<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[X] Confidential, for Use of the
Commission Only (as permitted by
Rule 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Webb Interactive Services Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
PROXY STATEMENT
WEBB INTERACTIVE SERVICES, INC.
1800 Glenarm Place
Suite 700
Denver, Colorado 80202
Annual Meeting of Shareholders - April 27, 2000
GENERAL
The enclosed proxy is solicited by the board of directors of Webb
Interactive Services, Inc., a Colorado corporation, for use at its annual
meeting to be held on Thursday, April 27, 2000, at 2:30 p.m., Mountain Time, at
_______________, or any adjournment thereof. Solicitations are being made by
mail and may also be made by our directors, officers and employees. Any proxy
given pursuant to such solicitation may be revoked by the shareholder at any
time prior to the voting thereof by so notifying us in writing at the above
address, attention: Lindley S. Branson, Secretary, or by appearing and voting in
person at the meeting. Shares represented by proxies will be voted as specified
in the proxies. In the absence of specific instructions, proxies will be voted
(to the extent they are entitled to be voted on such matters): (1) FOR the
election to the board of directors of the nominees named in this proxy
statement; (2) FOR the amendment to the Webb Interactive Services, Inc. Stock
Option Plan of 1995 to increase the number of shares authorized under such plan
from 3,500,000 to 4,500,000; (3) FOR issuances of our securities pursuant to a
Securities Purchase Agreement dated December 31, 1999 between Webb, Marshall
Capital Management, Inc. and Castle Creek Technology Partners LLC; (4) FOR the
amendment to our Articles of Incorporation to increase the number of authorized
shares of capital stock from 25,000,000 to ___________ and to increase the
number of authorized shares of common stock, no par value, from 20,000,000 to
__________; (5) FOR the ratification of the appointment of Arthur Andersen LLP
as our independent accountants for the current year; and (6) in the proxy's
discretion upon such other business as may properly come before the annual
meeting. So far as our management is aware, no matters other than those
described in this proxy statement will be acted upon at the annual meeting.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will be considered as shares that are
present for the purposes of determining the presence of a quorum, but will not
be considered as present and entitled to vote with respect to that matter.
We will pay all of the expenses involved in preparing, assembling and
mailing this proxy statement and the material enclosed herewith. We may
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy material to beneficial
owners of stock. This proxy statement and our annual report for the year ended
December 31, 1999 are being mailed to shareholders on or about March 30, 2000.
<PAGE>
OUTSTANDING STOCK
As of March 24, 2000, the record date for determining shares entitled to
notice of and to vote at our annual meeting, the following shares of our capital
stock were outstanding:
. __________ shares of our common stock; and
. 12,500 shares of our series B non-voting convertible preferred stock.
Information as to the name, address and stock holdings of each person known
by Webb to be a beneficial owner of more than five percent of our common stock
and as to the name, address and stock holdings of certain shareholders, each
director and nominee for election to the board of directors, and by all
executive officers and directors, as a group, as of March 24, 2000 is set forth
below. Except as indicated below, we believe that each such person has the sole
(or joint with spouse) voting and investment powers with respect to such shares.
<TABLE>
<CAPTION>
Amount of
Name/Address Common Stock Percent
Of Beneficially Of Common
Shareholder/Director Owned Stock (1)
------------------------------------------------------------------------------
<S> <C> <C>
R. Steven Adams 608,583 (2) __%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Perry Evans 119,196 (3) __%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
William R. Cullen 127,164 (4) __%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Gwenael Hagan 48,500 (5) *
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Andre Durand 135,000 (6) __%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Robert J. Lewis 108,096 (7) __%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Richard C. Jennewine 60,000 (8) *
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Directors and Executive Officers as a 631,289 (9) __%
Group (9 persons)
</TABLE>
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_______________
* Less than one percent of shares outstanding.
(1) In calculating percentage ownership, all shares of common stock which a
named shareholder has the right to acquire within 60 days from the date of
this report upon exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage of common stock
owned by that shareholder, but are not deemed to be outstanding for the
purpose of computing the percentage of common stock owned by any other
shareholders.
(2) Includes options for the purchase of 108,583 shares of common stock, but
excludes options for the purchase of 66,667 shares of common stock that are
not exercisable during the next 60 days.
(3) Includes options for the purchase of 26,667 shares of common stock, but
excludes options for the purchase of 553,333 shares of common stock that are
not exercisable during the next 60 days.
(4) Includes options for the purchase of 96,667 shares of common stock, but
excludes options for the purchase of 103,333 shares of common stock that are
not exercisable during the next 60 days.
(5) Includes options for the purchase of 48,500 shares of common stock, but
excludes options for the purchase of 96,500 shares of common stock that are
not exercisable during the next 60 days.
(6) Includes options for the purchase of 25,000 shares of common stock, but
excludes options for the purchase of 50,000 shares of common stock that are
not exercisable during the next 60 days.
(7) Includes options for the purchase of 36,667 shares of common stock, but
excludes options for the purchase of 55,833 shares of common stock that are
not exercisable during the next 60 days.
(8) Includes options for the purchase of 55,000 shares of common stock, but
excludes options for the purchase of 52,500 shares of common stock that are
not exercisable during the next 60 days.
(9) Includes options for the purchase of 321,834 shares of common stock, but
excludes options for the purchase of 1,503,166 shares of common stock that
are not exercisable during the next 60 days.
PROPOSAL 1:
ELECTION OF DIRECTORS
Nomination and Election of Directors
Our by-laws provide that the size of our board of directors shall be fixed
from time to time by resolution of the shareholders, subject to increase by
resolution of the board of directors. In the event the shareholders do not fix
by resolution the number of directors, the by-laws provide that the number of
directors shall be three, subject to increase by resolution of the board of
directors. The board of directors has set the size of the board at five. The
proxies granted by the shareholders will be voted at the annual meeting for the
election of the five persons listed below as our directors.
Nominees for Director
---------------------
William R. Cullen
Robert J. Lewis
Richard C. Jennewine
Perry Evans
___________
In the event that one of more of the above named persons shall become
unavailable for election, votes will be cast pursuant to authority granted by
the enclosed proxy for such person or persons as may be designated by the board
of directors, unless the board of directors determines to reduce its size
appropriately.
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Directors, Nominees for Director and Executive Officers
Our directors, nominees for director, and executive officers are as
follows:
<TABLE>
<CAPTION>
Name Age Director Position
- ---- --- -------- --------
Since
-----
<S> <C> <C> <C>
Perry Evans................... 40 1999 President, Chief Executive Officer and a Director
William R. Cullen............. 58 1998 Chief Financial Officer and a Director
Robert J. Lewis............... 69 1995 Director
Richard C. Jennewine.......... 61 1996 Director
Lindley S. Branson............ 57 --- Vice President and General Counsel
Gwenael S. Hagan.............. 39 --- Vice President, Corporate Development
Andre Durand.................. 32 --- General Manager, JabberIM Commercialization
Simon Greenman................ 30 --- General Manager, AccelX Commerce Services
Chris Fanjoy.................. 34 --- Chief Technology Officer
</TABLE>
Perry Evans, has served as President since June 24, 1999 and Chief
Executive Officer since February 1, 2000. Mr. Evans founded NetIgnite in 1998,
which was acquired by Webb in 1999. Mr. Evans was founder of and served as
President of the MapQuest Publishing Group, a widely licensed Internet locator
application service from December 1995 to October 1997. Prior to MapQuest, Mr.
Evans managed the new media development group within RR Donnelley that was
responsible for interactive yellow pages, travel and real estate products from
December 1993 to December 1995.
William R. Cullen, has served as Chief Financial Officer since April 1999
and a director since March 1998. From March 1998 to April 1999, Mr. Cullen
served as Chief Operating Officer. From May 1997 to March 1998, Mr. Cullen
worked as a consultant to businesses in the cable industry. From April 1994 to
May 1997, Mr. Cullen was Chairman and CEO of Access Television Network, Inc., a
privately held company specializing in providing paid programming to local cable
systems. From January 1992 to March 1994, Mr. Cullen was President and CEO of
California News Channel, a programming project of Cox Cable Communications. From
July 1984 to December 1991, Mr. Cullen was employed by United Artist Cable
Corporation (and its predecessor United Cable Television Corporation) as Vice
President of Operations and President of its subsidiary, United Cable of Los
Angeles, Inc., and as its Senior Vice President of the Southwest Division. Prior
to joining United Artist Cable Corporation, Mr. Cullen was President of Tribune
Company Cable of California, Inc. and CEO of its United-Tribune Cable of
Sacramento joint venture, served as a top financial officer of three companies
and worked in banking.
Robert J. Lewis, has been a director of Webb since February 1995. Mr. Lewis
retired in October 1995 after having spent 37 years in the cable television
industry as an owner and developer of cable systems and senior executive with
several cable television companies. Beginning in March 1997, however, and
continuing through the present, Mr. Lewis has been the General Partner and Chief
Executive Officer of InterMedia Partners, an operator of cable systems in
Kentucky, Tennessee, North Carolina, South Carolina, and Georgia. From 1987
until his retirement in 1995, Mr. Lewis was employed by Western Tele-
Communications, Inc. ("TCI"), one of the largest cable television companies in
the United States. Mr. Lewis served as a Senior Vice President of TCI from 1991
to 1993 and as a Senior Advisor to TCI from 1993 until his retirement in 1995.
Richard C. Jennewine, has been a director of Webb since November 1996. From
September 1995 to the present, Mr. Jennewine has been President-International
Operations and Regional Manager-Western Operations for Computer Aid, Inc. a
leader in strategic outsourcing and information services consulting. From
December 1991 to February 1995, Mr. Jennewine served as the Senior Vice
President of the CONCORD Group, a privately held entrepreneurial group of 40
international enterprises. From January 1994 to February 1995, he served as the
President of the Concord Trading Corporation, a company focusing on trading and
business ventures in Asia, Russia, the Middle East and South America. Prior to
these positions, Mr. Jennewine spent 26 years with IBM Corporation, including
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startup operations in mainland China. Mr. Jennewine is a director of Easter
Seals of Colorado and is a member of the Corporate Management Committee of
Computer Aid, Inc.
Lindley S. Branson, joined Webb as Vice President and General Counsel in
May 1999. Mr. Branson has been a senior partner with the Minneapolis law firm of
Gray, Plant, Mooty, Mooty and Bennett, PA for more than twenty years,
specializing in corporate finance, mergers and acquisitions and general
corporate law.
Gwenael S. Hagan, has served as Vice President, Corporate Development since
November 23, 1999. Mr. Hagan joined Webb in January 1998. From June 1996 to
January 1998, Mr. Hagan served as Vice President of New Business Development
with International Channel, a cable television network, where he was responsible
for new revenue opportunities, both domestically and internationally, and
developing and implementing strategies to increase revenue and position
International Channel for growth via evolving digital cable and satellite
platforms. From December 1994 to June 1996, Mr. Hagan served as the Internet
Marketing Manager for Microsoft's western region. His work with Microsoft
encompassed competitive strategy development, sales resource allocation,
presentations and public relations.
Andre Durand, has served as General Manager, JabberIM Commercialization
since November 23, 1999. Mr. Durand joined Webb in November 1998. Mr. Durand was
the founder of and served as President and Chief Executive Officer of Durand
Communications, Inc. from January 1993 to June 1999. Mr. Durand is a regular
guest speaker at computer fairs, conferences and expositions, and regularly
contributes articles to trade publications discussing Internet technologies,
trends and predictions. From January 1991 to January 1993, Mr. Durand was an
auditor with KPMG Peat Marwick in Los Angeles, California.
Simon Greenman, has served as General Manager, AccelX Commerce Services
since November 23, 1999. Mr. Greenman joined Webb in August 1999 after
graduating from Harvard with an MBA in May, 1999. Previously, Mr. Greenman was
Vice President of Internet Engineering at MapQuest.com, an Internet locator
application service, from January 1994 to December 1997, where he oversaw
MapQuest's technical development. While at Harvard, he consulted on strategy and
marketing for Expedia and Network Computers and was named by Internet Standard
magazine as its "Number 1 MBA draft choice" in the technical sector for 1999.
Chris Fanjoy, has served as the Chief Technology Officer since June, 1999.
Mr. Fanjoy co-founded and served as the Vice President of Engineering of
NetIgnite, before the company was acquired by Webb in 1999. Prior to NetIgnite,
Mr. Fanjoy was the director of engineering and lead architect for MapQuest.com,
an Internet locator application service, from August 1995 to January 1998, and a
senior technology director for MCI Systemhouse, a geographic information
solutions provider company, from January 1998 to April 1999. He has more than 12
years experience with complex database driven enterprise and web applications.
Committees and Meetings of the Board of Directors
Messrs. Cullen, Lewis and Jennewine are the current members of the Audit
Committee of the board of directors. The Audit Committee represents the Board in
discharging its responsibilities relating to our accounting, reporting, and
financial control practices. The Committee has general responsibility for review
with management of our financial controls, accounting, and audit and reporting
activities. The Committee annually reviews the qualifications and engagement of
our independent accountants, makes recommendations to the Board as to their
selection, reviews the scope, fees, and results of their audit, and reviews
their management comment letters.
Messrs. Jennewine and Lewis are the current members of the Compensation
Committee, which oversees compensation for directors, officers and key employees
of Webb.
During 1999, the board of directors met __ times. Each director attended,
in person or by telephone, 75% or more of the aggregate total of meetings of the
board of directors and meetings of committees of the board of directors
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on which such director serves. During 1999, the Audit Committee met __ times and
the Compensation Committee met __ times. The board of directors does not have a
standing nominating committee.
Vote Required
The affirmative vote of the holders of a majority of the voting power of
the shares of common stock, present or represented at the annual meeting and
entitled to vote on Proposal 1, is required to approve Proposal 1.
The board of directors recommends that the shareholders vote "FOR" the
election of the nominees for director.
EXECUTIVE COMPENSATION
The following table summarizes the annual compensation paid by Webb during
years ended December 31, 1997, 1998, and 1999 to R. Steven Adams, the chief
executive officer of Webb as of December 31, 1999 and the five highest paid
executive officers of Webb.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------------------------------------------
Salary Bonus Other Securities
Name and Principal Position Year $ $ $ Underlying Options
- --------------------------- ---- ------ ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
R. Steven Adams 1999 $ 200,000 $ 75,000 -- --
Chairman of the Board and 1998 $ 155,203 -- -- 175,250 shs. (1)
Director 1997 $ 120,217 -- -- --
William R. Cullen 1999 $ 173,333 (2) $ 75,000 $ 132,194 (3) --
Chief Financial Officer 1998 $ 165,000 -- $ 271,494 160,000 shs.
1997 -- -- -- --
Gwenael Hagan 1999 $ 160,000 $ 36,000 -- 50,000 shs.
Vice President, Corporate 1998 $ 91,549 $ 13,800 -- 100,000 shs. (4)
Development 1997 -- -- -- --
Perry Evans (5) 1999 $ 153,976 $121,250 -- 580,000 shs.
President and a Director 1998 -- -- -- --
Banking 1997 -- -- -- --
Andre Durand (6) 1999 $ 126,250 $ 29,250 -- --
General Manager, JabberIM 1998 $ 5,537 -- -- 75,000 shs.
Commercialization 1997 -- -- -- --
</TABLE>
_______________
(1) Includes options for the purchase of 25,000 and 250 shares of common stock
initially granted to Mr. Adams on June 3, 1998 and June 7, 1998,
respectively, but repriced on November 20, 1998.
(2) Mr. Cullen became a full-time employee on July 1, 1999. The 1999 salary
amount includes $70,000 Mr. Cullen was paid as a consultant to Webb.
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(3) Includes 6,497 shares of common stock issued instead of cash compensation
and $42,194 for reimbursement of travel and living expenses. The common
stock dollar value was determined by multiplying the last sale price of our
common stock by the amount of common stock on the dates such shares were
earned.
(4) Includes options for the purchase of 250 shares of common stock initially
granted to Mr. Hagan on June 7, 1998 but repriced on November 20, 1998.
(5) Mr. Evans was elected President of Webb effective June 24, 1999 and Chief
Executive Officer effective February 1, 2000.
(6) Mr. Durand was elected General Manager of JabberIM Commercialization in
November 23, 1999. Mr. Durand joined Webb in November, 1998.
Webb Stock Options
The following tables summarize the stock option grants and exercises during
1999 to or by the named officers and the value of all options held by the named
officers as of December 31, 1999. Unless otherwise noted, each of these stock
options is exercisable in one-third increments on the 12th, 24th, and 36th month
after the date of grant.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Number of Percent of Total Options
Securities Granted to Employee Exercise
Underlying Options During Year Ended Price Expiration
Name Granted December 31, 1999 ($/Share) Date
---- ------- ----------------- -------- ----
<S> <C> <C> <C> <C>
R. Steven Adams 0 0% N/A N/A
Total 0
William R. Cullen 0 0% N/A N/A
Total 0
Gwenael Hagan 50,000 $ 9.25 10/14/2006
------- 2.5%
Total 50,000
Perry Evans 80,000 $12.25 03/10/2006
200,000 $13.69 06/1/2006
300,000 $ 9.25 10/14/2006
------- 28.3%
Total 580,000
Andre Durand 0 0% N/A N/A
Total 0
</TABLE>
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AGGREGATED OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1999 AND OPTION
VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Options at In-The-Money Options at
Acquired Value December 31, 1999 December 31, 1999 (2)
Name on Exercise Realized (1) Exercisable / Unexercisable Exercisable / Unexercisable
---- ----------- ------------ --------------------------- ---------------------------
<S> <C> <C> <C> <C>
R. Steven Adams 0 $ 0 75,251 / 99,999 $1,086,910 / $1,454,152
William R. Cullen 0 $ 0 53,334 / 106,666 $ 793,993 / $1,587,957
Gwenael Hagan 5,000 $93,750 43,500 / 106,500 $ 719,500 / $1,619,375
Perry Evans 0 $ 0 0 / 580,000 $ 0 / $6,702,000
Andre Durand 0 $ 0 25,000 / 50,000 $ 378,125 / $ 756,250
</TABLE>
_______________
(1) The value realized was determined by multiplying the number of shares
exercised by the favorable difference between the exercise price per share
and the closing bid price per share on the date of exercise.
(2) The value of unexercised in-the-money options was determined by multiplying
the number of shares subject to such options by the favorable difference
between the exercise price per share and $22.75, the closing bid price per
share on December 31, 1999.
Board of Director Compensation
The Board of Directors of Webb do not receive cash compensation for their
services as directors of Webb, but they are reimbursed for their reasonable
expenses in attending meetings of the Board of Directors. During 1999, we issued
options for _________ shares of our common stock at an exercise price of $______
to Robert J. Lewis and Richard C. Jennewine for their services as directors.
Change of Control Agreements
We have entered into employment agreements with R. Steven Adams and our
executive officers, including William R. Cullen, Perry Evans, Gwenael Hagan and
Andre Durand which take effect only if a change of control of 30% or more of our
outstanding voting stock occurs. If a change of control occurs, these agreements
provide for the continued employment (at similar responsibility and salary
levels) of the employee for a period of three years after the change of control.
During this three year period, if we (or a successor entity) terminate the
employee's employment without cause or if the employee terminates his employment
for good reason, then we (or the successor entity) must pay a lump sum severance
to the employee equal to three years salary (including bonus), accelerate the
vesting of all outstanding options held by the employee and allow the employee
to continue to participate in our benefit and welfare plans (or those of the
successor entity) for a period of three years after the employment terminates.
Certain Transactions
Robert J. Lewis, one of our directors, is the general partner and chief
executive officer of, InterMedia Partners, one of our broadband customers.
InterMedia is an operator of cable systems in Kentucky, Tennessee, North
Carolina, South Carolina, and Georgia. We entered into a contract during August
1997, as amended, pursuant to which we provided our products and services to
several of InterMedia's markets. The expiration dates of the contracts and
related amendments range from August 1999 to July 2000. We earn revenue from the
sale of computer hardware and
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third party software, engineering fees, equipment installation fees, and
royalties from subscriber Internet access and content fees. We recognized
revenue in connection with these contracts totaling $122,120 and $185,768 for
the years ended December 31, 1999 and 1998, respectively. Included in accounts
receivable at December 31, 1999 and 1998 are amounts due from InterMedia
totaling $4,000 and $22,925, respectively.
On March 10, 1999, we acquired a majority interest in a newly formed
company, NetIgnite 2, LLC. NetIgnite was a development stage company which we
formed with a predecessor company by the name of NetIgnite, Inc., the sole
shareholder and founder of which was Perry Evans. In connection with the
formation of NetIgnite, the predecessor company contributed all of its rights to
specific technology of NetIgnite and we agreed to provide $1,500,000 of funding.
As a result of these contributions, we acquired the rights to 99.5% of
NetIgnite's operating income and approximately 60% of any proceeds upon the sale
of NetIgnite, and the predecessor company acquired the rights to .5% of
NetIgnite's operating income and approximately 40% of any proceeds upon the sale
of NetIgnite. Effective June 2, 1999, we acquired the predecessor company's
interests in NetIgnite through a merger of the predecessor company into Webb. As
consideration for this merger, we issued 71,429 shares of our common stock to
Mr. Evans. As a result of this merger, NetIgnite is now a wholly owned
subsidiary of Webb. Mr. Evans has entered into an employment agreement with Webb
which has an initial term of two years, provides for a minimum annual salary of
$190,000.
On June 30, 1999, we completed our acquisition of Durand Communications,
Inc. Mr. Durand was the founder and president and a shareholder of DCI. As a
result of the DCI acquisition, Mr. Durand received 112,370 shares of our common
stock. In addition, Mr. Durand has been employed by Webb as a vice president at
an annual base salary of $100,000.
We believe that the transactions summarized above are on terms no less
favorable than could be obtained from unaffiliated third parties. The board of
directors has determined that any transactions with officers, directors or
principal shareholders will be approved by the disinterested directors and will
be on terms no less favorable than could be obtained from an unaffiliated third
party. The board of directors will obtain independent counsel or other
independent advice to assist in that determination.
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PROPOSAL 2:
AMENDMENT OF WEBB INTERACTIVE SERVICES, INC. 1995 STOCK OPTION PLAN
Proposed Amendment
The board of directors proposes that our shareholders approve the
amendment to the Webb Interactive Services, Inc. 1995 Stock Option Plan (the
"1995 Plan") to increase the number of shares of common stock that may be issued
pursuant to the 1995 Plan from 3,500,000 to 4,500,000. The 1995 Plan was
originally adopted by the board of directors and the shareholders on March 17,
1995. The features of the 1995 Plan, a copy of which is attached hereto as
Appendix A, are summarized below.
Summary of Plan
The 1995 Plan terminates March 17, 2005, unless sooner terminated by
action of the Board. The 1995 Plan provides for the grant of options to purchase
shares of our common stock to officers, directors, employees and consultants. As
of March 24, 2000, there were __ executive officers, __ directors, __ employees
and __ consultants eligible to receive such options. Options granted under the
1995 Plan may have a term of up to ten years. Options which expire, are canceled
or are terminated without having been exercised, may be regranted to
participants under the 1995 Plan. Options granted under the 1995 Plan may be
either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or options that do not qualify for
special tax treatment. No incentive stock options may be granted with a per
share exercise price less than the fair market value per share at the date of
grant (or 110% of fair market value in the case of optionees who hold 10% or
more of our outstanding common stock). Under the 1995 Plan, the exercise price
of nonqualified stock options may not be less than 85% of the fair market value
of the common stock on the date of grant. The board of directors has adopted a
policy of not granting nonqualified stock options with an exercise price less
than the fair market value of the common stock on the date of grant. Not more
than $100,000 in value of incentive stock options under all Webb plans may vest
in any calendar year for any option holder and no incentive stock option may be
exercised more than ten years after the date of grant. The 1995 Plan is
administered by the board of directors and compensation committee and options
may be granted at such time and in such amounts as the board of directors or
compensation committee, in their discretion, determines.
All of the outstanding options currently held by employees who are not
directors and officers of Webb under the 1995 Plan are incentive stock options.
Options granted under the 1995 Plan and held by non-employee directors and
consultants are nonqualified and have an exercise price equal to the fair market
value of the common stock on the date of grant.
As of March 24, 2000 options for the purchase of an aggregate of ________
outstanding under the 1995 Plan, held by __ persons, with per share exercise
prices from $___ to $____ per share and a weighted average exercise price of
approximately $_____ per share. In addition an aggregate of _________ shares of
common stock have been issued to __ persons at a weighted average exercise price
of approximately $_____ per share upon the exercise of options granted under the
1995 Plan.
The following table shows, as of March 24, 2000, outstanding, but
unexercised, options granted to:
. Each of our nominees for director;
. Persons holding five percent or more of our outstanding, but
unexercised, options;
. Certain of our executive officers;
. Our current executive officers, as a group;
. Our current directors, who are not executive officers, as a group;
and
. Our current employees, excluding our executive officers, as a group.
10
<PAGE>
Each of these options has a term ranging from five to ten years unless earlier
terminated as provided in the 1995 Plan, and each of these options was granted
at an exercise price equal to the fair market value of our common stock on the
date of grant.
<TABLE>
<CAPTION>
STOCK OPTION AWARDS UNDER THE
WEBB INTERACTIVE SERVICES, INC. 1995 STOCK OPTION PLAN
- -------------------------------------------------------------------------------------------------
Name and Position Number of Options
----------------- -----------------
<S> <C>
Perry Evans, President and nominee for director 580,000
William R. Cullen, Chief Financial Officer and nominee for director 200,000
Robert J. Lewis, nominee for director 92,500
Richard C. Jennewine, nominee for director 107,500
R. Steven Adams, former Chief Executive Officer 175,250
Gwenael Hagan, Vice President - Business Development 145,000
Lindley S. Branson, Vice President - General Counsel and Secretary 200,000
Chris Fanjoy, Chief Technology Officer 200,000
Andre Durand, General Manager, JabberIM Commercialization 75,000
Simon Greenman, General Manager, AccelX Commerce Services 200,000
Current Executive Officers, as a group (7 persons) 1,600,000
Current Directors, who are not also executive officers, 200,000
as a group (2 persons)
Employees, excluding executive officers, as a group (__ persons) _______
</TABLE>
The last reported sale price for the common stock on the Nasdaq SmallCap
Market on March 24, 2000 was $_________.
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to awards under the
1995 Plan. This summary is not intended to be exhaustive and, among other
things, does not describe state or local tax consequences.
In general, an optionee will be subject to tax at the time a nonqualified
stock option is exercised (but not at the time of grant), and he or she will
include in ordinary income in the taxable year in which he or she exercises a
nonqualified stock option an amount equal to the difference between the exercise
price and the fair market value of the shares acquired on the date of exercise,
and we will generally be entitled to deduct such amount for federal income tax
purposes except as such deductions may be limited by the Revenue Reconciliation
Act of 1993 ("1993 Tax Act"),
11
<PAGE>
described below. Upon disposition of shares, the appreciation (or depreciation)
after the date of exercise will be treated by the optionee as either short-term
or long-term capital gain or loss depending on whether the shares have been held
for the then-required holding period.
In general, an optionee will not be subject to tax at the time an
incentive stock option is granted or exercised. Upon disposition of the shares
acquired upon exercise of an incentive stock option, long-term capital gain or
loss will be recognized in an amount equal to the difference between the
disposition price and the exercise price, provided that the optionee has not
disposed of the shares within two years of the date of grant or within one year
from the date of exercise. If the optionee disposes of the shares without
satisfying both holding period requirements (a "Disqualifying Disposition"), the
optionee will recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the difference between the exercise price and the
lesser of the fair market value of the share on the date the incentive stock
option was exercised or the date of sale. Any remaining gain or loss is treated
as short-term or long-term capital gain or loss depending upon how long the
shares have been held. We are not entitled to a tax deduction upon either the
exercise of an incentive stock option or upon disposition of the shares acquired
pursuant to such exercise, except to the extent that the optionee recognizes
ordinary income in a Disqualifying Disposition and then only to the extent that
such deduction is not limited by the 1993 Tax Act.
If the optionee pays the exercise price, in full or in part, with
previously acquired shares, the exchange will not affect the tax treatment of
the exercise. However, if such exercise is effected using shares previously
acquired through the exercise of an incentive stock option, the exchange of the
previously acquired shares will be considered a disposition of such shares for
the purpose of determining whether a Disqualifying Disposition has occurred.
Commencing with our 1995 fiscal year, the federal income tax deduction
that we may take for otherwise deductible compensation payable to executive
officers who, on the last day of the fiscal year, are treated as "named
executive officers" in our proxy statement for such year will be limited by the
1993 Tax Act to $1,000,000. Under the provisions of the 1993 Tax Act, the
deduction limit on compensation will apply to all compensation, except
compensation deemed under the 1993 Tax Act to be "performance-based" and certain
compensation related to retirement and other employee benefit plans. The
determination of whether compensation related to the 1995 Plan is performance-
based for purposes of the 1993 Tax Act will be dependent upon a number of
factors, including shareholder approval of the 1995 Plan, and the exercise price
at which options are granted. The 1993 Tax Act also prescribes certain
limitations and procedural requirements in order for compensation to qualify as
performance-based, including rules which require that in the case of
compensation paid in the form of stock options, the option price be not less
than the fair market value of the stock at date of grant and that the plan under
which the options are granted states the maximum number of shares with respect
to which options may be granted during a specified period to any employee.
Although we have structured the 1995 Plan to satisfy the requirements of the
1993 Tax Act with regard to its "performance-based" criteria, there is no
assurance that awards thereunder will so satisfy such requirements, and
accordingly, we may be limited in the deductions it may take with respect to
awards under the 1995 Plan.
Resolution and Vote Required for Proposal 2
The following resolutions will be submitted for approval at the annual
meeting:
"RESOLVED, That the total number of shares of stock hereby made
available and reserved for issuance under the Plan shall be 4,500,000.
The aggregate number of shares of stock available under this Plan
shall be subject to adjustment as provided in section 5.3. The total
number of shares of stock may be authorized but unissued shares of
stock, or shares acquired by purchase as directed by the Board of
Directors from time to time in its discretion, to be used for issuance
upon exercise of options granted under the Plan.
12
<PAGE>
FURTHER RESOLVED, That the officers of Webb be, and hereby are,
authorized and directed to take all steps necessary or desirable to
accomplish the purposes of the foregoing resolutions."
The affirmative vote of the holders of a majority of the voting power of
the shares of common stock, present or represented at the annual meeting and
voting on Proposal 2, is required to approve Proposal 2.
The board of directors recommends that the shareholders vote "FOR"
Proposal 2 to amend the Webb Interactive Services, Inc. Stock Option Plan of
1995.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Webb's
directors and officers, and persons who own more than ten percent of a
registered class of Webb's equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of our common stock and other equity securities. Officers, directors
and greater than ten-percent shareholders are also required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended December 31, 1999, all Section 16(a) filing requirements
applicable to our officers, directors and greater than ten-percent beneficial
owners were timely complied with except for the following:
<TABLE>
<CAPTION>
Name of Individual Form Number of Late Reports Transactions Not Timely Reported
------------------ ---- ---------------------- --------------------------------
<S> <C> <C> <C>
Andre Durand 4 2 2
</TABLE>
PROPOSAL 3:
ISSUANCE OF COMMON STOCK PURSUANT TO SECURITIES PURCHASE AGREEMENT
Background
Our business development strategy requires substantial capital to fund
capital expenditures and operating expenses required to rapidly expand our
products and services and to market and provide our products and services to a
growing number of potential customers. We believe we currently have sufficient
working capital to fund operations to June 2001.
On February 18, 2000, 12,500 shares of our series B convertible preferred
stock and warrants to acquire 343,750 shares of our common stock were issued to
Castle Creek Technology Partners LLC ("Castle Creek") and Marshall Capital
Management, Inc. ("Marshall Capital") for an aggregate cash investment of
$12,500,000. The proceeds from the sale of the series B preferred stock are
being used to fund our operations. The series B preferred stock was issued in
accordance with Colorado law and pursuant to authority conferred upon our Board
of Directors (the "Board") by our stockholders in Article IV of our Articles of
Incorporation. The Board approved the issuance of the series B preferred stock
because they believe such issuance will help to fund our operations during the
next year and will assist toward the elimination of the going concern paragraph
which appeared in the reports of our independent public accountants for the
years ended December 31, 1997 and 1998 from their report for the year ended
December 31, 1999. The elimination of the going concern paragraph is believed to
be important to eliminate a limitation on our common stock being listed on the
Nasdaq National Market and to eliminate a potential concern for our customers.
13
<PAGE>
The Bylaws of The Nasdaq Stock Market ("Nasdaq") which lists our
outstanding common stock, require stockholder approval of the issuance, other
than in a public offering, of common stock or securities convertible into common
stock if such common stock has or would have upon issuance voting power in
excess of 20% of the voting power outstanding before such issuance. Since it is
possible that the total number of shares of our common stock issuable upon
conversion of the series B preferred stock could exceed 20% of our currently
outstanding shares of common stock, it is necessary for us to obtain stockholder
approval of the sale of the series B preferred stock in order for Webb not to be
required to redeem a portion of the series B preferred stock should the
conversion price be below $8.80 per share due to a future decrease in the market
value for our common stock.
Our stockholders are being asked to approve the issuance of our common
stock pursuant to the Securities Purchase Agreement, in response to the Nasdaq
rules. Approval by a majority of the votes cast with respect to this proposal is
required to approve the proposal, provided that there is a quorum for the
conduct of business at the Annual Meeting. The Board recommends that the
stockholders vote FOR Proposal 3.
Terms of Preferred Stock
On February 18, 2000, 12,500 shares of our series B convertible preferred
stock and warrants to acquire 343,750 shares of our common stock were issued to
Castle Creek and Marshall Capital for an aggregate cash investment of
$12,500,000. The preferred stock does not bear dividends and does not entitle
the holders to any voting rights except as required by Colorado law. The
following is a summary of the material terms of the series B convertible
preferred stock. This summary is qualified in its entirety by reference to the
terms of the series B preferred stock as provided in the Articles of Amendment
to the Articles of Incorporation attached hereto as Appendix B.
Conversion. The preferred stock is convertible into common stock so long
as the conversion would not result in the holder being a beneficial owner of
more than 4.99% of our common stock and all such conversions do not exceed
1,764,537 shares of our common stock unless the issuance of the preferred stock
has been approved by our shareholders. The current conversion price is $20.00
per share. On the effective date of the registration statement under which the
resale of the common stock issuable upon the conversion of the preferred stock
and the exercise of the warrants is being registered, the conversion price will
be adjusted if the market price for our common stock is less than $20.00, in
which event, the conversion price will be the then market price for our common
stock. If the market price for our common stock on the effective date is less
than $26.00, the conversion price will be subject to further adjustment on the
later of 90 days following the effective date of this registration statement or
November 14, 2000. If the market price for our common stock on this date is less
than the then conversion price, the conversion price will thereafter be the
greater of the market price for our common stock on this date or $8.00. The
second adjustment date may be delayed in the event that we fail to obtain
shareholder approval of the issuance of the preferred stock, we have not
complied in any material respect with the terms of the preferred stock or the
agreement pursuant to which the preferred stock was purchased, our common stock
ceases to be quoted on the Nasdaq stock market, there is a change in the
ownership of Webb, the conversion would result in a holder owning more than
4.99% of our outstanding shares of common stock or we failed to keep the
registration statement for the shares issuable upon conversion of the preferred
stock effective for any period following the effective date.
The conversion price is also subject to anti-dilution protection in the
event of the issuance of our common stock at prices less than the conversion
price for the preferred stock or the then current price for our common stock and
for stock splits, stock dividends and other similar transactions.
Redemption. In the event that we do not have a sufficient number of
shares of our common stock available for the conversion of the preferred stock
for any reason, including our failure to obtain the approval of our shareholders
of the issuance of the preferred stock, fail in any material respect to comply
with the terms of the preferred stock or the purchase agreement pursuant to
which the preferred stock was sold or our common stock ceases to be quoted on
the Nasdaq Stock Market, the holders of the preferred stock have the right to
require us to redeem their shares of preferred
14
<PAGE>
stock. The redemption price would be equal to the greater of $1,250 per share of
preferred stock or the market value of the preferred stock based on the then
market value for our common stock.
Right of First Refusal. For a period of one year following the issuance
of the preferred stock, the initial holders have the first right to purchase any
equity securities to be sold by us except for securities being sold pursuant to
our benefit plans, any firm-commitment underwritten public offering or the
issuance of our equity securities in connection with a strategic investment or a
merger or acquisition with an unaffiliated third party which is not effected for
the primary purpose of raising equity capital.
Liquidation Preference. If we liquidate, dissolve or wind-up our
business, whether voluntary or otherwise, after we pay our debts and other
liabilities, the holders of the preferred stock will be entitled to receive from
our remaining net assets, before any distribution to the holders of our common
stock, the amount of $1,000 per share.
Registration Rights. Pursuant to the Securities Purchase Agreement under
which the preferred stock and warrants were issued, we were required to file
with the SEC a registration statement for the resale of the shares issuable upon
conversion of the preferred stock and the exercise of the warrants issued in
connection with the preferred stock and to use our best efforts to keep such
registration statement effective until all of the shares have been resold or can
be sold immediately without compliance with the registration requirements of the
Securities Act of 1933, pursuant to Rule 144 or otherwise.
Warrants Issued with the Preferred Stock
Castle Creek and Marshall Capital also have been granted five year
warrants to purchase an aggregate of 343,750 shares of our common stock at an
exercise price of $20.20 per share. During the first three years of the
warrants, the exercise price is subject to adjustment at the end of each ninety-
day period following the issuance of the warrants. During this period, the
exercise price at the end of each ninety-day period shall be adjusted if the
market price for our common stock is less than the then exercise price for the
warrants, and shall, in this event, be the then market price for our common
stock. The exercise price for the warrants is also subject to anti-dilution
protection in the event of the issuance of our common stock at prices less than
the exercise price for the warrants and for stock splits, stock dividends and
other similar transactions. The warrants may be subject to early expiration
after an underwritten public offering or one year if the market price for our
common stock exceeds $40.81.
Resolution and Vote Required for Proposal 3.
The additional common stock which could be issued pursuant to Proposal 3
would have rights identical to our currently outstanding common stock. The
adoption of Proposal 3 and the issuance of common stock authorized thereby would
not affect the rights of the holders of our currently outstanding common stock,
except for effects incidental to increasing the number of outstanding shares of
our common stock. Any future issuance of common stock will be subject to the
rights of holders of any outstanding shares of the series B preferred stock and
any other preferred stock that we may issue in the future.
The following resolution will be submitted for approval at the annual
meeting:
"RESOLVED, That for purpose of satisfying Rule 4310(c)(25)(H) of The
Nasdaq Stock Market, Inc., which requires that certain sales of Webb's
securities be approved by shareholders for Webb's common stock to
continue to be listed on the Nasdaq SmallCap Market, the shareholders
of Webb hereby approve the issuance of Webb's common stock in
connection with the terms of the Securities Purchase Agreement dated
December 31, 1999, between Webb, Castle Creek Technology Partners LLC
and Marshall Capital Management, Inc., including the elimination of
the limit of 1,764,537 shares as the maximum number of shares of
common stock
15
<PAGE>
issuable upon conversion of the series B preferred stock and the
exercise of the warrants."
The affirmative vote of the holders of a majority of the voting power
of the shares of common stock, present or represented at the annual meeting and
voting on Proposal 3, is required to approve Proposal 3.
The Board of Directors recommends that shareholders vote "FOR" Proposal 3.
PROPOSAL 4:
AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF STOCK
Under our current Articles of Incorporation, we have authority to issue
25,000,000 shares of capital stock of which 20,000,000 shares are authorized
shares of common stock, no par value, and 5,000,000 shares are authorized shares
of preferred stock, in such series and classes and with such par value, rights,
preferences, and limitations as the Board of Directors may designate. As of
March 24, 2000, __________ shares of common stock were issued and outstanding
and 12,500 shares of series B preferred stock were issued and outstanding.
Proposal 4 recommends to the shareholders an amendment to our Articles of
Incorporation that would increase the number of authorized shares of common
stock from 20,000,000 shares to __________ shares and thereby increase the
number of authorized shares of capital stock of the Company from 25,000,000
shares to _________ shares. The Board of Directors has unanimously approved the
amendment contained in Proposal 4. Attached hereto as Appendix C is copy of the
proposed amendment to the Articles of Incorporation.
The Board of Directors considers Proposal 4 to be in our best interests
and our shareholders. Although our currently authorized shares may be adequate
to cover anticipated needs for such shares as of the date of this Proxy
Statement, the authorized shares of common stock are not sufficient to enable
the Board to implement the previously announced 2 for 1 split of our common
stock (to be accomplished in the form of a stock dividend). We believe the split
is important as it will result in an increase in the number of shares of common
stock included in the public float and will reduce the per share cost of our
stock, both of which we believe will result in a less volatile trading market
for the stock. While we currently have no other specific plans to use the
additional authorized shares of common stock, the proposed increase will ensure
that a sufficient number of shares will be available, if needed, for the stock
split and for issuance in connection with any possible future transactions
approved by the Board of Directors, including, among others, stock dividends,
acquisitions, financings and other corporate purposes. The Board of Directors
believes that the availability of the additional shares of common stock for such
purposes without delay or the necessity for a special shareholders' meeting
(except as may be required by applicable law or regulatory authorities or by the
rules of any stock exchange on which our securities may then be listed) will be
beneficial to us by providing the flexibility required to consider and respond
to future business opportunities and needs as they arise. Currently, the rules
of the Nasdaq SmallCap Market, on which our common stock is listed, prohibit us
from issuing shares of our common stock without shareholder approval for such
issuance, if the issuance, among other things, (i) would result in a change of
control of Webb, (ii) in connection with an acquisition of the stock or assets
of another company, would result in the newly issued stock having voting power
equal to or in excess of 20% of the voting power outstanding before the issuance
or (iii) in connection with a transaction other than a public offering, is at a
price less than the greater of book or market value and equals 20% or more of
the voting power outstanding before the issuance. It is possible that shares of
common stock may be issued at a time and under circumstances that may increase
or decrease earnings per share and increase or decrease the book value per share
of shares presently held. Furthermore, shares of common stock could be issued to
deter or prevent a hostile takeover of Webb even though such a transaction was
favored by the holders of the requisite number of the then outstanding common
stock, series B preferred stock, and any other preferred stock which we may
issue in the future. The Board of Directors has no present intention to issue
shares of common stock to deter or prevent such a transaction and is not
currently aware of any attempt to takeover Webb.
16
<PAGE>
The additional common stock to be authorized by the adoption of Proposal
4 would have rights identical to our currently outstanding common stock. The
adoption of Proposal 4 and the issuance of common stock authorized thereby would
not affect the rights of the holders of our currently outstanding common stock,
except for effects incidental to increasing the number of outstanding shares of
our common stock. Any future issuance of common stock will be subject to the
rights of holders of any outstanding shares of the series B preferred stock and
any other preferred stock which we may issue in the future.
Resolution and Vote Required for Proposal 4
The following resolution will be submitted for approval at the annual
meeting:
"RESOLVED, That ARTICLE IV of the Articles of Incorporation of Webb
Interactive Services, Inc., as heretofore amended, be further amended
by deleting Section 1 thereof in its entirety and substituting
therefore the language set forth on Appendix C attached hereto."
The affirmative vote of the holders of a majority of the voting power of
the shares of common stock, present or represented at the annual meeting and
voting on Proposal 4, is required to approve Proposal 4.
The Board of Directors recommends that shareholders vote "FOR" Proposal 4
to amend the Articles of Incorporation to increase the number of authorized
shares of stock.
PROPOSAL 5:
SELECTION OF INDEPENDENT AUDITORS
The board of directors has appointed Arthur Andersen LLP as our
independent accountants for the fiscal year ending December 31, 2000. Arthur
Andersen LLP served as our independent accountants for the year ended December
31, 1999. Representatives of Arthur Andersen LLP who are expected to be present
at the meeting, will have an opportunity to make a statement if they desire to
do so, and are expected to be available to respond to appropriate questions.
In the event the holders of the common stock do not ratify the
appointment of Arthur Andersen LLP, the selection of other independent
accountants will be considered by the board of directors. The board of directors
recommends that the holders of the common stock vote for ratification of the
appointment of Arthur Andersen LLP.
Resolution and Vote Required for Proposal 5
The following resolution will be submitted for approval at the annual
meeting:
"RESOLVED, That the appointment by Webb of Arthur Andersen LLP as the
independent accounts for the company for the year ending December 31,
2000 be, and hereby is, ratified and approved by the shareholders of
Webb."
The affirmative vote of the holders of a majority of the voting power of
the shares of common stock, present or represented at the annual meeting and
voting on Proposal 5, is required to approve Proposal 5.
The board of directors recommends that shareholders vote "FOR" Proposal 5
to ratify the appointment of Arthur Andersen LLP as the independent accountants
of Webb.
17
<PAGE>
PROPOSALS OF SHAREHOLDERS
Any shareholder proposal intended to be considered for inclusion in the
proxy statement for presentation at our 2001 annual meeting must be received by
us by ____________, 2001. The proposal must be in accordance with the provisions
of Rule 14a-8 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934. We suggest that you submit your proposal by
certified mail -- return receipt requested. If you intend to present a proposal
at our 2001 annual meeting without including such proposal in our proxy
statement, then you must provide us with notice of such proposal no later than
_________, 2001. We reserve the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these and other applicable requirements.
OTHER MATTERS
The board of directors does not intend to bring before the meeting any
business other than as set forth in this proxy statement, and has not been
informed that any other business is to be presented to the meeting. However, if
any matters other than those referred to above should properly come before the
meeting, it is the intention of the persons named in the enclosed proxy to vote
such proxy in accordance with their best judgment.
Please sign and return promptly the enclosed proxy in the envelope
provided if you are a holder of common stock. The signing of a proxy will not
prevent your attending the meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Lindley S. Branson
Secretary
________, 2000
18
<PAGE>
APPENDIX A
WEBB INTERACTIVE SERVICES, INC.
-------------------------------
1995 STOCK OPTION PLAN
----------------------
Article I. Establishment and Purpose
-------------------------------------
1.1 Establishment. Webb Interactive Services, Inc., a Colorado Corporation
-------------
("Company"), hereby establishes a stock option plan for employees and others
providing services to Webb and its Subsidiary Corporations, as described herein,
which shall be known as the "1995 STOCK OPTION PLAN" (the "Plan"). It is
intended that certain of the options issued pursuant to the Plan to employees
may constitute incentive stock options within the meaning of section 422A of the
Internal Revenue Code and that other options issued pursuant to the Plan shall
constitute nonstatutory options. The Board shall determine which options are to
be incentive stock options and which are to be nonstatutory options and shall
enter into option agreements with recipients accordingly.
1.2 Purpose. The purpose of this Plan is to enhance stockholder investment
-------
by attracting, retaining and motivating key employees and consultants of Webb
and its Subsidiary Corporations, and to encourage stock ownership by such
employees and consultants by providing them with a means to acquire a
proprietary interest in our success.
Article II. Definitions
-----------------------
2.1 Definitions. Whenever used herein, the following terms shall have the
-----------
respective meanings set forth below, unless the context clearly requires
otherwise, and when said meaning is intended, the term shall be capitalized.
(a) "Board" means the board of directors of Webb.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Committee" shall mean the Committee provided for by Article IV
---------
hereof, which may be created at the discretion of the Board.
(d) "Company" means Webb Interactive Services, Inc., a Colorado
-------
Corporation.
(e) "Consultant" means any person or entity, including an officer or
----------
director of Webb or a Subsidiary Corporation, who provides services
(other than as an Employee) to Webb or a Subsidiary Corporation, and
shall include a Non-Employee Director, as defined below.
(f) "Date of Exercise" means the date Webb receives notice, by an
----------------
Optionee, of the exercise of an Option pursuant to section 8.1 of
this Plan. Such notice shall indicate the number of shares of Stock
the Optionee intends to exercise.
(g) "Employee" means any person, including an officer or director of Webb
--------
or a Subsidiary Corporation, who is employed by Webb or a Subsidiary
Corporation.
(h) "Fair Market Value" means the fair market value of Stock upon which
-----------------
an option is granted under this Plan.
(i) "Incentive Stock Option" means an Option granted under this Plan
----------------------
which is intended to qualify as an "incentive stock option" within
the meaning of Section 422A of the Code.
A-1
<PAGE>
(j) "Non-Employee Director" means a member of the Board who is not an
---------------------
employee of Webb or of any Subsidiary Corporation at the time an
Option is granted hereunder.
(k) "Nonstatutory Option" means an Option granted under this Plan which is
-------------------
not intended to qualify as an incentive stock option within the
meaning of Section 422A of the Code. Nonstatutory Options may be
granted at such times and subject to such restrictions as the Board
shall determine without conforming to the statutory rules of Section
422A of the Code applicable to incentive stock options.
(l) "Option" means the right, granted under this Plan, to purchase Stock
------
of Webb at the option price for a specified period of time. For
purposes of this Plan, an Option may be either an Incentive Stock
Option or a Nonstatutory Option.
(m) "Optionee" means an Employee or Consultant holding an Option under the
--------
Plan.
(n) "Parent Corporation" shall have the meaning set forth in Section
------------------
425(e) of the Code with Webb being treated as the employer corporation
for purposes of this definition.
(o) "Subsidiary Corporation" shall have the meaning set forth in Section
----------------------
425(f) of the Code with Webb being treated as the employer corporation
for purposes of this definition.
(p) "Significant Shareholder" means an individual who, within the meaning
-----------------------
of Section 422A(b)(6) of the Code, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of
Webb or of any Parent Corporation or Subsidiary Corporation of Webb.
In determining whether an individual is a Significant Shareholder, an
individual shall be treated as owning stock owned by certain relatives
of the individual and certain stock owned by corporations in which the
individual is a stockholder, partnerships in which the individual is a
partner, and estates or trusts of which the individual is a
beneficiary, all as provided in Section 425(d) of the Code.
(q) "Stock" means the no par value common stock of Webb.
-----
2.2 Gender and Number. Except when otherwise indicated by the context, any
-----------------
masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
Article III. Eligibility and Participation
-------------------------------------------
3.1 Eligibility and Participation. All Employees are eligible to
-----------------------------
participate in this Plan and receive Incentive Stock Options and/or Nonstatutory
Options hereunder. All Consultants are eligible to participate in this Plan and
receive Nonstatutory Options hereunder. Optionees in the Plan shall be selected
by the Board from among those Employees and Consultants who, in the opinion of
the Board, are in a position to contribute materially to our continued growth
and development and to its long-term financial success.
Article IV. Administration
---------------------------
4.1 Administration. The Board shall be responsible for administering the
--------------
Plan.
A-2
<PAGE>
The Board is authorized to interpret the Plan; to prescribe, amend, and
rescind rules and regulations relating to the Plan; to provide for conditions
and assurances deemed necessary or advisable to protect the interests of Webb;
and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. Determinations, interpretations, or other actions made
or taken by the Board, pursuant to the provisions of this Plan, shall be final
and binding and conclusive for all purposes and upon all persons.
At the discretion of the Board this Plan may be administered by a Committee
which shall be an executive committee of the Board, consisting of not less than
three (3) members of the Board. The members of such Committee may be directors
who are eligible to receive Options under this Plan, but Options may be granted
to such persons only by action of the full Board and not by action of the
Committee. Such Committee shall have full power and authority, subject to the
limitations of the Plan and any limitations imposed by the Board, to construe,
interpret and administer this Plan and to make determinations which shall be
final, conclusive and binding upon all persons, including, without limitation,
Webb, the stockholders, the directors and any persons having any interests in
any Options which may be granted under this Plan, and, by resolution or
resolution providing for the creation and issuance of any such Option, to fix
the terms upon which, the time or times at or within which, and the price or
prices at which any such shares may be purchased from Webb upon the exercise of
such Option, which terms, time or times and price or prices shall, in every
case, be set forth or incorporated by reference in the instrument or instruments
evidencing such Option, and shall be consistent with the provisions of this
Plan.
The Board may from time to time remove members from, or add members to, the
Committee. The Board may terminate the Committee at any time. Vacancies on the
Committee, howsoever caused, shall be filled by the Board. The Committee shall
select one of its members as Chairman, and shall hold meetings at such times and
places as the Chairman may determine. A majority of the Committee at which a
quorum is present, or acts reduced to or approved in writing by all of the
members of the Committee, shall be the valid acts of the Committee. A quorum
shall consist of two-thirds (2/3) of the members of the Committee.
Where the Committee has been created by the Board, references herein to
actions to be taken by the Board shall be deemed to refer to the Committee as
well, except where limited by this Plan or by the Board.
The Board shall have all of the enumerated powers of the Committee, but
shall not be limited to such powers. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted under it.
Article V. Stock Subject to the Plan
-------------------------------------
5.1 Number. The total number of shares of Stock hereby made available and
------
reserved for issuance under the Plan shall be 3,500,000. The aggregate number of
shares of Stock available under this Plan shall be subject to adjustment as
provided in section 5.3. The total number of shares of Stock may be authorized
but unissued shares of Stock, or shares acquired by purchase as directed by the
Board from time to time in its discretion, to be used for issuance upon exercise
of Options granted hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any reason
------------
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for other
Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
----------------------------
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change, the
aggregate number of shares of Stock set forth in section 5.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive;
provided, however, that fractional shares shall be rounded to the nearest whole
share. In any such case, the
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number and kind of shares that are subject to any Option (including any Option
outstanding after termination of employment) and the Option price per share
shall be proportionately and appropriately adjusted without any change in the
aggregate Option price to be paid therefor upon exercise of the Option.
Article VI. Duration of the Plan
---------------------------------
6.1 Duration of the Plan. Subject to stockholder approval, the Plan shall
--------------------
be in effect for ten years from the date of its adoption by the Board. Any
Options outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of said
period, if all Stock subject to it has been purchased pursuant to the exercise
of Options granted under the Plan.
Article VII. Terms of Stock Options
------------------------------------
7.1 Grant of Options. Subject to section 5.1, Options may be granted to
----------------
Employees or Consultants at any time and from time to time as determined by the
Board; provided, however, that Consultants may receive only Nonstatutory
Options, and may not receive Incentive Stock Options. The Board shall have
complete discretion in determining the number of Options granted to each
Optionee. In making such determinations, the Board may take into account the
nature of services rendered by such Employees or Consultants, their present and
potential contributions to Webb and its Subsidiary Corporations, and such other
factors as the Board in its discretion shall deem relevant. The Board also
shall determine whether an Option is to be an Incentive Stock Option or a
Nonstatutory Option.
In the case of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock with respect to which
incentive stock options granted after December 31, 1986 are exercisable for the
first time by the Optionee during any calendar year under all plans of Webb
under which incentive stock options may be granted (and all such plans of any
Parent Corporations and any Subsidiary Corporations of Webb) shall not exceed
$100,000. (Hereinafter, this requirement is sometimes referred to as the
"$100,000 Limitation".)
Nothing in this Article VII of the Plan shall be deemed to prevent the
grant of Options permitting exercise in excess of the maximums established by
the preceding paragraph where such excess amount is treated as a Nonstatutory
Option.
The Board is expressly given the authority to issue amended or replacement
Options with respect to shares of Stock subject to an Option previously granted
hereunder. An amended Option amends the terms of an Option previously granted
and thereby supersedes the previous Option. A replacement Option is similar to
a new Option granted hereunder except that it provides that it shall be
forfeited to the extent that a previously granted Option is exercised, or except
that its issuance is conditioned upon the termination of a previously granted
Option.
7.2 No Tandem Options. Where an Option granted under this Plan is intended
-----------------
to be an Incentive Stock Option, the Option shall not contain terms pursuant to
which the exercise of the Option would affect the Optionee's right to exercise
another Option, or vice versa, such that the Option intended to be an Incentive
Stock Option would be deemed a tandem stock option within the meaning of the
regulations under Section 422A of the Code.
7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
----------------------------------------------------------------
Specified. As determined by the Board on the date of grant, each Option shall
- ---------
be evidenced by an Option agreement (the "Option Agreement") that includes the
nontransferability provisions required by Section 10.2 hereof and specifies:
whether the Option is an Incentive Stock Option or a Nonstatutory Option; the
Option price; the duration of the Option; the number of shares of Stock to which
the Option applies; any vesting or exercisability restrictions which the Board
may impose; in the case of an Incentive Stock Option, a provision implementing
the $100,000 Limitation; and any other terms or conditions which
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the Board may impose. All such terms and conditions shall be determined by the
Board at the time of grant of the Option.
If not otherwise specified by the Board, the following terms and conditions
shall apply to Options granted under the Plan:
(a) Term. The duration of the Option shall be seven (7) years from the
----
date of grant.
(b) Exercise of Option. Unless an Option is terminated as provided
------------------
hereunder, an Optionee may exercise his Option for up to, but not in
excess of, the amounts of shares subject to the Option specified
below, based on the Optionee's number of years of continuous service
with Webb or a Subsidiary Corporation of Webb from the date on which
the Option is granted. In the case of an Optionee who is an Employee,
continuous service shall mean continuous employment; in the case of an
Optionee who is a Consultant, continuous service shall mean the
continuous provision of consulting services. In applying said
limitations, the amount of shares, if any, previously purchased by the
Optionee under the Option shall be counted in determining the amount
of shares the Optionee can purchase at any time. The Optionee may
exercise his Option in the following amounts:
(i) After one year of such continuous services for up to but not in
excess of thirty-three and one-third percent (33 1/3%) of the
shares originally subject to the Option;
(ii) After two years of such continuous services, for up to but not
in excess of sixty-six and two-thirds percent (66 2/3%) of the
shares originally subject to the Option; and
(iii) At the expiration of the third year of such continuous services
the Option may be exercised at any time and from time to time
within its terms in whole or in part, but it shall not be
exercisable after the expiration of seven (7) years (five (5)
years in the case of an Incentive Stock Option granted to a
Significant Shareholder) from the date on which it was granted.
The Board shall be free to specify terms and conditions other than those set
forth above, in its discretion.
All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 Option Price. No Incentive Stock Option granted pursuant to this Plan
------------
shall have an Option price that is less than the Fair Market Value of Stock on
the date the Option is granted. Incentive Stock Options granted to Significant
Shareholders shall have an Option price of not less than 110 percent of the Fair
Market Value of Stock on the date of grant. The Option price for Nonstatutory
Options shall be established by the Board and shall not be less than eighty-five
percent (8Series B) of the Fair Market Value of Stock on the date this Option is
granted.
7.5 Term of Options. Each Option shall expire at such time as the Board
---------------
shall determine when it is granted, provided however that no Option shall be
exercisable later than the tenth anniversary date of its grant. By its terms,
an Incentive Stock Option granted to a Significant Shareholder shall not be
exercisable after five years from the date of grant.
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7.6 Exercise of Options. Options granted under the Plan shall be
-------------------
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for all
Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the time that
-------
an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board, in Stock or in some other form; provided,
however, in the case of an Incentive Stock Option, that said other form of
payment does not prevent the Option from qualifying for treatment as an
"incentive stock option" within the meaning of the Code. Payment may also be
made, in the discretion of the Board, by delivery (including by FAX) to Webb or
its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions to a broker-dealer to sell or margin a sufficient
portion of the shares and deliver the sale or margin loan proceeds directly to
Webb to pay for the exercise price.
Article VIII. Written Notice, Issuance of
------------------------------------------
Stock Certificates, Stockholder Privileges
------------------------------------------
8.1 Written Notice. An Optionee wishing to exercise an Option shall give
--------------
written notice to Webb, in the form and manner prescribed by the Board. Full
payment for the shares exercised pursuant to the Option must accompany the
written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the
------------------------------
receipt of written notice and payment, Webb shall deliver to the Optionee or to
a nominee of the Optionee a certificate or certificates for the requisite number
of shares of Stock.
8.3 Privileges of a Stockholder. An Optionee or any other person entitled
---------------------------
to exercise an Option under this Plan shall not have stockholder privileges with
respect to any Stock covered by the Option until the date of issuance of a stock
certificate for such stock.
Article IX. Termination of Employment or Services
-------------------------------------------------
9.1 Death. Unless provided otherwise for a Nonstatutory Option, if an
-----
Optionee's employment in the case of an Employee, or provision of services as a
Consultant, in the case of a Consultant, terminates by reason of death, the
Option may thereafter be exercised at any time prior to the expiration date of
the Option or within 12 months after the date of such death, whichever period is
the shorter, by the person or persons entitled to do so under the Optionee's
will or, if the Optionee shall fail to make a testamentary disposition of an
Option or shall die intestate, the Optionee's legal representative or
representatives. The Option shall be exercisable only to the extent that such
Option was exercisable as of the date of death.
9.2 Termination Other Than For Cause Or Due to Death. Unless provided
------------------------------------------------
otherwise for a Nonstatutory Option, in the event of an Optionee's termination
of employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, other than by reason of
death, the Optionee may exercise such portion of his Option as was exercisable
by him at the date of such termination (the "Termination Date") at any time
within three (3) months of the Termination Date; provided, however, that where
the Optionee is an Employee, and is terminated due to disability within the
meaning of Code (S) 422A, he may exercise such portion of his Option as was
exercisable by him on his Termination Date within one year of his Termination
Date. In any event, the Option cannot be exercised after the expiration of the
term of the Option. Options not exercised within the applicable period specified
above shall terminate.
A-6
<PAGE>
In the case of an Employee, a change of duties or position within Webb or
an assignment of employment in a Subsidiary Corporation or Parent Corporation of
Webb, if any, or from such a Corporation to Webb, shall not be considered a
termination of employment for purposes of this Plan. The Option Agreements may
contain such provisions as the Board shall approve with reference to the effect
of approved leaves of absence upon termination of employment.
9.3 Termination for Cause. Unless provided otherwise for a Nonstatutory
---------------------
Option, in the event of an Optionee's termination of employment, in the case of
an Employee, or termination of the provision of services as a Consultant, in the
case of a Consultant, which termination is by Webb or a Subsidiary Corporation
for cause, any Option or Options held by him under the Plan, to the extent not
exercised before such termination, shall forthwith terminate.
Article X. Rights of Optionees
------------------------------
10.1 Service. Nothing in this Plan shall interfere with or limit in any
-------
way the right of Webb or a Subsidiary Corporation to terminate any Employee's
employment, or any Consultant's services, at any time, nor confer upon any
Employee any right to continue in the employ of Webb or a Subsidiary
Corporation, or upon any Consultant any right to continue to provide services to
Webb or a Subsidiary Corporation.
10.2 Nontransferability. All Options granted under this Plan shall be
------------------
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
Article XI. Optionee-Employee's
-------------------------------
Transfer or Leave of Absence
----------------------------
11.1 Optionee-Employee's Transfer or Leave of Absence. For Plan purposes--
------------------------------------------------
(a) A transfer of an Optionee who is an Employee from Webb to a
Subsidiary Corporation or Parent Corporation, or from one such
Corporation to another, or
(b) a leave of absence for such an Optionee (i) which is duly authorized
in writing by Webb or a Subsidiary Corporation, and (ii) if the
Optionee holds an Incentive Stock Option, which qualifies under the
applicable regulations under the Code which apply in the case of
incentive stock options,
shall not be deemed a termination of employment. However, under no
circumstances may an Optionee exercise an Option during any leave of absence,
unless authorized by the Board.
Article XII. Amendment,
-----------------------
Modification, and Termination of the Plan
-----------------------------------------
12.1 Amendment, Modification, and Termination of the Plan. The Board may
----------------------------------------------------
at any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders, may--
(a) increase the total amount of Stock which may be purchased through
Options granted under the Plan, except as provided in Article V;
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<PAGE>
(b) change the class of Employees or Consultants eligible to receive
Options;
No amendment, modification, or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.
Article XIII. Acquisition, Merger, or Liquidation
-------------------------------------------------
13.1 Acquisition. In the event that an Acquisition occurs with respect to
-----------
Webb, Webb shall have the option, but not the obligation, to cancel Options
outstanding as of the effective date of Acquisition, whether or not such Options
are then exercisable, in return for payment to the Optionees of an amount equal
to a reasonable estimate of an amount (hereinafter the "Spread") equal to the
difference between the net amount per share payable in the Acquisition, or as a
result of the Acquisition, less the exercise price of the Option. In estimating
the Spread, appropriate adjustments to give effect to the existence of the
Options shall be made, such as deeming the Options to have been exercised, with
Webb receiving the exercise price payable thereunder, and treating the shares
receivable upon exercise of the Options as being outstanding in determining the
net amount per share. For purposes of this section, an "Acquisition" shall mean
any transaction in which substantially all of our assets are acquired or in
which a controlling amount of our outstanding shares are acquired, in each case
by a single person or entity or an affiliated group of persons and/or entities.
For purposes of this Section a controlling amount shall mean more than 50% of
the issued and outstanding shares of stock of Webb. The Company shall have such
an option regardless of how the Acquisition is effectuated, whether by direct
purchase, through a merger or similar corporate transaction, or otherwise. In
cases where the acquisition consists of the acquisition of assets of Webb, the
net amount per share shall be calculated on the basis of the net amount
receivable with respect to shares upon a distribution and liquidation by Webb
after giving effect to expenses and charges, including but not limited to taxes,
payable by Webb before the liquidation can be completed.
Where Webb does not exercise its option under this Section 13.1 the
remaining provisions of this Article XIII shall apply, to the extent applicable.
13.2 Merger or Consolidation. Subject to any required action by the
-----------------------
stockholders, if Webb shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled in such merger or consolidation.
13.3 Other Transactions. A dissolution or a liquidation of Webb or a
------------------
merger and consolidation in which Webb is not the surviving corporation shall
cause every Option outstanding hereunder to terminate as of the effective date
of such dissolution, liquidation, merger or consolidation. However, the Optionee
either (i) shall be offered a firm commitment whereby the resulting or surviving
corporation in a merger or consolidation will tender to the Optionee an option
(the "Substitute Option") to purchase its shares on terms and conditions both as
to number of shares and otherwise, which will substantially preserve to the
Optionee the rights and benefits of the Option outstanding hereunder granted by
Webb, or (ii) shall have the right immediately prior to such dissolution,
liquidation, merger, or consolidation to exercise any unexercised Options
whether or not then exercisable, subject to the provisions of this Plan. The
Board shall have absolute and uncontrolled discretion to determine whether the
Optionee has been offered a firm commitment and whether the tendered Substitute
Option will substantially preserve to the Optionee the rights and benefits of
the Option outstanding hereunder. In any event, any Substitute Option for an
Incentive Stock Option shall comply with the requirements of Code Section
425(a).
Article XIV. Securities Registration
------------------------------------
14.1 Securities Registration. In the event that Webb shall deem it
-----------------------
necessary or desirable to register under the Securities Act of 1933, as amended,
or any other applicable statute, any Options or any Stock with respect to which
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<PAGE>
an Option may be or shall have been granted or exercised, or to qualify any such
Options or Stock under the Securities Act of 1933, as amended, or any other
statute, then the Optionee shall cooperate with Webb and take such action as is
necessary to permit registration or qualification of such Options or Stock.
Unless Webb has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
Webb, as a condition to the issuance of the shares pursuant to exercise of the
Option, to make a representation in writing (a) that he is acquiring such shares
for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, (b) that before any
transfer in connection with the resale of such shares, he will obtain the
written opinion of counsel for Webb, or other counsel acceptable to Webb, that
such shares may be transferred. The Company may also require that the
certificates representing such shares contain legends reflecting the foregoing.
Article XV. Tax Withholding
---------------------------
15.1 Tax Withholding. Whenever shares of Stock are to be issued in
---------------
satisfaction of Options exercised under this Plan, Webb shall have the power to
require the recipient of the Stock to remit to Webb an amount sufficient to
satisfy federal, state, and local withholding tax requirements.
Article XVI. Indemnification
----------------------------
16.1 Indemnification. To the extent permitted by law, each person who is
---------------
or shall have been a member of the Board shall be indemnified and held harmless
by Webb against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof, with
our approval, or paid by him in satisfaction of judgment in any such action,
suit, or proceeding against him, provided he shall give Webb an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under our articles of incorporation or bylaws, as a matter of
law, or otherwise, or any power that Webb or any Subsidiary Corporation may have
to indemnify them or hold them harmless.
Article XVII. Requirements of Law
---------------------------------
17.1 Requirements of Law. The granting of Options and the issuance of
-------------------
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan, and all agreements hereunder, shall be
-------------
construed in accordance with and governed by the laws of the State of Colorado.
Article XVIII. Effective Date of Plan
-------------------------------------
18.1 Effective Date. The Plan shall be effective on March 17, 1995, the
--------------
effective date of its adoption by the Board.
Article XIX. Compliance with Code.
----------------------------------
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19.1 Compliance with Code. Incentive Stock Options granted hereunder are
--------------------
intended to qualify as "incentive stock options" under Code (S) 422A. If any
provision of this Plan is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as incentive stock options under
the Code.
Article XX. No Obligation to Exercise Option.
---------------------------------------------
20.1 No Obligation to Exercise. The granting of an Option shall impose no
-------------------------
obligation upon the holder thereof to exercise such Option.
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<PAGE>
APPENDIX B
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
WEBB INTERACTIVE SERVICES, INC.
Pursuant to Section 7-106-102
of the Colorado Business Corporation Act
WEBB INTERACTIVE SERVICES, INC., a Colorado corporation (the
"Corporation"), hereby amends its Articles of Incorporation by adopting these
Articles of Amendment ("Articles of Amendment") pursuant to Section 7-106-102 of
---------------------
the Colorado Business Corporation Act to authorize a series of the Corporation's
previously authorized Preferred Stock, no par value (the "Preferred Stock"), as
---------------
follows:
1. The name of the Corporation is WEBB INTERACTIVE SERVICES, INC.
2. The Corporation's Board of Directors duly adopted these Articles
of Amendment on January 13, 2000.
3. These Articles of Amendment hereby amend Article IV of the
Corporation's Articles of Incorporation by adding the following language at the
end of such Article as follows:
[9]. SERIES B CONVERTIBLE PREFERRED STOCK
------------------------------------
1. DESIGNATION AND AMOUNT.
----------------------
The designation of this series, which consists of twelve thousand five
hundred (12,500) shares of Preferred Stock, is the "Series B Convertible
Preferred Stock" (the "Series B Preferred Stock") and the face amount of each
------------------------
share of Series B Preferred Stock (each, a "Preferred Share" and collectively,
---------------
the "Preferred Shares") shall be One Thousand Dollars ($1,000) per Preferred
----------------
Share (the "Stated Value"). The date on which the Preferred Shares are issued
------------
and sold, together with the related warrants (the "Warrants"), pursuant to the
--------
Securities Purchase Agreement, dated December 31, 1999, between the Corporation
and the Purchasers named therein (the "Securities Purchase Agreement") is
-----------------------------
referred to herein as the "Issue Date". The Corporation has agreed to register
----------
the shares of Corporation's Common Stock, no par value (the "Common Stock"),
------------
pursuant to a Registration Rights Agreement (the "Registration Rights
-------------------
Agreement"). The holders of Preferred Shares are each referred to as a "Holder"
- --------- ------
and, collectively, as the "Holders".
-------
B-1
<PAGE>
2. DIVIDENDS.
---------
The Series B Preferred Stock will not bear dividends.
3. PRIORITY.
--------
(a) Payment upon Dissolution.
------------------------
(i) Upon the occurrence of (x) any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, commenced by the Corporation or by its
creditors, as such, or relating to its assets or (y) the dissolution or other
winding up of the Corporation whether total or partial, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy proceedings,
or (z) any assignment for the benefit of creditors or any marshalling of the
material assets or material liabilities of the Corporation (each, a "Liquidation
-----------
Event"), no distribution shall be made to the holders of any shares of Junior
- -----
Securities (as defined below) unless, following the payment of preferential
amounts on all Senior Securities (as defined below), each Holder shall have
received the Liquidation Preference (as defined below) with respect to each
Preferred Share then held by such Holder. In the event that upon the occurrence
of a Liquidation Event, and following the payment of preferential amounts on all
Senior Securities (as defined below), the assets available for distribution to
the Holders and the holders of Pari Passu Securities are insufficient to pay the
Liquidation Preference with respect to all of the outstanding Preferred Shares
and the preferential amounts payable to such holders, the entire assets of the
Corporation shall be distributed ratably among the Preferred Shares and the
shares of Pari Passu Securities in proportion to the ratio that the preferential
amount payable on each such share (which shall be the Liquidation Preference in
the case of a Preferred Share) bears to the aggregate preferential amount
payable on all such shares.
(ii) "Liquidation Preference" with respect to a Preferred Share shall
----------------------
mean an amount equal to the Stated Value of such Preferred Share. "Junior
------
Securities" shall mean the Common Stock and all other capital stock of the
- ----------
Corporation that are not Pari Passu Securities or Senior Securities. "Pari Passu
----------
Securities" shall mean any securities ranking by their terms pari passu with the
- ----------
Series B Preferred Stock in respect of redemption or distribution upon
liquidation. "Senior Securities" shall mean (i) any debt issued or assumed by
-----------------
the Corporation and (ii) any securities of the Corporation which by their terms
have a preference over the Series B Preferred Stock in respect of redemption or
distribution upon liquidation.
4. CONVERSION.
----------
(a) Right to Convert. Each Holder shall have the right to convert, at any
----------------
time and from time to time after the Issue Date, all or any part of the
Preferred Shares held by such Holder into such number of fully paid and non-
assessable shares ("Conversion Shares") of the Common Stock as is determined in
-----------------
accordance with the terms hereof (a "Conversion").
----------
(b) Conversion Notice. In order to convert Preferred Shares, a Holder
-----------------
shall send to the Corporation by facsimile transmission, at any time prior to
11:59 p.m., eastern time, on the date on which such Holder wishes to effect such
Conversion (the "Conversion Date"), (i) a notice of conversion in substantially
---------------
the form of Exhibit A hereto (a "Conversion Notice") stating the number of
-----------------
Preferred Shares to be converted, the applicable Conversion Price (as defined
below) and a calculation of the number of shares of Common Stock issuable upon
such Conversion and (ii) a copy of the certificate or certificates representing
the Preferred Shares being converted. The Holder shall thereafter send the
original of the Conversion Notice and of such certificate or certificates to the
Corporation. The Corporation shall issue a new certificate for Preferred Shares
in the event that less than all of the Preferred Shares represented by a
certificate delivered to the Corporation in connection with a Conversion are
converted. Except as otherwise provided herein, upon delivery of a Conversion
Notice by a Holder in accordance with the terms hereof, such Holder shall, as of
the applicable Conversion Date, be deemed for all purposes to be record owner of
the Common Stock to which such Conversion Notice relates. In the case of a
dispute between the Corporation and a Holder as to the calculation of the
Conversion Price or the number of Conversion Shares issuable upon a Conversion
(including without limitation the calculation of any adjustment to the
Conversion Price pursuant
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<PAGE>
to Section 6 below), the Corporation shall issue to such Holder the number of
Conversion Shares that are not disputed within the time periods specified in
paragraph 4(e) below and shall submit the disputed calculations to its
independent accountant within two (2) Business Days of receipt of such Holder's
Conversion Notice. The Corporation shall cause such accountant to calculate the
Conversion Price as provided herein and to notify the Corporation and such
Holder of the results in writing no later than three (3) Business Days following
the Corporation's receipt of such Holder's Conversion Notice (such 3rd Business
Day being referred to herein as the "Disputed Share Calculation Date").
-------------------------------
Such accountant's calculation shall be deemed conclusive absent manifest error.
The fees of any such accountant shall be borne by the party whose calculations
were most at variance with those of such accountant.
(c) Number of Conversion Shares; Conversion Price.
---------------------------------------------
(A) The number of Conversion Shares to be delivered by the
Corporation pursuant to a Conversion shall be determined by dividing (i) the
aggregate Stated Value of the Preferred Shares to be converted by (ii) the
Conversion Price (as defined below) in effect on the applicable Conversion Date.
(B) "Conversion Price" shall be determined, subject to adjustment for
----------------
the events specified in Section 6 below, as follows: (A) during the period
beginning on the Issue Date and ending on the Trading Day (as defined below)
occurring immediately prior to the Effective Date (as defined below), the
Conversion Price shall be equal to the lower of (i) $20.00 (subject to
adjustment for the events specified in Section 6 hereof) and (ii) the Market
Price (as defined below) on the Issue Date (such lower price being referred to
herein as the "Initial Conversion Price"), (B) on and after the Effective Date
(and subject to further adjustment as specified in clause (C) below), the
Conversion Price shall be equal to the lower of (i) the Initial Conversion Price
and (ii) the Market Price on the Effective Date and (C) on and after the later
to occur of (x) the ninetieth (90/th/) day following the Effective Date and (y)
the two hundred and seventieth (270/th/) day following the Issue Date (the later
to occur of (x) and (y) being referred to as the "Determination Date"), the
------------------
Conversion Price shall be equal to the lowest of (i) the Initial Conversion
Price, (ii) the Conversion Price determined pursuant to clause (B) above, and
(iii) the Market Price on the Determination Date; provided, however, that the
-------- --------
adjustment to the Conversion Price effected pursuant to this clause (C) shall
not occur in the event that the Market Price on the Effective Date is at least
130% of the Initial Conversion Price. Notwithstanding the foregoing, in no event
will any Conversion Price calculated pursuant to clauses (A), (B) or (C) above
be lower than $8.00 (subject to adjustment for the events specified in Section 6
hereof).
(d) Certain Definitions. "Business Day" means any day on which the New
------------------- ------------
York Stock Exchange and commercial banks located in the City of New York are
open for business. "Closing Bid Price" means, with respect to the Common Stock,
-----------------
the closing bid price for the Common Stock occurring on a given Trading Day on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg Financial Markets or, if Bloomberg
Financial Markets is not then reporting such prices, by a comparable reporting
service of national reputation selected by the Corporation and reasonably
acceptable to each Holder of the then outstanding Preferred Shares
(collectively, "Bloomberg") or if the foregoing does not apply, the last
---------
reported bid price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
bid price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. (collectively, the "Applicable Reporting
--------------------
Entity"). If the Closing Bid Price cannot be calculated for such security on any
- ------
of the foregoing bases, the Closing Bid Price of such security shall be the fair
market value as reasonably determined by an independent investment banking firm
selected by all of the Holders of Preferred Shares, and reasonably acceptable to
the Corporation, with the costs of such appraisal to be borne by the
Corporation. "Effective Date" means the day on which the Registration Statement
--------------
(as defined in the Registration Rights Agreement) is declared effective by the
Securities and Exchange Commission. "Market Price" means the average Closing Bid
------------
Price for the Common Stock occurring during the period of ten (10) consecutive
Trading Days immediately preceding (but not including) the date of determination
(but in no event greater than the Closing Bid Price on the Trading Day
immediately preceding such date of determination); provided that if the Market
Price cannot be calculated as aforesaid, such Market Price shall be the fair
market value as reasonably determined by an investment banking firm selected by
the Corporation and reasonably acceptable to the Holders of a majority of the
Preferred Shares then
B-3
<PAGE>
outstanding, with the costs of such appraisal to be borne by the Corporation.
"Trading Day" means any day on which the Common Stock is purchased and sold on
-----------
the principal securities exchange or market on which the Common Stock is then
listed or traded.
(e) Delivery of Conversion Shares. Upon receipt of a Conversion Notice
-----------------------------
from a Holder, the Corporation shall, on or before the close of business on the
later to occur of (i) the third (3rd) Business Day following the Conversion Date
set forth in such Conversion Notice and (ii) with respect to Conversion Shares
that are the subject of a dispute as described in paragraph 4(b) above, the
Business Day immediately following the Disputed Share Calculation Date (the
applicable such Business Day being referred to herein as a "Delivery Date"),
-------------
issue and deliver or cause to be delivered to such Holder the number of
Conversion Shares to which such Holder is entitled to receive as provided
herein. The Corporation shall effect delivery of Conversion Shares to a Holder
by, as long as the transfer agent for the Corporation (the "Transfer Agent")
--------------
participates in the Depository Trust Company ("DTC") Fast Automated Securities
---
Transfer program ("FAST"), crediting the account of such Holder or its nominee
----
at DTC (as specified in the applicable Conversion Notice or otherwise in
writing) with the number of Conversion Shares required to be delivered, no later
than the close of business on such Delivery Date. In the event that Transfer
Agent is not a participant in FAST, or if Conversion Shares are not otherwise
eligible for delivery through FAST, or if a Holder so specifies in a Conversion
Notice or otherwise in writing on or before the Delivery Date, the Corporation
shall effect delivery of Conversion Shares by delivering to the Holder or its
nominee physical certificates representing such shares, no later than the close
of business on such Delivery Date. If any Conversion would create a fractional
Conversion Share, such fractional share shall be disregarded and the number of
Conversion Shares shall be the rounded to the nearest whole number of shares.
Conversion Shares delivered to a Holder shall not contain any restrictive legend
as long as (A) the resale, transfer, pledge or other disposition of such shares
is covered by an effective registration statement and such Holder represents in
writing to the Corporation that such shares have been or are being sold pursuant
to such registration statement, (B) such shares have been publicly sold pursuant
to Rule 144 ("Rule 144"), or (C) such shares can be sold pursuant to Rule 144(k)
--------
under Securities Act of 1933, as amended (the "Securities Act"), or any
--------------
successor rule or provision.
(f) Failure to Deliver Conversion Shares.
------------------------------------
(i) In the event that, as a result of any willful action or failure
to act on the part of the Corporation (whether under these Articles of
Amendment, under any other Transaction Document (as defined in the Securities
Purchase Agreement) or otherwise, including without limitation a failure by the
Corporation to have a sufficient number of shares of Common Stock authorized and
reserved for issuance pursuant to conversions of Preferred Shares), a Holder has
not received certificates (without any restrictive legend in the circumstances
described in clause (A), (B) or (C) of paragraph 4(e) above) representing the
number of Conversion Shares specified in the applicable Conversion Notice on or
before the Delivery Date therefor (a "Conversion Default"), and such failure to
------------------
deliver certificates continues for ten (10) Business Days following the delivery
of written notice thereof from such Holder (such tenth Business Day being
referred to herein as the "Conversion Default Date"), the Corporation shall pay
-----------------------
to such Holder payments ("Conversion Default Payments") in the amount of (i) "N"
---------------------------
multiplied by (ii) the aggregate Stated Value of the Preferred Shares which are
- -------------
the subject of such Conversion Default multiplied by (iii) one percent (1%),
-------------
where "N" equals the number of days elapsed between the Conversion Default Date
and the earlier to occur of (i) the date on which all of the certificates
(without any restrictive legend in the circumstances described in clause (A),
(B) or (C) of paragraph 4(e) above) representing such Conversion Shares are
issued and delivered to such Holder, (ii) the date on which such Preferred
Shares are redeemed pursuant to the terms hereof and (iii) the date on which a
Withdrawal Notice (as defined below) is delivered to the Corporation. Amounts
payable hereunder shall be paid to the Holder in immediately available funds on
or before the fifth (5th) Business Day of the calendar month immediately
following the calendar month in which such amounts have accrued.
(ii) In the event that a Holder has not received certificates (without
any restrictive legend in the circumstances described in clause (A), (B) or (C)
of paragraph 4(e) above) representing the Conversion Shares by the tenth (10th)
Business Day following a Conversion Default as a result of any willful action or
any failure to act on the part of the Corporation (whether under these Articles
of Amendment, under any other Transaction Document (as defined in the Securities
Purchase Agreement) or otherwise, including without limitation a failure by the
B-4
<PAGE>
Corporation to have a sufficient number of shares of Common Stock authorized and
reserved for issuance pursuant to conversions of Preferred Shares), such Holder
may, upon written notice (a "Withdrawal Notice") delivered to the Corporation on
-----------------
such Business Day or on any Business Day thereafter (unless, prior to the
delivery of such notice, such Conversion Shares are delivered to such Holder),
withdraw its Conversion Notice with respect to such Conversion Shares and regain
its rights as a Holder of the Preferred Shares that are the subject of such
Conversion Default. In such event, the Conversion Price in effect when such
Preferred Shares are thereafter converted shall be equal to the lowest
Conversion Price or (if lower) Market Price occurring on or after the date of
such Conversion Notice reduced by one percent (1%) for each day occurring during
the period immediately following such 10th Business Day until the day on which
the such Holder delivers a Withdrawal Notice to the Corporation; provided,
however, that the maximum percentage by which such Conversion Price may be
reduced hereunder shall be fifty percent (50%). (For example, if such Conversion
Default were to continue for five days following such 10th Business Day, such
Conversion Price would be reduced by 5%; if for ten days, by 10%; and for fifty
days or more, 50%, so that the number of Conversion Shares deliverable upon
conversion of such Preferred Shares would be increased proportionately). Upon
delivery by a Holder of a Withdrawal Notice, such Holder shall retain all of
such Holder's rights and remedies with respect to the Corporation's failure to
deliver such Conversion Shares (including without limitation the right to
receive the cash payments specified in subparagraph 4(f)(i) above).
(iii) In addition to any other remedies provided herein, each Holder
shall have the right to pursue actual damages for the Corporation's failure to
issue and deliver Conversion Shares on the applicable Delivery Date (including,
without limitation, damages relating to any purchase of shares of Common Stock
by such Holder to make delivery on a sale lawfully effected in anticipation of
receiving Conversion Shares upon Conversion, such damages to be in an amount
equal to (A) the aggregate amount paid by such Holder for the shares of Common
Stock so purchased minus (B) the aggregate Conversion Price for such Conversion
-----
Shares, and such Holder shall have the right to pursue all other remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief).
(g) Conversion at Maturity. On the Determination Date, all Preferred
----------------------
Shares then held by the Holders (and with respect to which a Holder has not
submitted a Notice of Conversion) shall be automatically converted into the
number of shares of Common Stock equal to the Stated Value of such Preferred
Shares divided by the Conversion Price then in effect (a "Conversion at
---------- -------------
Maturity"); provided, however, that if, on the Determination Date, (i) the
- --------
number of shares of Common Stock authorized, unissued and unreserved for all
other purposes, or held in the Corporation's treasury, is not sufficient to
effect the issuance and delivery of the number of Conversion Shares into which
all outstanding Preferred Shares are then convertible, (ii) the Common Stock is
not actively traded on either the Nasdaq SmallCap or National Market, (iii) a
Mandatory Redemption Event (as defined herein) has occurred and is continuing,
(iv) the conversion of a Holder's Preferred Shares pursuant to the Conversion at
Maturity would violate the provisions of Section 5 below; provided, however,
that in such event the Conversion at Maturity would apply solely to those
Preferred Shares the conversion of which would not violate Section 5 as of the
Determination Date and provided, further, that the determination on the
Determination Date of a Holder's beneficial ownership of Common Stock pursuant
to paragraph 5(b) above shall exclude any shares of Common Stock acquired by
such Holder otherwise than pursuant to the conversion or exercise of securities
outstanding on the day following the issuance of the Preferred Stock, or (v) the
Registration Statement (as defined in the Registration Rights Agreement) is not
effective and available for the resale of all Conversion Shares and Warrant
Shares issuable on the Determination Date upon the conversion or exercise of all
Preferred Shares and Warrants then outstanding (without regard to any
limitations on such conversion or exercise), each Holder shall have the option,
upon written notice to the Corporation, to regain its rights as a holder of
Preferred Shares (which, in the circumstances described in clause (iv) above,
would comprise the Preferred Shares not converted pursuant to the proviso of
clause (iv)), including without limitation, the right to convert such Preferred
Shares in accordance with the terms of paragraphs 4(a) through 4(f) hereof and,
upon delivery of such notice, such Preferred Shares shall not be subject to a
Conversion at Maturity hereunder until the thirtieth (30th) day following the
later of (a) the date on which the event specified in (i), (ii), (iii), (iv), or
(v) is no longer continuing and (b) the date on which the Corporation delivers
to each Holder written notice to such effect, and in such event, such thirtieth
day shall be deemed to be the Determination Date for purposes of these Articles
of Amendment; provided, however, that in the case of an event specified in
clause (iv), which (A) relates to the provisions of paragraph 5(a), the
Conversion Price for any conversions occurring after the happening of an event
(including
B-5
<PAGE>
without limitation the approval of the Corporation's stockholders described in
paragraph 5(a)) pursuant to which the applicability of such paragraph to the
conversion of Preferred Shares is eliminated shall be equal to the lowest of (i)
the Initial Conversion Price, (ii) the Conversion Price in effect on the
Determination Date, and (iii) the Market Price on the first Trading Day on which
paragraph 5(a) is no longer applicable, or (B) relates to the provisions of
paragraph 5(b), the Conversion Price for any conversions occurring after the
Determination Date shall be equal to the Conversion Price on the Determination
Date. In the event that the Registration Statement (as defined in the
Registration Rights Agreement) has not been effective and available to each
Holder for the resale of the maximum number of Conversion Shares and Warrant
Shares issuable upon conversion or exercise of such Holder's Preferred Shares
and Warrants, respectively (without regard to any limitations on such conversion
or exercise), for any period or periods on or after the Effective Date and
before the Determination Date (collectively, a "Blackout Period"), the
Determination Date (the "Original Determination Date") shall be delayed for a
period of days equal to the Blackout Period (the Trading Day immediately
following last day of such period being referred to herein as the "Delayed
Determination Date") and the Delayed Determination Date shall be deemed to be
the Determination Date for the purposes of these Articles of Amendment;
provided, however, that if the Determination Date is delayed because a Blackout
Period has occurred, the Conversion Price in effect on and after the Original
Determination Date (but prior to the Delayed Determination Date) shall be equal
to the lowest of (i) the Initial Conversion Price, (ii) the Conversion Price in
effect on the Trading Day immediately prior to the Original Determination Date,
and (iii) the Market Price on the Original Determination Date and provided,
further, that the Conversion Price in effect on the Delayed Determination Date
shall be equal to the lowest of (i) the Initial Conversion Price, (ii) the
Conversion Price in effect on the Trading Day immediately prior to the Delayed
Determination Date, and (iii) the Market Price on the Delayed Determination
Date. Notwithstanding the foregoing, in no event will any Conversion Price
calculated as set forth in this paragraph 4(g) be lower than $8.00 (subject to
adjustment for the events specified in Section 6 hereof). If a Conversion at
Maturity occurs, the Corporation and each Holder shall follow the procedures for
Conversion set forth in this Section 4, with the Determination Date deemed to be
the Conversion Date, except that the Holder shall not be required to send a
Conversion Notice as contemplated by paragraph 4(b).
5. CONVERSION LIMITATIONS.
----------------------
In no event shall a Holder be permitted to convert any Preferred Shares in
excess of the number of such shares, upon the Conversion of which:
(a) the number of Conversion Shares to be issued pursuant to such
Conversion, when added to the number of shares of Common Stock issued pursuant
to all prior Conversions of Preferred Shares and all prior exercises of the
Warrants by the Holders thereof, would exceed the maximum number of shares of
Common Stock issuable by the Corporation without stockholder approval in
compliance with the continued listing requirements of the Nasdaq SmallCap Market
(the "Cap Amount"), except that such limitation shall not apply in the event
----------
that (i) the Corporation obtains the approval of the holders of a majority of
the Corporation's Common Stock for the issuance of Common Stock in excess of the
Cap Amount (it being understood that any Holder whose Cap Allocation Amount (as
defined below) represents one hundred and seventy-five percent (175%) or less of
(A) the number of Conversion Shares and Warrant Shares into which the Preferred
Shares and Warrants then held by such Holder are convertible or exercisable at
the Conversion Price or the Exercise Price, as the case may be, then in effect
(without regard to any restrictions or limitations on such conversion or
exercise) plus (B) the number of Conversion Shares and Warrant Shares into which
----
such Holder has previously converted Preferred Shares and exercised the
Warrants, respectively, shall have the right to require the Corporation, upon
written notice to such effect, to seek such approval by means of a special
meeting of stockholders to be held as soon as practicable following the
Corporation's receipt of such notice, but in any case within ninety (90) days
following such receipt, and to recommend such approval to its stockholders at
such special meeting) or (ii) the Holders of a majority of the number of
Preferred Shares then outstanding (or, if no Preferred Shares are outstanding,
the holders of Warrants exercisable into majority of the Warrant Shares then
issuable) obtain an opinion of counsel reasonably satisfactory to the
Corporation that such approval is not required. Until such approval or opinion
is obtained, no purchaser of Preferred Shares pursuant to the Securities
Purchase Agreement (each, a "Purchaser" and together the "Purchasers") shall be
---------
issued, upon Conversion of the Preferred Shares, Conversion Shares in an amount
greater than the product of (A) the Cap
B-6
<PAGE>
Amount times (B) a fraction, the numerator of which is the number of Preferred
-----
Shares issued to such Purchaser pursuant to the Securities Purchase Agreement
and the denominator of which is the aggregate amount of all of the Preferred
Shares issued to the Purchasers pursuant to the Securities Purchase Agreement
(the "Cap Allocation Amount"). In the event that any Purchaser shall sell or
---------------------
otherwise transfer any of such Purchaser's Preferred Shares or Warrants, the
transferee shall be allocated a pro rata portion of such Purchaser's Cap
Allocation Amount. In the event that any Holder converts all of such Holder's
Preferred Shares and Warrants into a number of Conversion Shares and Warrant
Shares which, in the aggregate, is less than such Holder's Cap Allocation
Amount, then the difference between such Holder's Cap Allocation Amount and the
number of Conversion Shares and Warrant Shares actually issued to such Holder
shall be allocated to the respective Cap Allocation Amounts of the remaining
Holders of Preferred Shares on a pro rata basis in proportion to the number of
Preferred Shares then held by each such Holder; or
(b) (x) the number of shares of Common Stock beneficially owned by such
Holder (other than shares of Common Stock issuable upon conversion of such
Preferred Shares or which would otherwise be deemed beneficially owned except
for being subject to a limitation on conversion or exercise analogous to the
limitation contained in this paragraph 5(b)) plus (y) the number of shares of
----
Common Stock issuable upon the Conversion of such Preferred Shares, would be
equal to or exceed (z) 4.99% of the number of shares of Common Stock then issued
and outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this paragraph applies (and without limiting any rights the Corporation may
otherwise have), the Corporation may rely on the Holder's determination of
whether Preferred Shares are convertible pursuant to the terms hereof, the
Corporation having no obligation whatsoever to verify or confirm the accuracy of
such determination, and the submission of a Conversion Notice by the Holder
shall be deemed to be the Holder's representation that the Preferred Shares
specified therein are convertible pursuant to the terms hereof. This paragraph
may be amended by all of the Holders of Preferred Shares then outstanding only
with the consent of the holders of a majority of the shares of Common Stock then
outstanding. Nothing contained herein shall be deemed to restrict the right of
a Holder to convert Preferred Shares at such time as the Conversion thereof will
not violate the provisions of this paragraph 5(b).
6. ADJUSTMENTS TO CONVERSION PRICE.
-------------------------------
(a) Adjustment to Fixed Conversion Price Due to Stock Split,
--------------------------------------------------------
Stock Dividend, Etc. If, prior to the Conversion of all of the Preferred Shares,
- --------------------
(A) the number of outstanding shares of Common Stock is increased by a stock
split, a stock dividend on the Common Stock, a reclassification of the Common
Stock, or other similar event, the Conversion Price shall be proportionately
reduced, which reduction shall be effected on the date on which the Corporation
announces such event; or (B) the Corporation issues Common Stock, whether upon
the exercise of rights, warrants, securities convertible or exercisable into
Common Stock or otherwise, at a price (the "Issue Price") that is less than the
-----------
current Market Price thereof at the time of such issuance, the Conversion Price
that would otherwise be in effect on a particular date following such issuance
shall be proportionately reduced in order to account for the difference between
the Issue Price and such Market Price; provided, however, that if the Issue
Price is lower than the Conversion Price otherwise in effect on the date of such
issuance, such Conversion Price will be reduced to the lower of the amount
determined by this clause (B) and the amount determined by clause (D) below; (C)
the number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares or other similar event, the
Conversion Price shall be proportionately increased, which increase shall be
effected on the date on which the Corporation announces such event; or (D) the
Corporation issues Common Stock, whether upon the exercise of rights, warrants,
securities convertible or exercisable into Common Stock or otherwise, at a price
that is lower than the Conversion Price in effect on any Conversion Date
following the date of such issuance, such Conversion Price shall be reduced to
such lower price.
In no event shall any adjustment pursuant to clause (B) or clause (D) above
result in a Conversion Price that exceeds the Conversion Price that would
otherwise apply in the absence of such adjustment.
(b) Adjustment to Conversion Price During Reference Period. If, prior to
------------------------------------------------------
the Conversion of all of the Preferred Shares, the number of outstanding shares
of Common Stock is increased or decreased by a stock split, a
B-7
<PAGE>
stock dividend on the Common Stock, a combination, a reclassification of the
Common Stock or other similar event, and such event takes place during the
reference period for the determination of the Conversion Price for any
Conversion thereof, the Conversion Price shall be calculated giving appropriate
effect to the stock split, stock dividend, combination, reclassification or
other similar event for all Trading Days occurring during such reference period.
(c) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
--------------------------------------------
Conversion of all of the Preferred Shares, there shall be any merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of stock or securities
of the Corporation or another entity (an "Exchange Transaction"), then such
--------------------
Holder shall (A) upon the consummation of such Exchange Transaction, have the
right to receive, with respect to any shares of Common Stock then held by such
Holder, or which such Holder is then entitled to receive pursuant to a
Conversion Notice previously delivered by such Holder (and without regard to
whether such shares contain a restrictive legend or are freely-tradable), the
same amount and type of consideration (including without limitation, stock,
securities and/or other assets) and on the same terms as a holder of shares of
Common Stock would be entitled to receive in connection with the consummation of
such Exchange Transaction (the "Exchange Consideration"), and (B) upon the
----------------------
Conversion of Preferred Shares occurring subsequent to the consummation of such
Exchange Transaction (a "Subsequent Conversion"), have the right to receive the
---------------------
Exchange Consideration which such Holder would have been entitled to receive in
connection with such Exchange Transaction had such shares been converted
immediately prior to such Exchange Transaction at the Conversion Price
applicable on the Conversion Date relating to such Subsequent Conversion, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such Holder to the end that the provisions hereof (including,
without limitation, provisions for the adjustment of the Conversion Price and of
the number of shares of Common Stock issuable upon a Conversion) shall
thereafter be applicable as nearly as may be practicable in relation to any
securities thereafter deliverable upon the Conversion of such Preferred Shares.
The Corporation shall not effect any Exchange Transaction unless (i) it first
gives to each Holder twenty (20) days prior written notice of such Exchange
Transaction (an "Exchange Notice"), and makes a public announcement of such
---------------
event at the same time that it gives such notice (it being understood that the
filing by the Corporation of a Form 8-K for the purpose of disclosing the
anticipated consummation of the Exchange Transaction shall constitute an
Exchange Notice for purposes of this provision) and (ii) the resulting successor
or acquiring entity (if not the Corporation) assumes by written instrument the
obligations of the Corporation hereunder, including the terms of this
subparagraph 6(c), and under the Securities Purchase Agreement and the
Registration Rights Agreement.
(d) Distribution of Assets. If the Corporation or any of its subsidiaries
----------------------
shall declare or make any distribution of cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or the immediately
preceding year), or any rights to acquire any of the foregoing, to holders of
Common Stock (or to a holder, other than the Corporation, of the common stock of
any such subsidiary) as a partial liquidating dividend, by way of return of
capital or otherwise, including any dividend or distribution in shares of
capital stock of a subsidiary of the Corporation (collectively, a
"Distribution"), then each Holder shall be entitled to receive, at the same time
------------
as such assets are received by a holder of such stock, an amount and type of
such Distribution as though such Holder were a holder on the record date
therefor of a number of shares of Common Stock determined by dividing the
Liquidation Preference of the Preferred Shares held by such Holder on such
record date by the lower of the Market Price and the Conversion Price in effect
on such record date (such number of shares to be determined without regard to
any limitation on conversion of the Preferred Shares that may exist pursuant to
these Articles of Amendment or otherwise).
(e) Adjustment Due to Major Announcement. If the Corporation (i) makes a
------------------------------------
public announcement that it intends to enter into a Change of Control
Transaction (as defined below) or (ii) any person, group or entity (including
the Corporation) publicly announces a tender offer, exchange offer or other
transaction to purchase 50% or more of the Common Stock (such announcement being
referred to herein as a "Major Announcement" and the date on which a Major
------------------
Announcement is made, the "Announcement Date"), then, in the event that a Holder
-----------------
seeks to convert Preferred Shares on or following the Announcement Date, the
Conversion Price shall, effective upon the Announcement Date and continuing
through the fifth (5th) Business Day following the earlier to occur of
B-8
<PAGE>
the consummation of the proposed transaction or tender offer, exchange offer or
other transaction and the Abandonment Date (as defined below), be equal to the
lowest of (x) the Conversion Price in effect on the Announcement Date, (y) the
Market Price on the Announcement Date and (z) the Conversion Price that would
otherwise be in effect on the Conversion Date for such Preferred Shares.
"Abandonment Date" means with respect to any proposed transaction or tender
-----------------
offer, exchange offer or other transaction for which a public announcement as
contemplated by this paragraph 6(e) has been made, the date upon which the
Corporation (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) publicly announces the termination or abandonment
of the proposed transaction or tender offer, exchange offer or another
transaction which caused this paragraph 6(e) to become operative.
(f) Issuance of Other Securities. If, at any time after the Closing Date,
----------------------------
the Corporation shall issue any securities which are convertible into or
exchangeable for Common ("Convertible Securities") either (i) at a conversion or
exchange rate based on a discount from the Market Price of the Common Stock at
the time of conversion or exercise or (ii) with a fixed conversion or exercise
price less than the Conversion Price, then, at the Holder's option: (x) in the
case of clause (i), the Conversion Price in respect of any conversion of the
Preferred Shares after such issuance shall be calculated utilizing the greatest
discount applicable to any such Convertible Securities; and (y) in the case of
clause (ii), the Conversion Price shall be proportionately reduced. If the
Corporation shall issue any Convertible Securities that are convertible into or
exchangeable for shares of Common Stock on a basis different from that of these
Articles of Amendment, each Holder may elect that the provisions of these
Articles of Amendment be revised to incorporate such different provisions with
respect to conversion or exchange, subject to the limitations of Section 5
hereof; provided, however, Purchaser may not select provisions on a non-
integrated basis which would have an inequitable result on the intent of this
provision.
(g) Adjustment Pursuant to Other Agreements. In addition to and without
---------------------------------------
limiting in any way the adjustments provided in this Section 6, the Conversion
Price shall be adjusted as may be required by the provisions of the Registration
Rights Agreement and/or by the provisions of the Securities Purchase Agreement.
(h) No Fractional Shares. If any adjustment under this Section would
--------------------
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon Conversion shall be rounded to the
nearest whole number of shares.
(i) Exceptions to Adjustment of Conversion Price. No adjustment to the
--------------------------------------------
Conversion Price will be made (i) upon the exercise or conversion of any
warrants, options or convertible securities issued and outstanding on the date
hereof in accordance with the terms of such securities as of such date; (ii)
upon the grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee, consultant or director benefit plan of
the Corporation now existing or to be implemented in the future, so long as the
issuance of such stock or options is approved by a majority of the non-employee
members of the Board of Directors of the Corporation or a majority of the
members of a committee of non-employee directors established for such purpose;
(iii) upon the issuance of the Conversion Shares; or (iv) upon the exercise of
the Warrants.
7. REDEMPTION.
----------
(a) Mandatory Redemption. In the event that a Mandatory Redemption Event
--------------------
(as defined below) occurs, each Holder shall have the right to require the
Corporation to redeem all or any portion of the Preferred Shares held by such
Holder (a "Mandatory Redemption") at the Mandatory Redemption Price (as defined
--------------------
herein). In order to exercise its right to effect a Mandatory Redemption, a
Holder must deliver a written notice (a "Mandatory Redemption Notice") to the
---------------------------
Corporation at any time on or before 11:59 p.m. (eastern time) on the third
(3rd) Business Day following the Business Day on which the Mandatory Redemption
Event to which such Mandatory Redemption Notice relates is no longer continuing.
The Mandatory Redemption Notice shall specify the effective date of such
Mandatory Redemption (the "Mandatory Redemption Date") and the number of such
-------------------------
shares to be redeemed.
B-9
<PAGE>
(b) Mandatory Redemption Event. Each of the following events shall be
--------------------------
deemed a "Mandatory Redemption Event":
--------------------------
(i) the Corporation fails, as a result of (x) not having a
sufficient number of shares of Common Stock authorized and reserved for
issuance, (y) failing to obtain the approval of its stockholders as required by
paragraph 5(a) hereof or by paragraph 4.12 of the Securities Purchase Agreement,
or (z) for any other reason within the control of the Corporation, to issue
shares of Common Stock to a Holder and deliver certificates representing such
shares (without any restrictive legend under the circumstances described in
paragraph 4(e) hereof) to such Holder as and when required by the provisions
hereof upon conversion of any Preferred Shares, and such failure continues for
ten (10) Business Days;
(ii) the Corporation breaches, in a material respect, any covenant or
other material term or condition of these Articles of Amendment, the Securities
Purchase Agreement, the Registration Rights Agreement, the Warrants or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated thereby, and such breach continues for a
period of five (5) Business Days after written notice thereof to the Corporation
from a Holder;
(iii) any material representation or warranty made by the Corporation
in the Securities Purchase Agreement, the Registration Rights Agreement, the
Warrants or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby or thereby is
inaccurate or misleading in any material respect as of the date such
representation or warranty was made;
(iv) (x) the sale, conveyance or disposition of all or substantially
all of the assets of the Corporation, the effectuation of a transaction or
series of transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other entity, immediately
following which the prior stockholders of the Corporation fail to own, directly
or indirectly, at least fifty percent (50%) of the surviving entity or (y) a
transaction or series of transactions in which any person acquires control of
the Corporation (each a "Change of Control Transaction"). For purposes hereof,
"control" shall mean, with respect to the Corporation, the ability to direct the
-------
business, operations or management of the Corporation, whether through an equity
interest therein or otherwise; and
(v) the Common Stock is not quoted on the Nasdaq SmallCap Market or
Nasdaq National Market or listed on the New York Stock Exchange or the American
Stock Exchange, or trading in the Common Stock on such market or exchange is
suspended and such suspension is in effect for more than five consecutive (5)
Trading Days, and such suspension or failure to be so quoted or listed occurs as
a result of any willful action or failure to act on the part of the Corporation.
(c) Mandatory Redemption Price. The "Mandatory Redemption Price" shall be
-------------------------- --------------------------
equal to the greater of (i) the Liquidation Preference of the Preferred Shares
being redeemed multiplied by one hundred and twenty five percent (125%) and (ii)
-------------
an amount determined by dividing the Liquidation Preference of the Preferred
Shares being redeemed by the Conversion Price in effect on the Mandatory
Redemption Date and multiplying the resulting quotient by the average Closing
Trade Price for the Common Stock on the five (5) Trading Days immediately
preceding (but not including) the Mandatory Redemption Date.
(d) Payment of Mandatory Redemption Price.
-------------------------------------
(i) The Corporation shall pay the Mandatory Redemption Price to the
Holder exercising its right to redemption on the later to occur of (i) the fifth
(5th) Business Day following the Mandatory Redemption Date and (ii) the date on
which the Preferred Shares being redeemed are delivered by the Purchaser to the
Corporation for cancellation (the "Mandatory Redemption Payment Date").
---------------------------------
(ii) If Corporation fails to pay the Mandatory Redemption Price to
the Holder on or before the Mandatory Redemption Date, the Holder shall be
entitled to interest thereon, from and after the Mandatory Redemption Payment
Date until the Mandatory
B-10
<PAGE>
Redemption Price has been paid in full, at an annual rate equal to the Default
Interest Rate.
(iii) If the Corporation fails to pay the Mandatory Redemption Price
within ten (10) Business Days of the Mandatory Redemption Date, then the Holder
shall have the right to regain its rights as a Holder of the Series B Preferred
Stock and, upon written notice to such effect from the Holder, the Corporation
shall return to such Holder the certificates representing the Preferred Shares
that were delivered to the Corporation in connection with such Mandatory
Redemption; in such event, the Conversion Price otherwise applicable to future
Conversions of the Preferred Shares shall be reduced by one percent (1%) for
each day beyond such 10th Business Day in which the failure to pay the Mandatory
Redemption Price continued until the date of such notice; provided, however,
that the maximum percentage by which such Conversion Price may be reduced
hereunder shall be fifty percent (50%).
8. MISCELLANEOUS.
-------------
(a) Transfer of Preferred Shares. Upon notice to the Corporation, a
-----------------------------
Holder may sell or transfer all or any portion of the Preferred Shares to any
person or entity as long as such sale or transfer is the subject of an effective
registration statement under the Securities Act or is exempt from registration
thereunder and otherwise is made in accordance with the terms of the Securities
Purchase Agreement. Notwithstanding the foregoing, no Holder shall knowingly and
voluntarily sell any Preferred Shares to an entity that is a competitor of the
Corporation. From and after the date of such sale or transfer, the transferee
thereof shall be deemed to be a Holder. Upon any such sale or transfer, the
Corporation shall, promptly following the return of the certificate or
certificates representing the Preferred Shares that are the subject of such sale
or transfer, issue and deliver to such transferee a new certificate in the name
of such transferee.
(b) Notices. Except as otherwise provided herein, any notice, demand or
-------
request required or permitted to be given pursuant to the terms hereof, the form
or delivery of which notice, demand or request is not otherwise specified
herein, shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission on or before 5:00 p.m.,
eastern time, on a Business Day or, if such day is not a Business Day, on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the day actually received if
deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed to the parties as follows:
If to the Corporation:
WEBB Interactive Services, Inc.
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Tel: 303-296-9200
Fax: 303-(303) 292-5039
Attention: William Cullen
with a copy to:
Gray, Plant, Mooty, Mooty & Bennett, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, MN 55402-3796
Telecopy: (612) 333-0066
Attention: Lindley S. Branson, Esq.
and if to any Holder, to such address for such Holder as shall be
designated by such Holder in writing to the Corporation.
B-11
<PAGE>
(c) Lost or Stolen Certificate. Upon receipt by the Corporation of
--------------------------
evidence of the loss, theft, destruction or mutilation of a certificate
representing Preferred Shares, and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Corporation and the
Transfer Agent, and upon surrender and cancellation of such certificate if
mutilated, the Corporation shall execute and deliver to the Holder a new
certificate identical in all respects to the original certificate.
(d) No Voting Rights. Except as provided by applicable law and paragraph
----------------
8(g) below, the Holders of the Preferred Shares shall have no voting rights with
respect to the business, management or affairs of the Corporation; provided that
the Corporation shall provide each Holder with prior notification of each
meeting of stockholders (and copies of proxy statements and other information
sent to such stockholders).
(e) Remedies, Characterization, Other Obligations, Breaches and Injunctive
----------------------------------------------------------------------
Relief. The remedies provided to a Holder in these Articles of Amendment shall
- ------
be cumulative and in addition to all other remedies available to such Holder
under these Articles of Amendment or under any Transaction Document (as defined
in the Securities Purchase Agreement), at law or in equity (including without
limitation a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing contained herein shall limit
such Holder's right to pursue actual damages for any failure by the Corporation
to comply with the terms of these Articles of Amendment. The Corporation agrees
with each Holder that there shall be no characterization concerning this
instrument other than as specifically provided herein. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder hereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Corporation (or the performance thereof). The Corporation
acknowledges that a material breach by it of its obligations hereunder will
cause irreparable harm to the Holders and that the remedy at law for any such
breach may be inadequate. The Corporation agrees, in the event of any such
breach or threatened breach, each Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(f) Failure or Delay not Waiver. No failure or delay on the part of a
---------------------------
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
(g) Protective Provisions.
---------------------
So long as shares of Series B Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval of the Holders of at
least two-thirds (2/3) of outstanding shares of Series B Preferred Stock:
(i) alter, change, modify or amend (x) the terms of the Series
B Preferred Stock in any way or (y) the terms of any other capital stock of the
Corporation so as to affect adversely the Series B Preferred Stock;
(ii) create any new class or series of capital stock having a
preference over or ranking pari passu with the Series B Preferred Stock as to
redemption or distribution of assets upon a Liquidation Event or any other
liquidation, dissolution or winding up of the Corporation;
(iii) increase the authorized number of shares of Series B
Preferred Stock;
(iv) re-issue any shares of Series B Preferred Stock which have
been converted or redeemed in accordance with the terms hereof;
(v) issue any Pari Passu Securities or Senior Securities;
B-12
<PAGE>
(vi) redeem, or declare, pay or make any provision for any
dividend or distribution with respect to, the Common Stock or any other capital
stock of the Corporation ranking junior to the Series B Preferred Stock as to
the distribution of assets upon liquidation, dissolution or winding up of the
Corporation; or
(vii) issue any Series B Preferred Stock except pursuant to the
terms of the Securities Purchase Agreement.
In the event that the Holders of at least two-thirds of the outstanding
shares of Series B Preferred Stock agrees to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series B Preferred
Stock pursuant to the terms hereof, then the Corporation will deliver notice of
such approved change to the holders of the Series B Preferred Stock that did not
agree to such alteration or change (the "Dissenting Holders") and the Dissenting
------------------
Holders shall have the right for a period of thirty (30) days following such
delivery to convert their Preferred Shares pursuant to the terms hereof as they
existed prior to such alteration or change, or to continue to hold such
Preferred Shares. No such change shall be effective to the extent that, by its
terms, it applies to less than all of the Holders of Preferred Shares then
outstanding.
[Remainder of Page Intentionally Left Blank]
B-13
<PAGE>
IN WITNESS WHEREOF, the Corporation has duly executed these Articles of
Amendment as of the 16th day of February, 2000.
WEBB INTERACTIVE SERVICES, INC.
By:_________________________________
William R. Cullen
Chief Financial Officer
B-14
<PAGE>
EXHIBIT A
---------
NOTICE OF CONVERSION
The undersigned hereby elects to convert shares of Series B Convertible
Preferred Stock (the "Preferred Stock"), represented by stock certificate No(s).
_______________ (the "Preferred Stock Certificates"), into shares of common
stock ("Common Stock") of WEBB INTERACTIVE SERVICES, INC. according to the terms
and conditions of the Articles of Amendment relating to the Preferred Stock (the
"Articles of Amendment"), as of the date written below. Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth in
the Articles of Amendment. Unless otherwise specified in writing to the
Corporation, the undersigned represents to the Corporation that the shares of
Common Stock covered by this notice have been or will be sold pursuant to an
effective registration statement.
Date of Conversion:_______________________________
Number of Shares of
Preferred Stock to be Converted:__________________
Applicable Conversion Price:______________________
Number of Shares of
Common Stock to be Issued:________________________
Name of Holder:___________________________________
Address: ___________________________________
___________________________________
___________________________________
Signature: ___________________________________
Name:
Title:
Holder Requests Delivery to be made: (check one)
- -----------------------------------
By Delivery of Physical Certificates to the Above Address
Through Depository Trust Corporation
(Account _______________________________)
B-15
<PAGE>
APPENDIX C
PROPOSED AMENDMENT TO ARTICLE IV OF THE
ARTICLES OF INCORPORATION OF
WEBB INTERACTIVE SERVICES, INC.
Article IV, Section 1 of the Articles of Incorporation of the Corporation is
amended and replaced in its entirety to read as follows:
1. Authorized Shares. The aggregate number of shares that the
Corporation has authority to issue is ____________. The shares are
classified in two classes, consisting of ____________ shares of Common
Stock, no par value, and 5,000,000 shares of Preferred Stock, with such par
value as the Board of Directors of the Corporation may designate. The
Board of Directors of the Corporation is authorized to establish one or
more series of Preferred Stock, setting forth the designation of each such
series, and fixing the preferences, limitations and relative rights of each
such series of Preferred Stock.
C-1
<PAGE>
WEBB INTERACTIVE SERVICES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned having duly received the Notice of Annual Meeting and the
Proxy Statement dated ______, 2000, hereby appoints the Chief Executive Officer,
Perry Evans, the Chief Financial Officer, William R. Cullen, and the Secretary,
Lindley S. Branson, as proxies (each with the power to act alone and with the
power of substitution and revocation) to represent the undersigned and to vote,
as designated below, all common shares of Webb Interactive Services, Inc. held
of record by the undersigned on March 24, 2000, at the Annual Meeting of
Shareholders to be held on April 27, 2000 at ______________, Denver, Colorado,
at 2:30 p.m. Mountain Time, and at any adjournment thereof.
<TABLE>
<S> <C> <C>
1. PROPOSAL TO ELECT [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
FIVE DIRECTORS (except as marked to the contrary below) to vote for all nominees listed below
Perry Evans William R. Cullen Robert J. Lewis
Richard C. Jennewine ________________
</TABLE>
INSTRUCTION: To withhold authority to vote for an individual nominee or
nominees, write the person's name on the line below.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE [_] FOR [_] AGAINST [_] ABSTAIN
THE WEBB INTERACTIVE SERVICES, INC. 1995
STOCK OPTION PLAN.
3. PROPOSAL TO APPROVE THE ISSUANCE OF COMMON [_] FOR [_] AGAINST [_] ABSTAIN
STOCK PURSUANT TO CONVERSION OF PREFERRED
STOCK AND EXERCISE OF WARRANTS.
4. PROPOSAL TO AMEND THE ARTICLES OF [_] FOR [_] AGAINST [_] ABSTAIN
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
5. PROPOSAL TO RATIFY THE APPOINTMENT OF [_] FOR [_] AGAINST [_] ABSTAIN
ARTHUR ANDERSEN LLP AS THE AS THE
INDEPENDENT ACCOUNTANTS FOR THE CORPORATION.
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED [_] FOR [_] AGAINST [_] ABSTAIN
TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
</TABLE>
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
This Proxy, when properly executed, will be voted in the manner directed on
the Proxy be the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4, 5 AND 6.
Please sign exactly as your name appears on this card. When shares are held
by joint tenants, both should sign. If signing as attorney, guardian, executor,
administrator or trustee, please give full title as such. If a corporation,
please sign in the corporate name by the president or other authorized officer.
If a partnership, please sign in the partnership name by an authorized person.
________________________________________
(Signature)
________________________________________
(Signature, if held jointly)
Dated: ___________________________, 2000
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
RETURN ENVELOPE.
