital stock, and securities of
any type whatsoever that are, or may become, convertible into capital stock;
provided that the term "New Securities" does not include (i) securities
purchased under the Series A Agreement, the Series B Agreement, the Series C
Agreement, and the Series D Agreement; (ii) securities issued upon conversion of
the Shares or exercise of the Series B Warrants or the Strategic Warrants; (iii)
securities issued pursuant to the acquisition of another business entity or
business segment of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the Company will
own more than fifty percent (50%) of the voting power of such business entity or
business segment of any such entity; (iv) any borrowings, direct or indirect,
from financial institutions or other persons by the Company, whether or not
presently authorized, including any type of loan or payment evidenced by any
type of debt instrument, provided such borrowings do not have any equity
features including warrants, options or other rights to purchase capital stock
and are not convertible into capital stock of the Company; (v) securities issued
to employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
approved by the Board of Directors; (vi) securities issued to vendors or
customers or to other persons in similar commercial situations with the Company
if such issuance is approved by the Board of Directors and Meritech; (vii)
securities issued in connection with obtaining lease financing, whether issued
to a lessor, guarantor or other person; (viii) securities issued in a public
offering pursuant to a registration under the Securities Act; (ix) securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company; and (x) any right, option or warrant to acquire any security
convertible into the securities excluded from the definition of New Securities
pursuant to subsections (i) through (ix) above.

         (b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Major Investor written notice of its intention,
describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. Each Major Investor shall
have ten (10) days after any such notice is delivered to agree to purchase such
Major Investor's pro rata share of such New Securities for the price and upon
the terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.

         (c) In the event that a Major Investor does not subscribe for the
entirety of its pro rata share of New Securities, the Company shall give each
Major Investor who subscribed for its full pro rata share of the New Securities
(the "SUBSCRIBING INVESTOR") written notice of the quantity of the remaining New
Securities available for reallocation among the Subscribing Investors and the
number of the remaining New Securities that are purchasable by each Subscribing
Investor participating in the reallocation. The reallocation of the remaining
New Securities shall take place at the same price and upon the same terms as
those stated in the initial notice of the Company's intention to issue the New
Securities. Each Subscribing Investor shall have five (5) days after such notice
is delivered to agree to purchase up to such Subscribing Investor's pro rata
share of the remaining New Securities. For the purposes of this reallocation,
pro rata share is to

                                       16

<PAGE>

be determined only amongst those Subscribing Investors participating in the
reallocation. The Company shall only be required to effect one (1) reallocation
of the remaining New Securities.

         (d) In the event the Major Investors fail to exercise fully the right
of first refusal within such ten (10) day period, the Company shall have sixty
(60) days thereafter to sell or enter into an agreement (pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within one
hundred twenty (120) days from the date of such agreement) to sell the New
Securities respecting which the Major Investors' right of first refusal option
set forth in this Section 2.3 was not exercised, at a price and upon terms no
more favorable to the purchasers thereof than specified in the Company's notice
to Major Investors pursuant to Section 2.3(b). In the event the Company has not
sold within such one hundred twenty (120) day period or entered into an
agreement to sell the New Securities in accordance with the foregoing within one
hundred twenty (120) days from the date of such agreement, the Company shall not
thereafter issue or sell any New Securities, without first again offering such
securities to the Major Investors in the manner provided in Section 2.3(b)
above.

         (e) The right of first refusal granted under this Agreement shall
expire upon, and shall not be applicable to, the first sale of Common Stock of
the Company pursuant to a Qualified Public Offering.

         (f) The right of first refusal set forth in this Section 2.3 may not be
assigned or transferred, except that (i) such right is assignable by each Major
Investor to any wholly owned subsidiary or parent of, or to any corporation or
entity that is, within the meaning of the Securities Act, controlling,
controlled by or under common control with, any such Major Investor, and (ii)
such right is assignable between the Major Investors and any entities controlled
by such Major Investors.

         2.4 Compensation Committee. The Company shall create and maintain a
Compensation Committee of the Board of Directors, a majority of the members of
which shall be outside directors of the Company, which shall, among other
duties, review and approve the annual compensation paid to the executive
officers of the Company.

         2.5 Location of Business. The Company shall maintain its corporate
headquarters in the Los Angeles metropolitan area.

                                     SECTION

                         Restrictions on Transferability

         3.1 Restrictions on Transferability. The Registrable Securities and any
other securities issued in respect of the Registrable Securities upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. Each Investor shall cause any
proposed purchaser, assignee, transferee, or pledgee of any such shares held by
the Investors (the "TRANSFEREE") that is not a party to this Agreement to
execute and deliver to the Secretary of the Company an agreement (the
"ASSUMPTION AGREEMENT") or similar obligation, pursuant to which

                                       17

<PAGE>

such Transferee shall agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.

         3.2 RESTRICTIVE LEGENDS. Each certificate representing the Registrable
Securities and any other securities issued in respect of the Registrable
Securities upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 3.3 below) be stamped or otherwise imprinted with
appropriate restrictive legends. Each Investor and/or Holder consents to the
Company making a notation on its records and giving instructions to any transfer
agent of the Preferred Stock or the Common Stock in order to implement the
restrictions on transfer established in this Agreement.

         3.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Registrable Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 3.3. Prior to any proposed
sale, assignment, transfer or pledge (each, a "TRANSFER") of any such
Registrable Securities (other than (a) a transfer not involving a change in
beneficial ownership, (b) in transactions involving the distribution without
consideration of Registrable Securities by the Investor to any of its direct or
indirect members, partners, retired members or retired partners, to a
partnership of which such Investor is a genera] partner, or to the estate of any
of its direct or indirect members, partners, retired members or retired
partners, (c) in transactions involving the transfer without consideration of
Registrable Securities by the Investor during his lifetime by way of gift or on
death by will or intestacy, (d) in transactions involving the transfer or
distribution of Registrable Securities by a corporation, limited partnership or
limited liability company to any subsidiary, parent or affiliated corporation,
limited partnership or limited liability company of such corporation, limited
partnership or limited liability company, or (e) in transactions in compliance
with Rule 144), unless there is in effect a registration statement under the
Securities Act covering the proposed Transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
Transfer. Each such notice shall describe the manner and circumstances of the
proposed Transfer in sufficient detail, and shall be accompanied, at such
Holder's expense by either (i) an unqualified written opinion of legal counsel
who shall be, and whose legal opinion shall be, reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed Transfer of
the Registrable Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the Transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Registrable Securities shall be entitled
to transfer such Registrable Securities in accordance with the terms of the
notice delivered by the Holder to the Company.

         Not later than fifteen (15) days following the date of any Transfer as
to which prior notice is not required pursuant to this Section 3, the transferor
of the Registrable Securities shall deliver to the Secretary of the Company
written notification of such Transfer setting forth the name of the transferor,
name and address of the transferee and the number of Registrable Securities
which have been so transferred.

         Each certificate evidencing the Registrable Securities transferred as
above provided shall bear, except if such Transfer is made pursuant to Rule 144,
the appropriate restrictive legends, except that such certificate shall not bear
such restrictive legend if, in the opinion of counsel for

                                       18

<PAGE>

such holder and the Company, such legends are not required in order to establish
compliance with any provision of the Securities Act.

                                    SECTION 4

                                  Miscellaneous

         4.1 Governing law. This Agreement shall be governed in all respects by
the laws of the State of California, as if entered into by and between
California residents exclusively for performance entirely within California.

         4.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

         4.3 Entire Agreement; Amendment; Waiver. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and
supercedes in their entirety the Prior Rights Agreements. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the holders of at least a
majority of the Registrable Securities and any such amendment, waiver, discharge
or termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased or the rights of any
Holder hereunder be materially decreased, except upon the written consent of
such Holder.

         4.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated on the signature
page to this Agreement, or at such other address as such holder or permitted
assignee shall have furnished to the Company in writing, or (b) if to the
Company, to Legal Department, PeopleSupport, Inc., 1575 Westwood Blvd., Los
Angeles, CA 90024 with a copy to Robert Haymer, Esq., O'Melveny & Myers, LLP,
1999 Avenue of the Stars, Suite 700, Los Angeles, California, 90067, or at such
other address as the Company shall have furnished to each holder in writing. All
such notices and other written communications shall be effective (i) if mailed,
five (5) days after mailing and (ii) if delivered, upon delivery.

         4.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.

                                       19

<PAGE>

         4.6 Rights; Separability. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

         4.7 Information Confidential. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys and other professional advisors), except in
connection with the exercise of rights under this Agreement, unless the Company
has made such information available to the public generally or such Holder is
required to disclose such information by a governmental body.

         4.8 Termination. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall terminate in its entirety upon the occurrence of
(a) any acquisition of the Company by means of merger or other form of corporate
reorganization in which the stockholders of the Company prior to such merger or
reorganization own less than fifty percent (50%) of the outstanding voting power
of the surviving corporation or acquiring entity or (b) a sale of all or
substantially all of the assets of the Company.

         4.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

         4.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

                                       20

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investors' Rights Agreement effective as of the day and year first
above written.

                                   THE COMPANY

                                                 PEOPLESUPPORT, INC.

                                                 By: /s/ Lance Rosenzweig
                                                     ---------------------------
                                                 Title:
                                                       -------------------------
                 [Signature Page to Investors Rights Agreement]
<PAGE>

                     INVESTORS

                           MERITECH CAPITAL PARTNERS L.P.

                               By: Meritech Capital Associates L.L.C.
                               Its: General Partner

                               By: Meritech  Management Associates L.L.C.
                               Its: Managing Member

                               By: /s/ Paul S. Madera
                                  ---------------------------------------------
                               Printed Name: Paul S. Madera
                               Title: Managing Member
                               Address: 90 Middlefield Road, Suite 201
                                        Menlo Park,CA 94025

                           MERITECH CAPITAL AFFILIATES L.P.

                               By: Meritech Capital Associates L.L.C.
                               Its: General Partner

                               By: Meritech Management Associates L.L.C.
                               Its: Managing Member

                               By: /s/ Paul S. Madera
                                   ---------------------------------------------
                               Printed Name: Paul S. Madera
                               Title: Managing Member
                               Address: 90 Middlefield Road, Suite 201
                                        Menlo Park, CA 94025

                           CDB WEB TECH INTERNATIONAL S.A.

                               By: _____________________________________________
                               Printed name: ___________________________________
                               Title: __________________________________________
                               Address: 3 Place Dargent
                                        Luxembourg B.P. 916
                                        L 2019 Luxembourg

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                     INVESTORS

                           MERITECH CAPITAL PARTNERS L.P.

                               By: Meritech Capital Associates L.L.C.
                               Its: General Partner

                               By: Meritech  Management Associates L.L.C.
                               Its: Managing Member

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 90 Middlefield Road, Suite 201
                                        Menlo Park,CA 94025

                           MERITECH CAPITAL AFFILIATES L.P.

                               By: Meritech Capital Associates L.L.C.
                               Its: General Partner

                               By: Meritech Management Associates L.L.C.
                               Its: Managing Member

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 90 Middlefield Road, Suite 201
                                        Menlo Park, CA 94025

                           CDB WEB TECH INTERNATIONAL S.A.

                               By: /s/ CARLO DE BENEDETTI
                                  ----------------------------------------------
                               Printed name: CARLO DE BENEDETTI
                               Title: CHAIRMAN
                               Address: 3 Place Dargent
                                        Luxembourg B.P. 916
                                        L 2019 Luxembourg

                 [Signature Page to Investors Rights Agreement]
<PAGE>

                           CAMBRIDGE TECHNOLOGY CAPITAL FUND I, L.P.

                               By: Cambridge Technology GPLP, L.P.
                               By: Cambridge Technology CGP, Inc.

                               By: /s/ Barry Rosenbaum
                                   ---------------------------------------------
                               Printed Name: Barry Rosenbaum
                               Title: Managing Director
                               Address: 11512 El Camion Real, Suite 215
                                        San Diego, CA 92130

                           CAMBRIDGE TECHNOLOGY PARTNERS
                           (MASSACHUSETTS), INC.

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 8 Cambridge Center
                                        Cambridge, MA 02142

                           CAMELOT VENTURES, LLC

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 100 Galleria Officentre, Suite 427
                                        Southfield, MI 48034

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                           CAMBRIDGE TECHNOLOGY CAPITAL FUND I, L.P.

                               By: Cambridge Technology GPLP, L.P.
                               By: Cambridge Technology CGP, Inc.

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 8 Cambridge Center
                                        Cambridge, MA 02142

                           CAMBRIDGE TECHNOLOGY PARTNERS
                           (MASSACHUSETTS), INC.

                               By: /s/ Ralph T. Linslata
                                   ---------------------------------------------
                               Printed Name:  Ralph T. Linslata
                               Title: Executive VP
                               Address: 8 Cambridge Center
                                        Cambridge, MA 02142

                           CAMELOT VENTURES, LLC

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 100 Galleria Officentre, Suite 427
                                        Southfield, MI 48034

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                           CAMBRIDGE TECHNOLOGY CAPITAL FUND I, L.P.

                               By: Cambridge Technology GPLP, L.P.
                               By: Cambridge Technology CGP, Inc.

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 8 Cambridge Center
                                        Cambridge, MA 02142

                           CAMBRIDGE TECHNOLOGY PARTNERS
                           (MASSACHUSETTS), INC.

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 8 Cambridge Center
                                        Cambridge, MA 02142

                           CAMELOT VENTURES, LLC

                               By: /s/ David Katzman
                                   ---------------------------------------------
                               Printed Name: David Katzman
                               Title: VP
                               Address: 100 Galleria Officentre, Suite 427
                                        Southfield, MI 48034

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                           OCTANE CAPITAL FUND I, L.P.

                               By: Octane Capital Management, LLC,
                               Its: General Partner

                               By: /s/ Emeric J McDonald
                                   ---------------------------------------------
                               Printed Name: Emeric J McDonald
                               Title: Manager
                               Address: One Maritime Plaza, Suite 2555
                                        San Francisco, CA 94111

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                           EVO CAPITAL FUND I, L.P.

                               By: EVO Capital, LLC,
                               Its: General Partner

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: One Maritime Plaza, Suite 2555
                                        San Francisco, CA 94111

                           ACON VENTURE PARTNERS L.P.

                               By: ACON Venture Partners L.L.C.
                               Its: General Partner

                               By: /s/ Jonathan J. Ginns
                                   ---------------------------------------------
                               Printed Name: Jonathan J. Ginns
                               Title: __________________________________________
                               Address: 201 Main Street, Suite 2420
                                        Fort Worth, TX 76102

                           LANSDOWNE CAPITAL PARTNERS L.L.C.

                               By: Lansdowne Capital Partners L.L.C.
                               Its: Nominee

                               By: _____________________________________________
                               Printed Name: ___________________________________
                               Title: __________________________________________
                               Address: 1045 Fifth Avenue, 5th Floor
                                        New York, NY 10028

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       EVO CAPITAL FUND I, L.P.

                           By: EVO Capital, LLC,
                           Its: General Partner

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: One Maritime Plaza, Suite 2555
                                    San Francisco, CA 94111

                       ACON VENTURE PARTNERS L.P.

                           By: ACON Venture Partners L.L.C.
                           Its: General Partner

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 201 Main Street, Suite 2420
                                    Fort Worth, TX 76102

                       LANSDOWNE CAPITAL PARTNERS L.L.C.

                           By: Lansdowne Capital Partners L.L.C.
                           Its: Nominee

                           By: /s/ William Reid
                               ---------------------------------------------
                           Printed Name:  William Reid
                           Title: Senior Partner
                           Address: 1045 Fifth Avenue, 5th Floor
                                    New York, NY 10028

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       THE EXTRAPRISE GROUP

                           By: /s/ Kenneth E. Marshall
                               ---------------------------------------------
                           Printed Name:  Kenneth E. Marshall
                           Title: Chairman & CEO.
                           Address: 27 Melcher Street
                                    Boston, MA 02210

                       HEWLETT PACKARD

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 1421 S. Manhattan Avenue
                                    MS 48
                                    Fullerton, CA 92831

                       RARE MEDIUM GROUP, INC.

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 4081 Redwood Avenue
                                    Los Angeles, CA 90066

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       HEWLETT-PACKARD COMPANY

                           By: /s/ Craig White
                               ---------------------------------------------
                           Printed Name: Craig White
                           Title: Sr. Vice President - Finance & Complements
                           Address:   333 Logue Avenue
                                      MS 32
                                      Mountain Valley, CA 94043
                           Attention: Craig White

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       SIEBEL SYSTEMS, INC.

                           By: /s/ Howard H. Graham
                               ---------------------------------------------
                           Printed Name:  Howard H. Graham
                           Title: Sr. Vice President, Finance and
                                  Administration, and Chief Financial Officer
                           Address: 1855 South Grant St.
                                    San Maeo, CA 94402-2667

                       VIANT CORPORATION

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 89 South Street, 2nd floor
                                    Boston, MA 02111

                       GC&H INVESTMENTS

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 3000 El Camino Real
                                    Five Palo Alto Square
                                    Palo Alto, CA 94306

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       SIEBEL SYSTEMS, INC.

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 1855 South Grant St.
                                    San Maeo, CA 94402-2667

                       VIANT CORPORATION

                           By: /s/ Michael J. Tubridy
                               ---------------------------------------------
                           Printed Name:  Michael J. Tubridy
                           Title: Vice President Finance
                           Address: 89 South Street, 2nd floor
                                    Boston, MA 02111

                       GC&H INVESTMENTS

                           By: _____________________________________________
                           Printed Name: __________________________________
                           Title: __________________________________________
                           Address: 3000 El Camino Real
                                    Five Palo Alto Square
                                    Palo Alto, CA 94306

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       SIEBEL SYSTEMS, INC.

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 1855 South Grant St.
                                    San Maeo, CA 94402-2667

                       VIANT CORPORATION

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 89 South Street, 2nd floor
                                    Boston, MA 02111

                       GC&H INVESTMENTS

                           By: /s/ John L. Cardoza
                               ---------------------------------------------
                           Printed Name:  John L. Cardoza
                           Title: Executive Partner
                           Address: One Maritime Plaza, #2000
                                    San Francisco, CA 94111

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       O'MELVENY & MYERS LLP

                           By: /s/ Robert Haymer
                               ---------------------------------------------
                           Printed Name: Robert Haymer
                           Title: Partner
                           Address: 1999 Avenue of the Stars
                                    Suite 700
                                    Los Angeles, CA 90067

                       IDEALAB! CAPITAL PARTNERS I-A, L.P.

                           By: idealab! Capital Management I, LLC,
                           Its: General Partner

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 130 West Union Street
                                    Pasadena, CA 91103

                       IDEALAB! CAPITAL PARTNERS I-B, L.P.

                           By: idealab! Capital Management I, LLC,
                           Its: General Partner

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 130 West Union Street
                                    Pasadena, CA 91103

                 [Signature Page to Investors Rights Agreement]

<PAGE>

                       O'MELVENY & MYERS LLP

                           By: _____________________________________________
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 1999 Avenue of the Stars
                                    Suite 700
                                    Los Angeles, CA 90067

                       IDEALAB! CAPITAL PARTNERS I-A, L.P.

                           By: idealab! Capital Management I, LLC,
                           Its: General Partner

                           By:  /s/ William S Elkuf
                               ---------------------------------------------
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 130 West Union Street
                                    Pasadena, CA 91103

                       IDEALAB! CAPITAL PARTNERS I-B, L.P.

                           By: idealab! Capital Management I, LLC,
                           Its: General Partner

                           By: /s/ William S Elkuf
                               ---------------------------------------------
                           Printed Name: ___________________________________
                           Title: __________________________________________
                           Address: 130 West Union Street
                                    Pasadena, CA 91103
<PAGE>

                                     TMCT VENTURES, L.P.
                                     Under management by Rustic Canyon Partners,
                                     LLC

                                         By: /s/ Michael Song
                                             ----------------------------
                                         Printed Name: Michael Song
                                         Title: Partner
                                         Address: c/o Michael Song
                                                  2425 Olympic Boulevard
                                                  Suite 6050 West
                                                  Santa Monica, CA 90404

                                     ACCEL VII L.P.

                                         By: Accel VII Associates L.L.C.
                                         Its: General Partner

                                         By:
                                            -----------------------------
                                         Printed Name:
                                                      -------------------
                                         Title:
                                               --------------------------
                                         Address: 428 University Ave.
                                                  Palo Alto, CA 94301
                                                  Attn: Theresia Gouw Ranzella
                                                  650-614-4800
                                                  650-614-4880 (fax)

                                                  and

                                                  One Palmer Square
                                                  Princeton, NJ 08542
                                                  Attn: G. Carter Sednaoui
                                                  609-683-4500
                                                  609-683-0384 (fax)

<PAGE>

                                     TMCT VENTURES, L.P.
                                     Under management by Rustic Canyon Partners,
                                     LLC

                                         By:
                                            -----------------------------
                                         Printed Name:
                                                      -------------------
                                         Title:
                                               --------------------------
                                         Address: c/o Michael Song
                                                  Times Mirror Company
                                                  220 West 1st Street
                                                  Los Angeles, CA 90012

                                     ACCEL VII L.P.

                                         By: Accel VII Associates L.L.C.
                                         Its: General Partner

                                         By: /s/       [ILLEGIBLE]
                                            ---------------------------------
                                         Managing Member

                                         Address: 428 University Ave.
                                                  Palo Alto, CA 94301
                                                  Attn: Theresia Gouw Ranzetta
                                                  650-614-4800
                                                  650-614-4880 (fax)

                                                  and

                                                  One Palmer Square
                                                  Princeton, NJ 08542
                                                  Attn: G. Carter Sednaoui
                                                  609-683-4500
                                                  609-683-0384 (fax)

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                      ACCEL INTERNET FUND III L.P.

                                          By: Accel Internet Fund III
                                              Associates L.L.C.
                                          Its: General Partner

                                          By:      /s/ [ILLEGIBLE]
                                             ---------------------------------
                                          Managing Member

                                          Address: 428 University Ave.
                                                   Palo Alto, CA 94301
                                                   Attn: Theresia Gouw Ranzetta
                                                   650-614-4800
                                                   650-614-4880 (fax)

                                                   and

                                                   One Palmer Square
                                                   Princeton, NJ 08542
                                                   Attn: G. Carter Sednaoui
                                                   609-683-4500
                                                   609-683-0384 (fax)

                                      ACCEL INVESTORS '99 L.P.

                                          By:       /s/ [ILLEGIBLE]
                                             ---------------------------------
                                          General Partner

                                          Address: 428 University Ave.
                                                   Palo Alto, CA 94301
                                                   Attn: Theresia Gouw Ranzetta
                                                   650-614-4800
                                                   650-614-4880 (fax)

                                                   and

                                                   One Palmer Square
                                                   Princeton, NJ 08542
                                                   Attn: G. Carter Sednaoui
                                                   609-683-4500
                                                   609-683-0384 (fax)

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                        BENCHMARK CAPITAL PARTNERS IV, L.P.

                                            as nominee for
                                            Benchmark Capital Partners IV, L.P.
                                            Benchmark Founders' Fund IV, L.P.
                                            Benchmark Founders' Fund IV-A, L.P.
                                            and related individuals

                                            By: Benchmark Capital Management
                                                Co., IV, L.L.C.
                                            Its: general partner

                                            By: /s/ Steven M. Spurlock
                                                --------------------------------
                                            Printed Name: Steven M. Spurlock
                                            Title: Managing Member
                                            Address: 2480 Sand Hill Road, Suite
                                                     200 Menlo Park, CA 94025

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                                  /s/ Craig Ramsey
                                        ----------------------------------------
                                                      Craig Ramsey

                                        ----------------------------------------
                                                    Richard Wolpert

                                        ----------------------------------------
                                                    Michael Tubridy

                                        ----------------------------------------
                                                        Ed Mello

                                        JUMP INVESTORS II, LLC

                                            By: PBK Management Company, Inc.
                                            Its: Manager

                                        ----------------------------------------
                                                Randall Kaplan, President

                                        ----------------------------------------

                                        ----------------------------------------
                                                   John and Tina Farina

                                        ----------------------------------------
                                                        Chris Paine

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                        ----------------------------------------
                                                       Craig Ramsey

                                                  /s/ Richard Wolpert
                                        ----------------------------------------
                                                      Richard Wolpert

                                        ----------------------------------------
                                                      Michael Tubridy

                                        ----------------------------------------
                                                          Ed Mello

                                        JUMP INVESTORS II, LLC

                                            By: PBK Management Company, Inc.
                                            Its: Manager

                                        ----------------------------------------
                                                Randall Kaplan, President

                                        ----------------------------------------

                                        ----------------------------------------
                                                   John and Tina Farina

                                        ----------------------------------------
                                                        Chris Paine

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                        ----------------------------------------
                                                       Craig Ramsey

                                        ----------------------------------------
                                                      Richard Wolpert

                                                  /s/ Michael Tubridy
                                        ----------------------------------------
                                                      Michael Tubridy

                                        ----------------------------------------
                                                          Ed Mello

                                        JUMP INVESTORS II, LLC

                                            By: PBK Management Company, Inc.
                                            Its: Manager

                                        ----------------------------------------
                                                 Randall Kaplan, President

                                        ----------------------------------------

                                        ----------------------------------------
                                                   John and Tina Farina

                                        ----------------------------------------
                                                       Chris Paine

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                        ----------------------------------------
                                                       Craig Ramsey

                                        ----------------------------------------
                                                      Richard Wolpert

                                        ----------------------------------------
                                                      Michael Tubridy

                                                     /s/ Ed Mello
                                        ----------------------------------------
                                                         Ed Mello

                                        JUMP INVESTORS II, LLC

                                            By: PBK Management Company, Inc.
                                            Its: Manager

                                        ----------------------------------------
                                                 Randall Kaplan, President

                                        ----------------------------------------

                                        ----------------------------------------
                                                    John and Tina Farina

                                        ----------------------------------------
                                                        Chris Paine

<PAGE>

                                        ----------------------------------------
                                                        Craig Ramsey

                                        ----------------------------------------
                                                       Richard Wolpert

                                        ----------------------------------------
                                                       Michael Tubridy

                                        ----------------------------------------
                                                          Ed Mello

                                        JUMP INVESTORS II, LLC

                                            By: PBK Management Company, Inc.
                                            Its: Manager

                                             /s/ Randall Kaplan
                                        ----------------------------------------
                                                 Randall Kaplan, President

                                        ----------------------------------------

                                        ----------------------------------------
                                                   John and Tina Farina

                                        ----------------------------------------
                                                        Chris Paine

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                        JOHN AND TINA FARINA, not in their
                                        individual capacities but solely as
                                        Trustees of The Farina Living Trust,
                                        dated February 11,1988

                                              /s/ John Farina
                                        ----------------------------------------
                                                  John Farina, Trustee

                                              /s/ Tina Farina
                                        ----------------------------------------
                                                  Tina Farina, Trustee

                    [Signature Page to Investors Rights Agreement]

<PAGE>

                                        ----------------------------------------
                                                     Craig Ramsey

                                        ----------------------------------------
                                                    Richard Wolpert

                                        ----------------------------------------
                                                    Michael Tubridy

                                        ----------------------------------------
                                                        Ed Mello

                                        JUMP INVESTORS II, LLC

                                            By: PBK Management Company, Inc.
                                            Its: Manager

                                        ----------------------------------------
                                                Randall Kaplan, President

                                        ----------------------------------------

                                        ----------------------------------------
                                                  John and Tina Farina

                                                   /s/ Chris Paine
                                        ----------------------------------------
                                                       Chris Paine

                                               AS AN INDIVIDUAL INVESTOR

                    [Signature Page to Investors Rights Agreement]<PAGE>

                                                                    EXHIBIT 10.1

                               PEOPLESUPPORT, INC.

                           1998 STOCK INCENTIVE PLAN

                         (EFFECTIVE AS OF AUGUST 1, 1998)

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                   <C>
SECTION 1.  PURPOSE................................................     1

SECTION 2.  DEFINITIONS............................................     1
       (a)  "Board of Directors"...................................     1
       (b)  "Code".................................................     1
       (c)  "Committee"............................................     1
       (d)  "Company"..............................................     1
       (e)  "Consultant"...........................................     1
       (f)  "Disability"...........................................     1
       (g)  "Employee".............................................     1
       (h)  "Exercise Price".......................................     2
       (i)  "Fair Market Value"....................................     2
       (j)  "ISO"..................................................     2
       (k)  "Nonstatutory Option"..................................     2
       (l)  "Offeree"..............................................     2
       (m)  "Option"...............................................     2
       (n)  "Optionee".............................................     2
       (o)  "Parent"...............................................     2
       (P)  "Plan".................................................     2
       (q)  "Purchase Price".......................................     2
       (r)  "Service"..............................................     2
       (s)  "Share"................................................     2
       (t)  "Stock"................................................     2
       (u)  "Stock Option Agreement"...............................     3
       (v)  "Stock Purchase Agreement".............................     3
       (w)  "Subsidiary"...........................................     3

SECTION 3.  ADMINISTRATION.........................................     3
       (a)  Committee Membership...................................     3
       (b)  Committee Procedures...................................     3
       (c)  Committee Responsibilities.............................     4
       (d)  Financial Reports......................................     5

SECTION 4.  ELIGIBILITY............................................     5
       (a)  General Rule...........................................     5
       (b)  Ten-Percent Shareholders...............................     6
       (c)  Attribution Rules......................................     6
       (d)  Outstanding Stock......................................     6

SECTION 5.  STOCK SUBJECT TO PLAN..................................     6
       (a)  Basic Limitation.......................................     6
       (b)  Additional Shares......................................     7
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                   <C>
SECTION 6.   TERMS AND CONDITIONS OF AWARDS OR SALES...............     7
      (a)    Stock Purchase Agreement..............................     7
      (b)    Duration of Offers and Nontransferability of Rights...     7
      (c)    Purchase Price........................................     8
      (d)    Withholding Taxes ....................................     8
      (e)    Restrictions on Transfer of Shares....................     8

SECTION 7.   TERMS AND CONDITIONS OF OPTIONS.......................     8
      (a)    Stock Option Agreement................................     8
      (b)    Number of Shares......................................     9
      (c)    Exercise Price........................................     9
      (d)    Withholding Taxes ....................................     9
      (e)    Exercisability........................................     9
      (f)    Term..................................................     10
      (g)    Nontransferability....................................     10
      (h)    Exercise of Options on Termination of Service.........     10
      (i)    No Rights as a Shareholder............................     11
      (j)    Modification, Extension and Assumption of Options ....     11
      (k)    Restrictions on Transfer of Shares ...................     11

SECTION 8.   PAYMENT FOR SHARES....................................     11
      (a)    General Rule.   ......................................     11
      (b)    Surrender of Stock....................................     11
      (c)    Promissory Notes......................................     12
      (d)    Cashless Exercise.....................................     12
      (e)    Services Rendered.....................................     12

SECTION 9.   ADJUSTMENT OF SHARES..................................     12
      (a)    General...............................................     12
      (b)    Reorganizations.......................................     13
      (c)    Reservation of Rights ................................     13

SECTION 10.  LEGAL REQUIREMENTS....................................     13

SECTION 11.  NO EMPLOYMENT RIGHTS..................................     14

SECTION 12.  DURATION AND AMENDMENTS ..............................     14
      (a)    Term of the Plan......................................     14
      (b)    Right to Amend or Terminate the Plan..................     15
      (c)    Effect of Amendment or Termination....................     14

SECTION 13.  EXECUTION.............................................     15
</TABLE>

                                      -ii-

<PAGE>

                              PEOPLESUPPORT, INC.
                           1998 STOCK INCENTIVE PLAN
                      (EFFECTIVE AS OF AUGUST_______, 1998)

SECTION 1. PURPOSE.

         The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such selected persons to
remain in the employ of the Company and to attract new employees with
outstanding qualifications. The Plan provides for the direct award or sale of
Shares and for the grant of Options to purchase Shares. Options granted under
the Plan may include Nonstatutory Options as well as incentive stock options
intended to qualify under section 422 of the Internal Revenue Code.

SECTION 2. DEFINITIONS.

         (a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.

         (b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (c) "Committee" shall mean a committee consisting of members of the
Board of Directors authorized to administer the Plan under Section 3.

         (d) "Company" shall mean PeopleSupport, Inc., a Delaware corporation.

         (e) "Consultant" shall mean an individual who performs bona fide
services to the Company, a Parent or a Subsidiary as a consultant or advisor.

         (f) "Disability" shall means that an Optionee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment.

         (g) "Employee" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, or (iii) a Consultant.

                                      -1-
<PAGE>

Service as a member of the Board of Directors or as a Consultant shall be
considered employment for all purposes under the Plan except the second sentence
of Section 4(a).

         (h) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

         (i) "Fair Market Value" shall mean the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.

         (j) "ISO" shall mean an employee incentive stock option described in
Code section 422(b).

         (k) "Nonstatutory Option" or "NSO" shall mean an employee stock option
that is not an ISO.

         (l) "Offeree" shall mean an individual to whom the Committee has
offered the right to acquire Shares (other than upon exercise of an Option).

         (m) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.

         (n) "Optionee" shall mean an individual who holds an Option.

         (o) "Parent" shall have the meaning set forth in section 424(e) of the
Code.

         (p) "Plan" shall mean this PeopleSupport, Inc. 1998 Stock Incentive
Plan.

         (q) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.

         (r) "Service" shall mean service as an Employee, Non-Employee Director
or Consultant.

         (s) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).

         (t) "Stock" shall mean the common stock of the Company.

                                      -2-
<PAGE>

         (u) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.

         (v) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.

         (w) "Subsidiary" shall mean any corporation, of which the Company
and/or one or more other Subsidiaries own not less than fifty percent (50%) of
the total combined voting power of all classes of outstanding stock of such
corporation. A corporation that attains the status of a Subsidiary on a date
after the adoption of the Plan shall be considered a Subsidiary commencing as of
such date.

SECTION 3. ADMINISTRATION.

         (a) Committee Membership. The Plan shall be administered by the
Committee, which shall consist of members of the Board of Directors. The members
of the Committee shall be appointed by the Board of Directors. If no Committee
has been appointed, the entire Board of Directors shall constitute the
Committee. At such time as the directors of the Company become reporting persons
with respect to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Committee shall have a membership composition which enables the Plan
to qualify under Rule 16b-3 under the Exchange Act with regard to the grant of
options or other rights to acquire shares to persons who are subject to Section
16 of the Exchange Act.

         (b) Committee Procedures. The Board of Directors shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at

                                      -3-
<PAGE>

which a quorum exists, or acts reduced to or approved in writing by all
Committee members, shall be valid acts of the Committee.

         (c) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take the following
actions:

                  (i)      To interpret the Plan and to apply its provisions;

                  (ii)     To adopt, amend or rescind rules, procedures and
         forms relating to the Plan;

                  (iii)    To authorize any person to execute, on behalf of the
         Company, any instrument required to carry out the purposes of the Plan;

                  (iv)     To determine when Shares are to be awarded or offered
         for sale and when Options are to be granted under the Plan;

                  (v)      To select Offerees and Optionees;

                  (vi)     To determine the number of Shares to be awarded or
         offered for sale or to be made subject to each Option;

                  (vii)    To prescribe the terms and conditions of each award
         or sale of Shares, including (without limitation) the Purchase Price
         and vesting of the award, and to specify the provisions of the Stock
         Purchase Agreement relating to such award or sale;

                  (viii)   To prescribe the terms and conditions of each Option,
         including (without limitation) the Exercise Price and vesting of the
         Option, to determine whether such Option is to be classified as an ISO
         or as a Nonstatutory Option, and to specify the provisions of the Stock
         Option Agreement relating to such Option;

                  (ix)     To amend any outstanding Stock Purchase or Stock
         Option Agreement; provided, however, that the rights and obligations
         under any Stock Purchase or Stock Option Agreement shall not be
         materially altered or impaired adversely by any such amendment, except
         with the consent of the Optionee or Offeree;

                                      -4-
<PAGE>

                  (x)      To determine the disposition of an Option or other
         right to acquire Shares in the event of an Optionee's or Offeree's
         divorce or dissolution of marriage;

                  (xi)     To correct any defect, supply any omission, or
         reconcile any inconsistency in the Plan and any Stock Purchase
         Agreement or Stock Option Agreement; and

                  (xii)    To take any other actions deemed necessary or
         advisable for the administration of the Plan.

         All decisions, interpretations and other actions of the Committee shall
be final and binding on all Offerees, Optionees and all persons deriving their
rights from an Offeree or Optionee. No member of the Committee shall be liable
for any action that he or she has taken or has failed to take in good faith,
with respect to the Plan, any Option or any other right to acquire Shares under
the Plan.

         (d) Financial Reports. To the extent required by applicable law, and
not less often than annually, the Company shall furnish to Optionees, Offerees
and stockholders who have received Stock under the Plan, Company summary
financial information including a balance sheet regarding the Company's
financial condition and results of operations, unless such Optionees, Offerees
or stockholders have duties with the Company that assure them access to
equivalent information. Such financial statements need not be audited.

SECTION 4. ELIGIBILITY.

         (a) General Rule. Only Employees, as defined in Section 2(g), shall be
eligible for designation as Optionees or Offerees by the Committee. In addition,
only individuals who are employed as common-law employees by the Company or a
Subsidiary shall be eligible for the grant of ISOs.

                                      -5-
<PAGE>

         (b) Ten-Percent Shareholders. An Employee who owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for designation as an
Optionee or Offeree unless (i) the Exercise Price for an ISO (and an NSO to the
extent required by applicable law) is at least 110 percent of Fair Market Value
on the date of grant, (ii) the Purchase Price for a sale of Shares is at least
100% of Fair Market Value at the date of purchase, and (iii) in the case of an
ISO, such ISO by its terms is not exercisable after the expiration of five years
from the date of grant.

         (c) Attribution Rules. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.

         (d) Outstanding Stock. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person.

SECTION 5. STOCK SUBJECT TO PLAN.

         (a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares, or issued Shares that have been reacquired by the Company.
The aggregate number of Shares which may be issued under the Plan (upon exercise
of Options or other rights to acquire Shares) shall not exceed six million two
hundred fifteen thousand (6,215,000) Shares, subject to adjustment

                                      -6-
<PAGE>

pursuant to Section 9. The number of Shares which are subject to Options or
other rights to acquire Shares outstanding at any time under the Plan shall not
exceed the number of Shares which then remain available for issuance under the
Plan. During the term of the Plan, the Company shall at all times reserve and
keep available sufficient Shares to satisfy the requirements of the Plan.

         (b) Additional Shares. In the event that any outstanding Option or
other right to acquire Shares for any reason expires or is canceled or otherwise
terminated, the Shares allocable to the unexercised portion of such Option or
other right shall again be available for the purposes of the Plan.

SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.

         (a) Stock Purchase Agreement. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.

         (b) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within the number of days specified by the
Committee after the grant of such right was communicated to the Offeree by the
Committee. Such right shall not be transferable and shall be exercisable only by
the Offeree to whom such right was granted.

         (c) Purchase Price. To the extent required by applicable law, the
Purchase Price of Shares to be offered under the Plan shall not be less than
eighty-five percent (85%) of the Fair

                                      -7-
<PAGE>

Market Value of such Shares, except as otherwise provided in Section 4(b).
Subject to the preceding sentence, the Purchase Price shall be determined by the
Committee at its sole discretion. The Purchase Price shall be payable in a form
described in Section 8 or in the form of services previously rendered to the
Company.

         (d) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.

         (e) Restrictions on Transfer of Shares. No Shares awarded or sold under
the Plan may be sold or otherwise transferred or disposed of by the Offeree
during the one hundred eighty (180) day period following the effective date of a
registration statement covering securities of the Company filed under the
Securities Act of 1933, as amended. Subject to the preceding sentence, any
Shares awarded or sold under the Plan shall be subject to such special
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such restrictions shall be set
forth in the applicable Stock Purchase Agreement and shall apply in addition to
any general restrictions that may apply to all holders of Shares. To the extent
required by applicable law, any service-based vesting conditions shall not be
less rapid than the schedule set forth in Section 7(e).

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

         (a) Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems

                                      -8-
<PAGE>

appropriate for inclusion in a Stock Option Agreement. The provisions of the
various Stock Option Agreements entered into under the Plan need not be
identical.

         (b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.

         (c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(b). The Exercise Price of a Nonstatutory
Option shall not be less than eighty-five percent (85%) of the Fair Market Value
of a Share on the date of grant, except as otherwise provided in Section 4(b).
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee in its sole discretion. The Exercise Price
shall be payable in a form described in Section 8.

         (d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

         (e) Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of twenty percent (20%) per year

                                      -9-
<PAGE>

for each of the first five years from the date of grant. Subject to the
preceding sentence, the vesting of any Option shall be determined by the
Committee in its sole discretion.

         (f) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of grant, except
as otherwise provided in Section 4(b). Subject to the preceding sentence, the
Committee at its sole discretion shall determine when an Option is to expire.

         (g) Nontransferability. No Option shall be transferable by the Optionee
other than by will or by the laws of descent and distribution. An Option may be
exercised during the lifetime of the Optionee only by him or by his guardian or
legal representative. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.

         (h) Exercise of Options on Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment. Notwithstanding the foregoing, to the extent required
by applicable law, each Option shall provide that the Optionee shall have the
right to exercise the vested portion of any Option held at termination for at
least 30 days following termination of service with the Company for any reason
other than cause, and that the Optionee shall have the right to exercise the
Option for at least six months if the Optionee's service terminates due to death
or Disability.

                                      -10-
<PAGE>

         (i) No Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by an Option until the date of the issuance of a stock certificate for
such Shares.

         (j) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of Shares and at the same or a different Exercise
Price or for other consideration.

         (k) Restrictions on Transfer of Shares. No Shares issued upon exercise
of an Option may be sold or otherwise transferred or disposed of by the Optionee
during the one hundred eighty (180) day period following the effective date of a
registration statement covering securities of the Company filed under the
Securities Act of 1933. Subject to the preceding sentence, any Shares issued
upon exercise of an Option shall be subject to such rights of repurchase, rights
of first refusal and other transfer restrictions as the Committee may determine.
Such restrictions shall be set forth in the applicable Stock Option Agreement
and shall apply in addition to any restrictions that may apply to holders of
Shares generally.

SECTION 8. PAYMENT FOR SHARES.

         (a) General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b), (c),
(d) and (e) below.

         (b) Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with Shares which have already been
owned by the Optionee or the Optionee's representative for any time period
specified by the Committee and

                                      -11-
<PAGE>

which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.

         (c) Promissory Notes. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with a full recourse promissory
note executed by the Optionee or Offeree. The interest rate and other terms and
conditions of such note shall be determined by the Committee. The Committee may
require that the Optionee pledge his or her Shares to the Company for the
purpose of securing the payment of such note. In no event shall the stock
certificate(s) representing such Shares be released to the Optionee until such
note is paid in full.

         (d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides and a public market for the Shares exists, payment may be made all or
in part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker to sell Shares and to deliver all or part of
the sale proceeds to the Company in payment of the aggregate Exercise Price.

         (e) Services Rendered. At the discretion of the Committee, Shares may
be awarded under the Plan in consideration of services rendered to the Company
or a Subsidiary prior to the award.

SECTION 9. ADJUSTMENT OF SHARES.

         (a) General. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock into a lesser
number of Shares, a recapitalization, a reclassification or a similar
occurrence, the Committee shall make appropriate adjustments in one or more of
(i) the

                                      -12-
<PAGE>

number of Shares available for future grants of Options or other rights to
acquire Shares under Section 5, (ii) the number of Shares covered by each
outstanding Option or other right to acquire Shares or (iii) the Exercise Price
of each outstanding Option or the Purchase Price of each other right to acquire
Shares.

         (b) Reorganizations. In the event that the Company is a party to a
merger or reorganization, outstanding Options or other rights to acquire Shares
shall be subject to the agreement of merger or reorganization.

         (c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend,
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option, or the number or Purchase Price
of shares subject to any other right to acquire Shares. The grant of an Option
or other right to acquire Shares pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

SECTION 10. LEGAL REQUIREMENTS.

         Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on

                                      -13-
<PAGE>

which the Company's securities may then be listed, and the Company has obtained
the approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.

SECTION 11. NO EMPLOYMENT RIGHTS.

         No provision of the Plan, nor any Option granted or other right to
acquire Shares awarded under the Plan, shall be construed to give any person any
right to become, to be treated as, or to remain an Employee. The Company and its
Subsidiaries reserve the right to terminate any person's Service at any time and
for any reason.

SECTION 12. DURATION AND AMENDMENTS.

         (a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any Option grants or other right to acquire Shares already made shall
be null and void, and no additional Option grants or other right to acquire
Shares shall be made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.

         (b) Right to Amend or Terminate the Plan. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any Option granted or other right to acquire Shares awarded before amendment of
the Plan shall not be materially altered, or impaired adversely, by such
amendment, except with consent of the Optionee or

                                      -14-
<PAGE>

Offeree. An amendment of the Plan shall be subject to the approval of the
Company's shareholders only to the extent required by applicable laws,
regulations or rules.

         (c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or Option
previously granted under the Plan.

SECTION 13. EXECUTION.

         To record the adoption of the Plan by the Board of Directors as of
August _______, 1998, the Company has caused its authorized officer to execute
the same.

                                          PEOPLESUPPORT, INC.

                                          By ___________________________________

                                          Title ________________________________

                                      -15-

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