Exhibit 10.1
SERIES 5-A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
     THIS SERIES 5-A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
“Agreement”) is made as of the 14th day of January, 2008 by and among
Tri-Isthmus Group, Inc. (f/k/a Vsource, Inc.), a Delaware corporation (the
“Company”), and the investors listed on Exhibit A attached to this Agreement
(the “Purchaser”).
     The parties hereby agree as follows:
1. Authorization and Sale of Shares and Warrants.
     1.1 Authorization. The Company has duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of up to 4,560 shares (the “Shares”) of
its Series 5-A Convertible Preferred Stock, par value $0.01 per share (the
“Series 5-A Preferred”), and warrants to purchase up to 2,736,000 shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), at an
exercise price of $0.50 per share substantially in the form attached hereto as
Exhibit B (the “Warrants”). For purposes of this Agreement, a “Unit” shall
consist of one share of Series 5-A Preferred and one Warrant to purchase 600
shares of Common Stock.
     1.2 Purchase and Sale. Upon the terms and subject to the conditions herein,
and in reliance on the representations, warranties and covenants set forth
herein, at the Closing each Purchaser named on Exhibit A hereto shall,
individually and not jointly, purchase from the Company, and the Company shall
issue and sell to each such Purchaser, the number of Units set forth opposite
the name of such Purchaser on Exhibit A hereto, for a purchase price of
$1,000.00 per Unit (the “Purchase Price”).
     1.3 Defined Terms Used in this Agreement. The following terms used in this
Agreement shall be construed to have the meanings set forth below.
          “Affiliate” means with respect to any person or entity (a “Person”),
any Person which, directly or indirectly, controls, is controlled by, or is
under common control with such Person, including, without limitation, any
partner, officer, director, or member of such Person.
          “Balance Sheet” means the Company’s balance sheet as of January 31,
2007 included in the Company’s Annual Report on Form 10-K for the fiscal year
ended January 31, 2007.
          “Code” means the Internal Revenue Code of 1986, as amended.
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
          “Material Adverse Effect” means a material adverse effect on the
assets or liabilities of the Company.
          “SEC” means the United States Securities and Exchange Commission.
          “Securities Act” means the Securities Act of 1933, as amended.

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2. Closing; Deliveries.
     2.1 Closing. In accordance with the terms and conditions of that certain
escrow agreement, dated as of the date of this Agreement (the “Escrow
Agreement”), by and among the Company, the Purchasers and Hughes & Luce LLP, as
escrow agent (the “Escrow Agent”), the purchase and sale of the Units shall take
place as of the date hereof at the offices of the Escrow Agent (which time and
place is designated as the “Closing”).
     2.2 Deliveries; Certificate of Designation.
          (a) Shares and Warrants; Purchase Price. At the Closing and in
accordance with the Escrow Agreement, the Company shall deliver to Purchasers
certificates representing the Shares and the Warrants being purchased by
Purchasers against payment of the Purchase Price to the Company.
          (b) Certificate of Designation. The Company has previously filed the
Certificate of Designation of the Company, in the form attached hereto as
Exhibit C (the “Certificate of Designation”), which establishes the rights and
preferences of the Series 5-A Preferred.
3. Representations and Warranties of the Company. The Company hereby represents
and warrants to Purchasers that the following representations are true and
correct as of the date hereof. For purposes of these representations and
warranties, the phrase “to the Company’s knowledge” shall mean the actual
knowledge of David Hirschhorn, Todd Parker or Dennis Smith.
     3.1 Organization, Good Standing, Corporate Power and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as presently conducted and as proposed to
be conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
Material Adverse Effect.
     3.2 Capitalization. The authorized capital stock of the Company consists of
(i) 100,000,000 shares of Common Stock, 8,177,629 shares of which are issued and
outstanding, and (ii) 5,000,000 shares of preferred stock, of which (a) 67,600
shares of Series 1-A Preferred Stock, par value $0.01 per share, (b) 3,900
shares of Series 2-A Preferred Stock, par value $0.01 per share, and (c) 2,902
shares of Series 5-A Preferred Stock, par value $0.01 per share, are issued and
outstanding. Except as disclosed on Schedule 3.2 and as contemplated hereby,
there are no outstanding subscriptions, options, warrants, commitments,
agreements or arrangements for or relating to the issuance, or sale of, or
outstanding securities convertible into or exchangeable for, any shares of
capital stock of any class or other equity interests of the Company. As of the
Closing, and after giving effect to the transactions contemplated hereby, all of
the outstanding shares of capital stock of the Company will have been duly and
validly authorized and issued and will be fully paid and non-assessable and will
have been offered,

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issued, sold and delivered in compliance with applicable federal and state
securities laws and not subject to any preemptive rights. When issued in
accordance with the terms of the Series 5-A Preferred and the Warrants, the
shares of Common Stock issuable upon exercise of Series 5-A Preferred and the
Warrants will be validly issued, fully paid and non-assessable. The terms
relating to the Warrants are as set forth in Exhibit B attached hereto. The
relative rights, preferences and other terms relating to the Series 5-A
Preferred are as set forth in Exhibit C attached hereto. There are no preemptive
rights, rights of first refusal, put or call rights or obligations or any other
purchase or redemption obligations or anti-dilution rights with respect to the
Company’s capital stock or any interests therein, other than as disclosed on
Schedule 3.2 or rights set forth herein or in the Company’s Certificate of
Incorporation or the Certificates of Designation establishing such capital
stock. Other than as set forth herein, there are no rights to have the Company’s
capital stock registered for sale to the public in connection with the laws of
any jurisdiction, and there are no agreements relating to the voting of the
Company’s voting securities or restrictions on the transfer of the Company’s
capital stock.
     3.3 Authorization; No Conflict. The execution, delivery and performance by
the Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable in accordance with its terms. The execution of and performance of
the transactions contemplated by this Agreement and the compliance with its
provisions by the Company will not (a) conflict with or violate any provision of
the Certificate of Incorporation or Bylaws of the Company, (b) conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any material contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest (as defined below) or other
arrangement to which the Company is a party or by which the Company is bound or
to which its assets are subject, (c) result in the imposition of any Security
Interest upon any assets of the Company or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets. For purposes of this Agreement, “Security Interest”
means any mortgage, pledge, security interest, encumbrance, charge, or other
lien (whether arising by contract or by operation of law).
     3.4 Valid Issuance of Shares. The Shares, when issued, sold and delivered
in accordance with the terms and for the consideration set forth in this
Agreement, will be validly issued, fully paid and non-assessable and free of
restrictions on transfer other than restrictions on transfer under applicable
state and federal securities laws and liens or encumbrances created by or
imposed by a Purchaser. Assuming the accuracy of the representations of the
Purchasers in Section 4 of this Agreement and subject to the filings described
in Section 3.5 below, the Shares will be issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Shares and exercise of the Warrants has been duly reserved for
issuance, and upon issuance, will be validly issued, fully paid and
non-assessable and free of restrictions on transfer other than restrictions on
transfer under applicable federal and state securities laws and liens or
encumbrances created by or imposed by a Purchaser. Based in

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part upon the representations of the Purchasers in Section 4 of this Agreement,
and subject to Section 3.5 below, the Common Stock issuable upon conversion of
the Shares and exercise of the Warrants will be issued in compliance with all
applicable federal and state securities laws.
     3.5 Governmental Consents and Filings. Assuming the accuracy of the
representations made by the Purchasers in Section 4 of this Agreement, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Company in connection with
the consummation of the transactions contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of the
Closing and such filings required to be made after the Closing under applicable
federal and state securities laws.
     3.6 Subsidiaries. The Company’s subsidiaries are as set forth in the
Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2007.
     3.7 Compliance with Laws. The Company has complied in all material respects
with all laws, regulations and orders applicable to its present and currently
proposed business and has all material permits and licenses required thereby,
except where the failure to have such permits or licenses would not have a
Material Adverse Effect.
     3.8 Absence of Litigation. Except as disclosed in the Company’s periodic
reports filed with the Securities and Exchange Commission (the “SEC Filings”),
there is no action, suit or proceeding pending or, to the Company’s knowledge,
threatened, against the Company which questions the validity of this Agreement
or the right of the Company to enter into it, or which might result, either
individually or in the aggregate, in a Material Adverse Effect.
     3.9 Absence of Liabilities. The Company does not have any material
liabilities or obligations, whether accrued, absolute, contingent or otherwise,
of the type required to be disclosed on a balance sheet other than (i) such
matters as are specifically and expressly set forth on the Balance Sheet or
(ii) those which have been incurred by the Company in the ordinary course of
business during the period from the date of the Balance Sheet to the date
hereof.
     3.10 Material Contracts and Obligations. Except as disclosed in the
Company’s SEC Filings or as disclosed on Schedule 3.10, the Company is not a
party to, nor is it bound by any of the following types of agreements: (a) any
agreement which requires future expenditures by the Company in excess of $25,000
or which might result in payments to the Company in excess of $25,000, (b) any
agreement with any current officer or director of the Company, or any
“affiliate” or “associate” of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such Person, (c) any agreement under which the Company is
restricted from carrying on any business or other services anywhere in the
world, (d) any agreement for the disposition of a material portion of the
Company’s assets or (e) any agreement for the acquisition of the business or
shares of another party.

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     3.11 Changes. Except as disclosed in the Company’s SEC Filings, and in
Schedule 3.11, since January 31, 2007, there has not been:
          (a) any material change in the assets or liabilities of the Company
from that reflected on the Balance Sheet, except changes in the ordinary course
of business that have not caused, in the aggregate, a Material Adverse Effect;
          (b) any damage, destruction or loss, whether or not covered by
insurance, that would have a Material Adverse Effect;
          (c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
          (d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and the satisfaction or discharge of which would not have a Material
Adverse Effect;
          (e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
          (f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder;
          (g) any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable and liens that arise in
the ordinary course of business and do not materially impair the Company’s
ownership or use of such property or assets;
          (h) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business;
          (i) any declaration, setting aside or payment or other distribution in
respect of any of the Company’s capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by the Company;
          (j) to the Company’s knowledge, any other event or condition of any
character, other than events affecting the economy or the Company’s industry
generally, that could reasonably be expected to result in a Material Adverse
Effect; or
          (k) any agreement or commitment by the Company to do any of the
foregoing.
     3.12 Employees. The Company’s only current employees are David Hirschhorn
and Dennis Smith.

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     3.13 Tax Returns and Payments. There are no federal, state, county, local
or foreign taxes due and payable by the Company which have not been timely paid.
There are no accrued and unpaid federal, state, country, local or foreign taxes
of the Company which are due, whether or not assessed or disputed. There have
been no examinations or audits of any tax returns or reports by any applicable
federal, state, local or foreign governmental agency. The Company has duly filed
all federal, state, county, local and foreign tax returns required to have been
filed by it and there are in effect no waivers of applicable statutes of
limitations with respect to taxes for any year.
     3.14 No Stop Order. No stop order suspending or prohibiting the
transactions contemplated by this Agreement has been issued by the SEC or the
regulatory authorities of any state and, to the Company’s knowledge, no
proceeding for that purpose has been initiated or is threatened or contemplated
by the SEC or the regulatory authorities of any state.
     3.15 Quotation of Common Stock. The Company’s Common Stock continues to be
quoted on the OTC Bulletin Board under the ticker symbol, “TISG.OB”.
     3.16 Directors and Officer’s Liability Insurance. The Company has made all
payments under its existing policy of directors and officers’ liability
insurance on a timely basis.
4. Representations and Warranties of the Purchasers. Each Purchaser hereby
represents and warrants to the Company, severally and not jointly, that:
     4.1 Authorization. The Purchaser has full power and authority to enter into
this Agreement. This Agreement, when executed and delivered by the Purchaser,
will constitute the valid and legally binding obligation of the Purchaser,
enforceable in accordance with its terms.
     4.2 Purchase for Own Account; Accredited Investor. This Agreement is made
with the Purchaser in reliance upon the Purchaser’s representation to the
Company, which by the Purchaser’s execution of this Agreement, the Purchaser
hereby confirms, that the Shares to be acquired by the Purchaser will be
acquired for investment for the Purchaser’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participations to such Person or to any third
Person, with respect to any of the Shares. The Purchaser has not been formed for
the specific purpose of acquiring the Shares. The Purchaser is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
     4.3 Experience. The Purchaser has carefully reviewed the representations
concerning the Company contained in this Agreement and has made detailed inquiry
concerning the Company, its business and its personnel. The officers of the
Company have made available to the Purchaser any and all information which the
Purchaser has requested and have answered to the Purchaser’s satisfaction all
inquiries made by the Purchaser; and the Purchaser has sufficient

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knowledge and experience in finance and business that it is capable of
evaluating the risks and merits of its investment in the Company and the
Purchaser is able financially to bear the risks thereof.
     4.4 Restricted Securities. The Purchaser understands that the issuance of
the Shares and the Warrants and the Common Stock issuable upon conversion of the
Shares and exercise of the Warrants have not been registered under the
Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Purchaser’s
representations as expressed herein. The Purchaser understands that the Shares,
the Warrants and the Common Stock issuable upon conversion of the Shares and
exercise of the Warrants are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, the
Purchaser must hold the Shares, the Warrants and such Common Stock indefinitely
unless the resales of same are registered with the SEC and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that, except as otherwise
provided herein, the Company has no obligation to register or qualify the resale
of the Shares, the Warrants or the Common Stock issuable upon conversion of the
Shares or exercise of the Warrants for resale. The Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, the
Warrants and the Common Stock issuable upon conversion of the Shares and
exercise of the Warrants, and on requirements relating to the Company which are
outside of the Purchaser’s control, and which the Company is under no obligation
and may not be able to satisfy.
     4.5 Legends. The Purchaser understands that the Shares, the Warrants and
any securities issued in respect of or exchange for the Shares or exercise of
the Warrants, may bear one or all of the following legends:
          (a) “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.”
          (b) Any legend required by the securities laws of any state to the
extent such laws are applicable to the Shares and the Warrants represented by
the certificate so legended.
5. Directors’ and Officers’ Insurance and Indemnification. From and after the
Closing and for a period of six years, the Company will provide standard and
customary directors’ and officers’ liability insurance coverage commercially
consistent with the then-applicable size of the Company and its operations to
current and former officers and directors of the Company (all

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such directors and officers are referred to herein as the “Covered Persons”),
including run-off for past acts. From and after the Closing, the Company will
fulfill and honor in all respects the obligations of the Company pursuant to any
indemnification obligations of the Company with respect to each of the Covered
Persons, and any indemnification provisions under the Company’s certificate of
incorporation and bylaws will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Covered Persons as those
contained in the certificate of incorporation and bylaws of the Company as in
effect on the date hereof, which provisions will not be amended, repealed or
otherwise modified for a period of six years from the Closing in any manner that
would adversely affect the rights of the Covered Persons, unless such
modification is required by law. This covenant shall be enforceable by the
Covered Persons as third party beneficiaries, and shall be binding on all
successors and assigns of the Company.
6. Registration Rights.
     6.1 Registration Obligations. Upon demand by Purchasers owning at least
Fifty Percent (50%) of the outstanding Shares, the Company shall include the
shares of Common Stock issuable upon conversion of the Series 5-A Preferred and
exercise of the Warrants (the “Registrable Securities”) in a registration
statement prepared by the Company and filed with the SEC within thirty (30) days
of such demand (the “Registration Statement”); provided, that no demand shall be
made sooner than the six month anniversary of the Closing and the Purchasers
shall be entitled to only one demand to register the resale of the Registrable
Securities pursuant to this Section 6.1. The Registration Statement will be on
Form SB-2 or other appropriate form (as the Company shall determine in its sole
discretion) and will permit the Registrable Securities to be offered on a
continuous basis. The Company shall use its commercially reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act by the SEC as promptly as possible after the filing thereof. The Company
shall use its commercially reasonable efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is the
earliest of (a) the date on which all Registrable Securities have been sold,
(b) the date on which all Registrable Securities may be sold immediately without
registration under the Securities Act and without volume restrictions pursuant
to Rule 144(k) of the Securities Act or (c) two years from the date the
Registration Statement is declared effective by the SEC.
     6.2 Suspension of Registration Obligations. The Company’s obligations under
this Section 8 shall be suspended if (a) the fulfillment of such obligations
would require the Company to make a disclosure that would be detrimental to the
Company and the Company’s Board of Directors determines that it is in the best
interests of the Company to defer such obligations or (b) the fulfillment of
such obligations would require the Company to prepare financial statements not
required to be prepared by the Company to comply with its obligations under the
Exchange Act at the time the Registration Statement is proposed to be filed (the
period during which either of the preceding conditions is in effect is referred
to as a “Permitted Black-Out Period”). A Permitted Black-Out Period will end, as
applicable, upon the making of the relevant disclosure by the Company (or, if
earlier, when such disclosure would no longer be necessary or detrimental) or as
soon as it would no longer be necessary to prepare such financial statements to
comply with the Securities Act.

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     6.3 Expenses; Indemnification. The Company shall pay all costs and expenses
incurred by the Company in connection with the preparation and filing of the
Registration Statement, other than selling commissions and fees which shall be
the sole responsibility of the Purchaser. The Company and the Purchasers shall
provide each other with customary indemnification rights in connection with the
Registration Statement prepared and filed with the SEC pursuant to this
Section 6.
7. Indemnification.
     7.1 Indemnification by the Company. The Company shall indemnify and hold
harmless each Purchaser and its officers, directors, agents, Affiliates,
principal shareholders, successors and assigns from and against any and all
claims, demands, liabilities, obligations, damages, costs, and expenses
(including reasonable attorneys’ fees) (collectively, “Losses”) arising out of
any breach of the Company’s representations, warranties, covenants or agreements
set forth herein; provided, however, that (a) the Company shall not indemnify
any Purchaser for any Losses resulting from such Purchaser’s negligence or
intentional misconduct or any breach of Purchaser’s representations, warranties,
covenants or agreements hereunder; and (b) the Company’s total liability under
this Section 7.1 shall not exceed the aggregate consideration paid to the
Company by the Purchasers for the Units issued and sold pursuant to this
Agreement.
     7.2 Indemnification by the Purchaser. Michael Ciabattoni, the lead investor
(“Lead Investor”), will indemnify and hold harmless the Company and its
officers, directors, agents, Affiliates, principal shareholders, successors and
assigns from and against any and all Losses arising out of any breach of the
Purchaser’s representations, warranties, covenants or agreements set forth
herein; provided, however, that the Lead Investor shall not indemnify the
Company for any Losses resulting from the Company’s negligence or intentional
misconduct or any breach of the Company’s representations, warranties, covenants
or agreements hereunder.
8. Miscellaneous.
     8.1 Survival of Representations and Warranties. The representations and
warranties of the Company and the Purchaser contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing for a period of one year following the Closing.
     8.2 Successors and Assigns; No Third Party Beneficiaries. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
     8.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of Delaware, without
regard to its principles of conflicts of laws.

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     8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed and delivered by facsimile signature and in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
     8.5 Notices. All notices and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified, (b) when sent by
confirmed electronic mail or facsimile if sent during normal business hours of
the recipient, and if not so confirmed, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their address as set forth on the signature page or Exhibit A, or to
such e-mail address, facsimile number or address as subsequently modified by
written notice given in accordance with this Section 8.5. If notice is given to
the Company, a copy shall also be sent to Hughes & Luce, LLP, 2800 Bank One
Center, 1717 Main Street, Dallas, Texas 75201, Attention: I. Bobby Majumder.
     8.6 No Finder’s Fees. Each party represents that it neither is nor will be
obligated for any finder’s fee or commission in connection with the transactions
contemplated by this Agreement other than commissions payable to Waveland
Capital Partners, LLC. Each Purchaser agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the nature
of a finder’s fee arising out of the transactions contemplated hereby (and the
costs and expenses of defending against such liability or asserted liability)
for which each Purchaser or any of its officers, employees, or representatives
is responsible. The Company agrees to indemnify and hold harmless Purchaser from
any liability for any commission or compensation in the nature of a finder’s or
broker’s fee arising out of the transactions contemplated hereby (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of its officers, employees or representatives
is responsible.
     8.7 Fees and Expenses. All fees and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses.
     8.8 Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended, terminated or waived only
with the written consent of the Company and the holders of at least a majority
of the then-outstanding Shares. Any amendment or waiver effected in accordance
with this Section 8.8 shall be binding upon the Purchaser and each transferee of
the Shares (or the Common Stock issuable upon conversion thereof), each future
holder of all such securities, and the Company.
     8.9 Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.

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     8.10 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party 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. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
     8.11 Acknowledgement. Each party hereto acknowledges that: (a) it has read
this Agreement; (b) it has been represented in the preparation, negotiation and
execution of this Agreement by legal counsel of its own choice or has
voluntarily declined to seek such counsel; and (c) it understands the terms and
consequences of this Agreement and is fully aware of the legal and binding
effect of this Agreement.
     8.12 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the full and entire understanding and agreement among the parties
with respect to the subject matter hereof, and any other written or oral
agreement relating to the subject matter hereof existing among the parties is
expressly canceled.
[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the parties have executed this Series 5-A Preferred
Stock and Warrant Purchase Agreement as of the date first written above.

                  COMPANY:    
 
                TRI-ISTHMUS GROUP, INC.    
 
           
 
  By:  
/s/ David Hirschhorn
          DAVID HIRSCHHORN, CEO    
 
                Address:         149 S. Barrington Ave    
 
  #808             Los Angeles, CA 90049    

12

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                  PURCHASERS:    
 
           
 
           
 
                     
 
                     
 
                Address:    
 
                     
 
                     
 
                                        Address:    
 
                     
 
                     
 
                                        Address:    
 
                     
 
                     

[Purchaser Signature Page]

 

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EXHIBIT A
Purchasers

                      Number of   Number of Purchaser   Purchase Price   Shares
  Warrants
 
  $                                                                  
 
  $                                                                  
 
  $                                                                  
 
  $                                                                  
 
  $                                                                  
 
  $                                                                  
 
  $                                                                  

A-1

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EXHIBIT B
Form of Warrant

B-1

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EXHIBIT C
Form of Certificate of Designation

C-1

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CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF
SERIES 5-A CONVERTIBLE PREFERRED STOCK
OF
VSOURCE, INC.
     Vsource, Inc., a corporation organized and existing under the laws of the
State of Delaware (the “Company”), hereby certifies as follows:
     FIRST: That the name of the Company is Vsource, Inc., and the original
Certificate of Incorporation of the Company was filed with the Secretary of
State of the State of Delaware on November 8, 2000.
     SECOND: That the Certificate of Incorporation of the Company authorizes the
issuance of 5,000,000 shares of Preferred Stock, with the Board of Directors of
the Company authorized to establish the rights and preferences thereof in
accordance with Section 151(g) of the Delaware General Corporation Law.
     THIRD: That, on June 24, 2005, the Board of Directors of the Company duly
adopted resolutions setting forth the rights and preferences of the Series 5-A
Convertible Preferred Stock.
     FOURTH: That the rights and preferences of the Series 5-A Convertible
Preferred Stock shall be as follows:
I. DESIGNATION AND AMOUNT
     This series of Preferred Stock of Tri-Isthmus Group, Inc., f/k/a VScource,
Inc., a Delaware corporation (the “Company”), is designated Series 5-A
Convertible Preferred Stock, par value $0.01 per share (the “Series 5-A
Preferred Stock”). The number of authorized shares of Series 5-A Preferred Stock
shall be 9,000.
II. CERTAIN DEFINITIONS
     For purposes of this Certificate of Designation, the following terms shall
have the following meanings:
     A. “Board” means the Board of Directors of the Company.
     B. “Closing Date” means July 18, 2005.
     C. “Closing Price” means (i) if the Common Stock is traded on a securities
exchange such as The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc. or on the NASDAQ National Market System or Small Cap Market, the
closing price of the Common Stock on such exchange or market on a given trading
day or, if no sale takes place on that day on such exchange or market, the
average of the official closing bid and asked prices for the Common Stock on
that trading day, or (ii) if the Common Stock is traded on the OTC Bulletin
Board, the closing bid price for the Common Stock on a given trading day.

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     D. “Common Stock” means the common stock of the Company, par value $0.01
per share.
     E. “Conversion Price” shall initially be $0.3125 per share of Series 5-A
Preferred Stock. The Conversion Price shall be subject to adjustment pursuant to
Section VII.E.
     F. “Effectiveness Period” means the period from the date on which a
Registration Statement is declared effective by the SEC until the date which is
the earliest of (a) the date on which all Registrable Securities have been sold,
(b) the date on which all Registrable Securities may be sold immediately without
registration under the Securities Act and without volume restrictions pursuant
to Rule 144(k) of the Securities Act or (c) two years from the date the
Registration Statement is declared effective by the SEC.
     G. “Original Issue Price” means $1,000 per share (as adjusted for stock
splits, stock dividends, combinations and the like for the Series 5-A Preferred
Stock).
     H. “Permitted Black-Out Period” means the period during which (i) the Board
determines that fulfillment of the Company’s obligations to prepare and file a
Registration Statement, to cause such Registration Statement to be declared
effective by the SEC or to keep such Registration Statement continuously
effective would require the Company to make a disclosure that would be
detrimental to the Company and that it is in the best interests of the Company
to defer such obligations or (ii) the fulfillment of such obligations would
require the Company to prepare financial statements not required to be prepared
by the Company to comply with its obligations under the Securities Exchange Act
of 1934, as amended, at the time the Registration Statement is proposed to be
filed. A Permitted Black-Out Period will end, as applicable, upon the making of
the relevant disclosure by the Company (or, if earlier, when such disclosure
would no longer be necessary or detrimental) or as soon as it would no longer be
necessary to prepare such financial statements to comply with the Securities
Act.
     I. “Redemption Price” means, with respect to a share of Series 5-A
Preferred Stock for which a Redemption Notice or a Company Redemption Notice has
been delivered, an amount equal to: (i) 120% of the Original Issue Price if the
redemption occurs during the first twelve (12) months following the Closing
Date; (ii) 110% of the Original Issue Price if the redemption occurs during the
second twelve (12) months following the Closing Date; (iii) 105% of the Original
Issue Price if the redemption occurs during the period starting on the
completion of the twenty-fourth (24) month following the Closing Date and ending
on the completion of the forty-eighth (48) month following the Closing Date; and
(iv) the Original Issue Price if the redemption occurs after completion of the
forty-eighth (48) month following the Closing Date.
     J. “Registrable Securities” means the shares of Common Stock issuable upon
conversion of the Series 5-A Preferred Stock and exercise of the warrants issued
simultaneously with the issuance of Series 5-A Preferred Stock (the “Warrants”).
     K. “Registration Statement” means a registration statement filed by the
Company which covers the Registrable Securities.

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     L. “SEC” means the United States Securities and Exchange Commission.
     M. “Securities Act” means the Securities Act of 1933, as amended.
     N. “Triggering Event” means the occurrence of any of the following events:
(i) a Registration Statement is not declared effective by the SEC on or before
the date which is fifteen (15) months following the Closing Date or, during the
Effectiveness Period, an effective Registration Statement is not on file with
the SEC for any reason (including, without limitation, the issuance of a stop
order) for a period of twenty (20) consecutive trading days; provided, that a
Triggering Event shall not be deemed to occur if the failure to have an
effective Registration Statement on file is (x) due to factors within the
control of the holders of the Series 5-A Preferred Stock (including a failure to
make a demand for registration of the resale of the Series 5-A Preferred Stock)
or (y) the result of a Permitted Black-Out Period; (ii) the Common Stock is not
listed or eligible for quotation on one of the NASDAQ, the OTC Bulletin Board,
Nasdaq Small Cap Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc., for a period of five (5) consecutive trading days; (iii) the
Company’s issuance of a written notice to any holder of Series 5-A Preferred
Stock, including by way of public announcement, at any time, of its inability to
comply or its intention not to comply with proper requests for conversion of any
Series 5-A Preferred Stock into shares of Common Stock; (iv) the Company’s
failure to comply with a properly tendered Notice of Conversion within ten
(10) business days after the receipt by the Company of such Notice of
Conversion; or (v) the Company breaches any provision of this Certificate of
Designation and such breach is not cured within a reasonable period of time
following notice of such breach, except to the extent that such breach would not
have a material adverse effect on any holder of Series 5-A Preferred Stock.
III. DIVIDENDS
     The holders of shares of Series 5-A Preferred Stock shall be entitled to
receive, out of any assets legally available therefor, when, as and if declared
by the Board, noncumulative dividends in an amount equal to $40 per share
annually. If shares of Series 5-A Preferred Stock are converted or redeemed in
accordance with the provisions of this Certificate of Designation following the
declaration of a dividend in accordance with the provisions herein, no dividends
shall be paid on such shares unless the applicable record date for such dividend
has occurred prior to such conversion or redemption. No dividend may be declared
and paid upon shares of Series 5-A Preferred Stock in any fiscal year of the
Company unless dividends have first been paid upon or declared and set aside for
payment to the holders of shares of the Company’s Series 1-A Preferred Stock and
Series 2-A Preferred Stock at the rates set forth in the Certificate of
Incorporation and the Certificate of Designation for the Series 2-A Preferred
Stock for such fiscal year of the Company. No undeclared or unpaid dividend
shall ever bear interest.
IV. LIQUIDATION PREFERENCE
     A. Liquidation of the Company. In the event of any liquidation, dissolution
or winding up of the Company, either voluntary or involuntary, the holders of
Series 5-A Preferred Stock shall be entitled to receive, after distribution of
all amounts due to the holders of the

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Company’s Series 1-A Preferred Stock under Article 4, Section C.2(a) and C.2(b)
of the Company’s Certificate of Incorporation, if any, (computed as if no shares
of Series 5-A Preferred Stock were then outstanding) and distribution of all
amounts due to the holders of the Company’s Series 2-A Preferred Stock under
Section 4(a) and 4(b) of the Certificate of Designation for such Series
(computed as if no shares of Series 5-A Preferred Stock were then outstanding),
and prior and in preference to any distribution of any of the assets or surplus
funds of the Company to the holders of the Common Stock by reason of their
ownership thereof, a preference amount for each outstanding share of Series 5-A
Preferred Stock held by such holder equal to (i) the Original Issue Price for
that outstanding share of Series 5-A Preferred Stock plus (ii) an amount equal
to declared but unpaid dividends on such share, if any, but only to the extent
of the Company’s retained earnings. Nothing in this Section IV will be construed
to adversely affect the rights, preferences, privileges or limitations of the
holders of the Series 1-A Preferred Stock or the Series 2-A Preferred Stock upon
a liquidation, dissolution or winding up of the Company or reduce the amount to
which such holders are entitled under the Company’s Certificate of Incorporation
or the Series 2-A Certificate of Designation (assuming for such purpose that no
shares of Series 5-A Preferred Stock were then outstanding).
     B. For purposes of this Section IV, a liquidation, dissolution or winding
up of the Company shall be deemed to be occasioned by or to include (i) the
acquisition of the Company by another entity by means of any transaction or
series of related transactions (including, without limitation, reorganization,
merger or consolidation, excluding a merger solely to change the domicile of the
Company) or (ii) a sale of all or substantially all of the assets of the
Company; unless, in each case, the Company’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 Company’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 Company 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
twenty (20) consecutive trading days immediately preceding (and not including)
the date the Company 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 or NASDAQ on which such common stock is then listed or
admitted to trading, 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 and provided in writing by the
Company to the holders of the Series 5-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 the then
outstanding Series 5-A Preferred Stock object in writing to the Board’s
determination within fifteen (15) days of their receipt of notice of such
determination by the Board. A single appraiser shall be selected jointly by the
holders of a majority of the outstanding Series 5-A Preferred Stock and the
Company. If the holders of the Series 5-A Preferred Stock and the Company are
unable to agree on an appraiser within twenty (20) days of the Board

C-5

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receiving notice of such holders’ objection to the Board’s 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 the average of the appraised values. If the
lower of the appraised values is less than ninety percent (90%) of the higher
appraised value, 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 Company; 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 5-A Preferred
Stock.
V. REDEMPTION
     A. Redemption at the Option of the Company. The Company, at its option, may
redeem any or all of the outstanding shares of Series 5-A Preferred Stock at any
time upon five (5) business days’ prior written notice to each holder of shares
of Series 5-A Preferred Stock (a “Company Redemption Notice”), at a price per
share equal to the (i) Redemption Price then in effect plus (ii) an amount equal
to any declared but unpaid dividends on such share (collectively, the
“Redemption Amount”); provided, that if a holder of Series 5-A Preferred Stock
has delivered a Notice of Conversion to the Company prior to its receipt of the
Company Redemption Notice or delivers a Notice of Conversion within 24 hours of
receipt of the Company Redemption Notice, the shares of Series 5-A Preferred
Stock designated to be redeemed by the Company may be converted into Common
Stock by such holder in accordance with the terms of this Certificate of
Designation. In the event the Company elects to redeem less than all of the
outstanding shares of Series 5-A Preferred Stock, the Company shall redeem
shares of Series 5-A Preferred Stock on a pro rata basis, based on the number of
shares of Series 5-A Preferred Stock held by each holder relative to the total
number of shares of Series 5-A Preferred Stock outstanding as of the time of
such redemption.
     B. Redemption on a Triggering Event. If and as long as a Triggering Event
shall have occurred and remain in effect, the holders of a majority of the
outstanding shares of Series 5-A Preferred Stock shall have the right, at such
holders’ option, to require the Company to redeem all of such holders’ shares of
Series 5-A Preferred Stock at a price per share equal to the Original Issue
Price plus an amount equal to any declared but unpaid dividends on such share
(the “Holder Redemption Amount”) by delivery of written notice to the Company (a
“Redemption Notice”).
     C. Redemption Payments. The Company shall pay a holder of Series 5-A
Preferred Stock the Holder Redemption Amount or the Redemption Amount, by check
or wire transfer of immediately available funds, with respect to each share of
Series 5-A Preferred Stock within (i) ten (10) business days of the Company’s
receipt of a Redemption Notice or (ii) ten (10) business days of the Company’s
delivery of a Company Redemption Notice, as the case may be. In the event the
Company is not able to redeem all of the shares of Series 5-A Preferred Stock
subject

C-6

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to Redemption Notices, the Company shall redeem shares of Series 5-A Preferred
Stock from such holders pro rata, based on the total number of shares of
Series 5-A Preferred Stock included by such holder in its Redemption Notice
relative to the total number of shares of Series 5-A Preferred Stock in all
Redemption Notices; provided, that the foregoing shall not be deemed to limit
the Company’s obligation to purchase shares of Series 5-A Preferred Stock
hereunder.
     D. Capital Impairment. In the event that Section 160 of the DGCL would be
violated by the redemption of any shares of Series 5-A Preferred Stock that are
otherwise subject to redemption pursuant to Section V.B., the Company: (i) will
redeem the greatest number of shares of Series 5-A Preferred Stock possible
without violation of said Section pro rata among the shares of Series 5-A
Preferred Stock which are subject to Redemption Notices; (ii) thereafter shall
use its best efforts to take all necessary steps in order to remedy its capital
structure in order to allow further redemptions without violation of said
Section (and not take any action inconsistent with so remedying such capital
structure); and (iii) from time to time thereafter as promptly as possible,
shall redeem remaining shares of Series 5-A Preferred Stock at the request of
the holders to the greatest extent possible without causing a violation of
Section 160 of the DGCL.
VI. VOTING RIGHTS
     A. The holder of each share of Series 5-A Preferred Stock shall have the
right to one vote for each share of Common Stock into which such share of
Series 5-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 stockholders’ meeting in accordance with the bylaws 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.
     B. To the extent that under applicable law the vote of the holders of the
Series 5-A Preferred Stock, voting separately as a class or series, as
applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the holders of a majority of shares of the
Series 5-A Preferred Stock represented at a duly held meeting at which a quorum
is present or by written consent of a majority of the Series 5-A Preferred Stock
then outstanding (except as otherwise may be required by applicable law) shall
constitute the approval of such action by the class.
VII. CONVERSION
     A. Right to Convert. Each holder of Series 5-A Preferred Stock may, at its
option, at any time and from time to time, convert any or all of its shares of
Series 5-A Preferred Stock into such number of fully paid and non-assessable
shares of Common Stock of the Company (any such shares issued pursuant to this
Section VII, the “Conversion Shares”) as is determined by

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dividing (i) the Original Issue Price of such shares plus any declared but
unpaid dividend on such shares by (ii) the Conversion Price then in effect.
     B. Automatic Conversion. At any time, each share of Series 5-A Preferred
Stock outstanding shall be converted into such number of fully paid and
non-assessable shares of Common Stock as is determined by dividing (i) the
Original Issue Price of such share plus any declared but unpaid dividend on such
share by (ii) the Conversion Price then in effect immediately upon the date
specified by a written notice (“Automatic Election Notice”) delivered to the
Company by the holders of not less than the majority of the outstanding shares
of the Series 5-A Preferred Stock electing to effect the conversion. The
Automatic Election Notice shall be delivered to the Company not less than ten
(10) business days prior to the specified date of the automatic conversion.
Within three (3) business days of receipt of the Automatic Election Notice, the
Company shall provide written notice to all record holders of Series 5-A
Preferred Stock of the election of such automatic conversion. Such notice shall
state the date on which the automatic conversion shall occur and shall call upon
the holders of Series 5-A Preferred Stock to deliver to the Company the
certificates representing shares of Series 5-A Preferred Stock so converted (or,
in lieu thereof, materials contemplated by Section VII.J., if applicable). Upon
the delivery of such certificates (or, in lieu thereof, materials contemplated
by Section VII.J., if applicable), the Company shall as soon as practicable,
deliver to the transmitting holders (or at their direction) that number of
shares of Common Stock issuable upon conversion of such shares of Series 5-A
Preferred Stock being converted, dated as of the date of such conversion. Such
conversion shall be deemed to have been made (and the shares of Common Stock
issued) on the date of such automatic conversion, and the holders of the
Series 5-A Preferred Stock so converted shall be treated for all purposes as the
record holder or holders of such Common Stock as of the date of such conversion
specified in the Automatic Election Notice.
     C. Conversion by Company. The Company, at its option, may convert (a
“Company Conversion”) all shares of the Series 5-A Preferred Stock into shares
of Common Stock at the then applicable Conversion Price in the event the Closing
Price of the Common Stock exceeds $0.65 per share (as adjusted for stock splits,
recapitalizations, stock dividends and the like, the “Mandatory Redemption
Trigger”) for the thirty (30) consecutive trading days prior to the mailing of
the Company Conversion Notice (as defined below), provided, that no Triggering
Event is in effect at the time of the mailing of such notice. Not less than ten
(10) business days prior to the effective date of the Company Conversion, the
Company shall provide written notice (a “Company Conversion Notice”) to all
record holders of Series 5-A Preferred Stock of such Company Conversion. Such
Company Conversion Notice shall state the date on which the Company Conversion
shall occur and shall call upon the holders of Series 5-A Preferred Stock to
deliver to the Company the certificates representing shares of Series 5-A
Preferred Stock so converted (or, in lieu thereof, materials contemplated by
Section VII.J., if applicable). Upon the delivery of such certificates (or, in
lieu thereof, materials contemplated by Section VII.J., if applicable), the
Company shall as soon as practicable, deliver to the transmitting holders (or at
their direction) that number of shares of Common Stock issuable upon conversion
of such shares of Series 5-A Preferred Stock being converted, dated as of the
date of such conversion. Such Company Conversion shall be deemed to have been
made (and the shares of Common Stock issued) on the date of such Company
Conversion, and the holders of the Series 5-A Preferred

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Stock so converted shall be treated for all purposes as the record holder or
holders of such Common Stock as of the date of such conversion specified in the
Company Conversion Notice.
     D. Mechanics of Conversion. In order to effect a conversion pursuant to
Section VII.A, a holder of Series 5-A Preferred Stock shall fax (or otherwise
deliver) a copy of the fully executed notice of conversion (in substantially the
form attached hereto as Exhibit A, the “Notice of Conversion”) to the Company or
its transfer agent and shall surrender or cause to be surrendered personally or
via a reputable overnight courier to the Company or its transfer agent the
certificates representing the Series 5-A Preferred Stock being converted (the
“Preferred Stock Certificates”) duly endorsed or accompanied by duly executed
stock powers (or, in lieu thereof, materials contemplated by Section VII.J., if
applicable). Upon the delivery of a Notice of Conversion, the Company shall as
soon as practicable, deliver to the holder (or at its direction) (x) that number
of shares of Common Stock issuable upon conversion of such shares of Series 5-A
Preferred Stock being converted and (y) a certificate representing the number of
shares of Series 5-A Preferred Stock not being converted, if any. Such
conversion shall be deemed to have been made (and the shares of Common Stock
issued) immediately prior to the close of business on the date of surrender of
the Preferred Stock Certificates (or such other later date specified in the
Notice of Conversion), and the person entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
     E. Conversion Price Adjustments. The Conversion Price shall be subject to
the following adjustments:
     (1) Adjustment for Stock Splits and Combinations. If the Company at any
time or from time to time after the Closing Date effects a subdivision of the
Common Stock of the Company, by stock split or otherwise, the Conversion 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 Closing 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 VII.E(1) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
     (2) Adjustment for Certain Dividends and Distributions. In the event the
Company at any time or from time to time after the Closing 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 (a) 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
(b) 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

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as of 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 VII.E(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
Company at any time or from time to time after the Closing 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 Company
other than shares of Common Stock, then and in each such event, provision shall
be made so that each holder of Series 5-A Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereon, the amount and kind of securities of the Company which it
would have received had such shares of Series 5-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 conversion,
retained such securities receivable by it as aforesaid during such period,
subject to all other adjustments called for during such period hereunder with
respect to the rights of such holder.
     (4) Adjustment for Recapitalization, Reclassification, or Exchange. If the
Common Stock issuable upon the conversion of the Series 5-A Preferred Stock 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 VII.E), then and in any such event each holder of
Series 5-A Preferred Stock shall be entitled to convert its shares of Series 5-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
shares of Series 5-A Preferred Stock then held 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 VII.E or a merger or consolidation of the Company with
or into another corporation, or the sale

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of all or substantially all of the Company’s assets to any other person), then,
as a part of such capital reorganization, provision shall be made so that each
holder of Series 5-A Preferred Stock shall thereafter be entitled to receive
upon conversion of the shares of Series 5-A Preferred Stock then held by such
holder the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such capital
reorganization, to which a holder of the number of shares of Common Stock
deliverable upon such exercise would have been entitled on such capital
reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section VII.E with respect to the rights
of each holder of Series 5-A Preferred Stock, after the capital reorganization
to the end that the provisions of this Section VII.E (including the number of
shares deliverable upon conversion of the Series 5-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.
     (6) Sale of Shares Below Conversion Price.
     (a) If at any time or from time to time after the Closing Date, the Company
issues or sells Additional Shares of Common Stock (as hereinafter defined), or
securities convertible into or exchangeable for Additional Shares of Common
Stock, in connection with a transaction resulting in gross proceeds to the
Company of at least $1,000,000 (a “Subsequent Financing”) for an Effective Price
(as hereinafter defined) less than the then existing Conversion Price (i) on or
before the one-year anniversary of the Closing Date, then the Conversion Price
shall be reduced to an amount equal to such Effective Price effective as of the
closing of such Subsequent Financing or (ii) at any time following the one-year
anniversary of the Closing Date, then the Conversion Price shall be reduced,
effective as of the closing of such Subsequent Financing, 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 as of the close of
business on the day preceding the closing of the Subsequent Financing (treating
for this purpose as outstanding all shares of Common Stock issuable upon
exercise of all rights, options or warrants or upon conversion of all securities
convertible into or exchangeable for Common Stock (including the Series 1-A
Preferred Stock, the Series 2-A Preferred Stock and the Series 5-A Preferred
Stock) outstanding as of the close of business on the day preceding the closing
of the Subsequent Financing) 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 Company for the total number of Additional
Shares of Common Stock (or securities convertible into or exchangeable for
Additional Shares of Common Stock) so issued would purchase at such Conversion
Price (prior to such adjustment) and the denominator of which shall be (X) the
number of shares of Common Stock outstanding immediately prior to the closing of
the Subsequent Financing (treating for this purpose as outstanding all shares of
Common Stock issuable upon exercise of all rights, options or warrants or upon
conversion of all securities convertible into or

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exchangeable for Common Stock (including the Series 1-A Preferred Stock, the
Series 2-A Preferred Stock and the Series 5-A Preferred Stock) outstanding as of
the close of business on the day preceding the closing of the Subsequent
Financing) plus (Y) the number of such Additional Shares of Common Stock issued
or sold in the Subsequent Financing.
For the purpose of making any adjustment required under this Section VII.E(6),
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 market 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.
     (b) For the purpose of the adjustment required under this Section VII.E(6),
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 as 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

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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 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.
     (c) “Additional Shares of Common Stock” shall mean all shares of Common
Stock issued (or deemed issued hereunder) by the Company after the Closing Date,
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 5-A
Preferred Stock or any other options or warrants or convertible securities
outstanding or issuable on the Closing Date including, without limitation, the
Warrants; (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; (E) shares of Common Stock issuable or issued as part of an
acquisition by the Company 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; and (F) shares of Common Stock
issuable or issued pursuant to equipment financing or leasing arrangements. 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 VII.E(6), into the aggregate consideration received, or deemed to have
been received by the Company for such issue under this Section VII.E(6), for
such Additional Shares of Common Stock.
     (7) Upon the occurrence of each adjustment or readjustment of the
Conversion Price, 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 holders of Series 5-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.
     F. Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for

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the purpose of effecting the conversion of the shares of the Series 5-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 5-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 5-A Preferred Stock, the Company
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 the Company’s Certificate of
Incorporation.
     G. Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series 5-A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series 5-A Preferred Stock by a holder thereof shall 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 Company 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 IV.B).
     H. Notices. Any notice required by the provisions of this Section VII to be
given to the holders of shares of Series 5-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 its address appearing on
the books of the Company.
     I. Valid Issue. The Company will ensure that all Conversion Shares issued
pursuant to this Section VII, if any, will be duly and validly issued,
fully-paid and non-assessable, and free and clear of all encumbrances, liens,
mortgages and any other rights of third parties whatsoever.
     J. Lost or Stolen Certificates. Upon receipt by the Company of (i) evidence
of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (x) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company, or (y) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost or stolen Preferred Stock Certificate(s) if a
holder of Series 5-A Preferred Stock contemporaneously requests the Company to
convert such Preferred Stock.
VIII. AMENDMENT
     Any term relating to the Series 5-A Preferred Stock may be amended and the
observance of any term relating to the Series 5-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

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outstanding shares of the Series 5-A Preferred Stock. Any amendment so effected
shall be binding upon the Company and any holder of the Series 5-A Preferred
Stock.
IX. PROTECTIVE PROVISIONS
     So long as at least 25% of the authorized shares of Series 5-A Preferred
Stock remain outstanding, the Company shall not, without the vote or written
consent by the holders of a majority of the outstanding shares of Series 5-A
Preferred Stock, voting together as a single class:
     A. Amend, alter or repeal the provisions of the Series 5-A Preferred Stock
in this Certificate of Designation, whether by merger, consolidation or
otherwise, so as to adversely affect any right, preference, privilege or voting
power of the Series 5-A Preferred Stock;
     B. Repurchase, redeem or pay dividends or effect any other distribution on,
shares of the Company’s capital stock ranking junior to the Series 5-A Preferred
Stock, other than dividends payable in capital stock of the Company; or
     C. Amend the Certificate of Incorporation (including by way of a
Certificate of Designation) or bylaws of the Company to change materially and
adversely the rights, preferences, privileges or limitations of the Series 5-A
Preferred Stock;
     provided, that the foregoing shall in no way limit the Company’s ability to
authorize, create or issue any class of capital stock ranking senior (in terms
of dividends, liquidation preference or redemption) to, or pari passu with, the
Series 5-A Preferred Stock.
X. NO REISSUANCE OF SERIES 5-A PREFERRED STOCK
     No share or shares of Series 5-A Preferred Stock acquired by the Company 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.
*     *     *

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     IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 29th day of June, 2005.

            VSOURCE, INC.
      By:           Name:   Dennis M. Smith        Title:   Chief Executive
Officer     

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EXHIBIT A
NOTICE OF CONVERSION

ATTN:    CHIEF EXECUTIVE OFFICER       CHIEF FINANCIAL OFFICER

The undersigned hereby irrevocably elects to convert (the “Conversion”) the
number of shares of the Series 5-A Convertible Preferred Stock (the “Series 5-A
Preferred Stock”) set forth below (the “Amount of Preferred Stock”), plus all
declared and unpaid dividends thereof, into shares of common stock (“Common
Stock”) of Vsource, Inc. (the “Company”) according to the conditions of the
Certificate of Designation, as of the date written below.
In the event of partial exercise, please reissue an appropriate certificate for
the principal balance which shall not have been converted.
Date of Conversion:
 
Applicable Conversion Price:
 
Amount of Preferred stock:
 
Number of Shares of Common Stock
to be Issued upon conversion:
 

              Signature:           Name:              

Address:
 
Fax Number (for confirmation):
 

cc:                                             [Transfer Agent]

              Acknowledged And Agreed:

VSOURCE, INC.
          By:               Name:              Title:      Date:       

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