Document:

<PAGE>

                                                                   Exhibit 10.23

                                 AMENDMENT NO. 1

     THIS AMENDMENT NO. 1 (the "Amendment") to the Agreement and Plan of Merger
                                ---------
dated as of March 29, 2000 (the "Agreement") among Pinnacle Systems, Inc., a
                                 ---------
California corporation ("Purchaser"), 1117 Acquisition Corporation, a Delaware
                         ---------
corporation and wholly-owned subsidiary of Purchaser ("1117 Acquisition Corp."),
                                                       ----------------------
Digital Editing Services, Inc., a Delaware corporation (the "Company"), David
                                                             -------
Engelke and Bryan Engelke (Messrs. Engelke are referred to individually as a

"Shareholder" and collectively as the "Shareholders") is effective as of October
 -----------                           ------------
30, 2000 by and among Purchaser, 1117 Acquisition Corp. and the Shareholders.

                                    RECITALS

     A. Purchaser, Company, 1117 Acquisition Corp. and the Shareholders entered
into the Agreement providing for the merger of Company with and into 1117
Acquisition Corp. and the survival of 1117 Acquisition Corp. (the "Surviving
                                                                   ---------
Corporation").
-----------

     B. Purchaser, Surviving Corporation and the Shareholders desire to make
certain amendments to the Agreement as set forth in this Amendment.

     NOW, THEREFORE, the parties hereby agree to amend the Agreement as follows:

     1. Paragraphs (a), (b), (c) and (d) of Section 1.7 of the Agreement are
amended and restated to read as follows:

         1.7 Earnout Payment.
             ---------------

             (a) Definitions For Determination of Earnout Payment.
                 ------------------------------------------------

                 (i) "Avid Sports" shall mean the division of Purchaser
                      -----------
     operating as Avid Sports;

                 (ii) "Avid Sports Earnout Period" shall mean July 1, 2000 to
                       --------------------------
     March 29, 2001 inclusive;

                 (iii) "Avid Sports Expenses" shall mean (A) all cost of goods
                        --------------------
     sold attributable to Avid Sports Revenue, (B) to the extent not included in
     clause (A) of this paragraph (iii), all costs and expenses incurred by Avid
     Sports (operating as a division of Purchaser) during the Avid Sports
     Earnout Period (calculated in accordance with generally accepted accounting
     principles ("GAAP") applied on a consistent basis with that used by
                  ----
     Purchaser), including all selling, general and administrative expenses and
     engineering, research and development expenses, and all research and
     development expenses incurred by the employees of Avid Sports who remain
     employed by Purchaser and who are designing, developing and improving Avid
     Sports Products. With respect to clause (B) of the preceding sentence,
     because certain selling, general and administrative expenses and marketing
     expenses attributable to the generation of Avid Sports Revenues cannot
     easily be separated from selling, general and administrative expenses and
     marketing attributable to revenues of Purchaser that are not Avid Sports
     Revenues, there shall be allocated to Avid Sports Expenses as follows: an
     amount equal to (but not greater than) 5% of Avid Sports Revenues

<PAGE>

     for corporate selling, general and administrative expenses, and 5% of Avid
     Sports Revenues for corporate marketing expenses.

          Avid Sports Expenses shall not include costs or expenses attributable
     to (1) interest expense, (2) income Taxes, (3) amortization of goodwill or
     (4) any portion of the Earnout Payment. Anything in this definition to the
     contrary notwithstanding, all costs of goods sold attributable to Avid
     Sports Resale Goods shall be excluded from the calculation of Avid Sports
     Expenses. "Avid Sports Resale Goods" shall mean products of Panasonic and
                ------------------------
     JVC sold by Avid Sports;

                 (iv) "Avid Sports Operating Profit" shall mean the difference
                       ----------------------------
     obtained by subtracting Avid Sports Expenses from Avid Sports Revenues;

                 (v) "Avid Sports Revenues" shall mean gross revenues
                      --------------------
    (calculated in accordance with GAAP applied on a consistent basis with that
     used by Purchaser) recognized by Avid Sports (operating as a division of
     Purchaser) that are attributable to sales of the following products during
     the Avid Sports Earnout Period, net of customary and reasonable reserves
     established in connection with potential returns of any such products: (A)
     products that were being sold by Avid Sports as of July 1, 2000 ("Existing
                                                                       ---------
     Avid Sports Products"), (B) products that are enhancements, updates,
     --------------------
     improvements, releases, new features and other modifications and all works
     which constitute "derivative works" of the Existing Avid Sports Products,
     as such term is defined in 12 U.S. Code Section 101 ("Avid Sports
                                                           -----------
     Derivative Products") and (C) new products designed, developed and/or
     -------------------
     shipped by Avid Sports (operating as a division of Purchaser) (the products
     described in clauses (A), (B) and (C) are collectively referred to as the
     "Avid Sports Products").
      --------------------

         Avid Sports Revenues shall not include revenue attributable to sales of
     the following products (1) products that were being sold by Purchaser as of
     the date of the Agreement ("Existing Purchaser Products"), (2) products
                                 ---------------------------
     that are enhancements, updates, improvements, releases, new features and
     other modifications and all works that constitute "derivative works" of the
     Existing Purchaser Products, other than Avid Sports Derivative Products,
     and (3) new Purchaser products that are not included within clauses (A),
     (B) and (C) of the preceding paragraph. Anything in this definition to the
     contrary notwithstanding, all revenues attributable to Avid Sports Resale
     Goods shall be excluded from the calculation of Avid Sports Revenues.

                 (vi) "Company Earnout Period" shall mean the 12 month period
                       ----------------------
     commencing on the date of the Agreement;

                 (vii) "Company Expenses" shall mean (A) all cost of goods sold
                        ----------------
     attributable to Company Revenue, (B) to the extent not included in clause
     (A) of this paragraph (vii), all costs and expenses incurred by Company
     (operating as a division of Purchaser) during the Company Earnout Period
     (calculated in accordance with generally accepted accounting principles
     ("GAAP") applied on a consistent basis with that used by Purchaser),
       ----
     including all selling, general and administrative expenses and engineering,
     research and development expenses, and all research and development
     expenses incurred by the employees of Company who remain employed by
     Purchaser and who are designing, developing and improving Company Products.
     With respect to clause (B) of the preceding

                                      -2-

<PAGE>

     sentence, because certain selling, general and administrative expenses and
     marketing expenses attributable to the generation of Company Revenues
     cannot easily be separated from selling, general and administrative
     expenses and marketing attributable to revenues of Purchaser that are not
     Company Revenues, there shall be allocated to Company Expenses as follows:
     an amount equal to (but not greater than) 5% of Company Revenues for
     corporate selling, general and administrative expenses, and 5% of Company
     Revenues for corporate marketing expenses.

             Company Expenses shall not include costs or expenses attributable
     to (1) interest expense, (2) income Taxes, (3) amortization of goodwill or
     (4) any portion of the Company Earnout Payment. Anything in this definition
     to the contrary notwithstanding, all costs of goods sold attributable to
     Company Resale Goods (as defined below) shall be excluded from the
     calculation of Company Expenses. "Company Resale Goods" shall mean products
                                       --------------------
    of Panasonic and JVC sold by the Company;

                 (viii) "Company Operating Profit" shall mean the difference
                         ------------------------
     obtained by subtracting Company Expenses from Company Revenues;

                 (ix) "Company Revenues" shall mean gross revenues (calculated
                       ----------------
     in accordance with GAAP applied on a consistent basis with that used by
     Purchaser) recognized by the Company (operating as a division of
     Purchaser) that are attributable to sales of the following products during
     the Company Earnout Period, net of customary and reasonable reserves
     established in connection with potential returns of any such products: (A)
     products that were being sold by the Company as of the date of the
     Agreement ("Existing Company Products"), (B) products that are
                 -------------------------
     enhancements, updates, improvements, releases, new features and other
     modifications and all works which constitute "derivative works" of the
     Existing Company Products, as such term is defined in 12 U.S. Code Section
     101 ("Company Derivative Products") and (C) new products designed,
           ---------------------------
     developed and/or shipped by the Company (operating as a division of
     Purchaser) (the products described in clauses (A), (B) and (C) are
     collectively referred to as the "Company Products").
                                      ----------------

             Company Revenues shall not include revenue attributable to sales of
     the following products (1) Existing Purchaser Products, (2) products that
     are enhancements, updates, improvements, releases, new features and other
     modifications and all works that constitute "derivative works" of the
     Existing Purchaser Products, other than Company Derivative Products, and
     (3) new Purchaser products that are not included within clauses (A), (B)
     and (C) of the preceding paragraph. Anything in this definition to the
     contrary notwithstanding, all revenues attributable to Company Resale Goods
     shall be excluded from the calculation of Company Revenues;

                 (x) "Earnout Periods" shall mean the Avid Sports Earnout Period
                      ---------------
     and the Company Earnout Period, collectively;

                 (xi) "Earnout Trading Price" shall be the average of the last
                       ---------------------
     sale prices of a share of Purchaser Common Stock as reported on the Nasdaq
     National Market for the 20 trading days ending immediately prior to the
     date of final determination of the Earnout Payment in accordance with this
     Section 1.7;
     -----------

                                       -3-

<PAGE>

                 (xii) "Resale Goods" shall mean Avid Sports Resale Goods and
                        ------------
     Company Resale Goods;

                 (xiii) "Total Expenses" shall mean the sum of Avid Sports
                         --------------
     Expenses and Company Expenses;

                 (xiv) "Total Operating Profit" shall mean the difference
                        ----------------------
     obtained by subtracting Total Expenses from Total Revenues; and

                 (xv) "Total Revenues" shall mean the sum of Avid Sports
                       --------------
     Revenues and Company Revenues.

     For purposes of calculation of the Earnout Payment, references to Company
     shall mean references to the Surviving Corporation.

             (b) Calculation of Earnout Payment. In the event that during the
                 ------------------------------
     Earnout Periods:

                     (1) Total Operating Profit exceeds 10% of Total Revenues,
     Shareholders shall be entitled to receive a payment equal to (x) 55% of
     Total Revenues for the Earnout Periods minus (y) $7.0 million, payable in
     accordance with Section 1.7(c); or
                     --------------

                     (2) Total Operating Profit exceeds 15% of Total Revenues,
     Shareholders shall be entitled to receive a payment equal to (x) 77% of
     Total Revenues for the Earnout Periods minus (y) $7.0 million, payable in
     accordance with Section 1.7(c); or
                     --------------

                     (3) Total Operating Profit exceeds 20% of Total Revenues,
     Shareholders shall be entitled to receive a payment equal to (x) 96% of
     Total Revenues for the Earnout Periods minus (y) $7.0 million, payable in
     accordance with Section 1.7(c).
                     --------------

         No Earnout Payment shall be made if Total Operating Profit does not
     exceed 10% of Total Revenues during the Earnout Periods. To the extent that
     Total Operating Profit exceeds Total Revenues by a percentage other than
     10%, 15% and 20%, Shareholders shall be entitled to receive a payment equal
     to that percentage of Total Revenue for the Earnout Periods determined by
     applying a straight-line, pro rata calculation of between 55% and 77% (if
     Total Operating Profit exceeds Total Revenues by a percentage that falls
     between 10% and 15%), between 77% and 96% (if Total Operating Profit
     exceeds Total Revenues by a percentage that falls between 15% and 20%), and
     96% (if Total Operating Profit exceeds Total Revenues by a percentage that
     falls above 20%), minus, in each case $7.0 million. The provisions of this
     paragraph shall not apply to the additional Earnout Payment referred to in
     the next paragraph of this subsection (b).

         In addition, there shall be added to any Earnout Payment otherwise
     payable an amount equal to twice the gross margin earned by Avid Sports and
     the Company, collectively, attributable to the sale of Resale Goods during
     the Earnout Periods, calculated in accordance with GAAP as consistently
     applied by Purchaser, anything herein to the contrary notwithstanding.

                                       -4-

<PAGE>

             (c) Payment of Earnout. In the event that an Earnout Payment is
                 ------------------
     payable in accordance with Section 1.7(b), Purchaser shall pay to the
                                --------------
     Shareholders that number of shares of Purchaser Common Stock equal to the
     quotient of (x) the amount of the Earnout Payment divided by (y) the
     Earnout Trading Price. In the event that the issuance of the shares of
     Purchaser Common Stock in satisfaction of the Earnout Payment would trigger
     a requirement of Purchaser shareholder approval of the transactions
     contemplated hereby under Section 903 of the California General Corporation
     Law, Purchaser agrees to promptly solicit its shareholders for such
     approvals as would be necessary for the issuance of such shares and use its
     best efforts to obtain such approval. If such approval is not forthcoming,
     the amount not able to be so paid by the Purchaser in shares shall be paid
     in immediately available funds. Payment of the Earnout Payment shall be
     made within 45 days after the end of the Earnout Periods unless the
     Shareholders give notice of disagreement to the Purchaser in accordance
     with Section 1.7(d)(ii), in which case, the Earnout Payment shall be made
          ------------------
     within 15 days following final resolution of such disagreement or, if any
     approvals of Purchaser's shareholders is required, within three business
     days of the receipt of such approvals (or the date that such approval is
     voted down by the shareholders of Purchaser, as the case may be). Any
     Purchaser Shares issued to the Shareholders shall be issued to the
     Shareholders pro rata in accordance with the percentage ownership of the
     Company as of the date hereof as set forth on Schedule 1.1 hereto. In the
                                                   ------------
     event that any portion of the Earnout Payment is not made within 45 days
     after the end of the Earnout Periods, interest shall accrue and be payable
     by the Purchaser on the unpaid portion at the prime lending rate of
     Citibank, N.A. then in effect as specified in the Wall Street Journal
     beginning on the forty sixth day following the Earnout Periods through the
     date on which such amounts are paid; provided, however, that such interest
                                          --------  -------
     shall be payable in shares of Purchaser Common Stock, calculated and
     payable in the same manner as the Earnout Payment.

             (d) Mechanics for Determination of Total Revenues, Total Expenses
                 -------------------------------------------------------------
     and Total Operating Profit.
     --------------------------

                 (i) Not later than 30 calendar days following the end of the
     Earnout Periods, Purchaser shall deliver to the Shareholders a statement of
     the Total Revenues, Total Expenses and Total Operating Profit for the
     Earnout Periods as well as the calculation of gross margin on the Resale
     Goods (the "Statement of Total Operating Profit"), which will be determined
                 -----------------------------------
     in accordance with GAAP applied on a basis consistent with that used by
     Purchaser (both historically and during the Earnout Periods) in preparation
     of Purchaser's consolidated financial statements and certified to such
     effect by Purchaser's Chief Financial Officer.

                 (ii) Not later than 30 calendar days following the end of the
     Avid Sports Earnout Period, Purchaser shall deliver to the Shareholders a
     statement of the Avid Sports Revenues, Avid Sports Expenses and Avid Sports
     Operating Profit for the Avid Sports Earnout Period as well as the
     calculation of gross margin on the Avid Sports Resale Goods (the "Statement
                                                                       ---------
     of Avid Sports Operating Profit"), which will be determined in accordance
     -------------------------------
     with GAAP applied on a basis consistent with that used by Purchaser (both
     historically and during the Avid Sports Earnout Period) in preparation of
     Purchaser's consolidated financial statements and certified to such effect
     by Purchaser's Chief Financial Officer.

                                       -5-

<PAGE>

                 (iii) Not later than 30 calendar days following the end of the
     Company Earnout Period, Purchaser shall deliver to the Shareholders a
     statement of the Company Revenues, Company Expenses and Company Operating
     Profit for the Company Earnout Period as well as the calculation of gross
     margin on the Company Resale Goods (the "Statement of Company Operating
                                              ------------------------------
     Profit"), which will be determined in accordance with GAAP applied on a
     ------
     basis consistent with that used by Purchaser (both historically and during
     the Company Earnout Period) in preparation of Purchaser's consolidated
     financial statements and certified to such effect by Purchaser's Chief
     Financial Officer. The Statement of Total Operating Profit, the Statement
     of Avid Sports Operating Profit and the Statement of Company Operating
     Profit shall collectively be referred to herein as the "Statements").
                                                             ----------

                 (iv) If, within 30 days following receipt by the Shareholders
     of the Statements, the Shareholders determine in good faith that the amount
     of Avid Sports Revenue, Avid Sports Expenses, Avid Sports Operating Profit,
     Company Revenue, Company Expenses, Company Operating Profit, Total Revenue,
     Total Expenses, Total Operating Profit, or said gross margin as so computed
     on one or more of the Statements is inaccurate, the Shareholders shall give
     notice to Purchaser within such 30 day period, (A) setting forth the
     Shareholders' determination of the Avid Sports Operating Profit, Company
     Operating Profit, Total Operating Profit and/or Avid Sports Revenue,
     Company Revenue and Total Revenue, as applicable, and (B) specifying in
     reasonable detail the nature of the Shareholders' basis for its
     disagreement with Purchaser' calculation (including whether Avid Sports
     Operating Profit, Company Operating Profit and/or Total Operating Profit,
     as applicable, was maximized in the application of GAAP); provided,
                                                               --------
     however, that the Shareholders shall be provided with full access to
     -------
     Purchaser's financial records in connection with the Shareholders'
     determination of Avid Sports Operating Profit, Company Operating Profit,
     Total Operating Profit and/or Avid Sports Revenue, Company Revenue and
     Total Revenue, as applicable, and, consistent with Purchaser's best
     efforts, the work papers of Purchaser's accountants. The failure of the
     Purchaser to provide the Shareholder with full access to the Purchaser's
     financial records shall constitute Purchaser's acceptance of the
     Shareholders' determination of Avid Sports Operating Profit, Company
     Operating Profit, Total Operating Profit and/or Avid Sports Revenue,
     Company Revenue and Total Revenue, as applicable. The failure by the
     Shareholders to express its disagreement within such 30 day period shall
     constitute acceptance by Shareholders of the amount of Avid Sports
     Operating Profit, Company Operating Profit, Total Operating Profit and/or
     Avid Sports Revenue, Company Revenue and Total Revenue so computed on the
     Statements. If Purchaser and the Shareholders are unable to resolve their
     disagreement within 15 days after receipt by Purchaser of notice of such
     disagreement, the items in dispute, including whether the Avid Sports
     Operating Profit, Company Operating Profit and/or Total Operating Profit,
     as applicable, was maximized in the application of GAAP, will be referred
     to a "big five" accounting firm selected by the Shareholders (the
     "Accountant") within such 15 day period. The Accountant shall make a
      ----------
     determination as to each of the items in dispute (including, if requested,
     the ascertation of whether Avid Sports Operating Profit, Company Operating
     Profit and/or Total Operating Profit, as applicable, was maximized
     consistent with GAAP), which determination shall be (i) in writing, (ii)
     furnished to Purchaser and the Shareholders as promptly as practicable
     after the items in dispute have been referred to the Accountant, (iii) made
     in accordance with the accounting principles and procedures provided for in
     Section 1.7(d)(i) above for the preparation of the Statements and (iv)
     -----------------
     conclusive and binding

                                       -6-

<PAGE>

     on Purchaser and the Shareholders. The fees and expenses of the Accountant
     (the "Accounting Fees") shall be paid half by Purchaser and half by the
           ---------------
     Shareholders. Any amounts of the Earnout Payment that are not in dispute
     shall be paid within three business days after agreement by the parties
     with respect thereto.

         2. This Amendment shall be governed by California law and may be
     executed in counterparts, each of which shall be deemed an original and all
     of which shall constitute one instrument.

     3. Except as expressly amended by this Amendment, all provisions of the
     Agreement shall remain in full force and effect.

                  [Remainder of Page Intentionally Left Blank]

                                       -7-

<PAGE>

               IN WITNESS WHEREOF, the parties execute this Amendment as of the
date referred to above.

                                Pinnacle Systems, Inc.,
                                a California corporation

                                By:  /s/ Robert Wilson
                                     ---------------------------------------
                                Title: President, Broadcast Solutions Division
                                       -------------------------------------

                                1117 Acquisition Corporation,
                                a Delaware corporation

                                By:  /s/ Robert Wilson
                                     ---------------------------------------
                                Title: President
                                       -------------------------------------

                                David Engelke
                                     /s/ David Engelke
                                --------------------------------------------

                                Bryan Engelke
                                     /s/ Bryan Engelke
                                --------------------------------------------

                                       -8-VSOURCE, INC.

                          EXCHANGEABLE NOTE AND WARRANT

                               PURCHASE AGREEMENT

                                  July 12, 2001

<PAGE>
                                  VSOURCE, INC.

                EXCHANGEABLE NOTE AND WARRANT PURCHASE AGREEMENT

          This  Exchangeable  Note  and  Warrant  Purchase  Agreement  (this
"Agreement")  is  made  as  of this 12th day of July, 2001 by and among Vsource,
Inc.,  a  Delaware  corporation  (the  "Company"),  NetCel360.com Ltd., a Cayman
Islands  company  and  a  wholly-owned  subsidiary  of  the  Company ("NetCel"),
NetCel360  Sdn  Bhd,  a  Malaysian  company and a wholly-owned subsidiary of the
Company  ("NetCel Malaysia" together with NetCel, the "Guarantors"), and each of
the  persons  and  entities  listed  on  the  Schedule of Purchasers attached as
Exhibit  A hereto (hereinafter collectively referred to as "Purchasers" and each
individually  as  a  "Purchaser").

                                 R E C I T A L S

          A.  Pursuant  to that certain Bridge Loan Agreement, dated as of April
6,  2001, as amended by that certain Amended and Restated Bridge Loan Agreement,
dated  as  of  May 24, 2001 (as amended, supplemented or otherwise modified from
time  to  time,  the  "Bridge  Agreement"),  among NetCel360 Holdings Limited, a
Cayman  Islands  company  ("Holdings"),  the  Guarantors  and  certain  other
individuals  and  entities  listed as signatories thereto, NetCel has heretofore
borrowed  from  the  persons  and  entities  listed  on  Schedule  1A  thereto
(collectively,  the "Tranche A Bridge Lenders") an aggregate principal amount of
$2.25  million  (the  "Tranche  A  Bridge  Loan")  and  Schedule  1B  thereto
(collectively,  the "Tranche B Bridge Lenders", and, together with the Tranche A
Bridge  Lenders,  the "Bridge Lenders") an aggregate principal amount of US$1.45
million  (the  "Tranche  B  Bridge Loan", and together with the Tranche A Bridge
Loan,  the  "Bridge  Loans")  in  accordance  with  and subject to the terms and
conditions  of  the  Bridge  Agreement;

          B.  The  Company  has  acquired  certain subsidiaries of Holdings (and
related  assets),  including  each  of  the Guarantors, pursuant to that certain
Acquisition  Agreement,  dated  as  of  May  24,  2001, between Holdings and the
Company  (as  amended,  the  "Acquisition");

          C.  The  Company  has  also  entered  into a Convertible Note Purchase
Agreement dated June 25, 2001 (the "Series A Note Purchase Agreement") providing
for  financing to the Company of up to $11.5 million pursuant to the issuance of
Series A Convertible Promissory Notes (the "Series A Notes") in order to provide
for  the  working  capital  requirements  of  the  Company  and its subsidiaries
following  the  Acquisition;

          D.  Certain Tranche B Bridge Lenders have exchanged an aggregate of $1
million  of  Tranche  B Bridge Loans for Series A Notes; and the proceeds to the
Company from the Series A Notes will be used, in part, to prepay $200,000 of the
Tranche  B  Bridge  Loan  held  by  one  Tranche  B  Bridge  Lender;

          E.  The  Company  wishes to issue, and the Purchasers wish to purchase
from the Company, the Company's Exchangeable Promissory Notes in accordance with
and subject to the terms and conditions of this Agreement in order to provide to
the  Company  the  funds  necessary  to cash collateralize the Gateway Letter of
Credit  (as  defined  in  Section  1.4  below);

<PAGE>
          NOW  THEREFORE,  in  consideration  of  the foregoing recitals and the
mutual  promises  hereinafter  set  forth,  the parties hereto agree as follows:

     1.   PURCHASE  AND  SALE  OF  SERIES  B  NOTES

          1.1     SALE  AND ISSUANCE OF SERIES B NOTES AND WARRANTS.  Subject to
the terms and conditions of this Agreement, each Purchaser agrees, severally and
not  jointly, to purchase, and the Company agrees to sell and issue to each such
Purchaser,  (i)  that  principal amount of the Company's Exchangeable Promissory
Notes  (individually,  a "Note" and collectively, the "Series B Notes") and (ii)
warrants,  in  the  form  of Exhibit B hereto (each, a "Warrant"), to purchase 5
shares  of the common stock of the Company for each $1.00 in principal amount of
Series B Notes purchased by such Purchaser at the Closing, as set forth opposite
such  Purchaser's  name  on  Exhibit A hereto, for the purchase price payable in
cash  equal  to  the  amount  (the  "Purchase  Price")  set  forth opposite such
Purchaser's  name  on  Exhibit  A  hereto.  The aggregate Purchase Price for all
Purchasers  combined shall be not less than $4,100,000 nor more than $5,125,000.

          1.2     CONSENT.  Each  Purchaser  which is a holder of Series A Notes
hereby consents, for all purposes under the Series A Note Purchase Agreement, to
the execution, delivery and performance by the Company of this Agreement and the
Series B Notes, including, without limitation, the sale by the Company of Series
B  Notes,  the repayment thereof in accordance with the terms hereof and thereof
and  the exchange thereof for Series A Notes in accordance with the terms hereof
and  thereof.

          1.3     CLOSING.

               (a)     The  purchase  and  sale  of  the  Series B Notes with an
aggregate  Purchase  Price  of  not less than $4,100,000 shall take place at the
offices of McDermott, Will & Emery, Chicago, Illinois at 10:00 a.m., on July 12,
2001,  or  at  such  later  time,  not  beyond July 15, 2001, as the Company may
specify  in writing to the Purchasers (which time and date are designated as the
"Closing").

               (b)     Each Series B Note is exchangeable for a Series A Note in
the  amount  and manner and to the extent provided in the Series B Note.  In the
event  a Series B Note becomes exchangeable (whether at the election of a holder
of  a Series B Note (a "Series B Holder") or automatically) for a Series A Note,
the  Company  shall issue to the Series B Holder in respect of the Series B Note
so  exchanged  a  Series  A Note dated the date of such exchange.  Each Series B
Holder,  if any, who is not already a Purchaser under the Series A Note Purchase
Agreement  and who exchanges his Series B Notes for Series A Notes shall execute
a joinder to the Series A Note Purchase Agreement agreeing to be fully bound by,
and  subject to, all of the covenants, terms and conditions of the Series A Note
Purchase  Agreement  and  shall  be  deemed  a  "Purchaser"  for  all  purposes
thereunder,  entitled  to all of the rights, benefits and privileges thereunder.

               (c)     Subject  to  the terms of this Agreement, at the Closing,
the  Company  shall  deliver to each Purchaser a Note in the principal amount of
the  applicable  Purchase  Price,  together  with  all  Warrants  to  which such
Purchaser  is entitled, against payment of the Purchase Price therefor by check,
or  a  wire  transfer  of  funds  to  the  following  Account:

                                      -2-
<PAGE>
                    City National Bank, Encino Office
                    16133  Ventura  Blvd.
                    Encino,  CA  91436
                    ABA  #:          122016066
                    Beneficiary:     Vsource, Inc.
                    Acct  #:         024-845419

,  or  such  other  form  of  payment  as  shall be mutually agreed upon by such
Purchaser  and  the  Company.

               (d)     At the Closing, the Company shall pay to each Purchaser a
transaction  fee  equal  to  2.5% of the aggregate principal amount of all Notes
purchased  by such Purchaser by (x) wire transfer of immediately available funds
to  an  account  designated  by  such  Purchaser or (y) accepting payment at the
Closing  of  the  net  amount  of  such  Purchaser's  Purchase  Price  less such
Purchaser's  transaction fee.   Such transaction fee shall be deemed to be fully
earned upon payment by such Purchaser of the applicable Purchase Price and shall
be  non-refundable.

               (e)     Shares  of  the  Preferred  Stock of the Company issuable
upon  conversion of the Series A Notes are herein referred to as the "Series 3-A
Preferred  Stock"  or the "Exchange Shares."  The shares of the Company's Common
Stock  issuable  upon  exercise  of  the  Warrants are referred to herein as the
"Warrant  Shares."   The  shares  of  common  stock,  par  value $0.01 per share
("Common  Stock")  of  the  Company  issuable  upon conversion of the Series 3-A
Preferred Stock are sometimes herein referred to as the "Conversion Shares." The
Series  B Notes, Warrants, Warrant Shares, Series A Notes, Conversion Shares and
the  Exchange  Shares  are  sometimes  herein  referred  to  collectively as the
"Securities."

          1.4     USE  OF  PROCEEDS.  The proceeds of the sale of Series B Notes
and  Warrants  by  the  Company  shall  be  used  solely  to make a deposit (the
"Deposit")  with  an  issuer  (the  "Issuer") of a stand-by letter of credit (as
amended,  replaced or refinanced, the "Gateway Letter of Credit") issued for the
account of the Company or any of its subsidiaries and for the benefit of Gateway
Manufacturing,  Inc.  or  any  successor  thereto  under  the reseller agreement
referenced  in Section 5.1(g) ("Gateway"), or to make any other deposit (also, a
"Deposit")  or  similar  credit  enhancement  or security which is acceptable to
Gateway  under  such reseller agreement.  The Deposit will be (a) deposited with
or pledged to the Issuer as cash collateral for all reimbursement obligations of
the  Company  or  any  of  its  subsidiaries  arising  from  time  to  time as a
consequence  of  any  draw upon the Gateway Letter of Credit, as provided in the
reimbursement  or other related agreements entered into from time to time by the
Company  or  any  of its subsidiaries and the Issuer with respect to the Gateway
Letter  of Credit, or (b) otherwise deposited with or pledged to Gateway or such
other  issuer or entity as is acceptable to Gateway under the reseller agreement
referenced  in  Section  5.1(g).  Notwithstanding the foregoing, the proceeds of
the  sale  of Series B Notes and Warrants by the Company may also be used to pay
the  transaction  fees  payable  pursuant  to Section 1.3(d) hereof, to pay fees
incurred  by  the Company in connection with the Gateway Letter of Credit and to
pay  the  fees  and  expenses  described  in  Section  6.3.

     2.     Guarantee  and  Indemnity.

                                      -3-
<PAGE>
          2.1     GUARANTEE.  In  consideration  of the purchase of the Series B
Notes  and  Warrants  upon  the  terms  and  conditions  of  this Agreement, the
Guarantors  hereby  jointly  and  severally  and unconditionally and irrevocably
guarantee  as  a  continuing  obligation,  the  due  and punctual payment of the
Obligations  (as defined in Section 2.4 below) in the currency in which the same
is  payable  under  the  terms  of  this  Agreement  and  the  due  and punctual
performance  and  observance  by  the  Company  of  all other obligations of the
Company  contained  in  this Agreement and the Series A Notes (as defined below)
(collectively,  the  "Guarantee"), and if the Company fails to pay any amount of
the  Obligations when due the Guarantors shall pay such amount to the Purchasers
in  the  required  currency  as  aforesaid  forthwith upon receiving the written
demand  of  the  holders of a majority of the principal amount of Series B Notes
then  outstanding  (the  "Majority  Holders").

          2.2     DEMANDS.  Demands may be made under the Guarantee from time to
time and may be enforced irrespective of whether any steps or proceedings are or
will  be  taken  against  the  Company  or any other person to recover under the
Series  B  Notes  or  interest accrued thereon or this Agreement or any Warrant.

          2.3     INDEMNITY.  Without  prejudice  to  the guarantee contained in
Section 2.1, the Guarantors hereby jointly and severally and unconditionally and
irrevocably  undertake,  as  a  separate,  primary,  additional  and  continuing
obligation,  to  indemnify  each  Purchaser  against  all  losses,  liabilities,
damages, costs and expenses whatsoever arising out of any failure by the Company
to  make  due and punctual payment of the Obligations or in the due and punctual
performance  and  observance  of all other obligations under this Agreement, the
Series  B  Notes  and  the  Warrants.  This  indemnity  shall  remain  in effect
notwithstanding  that  the Guarantee under Section 2.1 may cease to be valid and
enforceable  against  the  Guarantors  for  any  reason  whatsoever.

          2.4     OBLIGATIONS.  For the purpose of this Agreement, "Obligations"
means  any  and  all  of  the obligations of the Company (whether or not for the
payment  of  money,  and  including  any obligation to pay damages for breach of
contract)  which  are  or  may  become  payable to the Purchasers or any of them
pursuant  to  this  Agreement,  the  Series  B  Notes  or  the  Warrants.

          2.5     CONTINUING  GUARANTEE.  This  Guarantee  shall be a continuing
guarantee  and  shall remain in full force and effect until the Obligations have
been  paid  and performed in full, notwithstanding the insolvency or liquidation
or  any  incapacity  or  change  in the constitution or status of the Company or
either  or  both  of  the  Guarantors  or  any  other person or any intermediate
settlement  of  account  or  other  matter  whatsoever.

          2.6     PROTECTIVE CLAUSES.  Without limiting Section 2.5, neither the
liability of either of the Guarantors nor the validity or enforceability of this
Guarantee  shall  be  prejudiced,  affected  or  discharged  by:

               (a)     the  granting of any time or indulgence to the Company or
any  other  person;

                                      -4-
<PAGE>
               (b)     any  variation  or  modification  of  this Agreement, the
Series B Notes, the Warrants or any other document referred to herein or therein
or  related  thereto;

               (c)     the  invalidity  or unenforceability of any obligation or
liability of any party under this Agreement, the Series B Notes, the Warrants or
any  other  documents  referred  to  herein  or  therein  or  related  thereto;

               (d)     any  invalidity  or irregularity in the execution of this
Agreement,  the  Series B Notes, the Warrants or any other documents referred to
herein  or  therein  or  related  thereto;

               (e)     any  lack  of capacity or deficiency in the powers of the
Company,  any  Guarantor or any other person to enter into or perform any of its
obligations  under this Agreement, the Series B Notes, the Warrants or any other
documents  referred  to herein or therein or related thereto or any irregularity
in the exercise thereof or any lack of authority by any person purporting to act
on  behalf  of  the  Company,  the  Guarantors  or  such  other  person;

               (f)     the  insolvency,  bankruptcy  or  liquidation  or  any
incapacity, disability or limitation or any change in the constitution or status
of  the  Company  or  either  or  both  of  the  Guarantors or any other person;

               (g)     any other security document, security interest, guarantee
or  other  security or right or remedy being or becoming held by or available to
any  Purchaser  or  by  any other person or by any of the same being or becoming
wholly  or  partly void, voidable, unenforceable or impaired or by any Purchaser
at  any  time  releasing, refraining from enforcing, varying or in any other way
dealing with any of the same or any power, right or remedy any Purchaser may now
or  hereafter  have  from  or  against  the  Company  or  any  other  person;

               (h)     any  waiver,  exercise, omission to exercise, compromise,
renewal  or release of any rights against the Company or any other person or any
compromise,  arrangement  or  settlement  with  any  of  the  same;  or

               (i)     any  act,  omission, event or circumstance which would or
may  but  for  this  provision  operate  to  prejudice, affect or discharge this
Guarantee  or  the  liability  of  the  Guarantors  hereunder.

          2.7     TAXES  AND  OTHER  DEDUCTIONS.

               (a)     Funds.  All  payments  to  be  made  by  the  Company  or
                       -----
Guarantors  or  any  other  person under this Purchaser shall be made in full in
immediately  available  U.S.  Dollars  without  any  set  off  or  consideration
whatsoever,  free  and  clear  of  any Taxes, deductions or withholdings save as
required  by  law.

               (b)     Taxes.  If at any time Company or a Guarantor is required
                       -----
to  make  any deduction or withholding in respect of Taxes (as defined below) or
otherwise  from  any payment due under this Agreement or the Series B Notes, the
sum due from such Guarantor in respect of such payment shall be increased to the
extent  necessary  to  ensure  that,  after  the  making  of  such  deduction or
withholdings,  each  Purchaser  receives  on  the due date for such payment (and

                                      -5-
<PAGE>
retains,  free  from and clear of any Taxes or otherwise) a net sum equal to the
sum  which  it  would  have  received  had no such deduction or withholding been
required  to  be  made and such Guarantor shall indemnify each Purchaser against
any  losses  or  costs  incurred by any of them by reason of any failure of such
Guarantor  to  make  any  such  deduction  or  withholding  or  by reason of any
increased  payment  not  being  made  on  the  due  date for such payment.  Such
Guarantor  shall promptly deliver to the Purchaser any receipts, certificates or
other  proof  evidencing  the amounts (if any) paid or payable in respect of any
deduction or withholding as aforesaid.  "Taxes" shall mean taxes, charges, fees,
levies or other assessments of any nature, including, without limitation, sales,
value added, use, excise, real or personal property, withholding, stamp or other
taxes,  customs,  duties  or  landing  fees  or other government charges however
designated,  now  or hereafter imposed, collected or assessed by, or payable to,
any  taxing  authority  of any country and shall include interest, penalties and
additions imposed, collected or assessed or payable with respect to such amount.

          2.8     COSTS,  CHARGES  AND  EXPENSES.  The  Company  and each of the
Guarantors  shall  from time to time forthwith on demand of the Majority Holders
pay to or reimburse the Purchaser for all reasonable costs, charges and expenses
(including  reasonable  legal  fees for one counsel for all Purchasers and other
reasonable  fees  on  a  full  indemnity  basis)  incurred  by  any Purchaser in
connection with the enforcement of any of their rights or powers hereunder or in
suing  for  or  seeking  to  recover  any sums due hereunder or in defending any
claims  brought  against  them in respect of this Agreement, the Series B Notes,
the  Warrants  or this Guarantee and until payment of the same in full, all such
costs,  charges  and  expenses  shall  be  secured  by  this  Guarantee.

          2.9     UNDERTAKINGS.  Each  Guarantor  hereby  undertakes  and agrees
jointly  and severally with the Purchasers that the undertakings in this Article
2 shall remain in force throughout the continuance of this Guarantee and so long
as  the  Obligations  or  any  part  thereof  remains  owing  or  outstanding.

          2.10     UNRESTRICTED  RIGHT  OF  ENFORCEMENT.  The  Guarantee  may be
enforced  without  any Purchaser first having made any demand or had recourse to
any  other  security  or rights or taking any other steps or proceedings against
the  Company,  either  or  both of the Guarantors or any other person and may be
enforced  for  any balance due after resorting to any one or more other means of
obtaining payment or discharge of the monies, obligations and liabilities hereby
secured.

          2.11     DISCHARGE  AND  RELEASE.  Notwithstanding  any  discharge,
release  or  settlement  from  time  to  time  between  any  Purchaser  and  the
Guarantors,  if  any  security,  disposition  or  payment granted or made to the
Majority  Holders  or  any  Purchaser  in  respect  of  the  Obligations  by the
Guarantors  or  any  other  person  is  avoided  or  set  aside or ordered to be
surrendered,  paid  away, refunded or reduced by virtue of any provision, law or
enactment  relating  to  bankruptcy,  insolvency,  liquidation,  winding-up,
composition  or arrangement for the time being in force or for any other reason,
the Majority Holders shall be entitled hereafter to enforce this Agreement as if
no  such  discharge,  release  or  settlement  had  occurred.

                                      -6-
<PAGE>
          2.12     AMENDMENT.  Any  amendment  or waiver of any provision of the
Guarantee  and  any  waiver  of  any  default under this Agreement shall only by
effective  if  made  in  writing  and  signed  by  the  Majority  Holders.

     3.   REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY

          As used herein, (i) any reference to any event, change or effect being
"material"  with  respect  to  the Company or any Subsidiary (as defined herein)
means  an event, change or effect which is material in relation to the financial
condition,  properties, business, operations, assets or results of operations of
the  Company  and each Subsidiary, taken as a whole, and (ii) the term "Material
Adverse  Effect" on the Company means a material adverse effect on the financial
condition,  properties, business, operations, assets or results of operations of
the  Company and its Subsidiaries, taken as a whole.  As of the date hereof, the
Company  hereby  represents and warrants to, and covenants with, each Purchaser,
except  as  contemplated  by  this  Agreement  or as set forth in the Disclosure
Schedule  (the  "Disclosure  Schedule")  attached  hereto,  as  follows:

          3.1     ORGANIZATION  AND  STANDING.  The  Company  has  been  duly
incorporated,  is  validly  existing  and in good standing under the laws of the
State  of  Delaware  and  has  corporate  power  and authority to own, lease and
operate  its  properties  and  to  conduct  its business in the manner presently
conducted  and  to  enter into and perform its obligations under this Agreement,
the  Series  B  Notes  and,  subject  to  obtaining  shareholder approval of the
Shareholder  Proposals,  the  Warrants  and  the  Certificate of Designation for
designation of the Exchange Shares.  The Company and each of the Subsidiaries is
duly  qualified  as  a  foreign  corporation to transact business and is in good
standing  in  each  other  jurisdiction in which such qualification is required,
whether  by  reason  of  the  ownership or leasing of property or the conduct of
business, except where the failure to so qualify or to be in good standing would
not  result  in  a  Material  Adverse  Effect.  The  Company  is not required to
register as an "investment company" within the meaning of the Investment Company
Act  of 1940.  The Company has made available to the Purchasers a true, complete
and  correct  copy  of the Company's certificate of incorporation and bylaws and
the  constitution  documents  of  each  Subsidiary,  each  as  amended  to  date
(collectively,  the  "Organizational  Documents").  The Organizational Documents
are  in  full  force  and  effect.  The  Certificate of Designation creating the
Series 3-A Preferred Stock of the Company (the "Certificate of Designation") has
been  executed  and  filed  with the Delaware Secretary of State, and is in full
force  and  effect.

          3.2     CAPITALIZATION.  As of the date hereof, the authorized, issued
and  outstanding  shares of capital stock of the Company are as set forth in the
Company's  Annual  Report  on  form 10-KSB for the fiscal year ended January 31,
2001,  as  filed  with the SEC on May 16, 2001, as amended (the "Form 10-K") and
Quarterly  Report  on  form 10-Q for the fiscal period ended April 30, 2001 (the
"Form  10-Q"),  with  such  changes  as  are (a) contemplated by the Acquisition
Agreement,  this  Agreement  or  the Series A Note Purchase Agreement or (b) set
forth  on  Schedule  3.2.  The authorized capital also includes shares of Series
3-A  Preferred  Stock having the rights, privileges and preferences set forth in
the  Certificate  of Designation, none of which shares have been issued prior to
the  date  hereof.  All  issued  and  outstanding shares of capital stock of the
Company  have  been  duly  authorized  and validly issued and are fully paid and
non-assessable;  none  of the outstanding shares of capital stock of the Company
have  been issued in violation of the pre-emptive or other similar rights of any
person or in violation of any applicable securities laws or regulations.  Except

                                      -7-
<PAGE>
as  otherwise  specified  in  Schedule 3.2 hereto or described in the Form 10-Q,
                              ------------
there  are  no shares of capital stock or other securities of the Company or any
Subsidiary (i) reserved for issuance or (ii) subject to preemptive rights or any
outstanding  subscriptions,  options,  warrants,  calls,  rights,  convertible
securities  or  other  agreements  or other instruments outstanding or in effect
giving  any  person  the  right  to acquire any shares of capital stock or other
securities  of the Company or any Subsidiary or any commitments of any character
relating  to  the  issued  or  unissued capital stock or other securities of the
Company  or  any  Subsidiary.  Except  as specified on Schedule 3.2, on the date
hereof  the  Company  does  not have outstanding any bonds, debentures, notes or
other  obligations  the  holders  of  which have the right to vote (or which are
convertible  into  or  exercisable for securities having the right to vote) with
the  stockholders  of Company.  The sale of the Securities is not subject to any
preemptive  rights  or rights of first refusal and, when issued and delivered in
compliance  with  the  provisions  of  the Series A Note Purchase Agreement, the
Series  A  Notes  and/or the Certificate of Designation, the Exchange Shares and
Conversion Shares will be duly and validly issued, fully paid and nonassessable,
and  will  be  free  of  any  liens,  encumbrances  or restrictions on transfer;
provided,  however,  that  (a)  the Securities may be subject to restrictions on
transfer  under  state  and/or federal securities laws as set forth herein or as
otherwise  required by such laws at the time a transfer is proposed, and (b) the
Securities  may  only  be  assigned  in  accordance  with to Section 8.3 hereof.

          3.3     AUTHORIZATION  OF  AGREEMENTS.  This  Agreement,  the Series B
Notes  and the Warrants have been duly authorized, executed and delivered by the
Company, and this Agreement, each of the Series B Notes and each of the Warrants
constitute  valid and legally binding obligations of the Company, enforceable in
accordance  with  their  terms,  subject  to  bankruptcy, insolvency, fraudulent
transfer,  reorganization,  moratorium  and  other  similar  laws  of  general
applicability  relating  to or affecting creditors' rights and to general equity
principles except that the right of the holder of Warrants to purchase shares of
Common  Stock  upon  exercise, and the right of the holder of Exchange Shares to
convert  Exchange  Shares  into Conversion Shares are each subject to receipt of
shareholder  approval  of  the  Shareholder  Proposals (as herein defined).  The
Board  of  Directors  of  the Company has approved the Shareholder Proposals and
recommended  approval  thereof  by  the shareholders of the Company and has duly
approved  the  Certificate  of Designation.  Such Certificate of Designation has
been duly filed with the Secretary of State of Delaware and is in full force and
effect.

          3.4     ABSENCE  OF  DEFAULTS  AND CONFLICTS.  None of the Company nor
any  Subsidiary  (as  defined  below)  is  in  violation  of  its organizational
documents.  Except  as  set  forth  on  Schedule  3.4,  the execution, delivery,
performance  and  consummation  of  this  Agreement  and  the Series B Notes and
issuance of the Securities by the Company does not and will not, with respect to
the  Company  and  each Subsidiary, directly or indirectly, (with or without the
giving  of notice or the lapse of time or both):  (i) subject in the case of the
issuance  of  the  Warrant  Shares  and  the Conversion Shares to the receipt of
shareholder approval of the Shareholder Proposals, contravene, conflict with, or
constitute  or  result  in  a breach or violation of, or a default under (A) any
provision  of  any of the Organizational Documents or (B) any resolution adopted
by the Board of Directors (or similar governing body) or the stockholders of the
Company  or  any  Subsidiary;  (ii)  contravene, conflict with, or constitute or
result  in a breach or violation of, or a default under, or the acceleration of,
or  the triggering of any payment or other obligations pursuant to, any existing

                                      -8-
<PAGE>
benefit  plan  maintained by the Company or any Subsidiary or any grant or award
made  under any of the foregoing; (iii) contravene, conflict with, or constitute
or  result in a breach or violation of, or a default under, or the cancellation,
modification  or  termination  of,  or the acceleration of, or the creation of a
lien  on any properties or assets owned or used by the Company or any Subsidiary
pursuant  to, any provision of any contract, indenture, mortgage, deed of trust,
loan  or credit agreement, note, lease or other agreement or instrument to which
it  is  a  party or by which it may be bound, or to which any of its property or
assets  is subject ("Contract"), except for those that would not individually or
in  the aggregate result in a Material Adverse Effect; (iv) contravene, conflict
with,  or  constitute or result in a breach or violation of, any federal, state,
local,  municipal, foreign, international, multinational, or other constitution,
law,  rule,  requirement,  administrative ruling, order, ordinance, principle of
common  law,  code, regulation, statute, treaty or process ("Law") or any award,
decision,  injunction,  judgment,  decree,  settlement,  order, process, ruling,
subpoena  or  verdict  (whether  temporary,  preliminary  or  permanent entered,
issued,  made  or  rendered  by  any  court,  administrative agency, arbitrator,
Governmental  Entity  or  other  tribunal of competent jurisdiction ("Order") or
give  any  foreign,  federal,  state,  local,  municipal,  county  or  other
governmental,  quasi-governmental, administrative or regulatory authority, body,
agency,  court,  tribunal,  commission  or  other  similar entity (including any
branch,  department  or  official  thereof) ("Governmental Entity") or any other
person  the right to challenge any of the transactions contemplated herein or to
exercise  any  remedy  or obtain any relief under, any Law or any Order to which
the Company or any Subsidiary, or any of the assets owned or used by the Company
or  any  Subsidiary,  are subject;  (v) require any filing by the Company or any
Subsidiary  with,  or  approval  or consent or other action by, any Governmental
Entity  or  any  other  person; (vi) contravene, conflict with, or constitute or
result  in  a  breach  or violation of, or a default under, any provision of, or
give  any  Governmental  Entity  the right to revoke, withdraw, suspend, cancel,
terminate  or  modify,  any license or permit that is held by the Company or any
Subsidiary  or  that  otherwise  relates  to  the business of the Company or any
Subsidiary, or any of the assets owned or used by the Company or any Subsidiary;
or  (vii)  cause  any of the assets owned by the Company or any Subsidiary as of
the  date  hereof  to be reassessed or revalued by the taxing authority or other
Governmental  Entity.

          3.5     ABSENCE  OF PROCEEDINGS.  Except as described in the Form 10-K
or Form 10-Q or set forth in Schedule 3.5, there is no action, suit, proceeding,
inquiry  or  investigation before or brought by any court or governmental agency
or  body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened,  against  or  affecting  the  Company  or any Subsidiary which might
reasonably  be expected individually or in the aggregate to result in a Material
Adverse  Effect,  or  which  might  reasonably  be  expected  to  materially and
adversely  affect the properties or assets of the Company or any Subsidiaries or
the  consummation of the transactions contemplated in this Agreement, the Series
B  Notes  or the Certificate of Designation or the performance by the Company of
its  obligations  hereunder.  Except as disclosed in the Form 10-K or Form 10-Q,
or  set forth in Schedule 3.5, no event has occurred or circumstance exists that
is reasonably likely to give rise to or serve as a basis for the commencement of
any  such  action.

          3.6     INTELLECTUAL  PROPERTY.

               (a)     Intellectual  Property  Assets.  The  term  "Intellectual
                       ------------------------------
Property  Assets"  includes:

                                      -9-
<PAGE>
                    (i)     the  names  Vsource,  NetCel360  and  all registered
          trademarks,  service  marks, and applications (collectively, "Marks");

                    (ii)     all  know-how,  trade  secrets,  confidential
          information,  software,  technical  information,  process  technology,
          plans,  drawings, and blue prints (collectively, "Trade Secrets"); and

                    (iii)     all domain names and URL addresses for websites on
          the  internet  or the world wide web ("Domain Names"); owned, used, or
          licensed  by  the  Company  or any Subsidiary as licensee or licensor.

               (b)     Intellectual  Property  Necessary  for  the  Company's
                       ------------------------------------------------------
Business.  The  Intellectual  Property  Assets  are  all those necessary for the
--------
operation of the business of the Company and its Subsidiaries as it is currently
conducted.  Except  as  set forth in Schedule 3.6(b) of the Disclosure Schedule,
the  Company  and/or  one or more of the Subsidiaries is the owner of all right,
title, and interest in and to, or has the right to use, each of the Intellectual
Property Assets, free and clear of all Liens (except for the Liens granted under
the  Bridge  Loans  (the "Bridge Loan Liens")), and other adverse claims and has
the  right  to  use, without any payment to any third party in excess of $50,000
per  year,  all  of  the  Intellectual  Property  Assets.

               (c)     Trademarks.
                       ----------

                    (i)     Except  as  set  forth  on Schedule 3.6(c), the Form
          10-K  contains  a  true,  complete  and  correct  list  and  summary
          description of all Marks. To the knowledge of the Company, the Company
          and/or  one  or  more  of  the  Subsidiaries is the owner, licensor or
          licensee  of  all  right,  title,  and  interest in and to each of the
          Marks, free and clear of all Liens (except for the Bridge Loan Liens),
          and  other  adverse  claims.

                    (ii)     No  Mark  has  been  or  is  now  involved  in  any
          opposition, invalidation, or cancellation and, to the knowledge of the
          Company,  no  such  action  is  threatened  with respect to any of the
          Marks.

                    (iii)     To  the  knowledge  of  the  Company,  there is no
          trademark  or  trademark  application  of  any  third  party  which
          potentially  interferes  with  any  of  the  Marks.

                    (iv)     No  Mark  is  infringed or, to the knowledge of the
          Company,  has  been  challenged  or threatened in any way by any other
          Person. To the knowledge of the Company, none of the Marks used by the
          Company  or  any  Subsidiary  infringes  or is alleged to infringe any
          trade  name,  trademark,  or  service  mark  of  any  third  party.

               (d)     Trade  Secrets.  To  the  knowledge  of  the Company, the
                       --------------
Company  and/or  one  or more of the Subsidiaries has good title and an absolute
(but not necessarily exclusive) right to use the Trade Secrets. To the knowledge
of  the  Company,  the  Trade  Secrets  are  not part of the public knowledge or
literature,  and, to the knowledge of the Company, have not been used, divulged,
or  appropriated either for the benefit of any person (other than the Company or

                                      -10-
<PAGE>
any  Subsidiary  or pursuant to a non-disclosure agreement), or to the detriment
of  the  Company  or  any  Subsidiary. No Trade Secret is subject to any adverse
claim or, to the knowledge of the Company or any Subsidiary, has been challenged
or  threatened  in  any  way.

               (e)     Domain Names.  Schedule 3.6(e) of the Disclosure Schedule
                       ------------
sets  forth  a  complete  list  of  all  Domain Names used in the conduct of the
business  of  the  Company and its Subsidiaries.  The Company and/or one or more
Subsidiaries  is  the  owner of all right, title, and interest in and to each of
the  Domain  Names,  free  and  clear  of  all Liens (except for the Bridge Loan
Liens).  Such  Domain  Names  are  properly registered with Network Solutions or
such  other  agency or company duly authorized by relevant Governmental Entities
to maintain such registry, and all fees due in respect of such registration have
been  paid.

          3.7     PRIVATE  PLACEMENT.  Neither the Company nor any affiliate (as
defined in Rule 405 under the U.S. Securities Act of 1933, as amended (the "1933
Act"))  thereof  has  (i)  sold,  offered  for  sale, solicited offers to buy or
otherwise  negotiated  in  respect of, any security (as defined in the 1933 Act)
which  is or will be integrated with the sale of the Securities in a manner that
would  require  the  registration  under  the 1933 Act of the Securities or (ii)
engaged  in  any form of general solicitation or general advertising (within the
meaning  of  Rule  502(c)  of  Regulation  D under the 1933 Act) or any directed
selling  efforts  (as  defined  under  the  1933  Act)  in  the United States in
connection  with  the offer and sale of the Securities. Assuming the accuracy of
the  representations  and  warranties  of  each Purchaser contained in Section 3
hereof,  the  offer,  issue,  and  sale  of the Securities:  (a) are and will be
exempt  from  the  registration and prospectus delivery requirements of the 1933
Act;  and neither the Company nor any authorized agent acting on its behalf will
take  any  action hereafter that would cause the loss of such exemption, and (b)
have  been  registered  or  qualified  (or  are  exempt  from  registration  and
qualification)  under the registration, permit, or qualification requirements of
all  applicable  state  securities  laws.

          3.8     SUBSIDIARIES.  Each  subsidiary  of  the  Company, meaning any
entity in which the Company, directly or indirectly, beneficially owns more than
50%  of  the equity interest in, or the voting control of, such company (each, a
"Subsidiary"),  is a corporation validly existing and in good standing under the
laws  of  its  jurisdiction  of  incorporation  and has full corporate power and
authority  to own, lease and operate its properties, conduct its business as and
to  the extent now conducted.  All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable,  and,  except as set out in Schedule 3.8, are owned, beneficially
                                           ------------
and  of  record, by the Company or Subsidiaries wholly owned by the Company free
and  clear  of  all liens, charges, encumbrances, options, rights of pre-emption
and  third  party rights whatsoever (collectively, "Liens").  A complete list of
all  Subsidiaries  is  set  out  in  Schedule  3.8.  Except  as  set out in that
                                     -------------
schedule,  the  Company does not own, directly or indirectly, any of the capital
stock  or  voting  stock  of  any  other  company  or  corporation.

          3.9     LIABILITIES.  Except  potential Liabilities referred to in the
Form  10-Q  or  as  set  forth  on  Schedule  3.9,  neither  the Company nor any
Subsidiary  has  any  debt,  liability,  commitment  or  obligation of any kind,
character  or  nature  whatsoever, whether known or unknown, choate or inchoate,
secured  or  unsecured,  accrued,  fixed, absolute, contingent or otherwise, and
whether  due  or  to  become  due  ("Liability")  (and,  to the knowledge of the
Company,  there  is  no basis for any present or future action against it giving

                                      -11-
<PAGE>
rise  to  any  Liability) except for (i) Liabilities or obligations reflected or
reserved  against the balance sheet contained in the Financial Statements or the
Interim  Financial  Statements  (as defined herein) and (ii) current Liabilities
incurred  in the ordinary course of business (none of which results from, arises
out  of,  relates  to,  is  in  the  nature  of,  or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of Law) since the
date  thereof.

          3.10     BROKERS.  All negotiations relative to this Agreement and the
transactions  contemplated  hereby have been carried out by the Company directly
without  the  intervention of any person on behalf of the Company in such manner
as  to give rise to any valid claim by any person against the Purchasers (or any
of them), the Company or any Subsidiary for a finder's fee, brokerage commission
or  similar  payment.

          3.11     SEC FILINGS.  Except as disclosed in the Disclosure Schedule,
the  Form 10-K or the Form 10-Q (including any financial statements or schedules
included  therein)  and  each  other  filing of the Company under the Securities
Exchange  Act  of 1934, as amended (the "1934 Act"), made since May 15, 2001 (i)
complied with the requirements of the 1933 Act, or the 1934 Act, as the case may
be,  in  all  material  respects,  and (ii) did not at the time of filing (or if
amended, supplemented or superseded by a filing prior to the date hereof, on the
date  of that filing) contain any untrue statement of a material fact or omit to
state  a  material  fact  required to be stated therein or necessary in order to
make  the statements therein, in the light of the circumstances under which they
were  made, not misleading.   To the Company's knowledge, except as disclosed in
the  Disclosure  Schedule, the Company is in compliance in all material respects
with  (i)  the  1933  Act,  (ii)  the  1934  Act, (iii) all applicable rules and
regulations of the Securities and Exchange Commission under the 1933 Act and the
1934  Act,  and  (iv)  all  applicable rules and regulations of The Nasdaq Stock
Market,  Inc.

          3.12     FINANCIAL  STATEMENTS.  The  audited  consolidated  financial
statements of (i) the Company as of and for the years ended January 31, 2000 and
January  31, 2001 and (ii) NetCel360 Holdings Limited ("Holdings") as of and for
the  year ended December 31, 2000 (collectively, the "Financial Statements") and
the unaudited consolidated financial statements of the Company as of and for the
three months ended April 30, 2001 and of Holdings as of and for the three months
ended  March  31, 2001 (collectively, the "Interim Financial Statements"), which
have  been  made  available  to the Purchasers, have been prepared in accordance
with  US  generally  accepted  accounting principles ("GAAP") applied on a basis
consistent  throughout  the periods indicated (except as may be indicated in the
notes  thereto)  and  present  fairly  in all material respects the consolidated
financial  condition  and  consolidated  operating  results  of  the  Company or
Holdings,  as  the  case  may  be, of the dates and during the periods indicated
therein  in conformance with GAAP, subject, in the case of the Interim Financial
Statements,  to normal year-end adjustments, consistent with past practices.  As
of  their  respective  date, the Financial Statements did not contain any untrue
statement  of  a  material  fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances  under  which they were made, not misleading.  Except as set forth
in  the  Financial  Statements, the Interim Financial Statements, the Form 10-K,
Form  10-Q  or  a  Current  Report on Form 8-K filed by the Company with the SEC
prior  to  the applicable Closing, or arising in the ordinary course of business
since  April  1,  2001,  as  of  the  date  hereof  none  of the Company nor any
Subsidiary  has  (A) incurred any material liabilities of any nature (matured or

                                      -12-
<PAGE>
unmatured,  fixed  or  contingent)  or (B) made any material disposal of assets,
suffered  any loss or material damage of any assets, waived any valuable rights,
made  any  material  change  in  any material contract to which it is a party or
declared  or  paid  any  dividends.

          3.13     NON-COMPETITION  AGREEMENTS.  Except  as  set  forth  in  the
Disclosure  Schedule delivered by Holdings to the Company in connection with the
Acquisition,  neither  the Company nor any of its Subsidiaries is a party to any
non-competition  or  other  agreement  or subject to any duty which prohibits or
limits the ability of the Company or any Subsidiary (i) to engage in any line of
business,  (ii)  to  compete  with  any  person, (iii) to carry on or expand the
nature  or  geographical scope of the business of the Company or such Subsidiary
anywhere  in  the  world or (iv) to disclose any confidential information in the
possession  of  the  Company  or  any  Subsidiary  (any  not otherwise generally
available to the public), other than, in the case of (iv) only, any contract for
the  sale  or  purchase  of  goods  or  services or any non-disclosure agreement
entered into in connection with the possible or actual sale or purchase of goods
or  services  in the ordinary course of business that does not meet any other of
the  criteria  set  forth  in  this  Section  3.13.

          3.14     CERTAIN PAYMENTS.  Since their incorporation or organization,
neither  the  Company  nor  any  Subsidiary  has,  nor has any representative of
Company  or  any  Subsidiary,  or  to  the knowledge of the Company or any other
person  associated  with  or  acting  for  or  on  behalf  of the Company or any
Subsidiary,  directly  or  indirectly  (a)  made  any contribution, gift, bribe,
rebate,  payoff,  influence  payment,  kickback, or other payment to any person,
private  or  public, regardless of form, whether in money, property, or services
(i)  to  obtain  favorable  treatment  in  securing  business,  (ii)  to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company or
any  Subsidiary  or (b) established or maintained any fund or asset that has not
been  recorded  in  the  books  and  records  of  the Company or any Subsidiary.

          3.15     SMALL  BUSINESS  MATTERS.  The  Company  acknowledges  and
understands  that  one or more of the Purchasers may be a Federal licensee under
the  Small  Business  Investment  Act  of  1958  and the regulations promulgated
thereunder,  each  as  amended (the "SBIC Act").  The Company, together with its
"affiliates"  (as  that  term  is  defined  in  the SBIC Act, including, without
-----------
limitation,  Title  13,  Code  of Federal Regulations, Sec.121.103), is a "small
                                                                           -----
business  concern"  within the meaning of Title 13, Code of Federal Regulations,
-----------------
Sec.121.301(c).  The  information  regarding  the Company and its affiliates set
forth  in  the SBA Form 480, Form 652 and Parts A and B of Form 1031 and the Use
of  Proceeds  Statement  delivered  at the Closing is accurate and complete. The
Company  does  not  presently  engage  in, and does not intend to engage in, any
activities,  nor  does  the  Company  intend to use, directly or indirectly, the
proceeds  from the Series A Notes for any purpose for which a licensee under the
SBIC  Act  is  prohibited  from providing funds by the SBIC Act (including under
Title  13,  Code  of  Federal  Regulations,  Sec.Sec.  107.720).

          3.16     NO  OTHER  REPRESENTATIONS.  Notwithstanding  anything to the
contrary  contained  in  this Agreement, it is the explicit intent of each party
hereto that the Company is not making any representation or warranty whatsoever,
express  or  implied,  except those representations, and warranties contained in
this  Article  3.

                                      -13-
<PAGE>
     4.   REPRESENTATIONS  AND  WARRANTIES  OF  THE  PURCHASERS

          Each  Purchaser,  severally  but  not  jointly,  hereby represents and
warrants  to  the Company  as  follows:

          4.1     LEGAL  POWER.  It  has the requisite legal power to enter into
this  Agreement,  to  purchase the Series B Notes hereunder and to carry out and
perform  its  obligations  under  the  terms  of  this  Agreement.

          4.2     DUE  EXECUTION.  This  Agreement  have  been  duly authorized,
executed  and  delivered  by  it,  and,  upon  due execution and delivery by the
Company  and  such  Purchaser,  this  Agreement  and  will  be valid and binding
agreements of it, subject to laws of general application relating to bankruptcy,
insolvency  and  the  relief  of  debtors  and  subject  to  the availability of
equitable  remedies.

          4.3     NO  CONFLICTS;  NO CONSENTS REQUIRED.  The execution, delivery
and performance of and compliance with this Agreement by such Purchaser will not
result  in  any  violation  of  any  term  of  any material mortgage, indenture,
contract,  agreement  or  other  instrument  or any judgment, decree or order to
which such Purchaser is a party or subject, or be in conflict with or constitute
a  default  under  any  such  term.  All  consents,  approvals,  orders,  or
authorizations  of or registrations, qualifications, designations, declarations,
or  filings  with,  any governmental authority or other third party, required on
the part of the Purchaser in connection with the valid execution and delivery of
this Agreement, the purchase of the Securities, or the consummation of any other
transaction  contemplated hereby have been obtained, or will be effective at the
Closing, except for notices required or permitted to be filed with certain state
and  federal  securities  commissions  after  the  Closing.

          4.4     INVESTMENT  REPRESENTATIONS.

               (a)     It  is  acquiring the Securities for its own account, not
as  nominee  or  agent,  for investment and not with a view to, or for resale in
connection  with, any distribution or public offering thereof within the meaning
of  the  1933  Act.

               (b)     It  understands  that  (i)  the  Securities have not been
registered  under the 1933 Act by reason of a specific exemption therefrom, that
it  may  be necessary to hold such Securities indefinitely, and, therefore, that
it  may  be necessary to bear the economic risk of such investment indefinitely,
unless  a  subsequent disposition thereof is registered under the 1933 Act or is
exempt  from  such  registration;  (ii) each certificate representing any of the
Securities  will  be  endorsed  with  a  legend similar to the following legend:

     "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER  THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT") OR THE
     SECURITIES  LAWS  OF  ANY  STATE  AND  MAY  NOT  BE SOLD, TRANSFERRED,
     ASSIGNED  OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
     STATEMENT  UNDER  THE  1933   ACT  COVERING  SUCH  SECURITIES  AND  IN
     COMPLIANCE  WITH SUCH STATE LAWS OR IF THE COMPANY RECEIVES AN OPINION

                                      -14-
<PAGE>
     OF  COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
     TO  THE  COMPANY,  STATING  THAT  SUCH  SALE,  TRANSFER, ASSIGNMENT OR
     HYPOTHECATION  IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
     REQUIREMENTS  OF  THE  1933  ACT  AND  SUCH  APPLICABLE  STATE  LAWS."

and  (iii)  the  Company  will  instruct  any transfer agent not to register the
transfer  of  any  of  the  Securities  unless  the  conditions specified in the
foregoing  legend  are  satisfied;  provided,  however,  that no such opinion of
counsel  shall be necessary if the sale, transfer or assignment is made pursuant
to  Securities  and  Exchange  Commission  ("SEC")  Rule  144 and such Purchaser
provides  the  Company  with evidence reasonably satisfactory to the Company and
its  counsel  that  the  proposed transaction satisfies the requirements of Rule
144.  The  Company  agrees to remove the foregoing legend from any securities if
the  requirements of SEC Rule 144(k) (or any successor rule or regulation) apply
with  respect  to  such  securities and the Company and its counsel are provided
with  reasonably  satisfactory  evidence  that  the  requirements of Rule 144(k)
apply.

               (c)     It  is  an  investor  in  securities  of companies in the
development  stage  and  acknowledges  that it can bear the economic risk of its
investment  and  has  such  knowledge  and  experience  in financial or business
matters  that it is capable of evaluating the merits and risks of the investment
in  the  Securities.

               (d)     It  has  reviewed  this  Agreement,  the  Series  A  Note
Purchase  Agreement and the Certificate of Designation and all the schedules and
exhibits to such documents carefully and has conducted such investigation of the
Company  as  it has deemed appropriate and has had the questions it has asked of
the  Company  answered  to  its  satisfaction.

               (e)     It  has  not  been  offered the Securities by any form of
advertisement,  article,  notice  or  other  communication  published  in  any
newspaper,  magazine  or similar media or broadcast over television or radio, or
any  seminar  or  meeting  whose  attendees  have  been  invited  by such media.

               (f)     It  is an (i) "accredited investor" within the meaning of
SEC  Rule  501  of  Regulation  D,  as  presently in effect; or (ii) not a "U.S.
person" within the meaning of SEC Rule 902 and is acquiring the Securities in an
"offshore  transaction"  as  defined  in  SEC  Rule  902.

               (g)     If  Purchaser  is  a  corporation,  partnership, trust or
other  entity,  (i)  it was not formed for the specific purpose of acquiring the
Securities  offered  hereunder;  or  (ii)  100% of such Purchaser is owned by an
entity for which all of the representations and warranties contained in Sections
4.3  and  4.4  would  be  accurate  if  such  entity were a Purchaser hereunder.

               (h)     Its  principal  address  is  as  set  forth  on Exhibit A
hereto,  and it does not reside in any state of the United States other than the
state  specified  in  its  address  on  Exhibit  A,  if  at  all.

     5.     CONDITIONS  TO  CLOSING

                                      -15-
<PAGE>
          5.1     CONDITIONS  TO  OBLIGATIONS  OF THE PURCHASERS AT THE CLOSING.
Each  Purchaser's  obligation  to  purchase the Series B Notes at the Closing is
subject  to the fulfillment, at or prior to the Closing, of all of the following
conditions,  any  of  which  may  be  waived  by  such  Purchaser:

               (a)     Representations  and  Warranties;  Performance  of
                       --------------------------------------------------
Obligations.  The  representations and warranties made by the Company in Section
-----------
3  hereof  shall be true and correct in all material respects on the date of the
Closing,  with  the  same force and effect as if they had been made on and as of
said  date;  and  the  Company  shall  have  performed  and complied with in all
material respects all obligations and conditions herein required to be performed
or  complied  with  by  it  on  or  prior  to  the  Closing.

               (b)     Proceedings  and  Documents.  All  corporate  and  other
                       ---------------------------
proceedings in connection with the transactions contemplated at the Closing, and
all  documents and instruments incident to such transactions shall be reasonably
satisfactory  in substance and form to the Purchasers' counsel, which shall have
received  all  such  counterpart  originals or certified or other copies of such
documents  as  it  may  reasonably  request.

               (c)     Qualifications;  Legal  Investment.  All  authorizations,
                       ----------------------------------
approvals,  or permits, if any, of any governmental authority or regulatory body
of  the  United  States or of any state that are required in connection with and
prior  to  the  lawful  sale  and  issuance  of  the Securities pursuant to this
Agreement  and all authorizations, approvals and permits, if any, needed by such
Purchaser  to purchase the Securities shall have been duly obtained and shall be
effective  on and as of the Closing.  No stop order or other order enjoining the
sale  of  the  Securities  shall  have  been  issued and no proceedings for such
purpose  shall be pending or, to the knowledge of the Company, threatened by the
SEC,  the  California  Commissioner  of  Corporations, the Delaware Secretary of
State  or  a  similar  official of any other state having jurisdiction over this
transaction.  At  the  time  of  the  Closing,  the  sale  and  issuance  of the
Securities  shall be legally permitted by all laws and regulations to which each
Purchaser  and  the  Company  are  subject.

               (d)     Payment  of Purchase Price.  The aggregate Purchase Price
                       --------------------------
for  all  Series  B  Notes purchased on or before the date of the Closing by all
Purchasers  at  the  Closing  shall  equal  or  exceed  $4,100,000.

               (e)     Use  of  Proceeds.  The  Company shall have delivered for
                       -----------------
each  Purchaser  which  is licensed as a small business investment company under
the  SBIC  Act  (the  "SBIC Holder"), completed and executed United States Small
Business Administration ("SBA") Forms 480, 652 and 1031 (Parts A and B) together
with a written statement from the Company regarding its intended use of proceeds
from the sale of the Series A Notes hereunder (the "Use of Proceeds Statement").

               (f)     Opinion of Company Counsel.  The Company's legal counsel,
                       --------------------------
McDermott,  Will  &  Emery,  shall  have  delivered an opinion to the Purchasers
addressing  the  issues  customarily  addressed in transactions of the nature of
those  contemplated in this Agreement and which shall be reasonably satisfactory
in  form  and  content  to  counsel  for  the  Purchasers.

                                      -16-
<PAGE>
               (g)     Gateway  Contract.  Gateway  shall  have  entered  into a
                       -----------------
Reseller  Agreement  with  NetCel360.com  Ltd., a wholly-owned subsidiary of the
Company,  subject  only to the Deposit and the issuance of the Gateway Letter of
Credit.

               (h)     SBA  Approval.  Each  Purchaser  which  is  a SBIC Holder
                       -------------
shall  have  received  all  approvals  from  the  SBA  necessary to purchase the
Securities.

          5.2     CONDITIONS  TO OBLIGATIONS OF THE COMPANY AT THE CLOSING.  The
Company's  obligation  to issue and sell the Series B Notes under this Agreement
to a Purchaser is subject to the fulfillment, on or prior to the Closing, of the
following  conditions  as  to  such Purchaser, any of which may be waived by the
Company:

               (a)     Representations  and  Warranties,  Performance  of
                       --------------------------------------------------
Obligations.  The  representations  and  warranties  made  by  such Purchaser in
-----------
Section  4 hereof shall be true and correct at the date of the Closing, with the
same  force  and  effect  as if they had been made on and as of said date.  Such
Purchaser  shall  have performed and complied with all agreements and conditions
herein required to be performed or complied with by it on or before the Closing.

               (b)     Qualifications,  Legal  Investment.  All  authorizations,
                       ----------------------------------
approvals,  or permits, if any, of any governmental authority or regulatory body
of  the  United  States or of any state that are required in connection with the
lawful sale and issuance of the Securities pursuant to this Agreement shall have
been  duly  obtained  and  shall be effective on and as of the Closing.  No stop
order or other order enjoining the sale of the Securities shall have been issued
and no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, the California Commissioner of Corporations, the
Delaware  Secretary  of  State  or any similar officer of any other state having
jurisdiction  over  this  transaction.  At the time of the Closing, the sale and
issuance  of  the  Securities  shall  be  legally  permitted  by  all  laws  and
regulations  to  which  such  Purchaser  and  the  Company  are  subject.

               (c)     Sale  of  Notes.  The  aggregate  Purchase  Price for all
                       ----------------
Series  B  Notes  purchased  on  or  before  the date of the Closing date by all
Purchasers  at  the  Closing  shall  equal  or  exceed  $4,100,000.

               (d)     Payment  of  Purchase  Price.  Such  Purchaser shall have
                       ----------------------------
delivered  the  Purchase  Price  for  the  Series  B  Notes  purchased  by  it.

     6.   COVENANTS

          6.1     COVENANTS  OF  THE  COMPANY.  The  Company  and each Guarantor
covenants  with  each  Purchaser,  so  long  as Series B Notes with an aggregate
principal  amount  of at least 50% of the principal amount of the Series B Notes
issued  at  the  Closing  are  outstanding,  that:

               (a)     Stamp  Tax.  The  Company and the Guarantors will pay (1)
                       ----------
any  stamp,  issue,  registration, documentary or other similar taxes and duties
including  interest and penalties, payable on or in connection with the issuance
of  the  Series  B Notes, the Warrants or the Guarantee, the creation, issue and
offering  of the Securities, if any, received in the exchange or upon conversion
of  the Series B Notes, the Series A Notes or the Series 3-A Preferred Stock, or

                                      -17-
<PAGE>
the execution or delivery of this Agreement, the Warrants or the Series A Notes;
and (2) in addition to any amount payable by the Company or the Guarantors under
this  Agreement,  any value added, turnover or similar tax payable in respect of
that  amount.

               (b)     Notification  of  Defaults.  Each  of the Company and the
                       --------------------------
Guarantors  will  notify  the  Purchasers in writing of any Event of Default (as
defined  in  Section  7.1)  forthwith  upon  the  occurrence  thereof.

               (c)     Consents.  Each  of  the  Company and the Guarantors will
                       --------
obtain  and  promptly  renew  from  time to time and thereafter maintain in full
force  and  effect,  and  will comply with and upon the Purchasers' request will
promptly furnish certified copies to the Purchasers of, all such authorizations,
approvals,  consents,  licenses  and  exemptions  as  may  be required under any
applicable  law or regulation to enable it to perform its obligations under this
Agreement  or  required  for  the  validity or enforceability of this Agreement.

               (d)     Pari  Passu  Ranking.  Each  of  the  Company  and  the
                       --------------------
Guarantors  undertakes  that  its  obligations  hereunder and under the Series B
Notes  do  and  will at all times rank at least pari passu with all of its other
present  and  future unsecured obligations save for any obligations preferred by
law.

               (e)     Disposals.  Each  of  the Company and the Guarantors will
                       ---------
not  and  will  procure  that  no  other  Subsidiary  will,  either  in a single
transaction  or  in  a series of transactions whether related or not and whether
voluntarily  or involuntarily, sell, transfer, lease or otherwise dispose of all
or  any  substantial  part  of  its  assets  or  revenues  except for any of the
following  types  of  disposals provided such disposal does not adversely affect
the  ability  of  the Company or the Guarantors to perform its obligations under
this  Agreement:

                    (i)     disposals made with the prior written consent of the
          Majority  Holders;

                    (ii)     disposals  of  cash  raised  or  borrowed  for  the
          purposes  for  which  such  cash  was  raised  or  borrowed;

                    (iii)     disposals  of  assets in exchange for other assets
          comparable  as  to  type  and  value;

                    (iv)     disposals  of  any  of  its assets on terms whereby
          such  asset is leased to or re-acquired by the Company or Guarantor or
          any  other  Subsidiary  in  an  amount  not  to  exceed  $5,000,000;

                    (v)     any  distribution  of  the  surplus  assets  to  the
          Company  or  either  Guarantor  or  any Subsidiary in a liquidation or
          winding-up  not  involving  insolvency;

                    (vi)     the  application  of  the  proceeds  of an issue of
          securities  (whether  equity  or  debt) for the purposes stated in the
          prospectus  or  other  offering  document  relating  to that issue; or

                                      -18-
<PAGE>
                    (vii)     sales  of  assets  pursuant  to sale and leaseback
          transactions  in  an  aggregate  amount  not  to  exceed  $5,000,000.

               (f)     Mergers.
                       -------

                    (i)     None  of  the Company or the Guarantors will without
          the  prior  written  consent  of  the  Majority Holders enter into any
          merger  or  consolidation  with  any  entity.

                    (ii)     None  of  the  Company  or the Guarantors will, and
          will  procure  that  no  Subsidiary  will,  without  the prior written
          consent  of  the  Majority  Holders, acquire any assets or business or
          acquire  or make any investment if such assets, business or investment
          is  substantial  in relation to the Company and its Subsidiaries taken
          as  a  whole.

               (g)     Maintenance  of  status  and  franchises.
                       ----------------------------------------

                    (i)     Each  of  the Company and the Guarantors will do all
          such  things  as  are necessary to maintain its corporate existence in
          good standing and to conduct its business in compliance with all laws,
          regulations,  authorizations, agreements and obligations applicable to
          it  and  pay  all  taxes  imposed  on  it  when  due.

                    (ii)     Each  of  the  Company  and the Guarantors will and
          will  procure  that each Subsidiary will, ensure that it has the right
          and  is duly qualified to conduct its business as it is or is intended
          as  at the date hereof to be conducted in all applicable jurisdictions
          and  will  obtain and maintain all franchises and rights necessary for
          the  conduct  of  its  business.

               (h)     Constitutional  Documents.  Each  of  the Company and the
                       -------------------------
Guarantors  shall  procure  that  no  amendment  or  supplement is made to their
respective  certificate  of incorporation, by-laws, memorandum of association or
articles  of  association, if any, which would have a material adverse effect on
the  Purchasers'  interests  hereunder  without the prior written consent of the
Majority  Holders  such  consent  not  to  be  unreasonably withheld or delayed.

               (i)     Share Capital.  Except upon conversion or exchange of any
                       -------------
class  of  convertible  or  exchangeable  securities  or  as  set  forth  in the
Certificate  of  Designation  or  the  Warrants,  each  of  the  Company and the
Guarantors  will  not without the prior written consent of the Majority Holders,
purchase  or  redeem  any  of  their  respective  issued  shares.

               (j)     Dividends.  Each  of  the Company and the Guarantors will
                       ---------
not  and will procure that no Subsidiary will, without the prior written consent
of the Majority Holders, pay any cash dividend or make any other distribution of
cash  to their respective shareholders other than dividends and distributions by
Subsidiaries  to  the  Company.

               (k)     Indebtedness.  None  of  the  Company or any Guarantor or
                       ------------
any  Subsidiary  will incur or guarantee any indebtedness exceeding US$5,000,000
in  the  aggregate  without  the  prior written consent of the Majority Holders,

                                      -19-
<PAGE>
other  than pursuant to Section 1.3(b)  hereof and other than as contemplated by
the Tranche A Loan Agreement or, subject to the limitations contained in Section
6.1(e)(vii),  in  connection  with  customary  sale  and leaseback transactions.

               (l)     Lending.  Each of the Company and the Guarantors will not
                       -------
and  will  procure  that  no  Subsidiary  will make or grant any loan or advance
except  as  may  be  necessary  in  the  ordinary  course  of  its  business.

               (m)     Taxation.  All  payments  of  interest  in respect of the
                       --------
Series B Notes and the Warrants will be made without withholding or deduction of
or  on  account  of  any  present  or  future  taxes,  duties,  assessments  or
governmental  charges  of  whatever  nature  imposed  or levied by any authority
unless  the  withholding  or  deduction  of  such  taxes, duties, assessments or
governmental  charges  is required by law.  The Company will pay such additional
amounts  as  may  be  necessary  in  order  that the net amounts received by the
Purchasers  after  such  withholding  or  deduction  shall  equal the respective
amounts  receivable  in  respect  of  the Series B Notes and the Warrants in the
absence  of  such  withholding  or  deduction.

               (n)     Inspection  of  Property.  The  Company  will permit each
                       -------------------------
SBIC  Holder or its representative, at such SBIC Holder's expense, and examiners
of the SBA to visit and inspect the properties and assets of the Company and its
Subsidiaries,  to  examine  its books of account and records, and to discuss the
Company's  affairs,  finances  and  accounts  with  the  Company's  and  its
Subsidiaries'  officers,  senior  management  and  accountants,  all  at  such
reasonable  times  as  may  be  requested  by  such  Purchaser  or  the  SBA.

          6.2     SBIC MATTERS.  This Section 6.2 shall apply with regard to any
Purchaser  for so long as such Purchaser is an SBIC Holder regardless of whether
such  Purchaser  holds  Series  A  Notes,  Series  B  Notes,  Exchange Shares or
Conversion  Shares.

               (a)     From  time  to  time as requested by any SBIC Holder, the
Company  shall  deliver to each SBIC Holder a written statement certified by the
Company's  Chief  Executive  Officer  or  Chief  Financial Officer describing in
reasonable  detail  the  use  of  the  proceeds  of  the  sale of the Series 3-A
Preferred  Stock  hereunder  by the Company and such other information as may be
reasonably  requested  by  the  SBIC  Holder,  including  without  limitation  a
description  of  the  use  of  proceeds of each SBIC Holder's investment, to (i)
evaluate  the financial condition of the Company for the purposes of valuing the
SBIC  Holder's  investment,  (ii)  determine  the  continued  eligibility of the
Company  under  the SBIC Act, and (iii) verify the use of proceeds.  In addition
to  any other rights granted hereunder, the Company shall grant each SBIC Holder
and  the  SBA  access  to  the  Company's  books  and records for the purpose of
verifying  the use of such proceeds and the other information which was provided
by  the Company at or before the Closing on Forms 480 and 652.  Such information
shall  be  certified by the Company's Chief Executive Officer or Chief Financial
Officer.

               (b)     Promptly  after  the  end of each fiscal year (but in any
event  prior  to  February  28  of  each year) and at such other times as may be
reasonably  requested  by an SBIC Holder, the Company shall deliver to each SBIC
Holder  a  written  unaudited  assessment  of  the  economic  impact of the SBIC
Holder's  investment  in  the  Company, specifying the full-time equivalent jobs

                                      -20-
<PAGE>
created  or  retained  in  connection  with  the  investment,  the impact of the
investment  on  the  businesses  of the Company in terms of expanded revenue and
taxes, other economic benefits resulting from the investment (including, but not
limited  to,  technology  development  or  commercialization,  minority business
development,  urban  or rural business development and expansion of exports) and
such  other  information  as may be required regarding the Company in connection
with  the  filing of each SBIC Holder's SBA Form 468.  All information submitted
to  the  Purchasers  in  accordance  with this Section shall be certified by the
Chief  Executive  Officer  or  the  Chief  Financial  Officer  of  the  Company.

               (c)     Neither  the Company nor any of its "affiliates" (as that
term  is  defined  in  Title 13, Code of Federal Regulations, Sec. 121.103) will
engage  in  any  activities  or use directly or indirectly the proceeds from the
sale  of the Series A Notes hereunder for any purpose for which a licensee under
the  SBIC  Act  is  prohibited from providing funds by Title 13, Code of Federal
Regulations,  Sec.  107.720.

               (d)     Without obtaining the prior written approval of each SBIC
Holder,  the  Company  will  not change, within one (1) year of the Closing, the
Company's  business  activity  to a business activity which a licensee under the
SBIC  Act  is  prohibited  from  providing  funds  by  Title 13, Code of Federal
Regulations,  Sec.  107.720.

               (e)     If  the  Company  breaches the representations in Section
3.15 or the covenants set forth in this Section 6.2 which, in either case, could
result  in  an  assertion by the SBA that the SBIC Holder and its Affiliates are
not  entitled  to  hold,  or exercise any significant right with respect to, the
Series  A  Notes  or the Securities, and such breach continues for 20 days after
receiving  written  notice thereof from a SBIC Holder, such breach or failure to
comply  shall  constitute  a  material  breach  of  this  Agreement (a "Material
Breach").  If  a  Material Breach occurs, then in addition to any other remedies
generally available to the holders of the Securities pursuant to this Agreement,
such  SBIC Holder may demand that the Company repurchase any Series A Notes then
held for the then outstanding principal amount plus all accrued interest thereon
and  any  other  Securities  acquired by such SBIC Holder upon conversion of the
Series A Notes pursuant to this Agreement at the redemption price for the Series
3-A  Preferred  Stock  set forth in Article V of the Certificate of Designation.
The  Company  will  make  such  payment  within thirty (30) days of receipt of a
demand  and  SBIC  Holder's  delivery  of  the  Securities,  as the case may be.

          6.3     LEGAL  FEES.  Promptly  upon receipt of invoices therefor, the
Company  shall  (a)  pay  one  counsel  for the Purchasers up to $30,000 for the
actual  legal  fees  and  costs  incurred  in  negotiating the terms hereof, the
preparation of this Agreement and the other agreements and instruments delivered
pursuant  hereto,  and  consummating  the  transactions  contemplated  by  this
Agreement.

          6.4     REGISTRATION  RIGHTS.  Each  holder  of shares of Common Stock
received  upon  exercise of the Warrants shall have the same registration rights
as  holders of shares of Common Stock received upon conversion of the Series 3-A
Preferred  Stock  as  set  forth  as  Exhibit  B  of  the Series A Note Purchase
Agreement.

                                      -21-
<PAGE>
          6.5     SHAREHOLDER  APPROVAL.  Unless  and  until  the  applicable
Alternative Condition (as defined below) is satisfied for a Shareholder Proposal
(as  defined below), the Company will use its reasonable efforts to (a) promptly
(but  not  later than 60 days) following the Closing, prepare in proper form and
file  with the SEC a proxy statement on Schedule 14A ("Proxy Statement") for use
in  soliciting  proxies  for  the approval by the shareholders of the Company of
such  Shareholder  Proposal, (b) duly call, give notice of and convene a special
meeting  of its shareholders, as soon as practicable, but not later than 40 days
after  the  Proxy  Statement  is  cleared  by the SEC, for purposes of obtaining
shareholder  approval  of  such  Shareholder  Proposal,  and  (c) have the Proxy
Statement  cleared  by the SEC and to obtain such shareholder approval. The term
"Shareholder Proposals" shall mean each of (i) a proposal to amend the Company's
Certificate  of  Incorporation  to  increase  the number of authorized shares of
Common  Stock to at least 200 million shares, and (ii) a proposal to approve the
issuance  of  the  Conversion Shares upon conversion of the Series 3-A Preferred
Stock  and  exercise  of  the  Warrants.  The  "Alternative  Condition" shall be
satisfied  with  respect to a Shareholder Proposal if the Company has determined
not to seek approval of such proposal and the Company has received an opinion of
counsel,  which has not been withdrawn, to the effect that (I) the approval that
is  not  being  sought is not required for the Company to issue shares of Common
Stock  upon the conversion of the Series 3-A Preferred Stock pursuant to Article
VII  of  the  Certificate  of  Designation and upon the exercise of the Warrants
pursuant  to  the  terms of the Warrants, (II) such shares of Common Stock, upon
issuance  will  be  fully paid, validly issued and nonassessable, and (III) such
issuance  would  not violate the rules or regulations of any securities exchange
or  market  on  which  any  of the Company's securities are then listed, if any.

          6.6     PREPAYMENT.  The Company agrees that it shall take such action
as  may  be  reasonably necessary to provide that any prepayment of the Series B
Notes  required  or  to  be effected pursuant to the terms of the Series B Notes
shall  be  made by direct transfer of the funds from the Deposit or a segregated
account  solely  for the benefit of the holders of Series B Notes to the account
of  the  holders  of  Series  B  Notes.

     7.   EVENTS  OF  DEFAULT

          7.1     DEFAULT.  Upon  the  occurrence  of any Event of Default, each
Note  then  outstanding  shall forthwith be immediately due and payable, without
presentment,  demand,  protest or any other notice of any kind, all of which are
hereby  expressly  waived,  unless the Majority Holders otherwise determine, and
the  Purchasers  may  exercise any and all rights and remedies available to them
under  this  Agreement  or  the  Series  B  Notes  or  as  provided  by  law.

An "Event of Default" shall mean the occurrence of any of the following events:

               (a)     Any  proceeding  shall  be  commenced  by  or against the
Company  or  either  Guarantor  under  any bankruptcy or insolvency laws, or the
Company  or a Guarantor shall take any action to authorize any of the foregoing;
provided  that  if  such  proceeding  is  not  instituted by or on behalf of the
Company  (or acquiesced by it) there shall be an "Event of Default" only if such
proceeding  shall  remain  unstayed  for  60  days;

               (b)     Any  law, rule or regulation of any jurisdiction shall be
enacted  or promulgated that shall have a material adverse affect on the ability

                                      -22-
<PAGE>
of the Company to perform any of its obligations hereunder or under the Series B
Notes,  including,  without  limitation,  any  moratorium  or  similar  laws;

               (c)     This  Agreement  or any of the Series B Notes or Warrants
ceases  to  be  the  legal,  valid  and binding obligation of the Company or the
Guarantors  enforceable  in  accordance  with  its  terms;

               (d)     if  any  governmental  authority  or  agency  of  any
jurisdiction  condemns,  seizes, compulsorily purchases or expropriates all or a
substantial  part  of the assets of the Company and its Subsidiaries, taken as a
whole, or places any material restriction on a material portion of the assets of
such  Company  and  its  Subsidiaries,  taken  as  a  whole  whether  by  way of
cancellation  or revocation of, or the imposition of conditions on, any licenses
of  such  companies,  or  otherwise  howsoever;  and

               (e)     as  to  an  SBIC  Holder  only, there exists any Material
Breach  (as  defined  in  Section  6.2(e).

          7.2     OTHER  EVENTS.  Without  implication  that  the contrary would
otherwise be true, the Purchasers retain all right to pursue any cause of action
(including  breach  of  contract)  in  the  event  that:

               (a)     there  is  a  material  breach  of  this  Agreement,  the
Certificate of Designation for the Series 3-A Preferred Stock or any Note by the
Company  or  a  Guarantor;  or

               (b)     Any  representation or warranty made or deemed to be made
or  repeated  by or in respect of the Company or either Guarantor in or pursuant
to  this  Agreement  is  or  proves  to have been incorrect or misleading in any
respect.

     8.   MISCELLANEOUS

          8.1     GOVERNING  LAW  AND  JURISDICTION.  This  Agreement  shall  be
governed  by  and  construed  under  the  laws of the State of Delaware.  If any
Delaware  law or laws shall require or permit the application of the laws of any
other  jurisdiction  to  this  Agreement,  such  Delaware  law  or laws shall be
disregarded  with  the  effect  that the remaining laws of the State of Delaware
shall  nonetheless  be  applied.

          8.2     SURVIVAL  AND  DISCLOSURE  SCHEDULE.  The  representations,
warranties,  covenants,  and  agreements  made  herein  shall  survive  any
investigation  made  by  any  party  hereto  and the closing of the transactions
contemplated  hereby and shall in no way be affected by any investigation of the
subject  matter  thereof  made by or on behalf of the Purchasers or the Company.

          8.3     SUCCESSORS  AND  ASSIGNS.  Except  as  otherwise  expressly
provided  herein,  the  provisions  hereof shall inure to the benefit of, and be
binding  upon,  the successors, assigns, heirs, executors, and administrators of
the  parties  hereto.  Each  Purchaser  shall be entitled to assign, transfer or
participate  all  or  any  portion  of  the  Securities;  provided that (1) such
transfers  comply  with  all  applicable law, (2) no such transfer is made to an
entity  which  the Board of Directors of the Company determines in good faith is

                                      -23-
<PAGE>
then  a  competitor of the Company (unless all common and preferred stock in the
Company  is  being  transferred  to  such  competitor  in such transaction), (3)
transfers of Securities may not be made in amounts of less than $500,000 and (4)
prior  to any assignment, each assignee shall execute and deliver to the Company
a  joinder  to this Agreement agreeing to be fully bound by, and subject to, all
of  the  covenants,  terms  and  conditions  of  this  Agreement.

          8.4     ENTIRE  AGREEMENT.  This  Agreement,  the Exhibits hereto, and
the  other  documents  delivered  pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and  no  party  shall be liable or bound to any other party in any manner by any
covenants  or  agreements  except  as  specifically set forth herein or therein.
Nothing  in  this  Agreement, express or implied, is intended to confer upon any
party,  other  than  the  parties  hereto  and  their  respective successors and
assigns,  any rights, remedies, obligations or liabilities under or by reason of
this  Agreement,  except  as  expressly  provided  herein.

          8.5     SEVERABILITY.  In  case  any provision of this Agreement shall
be  invalid,  illegal, or unenforceable, it shall, to the extent practicable, be
modified  so  as to make it valid, legal and enforceable and to retain as nearly
as  practicable  the  intent  of  the  parties;  and the validity, legality, and
enforceability  of  the remaining provisions shall not in any way be affected or
impaired  thereby.

          8.6     AMENDMENT  AND  WAIVER.  Any  term  of  this  Agreement may be
amended  and  the observance of any term of this Agreement may be waived (either
generally  or in a particular instance and either for a specified period of time
or indefinitely), with the written consent of the Company and the holders of 75%
of  the  aggregate  principal  amount  of  the  Series B Notes then outstanding;
provided  that  if  the  aggregate  principal  amount of all Series B Notes then
outstanding  is $2,000,000 or less, then only the consent of the Company and the
Majority  Holders  shall  be  required;  and  provided,  further,  that  no such
amendment or waiver shall reduce the amount of the Series B Notes the holders of
which  are  required to consent to any waiver or supplemental agreement, without
the  consent  of  the  holders  of all of the Series B Notes; provided, further,
however,  that  any  amendment,  modification  or  waiver  that would change the
interest  rate,  maturity  date,  requirement  of  pro  rata payment or exchange
privilege,  shall not be effective as to such Purchaser without such Purchaser's
prior written consent.  Any amendment or waiver effected in accordance with this
paragraph  shall  be  binding upon each holder of any securities purchased under
this  Agreement  at  the  time  outstanding,  each  future  holder  of  all such
securities,  and  the  Company.  Upon the effectuation of each such amendment or
waiver,  the  Company  shall  promptly give written notice thereof to the record
holders  of the Securities who have not previously consented thereto in writing.

          8.7     DELAYS  OR  OMISSIONS.  No  delay  or omission to exercise any
right, power, or remedy accruing to any party hereto or any subsequent holder of
any  Securities  upon  any  breach,  default or noncompliance of any other party
under  this Agreement or under the Certificate of Incorporation or Bylaws of the
Company shall impair any such right, power, or remedy, nor shall it be construed
to be a waiver of any such breach, default or noncompliance, or any acquiescence
therein,  or  of  any  similar  breach,  default  or  noncompliance  thereafter
occurring.  Any waiver, permit, consent, or approval of any kind or character on
any  party's  part  of  or  to  any  breach, default or noncompliance under this

                                      -24-
<PAGE>
Agreement  or under the Certificate of Incorporation or Bylaws of the Company or
any waiver on any party's part of any provisions or conditions of this Agreement
must  be  in  writing and shall be effective only to the extent specifically set
forth  in  such  writing;  and  all  remedies,  either under this Agreement, the
Certificate  of  Incorporation  or Bylaws, any law, or otherwise afforded to any
party,  shall  be  cumulative  and  not  alternative.

          8.8     NOTICES,  ETC.  All  notices and other communications required
or permitted hereunder shall be effective if in writing and delivered personally
or  sent by telecopier, nationally recognized overnight courier or registered or
certified  mail,  return  receipt  requested,  postage  prepaid,  addressed:

     If  to a Purchaser:      at  such  Purchaser's  address  as  set  forth  on
                              Exhibit  A  attached  hereto,  or  at  such  other
                              address  as such Purchaser shall have furnished to
                              the  Company  in  writing,

     If to the Company, to:   Vsource,  Inc.
                              5740 Ralston Street, Suite 110
                              Ventura,  California  93003
                              Attention:  Sandy  Waddell
                              Facsimile:    (805) 677-6740

          with a copy to:     McDermott, Will & Emery
                              227  W.  Monroe
                              Chicago,  Illinois  60606
                              Attention:  Brooks Gruemmer, Esq.
                              Facsimile:    (312) 984-7700

          Unless  otherwise  specified  herein,  such  notices  or  other
communications shall be deemed effective (a) on the date delivered, if delivered
personally,  (b)  two  business  days  after  being  sent, if sent by nationally
recognized  overnight courier, (c) one business day after being sent, if sent by
telecopier  with  confirmation  of  good transmission and receipt, and (d) three
business days after being sent, if sent by registered or certified mail, postage
prepaid,  return  receipt  requested.  Each  of  the  parties  herewith shall be
entitled to specify another address by giving notice as aforesaid to each of the
other  parties  hereto.

          8.9     TITLES  AND  SUBTITLES,  NUMBER AND GENDER.  The titles of the
paragraphs  and subparagraphs of this Agreement are for convenience of reference
only  and  are  not to be considered in construing this Agreement.  Whenever the
context requires, the plural shall include the singular and the reverse and each
gender  shall  include  the  others.

          8.10     COUNTERPARTS.  This  Agreement  may be executed in any number
of  counterparts,  each  of  which shall be deemed an original, but all of which
together  shall  constitute  one  instrument.

                                      -25-
<PAGE>
Executed as of the date first set forth above.

                                                VSOURCE,  INC.

                                                By:  /s/  Sandford  Waddell
                                                     --------------------------
                                                     Sandford  Waddell
                                                     Chief  Financial  Officer

                                                GUARANTORS

                                                NETCEL360.COM,  LTD.

                                                By:  /s/  Dennis  Smith
                                                     --------------------------
                                                     Dennis  Smith
                                                     Director

                                                NETCEL360  SDN  BHD

                                                By:  /s/  Dennis  Smith
                                                     --------------------------
                                                     Dennis  Smith
                                                     Director

                                      -26-
<PAGE>
This  is  page    to  the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware corporation, the Guarantors and the Purchaser set forth below
are  parties:

PURCHASER:

ANGLO  EAST  TRUST

By  its  Trustee,  Nigel  Spinks: /s/  Nigel Spinks
                                 ----------------------

Address:
Federal Bank of the Middle East Limited
90  Archbishop  Makarios  III  Avenue
P.O.  Box  25566
1391  Nicosia,  Cyprus

Purchase  Price:  $500,000.00               Dated:  12 July 2001
                                                    ------------

<PAGE>
This  is  page  25 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

  /s/  Phillip E. Kelly
---------------------------
Phillip  E.  Kelly

c/o NetCel360 Hong Kong Limited
5th  Floor,  AXA  Centre
151  Gloucester  Road
Wanchai,  Hong  Kong

Purchase  Price:  $768,750          Dated:  7/2/01
                 -----------               --------

<PAGE>
This  is  page  26 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

  /s/  Kumi  Hui
---------------------------
Kumi  Hui
Flat  9A,  Manly  Mansion
69B Robinson Road, Mid-Levels
Hong  Kong

Purchase  Price:  $35,875          Dated:   7/12/01
                  ---------                ---------

<PAGE>
This  is  page  27 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

  /s/  Jack Tai-On Poon
---------------------------
Jack  Tai-On  Poon
c/o  P.O.  Box  28843
151  Gloucester  Road
Wanchai,  Hong  Kong
Purchase  Price:  $51,250                    Dated:   7/12/01
                  ---------                          ----------

<PAGE>
This  is  page  28 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

  /s/  John Gerard Cantillon
------------------------------
John  Gerard  Cantillon
10  Jaian  Marie  Pitchay
Tanjong  Bungah
Hillside,  Penang  11200
Malaysia

Purchase  Price:  $512,500                    Dated:   07/02/01
                   ---------                          ----------

<PAGE>
This  is  page  29 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

BAPEF  INVESTMENTS  XII  LTD.,

a  Virgin  Islands  company

By:   /s/  Connie  Helyar
   ------------------------
Its:    Director
    -----------------------
c/o International Private Equity Services Ltd.
P.O.  Box  431
13-14  Victoria  Road
Guernsey,  UK
GY13ZD
Attn:  Connie  Helyar

Purchase  Price:  $2,050,000                    Dated:   7/12/01
                  ------------                          ---------

<PAGE>
This  is  page  30 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

[CRESTVIEW  CAPITAL]

By:  /s/  Gary J. Elkins
   ------------------------------
Its:  Managing  Member
630 Dundee Rd., Suite 230
Northbrook,  IL  60062

Purchase  Price:  $205,000                    Dated:   7/29/01
                  ----------                          ---------

<PAGE>
This  is  page  31 to the Exchangeable Note Purchase Agreement to which Vsource,
Inc.,  a  Delaware  corporation,  and the Purchaser set forth below are parties:

PURCHASER:

[Richard  Abrahams]

By:  /s/  R. L. Abrahams
   ------------------------
Its:
    -----------------------
1725  Lily  Ct.
Highland  Park,  IL  60035

Purchase  Price:  $51,250                    Dated:   7/9/01
                  ---------                          --------

<PAGE>
This is page to the Exchangeable Note Purchase Agreement to which Vsource, Inc.,
a  Delaware  corporation,  and  the  Purchaser  set  forth  below  are  parties:

PURCHASER:

G5  PARTNERS,  LP

By:  /s/  Stewart  J.  Homler
   ----------------------------------
Name:     Stewart J. Homler on behalf of MG5 LLC
Title:    Managing  Member

Hong  Kong  Parkview
Tower  12,  Apt.  2169
88  Tai  Tam  Reservoir  Rd.
Hong  Kong

Purchase  Price:  $76,875                    Dated:   7/12/01
                  ---------                          ---------

<PAGE>
                                    EXHIBIT B

                                 FORM OF WARRANT

THIS  WARRANT  HAS  NOT  BEEN  REGISTERED  UNDER  THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "SECURITIES  ACT"),  OR  APPLICABLE  STATE  SECURITIES LAWS.  THE
WARRANT  MAY  NOT  BE  SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THOSE LAWS OR UNLESS THE COMPANY
HAS  RECEIVED  AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH DISPOSITION IS
IN  COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                                                Right to Purchase _______ Shares
                                                of Common Stock of Vsource, Inc.

                                  VSOURCE, INC.
                          Common Stock Purchase Warrant

     VSOURCE,  INC.,  a  Delaware  corporation (the "Company"), hereby certifies
that, for value received,   _______________  (the "Holder") is entitled, subject
to  the  terms set forth below, to purchase from the Company at any time or from
time  to  time  on or before 5:00 p.m., Pacific Standard time, on July 12,  2006
(the "Expiration Date") _________  (_______) fully paid and nonassessable shares
of  common  stock  of  the  Company (the "Common Stock") at a purchase price per
share equal to the Purchase Price, as defined herein.  The number of such shares
of  Common Stock and the Purchase Price are subject to adjustment as provided in
this Warrant. The initial purchase price for shares subject to this Warrant will
be  10/100 Dollars ($0.10) per share (the "Initial Purchase Price"), and will be
adjusted  from  time to time as provided herein.  The Initial Purchase Price or,
if  such  price  has  been adjusted, the price per share of Common Stock as last
adjusted  pursuant  to  the  terms hereof is referred to as the "Purchase Price"
herein.

     1.   EXERCISE  OF  WARRANT.
          ---------------------

          (a)     At  any  time  while  the  Conversion  Conditions  have  been
satisfied, this Warrant may be exercised by the Holder hereof in full or in part
at  any time or from time to time until the Expiration Date by surrender of this
Warrant  and the subscription form annexed hereto (duly executed by the Holder),
to  the  Company, and by making payment in cash or by certified or official bank
check payable to the order of the Company, in the amount obtained by multiplying
(i)  the  number  of  shares  of  Common  Stock  designated by the Holder in the
subscription  form  by  (ii)  the  Purchase Price then in effect. On any partial

                                      -36-
<PAGE>
exercise  the  Company  will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant of like tenor, in the name of the Holder hereof,
providing  in the aggregate on the face or faces thereof for the purchase of the
number  of shares of Common Stock for which such Warrant may still be exercised.

          (b)     At  any  time  while  the  Conversion  Conditions  have  been
satisfied,  in lieu of exercising this Warrant as provided above, the Holder may
elect  to  receive,  without  the  payment  by  the  Holder  of  any  additional
consideration, shares of Common Stock equal to the value of this Warrant (or the
portion  thereof  being  canceled) by surrender of this Warrant at the principal
office  of  the  Company  together  with  the  subscription form attached hereto
indicating  such  election, in which event the Company shall issue to the holder
hereof  a  number  of  Warrant  Shares  computed  using  the  following formula:

                                          Y (A - B)
                                          ---------
                                     X =      A

      Where:        X = The number of shares of Common Stock to be issued to the
                    Holder  pursuant  to  this  net  exercise;

                    Y = The  number  of shares of Common Stock designated by the
                    Holder  in  the  subscription  form;

                    A = The then fair market value  of one share of Common Stock
                    as  of  the  date  the  election  is  made;

                    B = The  Exercise  Price  (as  adjusted  to  the date of the
                    election).

     For  purposes  of  this Section 1(b), the fair market value of one share of
     Common Stock as of a particular date shall be determined as follows: (i) if
     traded  on  a  securities exchange or through the Nasdaq National Market or
     SmallCap System, the value shall be deemed to be the average of the closing
     prices  of  the securities on such exchange over the thirty (30) day period
     ending  three  (3)  days prior to the net exercise election; (ii) if traded
     over-the-counter,  the  value  shall  be  deemed  to  be the average of the
     closing  prices over the thirty (30) day period ending three (3) days prior
     to  the  net  exercise;  and (iii) if there is no active public market, the
     value  shall  be the fair market value thereof, as determined in good faith
     by  the  Board  of  Directors  of  the  Company.

         (c) FOR  PURPOSES  OF  THIS  SECTION  1,  "CONVERSION CONDITIONS" MEANS
     EITHER:

          (1)     THE  COMPANY HAS (A) ADOPTED, HAD APPROVED BY ITS SHAREHOLDERS
     AND  HAS  FILED  WITH  THE  SECRETARY OF STATE OF DELAWARE (AND THERE SHALL
     REMAIN  IN  EFFECT)  AN  AMENDMENT  TO  THE  COMPANY'S  CERTIFICATE  OF
     INCORPORATION  TO  INCREASE  THE  AUTHORIZED SHARES OF THE COMPANY'S COMMON
     STOCK  TO  AT LEAST 200 MILLION SHARES AND (B) OBTAINED THE APPROVAL OF ITS
     SHAREHOLDERS OF THE ISSUANCE OF SHARES OF COMMON STOCK UPON THE EXERCISE OF
     THIS  WARRANT  PURSUANT  TO  SECTIONS  1(A)  OR  1(B)  HEREOF,  OR

                                      -37-
<PAGE>
          (2)     THE  COMPANY  HAS  DETERMINED  NOT  TO SEEK ONE OR BOTH OF THE
     APPROVALS  REFERRED TO IN CLAUSE (1) ABOVE, AND THE COMPANY HAS RECEIVED AN
     OPINION  OF  COUNSEL,  WHICH HAS NOT BEEN WITHDRAWN, TO THE EFFECT THAT (A)
     SUCH  APPROVAL  THAT IS NOT BEING SOUGHT IS NOT REQUIRED FOR THE COMPANY TO
     ISSUE  SHARES OF COMMON STOCK UPON THE EXERCISE OF THIS WARRANT PURSUANT TO
     SECTIONS  1(A)  OR  1(B)  HEREOF,  (B)  SUCH  SHARES  OF COMMON STOCK, UPON
     ISSUANCE,  WILL  BE  FULLY  PAID, VALIDLY ISSUED AND NONASSESSABLE, AND (C)
     SUCH  ISSUANCE WOULD NOT VIOLATE THE RULES OR REGULATIONS OF ANY SECURITIES
     EXCHANGE OR MARKET ON WHICH ANY OF THE COMPANY'S SECURITIES IS THEN LISTED,
     IF  ANY.

The  Company  will give the Holder prompt written notice of (a) the satisfaction
of  the  Conversion Conditions, and (b) if at any time after satisfaction of the
Conversion  Conditions  pursuant  to clause (2) above, the Conversion Conditions
cease  to  be  satisfied.

          (d)     In  the event that the Conversion Conditions are not satisfied
prior to February 15, 2002, or the Conversion Conditions fail to be satisfied at
any time on or after February 15, 2002, then the Holder shall have the right, at
any  time  after  June  30,  2002,  to  require the Company to redeem all or any
portion  of this Warrant for a redemption price equal to the number of shares of
Common  Stock into which this Warrant is otherwise exercisable multiplied by the
greater  of  (i)  $0.30  (adjusted  to reflect stock splits, stock dividends and
similar transactions) or (ii) the fair market value of one share of Common Stock
(as  determined  pursuant  to  Section  1(b)  hereof) (the "Redemption Amount");
provided,  that  in  no event shall the Redemption Amount exceed $0.35 per share
(adjusted  to  reflect  stock splits, stock dividends and similar transactions).
In  order  to  complete  a  redemption pursuant to this Section 1(d), the Holder
shall  submit  to  the  Company  an  executed notice setting forth the number of
shares subject to this Warrant to be redeemed (a "Redemption Notice") along with
this  Warrant.  The Company shall pay the Holder the Redemption Amount, in cash,
with  respect  to  each share subject to this Warrant being redeemed pursuant to
the  Redemption Notice within ten (10) business days of the Company's receipt of
a  Redemption  Notice.

     2.     DELIVERY  OF  STOCK  CERTIFICATES,  ETC.,  ON  EXERCISE.  As soon as
            -------------------------------------------------------
practicable  after  the  exercise  of this Warrant, the Company will cause to be
issued  in  the name of and delivered to the Holder hereof a certificate for the
number  of  fully  paid  and  nonassessable  shares  of  Common  Stock (or Other
Securities)  to  which  the  Holder shall be entitled on such exercise, plus, in
lieu  of  any  fractional share to which the Holder would otherwise be entitled,
cash  equal to such fraction multiplied by the then current fair market value as
determined  pursuant  to Section 1(b) above of one full share, together with any
other  stock  or other securities or property (including cash, where applicable)
to  which  the  Holder is entitled upon such exercise.  "Other Securities" shall
mean  any stock (other than Common Stock) and other securities of the Company or
any  other person (corporate or otherwise) which the Holder at any time shall be
entitled to receive, or shall have received, on the exercise of this Warrant, in
lieu  of  or in addition to Common Stock, or which at any time shall be issuable
or  shall  have been issued in exchange for or in replacement of Common Stock or
Other  Securities  pursuant  to  Sections  3  or  4.

     3.     ADJUSTMENT.
            ----------

                                      -38-
<PAGE>
          (a)     Initial  Purchase  Price;  Subsequent  Adjustment of Price and
                  --------------------------------------------------------------
Number  of Purchasable Shares.  The Initial Purchase Price will be adjusted from
-----------------------------
time  to  time  as provided below.  The Initial Purchase Price or, if such price
has been adjusted, the price per share of Common Stock as last adjusted pursuant
to  the  terms  hereof is referred to as the "Purchase Price" herein.  Upon each
adjustment  of  the  Purchase  Price,  the Holder will thereafter be entitled to
purchase,  at  the  Purchase Price resulting from such adjustment, the number of
shares  of  Common  Stock  obtained  by multiplying the Purchase Price in effect
immediately  before  such  adjustment  by  the  number of shares of Common Stock
purchasable  pursuant  to  this  Warrant  immediately before such adjustment and
dividing  the  product  by  the  Purchase  Price resulting from such adjustment.

          (b)     Adjustment  for Stock Splits and Combinations.  If the Company
                  ---------------------------------------------
at  any  time  or  from  time  to  time after the date of this Warrant effects a
subdivision  of  the  outstanding Common Stock, by stock split or otherwise, the
Purchase  Price  then  in  effect  immediately  before that subdivision shall be
proportionately  decreased;  and, conversely, if the Company at any time or from
time  to  time after the date of this Warrant combines the outstanding shares of
Common  Stock,  by  reverse stock split or otherwise, the Purchase Price then in
effect  immediately  before that combination shall be proportionately increased.
Any  adjustment  under  this Section 3(b) shall become effective at the close of
business  on  the  date  the  subdivision  or  combination  becomes  effective.

          (c)     Adjustment  for  Certain  Dividends and Distributions.  In the
                  -----------------------------------------------------
event  the  Company  at  any  time  or  from time to time after the date of this
Warrant either makes, or fixes a record date for the determination of holders of
Common  Stock  entitled  to receive, a dividend or other distribution payable in
additional  shares  of  Common  Stock,  then and in each such event the Purchase
Price  then  in effect shall be decreased as of the time of such issuance or, in
the  event  such  a  record  date  is fixed, as of the close of business on such
record  date, by multiplying the Purchase Price then in effect by a fraction (1)
the  numerator of which is the total number of shares of Common Stock issued and
outstanding  immediately  prior  to  the  time  of such issuance on the close of
business  on such record date, and (2) the denominator of which shall be (i) the
total  number of shares of Common Stock issued and outstanding immediately prior
to  the  time of such issuance or the close of business on such record date plus
(ii)  the  number of shares of Common Stock issuable in payment of such dividend
or  distribution;  provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed  therefor,  the  Purchase  Price shall be recomputed accordingly as of the
close  of business on such record date or date fixed therefor and thereafter the
Purchase Price shall be adjusted pursuant to this Section 3(c) as of the time of
actual  payment of such dividend or distribution.  For purposes of the foregoing
formula,  "the total number of shares of Common Stock issued and outstanding" on
a  particular date shall include shares of Common Stock issuable upon conversion
of  stock  or  securities  convertible  into  Common  Stock  and the exercise of
warrants,  options  or  rights  for  the  purchase  of  Common  Stock  which are
outstanding  on  such  date.

          (d)     Adjustments  for  Other  Dividends  and Distributions.  In the
                  -----------------------------------------------------
event  the  Company  at  any  time  or  from time to time after the date of this
Warrant makes, or fixes a record date for the determination of holders of Common

                                      -39-
<PAGE>
Stock  entitled  to  receive,  a  dividend  or  other  distribution  payable  in
securities  of  the  Company other than shares of Common Stock, then and in each
such  event,  provision  shall  be  made  so  that the Holder shall receive upon
exercise  hereof, in addition to the number of shares of Common Stock receivable
thereupon,  the amount of securities of the Company which it would have received
had  this  Warrant been converted into Common Stock as of the date of such event
and  had  it  thereafter,  during  the period from the date of such event to and
including  the  date  of  exercise, retained such securities receivable by it as
aforesaid during such period, subject to all other adjustments called for during
such  period  under  this  Section  3  with respect to the rights of the Holder.

          (e)     Adjustment  for  Recapitalization,  Reclassification,  or
                  ---------------------------------------------------------
Exchange.  If  the  Common  Stock  issuable upon the exercise of this Warrant is
changed into the same or a different number of shares of any class or classes of
stock  of  the  Company,  whether by recapitalization, reclassification or other
exchange (other than a subdivision or combination of shares, or a stock dividend
or  a  reorganization,  merger,  consolidation  or  sale of assets, provided for
elsewhere  in  this Section 3), then and in any such event the Holder shall have
the right thereafter to exercise this Warrant to purchase the kind and amount of
stock  and  other securities and property receivable upon such recapitalization,
reclassification  or other exchange by holders of the number of shares of Common
Stock  which  might  have been purchased under this Warrant immediately prior to
such  recapitalization,  reclassification  or  other  exchange,  all  subject to
further  adjustment  as  provided  herein.

          (f)     Reorganizations,  Mergers,  Consolidations or Sales of Assets.
                  -------------------------------------------------------------
If  at  any  time  or from time to time there is a capital reorganization of the
Common  Stock  (other  than  a  subdivision  or combination of shares or a stock
dividend  or  a  recapitalization, reclassification or other exchange of shares,
provided  for  elsewhere  in this Section 3) or a merger or consolidation of the
Company  with  or  into another corporation, or the sale of all or substantially
all of the Company's assets to any other person, then, as a part of such capital
reorganization,  merger,  consolidation or sale, provision shall be made so that
the Holder shall thereafter be entitled to receive upon exercise of this Warrant
the number of shares of stock or other securities or property of the Company, or
of the successor corporation resulting from such capital reorganization, merger,
consolidation or sale, to which a holder of the number of shares of Common Stock
deliverable  upon  such  conversion  would  have  been  entitled on such capital
reorganization,  merger,  consolidation  or sale.  In any such case, appropriate
adjustment  shall be made in the application of the provisions of this Section 3
with  respect  to  the  rights  of  the Holder after the capital reorganization,
merger,  consolidation  or sale to the end that the provisions of this Section 3
(including the number of shares deliverable upon exercise of this Warrant) shall
continue  to be applicable after that event and shall be as nearly equivalent to
the  provisions  hereof  as  may  be  practicable.

          (g)     Sale  of  Shares  Below  Conversion  Price.
                  ------------------------------------------

               (1)     If at any time or from time to time after the date hereof
     the Company issues or sells, or is deemed by the express provisions of this
     Section  3(g) to have issued or sold, Additional Shares of Common Stock (as
     hereinafter defined), other than as a dividend or other distribution on any

                                      -40-
<PAGE>
     class  of  stock as provided in Section 2 and other than upon a subdivision
     or  combination  of shares of Common Stock as provided in Section 2, for an
     Effective  Price  (as  hereinafter  defined)  less  than  the then existing
     Conversion  Price,  then and in each such case the then existing Conversion
     Price  shall  be  reduced  to  such  Effective  Price.

               (2)     For  the  purpose of making any adjustment required under
     this  Section 3(g), the consideration received by the Company for any issue
     or  sale  of  securities  shall  (A)  to  the extent it consists of cash be
     computed  at  the amount of cash received by the Company, (B) to the extent
     it  consists  of property other than cash, be computed at the fair value of
     that  property  as  determined  in  good  faith  by  the  Board, and (C) if
     Additional  Shares  of Common Stock, Convertible Securities (as hereinafter
     defined)  or  rights  or  options  to  purchase either Additional Shares of
     Common  Stock  or  Convertible  Securities are issued or sold together with
     other  stock  or  securities  or  other  assets  of  the  Company  for  a
     consideration  which  covers  both,  be  computed  as  the  portion  of the
     consideration  so  received that may be reasonably determined in good faith
     by  the  Board  to  be allocable to such Additional Shares of Common Stock,
     Convertible  Securities  or  rights  or  options.

               (3)     For  the  purpose  of  the adjustment required under this
     Section  3(g), if the Company issues or sells any rights or options for the
     purchase  of,  or  stock  or  other securities convertible into, Additional
     Shares  of  Common  Stock  (such  convertible  stock  or  securities  being
     hereinafter  referred  to as "Convertible Securities") and if the Effective
     Price of such Additional Shares of Common Stock is less than the Conversion
     Price then in effect, then in each case the Company shall be deemed to have
     issued at the time of the issuance of such rights or options or Convertible
     Securities the maximum number of Additional Shares of Common Stock issuable
     upon  exercise  or conversion thereof and to have received as consideration
     for  the issuance of such shares an amount equal to the total amount of the
     consideration,  if  any,  received  by the Company for the issuance of such
     rights  or  options  or  Convertible  Securities, plus, in the case of such
     rights or options, the minimum amounts of consideration, if any, payable to
     the  Company upon the exercise of such rights or options, plus, in the case
     of  Convertible  Securities,  the minimum amounts of consideration, if any,
     payable  to  the  Company  (other  than  by  cancellation of liabilities or
     obligations  evidenced  by such Convertible Securities) upon the conversion
     thereof.  No  further adjustment of the Conversion Price, adjusted upon the
     issuance  of  such rights, options or Convertible Securities, shall be made
     as  a result of the actual issuance of Additional Shares of Common Stock on
     the  exercise  of  any such rights or options or the conversion of any such
     Convertible  Securities.  If  any  such rights or options or the conversion
     privilege  represented  by  any  such  Convertible  Securities shall expire
     without  having  been  exercised,  the  Conversion  Price adjusted upon the
     issuance  of  such  rights,  options  or  Convertible  Securities  shall be
     readjusted  to  the Conversion Price which would have been in effect had an
     adjustment been made on the basis that the only Additional Shares of Common
     Stock  so  issued  were  the  Additional  Shares  of  Common Stock, if any,
     actually issued or sold on the exercise of such rights or options or rights
     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,

                                      -41-
<PAGE>
     actually  received  by  the  Company for the granting of all such rights or
     options,  whether  or  not  exercised,  plus the consideration received for
     issuing  or selling the Convertible Securities actually converted, plus the
     consideration,  if  any,  actually  received  by the Company (other than by
     cancellation  of  liabilities  or obligations evidenced by such Convertible
     Securities)  on  the  conversion  of  such  Convertible  Securities.

               (4)     "Additional Shares of Common Stock" shall mean all shares
     of  Common  Stock  issued (or deemed issued hereunder) by the Company after
     the  date  hereof, whether or not subsequently reacquired or retired by the
     Company,  other  than: (A) shares of Common Stock issued upon conversion or
     exchange of the Series 3-A Preferred Stock or any other options or warrants
     or  convertible  securities outstanding or issuable on the date hereof; (B)
     shares of Common Stock issued upon conversion or exchange of the Series 2-A
     Preferred  Stock  pursuant  to  Section 7 of the Certificate of Designation
     creating  the Series 2-A Preferred Stock; (C) shares of Common Stock issued
     upon  conversion  or exchange of the Series 1-A Preferred Stock pursuant to
     Article  4,  Section C.5 of the Certificate of Incorporation; (D) shares of
     Common Stock issuable or issued to the directors, officers and employees of
     or  consultants  to the Company pursuant to a plan approved by the Board of
     Directors  of the Company and (E) shares of Common Stock issuable or issued
     pursuant  to equipment financing or leasing arrangements, and (F) shares of
     Common Stock issuable pursuant to the warrants, if any, which may be issued
     in  connection  with  the  Exchangeable Note and Warrant Purchase Agreement
     dated  as  of  July 12, 2001, by and among the Company, NetCel360.com Ltd.,
     NetCel360  Sdn Bhd, and the Purchasers named therein. The "Effective Price"
     of  Additional Shares of Common Stock shall mean the quotient determined by
     dividing  the  total  number of Additional Shares of Common Stock issued or
     sold,  or  deemed  to  have  been  issued or sold by the Company under this
     Section  3(g), into the aggregate consideration received, or deemed to have
     been  received  by  the Company for such issue under this Section 3(g), for
     such  Additional  Shares  of  Common  Stock.

          (h)     Certificate  of  Adjustment.  Upon  the  occurrence  of  each
                  ---------------------------
adjustment  or readjustment of the Purchase Price and/or the number of shares of
Common  Stock subject to this Warrant, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof, and
shall  prepare  and  furnish  to  the  Holder  a  certificate setting forth such
adjustment  or  readjustment  and  showing  in  detail the facts upon which such
adjustment  or  readjustment  is  based.

     4.     EXERCISE  UPON  REORGANIZATION, CONSOLIDATION, MERGER, ETC.  In case
            ----------------------------------------------------------
at  any  time  or  from  time  to  time,  the  Company  intends  to (a) effect a
reorganization, (b) consolidate with or merge into any other person, (c) sell or
transfer  all  or  substantially  all  of  its properties or assets to any other
person,  (d)  dissolve,  (e)  consummate  an  initial  public  offering  of  its
securities;  or  if  the  Company is sold through the sale of its capital stock,
then, notwithstanding any other provision of this Warrant, in each such case, as
a  condition  of  such  reorganization, consolidation, merger, sale dissolution,
conveyance,  or  offering  the Company shall give at least fifteen (15) business
days  notice  to the Holder of such pending transaction whereby the Holder shall

                                      -42-
<PAGE>
have  the  right  to  exercise  this  Warrant  prior to any such reorganization,
consolidation,  merger, sale, dissolution, conveyance or offering.  Any exercise
of  this Warrant pursuant to notice under this Section shall be conditioned upon
the  closing  of  such reorganization, consolidation, merger, sale, dissolution,
conveyance  or  offering  which is the subject of the notice and the exercise of
this Warrant shall not be deemed to have occurred until immediately prior to the
closing  of  such  transaction.

     5.     FURTHER  ASSURANCES.  The  Company  will take all action that may be
            -------------------
necessary or appropriate in order that the Company may validly and legally issue
fully  paid  and  nonassessable  shares of stock, free from all taxes, liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of  this  Warrant  from  time  to  time  outstanding.

     6.     NOTICES  OF  RECORD  DATE,  ETC.  In  the  event  of:
            -------------------------------

               (a)     any  taking  by the Company of a record of the holders of
any  class  of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend on, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities or
property,  or  to  receive  any  other  right,  or

               (b)     any  capital  reorganization  of  the  Company,  any
reclassification  or recapitalization of the capital stock of the Company or any
transfer  of  all  or  substantially  all of the assets of the Company to or the
sale,  consolidation or merger of the Company with, to or into any other person,
or

               (c)     Any  voluntary or involuntary dissolution, liquidation or
winding-up  of  the  Company;

then  and  in each such event the Company will mail or cause to be mailed to the
Holder,  at least fifteen (15) business days prior to such record date, a notice
specifying  (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such  dividend,  distribution  or  right,  (ii)  the  date  on  which  any  such
reorganization,  reclassification,  recapitalization,  transfer,  consolidation,
merger,  dissolution,  liquidation or winding up is to take place, and the time,
if  any  is  to  be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock (or
Other  Securities)  for  securities  or  other  property  deliverable  on  such
reorganization,  reclassification,  recapitalization,  transfer,  consolidation,
merger,  dissolution,  liquidation  or  winding-up,  and  (iii)  the  amount and
character  of  any  stock or other securities, or rights or options with respect
thereto,  proposed  to  be issued or granted, the date of such proposed issue or
grant  and  the persons or class of persons to whom such proposed issue or grant
is  to  be  offered  or  made.  Such  notice shall also state that the action in
question  or  the  record date is subject to the effectiveness of a registration
statement under the Securities Act or a favorable vote of stockholders if either
is  required.  Such  notice  shall be mailed at least fifteen (15) business days
prior  to  the  date  specified in such notice on which any such action is to be
taken  or  the record date, whichever is earlier.  The Holder shall use its best
efforts  to  decide whether to exercise this Warrant within ten (10) days of its
receipt  of  such  notice.

                                      -43-
<PAGE>
     7.     RESERVATION  OF  STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS.  The
            --------------------------------------------------------------
Company  will  at all times reserve and keep available out of its authorized but
unissued  shares  of  capital  stock,  solely  for  issuance and delivery on the
exercise  of  this  Warrant,  a  sufficient number of shares of Common Stock (or
Other  Securities) to effect the full exercise of this Warrant and the exercise,
conversion  or  exchange  of  any  other  warrant  or  security  of  the Company
exercisable  for,  convertible into, exchangeable for or otherwise entitling the
Holder  to  acquire  shares of Common Stock (or Other Securities), and if at any
time  the  number  of  authorized  but unissued shares of Common Stock (or Other
Securities)  shall  not  be  sufficient  to  effect such exercise, conversion or
exchange, the Company shall take such action as may be necessary to increase its
authorized  but  unissued  shares  of Common Stock (or Other Securities) to such
number  as  shall  be  sufficient  for  such  purposes.

     8.     TRANSFER OF WARRANT.  This Warrant cannot be transferred without the
            -------------------
prior  written  consent  of the Company, which consent shall not be unreasonably
withheld;  provided, however, the Holder may transfer this Warrant to any of its
affiliates  without  such  consent  so  long  as such transfer complies with all
applicable  securities  laws.

     9.     NO  RIGHTS  AS  A  STOCKHOLDER.  This  Warrant shall not entitle the
            ------------------------------
Holder  hereof  to  any  voting  rights  or other rights as a stockholder of the
Company.

     10.     NOTICES,  ETC.  All notices which are required to be given pursuant
             -------------
to  this  Warrant  shall be in writing and shall be delivered by certified mail,
return  receipt  requested,  first  class  postage prepaid, or sent by overnight
express  or similarly recognized overnight delivery with receipt acknowledged or
by facsimile, with a copy thereof sent by one of the other means.  Notices shall
be  deemed  to  have  been given at the time delivered and shall be addressed as
follows  or  to  such  other  address  as a party may designate by proper notice
hereunder.

If  to  Holder:                       To the address set forth on the first page
                                      hereof.

If  to  the  Company:                 Vsource,  Inc.
                                      5740  Ralston  Street,  Suite  110
                                      Ventura,  California  93003
                                      Attn.:  CFO

     11.     SECURITIES  LAWS.  By  acceptance  of  this  Warrant,  the  Holder
             ----------------
represents  to  the  Company that the Holder is "accredited investor" within the
meaning  of  Rule  501  of  Regulation  D  adopted  under the Securities Act, as
presently  in  effect,  or  not  a  "U.S. person" within the meaning of Rule 902
adopted under the Securities Act and is acquiring the Securities in an "offshore
transaction" as defined in Rule 902, that this Warrant is being acquired for the
Holder's  own  account and for the purpose of investment and not with a view to,
or  for  sale in connection with, the distribution thereof, nor with any present
intention  of  distributing  or selling the Warrant or the Common Stock issuable
upon  exercise  of  the  Warrant,  and  that  it is an investor in securities of
companies  in  the  development  stage  and  acknowledges  that  it can bear the

                                      -44-
<PAGE>
economic  risk  of  its  investment  and  has  such  knowledge and experience in
financial  or  business  matters that it is capable of evaluating the merits and
risks  of  the  investment  in  the  shares subject to this Warrant.  The Holder
acknowledges  and  agrees  that  this Warrant and the Common Stock issuable upon
exercise  of this Warrant (if any) have not been (and at the time of acquisition
by  the  Holder,  will  not  have  been  or  will  not  be) registered under the
Securities  Act  or  under  the  securities  laws of any state, in reliance upon
certain  exemptive  provisions  of such statutes.  The Holder further recognizes
and  acknowledges  that  because this Warrant and the Common Stock issuable upon
exercise  of this Warrant are unregistered, they may not be eligible for resale,
and  may  only  be  resold  in  the future pursuant to an effective registration
statement  under the Securities Act and any applicable state securities laws, or
pursuant  to  a valid exemption from such registration requirements and that the
Holder  must, therefore, bear the economic risk of such investment indefinitely.

     12.     LEGEND.  Unless  theretofore  registered  for  resale  under  the
             ------
Securities Act, each certificate for shares issued upon exercise of this Warrant
shall  bear  the  following  or  a  similar  legend:

          THE  SHARES  REPRESENTED  BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER  THE  SECURITIES  ACT  OF  1933,  AS AMENDED, OR ANY APPLICABLE STATE
     SECURITIES  LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
     NOT  BE  RESOLD,  TRANSFERRED  OR  ASSIGNED  IN THE ABSENCE OF AN EFFECTIVE
     REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
     AS  AMENDED,  OR  AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
     DISPOSITION  IS  IN  COMPLIANCE  WITH THE SECURITIES ACT AND ANY APPLICABLE
     STATE  SECURITIES  LAWS.

     13.     MISCELLANEOUS.  This  Warrant  and any terms hereof may be changed,
             -------------
waived,  discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is  sought.  This Warrant shall be construed and enforced in accordance with and
governed  by  the  internal  laws  of the State of California, without regard to
conflict  of  laws principles.  The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The  invalidity  or  unenforceability  of  any  provision hereof shall in no way
affect  the  validity  or  enforceability  of  any  other  provision.

     IN  WITNESS  WHEREOF, the Company has caused this Warrant to be executed on
its behalf by one of its officers thereunto duly authorized as of July 12, 2001.

                                         VSOURCE,  INC.

                                         By:  _________________________________

                                      -45-
<PAGE>
                              FORM OF SUBSCRIPTION

                                  VSOURCE, INC.

                   (To be signed only on exercise of Warrant)

TO:  VSOURCE,  INC.

     1.     The  undersigned  Holder  of the attached original, executed Warrant
hereby  elects to exercise its purchase right under such Warrant with respect to
shares  of Common Stock, as defined in the Warrant, of Vsource, Inc., a Delaware
corporation  (the  "Company").

     2.     The undersigned Holder is hereby paying the aggregate purchase price
for  such  shares  of  Common  Stock (the "Exercise Shares") (i) by the enclosed
certified  or  official bank check payable in United States dollars to the order
of the Company in the amount of $___________, or (ii) by wire transfer of United
States  funds  to  the  account of the Company in the amount of $______________,
which  transfer has been made before or simultaneously with the delivery of this
Form  of  Subscription  pursuant  to  the  instructions of the Company, or (iii)
electing  to  exercise the attached Warrant for _______ shares purchasable under
the  Warrant  pursuant  to  the  net exercise provisions of Section 1(b) of such
Warrant.

     3.     Please  issue  a  stock certificate or certificates representing the
appropriate  number  of  shares  of  Common Stock in the name of the undersigned
Holder.

Dated:_______________________

                                              __________________________________
                                                      Signature of Holder

                                      -46-
<PAGE>
     THE  SECURITIES  EVIDENCED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
     THE  SECURITIES  ACT  OF  1933,  AS  AMENDED,  (THE "1933 ACT") OR THE
     SECURITIES  LAWS  OF  ANY  STATE  AND  MAY  NOT  BE SOLD, TRANSFERRED,
     ASSIGNED  OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
     STATEMENT  UNDER  THE  1933  ACT  COVERING  SUCH  SECURITIES  AND   IN
     COMPLIANCE  WITH SUCH STATE LAWS OR IF THE COMPANY RECEIVES AN OPINION
     OF  COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
     TO  THE  COMPANY,  STATING  THAT  SUCH  SALE,  TRANSFER, ASSIGNMENT OR
     HYPOTHECATION  IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
     REQUIREMENTS  OF  THE  1933  ACT  AND  SUCH  APPLICABLE  STATE  LAWS.

                          EXCHANGEABLE PROMISSORY NOTE

US$[*]
Principal  Amount                                                July  __,  2001

     Vsource,  Inc., a Delaware corporation (the "Company"), for value received,
hereby  promises  to  pay  to  the  order  of ______ or its registered permitted
assigns  ("Holder")  on June 30, 2003 or when sooner declared due and payable in
accordance  with  the  Purchase  Agreement  (the  "Maturity  Date")  the  sum of
US$________  (the  "Principal  Amount"), unless this Note is repaid or exchanged
before  that  date  pursuant  to  the  terms  hereunder  or  under  the Purchase
Agreement.  Interest  shall  accrue  on  the outstanding Principal Amount at the
rate of 10% per annum (compounded quarterly) from the date hereof and is due and
payable on the Maturity Date unless this Note is repaid or exchanged before that
date  pursuant  to the terms hereunder.  Payment shall be made at the registered
address of the Holder appearing in the records of the Company.  This Note is one
of  the  Notes  issued  pursuant  to  an  Exchangeable Note and Warrant Purchase
Agreement  dated  July  ___,  2001  among  the  Company,  the Guarantors and the
Purchasers  named  therein  (the  "Purchase  Agreement").  The  unpaid principal
balance  of this Note at any time, together with all accrued and unpaid interest
thereon  at such time, is referred to herein as the "Note Amount." Any terms not
defined  in this Note shall have the meaning set forth in the Purchase Agreement
unless  otherwise  indicated.

     1.     Guarantee.  The  Holder is entitled to the benefits of the Guarantee
            ---------
set  forth  in  the  Purchase  Agreement.

     2.     Intentionally  Omitted.
            ----------------------

     3.     Mandatory  Prepayments.  The  Company  shall  prepay this Note in an
            ----------------------
amount  equal  to  the Holder's Pro Rata Share of all Excess Financing Proceeds,
promptly  after  the  receipt  by  the Company, from time to time of such Excess
Financing  Proceeds  or the occurrence of an event resulting in the existence of
Excess  Financing  Proceeds.   Each  such  prepayment shall be applied first, to

<PAGE>
accrued  and  unpaid  interest  on the principal balance hereof and then, to the
unpaid  principal  balance  hereof.   As  used  herein  the  terms:

          "Pro  Rata  Share"  as  to  the  Holder  at  any  time  shall mean the
     percentage  which  the  unpaid  principal balance of this Note at such time
     bears  to the unpaid principal balance of all Series B Notes outstanding at
     such  time.

          "Excess  Financing  Proceeds" shall mean (x) all amounts raised by the
     Company in excess of $6,000,000 as a result of (i) the issuance and sale of
     Series  A  Notes for cash (as opposed to exchange of Bridge Notes) and (ii)
     the  offering  by  the Company of its common stock after the date hereof by
     way  of  a rights offering to its shareholders; and (y) the amount, if any,
     by  which the amount of the Deposit at any time exceeds the amount required
     by  the  Issuer  or  Gateway  Manufacturing,  Inc.  to be maintained in the
     Deposit  at such time (it being understood and agreed that if, at any time,
     no  Deposit  is  required  by  the  Issuer  or Gateway Manufacturing, Inc.,
     whether pursuant to the termination or expiration of the reseller agreement
     described  in  Section  5.1(g) of the Purchase Agreement or otherwise, this
     Note  shall  be  promptly  prepaid  in  full  pursuant to the terms of this
     Section  3).

     4.     Voluntary Prepayment.   The Company may prepay this Note in whole or
            --------------------
in  part, subject to the following conditions:  (i) the Company shall have given
the  Holder an irrevocable written notice of its intention to prepay at least 30
days  prior to prepayment and, if such prepayment is to occur after February 15,
2002, shall have deposited good funds in a segregated account for the benefit of
the Holder in an amount equal to the amount being prepaid; (ii) the Holder shall
not  have  exercised  its  exchange rights under Section 5 of this Note, if any,
prior  to  the  date  set forth in such irrevocable written notice of prepayment
upon  which  the  Company  intends  to  prepay  this  Note;  and  (iii) any such
prepayment  must  be  made  on  a  pro  rata basis among all Series B Notes then
outstanding.

     5.     Voluntary  and  Automatic  Exchange.
            -----------------------------------

          (a)     Voluntary Exchange.  If the Note Amount is not paid in full on
                  ------------------
     or prior to February 15, 2002, then, at any time thereafter while this Note
     is  outstanding,  Holder  may,  at  the Holder's option, exchange this Note
     including  accrued  interest thereon to the date of exchange, in accordance
     with the provisions of paragraph (b) below hereof, in whole or in part, for
     a Series A Note in the initial principal amount equal to the amount of this
     Note  being  exchanged,  including  all accrued and unpaid interest on this
     Note.

          (b)     Notice  of  Voluntary  Exchange.  If  the  Holder  elects  to
                  -------------------------------
     exchange  all  or  any  portion  of this Note pursuant to Section 5(a), the
     Holder shall submit an executed Notice of Election in the form of Exhibit A
     hereto  and  surrender  this Note at the office of the Company. The Company
     shall,  as soon as practicable (but within three business days) thereafter,
     issue  and  deliver  to  the  Holder  of  this  Note a Series A Note in the
     principal amount to which the Holder of this Note shall be entitled and, if
     this  Note  is being exchanged in part, a new Series B Note with respect to

                                        2
<PAGE>
     the  remainder  of  this  Note  which is not being exchanged. Such exchange
     shall  be  deemed to have been made and the Series A Note so issuable shall
     be  deemed  to  have  been  issued and outstanding immediately prior to the
     close  of  business  on  the  date  of  the  surrender of this Note and the
     delivery  of  an  executed  Notice  of  Election, and the person or persons
     entitled  to receive the Series A Note issuable upon such exchange shall be
     treated  for  all purposes as the record holder or holders of such Series A
     Note  as  of  such  date.

          (c)     Automatic Exchange.  In the event the Issuer is reimbursed for
                  ------------------
     any  draw  on  the  Gateway  Letter of Credit by withdrawing funds from the
     Deposit  and  such  funds  are not replaced by the Company within three (3)
     business  days,  then,  effective  as  of  the date of each such withdrawal
     (each,  a  "Deposit  Draw Date"), the Company shall issue to the Holder, in
     exchange  for  this Note (i) a Series A Note in a principal amount equal to
     the  Holder's  Pro Rata Share as of the applicable Deposit Draw Date of the
     amount  of  such  withdrawal  and  (ii)  a  substitute  Series  B Note in a
     principal  amount,  if any, equal to the Note Amount as of the Deposit Draw
     Date  less  the principal amount of the Series A Note issued to such Holder
     pursuant  to  clause (i) above. Such Series A Notes and substitute Series B
     Notes  shall be delivered to the Holder not less than six (6) business days
     after  the  applicable  Deposit  Draw  Date. Within three (3) business days
     following the receipt of such Series A Notes and substitute Series B Notes,
     the  Holder  shall  surrender  to the Company this Note marked "cancelled",
     and,  if not a party to the Series A Note Purchase Agreement, shall execute
     a  joinder  to  the  Series  A Note Purchase Agreement agreeing to be fully
     bound by, and subject to, all of the covenants, terms and conditions of the
     Series A Note Purchase Agreement as a "Purchaser" thereunder. Regardless of
     whether the Holder has surrendered this Note for exchange and executed such
     a joinder, on the applicable Deposit Draw Date, (i) such automatic exchange
     shall  be  deemed to have been made; (ii) the Series A Notes and substitute
     Series  B  Notes  so  issuable  shall  be  deemed  to  have been issued and
     outstanding;  (iii)  the person or persons entitled to receive the Series A
     Notes  and  substitute Series B Notes issuable upon such automatic exchange
     shall  be  treated for all purposes as the record holder or holders of such
     Series  A  Notes  and  substitute  Series  B Notes; (iv) this Note shall be
     deemed  cancelled  and  the  Company  shall  be  forever  released from its
     obligations  and  liabilities  under  this  Note,  with  the  Holder  being
     entitled,  in lieu thereof, to the benefit of the Company's obligations and
     liabilities  under the Series A Notes and substitute Series B Notes issued;
     and  (v)  the  Holder  shall be deemed for all purposes to be a "Purchaser"
     under the Series A Note Purchase Agreement and subject to all of the terms,
     conditions  and  covenants  applicable  to  "Purchasers"  thereunder.

          (d)     Series  A  Notes  Issuable  Upon Exchange.  The Company agrees
                  -----------------------------------------
     that  all  Series  A Notes issued upon a voluntary or automatic exchange of
     this  Note  will,  upon  issuance be duly authorized and validly issued and
     free  of  all  preemptive  rights  and  all liens, charges, encumbrances or
     restrictions  on transfer except such restrictions on transfer as may apply
     under  state  or  federal  securities  laws.

                                        3
<PAGE>
     6.     Notices  of  Record  Date.  In the event of:
            -------------------------

          (a)     Any  taking  by  the Company of a record of the holders of any
     class  of  equity  securities of the Company for the purpose of determining
     the  holders  thereof  who are entitled to receive any distribution, or any
     right  to subscribe for, purchase or otherwise acquire any other securities
     or  property,  or  to  receive  any  other  right;  or

          (b)     Any   capital   reorganization   of   the   Company,   any
     reclassification  or  recapitalization of the equity capital of the Company
     (other  than  a  subdivision or combination of the Company's securities) or
     any  transfer  of  all or substantially all of the assets of the Company to
     any  other  person or any consolidation or merger involving the Company; or

          (c)     Any  voluntary  or  involuntary  dissolution,  liquidation  or
     winding-up  of  the  Company,

then  the  Company  will  deliver  to the Holder at least ten business (10) days
prior  to  the  earliest  applicable  date  hereinafter  specified,  a  notice
specifying:  (i)  the  date  on  which  any  such  record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such  dividend,  distribution  or  right;  (ii)  the  date  on  which  any  such
reorganization,  reclassification, transfer, consolidation, merger, dissolution,
liquidation  or  winding-up  is expected to become effective and the record date
for  determining  stockholders  entitled to vote thereon or participate therein;
and  (iii)  a  description  of  the  material  terms  thereof.

     7.     No  Shareholder  Rights.  Nothing  contained  in  this Note shall be
            -----------------------
construed  as  conferring  upon  the  Holder  or  any  other  person  any rights
whatsoever  as  a  shareholder  of  the  Company.

     8.     Event  of  Default.  Upon the occurrence of an Event of Default, the
            ------------------
entire  principal balance and interest on this Note shall immediately become due
and  payable and the Holder shall have all remedies under the Purchase Agreement
or  as  provided  by  law.

     The  Company and the Guarantors waive the rights of presentment, demand for
performance,  protest,  notice  of protest, and notice of dishonor.  No delay on
the part of the Holder in exercising any right hereunder shall operate as waiver
of  such  right  under  this  Note.  This  Note  is being delivered and shall be
construed  in accordance with the internal laws of the State of Delaware without
giving  effect to any choice of law rule that would cause the application of the
laws  of  any jurisdiction other than the internal laws of the State of Delaware
to  the  rights  and  duties  of  the  parties.

                                         VSOURCE,  INC.

                                         By: ___________________________________
                                         Name:
                                         Title:

                                        4
<PAGE>
                                         AS  GUARANTORS:
                                         NETCEL360.COM  LTD

                                         By:
                                         Name:
                                         Title:

                                         NETCEL360  SDN  BHD

                                         By: ___________________________________
                                         Name:
                                         Title:

                                        5
<PAGE>
                                    EXHIBIT A
                                    ---------

                               NOTICE OF ELECTION

TO: VSOURCE, INC.

     The  undersigned,  the holder of the foregoing Note, hereby surrenders such
Note  and  irrevocably  elects  to  exchange  such  Note  for a Series A Note of
VSOURCE, INC., pursuant to and in accordance with the Exchangeable Note Purchase
Agreement  dated  July __, 2001 and requests that the Series A Note be issued in
the  name  of,  and  delivered  to,  ______________________,  whose  address  is
__________________________________.

     The  undersigned hereby joins in and elects to become a party to the Series
A  Note  Purchase  Agreement  as  a "Purchaser" thereunder, agreeing to be fully
bound  by,  and  subject  to,  all of the covenants, terms and conditions of the
Series  A  Note  Purchase  Agreement  applicable  to  "Purchasers"  thereunder.

Dated: _________________, 200_.

                              ____________________________________________
                              (Signature must conform in all respects to name of
                              holder as specified on the face of the Note)

                              ____________________________________________

                              ____________________________________________
                                                (Address)

                                        6
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00029-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00029-of-00352.parquet"}]]