State of Delaware PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "VSOURCE, INC.",FILED IN THIS OFFICE ON THE EIGHTH DAY OF
NOVEMBER, A.D. 2000, AT 9:10 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL]
/s/ Edward J. Freel
-----------------------
Edward J. Freel, Secretarey of State
3313408 8100 AUTHENTICATION: 0781006
001559072 DATE: 11-08-00
<PAGE>
VSOURCE, INC.,
A DELAWARE CORPORATION
Certificate of Designation
Robert C. McShirley and Sandford T. Waddell, certify that:
A. They are the duly elected and acting President and Secretary, respectively,
of Vsource, Inc., a Delaware corporation (the "Company");
B. The following resolution, which sets forth the rights, preferences,
privileges and restrictions of the Series 2-A Convertible Preferred Stock
of the Company determined by the Board of Directors of the Company in
accordance with the authorization contained in the Company's Certificate of
Incorporation was duly adopted by the Board by unanimous written consent
dated as of November 3, 2000:
AUTHORIZATION OF SERIES 2-A CONVERTIBLE PREFERRED STOCK
Resolved that the Board of Directors hereby determines that 1,672,328
shares of Class A Preferred Stock shall be designated "Series 2-A
Convertible Preferred Stock" and that such Series 2-A Convertible Preferred
Stock shall have the rights, preferences, privileges and restrictions
hereinafter set forth:
DESIGNATION OF SERIES 2-A CONVERTIBLE PREFERRED STOCK
1. Designation.
-----------
This series of Class A Preferred Stock shall be designated "Series 2-A
Convertible Preferred Stock," par value $0.01 per share ("Series 2-A
Preferred").
2. Authorized Number.
------------------
The number of authorized shares of Series 2-A Preferred shall be one
million six hundred seventy two thousand three hundred twenty eight (1,672,328)
shares.
-1-
<PAGE>
3. Dividends.
---------
The holders of shares of Series 2-A Preferred Stock shall be entitled
to receive, out of any assets legally available therefor, and when, as and if
declared by the Board of Directors, noncumulative dividends in an amount equal
to eight percent (8%) of the Original Issue Price (defined below) per share
annually. No dividend may be declared and paid upon shares of Common Stock in
any fiscal year of the Corporation unless dividends of eight percent of the
Original Issue Price (defined below) per share has first been paid upon or
declared and set aside for payment to the holders of the shares of Series 2-A
Preferred Stock for such fiscal year of the Corporation. No undeclared or
unpaid dividend shall ever bear interest.
4. Liquidation Preference.
-----------------------
a. In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, each holder of the Series 2-A
Preferred Stock shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation
to the holders of the Common Stock by reason of their ownership thereof, a
preference amount for each outstanding share of Series 2-A Preferred Stock
held by such holder equal to the sum of (A) the price originally paid to
the Corporation for that outstanding share of Series 2-A Preferred Stock
(the "Original Issue Price") at the same time and with the same priority as
the payment to the holders of the Series 1-A Convertible Preferred Stock
("Series 1-A Preferred") of $2.50 for each outstanding share of Series 1-A
Preferred Stock and (B) an amount equal to declared but unpaid dividends on
such share, if any, but only to the extent of the Company's retained
earnings. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series 1-A Preferred Stock and the
Series 2-A Preferred Stock shall be insufficient to permit the payment to
such holders of the full preferential amount each such holder is entitled
to receive, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed among such holders and the
holders of the Series 1-A Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive.
b. After payment to the holders of the Series 2-A Preferred Stock and
the Series 1-A Preferred Stock of the amounts to which they are entitled to
be paid prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by
reason of their ownership thereof, the remaining assets and funds of the
Corporation legally available for distribution, if any, shall be
distributed among the holders of the Common Stock, the Series 1-A Preferred
Stock and the Series 2-A Preferred Stock pro rata based on the number of
-2-
<PAGE>
shares of Common Stock held by each (assuming conversion of all such Series
2-A Preferred Stock pursuant to Paragraph 7 below and of all such Series
1-A Preferred Stock pursuant to Paragraph 7 of the Certificate of
Designation creating the Series 1-A Preferred Stock ).
c. For purposes of this Section 4, a liquidation, dissolution or
winding up of the Corporation shall be deemed to be occasioned by or to
include (i) the acquisition of the Corporation by another entity by means
of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of the
Corporation), or (ii) a sale of all or substantially all of the assets of
the Corporation; unless the Corporation's shareholders of record as
constituted immediately prior to such acquisition or sale will, immediately
after such acquisition or sale (by virtue of securities issued as
consideration for the Corporation's acquisition or sale or otherwise) hold
a majority of the voting power of the surviving or acquiring entity. In any
of such events, if the consideration received by the Corporation received
is other than cash, its value will be deemed its fair market value. The
fair market value of common stock which is publicly traded on an exchange
or the NASDAQ National Market System or Small Cap Market shall be the
average of the daily market prices of that stock over the 20 consecutive
trading days immediately preceding (and not including) the date the
Corporation or its shareholders receive such stock. The daily market price
for each trading day shall be: (A) the closing price on that day on the
principal exchange on which such common stock is then listed or admitted to
trading or on NASDAQ, as applicable; or (B) if no sale takes place on that
day on such exchange or NASDAQ, the average of the official closing bid and
asked prices for that stock. Otherwise, the fair market value of such
consideration shall be determined in good faith by the Board of Directors
and provided in writing by the Corporation to the holders of the Series 2-A
Preferred Stock within five (5) days of the date of such determination;
provided, however, that the fair market value of such consideration shall
be determined by appraisal in accordance with the following provisions if
the holders of at least two-thirds of then outstanding Series 2-A Preferred
Stock object in writing to the Board of Director's determination within 15
days of their receipt of notice of such determination by the Board of
Directors. A single appraiser shall selected jointly by the holders of a
majority of the Series 2-A Preferred Stock and the Corporation. If the
holders of the Series 2-A Preferred Stock and the Corporation are unable to
agree on an appraiser within twenty (20) days of the Board of Directors
receiving notice of such holders' objection to the Board of Directors'
determination, each shall immediately appoint an appraiser who shall
determine such fair market value. If the lower of the appraised fair market
values is not less than ninety percent (90%) of the higher appraised fair
market value, the final fair market value of such consideration shall be
-3-
<PAGE>
the average of the appraised values. If the lower of the appraised values
is less than ninety percent (90%) of the higher appraised values, the
original appraisers shall appoint a final appraiser who shall pick one of
the two prior values determined by the first two appraisers. All appraisal
reports shall be completed no later than sixty (60) days after the
appointment of the appraiser engaged to render such appraisal. All
appraisal fees and costs shall be paid by the Corporation; provided,
however, that if the final appraised value is no more than ten percent
(10%) higher than that determined by the Board, the appraisal fees and
costs shall be subtracted from the liquidation preference to be paid to the
holders of the Series 2-A Preferred Stock.
5. Redemption.
----------
a. Redemption at the Option of the Corporation. The Corporation shall
-------------------------------------------------
not have the right to call or redeem any shares of the Series 2-A Preferred
Stock.
b. Redemption at the Option of the Holders. The holders of the Series
---------------------------------------
2-A Preferred Stock shall not have any right to require the Corporation to
redeem all or any part of the Series 2-A Preferred Stock held by them.
6. Voting Rights. The holder of each share of Series 2-A Preferred Stock
--------------
shall have the right to one vote for each share of Common Stock into which such
Series 2-A Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded down to the nearest
whole share), and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any shareholders' meeting in accordance with the by-laws of the Company, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
7. Conversion.
----------
The holders of the Series 2-A Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
a. Right to Convert. Each share of Series 2-A Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the
Original Issue Price by the then applicable Conversion Price, determined as
hereinafter provided, in effect on the date the certificate evidencing such
-4-
<PAGE>
share is surrendered for conversion. The initial Conversion Price per share
for Series 2-A Preferred Stock (the "Conversion Price") shall be the
Original Issue Price. Such initial Conversion Price shall be adjusted as
hereinafter provided.
b. Automatic Conversion. Each share of Series 2-A Preferred Stock
---------------------
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price as provided in Section 7.a. above, immediately
upon the closing of a public offering of the Corporation's Common Stock
with aggregate gross proceeds of at least $20,000,000 and a per share price
to the public of at least Thirteen Dollars ($13.00), or at the election of
the holders of a majority of the outstanding shares of Series 2-A Preferred
Stock.
c. Mechanics of Conversion. Before any holder of Series 2-A Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock,
such holder shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent for
such stock, and shall give written notice to the Corporation at such office
that it elects to convert the same and shall state therein the number of
shares to be converted and the name or names in which it wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Series 2-A Preferred
Stock to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock
on such date.
d. Conversion Price Adjustments. The Conversion Price shall be subject
----------------------------
to the following adjustments:
(1) Adjustment for Stock Splits and Combinations. If the
-------------------------------------------------
Corporation at any time or from time to time after the first issuance
of Series 2-A Preferred Stock (the "Purchase Date") effects a
subdivision of the outstanding Common Stock, by stock split or
otherwise, the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased; and, conversely, if
the Corporation at any time or from time to time after the Purchase
Date combines the outstanding shares of Common Stock, by reverse stock
split or otherwise, the Conversion Price then in effect immediately
before that combination shall be proportionately increased. Any
adjustment under this Section d(1) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
-5-
<PAGE>
(2) Adjustment for Certain Dividends and Distributions. In the
----------------------------------------------------
event the Corporation at any time or from time to time after the
Purchase Date 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 Conversion 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 Conversion 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 Conversion Price
shall be recomputed accordingly as of the close of business on such
record date or date fixed therefor and thereafter the Conversion Price
shall be adjusted pursuant to this Section d(2) 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.
(3) Adjustments for Other Dividends and Distributions. In the
---------------------------------------------------
event the Corporation at any time or from time to time after the
Purchase Date 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 Corporation other than
shares of Common Stock, then and in each such event, provision shall
be made so that each Holder of Series 2-A Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the
Corporation which it would have received had the Holder's shares of
Series 2-A Preferred Stock 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 5 with respect to the rights of such Holder.
-6-
<PAGE>
(4) Adjustment for Recapitalization, Reclassification, or
------------------------------------------------------------
Exchange. If the Common Stock issuable upon the conversion of the
--------
Series 2-A Preferred Stock is changed into the same or a different
number of shares of any class or classes of stock of the Corporation,
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 d), then and in any such event each Holder
of Series 2-A Preferred Stock shall have the right thereafter to
convert the Series 2-A Preferred Stock into 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 into which the number of shares of
Series 2-A Preferred Stock then by such Holder could be converted
immediately prior to such recapitalization, reclassification or other
exchange, all subject to further adjustment as provided herein.
(5) 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 d) or a
merger or consolidation of the Corporation with or into another
corporation, or the sale of all or substantially all of the
Corporation's assets to any other person, then, as a part of such
capital reorganization, merger, consolidation or sale, provision shall
be made so that each Holder of the Series 2-A Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series 2-A
Preferred Stock the number of shares of stock or other securities or
property of the Corporation, 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 exercise 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 d with respect to the rights of each Holder
of Series 2-A Preferred Stock after the capital reorganization,
merger, consolidation or sale to the end that the provisions of this
Section d (including the number of shares deliverable upon conversion
of the Series 2-A Preferred Stock) shall continue to be applicable
after that event and shall be as nearly equivalent to the provisions
hereof as may be practicable.
-7-
<PAGE>
(6) Sale of Shares Below Conversion Price.
-------------------------------------
(a) If at any time or from time to time after the Purchase
Date, the Corporation issues or sells, or is deemed by the
express provisions of this Section d(6) 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 d(2) and other than upon a subdivision or
combination of shares of Common Stock as provided in Section
d(1), 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, as of the
opening of business on the date of such issue or sale, to a price
determined by multiplying that Conversion Price by a fraction the
numerator of which shall be (A) the number of shares of Common
Stock outstanding at the close of business on the day next
preceding the date of such issue or sale, plus (B) the number of
shares of Common Stock which the aggregate consideration received
(or by the express provisions hereof is deemed to have been
received) by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such
Conversion Price, plus (C) the number of shares of Common Stock
underlying Other Securities (as hereinafter defined) and the
denominator of which shall be (X) the number of shares of Common
Stock outstanding at the close of business on the date of such
issue after giving effect to such issue of Additional Shares of
Common Stock, plus (Y) the number of shares of Common Stock
underlying the Other Securities at the close of business on the
date of such issue or sale.
(b) For the purpose of making any adjustment required under
this Section d(6), the consideration received by the Corporation
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 Corporation, (B) to the extent it consists of property other
than cash, be computed at the fair value of that property as
determined in accordance with the procedure set forth in Section
4.c. above, and (C) if Additional Shares of Common Stock,
Convertible Securities (as hereinafter defined) or rights or
-8-
<PAGE>
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 Corporation 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 under the procedure set forth in Section 4.c. above.
(c) For the purpose of the adjustment required under this
Section d(6), if the Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation (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 of conversion of such Convertible
-9-
<PAGE>
Securities, and such Additional Shares of Common Stock, if any,
were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if
any, actually received by the Corporation 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 Corporation (other than by cancellation
of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
(d) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Corporation after the
Purchase Date, whether or not subsequently reacquired or retired
by the Corporation, other than: (A) shares of Common Stock issued
upon conversion of the Series 2-A Preferred Stock or any other
options or warrants or convertible securities outstanding or
issuable on the Purchase Date; (B) shares of Common Stock
issuable or issued to the directors, officers and employees of or
consultants to the Corporation; (C) shares of Common Stock
issuable or issued as part of an acquisition by the Corporation
of all of or certain assets (including technology rights) or
shares of another company or entity whether through a purchase,
merger, exchange, reorganization or the like; (D) shares of
Common Stock issuable or issued pursuant to equipment financing
or leasing arrangements; or (E) shares issued in a public
offering of the Corporation's securities. 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 Corporation under this Section d(6), into the
aggregate consideration received, or deemed to have been received
by the Corporation for such issue under this Section d(6), for
such Additional Shares of Common Stock. "Other Securities" with
respect to an issue or sale of Additional Shares of Common Stock
shall mean (i) preferred stock, debentures and notes convertible
into Common Stock, and (ii) options or warrants to purchase
Common Stock at a price that is no greater than 95% of the
Effective Price of such issue or sale of Additional Shares of
Common Stock. The "number of shares of Common Stock underlying
Other Securities" on a particular date shall mean the number of
shares of Common Stock issuable upon the exercise or conversion,
as the case may be, of such Other Securities at the close of
business on such date but only to the extent that the holders
thereof have the fully vested legal right to exercise or convert
such Other Securities on such date and to retain the Common Stock
issued upon such exercise or conversion.
-10-
<PAGE>
(7) Upon the occurrence of each adjustment or readjustment
of the Conversion Price, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof, and shall prepare and furnish to the
holders of the Series 2-A Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.
e. Notices of Record Date. In the event of any taking by the
-------------------------
Corporation 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 (other than a cash dividend) or other distribution, any security
or right convertible into or entitling the holder thereof to receive 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, the Corporation shall mail to each holder of Series 2-A Preferred
Stock at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, security or right, and the amount
and character of such dividend, distribution, security or right.
f. Reservation of Stock Issuable Upon Conversion. The Corporation
------------------------------------------------
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series 2-A Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series 2-A Preferred
Stock and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series 2-A Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Articles of
Incorporation.
g. Fractional Shares. No fractional share shall be issued upon the
------------------
conversion of any share or shares of Series 2-A Preferred Stock. All shares
of Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Series 2-A Preferred Stock by a holder thereof shall
-11-
<PAGE>
be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of
a fraction of a share of Common Stock, the Corporation shall, in lieu of
issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on
the date of conversion (determined as provided in Section 5.c.).
h. Notices. Any notice required by the provisions of this Section 5 to
-------
be given to the holders of shares of Series 2-A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid,
return receipt requested, and addressed to each holder of record at his
address appearing on the books of the Corporation.
8. Amendment.
---------
Any term relating to the Series 2-A Preferred Stock may be amended and the
observance of any term relating to the Series 2-A Preferred Stock may be waived
(either generally or in a particular instance) only with the vote or written
consent of holders of a majority of the outstanding shares of the Series 2-A
Preferred Stock. Any amendment so effected shall be binding upon the Corporation
and any holder of the Series 2-A Preferred Stock.
9. Restrictions and Limitations.
----------------------------
So long as any shares of Series 2-A Preferred Stock remain outstanding, the
Corporation shall not, without the vote or written consent by the holders of a
majority of the outstanding shares of Series 2-A Preferred Stock, voting
together as a single class:
a. Increase or decrease (other than by conversion) the total number of
authorized shares of Series 2-A Preferred Stock; or
b. Amend the Articles of Incorporation of the Corporation to change
the rights, preferences, privileges or limitations of the Series 2-A
Preferred Stock.
10. No Reissuance of Series 2-A Preferred Stock.
-------------------------------------------
No share or shares of Series 2-A Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be returned to the status of undesignated
shares of Preferred Stock.
-12-
<PAGE>
11. Residual Rights.
---------------
Holders of shares of Series 2-A Preferred Stock shall not have any
pre-emptive rights. All rights accruing to the outstanding shares of the Company
not expressly provided for to the contrary herein shall be vested in the Common
Stock.
C. That the number of shares of Series 2-A Preferred Stock is
1,672,328; and
D. That none of such shares of Series 2-A Preferred Stock has been
issued.
-13-
<PAGE>
IN WITNESS WHEREOF Vsource, Inc. has caused this certificate to be
executed by Robert C. McShirley, its President and Sandford T. Waddell, its
Secretary, on the date set forth below.
Dated: 11/3, 2000
----
/s/ Robert C. McShirley
-----------------------------
Robert C. McShirley, President
/s/ Sandford T. Waddell
-----------------------------
Sandford T. Waddell, Secretary
-14-
<PAGE>
