Notice of Adjustment to Conversion Price for Series 1-A Convertible Preferred Stock – Vsource, Inc.

Summary

Vsource, Inc. notifies holders of its Series 1-A Convertible Preferred Stock that, as of February 5, 2002, the conversion price has been reduced to $0.82 per share. This means each preferred share can now be converted into 3.04 shares of common stock. The adjustment is made in accordance with the company's Certificate of Incorporation, reflecting recent issuances of convertible securities and warrants. The notice is signed by the company's Vice-Chairman and CFO, Dennis M. Smith.

EX-4.2 4 doc3.txt Exhibit 4.2 February 5, 2002 To: Holders of Series 1-A Convertible Preferred Stock RE: Reduction of Conversion Price In accordance with the terms of the Certificate of Incorporation (the "Certificate") of Vsource, Inc. (the "Company"), the Company hereby certifies that as of the date hereof, the Conversion Price of its outstanding Series 1-A Convertible Preferred Stock (the "Series 1-A Preferred Stock") has been adjusted to $0.82. As a result, a holder of Series 1-A Preferred Stock will receive 3.04 shares of the Company's common stock (the "Common Stock") for each share of Series 1-A Preferred Stock that is converted. The foregoing adjustment is based on the following facts: - - The following securities have become convertible into or exercisable for shares of Common Stock: o $4,557,596 in principal amount of Convertible Promissory Notes issued pursuant to a Convertible Note Purchase Agreement dated June 24, 2001 between the Company and the Purchasers set forth therein, which are convertible into 75,960 shares of the Company's Series 3-A Convertible Preferred Stock, which, in turn are now convertible into 45,575,951shares of Common Stock; o Warrants (the "Series B Warrants") to purchase 21,256,500 shares of Common Stock, issued pursuant to an Exchangeable Note and Warrant Purchase Agreement dated as of July 12, 2001, between the Company and the Purchasers set forth therein; o Warrants to purchase an aggregate of 350,000 shares of Common Stock granted to third-party advisers in consideration of services provided in connection with the Company's acquisition of substantially all of the assets of NetCel360 Holdings Limited; and o Warrants to purchase 14,695,976 shares of Common Stock, pursuant to an Exchangeable Note and Warrant Purchase Agreement dated as of January 28, 2001, between the Company and the Purchasers set forth therein. - - In accordance with Section 4C5(d)(6)(A) of Article 4 of the Certificate, the Conversion Price was adjusted to $0.82, being the Original Issue Price of $2.50 multiplied by a fraction, o the numerator of which was 38,518,045, being comprised of (A) 33,831,184 shares of Common Stock outstanding at the close of business on the day next preceding the date on which the above-described securities became convertible or exercisable (the "Effective Date"), plus (B) 3,275,137 shares of Common Stock which the aggregate consideration received (or deemed to have been received) by the Company for the total number of Additional Shares of Common Stock so issued would purchase at the then Conversion Price, plus (C) 1,411,724 shares of Common Stock underlying Other Securities, and o the denominator of which was 116,971,341, being comprised of (X) 115,559,617 shares of Common Stock outstanding at the close of business on the Effective Date, after giving effect to the issue of Additional Shares, plus (Y) 1,411,724 shares of Common Stock underlying the Other Securities at the close of business on the Effective Date. All terms not otherwise defined herein shall have the meaning set forth in the Certificate. Sincerely, /S/ Dennis M. Smith DENNIS M. SMITH Vice-Chairman and Chief Financial Officer