AGREEMENT AND PLAN OF MERGER involving HOSTOPIA.COM INC. and DELUXE CORPORATION, DELUXE BUSINESS OPERATIONS, INC. AND HELIX MERGER CORP. SPECIAL MEETING OF STOCKHOLDERS OF HOSTOPIA.COM INC. TO BE HELD ON JULY 30, 2008 NOTICE OF SPECIAL MEETING AND...

Exhibit 99.1

June 27, 2008

Dear Stockholder:

On behalf of the board of directors of ▇▇▇▇▇▇▇▇.▇▇▇ Inc. (“Hostopia”), I cordially invite you to attend a special meeting of stockholders to be held at ▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ on July 30, 2008 at 10:00 a.m. (Toronto time).

At the special meeting, you will be asked to consider and vote upon a special resolution to adopt and approve the agreement and plan of merger (the “Merger Agreement”), dated as of June 18, 2008, among Hostopia, Deluxe Corporation (“Deluxe”), Deluxe Business Operations, Inc. (“Operating Sub”), a wholly-owned subsidiary of Deluxe, and Helix Merger Corp. (“Sub”), a wholly-owned subsidiary of Operating Sub, and to approve the merger of Sub with and into Hostopia (the “Merger”), as contemplated by the Merger Agreement. If the Merger is consummated, Hostopia will become a wholly-owned indirect subsidiary of Deluxe and you will be entitled to receive Cdn.$10.55 in cash, without interest, for each share of Hostopia common stock that you own.

Based on various factors, the Board of Directors has unanimously concluded that the Merger is advisable, fair to and in the best interests of Hostopia and the Hostopia stockholders and recommended to Hostopia stockholders that they vote in favour of the special resolution adopting the Merger Agreement and approving the Merger.

The accompanying notice of meeting and management information circular (“Circular”) provide a summary description of the Merger Agreement and the Merger. The full text of the Merger Agreement and the special resolution adopting the Merger Agreement and approving the Merger are attached as appendices to the Circular, to assist you in considering how to vote. The summaries provided in the Circular are qualified in their entirety by the documents attached thereto. You are urged to read this information carefully and, if you require assistance, to consult your financial or professional advisor. Hostopia’s board of directors unanimously recommends that you vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

Your vote is very important. Hostopia cannot consummate the Merger unless the holders of at least a majority of the outstanding shares of Hostopia common stock vote to adopt the Merger Agreement and approve the Merger.

Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing to Hostopia’s registrar and transfer agent, Equity Transfer & Trust Company, the enclosed form of proxy as soon as possible. If your shares are held in an account at a brokerage firm, bank or other nominee, you should instruct your broker, bank or nominee how to vote in accordance with the voting instruction form furnished by your broker, bank or nominee. If you do not vote or do not instruct your broker, bank or nominee how to vote, it will have the same effect as voting against the adoption of the Merger Agreement and the approval of the Merger.

If you sign, date and send your proxy and do not indicate how you want to vote, your proxy will be voted “FOR” the adoption of the Merger Agreement and approval of the Merger.

I enthusiastically support this transaction and join the other members of Hostopia’s board of directors in recommending that you vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

Sincerely,

(Signed) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇

▇▇▇▇▇ ▇▇▇▇▇▇▇▇

Chief Executive Officer

▇▇▇▇▇▇▇▇.▇▇▇ INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of ▇▇▇▇▇▇▇▇.▇▇▇ Inc.:

▇▇▇▇▇▇▇▇.▇▇▇ Inc. (“Hostopia” or the “Company”) will hold a special meeting of the stockholders of Hostopia on July 30, 2008 at ▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ at 10:00 a.m. (Toronto time). The purpose of the special meeting will be:

1.                                      to consider and vote upon a special resolution to adopt the Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 18, 2008, among Hostopia, Deluxe Corporation (“Deluxe”), Deluxe Business Operations, Inc. (“Operating Sub”), a wholly-owned subsidiary of Deluxe, and Helix Merger Corp. (“Sub”), a wholly-owned subsidiary of Operating Sub, as it may be amended from time to time, and to approve the merger of Sub with and into Hostopia (the “Merger”), as contemplated by the Merger Agreement; and

2.                                     to transact any other business as may properly come before the special meeting or any adjournment or postponement of the special meeting.

Hostopia’s board of directors unanimously recommends that you vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

Only holders of record of Hostopia common stock at the close of business on June 25, 2008 (“Registered Stockholders”), the record date for the special meeting, may attend and vote in person or by proxy at the special meeting. Each share of Hostopia common stock is entitled to one vote on each matter to be voted upon at the special meeting. A complete list of Hostopia stockholders of record entitled to attend and vote in person at the special meeting will be available for ten days prior to the special meeting at Hostopia’s Canadian executive offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting and will also be available at the special meeting.

Hostopia stockholders have the right under Delaware law to dissent from the adoption of the Merger Agreement and approval of the Merger, to exercise appraisal rights and to receive payment in cash for the fair value of their shares of Hostopia common stock determined in accordance with Delaware law in lieu of receipt of $10.55 per share of Hostopia common stock pursuant to the Merger Agreement. Dissenting Hostopia stockholders must precisely follow these specific procedures to exercise appraisal rights, or their appraisal rights may be lost. Hostopia stockholders who wish to exercise appraisal rights must not vote in favour of the special resolution adopting the Merger Agreement and approving the Merger and must follow specific procedures outlined in Section 262 of the Delaware General Corporation Law to exercise appraisal rights. See “The Merger – Appraisal Rights” in the accompanying management information circular (the “Circular”).

Registered Stockholders who are unable to attend the special meeting in person are requested to complete, date and sign the enclosed form of proxy and send it in the enclosed envelope or otherwise to Equity Transfer & Trust Company, by mail or by courier at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, or by facsimile at 416-595-9593. Non-Registered Stockholders who receive these materials through their broker or other intermediary should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by their broker or intermediary. To be effective, a proxy must be received by Equity Transfer & Trust Company by no later than 4:00 p.m. (Toronto time) on July 28, 2008.

Please review the instructions in the accompanying Circular and the enclosed form of proxy or the information forwarded by your bank, broker or other holder of record regarding each of these options. If you do not vote in person, submit the proxy, or instruct your broker on how to vote at the special meeting, the effect will be the same as a vote against the special resolution to adopt the Merger Agreement and approve the Merger.

For more information about the Merger, please review the accompanying Circular and the Merger Agreement attached to it as Appendix B.

By Order of the Board of Directors,

(Signed) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇

▇▇▇▇▇ ▇▇▇▇▇▇▇▇

Chief Executive Officer

TABLE OF CONTENTS

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▇▇▇▇▇▇▇▇.▇▇▇ INC.

Management Information Circular for the Special Meeting of Stockholders
To be held on July 30, 2008

SOLICITATION OF PROXIES

This management information circular (this “Circular”) is furnished in connection with the solicitation by the management of ▇▇▇▇▇▇▇▇.▇▇▇ Inc. (“Hostopia” or the “Company”) of proxies to be used at the Company’s special meeting of holders of shares of common stock in the capital of the Company to be held at ▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ on July 30, 2008 at 10:00 a.m. (Toronto time), or at any adjournment or postponement thereof, to consider and vote upon a special resolution to adopt and approve the Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 18, 2008, among Hostopia, Deluxe Corporation (“Deluxe”), Deluxe Business Operations, Inc. (“Operating Sub”), a wholly-owned subsidiary of Deluxe, and Helix Merger Corp. (“Sub”), a wholly-owned subsidiary of Operating Sub, as it may be amended from time to time, and to approve the merger of Sub with and into Hostopia (the “Merger”), as contemplated by the Merger Agreement. It is expected that the solicitation will be primarily by mail, but proxies may also be solicited personally, by advertisement or by telephone by Hostopia’s directors, officers or employees or such other persons as may be designated by Hostopia for such purpose, or by the Transfer Agent, at nominal cost. The cost of solicitation will be borne by the Company.

ENFORCEMENT OF LEGAL RIGHTS

▇▇▇▇▇▇▇▇.▇▇▇ Inc. is incorporated under the laws of the State of Delaware and, accordingly, the rights and remedies generally available to stockholders under Canadian corporate law will not be available to Hostopia stockholders. Although Hostopia has appointed Gowling ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, Suite 1600, 1 First Canadian Place, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, as Hostopia’s agent for service of process in Ontario, it may not be possible for Hostopia stockholders to collect from Hostopia judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation.

Certain of Hostopia’s directors may reside outside of Canada. Furthermore, substantially all of the assets of such persons may be located outside of Canada. It may not be possible for Hostopia stockholders to effect service of process within Canada upon the directors referred to above. In addition, it may not be possible to enforce against Hostopia and Hostopia’s directors judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable securities laws in Canada.

NOTICE TO STOCKHOLDERS IN THE UNITED STATES

Hostopia is a corporation incorporated under the laws of the State of Delaware. The solicitation of proxies and the transaction contemplated in this Circular involve securities of a U.S. issuer and are being effected in accordance with Canadian securities laws. The proxy rules under the Exchange Act are not applicable to Hostopia or this solicitation because Hostopia does not have a class of securities registered under Section 12 of the Exchange Act, and therefore this solicitation is not being effected in accordance with such U.S. securities laws. Hostopia stockholders should be aware that disclosure requirements under Canadian securities laws may be different from such requirements under U.S. federal securities laws.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY ANY SECURITIES REGULATORY AUTHORITY NOR HAS ANY SECURITIES REGULATORY AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Circular contains “forward-looking statements,” as defined in Section 27A of the Securities Act, Section 21E of the Exchange Act and the securities legislation in certain Canadian jurisdictions concerning Hostopia’s current expectations and assumptions about Hostopia, its industry and the proposed Merger. Statements that are not historical or current facts, statements based on assumptions, suppositions and uncertainties, statements about beliefs and expectations, and management’s projections and evaluations of future events are forward-looking statements. Forward-looking statements may be statements in the future tense and often include the words “may”, “might”, “could”, “would”, “should”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “targets”, “potentially”, “probably”, “projects”, “outlook”, “objectives”, “strategies”, “goals” or similar expressions.

Forward-looking statements are subject to various risks and uncertainties. In particular, any statements contained herein regarding expectations with respect to the proposed Merger and other matters are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond Hostopia’s control and may cause actual results, performance or achievements to differ materially from those projected or implied in such forward-looking statements.

Certain important factors relating to the proposed Merger that may cause actual events not to occur as expressed in such forward-looking statements include, but are not limited to, the failure to obtain the necessary approval of the Merger by Hostopia stockholders and the failure of other closing conditions contained in the Merger Agreement to be satisfied as provided therein. For additional information about risk factors that could cause actual results to differ materially from those described in the forward-looking statements, please see Hostopia’s filings with the Canadian Securities Administrators and the SEC, including Hostopia’s annual financial statements and management’s discussion and analysis on Form 10-K for the year ended March 31, 2008, as described under “Additional Information”.

Reliance on forward-looking statements involves risks and uncertainties. Although Hostopia believes that the assumptions on which its forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate or incomplete and, as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that Hostopia will necessarily achieve any plans or objectives referred to in any of the forward-looking statements. None of Hostopia, Deluxe, Operating Sub or Sub undertake any obligation to update or revise any forward-looking statements to reflect future events or circumstances, whether as a result of new information, future events or otherwise.

INFORMATION CONTAINED IN THIS CIRCULAR

No person has been authorized to give information or to make any representations in connection with the Merger other than those contained in this Circular and, if given or made, any such information or representations should not be relied upon in making a decision as to how to vote on the special resolution adopting the Merger Agreement and approving the Merger or be considered to have been authorized by Hostopia, Deluxe, Operating Sub or Sub.

This Circular does not constitute an offer to buy, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.

Hostopia stockholders should not construe the contents of this Circular as legal, tax or financial advice and should consult with their own professional advisors as to the relevant legal, tax, financial or other matters in connection herewith.

Capitalized terms used but not defined in the Circular (except for Appendices B, C, D, E and F) have the meanings ascribed thereto in Appendix A – “Glossary of Terms”. Unless otherwise indicated, all references to dollar amounts, and all references to “$” or “dollar” in this Circular are to Canadian dollars. References in this Circular to “U.S.$” are to United States dollars.

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THE SPECIAL MEETING

Hostopia is furnishing this Circular to Hostopia stockholders as part of the solicitation of proxies by management of Hostopia for use at the special meeting.

Date, Time and Place

Hostopia will hold the special meeting of Hostopia stockholders on July 30, 2008 at 10:00 a.m. (Toronto time) at ▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ to consider and vote upon a special resolution to adopt the Merger Agreement and approve the Merger.

Purpose of Special Meeting

At the special meeting, Hostopia stockholders will be asked to consider and vote upon a special resolution to adopt the Merger Agreement and approve the Merger. The Board of Directors, based in part on the recommendation of the M&A Committee, has unanimously approved the Merger Agreement and declared the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement, advisable, fair to and in the best interests of Hostopia and its stockholders and resolved to recommend that the Hostopia stockholders adopt the Merger Agreement and approve the Merger. The Board of Directors therefore unanimously recommends that Hostopia stockholders vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

Record Date, Stockholders Entitled to Vote and Quorum

Only Hostopia stockholders of record at the close of business on June 25, 2008, the record date for the special meeting, are entitled to notice of and to vote at the special meeting. On the record date, there were 11,652,352 shares of Hostopia common stock issued and outstanding held by approximately 32 holders of record. Hostopia stockholders of record on the record date are entitled to one vote per share at the special meeting on the special resolution to be brought before the special meeting.

A quorum will be present at the special meeting if a majority of the shares of Hostopia common stock issued and outstanding and entitled to vote on the record date are represented at the special meeting in person or by proxy.

Vote Required, Abstentions and Broker Non-Votes

The adoption of the Merger Agreement and approval of the Merger requires that stockholders holding at least a majority of the shares of Hostopia common stock outstanding at the close of business on the record date and entitled to vote on the proposal vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

If a Hostopia stockholder abstains from voting at the special meeting, the abstention will count as a vote against the adoption of the Merger Agreement and approval of the Merger.

If your shares are held in “street name” by a broker, you should instruct your broker how to vote your shares using the instructions provided by your broker. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker and the broker can give you directions on how to vote your shares. A broker non-vote generally occurs when a broker, bank or other nominee holding shares on your behalf does not vote on a proposal because the nominee has not received your voting instructions and lacks discretionary power to vote the shares.

Because brokers have no discretionary authority to vote on the proposal to adopt the Merger Agreement and approve the Merger, broker non-votes will have the same effect as a vote against the adoption of the Merger Agreement and approval of the Merger.

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Voting of Proxies

All shares represented by valid proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders. Valid proxies that do not contain voting instructions will be voted “FOR” the adoption of the Merger Agreement and approval of the Merger.

Shares of Hostopia common stock represented at the special meeting but not voting, including shares of Hostopia common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.

If you are a stockholder of record, you must vote your shares by dating, signing and returning the enclosed proxy or by voting in person at the special meeting. If no voting instructions are indicated on your signed proxy, the proxy will be treated as a vote “FOR” the adoption of the Merger Agreement and approval of the Merger. If you do not execute and return a proxy or vote in person at the special meeting, it will effectively count as a vote against the adoption of the Merger Agreement and approval of the Merger.

If your shares are held in “street name” through a broker, bank, or other nominee, you may vote by completing, signing and returning the voting form provided by your broker, bank, or nominee, or by telephone or over the Internet if telephone or Internet voting is provided by your broker or bank. Your broker will not vote your shares unless you instruct the broker how to vote by following the voting procedures provided to you by your broker. If telephone or Internet voting is available through your broker or bank, please follow the telephone or Internet voting instructions provided by your broker or bank.

Hostopia does not expect that any matter other than the proposal to adopt the Merger Agreement and approve the Merger will be brought before the special meeting. If, however, the Board of Directors properly presents other matters at the special meeting or any adjournment or postponement of the special meeting, the persons named as proxies will vote the shares represented by your proxies in accordance with their reasonable judgment as to what they believe to be in the best interests of Hostopia stockholders.

Revocability of Proxies

The grant of a proxy does not mean that you cannot vote in person at the special meeting. You may also revoke a proxy at any time prior to the time it is voted at the special meeting in one of three ways:

(a)            You can send a written, signed and dated notice to the Transfer Agent at Equity Transfer & Trust Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ M5H 4H1, Attention: Ms. An ▇▇▇▇▇, fax: ▇▇▇-▇▇▇-▇▇▇▇ prior to 4:00 p.m. (Toronto time) on July 28, 2008 stating that you would like to revoke your proxy;

(b)           You can complete, date, sign and return a later dated proxy to the Transfer Agent at Equity Transfer & Trust Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ M5H 4H1, Attention: Ms. An ▇▇▇▇▇, fax: ▇▇▇-▇▇▇-▇▇▇▇, prior to 4:00 p.m. (Toronto time) on July 28, 2008; or

(c)            If your shares are registered in your name, you can attend the meeting and vote in person.

Your attendance at the special meeting alone will not revoke your proxy. If you instructed your broker to vote your shares (whether by mail, telephone or over the Internet), the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by your broker to change your voting instructions.

Costs of Solicitation

All costs of soliciting proxies for the special meeting will be borne by Hostopia. Proxies may be solicited by Hostopia’s directors, officers and regular employees, but such persons will not receive any additional compensation for doing so. Proxies may be solicited in person, or by telephone, over the Internet or by facsimile.

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Hostopia also expects to reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to Hostopia stockholders.

Procedures for Surrender of Stock Certificates

Please do not send stock certificates with your proxies. A letter of transmittal with instructions for surrendering any Hostopia common stock certificate will be mailed to Hostopia stockholders as soon as reasonably practicable after completion of the Merger. See “The Merger – Procedures for Surrender of Certificates”.

THE COMPANIES

Hostopia

Hostopia is a leading provider of Web services that enable small and medium sized businesses to establish and maintain an Internet presence. Hostopia’s customers are communication services providers, including telecommunication carriers, cable companies, Internet service providers, domain registrars and Web hosting service providers. Hostopia’s customers purchase its Web services on a wholesale basis and resell these services under their own brands to small and medium sized businesses. Hostopia provides its customers with the technology, infrastructure and support services to enable them to offer Web services, while saving them research and development and capital and operating costs typically associated with the design, development and delivery of Web services. Hostopia refers to small and medium sized businesses which use its Web services as “end-users”. Hostopia believes it is a leading provider of such Web services based on the number and size of its customers, the number of end-user websites that it supports, the quality of its Web services, and its reputation.

Hostopia currently has three wholly-owned subsidiaries, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Corp., a Nova Scotia unlimited liability company, Internet Names for Business Inc., an Ontario corporation, and Nexthaus Corporation, a Delaware corporation. ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Corp. sells Web services directly to small Web hosting resellers and end-users. Internet Names for Business Inc. is the entity through which Hostopia provides generic domain and billing services to its customers. Nexthaus Corporation sells wireless communications services that synchronize data between computers and mobile devices, such as calendar and contact updates from a desktop to a smart phone.

Hostopia was incorporated under the laws of the State of Delaware on December 10, 1999. Hostopia is currently listed on the TSX under the stock symbol “H”. Hostopia’s principal U.S. executive offices are located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. Hostopia’s principal Canadian executive offices are located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇. Hostopia’s telephone number is ▇▇▇-▇▇▇-▇▇▇▇ in the United States and 905-673-7575 in Canada. Hostopia’s website address is ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇. Information on Hostopia’s website is not a part of this Circular.

Please see Hostopia’s filings with the SEC for additional information regarding Hostopia offices and facilities. See also “Additional Information”.

Deluxe

Deluxe helps small businesses and financial institutions better manage, promote, and grow their businesses, through industry-leading businesses and brands. Deluxe uses direct marketing, a North American sales force, financial institution referrals, independent distributors and the Internet to provide its customers a wide range of customized products and services: personalized printed items (checks, forms, business cards, stationery, greeting cards, labels, and retail packaging supplies), promotional products and merchandising materials, fraud prevention and marketing services and financial institution customer loyalty and retention programs. Deluxe also sells personalized checks, accessories, stored value gift cards and other services directly to consumers.

Deluxe’s business segments include Small Business Services, Financial Services and Direct Checks.

Small Business Services operates under various brands including Deluxe, New England Business Service, Inc. (NEBS®), Safeguard®, ▇▇▇▇▇®, and RapidForms®. This is Deluxe’s largest segment in terms of revenue and operating income. Small Business Services provides personalized products and services that help small businesses manage, promote and grow their businesses. Small Business Services sells business checks, printed forms,

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promotional products, marketing materials and related services and products to more than six million small business customers in the United States and Canada. Printed forms include billing forms, work orders, job proposals, purchase orders, invoices and personnel forms. Deluxe also produces computer forms compatible with accounting software packages commonly used by small businesses. Deluxe’s stationery, letterhead, envelopes and business cards are produced in a variety of formats and ink colors.

Financial Services sells personal and business checks, check-related products and services, stored value gift cards and customer loyalty, retention and fraud monitoring/protection services to financial institutions. Deluxe also offers enhanced services such as customized reporting, file management and expedited account conversion support. Deluxe’s relationships with specific financial institutions are generally formalized through supply contracts which usually range in duration from three to five years. Deluxe serves approximately 7,000 financial institutions in the United States. Consumers and small businesses typically submit their check order to their financial institution, which then forwards the order to Deluxe. Deluxe processes the order and ships it directly to the consumer or small business. Financial Services produces a wide range of check designs, with many consumers preferring one of the dozens of licensed or cause-related designs Deluxe offers, including Disney®, Warner Brothers®, Garfield®, Harley-Davidson®, NASCAR®, PGA TOUR, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇®, ▇▇▇▇▇ ▇. Komen Breast Cancer Foundation and National Arbor Day Foundation®.

Direct Checks is a direct-to-consumer check supplier, selling under the Checks Unlimited®, Designer® Checks and ▇▇▇▇▇▇.▇▇▇ brand names. Through these brands, Deluxe sells personal and business checks and related products and services directly to consumers using direct response marketing and the Internet. Deluxe estimates the direct-to-consumer personal check printing portion of the payments industry accounts for approximately 15% of all personal checks sold.

Deluxe Corporation was incorporated under the laws of the State of Minnesota in 1920. Deluxe is listed on the New York Stock Exchange under the symbol “DLX”. Deluxe’s principal corporate offices are located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. Deluxe’s telephone number is ▇▇▇-▇▇▇-▇▇▇▇. Deluxe’s website address is ▇▇▇.▇▇▇▇▇▇.▇▇▇. Information on Deluxe’s website is not a part of this Circular.

Operating Sub

Operating Sub was incorporated under the laws of the State of Delaware on August 27, 1986. Operating Sub is a wholly-owned subsidiary of Deluxe.

Operating Sub is located at c/o Deluxe, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, telephone: ▇▇▇-▇▇▇-▇▇▇▇.

Sub

Sub was incorporated under the laws of the State of Delaware on June 16, 2008. Sub is a wholly-owned subsidiary of Operating Sub. Sub was organized solely for the purpose of entering into the Merger Agreement with Hostopia and completing the Merger and has not conducted any business operations.

Sub is located at c/o Deluxe, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, telephone: ▇▇▇-▇▇▇-▇▇▇▇.

THE MERGER

Background of the Merger

The Board of Directors has periodically assessed strategic options in light of increasing competition in the Web services industry with the objective of enhancing stockholder value. Among other things, the Board of Directors has assessed Hostopia’s prospects for continued growth given its relatively small size in the industry. While the majority of the strategic options explored by Hostopia involved the acquisition of other companies, from time to time Hostopia has discussed potential combinations with third parties involving the acquisition of Hostopia.

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The Board of Directors has established an M&A Committee which is comprised of Messrs. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (Chair), ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, a majority of whom are independent members of the Board of Directors. The purpose of the M&A Committee has been to consider strategic acquisitions of other companies as well as consider potential combinations with third parties.

During November and December 2007, Hostopia met with the chief executive officer of a third party (“Company #1”) to discuss a potential strategic transaction between Hostopia and Company #1. Following several additional introductory meetings, the stock price of Company #1 declined significantly, and Company #1 indicated that it intended to delay any additional discussions regarding a combination of Company #1 and Hostopia.

On February 27, 2008, Deluxe first met with Hostopia concerning a potential commercial opportunity.

On March 11, 2008, representatives of Hostopia met with a third party (“Company #2”) to discuss a strategic transaction.  Following the execution of a confidentiality agreement and a discussion among representatives of Hostopia and Company #2, Hostopia determined that a strategic combination with Company #2 was not something the management wanted to pursue any further.

On March 13, 2008, Hostopia and Deluxe entered into a confidentiality agreement.

On March 19, 2008, the chief executive officer of a third party (“Company #3”) called Hostopia to discuss a potential strategic transaction. On March 27, 2008, Hostopia entered into a confidentiality agreement with Company #3 and representatives of Hostopia met with representatives of Company #3 to discuss a strategic combination.

On April 7 and 8, 2008, representatives from Hostopia and Deluxe met at Deluxe’s headquarters to discuss a commercial relationship between Deluxe and Hostopia. On April 9, 2008, the chief executive officer of Deluxe met with the chief executive officer of Hostopia and verbally indicated that Deluxe would like to explore a possible strategic transaction with Hostopia.

On April 18, 2008, the president of Company #3 contacted Hostopia with concerns that the declining stock price of Company #3 limited its ability to pay a fair value for Hostopia at that time.

On April 21, 2008, Deluxe delivered to Hostopia a letter containing an expression of interest in acquiring Hostopia at $10.00 per outstanding share of capital stock subject to the completion of a due diligence review of Hostopia and Hostopia entering into an exclusivity agreement. The Board of Directors met shortly thereafter and discussed the expression of interest and instructed management to hire a financial advisor and special counsel to assist it in considering strategic opportunities for Hostopia including the Deluxe proposal.

On April 23, 2008, Hostopia engaged special counsel, Pillsbury ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ LLP (“Pillsbury”).

On April 25, 2008, a third party (“Company #4”) contacted representatives of Hostopia regarding a potential strategic transaction. On May 6, 2008, representatives of Hostopia and Company #4 met to further discuss a potential strategic fit and other opportunities.

On May 7, 2008, Hostopia formally engaged RBC as its financial advisor.

On May 12, 2008, the Board of Directors met telephonically and discussed the status of the Deluxe proposal and Hostopia’s efforts in coordinating due diligence materials.

On May 13, 2008, the M&A Committee met and discussed the Deluxe expression of interest. The M&A Committee advised management that it should continue discussions with Deluxe but that it was unwilling to recommend to the Hostopia board entering into an exclusivity agreement with Deluxe at that time. Following this meeting, members of Hostopia’s management provided frequent email updates to members of the Board of Directors regarding progress with Deluxe and the proposed transaction.

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On May 19, 2008, Deluxe delivered a letter to Hostopia renewing its request that Hostopia enter into an exclusivity agreement with Deluxe after which Deluxe would proceed with its due diligence investigation. On May 21, 2008, Hostopia responded by letter that it was continuing to evaluate the Deluxe proposal.

On May 22, 2008, the M&A Committee met telephonically to discuss the Deluxe proposal. During the meeting, representatives of RBC presented a preliminary analysis of the financial terms of the Deluxe proposal. Several hours following the meeting of the M&A Committee, the entire Board of Directors met to consider the Deluxe proposal and the recommendations of the M&A Committee. The M&A Committee reported on the status of the discussions with Deluxe. Thereafter, representatives of RBC presented a preliminary analysis of the financial terms of the Deluxe proposal for the entire Board of Directors. Following RBC’s presentation, Pillsbury reviewed with the Board of Directors its fiduciary duties in evaluating the Deluxe proposal. The Board of Directors considered the proposed restriction on Hostopia’s ability to conduct a broad solicitation of potential buyers and discussed the possibility of a post-signing solicitation. After discussions with Pillsbury and RBC, the Board of Directors instructed management and its financial advisors to continue to negotiate with Deluxe regarding the price at which Deluxe would acquire Hostopia and rejected the execution of an exclusivity agreement at that time.

From May 22 to May 24, 2008, members of Hostopia’s management, Pillsbury and RBC discussed the terms of the Deluxe proposal with Deluxe and its representatives. On May 24, 2008, Deluxe indicated that it would raise its proposed price to $10.55 per share, and expressly stated that if Hostopia entered into negotiations with any third party regarding the acquisition of Hostopia, whether prior to or following the signing of a definitive agreement, Deluxe would rescind the offer and negotiations would be discontinued.

On May 24, 2008, Company #4 contacted Hostopia regarding continuing strategic discussions between the two companies.

On May 25, 2008, the M&A Committee met telephonically to discuss the revised Deluxe proposal. ▇▇. ▇▇▇▇▇▇▇▇▇▇ outlined the discussions that he had with Deluxe over the prior three days and conveyed to the M&A Committee the substance of the Deluxe verbal offer. The M&A Committee recommended approving the revised proposal and entering into an exclusivity agreement with Deluxe. Following the M&A Committee meeting, the Board of Directors met telephonically to consider the revised Deluxe proposal and the recommendation of the M&A Committee. Following discussion with Pillsbury and RBC, the Board of Directors concluded that Deluxe would be the buyer most likely to offer the greatest value for Hostopia in light of the substantial premium being offered by Deluxe to the current trading price of Hostopia and other financial aspects of the offer, the uncertainty and disruption that would be created for the Company’s employees, customers and suppliers if a broad solicitation were conducted, and the historical conversations between Hostopia’s senior management with various potential buyers. The Board of Directors then instructed management to proceed with the execution of the exclusivity agreement.

On May 26, 2008, Hostopia delivered the signed exclusivity agreement to Deluxe and Deluxe commenced its due diligence investigation of Hostopia. Between May 26 and June 18, 2008, Hostopia provided Deluxe representatives access to due diligence materials requested by Deluxe and Hostopia’s management made itself available to answer due diligence questions from the Deluxe representatives. During this time, including two full days of presentations at the Canadian headquarters of Hostopia, the Hostopia management team made presentations regarding its business to representatives of Deluxe.

On May 27, 2008, Hostopia sent a letter to Company #4 declining to continue its discussions of strategic opportunities with Company #4.

On May 27 and May 28, 2008, U.S. and Canadian legal advisors for Deluxe and Hostopia met telephonically to discuss the structure for the proposed transaction.

On June 4, 2008, U.S. legal counsel for Deluxe, Faegre & ▇▇▇▇▇▇ LLP (“Faegre”), delivered an initial draft of the Merger Agreement and Voting Agreement to Hostopia, Pillsbury and Gowling ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP (“Gowlings”), Canadian counsel for Hostopia.  Over the next several days, legal counsel for Hostopia discussed the Merger Agreement with Hostopia and its other advisors and prepared a response. Among other matters, Hostopia focused on the certainty of closing of the proposed merger with Deluxe. On June 6, 2008, Pillsbury sent a markup to Faegre identifying Hostopia’s key issues. On June 10, 2008, Pillsbury, Gowlings and Faegre discussed by telephone

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certain of the provisions of Hostopia’s June 6 markup, in order to better understand each party’s positions. On June 11, 2008, Faegre sent a revised Merger Agreement to Hostopia’s legal counsel. Later that day, Pillsbury, Gowlings, Hostopia and its other advisors discussed the revised Merger Agreement on a telephone conference call. On June 12, 2008, Pillsbury, Gowlings and Faegre had a telephone call where Pillsbury presented Hostopia’s open issues relating to the revised Merger Agreement. On June 13, 2008, Faegre sent a revised Merger Agreement to Hostopia’s legal counsel. During this period, members of Hostopia’s management and Pillsbury met frequently with members of the M&A Committee to discuss the status of discussions regarding the Merger Agreement.

On June 16, June 17 and June 18, 2008, Faegre delivered to Pillsbury and Gowlings revised drafts of the proposed Merger Agreement and Voting Agreement, and Deluxe and Hostopia and their respective counsel continued negotiation of the Merger Agreement and the Voting Agreement.

On June 18, 2008, the Board of Directors met telephonically to discuss the proposed Merger Agreement. Pillsbury presented a detailed overview of the Merger Agreement and the status of discussions with Deluxe and reviewed with the Board of Directors its fiduciary duties. Following this presentation, RBC made a presentation regarding the financial terms of the proposed transaction and rendered its oral opinion, subsequently confirmed in writing, that, as of such date, the consideration proposed to be paid to the Hostopia stockholders in the merger was fair, from a financial point of view, to such stockholders. The full text of the written opinion of RBC dated June 18, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on review undertaken in connection with such opinion, is attached as Appendix C hereto. At the meeting, after considering the presentations of RBC and Pillsbury, and the other factors described below in “Reasons for the Merger,” including the Board of Directors’ ability to accept an unsolicited superior offer after the execution of the proposed merger agreement with Deluxe, if one emerged, and Deluxe’s stated position that it would discontinue negotiations and rescind its $10.55 offer if Hostopia entered into discussions with any third party, the Board of Directors concluded that the execution of the Merger Agreement with Deluxe would be in the best interests of the Hostopia stockholders. The Board of Directors then approved the proposed merger with Deluxe. Following the board meeting on the evening of June 18, 2008, Hostopia and Deluxe executed the Merger Agreement.

Prior to the commencement of trading on June 19, 2008, Deluxe and Hostopia issued a joint press release announcing the signing of the Merger Agreement.

Reasons for the Merger

In evaluating the Merger Agreement and the Merger, the M&A Committee and the Board of Directors consulted with Hostopia’s senior management, Pillsbury and RBC, and reviewed a significant amount of information and considered a number of factors, including, among others, the following material factors:

(a)            the Board of Directors’ belief that no other alternative reasonably available to Hostopia and its stockholders would provide greater value and certainty to stockholders within the foreseeable future;

(b)            the value of the Merger Consideration of $10.55 per share to be received by Hostopia stockholders in the Merger pursuant to the Merger Agreement;

(c)            among other things (i) that the volume weighted average price for the one year period ended June 17, 2008 was $5.68, (ii) that 100% of the shares of Hostopia common stock have traded below $6.99, and (iii) that the Merger Consideration of $10.55 per share to be paid pursuant to the Merger Agreement represents a premium of $6.04, or approximately 134%, over the $4.51 closing sale price per share of Hostopia common stock on the TSX on June 17, 2008;

(d)            the likelihood, in the Board of Directors’ view, that conducting an auction process before approving the Merger would result in the withdrawal of Deluxe’s proposal and would be detrimental to Hostopia by posing significant risks to Hostopia’s existing operations, including risks related to employee retention;

(e)            the unanimous recommendation of the M&A Committee as to the advisability and fairness of the Merger Agreement and the Merger to Hostopia stockholders;

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(f)             the determination that the provisions in the Merger Agreement with respect to Hostopia’s ability to accept other Acquisition Proposals, including Hostopia’s rights to pursue an alternative proposal deemed reasonably likely to lead to a Superior Proposal, and to terminate the Merger Agreement in order to accept a Superior Proposal, subject to paying Deluxe a $4.3 million termination fee and up to $500,000 in expense reimbursement, would not reasonably preclude interested parties from subsequently proposing a more favourable transaction;

(g)            the oral opinion of RBC delivered on June 18, 2008 to the Board of Directors, which was subsequently confirmed by delivery of a written opinion dated June 18, 2008, that the Merger Consideration was fair from a financial point of view to the stockholders of Hostopia (RBC’s written opinion dated June 18, 2008 is attached as Appendix C to this Circular and should be carefully read in its entirety, together with the discussion of RBC’s analyses in “The Merger - Opinion of Hostopia’s Financial Advisor” for a discussion of the assumptions, qualifications and limitations stated by RBC in its opinion);

(h)            the form of consideration to be paid to Hostopia stockholders in the Merger and the certainty of value of such cash Merger Consideration;

(i)             the current and historical financial condition, results of operations, business and prospects of Hostopia as well as Hostopia’s financial plan and prospects if it were to remain an independent company. The Board of Directors discussed Hostopia’s current financial plan, including the risks associated with achieving and executing upon Hostopia’s business plan, as well as the general risks of market conditions that could reduce Hostopia’s stock price. The Board of Directors determined that Hostopia stockholders would continue to be subject to the risks and uncertainties of Hostopia’s financial plan, operations and prospects unless Hostopia’s common stock was acquired for cash;

(j)             the Merger represents a liquidity opportunity for stockholders to dispose of their shares of Hostopia common stock for cash consideration of $10.55 per share that, in the absence of the Merger, might not otherwise be available due to the relatively low historical trading volume of shares of Hostopia common stock;

(k)            certain significant Hostopia stockholders, including the Chief Executive Officer and President of Hostopia, were prepared to support the Merger and enter into the Voting Agreement;

(l)             the relationship of the Merger Consideration of $10.55 per share to the historical trading prices of Hostopia common stock and the consideration to be received by Hostopia stockholders in the Merger as compared to premiums in other comparable merger transactions;

(m)           the anticipated time of the consummation of the transactions contemplated by the Merger Agreement which would allow Hostopia stockholders who do not seek appraisal rights to receive the Merger Consideration in a relatively short time frame. The Board of Directors also considered the business reputation, management and financial resources of Deluxe, which the Board of Directors believed supported the conclusion that a Merger with Deluxe could be completed relatively quickly and in an orderly manner and, in as much as possible, would allow Hostopia to conduct business as usual; and

(n)            the material terms of the Merger Agreement, taken as a whole, were fair and reasonable.

In approving the Merger, the Board of Directors and the M&A Committee also took into account a number of risks and other negative factors relating to the Merger, including the following material risks and factors:

(a)            the risks that Hostopia’s operations would be disrupted by employee and customer uncertainty following the public announcement of the Merger;

(b)            the restrictions on Hostopia’s ability to solicit alternative Acquisition Proposals under the no solicitation provisions in the Merger Agreement;

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(c)            the possibility that Hostopia may be required to pay a $4.3 million termination fee to Deluxe and to reimburse Deluxe for up to $500,000 of transaction expenses if the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement;

(d)            the potential adverse effect on Hostopia’s business, operations and financial condition, including the effect on Hostopia’s sales and operating results, the effect on Hostopia’s ability to attract and retain key management, marketing and technical personnel and the effect on the progress of certain development projects if the Merger is not consummated;

(e)            the substantial costs incurred and to be incurred by Hostopia in connection with the Merger;

(f)             the conduct of business restrictions on the operation of Hostopia’s business in the interim period between signing the Merger Agreement and closing the Merger;

(g)            the fact that certain of Hostopia’s officers and directors have certain interests in the Merger that are in addition to their interests as stockholders, which has the potential to influence their views and actions in connection with the merger proposal; and

(h)            the possibility that one of the parties to the Merger Agreement may not be able to fulfill one or more of the conditions to closing the Merger.

The preceding discussion of the factors considered by the M&A Committee and the Board of Directors is not, and is not intended to be, exhaustive. In light of the variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the members of the M&A Committee and the Board of Directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching their respective determinations. In addition, the members of the M&A Committee and the Board of Directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favourable or unfavourable to the ultimate determination of the members of the M&A Committee and Board of Directors, but rather, the M&A Committee and the Board of Directors conducted an overall analysis of the factors described above.

Merger Consideration

At the Effective Time, each outstanding share of Hostopia common stock, other than shares of Hostopia common stock held by Deluxe, Operating Sub, Sub or any of their or Hostopia’s respective subsidiaries and those shares held by stockholders who perfect their appraisal rights (as described in “The Merger—Appraisal Rights”), will be automatically converted into the right to receive $10.55 in cash, without interest, upon surrender of the certificate representing such share(s) of Hostopia common stock. Any shares of Hostopia common stock held by Hostopia, Deluxe, Sub or any of their respective subsidiaries immediately prior to the Effective Time will be cancelled in the Merger without payment. The price of $10.55 per share was determined through arm’s length negotiations between Hostopia and Deluxe.

Board of Directors’ Vote and Recommendation

After careful consideration, and based in part on the recommendation of the M&A Committee, the Board of Directors has unanimously approved the Merger Agreement and declared the Merger, the Merger Agreement, and the transactions contemplated by the Merger Agreement advisable, fair to and in the best interests of Hostopia and its stockholders, and resolved to recommend that the Hostopia stockholders adopt the Merger Agreement and approve the Merger. Accordingly, the Board of Directors unanimously recommends that Hostopia stockholders vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

Opinion of Hostopia’s Financial Advisor

On June 18, 2008, RBC rendered its oral opinion to the Board of Directors that, as of that date and subject to the assumptions, qualifications and limitations to be set forth in its written opinion, the per share Merger Consideration of $10.55 in cash per share of Hostopia’s common stock specified in the Merger Agreement was fair,

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from a financial point of view, to the Hostopia stockholders. The full text of RBC’s confirmatory written opinion, dated June 18, 2008, is attached to this Circular as Appendix C. The form and content of RBC’s opinion were approved for release by a committee of RBC directors. Hostopia stockholders are urged to read the RBC opinion carefully and in its entirety.

RBC’s opinion was provided for the information and assistance of the Board of Directors in connection with their consideration of the Merger. RBC has not prepared a valuation of Hostopia or any of its securities or assets and RBC’s opinion should not be construed as such. RBC’s opinion did not address Hostopia’s underlying business decision to engage in the Merger or the relative merits of the Merger compared to any alternative business strategy or transaction in which Hostopia might engage. RBC’s opinion does not constitute a recommendation to Hostopia stockholders as to whether to vote in favour of the Merger.

RBC’s opinion was given as of June 18, 2008 and RBC disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting RBC’s opinion which may come or be brought to RBC’s attention after the date hereof.  Without limiting the foregoing, in the event that there is any material change in any fact or matter affecting RBC’s opinion after the date hereof, RBC reserves the right to change, modify or withdraw its opinion.

In rendering its opinion, RBC has relied upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions or representations obtained by it from public sources, senior management of Hostopia, and their consultants and advisors (collectively, the “Information”).  RBC’s opinion is conditional upon such completeness, accuracy and fair presentation of such Information.  Subject to the exercise of professional judgment and except as expressly described herein, RBC has not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information.

Senior officers of Hostopia have represented to RBC in a certificate delivered as of the date of RBC’s opinion, among other things, that (i) the Information provided orally by, or in the presence of, an officer or employee of Hostopia or in writing by Hostopia or any of its subsidiaries or their respective agents to RBC for the purpose of preparing RBC’s opinion was, at the date the Information was provided to RBC, and as of the date of RBC’s opinion, complete, true and correct in all material respects, and did not as of those dates contain any untrue statement of a material fact in respect of Hostopia, its subsidiaries or the Merger and did not as of those dates omit to state a material fact in respect of Hostopia, its subsidiaries or the Merger necessary to make the Information or any statement contained therein not misleading in light of the circumstances under which the Information was provided or any statement was made; and that (ii) since the dates on which the Information was provided to RBC, except as disclosed in writing to RBC, there had been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of Hostopia or any of its subsidiaries and no material change has occurred in the Information or any part thereof which would have or which would reasonably be expected to have a material effect on RBC’s opinion.

In preparing its opinion, RBC has made several assumptions, including that all of the conditions required to implement the Merger will be met.

RBC’s opinion is rendered on the basis of securities markets, economic, financial and general business conditions prevailing as at the date it was rendered and the condition and prospects, financial and otherwise, of Hostopia, and its subsidiaries and affiliates, as they were reflected in the Information and as they have been represented to RBC in discussions with management of Hostopia.  In its analyses and in preparing its opinion, RBC made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of RBC or any party involved in the Merger.

In connection with its opinion, RBC reviewed and relied upon or carried out, among other things, the following:

(a)           the draft Merger Agreement dated June 18, 2008;

(b)           the draft Voting Agreement dated June 18, 2008;

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(c)           audited financial statements of Hostopia for each of the five fiscal years ended March 31, 2007 and draft unaudited financial statements for the fiscal year ended March 31, 2008;

(d)           the unaudited interim reports of Hostopia for the fiscal quarters ended June 30, September 30 and December 31, 2007;

(e)           the annual report of Hostopia for the fiscal year ended March 31, 2007 and the draft annual report of Hostopia for the fiscal year ended March 31, 2008;

(f)            the prospectus for the public offering of common stock of Hostopia dated November 3, 2006;

(g)           the Notice of Annual Meeting of Shareholders and Management Information Circular of Hostopia for the fiscal year ended March 31, 2007;

(h)           unaudited projected financial statements for Hostopia on a consolidated basis prepared by management of Hostopia for the five fiscal years ending March 31, 2009 through March 31, 2013 including a base case forecast (the “Base Case Management Forecast”) and an upside case forecast (the “Upside Case Management Forecast”);

(i)            discussions with senior management of Hostopia;

(j)            discussions with Hostopia’s legal counsel;

(k)           public information relating to the business, operations, financial performance and stock trading history of Hostopia and other selected public companies considered by RBC to be relevant;

(l)            public information with respect to other transactions of a comparable nature considered by RBC to be relevant;

(m)          public information regarding the internet infrastructure and internet software services industries;

(n)           representations contained in certificates addressed to RBC, dated as of the date of RBC’s opinion, from senior officers of Hostopia as to the completeness and accuracy of the information upon which RBC’s opinion was based; and

(o)           such other corporate, industry and financial market information, investigations and analyses as RBC considered necessary or appropriate in the circumstances.

In connection with the rendering of its opinion to the Board of Directors, RBC prepared and delivered to the Board of Directors written materials containing the analyses listed above and other information material to the opinion. Set forth below is a summary of the analyses used by RBC, including information presented in tabular format. To fully understand the summary of the analyses used by RBC, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses.

Comparable Company Trading Analysis

RBC prepared a comparable company trading analysis (“Comparable Company Trading Analysis”) of Hostopia’s implied transaction multiples relative to a group of publicly-traded companies that RBC deemed for purposes of this analysis to be comparable to Hostopia. In selecting publicly-traded companies, RBC considered comparable internet infrastructure and software companies with businesses focused primarily on services over the internet. In this analysis, RBC compared the enterprise value (“EV”) of Hostopia implied by the per share Merger Consideration, expressed as a multiple of Hostopia’s actual last twelve-months (“LTM”) revenue and LTM earnings before interest, taxes, depreciation and amortization (“EBITDA”), and projected fiscal years 2009 and 2010 revenue and EBITDA, to the respective mean and median multiples of estimated calendar years 2008 and 2009 EV-to-revenue and to EV-to-EBITDA, of the comparable companies implied by the public trading prices of their common

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stock. RBC also compared the multiples of Hostopia implied by the per share Merger Consideration, expressed as multiples of actual LTM fully-diluted earnings per share (“EPS”) and projected fiscal years 2009 and 2010 EPS, to the EPS multiples of the comparable companies implied by the public trading prices of their common stock. Projected revenue, EBITDA and EPS were based on the Base Case Management Forecast and the Upside Case Management Forecast in the case of Hostopia and, in the case of the comparable companies, on Bloomberg and ThomsonOne Analytics consensus estimates. RBC defined EV as equity value plus total debt, preferred stock and minority interest less cash, cash equivalents, marketable securities and long-term investments (as applicable). For the purpose of RBC’s analysis summarized in this section, EV-to-EBITDA multiples greater than 25x and less than zero, and Share Price-to-EPS multiples greater than 55x and less than zero were deemed Not Meaningful (“NM”).

For the purposes of its Comparable Company Trading Analysis, RBC reviewed the relevant metrics of the following publicly-traded companies (with their metrics adjusted, as applicable, in one case, to reflect recently-completed or pending acquisitions and, in two cases, for conversion of foreign currency into U.S. dollars).

Internet Infrastructure Companies:

·              Earthlink Inc.;

·              Website Pros, Inc.;

·              Peer 1 Network Enterprises, Inc.;

·              Navisite Inc.; and

·              Tucows Inc.

Software as a Service Companies

·              Intuit Inc.;

·              ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Inc.;

·              Concur Technologies Inc.;

·              Digital River Inc.;

·              Netsuite Inc.;

·              j2 Global Communications Inc.;

·              Acxiom Corp.;

·              Ultimate Software Group Inc.;

·              Constant Contact Inc.; and

·              Liveperson Inc.

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The following table presents, as of June 17, 2008, Hostopia’s implied EV-to-revenue, EV-to-EBITDA and price-to-EPS multiples, and the corresponding multiples for the comparable companies, for the periods reviewed by RBC in connection with its analysis:

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RBC noted that: (1) Hostopia’s multiples implied by the per share Merger Consideration for the projected years 2008 and 2009 EV-to-revenue, in each of the management forecasts, were above the observed range of multiples and were above the mean and median multiples of the internet infrastructure companies analyzed. Hostopia’s multiples implied by the per share Merger Consideration for the projected years 2008 and 2009 EV-to-revenue, in each of the management forecasts, were within the observed range of multiples and were below the mean and median multiples of the software as a service companies analyzed; (2) Hostopia’s EV-to-EBITDA multiples implied by the Merger Consideration for the projected years 2008 and 2009, in each of the management forecasts, were above the observed range of multiples and were above the mean and median multiples of the internet infrastructure companies analyzed. Hostopia’s EV-to-EBITDA multiples implied by the Merger Consideration for the projected year 2008, in each of the management forecasts, were above the observed range of multiples and were above the mean and median multiples of the software as a service companies analyzed; (3) Hostopia’s multiple implied by the Merger Consideration for 2008 projected earnings per share, in each of the management forecasts, was above the range of observed multiples and above the mean and median multiples of the internet infrastructure and software as a service comparable companies analyzed.

Precedent Transactions Analysis

RBC compared EV-to-LTM revenue and EV-to-LTM EBITDA multiples relating to the Merger with corresponding multiples in selected publicly-announced precedent merger and acquisition transactions involving companies providing software or services over the internet (“Precedent Transaction Analysis”). In selecting precedent transactions, RBC considered comparable transactions announced since January 1, 2004 in which the transaction values were between $25 million and $500 million. Based on these criteria, the following sixteen transactions were analyzed:

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For the purpose of calculating the multiples, multiples of LTM revenue and LTM EBITDA were derived from the actual revenue, and adjusted EBITDA (adjusted to exclude non-cash and one-time charges), of the target companies in the last twelve months prior to the announcement of the transaction. Financial data regarding the precedent transactions was taken from filings with the SEC, press releases, Bloomberg and other publicly available sources.

The following table compares the implied transaction multiples for the Merger with the corresponding mean and median multiples for the selected precedent transactions:

RBC noted that Hostopia’s multiple for LTM EBITDA implied by the per share Merger Consideration was within the range of observed transactions and above the mean and median multiples found in the selected precedent transactions analyzed.

Unlevered Discounted Cash Flow (“DCF”) Analysis

RBC performed a DCF analysis for Hostopia in which it calculated the present value of the projected after-tax, unlevered cash flows of Hostopia for the fiscal years 2009 through 2013 based on the financial projections and other information provided by and discussions with management of Hostopia. RBC utilized both the Base Case Management Forecast and the Upside Case Management Forecast to perform the DCF analysis.

In completing the DCF analysis, RBC performed a variety of sensitivity analyses using the aforementioned financial projections. Variables sensitized included revenue growth, operating margins, discount rates and terminal value assumptions.

RBC utilized a range of discount rates from 16% to 20% and a range of terminal value multiples from 6.0x to 10.0x forecasted 2013 EBITDA. Based on this range of discount rates and terminal value multiples, RBC calculated the implied equity value per share for Hostopia, as shown in the table below:

RBC noted that the Merger Consideration of $10.55 per share was in excess of the implied equity values per share based upon the DCF analysis of the Base Case Management Forecast and the Upside Case Management Forecast.

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Premiums Analysis

RBC compared the premiums implied by the per share Merger Consideration to the premiums paid in selected precedent publicly-announced merger and acquisition transactions in the information technology industry (this was a different and broader group of transactions than those selected for the Precedent Transaction Analysis). In selecting precedent transactions, RBC considered comparable U.S transactions announced since January 1, 2006 with public targets in which the transaction values were between U.S.$50 million and U.S.$250 million, which totalled 37 transactions. In addition, RBC considered comparable Canadian technology transactions announced since January 1, 2002 with public targets in which the transaction values were between $50 million and $1 billion, which totalled 28 transactions. RBC performed this analysis taking into account the trading prices of Hostopia’s common stock during periods it considered relevant ended on June 17, 2008, the last trading day prior to RBC finalizing its presentation to the Board of Directors with respect to RBC’s conclusions on the fairness, from a financial point of view, of the per share Merger Consideration to the Hostopia stockholders. RBC compared the premiums implied by dividing the per share Merger Consideration by Hostopia’s “spot” stock price one day prior to the date of RBC’s opinion, one week and one month prior to June 17, 2008 to the spot price premiums for the same periods for the targets in the selected precedent transactions. The following table summarizes this analysis:

(1) Based on comparison to target company trading prices at indicated points before announcement.

RBC noted that during the measuring period ended June 17, 2008, the spot one day, one week and one month premiums implied by the per share Merger Consideration as of June 17, 2008 were (i) within the observed range and above both the mean and median of the selected U.S. precedent transactions premiums analyzed, and (ii) above the observed range and above both the mean and median of the selected Canadian precedent transactions premiums analyzed.

Overview of Analysis; Other Considerations

In reaching its opinion, RBC did not assign any particular weight to any one analysis or the results yielded by that analysis. Rather, having reviewed these results in the aggregate, RBC exercised its professional judgment in determining that, based on the aggregate of the analyses used and the results they yielded, the per share Merger Consideration was fair, from a financial point of view, to the Hostopia stockholders. RBC believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the analyses and, accordingly, also made qualitative judgments concerning differences between the characteristics of Hostopia and the Merger and the data selected for use in its analyses, as further discussed below.

No single company or transaction used in the above analyses as a comparison is identical to Hostopia or the Merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, businesses, or transactions analyzed. The analyses were prepared solely for purposes of RBC providing an opinion as to the fairness of the per share Merger Consideration, from a financial point of view, to the Hostopia stockholders and do not purport to be

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appraisals or necessarily reflect the prices at which businesses or securities actually may be sold, which are inherently subject to uncertainty.

The opinion of RBC as to the fairness, from a financial point of view, of the per share Merger Consideration, was necessarily based upon market, economic, and other conditions that existed as of the date of its opinion and on information available to RBC as of that date.

The preparation of a fairness opinion is a complex process that involves the application of subjective business judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Several analytical methodologies were used by RBC and no one method of analysis should be regarded as critical to the overall conclusion reached. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. The overall conclusions of RBC were based on all the analyses and factors presented herein taken as a whole and also on application of RBC’s own experience and judgment. Such conclusions may involve significant elements of subjective judgment and qualitative analysis. RBC therefore believes that its analyses must be considered as a whole and that selecting portions of the analyses and of the factors considered, without considering all factors and analyses, could create an incomplete or misleading view of the processes underlying its opinion.

In connection with its analyses, RBC made, and was provided by Hostopia’s management with, numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond Hostopia’s control. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of Hostopia or its advisors, none of Hostopia, RBC or any other person assumes responsibility if future results or actual values are materially different from these forecasts or assumptions.

RBC is one of Canada’s largest investment banking firms, with operations in all facets of corporate and government finance, corporate banking, mergers and acquisitions, equity and fixed income sales and trading and investment research. RBC also has significant operations in the United States and internationally. RBC acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have positions in the securities of Hostopia, Deluxe or any of their respective associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it received or may receive compensation. As an investment dealer, RBC conducts research on securities and may, in the ordinary course of its business, provide research and investment advice to its clients on investment matters, including with respect to Hostopia, Deluxe or the Merger.

Under its May 7, 2008 engagement agreement with Hostopia (the “Engagement Agreement”), RBC became entitled to receive a fee of $400,000 upon the delivery of its June 18, 2008 opinion to the Hostopia board of directors regarding the fairness to the Hostopia stockholders, from a financial point of view, of the per share Merger Consideration, without regard to whether RBC’s opinion was accepted or the Merger is consummated. In addition, for its services as financial advisor to Hostopia in connection with the Merger, if the Merger is consummated, RBC will receive an additional larger fee, against which the opinion fee, as well as the monthly work fees payable under the Engagement Agreement, will be credited.  Further, in the event that the Merger is not completed and Hostopia closes another “Transaction” during the period ending on the earlier of the termination of RBC’s engagement and twelve months ending from the date of the Engagement Agreement, RBC will be entitled to a special fee (all as specified in the Engagement Agreement). In addition, Hostopia has agreed to indemnify RBC and its affiliates for certain liabilities that may arise out of its engagement and reimburse RBC for its reasonable out-of-pocket expenses incurred in entering into and performing the Engagement Agreement. The terms of the Engagement Agreement were negotiated at arm’s-length between the Board of Directors and RBC and the Board of Directors were aware of this fee arrangement at the time of their approval of the Merger Agreement.

Financing of the Merger

On the Closing Date, Deluxe is required to provide evidence reasonably satisfactory to Hostopia that funds have been deposited with ▇▇▇▇▇ Fargo Bank, N.A. (the “Disbursing Agent”), or such other permitted disbursing

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agent, representing the Merger Consideration multiplied by the number of shares of Hostopia common stock issued and outstanding immediately before the Effective Time. Deluxe is financing the Merger Consideration with cash on hand at the closing of the Merger, including cash obtained from committed lines of credit. Hostopia estimates that the total amount of funds necessary to finance the Merger Consideration and to make payments to holders of Hostopia’s options as required by the Merger Agreement and to consummate the Merger and the related transactions contemplated thereby will be approximately $124 million.

Procedures for Surrender of Certificates

Each share of Hostopia common stock that is issued and outstanding immediately before the Effective Time (other than dissenting shares and shares held of record by Deluxe, Operating Sub, Sub, or any other direct or indirect subsidiary of Deluxe or the Company immediately before the Effective Time) will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and represent the right to receive $10.55 in cash, without interest, subject to any applicable tax withholdings. On the Closing Date, Deluxe is required to provide evidence reasonably satisfactory to Hostopia that it has deposited with the Disbursing Agent the cash necessary to pay the full amount of the Merger Consideration in respect of the certificates formerly representing shares of Hostopia common stock to be surrendered to the Disbursing Agent pursuant to the terms of the Merger Agreement. Promptly following the Effective Time, Deluxe will cause the Disbursing Agent to send to each holder of record of shares of Hostopia common stock (other than holders of Hostopia common stock who properly exercise their appraisal rights) immediately prior to the Effective Time a letter of transmittal and instructions for obtaining cash in exchange for shares of Hostopia common stock held by such stockholder. You should not return stock certificates with the enclosed proxy.

Upon surrender of a stock certificate formerly representing shares of Hostopia common stock, together with a duly completed and validly executed letter of transmittal, and any other documents that may be required by the Disbursing Agent, the holder of the certificate will be entitled to receive from the Disbursing Agent, on behalf of Deluxe, as promptly as practicable in accordance with the Disbursing Agent’s customary procedures, $10.55 in cash, without interest, for each share represented by the stock certificate (less any applicable tax withholdings). The stock certificates will then be cancelled.

Until surrendered, any outstanding stock certificates will, from and after the Effective Time, evidence only the right to receive $10.55 per share in cash, without interest, in the case of shares represented by stock certificates, and holders of such certificates shall cease to have any rights with respect to such shares of Hostopia common stock, except as otherwise required by the DGCL.

Treatment of Outstanding Stock Options

Pursuant to the Merger Agreement, all options to purchase shares of Hostopia common stock under the Stock Option Plans that are exercisable and are outstanding immediately prior to the Closing Date (the “Vested Options”) will be cancelled and Deluxe will, or will cause Hostopia, as the surviving corporation, to pay each holder of any such Vested Option, promptly after the Effective Time, cash in an amount (the “Settlement Amount”) (less any applicable tax withholdings) determined by multiplying:

(a)                                  the amount, if any, by which the Merger Consideration of $10.55 per share of Hostopia common stock, exceeds the exercise price of the Vested Option, by

(b)                                 the number of shares of Hostopia common stock subject to the Vested Option.

Holders of Vested Options will receive notice of and an opportunity to exercise such Vested Options in advance of the Merger.

With respect to options to purchase shares of Hostopia common stock under the Stock Option Plans that are not exercisable immediately prior to the Closing Date (the “Unvested Options”), the Merger Agreement provides that, on the Closing Date Hostopia will, at the direction of Deluxe, (a) accelerate and immediately and fully vest the Unvested Options and pay the Settlement Amount (less any applicable tax withholdings) promptly after the Effective Time, (b) provide for the cancellation of such Unvested Options, subject to the option holder’s consent, or

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(c) take such other action as may be deemed appropriate by Deluxe, subject to the option holder’s consent, if required. Deluxe may direct different treatment for different stock option holders. Hostopia expects that 77,852 Unvested Options will be accelerated and paid the Settlement Amount (less any applicable tax withholdings) promptly following the Effective Time and 285,000 Unvested Options will be cancelled.

As of June 27, 2008, there were options to purchase 542,297 shares of Hostopia common stock outstanding, representing 179,445 Vested Options and 362,852 Unvested Options (of which, 77,852 will be accelerated at the Effective Time). Using exchange rate information published by the Bank of Canada on June 26, 2008, the aggregate consideration to be received by option holders at or about the Effective Time is expected to be approximately $1,410,680, representing approximately $1,067,524 for Vested Options and approximately $343,156 for accelerated Unvested Options. See “Interests of Hostopia’s Directors and Management in the Merger – Grant of Retention Bonus”.

Effective Time and Date of the Merger

The Merger will become effective at a time (the “Effective Time”) on the fourth business day following the filing of a certificate of merger with the Secretary of State of the State of Delaware (the “Effective Date”), or at such later time as is agreed upon by Deluxe and Hostopia and specified in the certificate of merger. The filing of the certificate of merger will occur on the closing date (the “Closing Date”) which is expected to occur on the same business day as, and promptly following, obtaining the requisite vote in favour of the adoption of the Merger Agreement and approval of the Merger at the special meeting of Hostopia stockholders.

Delisting and Deregistration of Hostopia’s Common Stock and Reporting Issuer Status

If the Merger is completed, Hostopia common stock will be delisted from the TSX on the Effective Date and will be deregistered under the Securities Act in the United States. Hostopia will also apply to the securities regulatory authority in each province and territory of Canada to cease being a reporting issuer in Canada.

Appraisal Rights

The discussion of the provisions set forth below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the text of the relevant provisions of the DGCL, which is attached to this Circular as Appendix D. Stockholders intending to exercise appraisal rights should carefully review Appendix D and should consult a lawyer. Failure to follow precisely any of the statutory procedures set forth in Appendix D may result in a termination or waiver of these rights.  The following summary does not constitute legal or other advice nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262.

If the Merger is consummated, dissenting holders of Hostopia common stock who follow the procedures specified in Section 262 of the DGCL within the appropriate time periods will be entitled to have their shares of Hostopia common stock appraised by the Delaware Court of Chancery and to receive the “fair value” of such shares in cash, as determined by the Delaware Court of Chancery, in lieu of the consideration that such stockholder would otherwise be entitled to receive pursuant to the Merger Agreement.

The following is a brief summary of Section 262, which sets forth the procedures for dissenting from the Merger and demanding statutory appraisal rights. Failure to follow the procedures set forth in Section 262 precisely could result in the loss of appraisal rights.  Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, Hostopia believes that if a stockholder considers exercising such rights, such stockholder should seek the advice of legal counsel.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, Hostopia, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262.  This Circular constitutes notice to holders of Hostopia common stock concerning the availability of appraisal rights under Section 262.

Stockholders who desire to exercise their appraisal rights must satisfy all of the conditions of Section 262. A registered holder of shares of Hostopia common stock who wishes to dissent must send a written demand for

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appraisal of their shares to ▇▇▇▇▇▇▇▇.▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer, or by facsimile: ▇▇▇-▇▇▇-▇▇▇▇ to be received by Hostopia not later than the time of the special meeting.  This written demand for appraisal of shares is in addition to and separate from a vote against the Merger. Stockholders electing to exercise their appraisal rights must not vote “FOR” adoption of the Merger Agreement and approval of the Merger. A proxy or vote against the Merger, abstaining from voting, or failing to vote on the proposal to adopt and approve the Merger Agreement will not by itself constitute a demand for appraisal within the meaning of Section 262.  The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. In addition to the other requirements provided in Section 262, a stockholder of record wishing to assert appraisal rights must also hold the shares of stock on the date of making a demand for appraisal rights with respect to such shares and must continuously hold such shares through the Effective Time, since appraisal rights will be lost if the shares are transferred prior to the Effective Time.

A demand for appraisal must be executed by or for the stockholder of record and must reasonably inform Hostopia of the identity of the stockholder of record and that such stockholder intends thereby to demand appraisal of the “fair value” of the Hostopia common stock held by such stockholder. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the special meeting of stockholders will constitute a waiver of appraisal rights.  Only a holder of record of shares of common stock of Hostopia is entitled to demand an appraisal of the shares registered in that holder’s name.  A demand for appraisal in respect of shares of common stock of Hostopia should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, should specify the holder’s name and mailing address and the number of shares registered in the holder’s name and must state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the record owner. If the shares are owned of record by or for more than one person, as in a joint tenancy or tenancy in common, such demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he is acting as agent for the record owner. A person having a beneficial interest in Hostopia common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below and in a timely manner to perfect appraisal rights. If the shares are held in “street name” by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising the rights with respect to the shares held for other beneficial owners. In such case, however, the written demand should set forth the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares of common stock of Hostopia held in the name of the record owner.  Stockholders who hold their shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

A Hostopia stockholder who elects to exercise appraisal rights should mail or deliver his, her or its written demand to ▇▇▇▇▇▇▇▇.▇▇▇ Inc., at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer, or by facsimile: ▇▇▇-▇▇▇-▇▇▇▇, by no later than the time of the special meeting. The written demand for appraisal should specify the stockholder’s name and mailing address, and that the stockholder is thereby demanding appraisal of the “fair value” of his, her or its Hostopia common stock. Within ten days after the Effective Time, Hostopia must provide notice of the Effective Time to all of Hostopia stockholders who have complied with Section 262.

Within 120 days after the Effective Time (but not thereafter), any stockholder who has satisfied the requirements of Section 262 may deliver to Hostopia a written demand for a statement listing the aggregate number of shares not voted in favour of the Merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Hostopia, as the surviving corporation in the Merger, must mail such written statement to the stockholder no later than the later of (a) ten days after the stockholders’ request is received by Hostopia or (b) ten days after expiration of the period for delivery of written demands for appraisal.  Notwithstanding the foregoing, a person who is the beneficial owner of shares of common stock of Hostopia held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or request from Hostopia the statement described in this paragraph.

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Within 120 days after the Effective Time (but not thereafter), either Hostopia or any stockholder who has complied with the required conditions of Section 262 and who is otherwise entitled to appraisal rights may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the Hostopia shares of stockholders entitled to appraisal rights. Hostopia is under no obligation to and has no present intention to file such a petition if demand for appraisal is made, and holders should not assume Hostopia will file a petition.  Accordingly, it is the obligation of the holders of common stock of Hostopia to initiate all necessary action to perfect their appraisal rights in respect of shares of common stock of Hostopia within the time prescribed in Section 262.

Upon the filing of any petition by a stockholder in accordance with Section 262, service of a copy of the petition must be made upon Hostopia, and Hostopia must, within 20 days after service, file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by Hostopia. If Hostopia files a petition, the petition must be accompanied by the verified list. The Register in Chancery, if so ordered by the court, will give notice of the time and place fixed for the hearing of such petition by registered or certified mail to Hostopia and to the stockholders shown on the list at the addresses therein stated, and notice will also be given by publishing a notice at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or such publication as the court deems advisable. The forms of the notices by mail and by publication must be approved by the court, and Hostopia will bear the costs thereof. The Delaware Court of Chancery may require the stockholders who have demanded an appraisal for their shares (and who hold stock represented by certificates) to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings, and the Delaware Court of Chancery may dismiss the proceedings as to any stockholder that fails to comply with such direction.

If a petition for an appraisal is filed in a timely fashion, after a hearing on the petition, the court will determine which stockholders are entitled to appraisal rights and will appraise the shares owned by these stockholders, determining the fair value of such shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid, if any, upon the amount determined to be the fair value.  Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment.

Hostopia stockholders considering appraisal of their shares should note that the fair value of their shares determined under Section 262 could be more than, the same as, or less than the consideration they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares. Hostopia stockholders should also note that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a Merger are not opinions as to fair value under Section 262.  Although Hostopia believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the court, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration.  Neither Deluxe nor Hostopia anticipate offering more than the applicable Merger Consideration to any stockholder of Hostopia exercising appraisal rights, and reserve the right to assert, in any appraisal proceeding that, for purposes of Section 262, the “fair value” of a share of common stock of Hostopia is less than the applicable Merger Consideration.

The costs of the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, may be determined by the court and taxed against the parties as the court deems equitable under the circumstances, including by charging any costs pro rata against the value of all shares entitled to appraisal.

Any stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the Effective Time, be entitled to vote for any purpose the shares subject to demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the Effective Time.

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At any time within 60 days after the Effective Time, any stockholder will have the right to withdraw such holder’s demand for appraisal and to accept the terms offered in the Merger Agreement by delivering to Hostopia a written withdrawal of the demand for appraisal. After this period, a stockholder may withdraw his, her or its written demand for appraisal and receive payment for such holder’s shares as provided in the Merger Agreement only with Hostopia’s consent. If no petition for appraisal is filed with the court within 120 days after the Effective Time, stockholders’ rights to appraisal (if available) will cease. Inasmuch as Hostopia has no obligation to file such a petition, any stockholder who desires a petition to be filed is advised to file it on a timely basis. No petition timely filed in the court demanding appraisal may be dismissed as to any stockholder without the approval of the court, which approval may be conditioned upon such terms as the court deems just.  If Hostopia does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal, if the court does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the Merger Agreement.

If any stockholder who demands appraisal of shares of common stock of Hostopia under Section 262 fails to perfect, successfully withdraws or loses such holder’s right to appraisal, the stockholder’s shares of common stock of Hostopia will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration pursuant to the Merger Agreement.  A stockholder will fail to perfect, or effectively lose, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time.  In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 and accept the Merger Consideration offered pursuant to the Merger Agreement.

Failure by any Hostopia stockholder to comply fully with the procedures described above and set forth in Appendix D to this Circular may result in the loss of such stockholder’s appraisal rights.

THE MERGER AGREEMENT

The following description summarizes the material provisions of the Merger Agreement. This summary is qualified in its entirety by the Merger Agreement. Stockholders should read carefully the Merger Agreement, which is attached as Appendix B to this Circular, as it is the legal document that governs the Merger.

Merger Consideration

At the Effective Time, each outstanding share of Hostopia common stock, other than shares of Hostopia common stock held by Deluxe, Operating Sub and Sub or any of their or Hostopia’s respective subsidiaries and those shares held by stockholders who perfect their appraisal rights (as described in “The Merger—Appraisal Rights”), will be automatically converted into the right to receive $10.55 in cash, without interest, upon surrender of the certificate formerly representing such share(s) of Hostopia common stock (less any applicable tax withholdings). Any shares of Hostopia common stock held by Deluxe, Operating Sub, Sub or any of their or Hostopia’s respective subsidiaries immediately prior to the Effective Time will be cancelled in the Merger without payment. The price of $10.55 per share was determined through arm’s length negotiations between Deluxe and Hostopia.

Treatment of Outstanding Stock Options

Pursuant to the Merger Agreement, all Vested Options will be cancelled and Deluxe will, or will cause Hostopia, as the surviving corporation, to, pay each holder of any such Vested Option, within 15 days after the Effective Time, the applicable Settlement Amount (less any applicable tax withholdings). Holders of Vested Options will receive notice of and an opportunity to exercise such Vested Options in advance of the Merger.

With respect to Unvested Options, the Merger Agreement provides that on the Closing Date, Hostopia will, at the direction of Deluxe, (a) accelerate and immediately and fully vest the Unvested Options and pay the Settlement Amount (less any applicable tax withholdings) promptly after the Effective Time, (b) provide for the cancellation of such Unvested Options, subject to the option holder’s consent, or (c) take such other action as may be deemed appropriate by Deluxe, subject to the option holder’s consent, if required. Deluxe may direct different treatment for different option holders.

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See “The Merger – Treatment of Outstanding Stock Options” for additional information.

Conditions to the Completion of the Merger

Each party’s obligation to consummate the Merger is subject to the satisfaction or waiver of various conditions set forth in the Merger Agreement, which include the following mutual conditions:

(a)           the holders of at least a majority of the outstanding shares of Hostopia common stock have voted in favour of adopting the Merger Agreement;

(b)           no proceedings have been brought by a governmental authority or laws adopted that may restrain or otherwise make the consummation of the Merger illegal; and

(c)           all material consents, approvals, filings and notices with respect to governmental authorities required to permit the consummation of the Merger have been taken or made.

Deluxe’s obligations to complete the Merger are also subject to the satisfaction or waiver by Deluxe of certain conditions including, among others:

(a)           Hostopia has performed in all material respects all of its obligations under the Merger Agreement;

(b)           Hostopia’s representations and warranties contained in the Merger Agreement are true and correct except to the extent that inaccuracies have not had and would not reasonably be expected to have a Material Adverse Effect on Hostopia;

(c)           there has not been any event, development or condition (financial or otherwise) of any character that has or would reasonably be expected to have a Material Adverse Effect on Hostopia;

(d)           the holders of not more than 10% of the issued and outstanding shares of Hostopia common stock shall have exercised their statutory appraisal rights under the DGCL before or at the time of the stockholders’ vote on the Merger Agreement and the Merger; and

(e)           Hostopia has provided a termination statement or other evidence reasonably satisfactory to Deluxe that the liens on Hostopia’s assets in favour of The Royal Bank of Canada have been released.

Hostopia’s obligation to complete the Merger is also subject to the satisfaction or waiver by Hostopia of certain conditions, including, among others:

(a)           each of Deluxe, Operating Sub and Sub has performed in all material respects all of its obligations under the Merger Agreement; and

(b)           the representations and warranties of each of Deluxe, Operating Sub and Sub contained in the Merger Agreement are true and correct, except as would not be reasonably likely to impair the consummation of the Merger.

Adverse Recommendation Change

The Board of Directors may make an Adverse Recommendation Change only if it determines in good faith (after consultation with Hostopia’s outside legal counsel) that it is required to do so in order to comply with its fiduciary duties under Delaware law.

Material Adverse Effect

The Merger Agreement provides that a material adverse effect (“Material Adverse Effect”) is any change, effect, event, occurrence, state of facts, or development that, individually or in the aggregate with all other changes, effects, events, occurrences, states of facts or developments,

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(a)           is materially adverse to the business, operations, results of operations, properties, assets, liabilities, or condition (financial or otherwise) of Hostopia and its subsidiaries, taken as a whole; provided, however, that none of the following will be taken into account in determining whether there has been or would reasonably be expected to be a material adverse effect:

(i)            any change in the market price or trading volume of Hostopia common stock after the date of the Merger Agreement;

(ii)          any change generally relating to the economy or securities markets of the United States or Canada or generally affecting the industry in which Hostopia and its subsidiaries operate that does not have a materially disproportionate effect on Hostopia and its subsidiaries;

(iii)          any acts of God, terrorism or war (whether or not declared) that do not have a materially disproportionate effect on Hostopia and its subsidiaries;

(iv)          any adverse change resulting from compliance with the terms of, or the taking of any action at the direction of Deluxe or required by, the Merger Agreement, including the failure to take any action as a result of restrictions or other prohibitions set forth in the Merger Agreement;

(v)           any changes (after the date of the Merger Agreement) in GAAP or applicable law, except to the extent that any such change has a materially disproportionate effect on Hostopia and its subsidiaries compared to other companies in the industry in which Hostopia and its subsidiaries operate; or

(vi)          the announcement, pendency or consummation of the Merger (including any loss of or adverse change in the relationship of Hostopia and its subsidiaries with their respective employees, customers, partners or suppliers related thereto); or

(b)           would prevent the consummation of the Merger or any of the transactions contemplated by the Merger Agreement.

No Solicitation

Until the earlier of the Effective Time or termination of the Merger Agreement, Hostopia has agreed that Hostopia will not, and will not authorize or permit any of its officers, directors, employees, financial advisers, legal counsel, representatives, agents, subsidiaries, or affiliates to, directly or indirectly:

(a)           solicit, seek, initiate, or encourage any inquiries or proposals that constitute, or would be reasonably likely to lead to, an Acquisition Proposal;

(b)           engage in discussions or negotiations with any third party (other than Deluxe or its affiliates) concerning any Acquisition Proposal, or provide any non-public information, or afford access to the properties, books, records, or personnel of Hostopia or any of its subsidiaries, to any third party that is considering making, or has made, any Acquisition Proposal;

(c)           enter into any letter of intent, agreement in principle, or other agreement, arrangement, or understanding with respect to an Acquisition Proposal; or

(d)           otherwise agree to or recommend any Acquisition Proposal.

In addition, Hostopia shall, and shall cause its officers, directors, employees, financial advisers, legal counsel, representatives, agents, subsidiaries, and affiliates to, immediately cease and cause to be terminated immediately all existing activities, discussions, and negotiations with any third parties conducted prior to the date of the Merger Agreement with respect to, or that would reasonably be expected to lead to, any Third-Party Transaction.

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Under the terms of the Merger Agreement, however, Hostopia is not prevented from complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. Further, Hostopia may, before the adoption of the Merger Agreement and approval of the Merger by Hostopia stockholders, furnish non-public information or afford access to the properties, books, records, or personnel of Hostopia or any of its subsidiaries to, or enter into discussions or negotiations with, any third party in connection with an Acquisition Proposal, if and only to the extent that:

(a)           the Acquisition Proposal was made after the date of the Merger Agreement and was not solicited, sought, encouraged, or initiated in violation of the Merger Agreement;

(b)          the Board of Directors, in the exercise of its fiduciary duties, determines in good faith (after consultation with Hostopia’s financial adviser and outside legal counsel) that the Acquisition Proposal is, or is reasonably likely to result in, a Superior Proposal; and

(c)           before furnishing such non-public information, affording such access, or entering into such discussions or negotiations, Hostopia receives from the third party an executed confidentiality agreement with terms no less favourable to Hostopia in all material respects than the letter agreement regarding confidentiality from Hostopia to Deluxe and Hostopia contemporaneously furnishes such information to Deluxe (to the extent such information has not been previously furnished by Hostopia to Deluxe).

If the Board of Directors determines in good faith in the exercise of its fiduciary duties (after consultation with Hostopia’s financial adviser and outside legal counsel) to recommend or approve a Superior Proposal, then:

(a)           at least four business days prior to such recommendation or approval, Hostopia is required to give Deluxe written notice thereof (which notice will not constitute an Adverse Recommendation Change) and furnish Deluxe with a copy of the definitive agreement Hostopia is prepared to execute with respect to the transactions contemplated by the Superior Proposal and will afford a reasonable opportunity to Deluxe within such four-business-day period to make such adjustments to the Merger Agreement as would enable the Board of Directors to maintain its recommendation of the Merger Agreement and the Merger to Hostopia stockholders and enable Hostopia to proceed with the Merger on such adjusted terms (with any amendment to the financial terms or any other material term of the Superior Proposal requiring a new four-business-day notice and an additional right of Deluxe to make adjustments to the Merger Agreement); and

(b)           the Superior Proposal will not be recommended or approved by the Board of Directors nor will any notice of termination of the Merger Agreement be given by Hostopia in connection therewith if Deluxe submits to Hostopia during such four-business-day period a legally binding, executed offer to enter into an amendment to the Merger Agreement within such four-business-day period reflecting such adjustments, unless the Board of Directors has determined in good faith (after consultation with Hostopia’s financial adviser and outside legal counsel) that the transactions contemplated in the Merger Agreement, as modified by the amendment to the Merger Agreement that Deluxe has agreed to enter into during such four-business-day period, would not, if consummated, result in a transaction that is at least as favourable to Hostopia stockholders (in their capacity as stockholders) from a financial point of view as the Superior Proposal.

The Board of Directors may recommend, approve, or accept a Superior Proposal only if Hostopia terminates the Merger Agreement and, concurrently with such termination, makes the payment of the $4.3 million termination fee and up to $500,000 in expense reimbursement to Deluxe. See also “The Merger Agreement – Termination of the Merger Agreement”.

Hostopia is required to notify Deluxe immediately after receipt by Hostopia (or its advisers) of any Acquisition Proposal or any request for non-public information, or for access to the properties, books, records, or personnel of Hostopia or any of its subsidiaries, by any third party that is considering making, or has made, an Acquisition Proposal. Hostopia is also required to keep Deluxe informed, on a reasonably current basis, of the status of any discussions or negotiations regarding any Acquisition Proposal and the terms being discussed.

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Termination of the Merger Agreement

Deluxe and Hostopia can terminate the Merger Agreement at any time prior to the Effective Time, even after the Hostopia stockholders have adopted the Merger Agreement, under certain circumstances, including:

(a)           by mutual written consent;

(b)           by either Hostopia or Deluxe if:

(i)           the Merger has not been consummated on or before November 14, 2008, if such terminating party is not in breach of its obligations under the Merger Agreement;

(ii)          any governmental authority has taken any final action restraining or otherwise prohibiting the consummation of the Merger, or if any law is adopted that makes consummation of the Merger illegal; or

(iii)         if the Hostopia stockholders fail to adopt the Merger Agreement and approve the Merger;

(c)           by Deluxe if:

(i)           any of the representations, warranties, covenants or agreements of Hostopia contained in the Merger Agreement becomes impossible to fulfill, other than for reasons totally within the control of Deluxe or its subsidiaries;

(ii)          Hostopia fails to call or hold the special meeting, to solicit proxies in connection with the special meeting in favour of adoption of the Merger Agreement and approval of the Merger, or to conduct the vote to consider the Merger Agreement and the Merger;

(iii)         the Board of Directors fails to recommend the Merger to Hostopia’s stockholders or makes, or publicly announces an intent to make, an Adverse Recommendation Change;

(iv)         the Board of Directors or any committee thereof makes a determination to accept, recommend or approve an Acquisition Proposal or a proposal for a Third-Party Transaction;

(v)          Hostopia enters into any agreement for a Third-Party Transaction; or

(vi)         Hostopia materially breaches its non-solicitation obligations under the Merger Agreement. See “The Merger – No Solicitation”.

(d)           by Hostopia, if:

(i)           any of the representations, warranties, covenants or agreements of Deluxe, Operating Sub or Sub contained in the Merger Agreement becomes impossible to fulfill, other than for reasons totally within the control of Hostopia; or

(ii)          the Board of Directors recommends or approves a Superior Proposal, provided that Hostopia fulfills its obligations to Deluxe under the Merger Agreement, including the payment of the $4.3 million termination fee and up to $500,000 of documented expenses of Deluxe incurred in connection with the proposed Merger (as discussed in the subsection entitled “The Merger Agreement—Termination Fees and Expenses”) and Hostopia immediately enters thereafter substantially concurrently into a definitive agreement with respect to such Superior Proposal.

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Termination Fees and Expenses

The Merger Agreement provides that Hostopia will pay Deluxe a termination fee in the amount of $4.3 million, if the Merger Agreement is terminated either:

(a)           by Hostopia, as a result of the Board of Directors recommending or approving a Superior Proposal and Hostopia enters into a definitive agreement with respect to such Superior Proposal; or

(b)           by Deluxe, if:

(i)            Hostopia fails to call or hold the special meeting, to solicit proxies in connection with the special meeting in favour of adoption of the Merger Agreement and approval of the Merger, or to conduct the vote to consider the Merger Agreement and the Merger;

(ii)           the Board of Directors fails to recommend the Merger to Hostopia’s stockholders or makes, or publicly announces an intent to make, an Adverse Recommendation Change;

(iii)          the Board of Directors or any committee thereof makes a determination to accept, recommend or approve an Acquisition Proposal or a proposal for a Third-Party Transaction;

(iv)          Hostopia enters into any agreement for a Third-Party Transaction; or

(v)           Hostopia materially breaches its non-solicitation obligations under the Merger Agreement.

The Merger Agreement further provides that if the Merger Agreement is terminated by Hostopia or Deluxe because of an event described under either paragraph (b)(i) or (b)(ii) of the heading “The Merger Agreement – Termination of the Merger Agreement” or by Deluxe because of an event described under paragraph (c)(i) of the heading “The Merger Agreement – Termination of the Merger Agreement” and

(a)           before such termination,

(i)            any person or group has informed Hostopia (or the Board of Directors or any officer of Hostopia) after the date of the Merger Agreement that such person or group proposes, intends to propose, is considering proposing, or will or may, if the Merger is delayed, abandoned, or not approved by Hostopia’s stockholders, propose, a Third-Party Transaction, or

(ii)           any such person or group or Hostopia publicly announces or it otherwise has become publicly known that such person or group has proposed, intends to propose, is considering proposing, or will or may, if the Merger is delayed, abandoned, or not approved by the Hostopia’s stockholders, propose, a Third-Party Transaction, and

(b)           within one year after such termination Hostopia or any of its subsidiaries enters into a definitive agreement for, or consummates, a Third-Party Transaction (whether or not involving such person or group),

then, substantially concurrently with the time it or any of its subsidiaries enters into such definitive agreement for, or consummates, such Third-Party Transaction, Hostopia is required to pay to Deluxe the termination fee of $4.3 million. The Merger Agreement provides that in no event will more than one termination fee be payable by Hostopia.

The Merger Agreement provides that all costs and expenses incurred in connection with the Merger Agreement are to be paid by the party incurring such costs and expenses. However, if the Merger Agreement is

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terminated and Deluxe is entitled to a termination fee, then Hostopia is required to pay Deluxe’s documented reasonable out-of-pocket expenses incurred in connection with the proposed Merger up to $500,000.

Conduct of Business Pending the Merger

Under the Merger Agreement, Hostopia has agreed that, prior to the Effective Time, subject to certain exceptions, Hostopia:

(a)           will use its reasonable best efforts to preserve intact in all material respects its business organization, assets, and technology and those of its subsidiaries, to maintain its rights and franchises and those of its subsidiaries, to keep available to itself and to the surviving corporation the services of the present officers and employees of Hostopia and its subsidiaries, and to preserve for itself and for the surviving corporation the present relationships of Hostopia and its subsidiaries with persons having significant business dealings with Hostopia or any of its subsidiaries; and

(b)           will, and will cause each of its subsidiaries to, except as otherwise consented to in writing by Deluxe, conduct its business and operations in the ordinary course consistent with past practice.

In addition, Hostopia has agreed that prior to the Effective Time, subject to certain exceptions, Hostopia will not, and will not permit any of its subsidiaries to, except as otherwise consented to in writing by Deluxe:

(a)           amend its certificate of incorporation, by-laws, or charter documents, or alter through merger, liquidation, reorganization, restructuring, or in any other fashion the corporate structure or ownership of any subsidiary of Hostopia;

(b)           increase or decrease the number of authorized shares of its capital stock;

(c)           issue, grant, sell, or pledge any shares of capital stock or other equity securities of Hostopia or any of its subsidiaries (other than the issuance of shares of Hostopia common stock upon exercise of options outstanding as of the date of the Merger Agreement) or any options, warrants, or other rights to purchase any such capital stock or other equity securities or any securities convertible into or exchangeable for any such capital stock or other equity securities or any stock appreciation rights, performance shares, phantom stock, or other similar rights based upon the value of any such capital stock or other equity securities, or reprice any options;

(d)          split, combine, or reclassify any shares of its capital stock or make any other changes in its equity capital structure;

(e)           purchase, redeem, or cancel for value, or permit any of its subsidiaries to purchase, redeem, or cancel for value, directly or indirectly, any shares of capital stock or other equity securities of Hostopia or any of its subsidiaries or any options or other rights to purchase any such capital stock or other equity securities or any securities convertible into or exchangeable for any such capital stock or other equity securities except such cancellation of options as required in connection with the Merger;

(f)           declare, set aside, or pay, or permit any of its subsidiaries to declare, set aside, or pay, any dividend or other distribution or payment in cash, stock, or property in respect of shares of its capital stock or other equity securities, except that any subsidiary of Hostopia may pay dividends or other distributions to Hostopia or any of its other wholly-owned subsidiaries;

(g)          designate any class or series of shares of Hostopia preferred stock;

(h)           purchase, lease, or otherwise acquire (including acquisitions by merger, consolidation, or stock or asset purchase) any assets or properties, other than those the fair value of which does not exceed $100,000 individually or $250,000 in the aggregate, and other than inventory and supplies acquired in the ordinary course of business consistent with past practice;

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(i)            sell, lease, encumber, mortgage, or otherwise dispose of any material assets or properties, except that Hostopia and its subsidiaries may sell or otherwise dispose of inventory and obsolete equipment in the ordinary course of business consistent with past practice;

(j)            waive, release, grant, or transfer any rights of material value or modify or change in any material respect any existing license, contract, or other document or agreement, other than in the ordinary course of business consistent with past practice;

(k)           incur any indebtedness for money borrowed, other than indebtedness of Hostopia to its wholly-owned subsidiaries or of a wholly-owned subsidiary to Hostopia or its other wholly owned subsidiaries, or incur any purchase money indebtedness for fixed assets or enter into any financing, “synthetic,” or capitalized lease;

(l)            incur any other liability or obligation (except of Hostopia to its wholly-owned subsidiaries or of a wholly-owned subsidiary to Hostopia or its other wholly owned subsidiaries), other than in the ordinary course of business consistent with past practice, or assume, guarantee, endorse (other than endorsements of checks in the ordinary course of business) or otherwise as an accommodation become responsible for the obligations of any other person (except by Hostopia with respect to the obligations of its wholly-owned subsidiaries or by a subsidiary with respect to the obligations of Hostopia or its other wholly-owned subsidiaries);

(m)          except as otherwise required by the Merger Agreement, (i) enter into any new employee benefit plan, program, or arrangement, or any new employment, severance, or consulting agreement; (ii) amend any existing employee benefit plan, program, or arrangement, or any existing employment, severance, or consulting agreement; (iii) pay any retention, “stay,” transaction, or other bonuses in connection with the Merger; (iv) grant any increases in compensation or benefits other than pursuant to customary salary and employee benefit administration in the ordinary course of business consistent with past practice; (v) hire any new employee of Hostopia or any of its subsidiaries at an annual compensation rate in excess of customary practice or, in any event, in excess of $100,000; or (vi) engage any new consultant of Hostopia outside of the ordinary course of business;

(n)           enter into, extend, renew, modify, or amend any collective bargaining agreement;

(o)           enter into any other material transaction, other than in the ordinary course of business consistent with past practices;

(p)           make any tax election or settle or compromise any material tax liability;

(q)           change any accounting principles used by it, unless required by GAAP;

(r)            settle any litigation, proceedings, or material claims other than those arising in the ordinary course of business;

(s)           enter into any agreement with any affiliate of Hostopia or any associate, other than agreements solely between Hostopia and one or more of its wholly-owned subsidiaries or between two or more of the Hostopia’s wholly-owned subsidiaries; or

(t)            enter into any contract, agreement, commitment, or arrangement with respect to any of the foregoing.

Employee Benefits

Pursuant to the Merger Agreement, Hostopia will cause any Employee Plans that it may maintain to be amended for the purpose of permitting the Employee Plans to continue to operate in conformity with tax, pension and other applicable laws in effect on or before the Merger, subject to approval of any such amendment by Deluxe.  Hostopia will take any actions necessary to terminate effective at or, at the election of Deluxe, immediately before the Effective Time, any Employee Plans that Deluxe requests to be terminated.

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Deluxe will take such actions as are necessary to provide each employee of Hostopia and its subsidiaries with credit for service for Hostopia and certain of its subsidiaries for purposes of vesting, eligibility and participation (but not benefit accruals under any defined benefit plan or eligibility for post-retirement medical benefits) under any benefit plan or arrangement of Deluxe in which such employee of Hostopia and its subsidiaries may participate on or after the Effective Time in the same manner as if such service had been service for Deluxe; provided that (a) service will only be required to be credited to the extent such service was recognized by Hostopia and certain of its subsidiaries prior to the Effective Time, and (b) no such credit will be required to the extent that such credit would result in a duplication of benefits for the same period of service.

Subject to the requirements of applicable law, Deluxe will take such actions as are necessary to cause the group health plan maintained by Deluxe, and applicable insurance carriers, third-party administrators, and any other third parties, to the extent such group health plan is made available to employees of Hostopia and its subsidiaries, to (a) waive any evidence-of-insurability requirements, waiting periods, and limitations as to pre-existing medical conditions under the group health plan that are applicable to employees of Hostopia and its subsidiaries and their spouses and eligible dependents (but only to the extent that such requirements, waiting periods, and pre-existing condition limitations did not apply or were satisfied under the group health plan maintained by Hostopia or certain of its subsidiaries before the Effective Time) and (b) provide each employee of Hostopia or any of its subsidiaries with credit, for the calendar year in which the Effective Time occurs, for the amount of any out-of-pocket expenses that are paid by such employee before the Effective Time under the group health plan maintained by Hostopia or certain of its subsidiaries during such calendar year toward any annual deductible or annual out-of-pocket maximum that applies under the group health plan maintained by Deluxe that may be extended to such employee during such calendar year.

If Deluxe directs pursuant to the Merger Agreement that an Employee Plan qualified under Section 401(a) of the Code be terminated before the Effective Time, Deluxe shall take such actions as are necessary to cause a retirement plan maintained by it or one of its affiliates that is qualified under Section 401(a) of the Code to accept direct and indirect rollover distributions from such Employee Plan, by the employees of Hostopia and its subsidiaries who continue employment following the Closing, of account balances maintained by them under such Employee Plan, including promissory notes evidencing outstanding plan loans (if any).

Amendment and Modification

To the extent permitted by applicable law, the Merger Agreement may be amended by written agreement of Hostopia, Deluxe, Operating Sub and Sub at any time before the Effective Time with respect to any of the terms contained in the Merger Agreement. However, after the special meeting, no amendment will be made that by applicable law requires further approval by the stockholders of Hostopia or Deluxe without such further approval of such stockholders.

Representations and Warranties

The Merger Agreement contains representations and warranties made by Hostopia to Deluxe, Operating Sub and Sub and representations and warranties made by Deluxe, Operating Sub and Sub to Hostopia. The statements embodied in those representations and warranties were made for purposes of the agreement among the parties and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the agreement. In addition, certain representations and warranties were made as of a specific date, may be subject to contractual standards of materiality different from those generally applicable to stockholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters of fact. In addition, the representations and warranties (a) have been qualified by disclosures made to the other parties in connection with the Merger Agreement, (b) will not survive consummation of the Merger and cannot be the basis for any claims under the Merger Agreement by the other parties after termination of the Merger Agreement, and (c) at closing, must only be true and correct subject to the standards contained in the Merger Agreement, which may differ from what may be viewed as material by stockholders. For the foregoing reasons, you should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information.

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The representations and warranties by Hostopia in the Merger Agreement relate to, among other things:

(a)                                  corporate existence and power;

(b)                                 capitalization;

(c)                                  corporate authorization;

(d)                                 governmental authorization;

(e)                                  non-contravention and consents;

(f)                                    SEC filings;

(g)                                 financial statements;

(h)                                 internal controls over financial reporting;

(i)                                     compliance with TSX rules;

(j)                                     no undisclosed material liabilities;

(k)                                  absence of certain changes;

(l)                                     taxes;

(m)                               title or other interests to property, assets and rights;

(n)                                 real property and interests in real property;

(o)                                 material contracts;

(p)                                 intellectual property;

(q)                                 litigation;

(r)                                    compliance with laws;

(s)                                  licenses and permits;

(t)                                    employee benefit plans;

(u)                                 employment and labour matters;

(v)                                 environmental matters;

(w)                               suppliers and customers;

(x)                                   insurance;

(y)                                 Competition Act (Canada) requirements;

(z)                                   DGCL anti-takeover provisions;

(aa)                            Hostopia stockholder voting requirements;

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(bb)                          associate transactions;

(cc)                            unregistered sale of securities; and

(dd)                          brokers, finders and transaction fees.

Funding Commitment

The Merger Agreement contains customary representations and warranties by Deluxe, Operating Sub and Sub to Hostopia, including to have sufficient funds for the payment of the aggregate Merger Consideration at the Effective Time.

Hostopia Certificate of Incorporation and Bylaws

The Merger Agreement provides that, as of the Effective Time, the certificate of incorporation of Hostopia, as in effect immediately prior to the Effective Time, will be amended and restated and will be the certificate of incorporation of the surviving corporation. The Merger Agreement also provides that, as of the Effective Time, the by-laws of Sub, as in effect immediately prior to Effective Time, will be the by-laws of the surviving corporation, until changed or amended.

Assignment

No party may assign any of its right, interests or obligations under the Merger Agreement without the prior written consent of each other party thereto, except that Sub may assign to any other direct or indirect wholly-owned subsidiary of Deluxe any and all rights and obligations of Sub under the Merger Agreement, provided that any such assignment will not relieve Deluxe from any of its obligations under the Merger Agreement.

INTERESTS OF HOSTOPIA’S DIRECTORS AND MANAGEMENT IN THE MERGER

In considering the recommendation of the Board of Directors in favour of the adoption of the Merger, you should be aware that members of the Board of Directors and certain of Hostopia’s officers have interests in the Merger that are different from, or in addition to, the interests of Hostopia stockholders.

These interests, to the extent material, are described below and, except as described below, such persons have no material interest in the Merger apart from those of Hostopia stockholders generally. No Hostopia director or executive officer has been asked to join the board of directors of Deluxe. The Board of Directors was aware of, and considered the interests of, Hostopia’s directors and officers in approving the Merger Agreement and the Merger.

Indemnification

The Merger Agreement provides that Deluxe will cause Hostopia, as the surviving corporation, to maintain all rights to indemnification, expense advancement, and exculpation existing in favour of any person who is or was a director or officer of Hostopia or any of its subsidiaries before the Effective Time, as provided in the certificate of incorporation or by-laws of Hostopia or its subsidiaries as in effect on the date of the Merger Agreement, and provides that such provisions will survive the Merger for a period of six years after the Effective Time (or, with respect to any relevant claim made within such six year period, until final disposition of such claim).

Directors’ and Officers’ Liability Insurance

The Merger Agreement provides that, for a period of six years after the Effective Time, Deluxe will cause Hostopia, as the surviving corporation, to maintain in effect either:

(a)                                  the current policy of directors’ and officers’ liability insurance maintained by Hostopia (or a substitute policy of at least the same coverage and containing terms and conditions that are no less advantageous in any material respects) covering such parties with respect to claims arising from facts or events that occurred at or before the Effective Time; provided that (i) in no event will Hostopia, as the surviving corporation, be required to pay more than an amount per year equal to 200% of the current annual premium paid by Hostopia for such existing insurance coverage (the “D&O Cap”), and (ii) if equivalent coverage

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cannot be obtained, or can be obtained only by paying an annual premium in excess of the D&O Cap, the surviving corporation will only be required to obtain as much coverage as can be obtained by paying an annual premium equal to the D&O Cap; or

(b)                                 a run-off policy or endorsement with respect to the current policy of directors’ and officers’ liability insurance maintained by Hostopia covering such parties with respect to claims asserted within six years after the Effective Time arising from facts or events that occurred at or before the Effective Time.

Stock Options

Certain of Hostopia’s directors and executive officers currently hold options to purchase shares of Hostopia common stock under the Stock Option Plans. Pursuant to the Merger Agreement, all Vested Options will be cancelled and Deluxe will cause Hostopia, as the surviving corporation, to pay each holder of any such Vested Option, promptly after the Effective Time, the applicable Settlement Amount (less any applicable tax withholdings).

With respect to Unvested Options, the Merger Agreement provides that on the Closing Date, Hostopia will, at the direction of Deluxe, (a) accelerate and immediately and fully vest the Unvested Options and pay the Settlement Amount (less any applicable tax withholdings) promptly after the Effective Time, (b) provide for the cancellation of such Unvested Options, subject to the option holder’s consent, or (c) take such other action as may be deemed appropriate by Deluxe, subject to the option holder’s consent, if required. Deluxe may direct different treatment for different stock option holders. Hostopia expects that 50,000 Unvested Options held by ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will be accelerated and paid the Settlement Amount (less any applicable tax withholdings), promptly following the Effective Time, and 260,000 Unvested Options held by other executive officers will be cancelled.  Hostopia expects that Unvested Options of the following executive officers will be cancelled:

As of June 27, 2008, there were options outstanding held by directors and/or executive officers to purchase 416,600 shares of Hostopia common stock, representing 106,600 Vested Options and 310,000 Unvested Options (of which, 50,000 held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will be accelerated and paid the Settlement Amount (less any applicable tax withholdings) promptly after the Effective Time). Using exchange rate information published by the Bank of Canada on June 26, 2008, the aggregate consideration to be received by option holders who are directors and/or executive officers at or about the Effective Time is expected to be approximately $928,934, representing approximately $698,485 for Vested Options and approximately $230,449 for accelerated Unvested Options.

See “Grant of Retention Bonus” below.

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Grant of Retention Bonus

The executive officers (listed in the following chart) will be granted a retention bonus that vests based upon continued service after the Closing Date.  The retention bonus is designed to result in each executive officer ultimately receiving the same amount on an after-tax basis as if he had received the Settlement Amount upon cancellation of his Unvested Options.

Grant of Deluxe Stock Options

Hostopia expects that each of Messrs. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Kostandenou, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ will be granted an option to purchase 5,000 shares of common stock of Deluxe in connection with such person’s employment following the Merger. Such options are not being conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to any of the foregoing individuals and the granting of such options was not conditional on such individuals supporting the Merger Agreement or the Merger. Each of such individuals, except ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and his associated entities, beneficially owns or exercises control or direction over less than 1% of the outstanding shares of Hostopia common stock. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ disclosed to the M&A Committee the Merger Consideration he expects to be beneficially entitled to receive under the terms of the Merger Agreement for the shares of Hostopia common stock he beneficially owns and the M&A Committee (in the absence of ▇▇. ▇▇▇▇▇▇▇▇) determined that the value of the option is less than 5% of the Merger Consideration he expects to receive.

Directors Fees for Service on M&A Committee

The M&A Committee is comprised of Messrs. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (Chair), ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. Messrs. Cytrynbaum and ▇▇▇▇, the independent members of the M&A Committee, are entitled to receive fees as compensation for their service on the M&A Committee at a rate of $250 per day of active service. Hostopia expects that Messrs. Cytrynbaum and ▇▇▇▇ will receive an aggregate of approximately $33,750 and $8,475, respectively, in fees as compensation for their active service on the M&A Committee in connection with the Merger.

Continued Employment

Hostopia expects that, with the exception of ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, each of its executive officers’ contracts of employment will continue in effect with the surviving corporation following the Effective Time. Hostopia anticipates that, if the Merger is consummated, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will not continue his employment with the surviving corporation.

VOTING AGREEMENT ENTERED INTO BY CERTAIN HOSTOPIA STOCKHOLDERS

Certain Hostopia stockholders (the “Supporting Stockholders”), including certain of Hostopia’s senior officers and directors, have entered into a voting agreement (the “Voting Agreement”) with Deluxe concurrently with Hostopia entering into the Merger Agreement. Each of the Supporting Stockholders has irrevocably agreed, among other things, to vote all shares of Hostopia common stock owned by the Supporting Stockholders in favour of the special resolution adopting the Merger Agreement and approving the Merger. The Voting Agreement will terminate at the earlier of the termination of the Merger Agreement and the Effective Time.

The Supporting Stockholders are ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, 1999 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Family Trust, 1555706 Ontario Limited and TELUS Corporation, which have collectively agreed to vote an aggregate of 4,138,038 shares,

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representing approximately 35% of the outstanding shares of Hostopia common stock, in favour of the special resolution adopting the Merger Agreement and approving the Merger.

PRICE RANGE AND TRADING VOLUME OF HOSTOPIA COMMON STOCK

The shares of Hostopia common stock are listed for trading under the symbol “H” on the TSX. The following table sets forth the high and low prices at which a board lot of shares were traded and the total trading volumes of the shares for the periods indicated on the TSX.

Source: TSX datalinx

Notes:

(*)                                  Hostopia commenced trading on the TSX on November 10, 2006.

On June 18, 2008, the last trading day immediately prior to the public announcement of the proposed Merger, a share of Hostopia common stock closed at $4.50. On June 26, 2008, the last trading day prior to the date of this Circular, a share of Hostopia common stock closed at $10.35.

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PRINCIPAL STOCKHOLDERS

Voting Securities and Principal Holders Thereof

To the knowledge of the directors and officers of Hostopia, the only persons or companies beneficially owning, directly or indirectly, or exercising control or direction over 10% or more of the issued and outstanding shares of Hostopia common stock are as follows:

Notes:

INFORMATION REGARDING PROXIES AND VOTING INSTRUCTIONS

Appointment and Revocation of Proxies

The persons named in the enclosed form of proxy or voting instruction form are directors or officers of Hostopia. A Hostopia stockholder desiring to appoint some other person to attend and act on his or her behalf at the special meeting may do so by inserting the name of such person (who need not be a Hostopia stockholder) in the blank space provided in the enclosed form of proxy or voting instruction form or by completing another proper form of proxy.

In the case of Registered Stockholders, the completed, dated and signed form of proxy should be sent in the enclosed envelope or otherwise to Equity Transfer & Trust Company, Attention: An ▇▇▇▇▇, by mail or by courier at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ or by facsimile at 416-595-9593. In the case of Non-Registered Stockholders who receive these materials through their broker or other intermediary, the stockholder should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by their broker or other intermediary. To be effective, a proxy must be received by the Transfer Agent by 4:00 p.m. (Toronto time) on July 28, 2008.

A Hostopia stockholder who has given a proxy has the right to revoke it as to any matter on which a vote has not already been cast pursuant to the authority conferred by that proxy and may do so: (a) by completing and signing a proxy bearing a later date and depositing it as described above; (b) by depositing an instrument in writing with respect to the revocation executed by the stockholder or by the stockholder’s attorney authorized in writing: (i) with Equity Transfer & Trust Company, Attention: An ▇▇▇▇▇ at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ or by facsimile at 416-595-9593 any time up to 4:00 p.m. (Toronto time) on July 28,

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2008 or 4:00 p.m. (Toronto time) on the second business day preceding the adjournment or postponement of the special meeting, at which the proxy is to be used, or (ii) with the chairman of the special meeting prior to the commencement of the special meeting on the day of the special meeting or any adjournment or postponement of the special meeting; (c) by revoking the proxy in one of the foregoing manners and if a Registered Stockholder, attending and voting at the special meeting in person; or (d) in any other manner permitted by law.

Voting of Proxies

On any ballot that may be called for, shares of Hostopia common stock represented by properly executed proxies will be voted for or against the particular matter in accordance with the instructions given therein. If the Hostopia stockholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly. If no choice is specified in the proxy, the persons designated in the accompanying form of proxy will vote FOR the special resolution adopting the Merger Agreement and approving the Merger.

The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the accompanying Notice of Meeting, and with respect to other matters which may properly come before the special meeting. As of the date of this Circular, management of Hostopia is not aware of any such amendment, variation or other matter to come before the special meeting other than those referred to in the accompanying Notice of Meeting. However, if any other matters which are not now known to management should properly come before the special meeting, the shares of Hostopia common stock represented by proxies given in favour of management nominees will be voted on such matters in accordance with the best judgment of such nominees.

VOTING SHARES AND RECORD DATE

As of June 25, 2008, 11,642,352 shares of Hostopia common stock and nil shares of Hostopia preferred stock were outstanding. Each share of Hostopia common stock carries the right to one vote.

Any Hostopia stockholder of record at 5:00 p.m. (Toronto time) on June 25, 2008 is entitled to vote the shares of Hostopia common stock registered in such stockholder’s name at that date on each matter to be acted upon at the special meeting.

Under normal conditions, confidentiality of voting is maintained by virtue of the fact that proxies and votes are tabulated by the Transfer Agent. However, such confidentiality may be lost as to any proxy or ballot if a question arises as to its validity or revocation or any other like matter. Loss of confidentiality may also occur if the Board of Directors decides that disclosure is in the best interest of Hostopia or its stockholders.

CERTAIN CANADIAN FEDERAL INCOME TAX
CONSIDERATIONS FOR STOCKHOLDERS

The following is a general summary of the principal Canadian federal income tax considerations applicable to a Hostopia stockholder who disposes of shares of Hostopia common stock under the Merger and, for the purposes of the Tax Act and at all relevant times, holds the shares of Hostopia common stock as capital property, deals at arm’s length with Hostopia, Deluxe, Operating Sub and Sub, is not affiliated with any of Hostopia, Deluxe, Operating Sub or Sub and does not, together with persons to whom the stockholder was related, hold 10% or more of any class of shares in the capital of Hostopia.

Generally, shares of Hostopia common stock will be capital property to a Hostopia stockholder unless the shares are held or were acquired in the course of carrying on a business or as part of an adventure or concern in the nature of trade.

This summary is based upon the current provisions of the Tax Act, the regulations thereunder (the “Regulations”) and counsel’s understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) made publicly available in writing prior to the date hereof. This summary also takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced by or on

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behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes that all Proposed Amendments will be enacted in the form proposed. No assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary is not exhaustive of all possible Canadian federal income tax consequences and except for the Proposed Amendments does not take into account or anticipate any changes in law or administrative policies or assessing practices whether by legislative, regulatory, administrative or judicial action or decision nor does it take into account provincial, territorial or foreign tax legislation or considerations, which may be different from those discussed in this summary.

This summary is not applicable to a stockholder (i) that is, for the purposes of certain rules in the Tax Act applicable to securities held by financial institutions, a “financial institution” (as defined for purposes of those rules), (ii) an insurer carrying on business in Canada or elsewhere that is not a resident of Canada for purposes of the Tax Act, (iii) an interest in which is or would be a “tax shelter investment” within the meaning of the Tax Act, (iv) to whom the functional currency for purposes of the Tax Act is not the Canadian dollar, or (iv) who acquired his or her shares upon the exercise of an option to purchase shares of Hostopia common stock. The disposition of options pursuant to the Merger Agreement has tax consequences which are not described herein. Each holder of options is urged to consult his or her own tax advisors concerning the tax consequences of the Merger to them.

This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular stockholder. This summary is not exhaustive of all Canadian federal income tax considerations.  Accordingly, stockholders should consult their own tax advisors with respect to the Canadian federal income tax consequences of the Merger having regard to their own particular circumstances.

For purposes of the Tax Act all amounts relating to the acquisition, holding or disposition of shares of Hostopia common stock, including the adjusted cost base and the proceeds of disposition, in respect of such shares, must be converted into Canadian dollars based on the prevailing exchange rates at the relevant time.

Stockholders Resident in Canada

The following portion of this summary is applicable to a stockholder who, for the purposes of the Tax Act and at all relevant times, is or is deemed to be resident in Canada (a “Resident Holder”).

Disposition of Shares

A Resident Holder who disposes of shares of Hostopia common stock under the Merger will realize a capital gain (or capital loss) equal to the amount by which the cash received by the Resident Holder under the Merger, net of any reasonable costs of disposition, exceeds (or is less than) the adjusted cost base of the Hostopia common stock to the Resident Holder.

Generally, a Resident Holder is required to include in computing its income for a taxation year one-half of the amount of any capital gain (a “taxable capital gain”) realized by the Resident Holder in the year. A Resident Holder is required to deduct one-half of the amount of any capital loss (an “allowable capital loss”) realized in a taxation year from taxable capital gains realized in the year. Allowable capital losses in excess of taxable capital gains may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized by the Resident Holder in such years, to the extent and in the circumstances prescribed by the Tax Act.

Capital gains realized by an individual or a trust, other than certain trusts, may give rise to alternative minimum tax under the Tax Act.

A Resident Holder that is throughout the year a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable for a refundable tax of 62/3% on certain investment income, including taxable capital gains realized upon a disposition of the shares of Hostopia common stock.

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Dissenting Resident Holders

A Resident Holder who exercises appraisal rights with respect to the special resolution adopting the Merger Agreement and approving the Merger (a “Resident Dissenting Stockholder”) will be considered to have transferred shares of Hostopia common stock to Hostopia, as the surviving corporation, in consideration for payment by Hostopia of the fair value of such shares and will realize a capital gain (or capital loss) to the extent that the proceeds of disposition received from Hostopia on the disposition of such shares, less any interest awarded by the court, exceed (or are less than) the adjusted cost base to the Resident Dissenting Holder of such shares immediately before the disposition and any reasonable costs of disposition. The computation and treatment of capital gains and capital losses under the Tax Act are described above under the heading “Stockholders Resident in Canada - Disposition of Shares”. Interest awarded to a Resident Dissenting Stockholder by a court will be included in the stockholder’s income for the purposes of the Tax Act. Resident Dissenting Stockholders should consult their own tax advisors.

Stockholders Not Resident in Canada

The following portion of this summary is applicable to a stockholder who, for the purposes of the Tax Act, at all relevant times, (i) has not been and is not resident or deemed to be resident in Canada and (ii) does not use or hold and is not deemed to use or hold shares of Hostopia common stock in connection with carrying on a business in Canada (a “Non-Resident Holder”). Special rules, which are not discussed in this summary, may apply to a non-resident stockholder that is an insurer carrying on business in Canada and elsewhere or is an “authorized foreign bank” as defined in the Tax Act.

Disposition of Shares

A Non-Resident Holder will not be subject to tax under the Tax Act on any capital gain realized on the disposition of shares of Hostopia common stock under the Merger.

Dissenting Non-Resident Holders

A Non-Resident Holder who exercises appraisal rights with respect to the special resolution adopting the Merger Agreement and approving the Merger (a “Non-Resident Dissenting Stockholder”) will be considered to have transferred shares of Hostopia common stock to Hostopia, as the surviving corporation, in consideration for payment by Hostopia of the fair value of such shares. In general, the tax treatment of a Non-Resident Dissenting Stockholder will be similar to that of a Non-Resident Holder who participates in the Merger. See “Certain Canadian Federal Income Tax Considerations – Stockholders Not Resident in Canada – Disposition of Shares”.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

United States Internal Revenue Service regulations generally provide that, for the purpose of avoiding United States federal tax penalties, a taxpayer may rely only on formal written advice meeting specific requirements. The United States federal tax advice in this portion of the Circular does not meet those requirements. Accordingly, the United States federal tax advice was not intended or written to be used, and it cannot be used, for the purpose of avoiding United States federal tax penalties. Further, the United States federal tax advice in this portion of the Circular was written to support the promotion or marketing of the Merger. Any person reading the United States federal tax advice in this portion of the Circular should seek advice based on such person’s particular circumstances from an independent tax advisor.

The following is a general summary of the principal United States federal income tax consequences of the Merger to Hostopia stockholders who surrender Hostopia common stock in the Merger in exchange for the right to receive the cash Merger Consideration of $10.55 per share. The discussion below applies only to Hostopia stockholders that hold Hostopia common stock as capital assets (generally, property held for investment) at the time of the Merger, and the discussion does not apply to:

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·              stockholders that are subject to special tax rules, such as financial institutions, insurance companies, dealers in securities, persons that ▇▇▇▇-to-market their securities, or persons that hold common stock as part of a “straddle,” “hedge” or “synthetic security transaction” (including a “conversion” transaction);

·              United States holders (as defined below) with a “functional currency” other than the U.S. dollar;

·              persons who hold their stock through partnerships or other pass-through entities;

·              retirement plans and tax-exempt organizations;

·              certain United States expatriates;

·              stockholders who acquired Hostopia common stock pursuant to the exercise of stock options or otherwise as compensation; or

·              stockholders who exercise appraisal rights.

If a partnership holds Hostopia common stock, the tax treatment of a partner generally depends upon the status of the partner and the activities of the partnership. Partners of partnerships holding Hostopia common stock should consult their own tax advisors.

The discussion below is based upon the United States Internal Revenue Code, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect and interpreted as of the date of this Circular and does not take into account possible changes in these tax laws or interpretations, any of which may be applied retroactively. The discussion does not contain a detailed description of all United States federal income tax consequences to Hostopia stockholders and does not include any description of the tax laws of any state, local or foreign government that may be applicable to Hostopia stockholders.

For purposes of this discussion, a “United States holder” is:

·                                          an individual who is a citizen or resident of the United States for United States federal income tax purposes;

·                                          a corporation, or any entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia;

·                                          any estate that is subject to United States federal income tax regardless of its source; or

·                                          a trust if (i) a United States court is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (ii) the trust has a valid election in effect to be treated as a United States person for United States federal income tax purposes.

Generally, an individual may be treated as a resident of the United States in any calendar year for United States federal income tax purposes by, among other ways, being present in the United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year.  For purposes of this calculation, such individual would count all of the days in which he or she was present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year.  Residents are taxed for United States federal income tax purposes as if they were citizens of the United States.

For purposes of this discussion, a “non United States holder” is any holder of Hostopia common stock other than a United States holder.

United States Holders

The exchange of Hostopia common stock for cash Merger Consideration in the Merger will be a taxable transaction for United States federal income tax purposes. A United States holder of Hostopia common stock generally will recognize capital gain or capital loss equal to the difference, if any, between the U.S. dollar value of cash received pursuant to the Merger, and such United States holder’s adjusted tax basis in the Hostopia common

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stock surrendered. Such capital gain or loss will be calculated separately for each block of shares exchanged in the Merger (i.e., shares acquired at the same cost in a single transaction) and will be long-term capital gain or loss if such block of shares has been held for more than one year on the date of the Merger. Long-term capital gains of individual United States holders are currently subject to United States federal income tax at preferential rates.

The amount of any cash paid to a United States holder in Canadian dollars will equal the United States dollar value of the Canadian dollars, calculated by reference to the exchange rate in effect on the date the cash is received by the United States holder regardless of whether the Canadian dollars are converted into United States dollars.  If the Canadian dollars received are not converted into United States dollars on the date of receipt, a United States holder will have a basis in the Canadian dollars equal to their United States dollar value on the date of receipt, and any gain or loss realized on a subsequent conversion or other disposition of the Canadian dollars will generally be treated as ordinary income or loss.

A United States holder who exercises dissenters’ rights and receives payment in cash for Hostopia common stock generally will recognize capital gain or loss for federal income tax purposes, measured by the difference between the holder’s basis in such shares and the dollar value of cash received (other than the cash received, if any, that is or is deemed to be interest for federal income tax purposes (which amount will be taxed as ordinary income)).

The cash consideration received by non-corporate United States holders in the Merger may be subject to backup withholding at a 28 percent rate. Backup withholding generally will apply only if such United States holder fails to furnish a correct social security number or other taxpayer identification number, or otherwise fails to comply with applicable backup withholding rules and certification requirements. Corporations generally are exempt from backup withholding. Each non-corporate United States holder should complete and sign the substitute Internal Revenue Service Form W-9 that will be part of the letter of transmittal to be returned to the Disbursing Agent in order to provide the information and certification necessary to avoid backup withholding, unless an applicable exemption exists and is otherwise proved in a manner satisfactory to the Disbursing Agent.