Exhibit 4.1
VSOURCE, INC.
EXCHANGEABLE NOTE AND WARRANT
PURCHASE AGREEMENT
January 28, 2002
VSOURCE, INC.
EXCHANGEABLE NOTE AND WARRANT PURCHASE AGREEMENT
This Exchangeable Note and Warrant Purchase Agreement (this
"Agreement") is made as of this 28th day of January, 2002 by and among Vsource,
Inc., a Delaware corporation (the "Company"), Vsource (CI) Ltd, a Cayman Islands
company and a wholly-owned subsidiary of the Company ("Vsource CI"), Vsource
(Malaysia) Sdn Bhd, a Malaysian company and a wholly-owned subsidiary of the
Company ("Vsource Malaysia" together with Vsource CI, the "Guarantors"), and
each of the persons and entities listed on the Schedule of Purchasers attached
as Exhibit A hereto (hereinafter collectively referred to as "Purchasers" and
each individually as a "Purchaser").
R E C I T A L S
A. Pursuant to that certain Exchangeable Note and Warrant Purchase
Agreement dated as of July 12, 2001 (the "Series B Agreement") by and among the
Company, Vsource CI (formerly ▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd.), Vsource Malaysia (formerly
NetCel360 Sdn Bhd) and each of the purchasers listed in Exhibit A thereto
(the"Series B Purchasers"), the Company sold an aggregate principal amount of
$4,251,500 of Exchangeable Promissory Notes (the "Series B Notes") and
21,257,501 warrants (the "Series B Warrants");
B. Under the terms of the Series B Agreement, the proceeds from the
sale of the Series B Notes and Series B Warrants may be used solely to make a
deposit to secure a stand-by letter of credit (the "Letter of Credit") issued
for the benefit of Gateway Manufacturing, Inc., and the principal and interest
accrued on the Series B Notes must be repaid upon termination of the Letter of
Credit;
C. The Company has asked the Series B Purchasers to, and the Series B
Purchasers that are party to this Agreement wish to, exchange, in accordance
with and subject to the terms and conditions of this Agreement, some or all of
their Series B Notes for Series B-1 Notes and additional Warrants, the proceeds
of which may be used for general working capital, and repayment of which is not
required upon termination of the Letter of Credit;
D. The Company has repaid in full, in cash, all principal and accrued
interest on the Series B Notes that are not being exchanged for the Series B-1
Notes; and
E. The Company wishes to be able to sell Series B-1 Notes and
Warrants to Purchasers other than Series B Purchasers for cash in accordance
with and subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SERIES B-1 NOTES
1.1. SALE AND ISSUANCE OF SERIES B-1 NOTES AND WARRANTS. Subject
to the terms and conditions of this Agreement, each Purchaser agrees, severally
and not jointly, to purchase, and the Company agrees to sell and issue to each
such Purchaser, (i) that principal amount of the Company's Exchangeable
Promissory Notes, in the form of Exhibit B hereto (individually, a "Note" and
collectively, the "Series B-1 Notes") and (ii) warrants, in the form of Exhibit
C hereto (each, a "Warrant"), to purchase 5 shares of the common stock of the
Company for each $1.00 in principal amount of Series B-1 Notes purchased by such
Purchaser at the Closing, as set forth opposite such Purchaser's name on Exhibit
A hereto. Payment by each Purchaser will be made in cash equal to the amount
(the "Purchase Price") set forth opposite such Purchaser's name on Exhibit A
hereto or, in lieu of paying cash and at the option of each Purchaser, by
surrendering to the Company for extinguishment and cancellation such number or
amount of such Purchaser's Series B Notes in respect of which the aggregate
principal amount of, and interest accrued on, those Series B Notes is equal to
the amount set forth opposite such Purchaser's name on Exhibit A hereto. The
surrender by a Purchaser for extinguishment and cancellation of Series B Notes
in respect of which the aggregate of the principal amount of and interest
accrued on those Series B Notes is equal to the amount set forth opposite such
Purchaser's name on Exhibit A hereto shall constitute full and complete
discharge and satisfaction of such Purchaser's obligation to pay the Purchase
Price for the Series B-1 Notes to be purchased by the Purchaser hereunder, the
relevant Purchaser shall have no further obligation or liability howsoever or
whatsoever in relation to the payment of such Purchase Price and such Series B-1
Notes shall be issued fully paid and non-assessable. The aggregate Purchase
Price for all Purchasers combined (including any New Purchasers (as defined in
Section 1.3)) shall be not more than $4,450,000.
1.2. CONSENT. Each Purchaser which is a holder of Convertible
Promissory Notes (the "Series A Notes") issued pursuant to that Convertible Note
Purchase Agreement dated June 25, 2001 (the "Series A Note Purchase Agreement")
hereby consents, for all purposes under the Series A Note Purchase Agreement, to
the execution, delivery and performance by the Company of this Agreement and the
Series B-1 Notes, including, without limitation, the sale by the Company of
Series B-1 Notes, the repayment thereof in accordance with the terms hereof and
thereof and the exchange thereof for Series A Notes in accordance with the terms
hereof and thereof.
1.3. CLOSING; ADDITIONAL CLOSINGS.
(a) The purchase and sale of the Series B-1 Notes with an
aggregate Purchase Price of not less than $1,500,000 shall take place at the
offices of Vsource (Asia) Ltd in Hong Kong at 10:00 a.m., on January 31, 2002,
or at such later time, not beyond February 7, 2002, as the Company may specify
in writing to the Purchasers (which time and date are designated as the "First
Closing").
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(b) For a period of 120 days following the date of the First
Closing, the Company may, at any time or from time to time, issue and sell
additional Series B-1 Notes of like tenor (other than issuance date and interest
accrual date) and otherwise on the same terms as the Series B-1 Notes to be
purchased under this Agreement, and Warrants on the same terms as the Warrants
to be purchased under this Agreement, to one or more individuals or entities
("New Purchasers") on the same terms as set forth in this Agreement. Each New
Purchaser, if any, which is not already a Purchaser hereunder, shall execute a
joinder to this Agreement agreeing to be fully bound by, and subject to, all of
the covenants, terms and conditions of this Agreement and shall be deemed a
"Purchaser" for all purposes hereof. In connection with any sale of Series B-1
Notes and Warrants to any New Purchaser pursuant to this Section 1.3(b),
Exhibit A shall be automatically amended to reflect the identity of such New
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Purchaser and such New Purchaser's purchase of Series B-1 Notes and Warrants.
The date of closing of any purchase of Series B-1 Notes and Warrants pursuant to
this Section 1.3(b) shall be an "Additional Closing" and each of the First
Closing and each Additional Closing shall be a "Closing" hereunder.
(c) Each Series B-1 Note is exchangeable for a Series A Note
in the amount and manner and to the extent provided in the Series B-1 Note. In
the event a Series B-1 Note becomes exchangeable (whether at the election of a
holder of a Series B-1 Note (a "Series B-1 Holder") or automatically) for a
Series A Note, the Company shall issue to the Series B-1 Holder in respect of
the Series B-1 Note so exchanged a Series A Note dated the date of such
exchange. Each Series B-1 Holder, if any, that is not already a Purchaser under
the Series A Note Purchase Agreement and that exchanges its Series B-1 Notes for
Series A Notes shall execute a joinder to the Series A Note Purchase Agreement
agreeing to be fully bound by, and subject to, all of the covenants, terms and
conditions of the Series A Note Purchase Agreement and shall be deemed a
"Purchaser" for all purposes thereunder, entitled to all of the rights, benefits
and privileges thereunder.
(d) Subject to the terms of this Agreement, at the First
Closing, the Company shall deliver to each Purchaser a Note in the principal
amount of the applicable Purchase Price, together with all Warrants to which
such Purchaser is entitled, against either, at the option of the relevant
Purchaser, (i) surrender of that amount of principal and accrued interest of
such Purchaser's Series B Notes equal to the Purchase Price or (ii) payment of
the Purchase Price therefore by check, or a wire transfer of funds to the
following Account:
Citibank N.A. (Singapore branch)
SWIFT Code: ▇▇▇▇▇▇▇▇
Account No.: ▇-▇▇▇▇▇▇-▇▇▇
Beneficiary: Vsource (CI) Ltd
, or such other form of payment as shall be mutually agreed upon by such
Purchaser and the Company.
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(e) Subject to the terms of this Agreement, at each
Additional Closing, the Company shall deliver to each Purchaser a Note in the
principal amount of the applicable Purchase Price, together with all Warrants to
which such Purchaser is entitled, against payment of the Purchase Price
therefore by check, or a wire transfer of funds to the Account set forth in
Section 1.3(c), or such other form of payment as shall be mutually agreed upon
by such Purchaser and the Company.
(f) Shares of the Preferred Stock of the Company issuable
upon conversion of the Series A Notes are herein referred to as the "Series 3-A
Preferred Stock" or the "Exchange Shares." The shares of the Company's Common
Stock issuable upon exercise of the Warrants are referred to herein as the
"Warrant Shares." The shares of common stock, par value $0.01 per share
("Common Stock") of the Company issuable upon conversion of the Series 3-A
Preferred Stock are sometimes herein referred to as the "Conversion Shares." The
Series B-1 Notes, Warrants, Warrant Shares, Series A Notes, Conversion Shares
and the Exchange Shares are sometimes herein referred to collectively as the
"Securities."
1.4. USE OF PROCEEDS. The proceeds of the sale of Series B-1
Notes and Warrants by the Company shall be used, at its sole discretion, for
general corporate purposes and to pay any fees and expenses incurred in
connection with the transactions contemplated hereby.
1.5. EFFECTIVE DATE. The parties hereto agree that the effective
date of this Agreement shall be December 28, 2001 (the "Effective Date").
Interest shall accrue on the Series B-1 Notes from the date of issuance of each
respective Note; provided, that all Series B-1 Notes issued in exchange for
Series B Notes shall begin accruing interest from the Effective Date.
1.6. TERMINATION OF SERIES B AGREEMENT. Each Purchaser which is a
holder of Series B Notes hereby agrees that upon the issuance of the Series B-1
Notes in exchange for such Purchaser's Series B Notes and/or repayment in cash
by the Company for the remaining balance of any principal and accrued interest
on such Purchaser's Series B Notes not exchanged for Series B-1 Notes, all
repayment obligations of the Company arising under the Series B Notes and the
Series B Agreement will have been satisfied in full as of the Effective Date.
2. GUARANTEE AND INDEMNITY.
2.1. GUARANTEE. In consideration of the purchase of the Series
B-1 Notes and Warrants upon the terms and conditions of this Agreement, the
Guarantors hereby jointly and severally and unconditionally and irrevocably
guarantee as a continuing obligation, the due and punctual payment of the
Obligations (as defined in Section 2.4 below) in the currency in which the same
is payable under the terms of this Agreement and the due and punctual
performance and observance by the Company of all other obligations of the
Company contained in this Agreement and the Series B-1 Notes (as defined below)
(collectively, the "Guarantee"), and if the Company fails to pay any amount of
the Obligations when due the Guarantors shall pay such amount to the Purchasers
in the required currency as aforesaid forthwith upon receiving the written
demand of the holders of at least a majority of the principal amount of Series
B-1 Notes then outstanding (the "Majority Holders").
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2.2. DEMANDS. Demands may be made under the Guarantee from time
to time and may be enforced irrespective of whether any steps or proceedings are
or will be taken against the Company or any other person to recover under the
Series B-1 Notes or interest accrued thereon or this Agreement or any Warrant.
2.3. INDEMNITY. Without prejudice to the guarantee contained in
Section 2.1, the Guarantors hereby jointly and severally and unconditionally and
irrevocably undertake, as a separate, primary, additional and continuing
obligation, to indemnify each Purchaser against all losses, liabilities,
damages, costs and expenses whatsoever arising out of any failure by the Company
to make due and punctual payment of the Obligations or in the due and punctual
performance and observance of all other obligations under this Agreement, the
Series B-1 Notes and the Warrants. This indemnity shall remain in effect
notwithstanding that the Guarantee under Section 2.1 may cease to be valid and
enforceable against the Guarantors for any reason whatsoever.
2.4. OBLIGATIONS. For the purpose of this Agreement,
"Obligations" means any and all of the obligations of the Company (whether or
not for the payment of money, and including any obligation to pay damages for
breach of contract) which are or may become payable to the Purchasers or any of
them pursuant to this Agreement, the Series B-1 Notes or the Warrants.
2.5. CONTINUING GUARANTEE. This Guarantee shall be a continuing
guarantee and shall remain in full force and effect until the Obligations have
been paid and performed in full, notwithstanding the insolvency or liquidation
or any incapacity or change in the constitution or status of the Company or
either or both of the Guarantors or any other person or any intermediate
settlement of account or other matter whatsoever.
2.6. PROTECTIVE CLAUSES. Without limiting Section 2.5, neither
the liability of either of the Guarantors nor the validity or enforceability of
this Guarantee shall be prejudiced, affected or discharged by:
(a) the granting of any time or indulgence to the Company or
any other person;
(b) any variation or modification of this Agreement, the
Series B-1 Notes, the Warrants or any other document referred to herein or
therein or related thereto;
(c) the invalidity or unenforceability of any obligation or
liability of any party under this Agreement, the Series B-1 Notes, the Warrants
or any other documents referred to herein or therein or related thereto;
(d) any invalidity or irregularity in the execution of this
Agreement, the Series B-1 Notes, the Warrants or any other documents referred to
herein or therein or related thereto;
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(e) any lack of capacity or deficiency in the powers of the
Company, any Guarantor or any other person to enter into or perform any of its
obligations under this Agreement, the Series B-1 Notes, the Warrants or any
other documents referred to herein or therein or related thereto or any
irregularity in the exercise thereof or any lack of authority by any person
purporting to act on behalf of the Company, the Guarantors or such other person;
(f) the insolvency, bankruptcy or liquidation or any
incapacity, disability or limitation or any change in the constitution or status
of the Company or either or both of the Guarantors or any other person;
(g) any other security document, security interest, guarantee
or other security or right or remedy being or becoming held by or available to
any Purchaser or by any other person or by any of the same being or becoming
wholly or partly void, voidable, unenforceable or impaired or by any Purchaser
at any time releasing, refraining from enforcing, varying or in any other way
dealing with any of the same or any power, right or remedy any Purchaser may now
or hereafter have from or against the Company or any other person;
(h) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Company or any other person or any
compromise, arrangement or settlement with any of the same; or
(i) any act, omission, event or circumstance which would or
may but for this provision operate to prejudice, affect or discharge this
Guarantee or the liability of the Guarantors hereunder.
2.7. TAXES AND OTHER DEDUCTIONS.
(a) Funds. All payments to be made by the Company or
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Guarantors or (subject to the option of the Purchasers to deliver their Series
B-1 Notes in satisfaction of the Purchase Price under Section 1.1) any other
person under this Agreement and the Series B-1 Notes shall be made in full in
immediately available U.S. Dollars without any set off or consideration
whatsoever, free and clear of any Taxes, deductions or withholdings save as
required by law.
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(b) Taxes. If at any time the Company or a Guarantor is
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required to make any deduction or withholding in respect of Taxes (as defined
below) or otherwise from any payment due under this Agreement or the Series B-1
Notes, the sum due from such Guarantor in respect of such payment shall be
increased to the extent necessary to ensure that, after the making of such
deduction or withholdings, each Purchaser receives on the due date for such
payment (and retains, free from and clear of any Taxes or otherwise) a net sum
equal to the sum which it would have received had no such deduction or
withholding been required to be made and such Guarantor shall indemnify each
Purchaser against any losses or costs incurred by any of them by reason of any
failure of such Guarantor to make any such deduction or withholding or by reason
of any increased payment not being made on the due date for such payment. Such
Guarantor shall promptly deliver to the Purchaser any receipts, certificates or
other proof evidencing the amounts (if any) paid or payable in respect of any
deduction or withholding as aforesaid. "Taxes" shall mean taxes, charges, fees,
levies or other assessments of any nature, including, without limitation, sales,
value added, use, excise, real or personal property, withholding, stamp or other
taxes, customs, duties or landing fees or other government charges however
designated, now or hereafter imposed, collected or assessed by, or payable to,
any taxing authority of any country and shall include interest, penalties and
additions imposed, collected or assessed or payable with respect to such amount.
2.8. COSTS, CHARGES AND EXPENSES. The Company and each of the
Guarantors shall from time to time forthwith on demand of the Majority Holders
pay to or reimburse each Purchaser for all reasonable costs, charges and
expenses (including reasonable legal fees for one counsel for all Purchasers and
other reasonable fees on a full indemnity basis) reasonably incurred by any
Purchaser in connection with the enforcement of any of their rights or powers
hereunder or in suing for or seeking to recover any sums due hereunder or in
defending any claims brought against them in respect of this Agreement, the
Series B-1 Notes, the Warrants or this Guarantee and until payment of the same
in full, all such costs, charges and expenses shall be secured by this
Guarantee.
2.9. UNDERTAKINGS. Each Guarantor hereby undertakes and agrees
jointly and severally with the Purchasers that the undertakings in this Article
2 shall remain in force throughout the continuance of this Guarantee and so long
as the Obligations or any part thereof remains owing or outstanding.
2.10. UNRESTRICTED RIGHT OF ENFORCEMENT. The Guarantee may be
enforced without any Purchaser first having made any demand or having recourse
to any other security or rights or taking any other steps or proceedings against
the Company, either or both of the Guarantors or any other person and may be
enforced for any balance due after resorting to any one or more other means of
obtaining payment or discharge of the monies, obligations and liabilities hereby
secured.
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2.11. DISCHARGE AND RELEASE. Notwithstanding any discharge,
release or settlement from time to time between any Purchaser and the
Guarantors, if any security, disposition or payment granted or made to the
Majority Holders or any Purchaser in respect of the Obligations by the
Guarantors or any other person is avoided or set aside or ordered to be
surrendered, paid away, refunded or reduced by virtue of any provision, law or
enactment relating to bankruptcy, insolvency, liquidation, winding-up,
composition or arrangement for the time being in force or for any other reason,
the Majority Holders shall be entitled hereafter to enforce this Agreement as if
no such discharge, release or settlement had occurred.
2.12. AMENDMENT. Any amendment or waiver of any provision of the
Guarantee and any waiver of any default under this Agreement shall only by
effective if made in writing and signed by the Majority Holders.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As used herein, (i) any reference to any event, change or effect being
"material" with respect to the Company or any Subsidiary (as defined herein)
means an event, change or effect which is material in relation to the financial
condition, properties, business, operations, assets or results of operations of
the Company and each Subsidiary, taken as a whole, and (ii) the term "Material
Adverse Effect" on the Company means a material adverse effect on the financial
condition, properties, business, operations, assets or results of operations of
the Company and its Subsidiaries, taken as a whole. As of the date hereof, the
Company hereby represents and warrants to, and covenants with, each Purchaser,
except as contemplated by this Agreement or as set forth in the Disclosure
Schedule (the "Disclosure Schedule") attached hereto, as follows:
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3.1. Organization and Standing. The Company has been duly
incorporated, is validly existing and in good standing under the laws of the
State of Delaware and has corporate power and authority to own, lease and
operate its properties and to conduct its business in the manner presently
conducted and to enter into and perform its obligations under this Agreement,
the Series B-1 Notes, the Warrants and the Certificate of Designation for
designation of the Exchange Shares. The Company and each of the Subsidiaries is
duly qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or to be in good standing would
not result in a Material Adverse Effect. The Company is not required to
register as an "investment company" within the meaning of the Investment Company
Act of 1940. The Company has made available to the Purchasers a true, complete
and correct copy of the Company's certificate of incorporation and bylaws and
the constitution documents of each Subsidiary, each as amended to date
(collectively, the "Organizational Documents"). The Organizational Documents
are in full force and effect. The Certificate of Designation creating the
Series 3-A Preferred Stock of the Company (the "Certificate of Designation") has
been executed and filed with the Delaware Secretary of State, and is in full
force and effect.
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3.2. CAPITALIZATION. As of the date hereof, the authorized shares
of capital stock of the Company are set forth in the Organizational Documents,
and the issued and outstanding shares of capital stock of the Company are as set
forth in the Company's Amendment No. 2 to Annual Report on Form 10-KSB for the
fiscal year ended January 31, 2001 (the "Form 10-K"), Quarterly Reports on form
10-Q filed since the date of the Form 10-K (the "Form 10-Qs") and Current
Reports on Form 8-K filed since the date of the Form 10-K (the "Form 8-Ks", and
together with the Form 10-K and the Form 10-Qs, the "Public Filings"). The
authorized capital also includes shares of Series 3-A Preferred Stock having the
rights, privileges and preferences set forth in the Certificate of Designation,
none of which shares have been issued prior to the date hereof. All issued and
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the outstanding
shares of capital stock of the Company have been issued in violation of the
pre-emptive or other similar rights of any person or in violation of any
applicable securities laws or regulations. Except as otherwise described in the
Public Filings, there are no shares of capital stock or other securities of the
Company or any Subsidiary (i) reserved for issuance or (ii) subject to
preemptive rights or any outstanding subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or other instruments
outstanding or in effect giving any person the right to acquire any shares of
capital stock or other securities of the Company or any Subsidiary or any
commitments of any character relating to the issued or unissued capital stock or
other securities of the Company or any Subsidiary. Except as specified on
Schedule 3.2, on the date hereof the Company does not have outstanding any
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bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of Company. The sale of the
Securities is not subject to any preemptive rights or rights of first refusal
and, when issued and delivered in compliance with the provisions of the Series A
Note Purchase Agreement, the Series A Notes and/or the Certificate of
Designation, the Exchange Shares and Conversion Shares will be duly and validly
issued, fully paid and nonassessable, and will be free of any liens,
encumbrances or restrictions on transfer; provided, however, that (a) the
Securities may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed, and (b) the Securities may only be assigned in
accordance with Section 8.3 hereof.
3.3. AUTHORIZATION OF AGREEMENTS. This Agreement, the Series B-1
Notes and the Warrants have been duly authorized, executed and delivered by the
Company, and this Agreement, each of the Series B-1 Notes and each of the
Warrants constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. The Board of Directors of the Company has duly approved the
Certificate of Designation. Such Certificate of Designation has been duly filed
with the Secretary of State of Delaware and is in full force and effect.
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3.4. ABSENCE OF DEFAULTS AND CONFLICTS. None of the Company nor
any Subsidiary (as defined below) is in violation of its organizational
documents. Except as set forth on Schedule 3.4, the execution, delivery,
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performance and consummation of this Agreement and the Series B-1 Notes and
issuance of the Securities by the Company does not and will not, with respect to
the Company and each Subsidiary, directly or indirectly, (with or without the
giving of notice or the lapse of time or both): (i) contravene, conflict with,
or constitute or result in a breach or violation of, or a default under (A) any
provision of any of the Organizational Documents or (B) any resolution adopted
by the Board of Directors (or similar governing body) or the stockholders of the
Company or any Subsidiary; (ii) contravene, conflict with, or constitute or
result in a breach or violation of, or a default under, or the acceleration of,
or the triggering of any payment or other obligations pursuant to, any existing
benefit plan maintained by the Company or any Subsidiary or any grant or award
made under any of the foregoing; (iii) contravene, conflict with, or constitute
or result in a breach or violation of, or a default under, or the cancellation,
modification or termination of, or the acceleration of, or the creation of a
lien on any properties or assets owned or used by the Company or any Subsidiary
pursuant to, any provision of any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to which
it is a party or by which it may be bound, or to which any of its property or
assets is subject ("Contract"), except for those that would not individually or
in the aggregate result in a Material Adverse Effect; (iv) contravene, conflict
with, or constitute or result in a breach or violation of, any federal, state,
local, municipal, foreign, international, multinational, or other constitution,
law, rule, requirement, administrative ruling, order, ordinance, principle of
common law, code, regulation, statute, treaty or process ("Law") or any award,
decision, injunction, judgment, decree, settlement, order, process, ruling,
subpoena or verdict (whether temporary, preliminary or permanent entered,
issued, made or rendered by any court, administrative agency, arbitrator,
Governmental Entity or other tribunal of competent jurisdiction ("Order") or
give any foreign, federal, state, local, municipal, county or other
governmental, quasi-governmental, administrative or regulatory authority, body,
agency, court, tribunal, commission or other similar entity (including any
branch, department or official thereof) ("Governmental Entity") or any other
person the right to challenge any of the transactions contemplated herein or to
exercise any remedy or obtain any relief under, any Law or any Order to which
the Company or any Subsidiary, or any of the assets owned or used by the Company
or any Subsidiary, are subject; (v) require any filing by the Company or any
Subsidiary with, or approval or consent or other action by, any Governmental
Entity or any other person; (vi) contravene, conflict with, or constitute or
result in a breach or violation of, or a default under, any provision of, or
give any Governmental Entity the right to revoke, withdraw, suspend, cancel,
terminate or modify, any license or permit that is held by the Company or any
Subsidiary or that otherwise relates to the business of the Company or any
Subsidiary, or any of the assets owned or used by the Company or any Subsidiary;
or (vii) cause any of the assets owned by the Company or any Subsidiary as of
the date hereof to be reassessed or revalued by the taxing authority or other
Governmental Entity.
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3.5. ABSENCE OF PROCEEDINGS. Except as described in the Public
Filings, there is no action, suit, proceeding, inquiry or investigation before
or brought by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company or any Subsidiary which might reasonably be expected individually or
in the aggregate to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets of the Company or any Subsidiaries or the consummation of the
transactions contemplated in this Agreement, the Series B-1 Notes or the
Certificate of Designation or the performance by the Company of its obligations
hereunder. Except as disclosed in the Public Filings, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such action.
3.6. INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term "Intellectual
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Property Assets" includes:
(i) the names Vsource, NetCel360 and all registered
trademarks, service marks, and applications (collectively, "Marks");
(ii) all know-how, trade secrets, confidential
information, software, technical information, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets"); and
(iii) all domain names and URL addresses for websites on
the internet or the world wide web ("Domain Names");
owned, used, or licensed by the Company or any Subsidiary as licensee
or licensor.
(b) Intellectual Property Necessary for the Company's
------------------------------------------------------
Business. The Intellectual Property Assets are all those necessary for the
--------
operation of the business of the Company and its Subsidiaries as it is currently
conducted. The Company and/or one or more of the Subsidiaries is the owner of
all right, title, and interest in and to, or has the right to use, each of the
Intellectual Property Assets, free and clear of all Liens, and other adverse
claims and has the right to use, without any payment to any third party in
excess of $50,000 per year, all of the Intellectual Property Assets.
(c) Trademarks.
----------
(i) To the knowledge of the Company, the Company and/or
one or more of the Subsidiaries is the owner, licensor or licensee of
all right, title, and interest in and to each of the Marks, free and
clear of all Liens, and other adverse claims.
(ii) No ▇▇▇▇ has been or is now involved in any
opposition, invalidation, or cancellation and, to the knowledge of the
Company, no such action is threatened with respect to any of the
Marks.
-12-
(iii) To the knowledge of the Company, there is no
trademark or trademark application of any third party which
potentially interferes with any of the Marks.
(iv) No ▇▇▇▇ is infringed or, to the knowledge of the
Company, has been challenged or threatened in any way by any other
Person. To the knowledge of the Company, none of the Marks used by the
Company or any Subsidiary infringes or is alleged to infringe any
trade name, trademark, or service ▇▇▇▇ of any third party.
(d) Trade Secrets. To the knowledge of the Company, the
--------------
Company and/or one or more of the Subsidiaries has good title and an absolute
(but not necessarily exclusive) right to use the Trade Secrets. To the knowledge
of the Company, the Trade Secrets are not part of the public knowledge or
literature, and, to the knowledge of the Company, have not been used, divulged,
or appropriated either for the benefit of any person (other than the Company or
any Subsidiary or pursuant to a non-disclosure agreement), or to the detriment
of the Company or any Subsidiary. No Trade Secret is subject to any adverse
claim or, to the knowledge of the Company or any Subsidiary, has been challenged
or threatened in any way.
(e) Domain Names. The Company and/or one or more
-------------
Subsidiaries is the owner of all right, title, and interest in and to, or is
licensed to use, all of the Domain Names used in the conduct of the business of
the Company and its Subsidiaries, free and clear of all Liens. Such Domain
Names are properly registered with Network Solutions or such other agency or
company duly authorized by relevant Governmental Entities to maintain such
registry, and all fees due in respect of such registration have been paid.
3.7. PRIVATE PLACEMENT. Neither the Company nor any affiliate (as
defined in Rule 405 under the U.S. Securities Act of 1933, as amended (the "1933
Act")) thereof has (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the 1933 Act)
which is or will be integrated with the sale of the Securities in a manner that
would require the registration under the 1933 Act of the Securities or (ii)
engaged in any form of general solicitation or general advertising (within the
meaning of Rule 502(c) of Regulation D under the ▇▇▇▇ ▇▇▇) or any directed
selling efforts (as defined under the ▇▇▇▇ ▇▇▇) in the United States in
connection with the offer and sale of the Securities. Assuming the accuracy of
the representations and warranties of each Purchaser contained in Section 3
hereof, the offer, issue, and sale of the Securities: (a) are and will be
exempt from the registration and prospectus delivery requirements of the 1933
Act; and neither the Company nor any authorized agent acting on its behalf will
take any action hereafter that would cause the loss of such exemption, and (b)
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit, or qualification requirements of
all applicable state securities laws.
-13-
3.8. SUBSIDIARIES. Each subsidiary of the Company, meaning any
entity in which the Company, directly or indirectly, beneficially owns more than
50% of the equity interest in, or the voting control of, such company (each, a
"Subsidiary"), is a corporation validly existing and in good standing under the
laws of its jurisdiction of incorporation and has full corporate power and
authority to own, lease and operate its properties, conduct its business as and
to the extent now conducted. All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned, beneficially and of record, by the Company or
Subsidiaries wholly owned by the Company free and clear of all liens, charges,
encumbrances, options, rights of pre-emption and third party rights whatsoever
(collectively, "Liens").
3.9. LIABILITIES. Except for potential Liabilities referred to in
the Public Filings, neither the Company nor any Subsidiary has any debt,
liability, commitment or obligation of any kind, character or nature whatsoever,
whether known or unknown, ▇▇▇▇▇▇ or inchoate, secured or unsecured, accrued,
fixed, absolute, contingent or otherwise, and whether due or to become due
("Liability") (and, to the knowledge of the Company, there is no basis for any
present or future action against it giving rise to any Liability) except for (i)
Liabilities or obligations reflected or reserved against the balance sheet
contained in the Financial Statements or the Interim Financial Statements (as
defined herein) and (ii) current Liabilities incurred in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of Law) since the date thereof.
3.10. BROKERS. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Company
directly without the intervention of any person on behalf of the Company in such
manner as to give rise to any valid claim by any person against the Purchasers
(or any of them), the Company or any Subsidiary for a finder's fee, brokerage
commission or similar payment.
3.11. SEC FILINGS. Except as disclosed in Schedule 3.11 to the
-------------
Disclosure Schedule, the Public Filings (including any financial statements or
schedules included therein) and each other filing of the Company under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), made since May 15,
2001 (i) complied with the requirements of the 1933 Act, or the 1934 Act, as the
case may be, in all material respects, and (ii) did not at the time of filing
(or if amended, supplemented or superseded by a filing prior to the date hereof,
on the date of that filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. To the Company's knowledge, except as
disclosed in Schedule 3.11 to the Disclosure Schedule, the Company is in
--------------
compliance in all material respects with (i) the 1933 Act, (ii) the 1934 Act,
and (iii) all applicable rules and regulations of the Securities and Exchange
Commission under the 1933 Act and the 1934 Act.
-14-
3.12. FINANCIAL STATEMENTS. The restated audited consolidated
financial statements of the Company as of and for the years ended January 31,
2000 and January 31, 2001 and the audited consolidated financial statements of
NetCel360 Holdings Limited ("Holdings") as of and for the year ended December
31, 2000 (collectively, the "Financial Statements") and the unaudited
consolidated financial statements of the Company as of and for the three months
ended April 30, 2001, July 31, 2001 and October 31, 2001 and of Holdings as of
and for the three months ended March 31, 2001 (collectively, the "Interim
Financial Statements"), which have been made available to the Purchasers, have
been prepared in accordance with US generally accepted accounting principles
("GAAP") applied on a basis consistent throughout the periods indicated (except
as may be indicated in the notes thereto) and, except as set forth in Schedule
--------
3.11 to the Disclosure Schedule, present fairly in all material respects the
----
consolidated financial condition and consolidated operating results of the
Company or Holdings, as the case may be, of the dates and during the periods
indicated therein in conformance with GAAP, subject, in the case of the Interim
Financial Statements, to normal year-end adjustments, consistent with past
practices. As of their respective date, the Financial Statements did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
Except as set forth in the Financial Statements, the Interim Financial
Statements, the Public Filings, or arising in the ordinary course of business
since April 1, 2001, as of the date hereof none of the Company nor any
Subsidiary has (A) incurred any material liabilities of any nature (matured or
unmatured, fixed or contingent) or (B) made any material disposal of assets,
suffered any loss or material damage of any assets, waived any valuable rights,
made any material change in any material contract to which it is a party or
declared or paid any dividends.
3.13. NON-COMPETITION AGREEMENTS. Neither the Company nor any of
its Subsidiaries is a party to any non-competition or other agreement or subject
to any duty which prohibits or limits the ability of the Company or any
Subsidiary (i) to engage in any line of business, (ii) to compete with any
person, (iii) to carry on or expand the nature or geographical scope of the
business of the Company or such Subsidiary anywhere in the world or (iv) to
disclose any confidential information in the possession of the Company or any
Subsidiary (any not otherwise generally available to the public), other than, in
the case of (iv) only, any contract for the sale or purchase of goods or
services or any non-disclosure agreement entered into in connection with the
possible or actual sale or purchase of goods or services in the ordinary course
of business that does not meet any other of the criteria set forth in this
Section 3.13.
3.14. CERTAIN PAYMENTS. Since their incorporation or
organization, neither the Company nor any Subsidiary has, nor has any
representative of Company or any Subsidiary, or to the knowledge of the Company
or any other person associated with or acting for or on behalf of the Company or
any Subsidiary, directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company or
any Subsidiary or (b) established or maintained any fund or asset that has not
been recorded in the books and records of the Company or any Subsidiary.
-15-
3.15. NO OTHER REPRESENTATIONS. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that the Company is not making any representation or warranty whatsoever,
express or implied, except those representations, and warranties contained in
this Article 3.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally but not jointly, hereby represents and warrants to the
Company as follows:
4.1. LEGAL POWER. It has the requisite legal power to enter into
this Agreement, to purchase the Series B-1 Notes hereunder and to carry out and
perform its obligations under the terms of this Agreement.
4.2. DUE EXECUTION. This Agreement have been duly authorized,
executed and delivered by it, and, upon due execution and delivery by the
Company and such Purchaser, this Agreement and will be valid and binding
agreements of it, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and subject to the availability of
equitable remedies.
4.3. NO CONFLICTS; NO CONSENTS REQUIRED. The execution, delivery
and performance of and compliance with this Agreement by such Purchaser will not
result in any violation of any term of any material mortgage, indenture,
contract, agreement or other instrument or any judgment, decree or order to
which such Purchaser is a party or subject, or be in conflict with or constitute
a default under any such term. All consents, approvals, orders, or
authorizations of or registrations, qualifications, designations, declarations,
or filings with, any governmental authority or other third party, required on
the part of the Purchaser in connection with the valid execution and delivery of
this Agreement, the purchase of the Securities, or the consummation of any other
transaction contemplated hereby have been obtained, or will be effective at the
Closing, except for notices required or permitted to be filed with certain state
and federal securities commissions after the Closing.
4.4. INVESTMENT REPRESENTATIONS.
(a) It is acquiring the Securities for its own account, not
as nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the 1933 Act.
(b) It understands that (i) the Securities have not been
registered under the 1933 Act by reason of a specific exemption therefrom, that
it may be necessary to hold such Securities indefinitely, and, therefore, that
it may be necessary to bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the 1933 Act or is
exempt from such registration; (ii) each certificate representing any of the
Securities will be endorsed with a legend similar to the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT") OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
-16-
HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 ACT COVERING SUCH SECURITIES AND IN COMPLIANCE WITH SUCH STATE
LAWS OR IF THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND SUCH APPLICABLE
STATE LAWS."
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Securities unless the conditions specified in the
foregoing legend are satisfied; provided, however, that no such opinion of
counsel shall be necessary if the sale, transfer or assignment is made pursuant
to Securities and Exchange Commission ("SEC") Rule 144 and such Purchaser
provides the Company with evidence reasonably satisfactory to the Company and
its counsel that the proposed transaction satisfies the requirements of Rule
144. The Company agrees to remove the foregoing legend from any securities if
the requirements of SEC Rule 144(k) (or any successor rule or regulation) apply
with respect to such securities and the Company and its counsel are provided
with reasonably satisfactory evidence that the requirements of Rule 144(k)
apply.
-17-
(c) It is an investor in securities of companies in the
development stage and acknowledges that it can bear the economic risk of its
investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities.
(d) It has reviewed this Agreement, the Series A Note
Purchase Agreement and the Certificate of Designation and all the schedules and
exhibits to such documents carefully and has conducted such investigation of the
Company as it has deemed appropriate and has had the questions it has asked of
the Company answered to its satisfaction.
(e) It has not been offered the Securities by any form of
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by such media.
(f) It is an (i) "accredited investor" within the meaning of
SEC Rule 501 of Regulation D, as presently in effect; or (ii) not a "U.S.
person" within the meaning of SEC Rule 902 and is acquiring the Securities in an
"offshore transaction" as defined in SEC Rule 902.
(g) If Purchaser is a corporation, partnership, trust or
other entity, (i) it was not formed for the specific purpose of acquiring the
Securities offered hereunder; or (ii) 100% of such Purchaser is owned by an
entity for which all of the representations and warranties contained in Sections
4.3 and 4.4 would be accurate if such entity were a Purchaser hereunder.
(h) Its principal address is as set forth on Exhibit A
hereto, and it does not reside in any state of the United States other than the
state specified in its address on Exhibit A, if at all.
5. CONDITIONS TO CLOSING
5.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS AT THE CLOSING.
Each Purchaser's obligation to purchase the Series B-1 Notes at the Closing is
subject to the fulfillment, at or prior to the Closing, of all of the following
conditions, any of which may be waived by such Purchaser:
(a) Representations and Warranties; Performance of
--------------------------------------------------
Obligations. The representations and warranties made by the Company in Section
-----------
3 hereof shall be true and correct in all material respects on the date of the
Closing, with the same force and effect as if they had been made on and as of
said date; and the Company shall have performed and complied with in all
material respects all obligations and conditions herein required to be performed
or complied with by it on or prior to the Closing.
(b) Proceedings and Documents. All corporate and other
---------------------------
proceedings in connection with the transactions contemplated at the Closing, and
all documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers' counsel, which shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
-18-
(c) Qualifications; Legal Investment. All authorizations,
----------------------------------
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with and
prior to the lawful sale and issuance of the Securities pursuant to this
Agreement and all authorizations, approvals and permits, if any, needed by such
Purchaser to purchase the Securities shall have been duly obtained and shall be
effective on and as of the Closing. No stop order or other order enjoining the
sale of the Securities shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
SEC, the California Commissioner of Corporations, the Delaware Secretary of
State or a similar official of any other state having jurisdiction over this
transaction. At the time of the Closing, the sale and issuance of the
Securities shall be legally permitted by all laws and regulations to which each
Purchaser and the Company are subject.
(d) Payment of Purchase Price. The aggregate Purchase Price
--------------------------
for all Series B-1 Notes purchased on or before the date of the Closing by all
Purchasers at the Closing shall equal or exceed $1,500,000.
(e) Opinion of Company Counsel. The Company's legal counsel
---------------------------
shall have delivered an opinion to the Purchasers addressing the issues
customarily addressed in transactions of the nature of those contemplated in
this Agreement and which shall be reasonably satisfactory in form and content to
counsel for the Purchasers.
5.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AT THE CLOSING. The
Company's obligation to issue and sell the Series B-1 Notes under this Agreement
to a Purchaser is subject to the fulfillment, on or prior to the Closing, of the
following conditions as to such Purchaser, any of which may be waived by the
Company:
(a) Representations and Warranties, Performance of
--------------------------------------------------
Obligations. The representations and warranties made by such Purchaser in
-----------
Section 4 hereof shall be true and correct at the date of the Closing, with the
same force and effect as if they had been made on and as of said date. Such
Purchaser shall have performed and complied with all agreements and conditions
herein required to be performed or complied with by it on or before the Closing.
(b) Qualifications, Legal Investment. All authorizations,
----------------------------------
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Securities pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall have been issued
and no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, the California Commissioner of Corporations, the
Delaware Secretary of State or any similar officer of any other state having
jurisdiction over this transaction. At the time of the Closing, the sale and
issuance of the Securities shall be legally permitted by all laws and
regulations to which such Purchaser and the Company are subject.
(c) Payment of Purchase Price. Each Purchaser shall have
----------------------------
delivered the Purchase Price for the Series B-1 Notes purchased by it.
-19-
6. COVENANTS
6.1. COVENANTS OF THE COMPANY. The Company and each Guarantor
covenants with each Purchaser, so long as Series B-1 Notes with an aggregate
principal amount of at least 50% of the principal amount of the Series B-1 Notes
issued at the Closing are outstanding, that:
(a) Stamp Tax. The Company and the Guarantors will pay (1)
----------
any stamp, issue, registration, documentary or other similar taxes and duties
including interest and penalties, payable on or in connection with the issuance
of the Series B-1 Notes, the Warrants or the Guarantee, the creation, issue and
offering of the Securities, if any, received in the exchange or upon conversion
of the Series B-1 Notes, the Series A Notes or the Series 3-A Preferred Stock,
or the execution or delivery of this Agreement, the Warrants or the Series A
Notes; and (2) in addition to any amount payable by the Company or the
Guarantors under this Agreement, any value added, turnover or similar tax
payable in respect of that amount.
(b) Notification of Defaults. Each of the Company and the
--------------------------
Guarantors will notify the Purchasers in writing of any Event of Default (as
defined in Section 7.1) forthwith upon the occurrence thereof.
(c) Consents. Each of the Company and the Guarantors will
--------
obtain and promptly renew from time to time and thereafter maintain in full
force and effect, and will comply with and upon the Purchasers' request will
promptly furnish certified copies to the Purchasers of, all such authorizations,
approvals, consents, licenses and exemptions as may be required under any
applicable law or regulation to enable it to perform its obligations under this
Agreement or required for the validity or enforceability of this Agreement.
(d) Pari Passu Ranking. Each of the Company and the
--------------------
Guarantors undertakes that its obligations hereunder and under the Series B-1
Notes do and will at all times rank at least pari passu with all of its other
present and future unsecured obligations save for any obligations preferred by
law.
(e) Disposals. Each of the Company and the Guarantors will
---------
not and will procure that no other Subsidiary will, either in a single
transaction or in a series of transactions whether related or not and whether
voluntarily or involuntarily, sell, transfer, lease or otherwise dispose of all
or any substantial part of its assets or revenues except for any of the
following types of disposals provided such disposal does not adversely affect
the ability of the Company or the Guarantors to perform its obligations under
this Agreement:
(i) disposals made with the prior written consent of the
Majority Holders;
(ii) disposals of cash raised or borrowed for the
purposes for which such cash was raised or borrowed;
(iii) disposals of assets in exchange for other assets
comparable as to type and value;
-20-
(iv) disposals of any of its assets on terms whereby
such asset is leased to or re-acquired by the Company or Guarantor or
any other Subsidiary in an amount not to exceed $5,000,000;
(v) any distribution of the surplus assets to the
Company or either Guarantor or any Subsidiary in a liquidation or
winding-up not involving insolvency;
(vi) the application of the proceeds of an issue of
securities (whether equity or debt) for the purposes stated in the
prospectus or other offering document relating to that issue; or
(vii) sales of assets pursuant to sale and leaseback
transactions in an aggregate amount not to exceed $5,000,000.
(f) Mergers.
-------
(i) None of the Company or the Guarantors will without
the prior written consent of the Majority Holders enter into any
merger or consolidation with any entity.
(ii) None of the Company or the Guarantors will, and
will procure that no Subsidiary will, without the prior written
consent of the Majority Holders, acquire any assets or business or
acquire or make any investment if such assets, business or investment
is substantial in relation to the Company and its Subsidiaries taken
as a whole.
(g) Maintenance of status and franchises.
----------------------------------------
(i) Each of the Company and the Guarantors will do all
such things as are necessary to maintain its corporate existence in
good standing and to conduct its business in compliance with all laws,
regulations, authorizations, agreements and obligations applicable to
it and pay all taxes imposed on it when due.
(ii) Each of the Company and the Guarantors will and
will procure that each Subsidiary will, ensure that it has the right
and is duly qualified to conduct its business as it is or is intended
as at the date hereof to be conducted in all applicable jurisdictions
and will obtain and maintain all franchises and rights necessary for
the conduct of its business.
(h) Constitutional Documents. Each of the Company and the
-------------------------
Guarantors shall procure that no amendment or supplement is made to their
respective certificate of incorporation, by-laws, memorandum of association or
articles of association, if any, which would have a material adverse effect on
the Purchasers' interests hereunder without the prior written consent of the
Majority Holders such consent not to be unreasonably withheld or delayed.
-21-
(i) Share Capital. Except upon conversion or exchange of any
-------------
class of convertible or exchangeable securities or as set forth in the
Certificate of Designation or the Warrants, each of the Company and the
Guarantors will not without the prior written consent of the Majority Holders,
purchase or redeem any of their respective issued shares.
(j) Dividends. Each of the Company and the Guarantors will
---------
not and will procure that no Subsidiary will, without the prior written consent
of the Majority Holders, pay any cash dividend or make any other distribution of
cash to their respective shareholders other than dividends and distributions by
Subsidiaries to the Company.
(k) Indebtedness. None of the Company or any Guarantor or
------------
any Subsidiary will incur or guarantee any indebtedness exceeding US$15,000,000
in the aggregate without the prior written consent of the Majority Holders,
other than pursuant to Section 1.3(b) hereof or, subject to the limitations
contained in Section 6.1(e)(vii), in connection with customary sale and
leaseback transactions.
(l) Lending. Each of the Company and the Guarantors will not
-------
and will procure that no Subsidiary will make or grant any loan or advance
except as may be necessary in the ordinary course of its business.
(m) Taxation. All payments of interest in respect of the
--------
Series B-1 Notes and the Warrants will be made without withholding or deduction
of or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied by any authority
unless the withholding or deduction of such taxes, duties, assessments or
governmental charges is required by law. The Company will pay such additional
amounts as may be necessary in order that the net amounts received by the
Purchasers after such withholding or deduction shall equal the respective
amounts receivable in respect of the Series B-1 Notes and the Warrants in the
absence of such withholding or deduction.
6.2. LEGAL FEES. Promptly upon receipt of invoices therefor, the
Company shall (a) pay one counsel for the Purchasers up to $10,000 for the
actual legal fees and costs incurred in negotiating the terms hereof, the
preparation of this Agreement and the other agreements and instruments delivered
pursuant hereto, and consummating the transactions contemplated by this
Agreement.
6.3. REGISTRATION RIGHTS. Each holder of shares of Common Stock
received upon exercise of the Warrants shall have the same registration rights
as holders of shares of Common Stock received upon conversion of the Series 3-A
Preferred Stock as set forth as Exhibit B of the Series A Note Purchase
Agreement.
7. EVENTS OF DEFAULT
7.1. DEFAULT. Upon the occurrence of any Event of Default, each
Note then outstanding shall forthwith be immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, unless the Majority Holders otherwise determine, and
the Purchasers may exercise any and all rights and remedies available to them
under this Agreement or the Series B-1 Notes or as provided by law.
-22-
An "Event of Default" shall mean the occurrence of any of the following events:
-23-
(a) Any proceeding shall be commenced by or against the
Company or either Guarantor under any bankruptcy or insolvency laws, or the
Company or a Guarantor shall take any action to authorize any of the foregoing;
provided that if such proceeding is not instituted by or on behalf of the
Company (or acquiesced by it) there shall be an "Event of Default" only if such
proceeding shall remain unstayed for 60 days;
(b) Any law, rule or regulation of any jurisdiction shall be
enacted or promulgated that shall have a material adverse affect on the ability
of the Company to perform any of its obligations hereunder or under the Series
B-1 Notes, including, without limitation, any moratorium or similar laws;
(c) This Agreement or any of the Series B-1 Notes or Warrants
ceases to be the legal, valid and binding obligation of the Company or the
Guarantors enforceable in accordance with its terms; and
(d) if any governmental authority or agency of any
jurisdiction condemns, seizes, compulsorily purchases or expropriates all or a
substantial part of the assets of the Company and its Subsidiaries, taken as a
whole, or places any material restriction on a material portion of the assets of
such Company and its Subsidiaries, taken as a whole whether by way of
cancellation or revocation of, or the imposition of conditions on, any licenses
of such companies, or otherwise howsoever.
7.2. OTHER EVENTS. Without implication that the contrary would
otherwise be true, the Purchasers retain all right to pursue any cause of action
(including breach of contract) in the event that:
(a) there is a material breach of this Agreement, the
Certificate of Designation for the Series 3-A Preferred Stock or any Note by the
Company or a Guarantor; or
(b) Any representation or warranty made or deemed to be made
or repeated by or in respect of the Company or either Guarantor in or pursuant
to this Agreement is or proves to have been incorrect or misleading in any
material respect.
8. MISCELLANEOUS
8.1. GOVERNING LAW AND JURISDICTION. This Agreement shall be
governed by and construed under the laws of the State of Delaware. If any
Delaware law or laws shall require or permit the application of the laws of any
other jurisdiction to this Agreement, such Delaware law or laws shall be
disregarded with the effect that the remaining laws of the State of Delaware
shall nonetheless be applied.
8.2. SURVIVAL AND DISCLOSURE SCHEDULE. The representations,
warranties, covenants, and agreements made herein shall survive any
investigation made by any party hereto and the closing of the transactions
contemplated hereby and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Purchasers or the Company.
-24-
8.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto. Each Purchaser shall be entitled to assign, transfer or
participate all or any portion of the Securities; provided that (1) such
transfers comply with all applicable law, (2) no such transfer is made to an
entity which the Board of Directors of the Company determines in good faith is
then a competitor of the Company (unless all common and preferred stock in the
Company is being transferred to such competitor in such transaction), (3)
transfers of Securities may not be made in amounts of less than $500,000 and (4)
prior to any assignment, each assignee shall execute and deliver to the Company
a joinder to this Agreement agreeing to be fully bound by, and subject to, all
of the covenants, terms and conditions of this Agreement.
8.4. ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other party in any manner by any
covenants or agreements except as specifically set forth herein or therein.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
8.5. SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties; and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
8.6. AMENDMENT AND WAIVER. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either for a specified period of time
or indefinitely), with the written consent of the Company and the holders of 75%
of the aggregate principal amount of the Series B-1 Notes then outstanding;
provided, that no such amendment or waiver shall reduce the amount of the Series
B-1 Notes the holders of which are required to consent to any waiver or
supplemental agreement, without the consent of the holders of all of the Series
B-1 Notes; provided, further, however, that any amendment, modification or
waiver that would change the interest rate, maturity date, requirement of pro
rata payment or exchange privilege, shall not be effective as to such Purchaser
without such Purchaser's prior written consent. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding, each
future holder of all such securities, and the Company. Upon the effectuation of
each such amendment or waiver, the Company shall promptly give written notice
thereof to the record holders of the Securities who have not previously
consented thereto in writing.
-25-
8.7. DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power, or remedy accruing to any party hereto or any subsequent holder of
any Securities upon any breach, default or noncompliance of any other party
under this Agreement or under the Certificate of Incorporation or Bylaws of the
Company shall impair any such right, power, or remedy, nor shall it be construed
to be a waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. Any waiver, permit, consent, or approval of any kind or character on
any party's part of or to any breach, default or noncompliance under this
Agreement or under the Certificate of Incorporation or Bylaws of the Company or
any waiver on any party's part of any provisions or conditions of this Agreement
must be in writing and shall be effective only to the extent specifically set
forth in such writing; and all remedies, either under this Agreement, the
Certificate of Incorporation or Bylaws, any law, or otherwise afforded to any
party, shall be cumulative and not alternative.
8.8. NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be effective if in writing and delivered personally
or sent by telecopier, nationally recognized overnight courier or registered or
certified mail, return receipt requested, postage prepaid, addressed:
If to a Purchaser: at such Purchaser's address as set forth on
Exhibit A attached hereto, or at such other
address as such Purchaser shall have furnished to
the Company in writing,
If to the Company, to: Vsource, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Vsource (Asia) Ltd
▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇▇-▇▇▇▇
Unless otherwise specified herein, such notices or other
communications shall be deemed effective (a) on the date delivered, if delivered
personally, (b) two business days after being sent, if sent by nationally
recognized overnight courier, (c) one business day after being sent, if sent by
telecopier with confirmation of good transmission and receipt, and (d) three
business days after being sent, if sent by registered or certified mail, postage
prepaid, return receipt requested. Each of the parties herewith shall be
entitled to specify another address by giving notice as aforesaid to each of the
other parties hereto.
-26-
8.9. TITLES AND SUBTITLES, NUMBER AND GENDER. The titles of the
paragraphs and subparagraphs of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement. Whenever the
context requires, the plural shall include the singular and the reverse and each
gender shall include the others.
8.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
-27-
Executed as of the date first set forth above.
VSOURCE, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
GUARANTORS
VSOURCE (CI) LTD
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
VSOURCE (MALAYSIA) SDN BHD
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
-28-
This is page to the Exchangeable Note and Warrant Purchase Agreement to
which Vsource, Inc., a Delaware corporation, the Guarantors and the Purchaser
set forth below are parties:
PURCHASER:
__________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
5th Floor, AXA Centre
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Purchase Price: $402,629 Dated: 1/28/2002
-------- ----------
This is page to the Exchangeable Note and Warrant Purchase Agreement to
which Vsource, Inc., a Delaware corporation, the Guarantors and the Purchaser
set forth below are parties:
PURCHASER:
_________________________________
Kumi Hui
▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇-▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Purchase Price: $26,843 Dated: 1/28/2002
------- -----------
This is page to the Exchangeable Note and Warrant Purchase Agreement to
which Vsource, Inc., a Delaware corporation, the Guarantors and the Purchaser
set forth below are parties:
PURCHASER:
_______________________________
▇▇▇▇ ▇▇▇-On Poon
▇/▇ ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Purchase Price: $53,684 Dated: 1/28/2002
------- -----------
This is page to the Exchangeable Note and Warrant Purchase Agreement to
which Vsource, Inc., a Delaware corporation, the Guarantors and the Purchaser
set forth below are parties:
PURCHASER:
______________________________
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
10 Jalan ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇
Purchase Price: $268,420 Dated: 1/28/2002
------- -----------
This is page to the Exchangeable Note and Warrant Purchase Agreement to
which Vsource, Inc., a Delaware corporation, the Guarantors and the Purchaser
set forth below are parties:
PURCHASER:
BAPEF INVESTMENTS XII LTD.,
a Virgin Islands company
By:_________________
Its: Director
-----------------------------------------------
c/o International Private Equity Services Ltd.
▇.▇. ▇▇▇ ▇▇▇
▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇
GY13ZD
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Purchase Price: $2,147,357 Dated: 1/28/2002
---------- -----------
This is page to the Exchangeable Note and Warrant Purchase Agreement to
which Vsource, Inc., a Delaware corporation, the Guarantors and the Purchaser
set forth below are parties:
PURCHASER:
G5 PARTNERS, LP
By:___________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ on behalf of MG5 LLC
Title: Managing Member
Tokyu Vanuguard
Apartment #504
▇-▇-▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇▇, ▇▇▇▇▇
Purchase Price: $40,263 Dated: 1/28/2002
------- -----------
EXHIBIT A
PURCHASERS
----------
Principal Amount of Number of Contact
--------------------------- ------------------ ------------------------
Name of Purchaser Series B-1 Notes Purchased Warrants Purchased Information
--------------------------- --------------------------- ------------------ ------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $ 402,629 2,013,145 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Kumi Hui $ 26,843 134,215 ▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 268,420 1,342,100 ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Malaysia
▇▇▇▇ ▇▇▇-on Poon $ 53,684 268,420 ▇/▇ ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
BAPEF Investments XII, Ltd. $ 2,147,357 10,736,785 c/o International Private
Equity Services Ltd.
▇.▇. ▇▇▇ ▇▇▇
▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
G5 Partners, LP $ 40,263 201,315 Tokyu Vanuguard
Apartment #504
▇-▇-▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇▇, ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT B
FORM OF SERIES B-1 NOTE
-----------------------
THE SECURITIES EVIDENCED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT") OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT COVERING SUCH SECURITIES AND IN
COMPLIANCE WITH SUCH STATE LAWS OR IF THE COMPANY RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE 1933 ACT AND SUCH APPLICABLE STATE LAWS.
EXCHANGEABLE PROMISSORY NOTE
US$__________________
Principal Amount Date: _________________
Vsource, Inc., a Delaware corporation (the "Company"), for value received,
hereby promises to pay to the order of ______ or its registered permitted
assigns ("Holder") on June 30, 2003 or when sooner declared due and payable in
accordance with the Purchase Agreement (the "Maturity Date") the sum of
US$________ (the "Principal Amount"), unless this Note is repaid or exchanged
before that date pursuant to the terms hereunder or under the Purchase
Agreement. Interest shall accrue on the outstanding Principal Amount at the
rate of 10% per annum (compounded quarterly) from [the date hereof][December 28,
2001] and is due and payable on the Maturity Date unless this Note is repaid or
exchanged before that date pursuant to the terms hereunder. Payment shall be
made at the registered address of the Holder appearing in the records of the
Company. This Note is one of the Notes issued pursuant to an Exchangeable Note
and Warrant Purchase Agreement dated as of January 28, 2002 among the Company,
the Guarantors and the Purchasers named therein (the "Purchase Agreement"). The
unpaid principal balance of this Note at any time, together with all accrued and
unpaid interest thereon at such time, is referred to herein as the "Note
Amount." Any terms not defined in this Note shall have the meaning set forth in
the Purchase Agreement unless otherwise indicated.
1. Guarantee. The Holder is entitled to the benefits of the Guarantee
---------
set forth in the Purchase Agreement.
2. Voluntary Prepayment. The Company may prepay this Note in whole or
--------------------
in part, subject to the following conditions: (i) the Company shall have given
the Holder an irrevocable written notice of its intention to prepay at least 30
days prior to prepayment and, if such prepayment is to occur after August 15,
2002, shall have deposited good funds in a segregated account for the benefit of
the Holder in an amount equal to the amount being prepaid; (ii) the Holder shall
not have exercised its exchange rights under Section 3 of this Note, if any,
prior to the date set forth in such irrevocable written notice of prepayment
upon which the Company intends to prepay this Note; and (iii) any such
prepayment must be made on a pro rata basis among all Series B-1 Notes then
outstanding.
3. Voluntary Exchange.
-------------------
(a) Voluntary Exchange. If the Note Amount is not paid in full on
------------------
or prior to August 15, 2002, then, at any time thereafter while this Note
is outstanding, Holder may, at the Holder's option, exchange this Note
including accrued interest thereon to the date of exchange, in accordance
with the provisions of paragraph (b) below hereof, in whole or in part, for
a Series A Note in the initial principal amount equal to the amount of this
Note being exchanged, including all accrued and unpaid interest on this
Note.
(b) Notice of Voluntary Exchange. If the Holder elects to
-------------------------------
exchange all or any portion of this Note pursuant to Section 3(a), the
Holder shall submit an executed Notice of Election in the form of Exhibit 1
hereto and surrender this Note at the office of the Company. The Company
shall, as soon as practicable (but within three business days) thereafter,
issue and deliver to the Holder of this Note a Series A Note in the
principal amount to which the Holder of this Note shall be entitled and, if
this Note is being exchanged in part, a new Series B-1 Note with respect to
the remainder of this Note which is not being exchanged. Such exchange
shall be deemed to have been made and the Series A Note so issuable shall
be deemed to have been issued and outstanding immediately prior to the
close of business on the date of the surrender of this Note and the
delivery of an executed Notice of Election, and the person or persons
entitled to receive the Series A Note issuable upon such exchange shall be
treated for all purposes as the record holder or holders of such Series A
Note as of such date.
(c) Series A Notes Issuable Upon Exchange. The Company agrees
-----------------------------------------
that all Series A Notes issued upon a voluntary exchange of this Note will,
upon issuance be duly authorized and validly issued and free of all
preemptive rights and all liens, charges, encumbrances or restrictions on
transfer except such restrictions on transfer as may apply under state or
federal securities laws.
4. Notices of Record Date. In the event of:
-------------------------
(a) Any taking by the Company of a record of the holders of any
class of equity securities of the Company for the purpose of determining
the holders thereof who are entitled to receive any distribution, or any
right to subscribe for, purchase or otherwise acquire any other securities
or property, or to receive any other right; or
(b) Any capital reorganization of the Company, any
reclassification or recapitalization of the equity capital of the Company
(other than a subdivision or combination of the Company's securities) or
any transfer of all or substantially all of the assets of the Company to
any other person or any consolidation or merger involving the Company; or
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then the Company will deliver to the Holder at least ten (10) business days
prior to the earliest applicable date hereinafter specified, a notice
specifying: (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the record date
for determining stockholders entitled to vote thereon or participate therein;
and (iii) a description of the material terms thereof.
5. No Shareholder Rights. Nothing contained in this Note shall be
-----------------------
construed as conferring upon the Holder or any other person any rights
whatsoever as a shareholder of the Company.
6. Event of Default. Upon the occurrence of an Event of Default, the
------------------
entire principal balance and interest on this Note shall immediately become due
and payable and the Holder shall have all remedies under the Purchase Agreement
or as provided by law.
The Company and the Guarantors waive the rights of presentment, demand for
performance, protest, notice of protest, and notice of dishonor. No delay on
the part of the Holder in exercising any right hereunder shall operate as waiver
of such right under this Note. This Note is being delivered and shall be
construed in accordance with the internal laws of the State of Delaware without
giving effect to any choice of law rule that would cause the application of the
laws of any jurisdiction other than the internal laws of the State of Delaware
to the rights and duties of the parties.
VSOURCE, INC.
By:___________________________________________
Name:
Title:
AS GUARANTORS:
VSOURCE (CI) LTD
By:___________________________________________
Name:
Title:
VSOURCE (MALAYSIA) SDN BHD
By:___________________________________________
Name:
Title:
EXHIBIT 1
---------
NOTICE OF ELECTION
TO: VSOURCE, INC.
The undersigned, the holder of the foregoing Note, hereby surrenders such
Note and irrevocably elects to exchange such Note for a Series A Note of
VSOURCE, INC., pursuant to and in accordance with the Exchangeable Note and
Warrant Purchase Agreement dated as of January 28, 2002 and requests that the
Series A Note be issued in the name of, and delivered to,
______________________, whose address is __________________________________.
The undersigned hereby joins in and elects to become a party to the Series A
Note Purchase Agreement as a "Purchaser" thereunder, agreeing to be fully bound
by, and subject to, all of the covenants, terms and conditions of the Series A
Note Purchase Agreement applicable to "Purchasers" thereunder.
Dated: _________________, 200_.
__________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Note)
__________________________________
__________________________________
(Address)
EXHIBIT C
FORM OF WARRANT
---------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THOSE LAWS OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH DISPOSITION IS
IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Right to Purchase _______ Shares
of Common Stock of Vsource, Inc.
VSOURCE, INC.
Common Stock Purchase Warrant
VSOURCE, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received, _______________ (the "Holder") is entitled, subject
to the terms set forth below, to purchase from the Company at any time or from
time to time on or before 5:00 p.m., Pacific Standard time, on [date 5 years
after issuance date] (the "Expiration Date") _________ (_______) fully paid and
nonassessable shares of common stock of the Company (the "Common Stock") at a
purchase price per share equal to the Purchase Price, as defined herein. The
number of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided in this Warrant. The initial purchase price for shares
subject to this Warrant will be 10/100 Dollars ($0.10) per share (the "Initial
Purchase Price"), and will be adjusted from time to time as provided herein.
The Initial Purchase Price or, if such price has been adjusted, the price per
share of Common Stock as last adjusted pursuant to the terms hereof is referred
to as the "Purchase Price" herein.
1. EXERCISE OF WARRANT.
---------------------
(a) This Warrant may be exercised by the Holder hereof in full or
in part at any time or from time to time until the Expiration Date by surrender
of this Warrant and the subscription form annexed hereto (duly executed by the
Holder), to the Company, and by making payment in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying (i) the number of shares of Common Stock designated by the Holder
in the subscription form by (ii) the Purchase Price then in effect. On any
partial exercise the Company will forthwith issue and deliver to or upon the
order of the Holder hereof a new Warrant of like tenor, in the name of the
Holder hereof, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant may
still be exercised.
-41-
(b) In lieu of exercising this Warrant as provided above, the
Holder may elect to receive, without the payment by the Holder of any additional
consideration, shares of Common Stock equal to the value of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the subscription form attached hereto
indicating such election, in which event the Company shall issue to the holder
hereof a number of Warrant Shares computed using the following formula:
Y (A - B)
---------
X = A
Where: X = The number of shares of Common Stock to be issued to the
Holder pursuant to this net exercise;
Y = The number of shares of Common Stock designated by the Holder
in the subscription form;
A = The then fair market value of one share of Common Stock as of
the date the election is made;
B = The Exercise Price (as adjusted to the date of the election).
For purposes of this Section 1(b), the fair market value of one share of
Common Stock as of a particular date shall be determined as follows: (i) if
traded on a securities exchange or through the Nasdaq National Market or
SmallCap System, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty (30) day period
ending three (3) days prior to the net exercise election; (ii) if traded
over-the-counter, the value shall be deemed to be the average of the
closing prices over the thirty (30) day period ending three (3) days prior
to the net exercise; and (iii) if there is no active public market, the
value shall be the fair market value thereof, as determined in good faith
by the Board of Directors of the Company.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
-------------------------------------------------------
practicable after the exercise of this Warrant, the Company will cause to be
issued in the name of and delivered to the Holder hereof a certificate for the
number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which the Holder would otherwise be entitled,
cash equal to such fraction multiplied by the then current fair market value as
determined pursuant to Section 1(b) above of one full share, together with any
other stock or other securities or property (including cash, where applicable)
to which the Holder is entitled upon such exercise. "Other Securities" shall
mean any stock (other than Common Stock) and other securities of the Company or
any other person (corporate or otherwise) which the Holder at any time shall be
entitled to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Sections 3 or 4.
-42-
3. ADJUSTMENT.
----------
(a) Initial Purchase Price; Subsequent Adjustment of Price and
--------------------------------------------------------------
Number of Purchasable Shares. The Initial Purchase Price will be adjusted from
-----------------------------
time to time as provided below. The Initial Purchase Price or, if such price
has been adjusted, the price per share of Common Stock as last adjusted pursuant
to the terms hereof is referred to as the "Purchase Price" herein. Upon each
adjustment of the Purchase Price, the Holder will thereafter be entitled to
purchase, at the Purchase Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Purchase Price in effect
immediately before such adjustment by the number of shares of Common Stock
purchasable pursuant to this Warrant immediately before such adjustment and
dividing the product by the Purchase Price resulting from such adjustment.
(b) Adjustment for Stock Splits and Combinations. If the Company
---------------------------------------------
at any time or from time to time after the date of this Warrant effects a
subdivision of the outstanding Common Stock, by stock split or otherwise, the
Purchase Price then in effect immediately before that subdivision shall be
proportionately decreased; and, conversely, if the Company at any time or from
time to time after the date of this Warrant combines the outstanding shares of
Common Stock, by reverse stock split or otherwise, the Purchase Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this Section 3(b) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(c) Adjustment for Certain Dividends and Distributions. In the
-----------------------------------------------------
event the Company at any time or from time to time after the date of this
Warrant either makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Purchase
Price then in effect shall be decreased as of the time of such issuance or, in
the event such a record date is fixed, as of the close of business on such
record date, by multiplying the Purchase Price then in effect by a fraction (1)
the numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance on the close of
business on such record date, and (2) the denominator of which shall be (i) the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date plus
(ii) the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Purchase Price shall be recomputed accordingly as of the
close of business on such record date or date fixed therefor and thereafter the
Purchase Price shall be adjusted pursuant to this Section 3(c) as of the time of
actual payment of such dividend or distribution. For purposes of the foregoing
formula, "the total number of shares of Common Stock issued and outstanding" on
a particular date shall include shares of Common Stock issuable upon conversion
of stock or securities convertible into Common Stock and the exercise of
warrants, options or rights for the purchase of Common Stock which are
outstanding on such date.
-43-
(d) Adjustments for Other Dividends and Distributions. In the
-----------------------------------------------------
event the Company at any time or from time to time after the date of this
Warrant makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock, then and in each
such event, provision shall be made so that the Holder shall receive upon
exercise hereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which it would have received
had this Warrant been converted into Common Stock as of the date of such event
and had it thereafter, during the period from the date of such event to and
including the date of exercise, retained such securities receivable by it as
aforesaid during such period, subject to all other adjustments called for during
such period under this Section 3 with respect to the rights of the Holder.
(e) Adjustment for Recapitalization, Reclassification, or
---------------------------------------------------------
Exchange. If the Common Stock issuable upon the exercise of this Warrant is
changed into the same or a different number of shares of any class or classes of
stock of the Company, whether by recapitalization, reclassification or other
exchange (other than a subdivision or combination of shares, or a stock dividend
or a reorganization, merger, consolidation or sale of assets, provided for
elsewhere in this Section 3), then and in any such event the Holder shall have
the right thereafter to exercise this Warrant to purchase the kind and amount of
stock and other securities and property receivable upon such recapitalization,
reclassification or other exchange by holders of the number of shares of Common
Stock which might have been purchased under this Warrant immediately prior to
such recapitalization, reclassification or other exchange, all subject to
further adjustment as provided herein.
(f) Reorganizations, Mergers, Consolidations or Sales of Assets.
-------------------------------------------------------------
If at any time or from time to time there is a capital reorganization of the
Common Stock (other than a subdivision or combination of shares or a stock
dividend or a recapitalization, reclassification or other exchange of shares,
provided for elsewhere in this Section 3) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's assets to any other person, then, as a part of such capital
reorganization, merger, consolidation or sale, provision shall be made so that
the Holder shall thereafter be entitled to receive upon exercise of this Warrant
the number of shares of stock or other securities or property of the Company, or
of the successor corporation resulting from such capital reorganization, merger,
consolidation or sale, to which a holder of the number of shares of Common Stock
deliverable upon such conversion would have been entitled on such capital
reorganization, merger, consolidation or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 3
with respect to the rights of the Holder after the capital reorganization,
merger, consolidation or sale to the end that the provisions of this Section 3
(including the number of shares deliverable upon exercise of this Warrant) shall
continue to be applicable after that event and shall be as nearly equivalent to
the provisions hereof as may be practicable.
(g) Sale of Shares Below Conversion Price.
------------------------------------------
-44-
(1) If at any time or from time to time after the date hereof
the Company issues or sells, or is deemed by the express provisions of this
Section 3(g) to have issued or sold, Additional Shares of Common Stock (as
hereinafter defined), other than as a dividend or other distribution on any
class of stock as provided in Section 2 and other than upon a subdivision
or combination of shares of Common Stock as provided in Section 2, for an
Effective Price (as hereinafter defined) less than the then existing
Conversion Price, then and in each such case the then existing Conversion
Price shall be reduced to such Effective Price.
(2) For the purpose of making any adjustment required under
this Section 3(g), the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash be
computed at the amount of cash received by the Company, (B) to the extent
it consists of property other than cash, be computed at the fair value of
that property as determined in good faith by the Board, and (C) if
Additional Shares of Common Stock, Convertible Securities (as hereinafter
defined) or rights or options to purchase either Additional Shares of
Common Stock or Convertible Securities are issued or sold together with
other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith
by the Board to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(3) For the purpose of the adjustment required under this
Section 3(g), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional
Shares of Common Stock (such convertible stock or securities being
hereinafter referred to as "Convertible Securities") and if the Effective
Price of such Additional Shares of Common Stock is less than the Conversion
Price then in effect, then in each case the Company shall be deemed to have
issued at the time of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable
upon exercise or conversion thereof and to have received as consideration
for the issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such
rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to
the Company upon the exercise of such rights or options, plus, in the case
of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof. No further adjustment of the Conversion Price, adjusted upon the
issuance of such rights, options or Convertible Securities, shall be made
as a result of the actual issuance of Additional Shares of Common Stock on
the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire
without having been exercised, the Conversion Price adjusted upon the
issuance of such rights, options or Convertible Securities shall be
readjusted to the Conversion Price which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any,
actually issued or sold on the exercise of such rights or options or rights
-45-
of conversion of such Convertible Securities, and such Additional Shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of all such rights or
options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
(4) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or deemed issued hereunder) by the Company after
the date hereof, whether or not subsequently reacquired or retired by the
Company, other than: (A) shares of Common Stock issued upon conversion or
exchange of the Series 3-A Preferred Stock or any other options or warrants
or convertible securities outstanding or issuable on the date hereof; (B)
shares of Common Stock issued upon conversion or exchange of the Series 2-A
Preferred Stock pursuant to Section 7 of the Certificate of Designation
creating the Series 2-A Preferred Stock; (C) shares of Common Stock issued
upon conversion or exchange of the Series 1-A Preferred Stock pursuant to
Article 4, Section C.5 of the Certificate of Incorporation; (D) shares of
Common Stock issuable or issued to the directors, officers and employees of
or consultants to the Company pursuant to a plan approved by the Board of
Directors of the Company and (E) shares of Common Stock issuable or issued
pursuant to equipment financing or leasing arrangements, and (F) shares of
Common Stock issuable pursuant to the warrants, if any, which may be issued
in connection with the Exchangeable Note and Warrant Purchase Agreement
(the "Series B-1 Agreement") dated as of January 28, 2002, by and among the
Company, Vsource (CI) Ltd, Vsource (Malaysia) Sdn Bhd, and the Purchasers
named therein. The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been
issued or sold by the Company under this Section 3(g), into the aggregate
consideration received, or deemed to have been received by the Company for
such issue under this Section 3(g), for such Additional Shares of Common
Stock.
(h) Certificate of Adjustment. Upon the occurrence of each
---------------------------
adjustment or readjustment of the Purchase Price and/or the number of shares of
Common Stock subject to this Warrant, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof, and
shall prepare and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case
----------------------------------------------------------
at any time or from time to time, the Company intends to (a) effect a
reorganization, (b) consolidate with or merge into any other person, (c) sell or
transfer all or substantially all of its properties or assets to any other
person, (d) dissolve, (e) consummate an initial public offering of its
securities; or if the Company is sold through the sale of its capital stock,
then, notwithstanding any other provision of this Warrant, in each such case, as
a condition of such reorganization, consolidation, merger, sale dissolution,
-46-
conveyance, or offering the Company shall give at least fifteen (15) business
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, merger, sale, dissolution, conveyance or offering. Any exercise
of this Warrant pursuant to notice under this Section shall be conditioned upon
the closing of such reorganization, consolidation, merger, sale, dissolution,
conveyance or offering which is the subject of the notice and the exercise of
this Warrant shall not be deemed to have occurred until immediately prior to the
closing of such transaction.
5. FURTHER ASSURANCES. The Company will take all action that may be
-------------------
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all taxes, liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of this Warrant from time to time outstanding.
6. NOTICES OF RECORD DATE, ETC. In the event of:
-------------------------------
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to or the
sale, consolidation or merger of the Company with, to or into any other person,
or
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least fifteen (15) business days prior to such record date, a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock (or
Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall also state that the action in
question or the record date is subject to the effectiveness of a registration
statement under the Securities Act or a favorable vote of stockholders if either
is required. Such notice shall be mailed at least fifteen (15) business days
prior to the date specified in such notice on which any such action is to be
taken or the record date, whichever is earlier. The Holder shall use its best
efforts to decide whether to exercise this Warrant within ten (10) days of its
receipt of such notice.
-47-
7. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
--------------------------------------------------------------
Company will at all times reserve and keep available out of its authorized but
unissued shares of capital stock, solely for issuance and delivery on the
exercise of this Warrant, a sufficient number of shares of Common Stock (or
Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company
exercisable for, convertible into, exchangeable for or otherwise entitling the
Holder to acquire shares of Common Stock (or Other Securities), and if at any
time the number of authorized but unissued shares of Common Stock (or Other
Securities) shall not be sufficient to effect such exercise, conversion or
exchange, the Company shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock (or Other Securities) to such
number as shall be sufficient for such purposes.
8. TRANSFER OF WARRANT. This Warrant cannot be transferred without the
-------------------
prior written consent of the Company, which consent shall not be unreasonably
withheld; provided, however, the Holder may transfer this Warrant to any of its
affiliates without such consent so long as such transfer complies with all
applicable securities laws.
9. NO RIGHTS AS A STOCKHOLDER. This Warrant shall not entitle the
------------------------------
Holder hereof to any voting rights or other rights as a stockholder of the
Company.
10. NOTICES, ETC. All notices which are required to be given pursuant
-------------
to this Warrant shall be in writing and shall be delivered by certified mail,
return receipt requested, first class postage prepaid, or sent by overnight
express or similarly recognized overnight delivery with receipt acknowledged or
by facsimile, with a copy thereof sent by one of the other means. Notices shall
be deemed to have been given at the time delivered and shall be addressed as
follows or to such other address as a party may designate by proper notice
hereunder.
If to Holder: To the address set forth on Exhibit A of the
Series B-1 Agreement.
If to the Company: Vsource, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Vsource (Asia) Ltd
▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇▇-▇▇▇▇
-48-
11. SECURITIES LAWS. By acceptance of this Warrant, the Holder
----------------
represents to the Company that the Holder is "accredited investor" within the
meaning of Rule 501 of Regulation D adopted under the Securities Act, as
presently in effect, or not a "U.S. person" within the meaning of Rule 902
adopted under the Securities Act and is acquiring the Securities in an "offshore
transaction" as defined in Rule 902, that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise of the Warrant, and that it is an investor in securities of
companies in the development stage and acknowledges that it can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the shares subject to this Warrant. The Holder
acknowledges and agrees that this Warrant and the Common Stock issuable upon
exercise of this Warrant (if any) have not been (and at the time of acquisition
by the Holder, will not have been or will not be) registered under the
Securities Act or under the securities laws of any state, in reliance upon
certain exemptive provisions of such statutes. The Holder further recognizes
and acknowledges that because this Warrant and the Common Stock issuable upon
exercise of this Warrant are unregistered, they may not be eligible for resale,
and may only be resold in the future pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws, or
pursuant to a valid exemption from such registration requirements and that the
Holder must, therefore, bear the economic risk of such investment indefinitely.
12. LEGEND. Unless theretofore registered for resale under the
------
Securities Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following or a similar legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
DISPOSITION IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
13. MISCELLANEOUS. This Warrant and any terms hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of California, without regard to
conflict of laws principles. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
-49-
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on
its behalf by one of its officers thereunto duly authorized as of [date of
issuance].
VSOURCE, INC.
By: _________________________________
-50-
FORM OF SUBSCRIPTION
VSOURCE, INC.
(To be signed only on exercise of Warrant)
TO: VSOURCE, INC.
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
shares of Common Stock, as defined in the Warrant, of Vsource, Inc., a Delaware
corporation (the "Company").
2. The undersigned Holder is hereby paying the aggregate purchase price
for such shares of Common Stock (the "Exercise Shares") (i) by the enclosed
certified or official bank check payable in United States dollars to the order
of the Company in the amount of $___________, or (ii) by wire transfer of United
States funds to the account of the Company in the amount of $______________,
which transfer has been made before or simultaneously with the delivery of this
Form of Subscription pursuant to the instructions of the Company, or (iii)
electing to exercise the attached Warrant for _______ shares purchasable under
the Warrant pursuant to the net exercise provisions of Section 1(b) of such
Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned
Holder.
Dated:_______________________
__________________________________
Signature of Holder
Schedule 3.2
-------------
1. The Series A Notes are convertible into securities which have the
right to vote.
Schedule 3.4
-------------
1. The Company may file a Form 8-K with the U.S. Securities and
Exchange Commission ("SEC") in connection with this transaction.
2. The transactions contemplated by this Agreement and the Securities
will:
(a) Result in a change in the conversion or exercise prices pursuant
to the "anti-dilution" provisions of the Company's outstanding
Series 1-A Convertible Preferred Stock and Series 2-A Convertible
Preferred Stock and certain outstanding warrants and options; and
(b) The provisions of Exhibit B to the Series A Note Purchase
Agreement will require the filing and effectiveness of a
Registration Statement with the SEC and certain filings with
state securities commissions.
Schedule 3.11
--------------
1. The Company received a letter from the SEC dated December 18, 2001
commenting (the "SEC Comments") upon the Company's Post Effective Amendment
No. 2 on Form S-3 to Form SB-2 filed November 15, 2001, Form 10-K and Form
10-Q/A for the quarter ended October 31, 2001. On January 14, 2002, the
Company filed its response (the "Response") to the SEC Comments with the
SEC. As of the date of this Agreement, the Company has not received any
further response from the SEC and can provide no assurance that the
Response adequately addressed the SEC Comments.