<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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14A-6(E)(2))
[X] 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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
WEBB INTERACTIVE SERVICES, INC.
1800 Glenarm Place
Suite 700
Denver, Colorado 80202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Webb
Interactive Services, Inc., a Colorado corporation, will be held on Thursday,
April 27, 2000, at 2:30 p.m., Mountain Time, at the Hyatt Regency, 1750 Welton
Street, Denver, Colorado for the following purposes:
1. To elect five nominees to our board of directors to serve for a term of
one year.
2. To approve an amendment to the Webb Interactive Services, Inc. Stock
Option Plan of 1995 to increase the number of shares authorized under
the plan from 3,500,000 to 4,500,000.
3. To approve issuances of our securities pursuant to the issuance of
preferred stock and the exercise of warrants.
4. To approve an amendment to our Articles of Incorporation to increase
our authorized shares of capital stock from 25,000,000 to 65,000,000
and to increase the number of authorized shares of common stock, no par
value, from 20,000,000 to 60,000,000 shares.
5. To ratify the appointment of Arthur Andersen LLP as our independent
accountants for the current fiscal year.
6. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Only holders of record of our common stock at the close of business on March
24, 2000 will be entitled to notice of, and to vote at, the annual meeting or
any adjournment thereof.
You are cordially invited to attend the annual meeting. Whether or not you
plan to attend the annual meeting, please complete, sign and date the enclosed
proxy and return it in the enclosed reply envelope as promptly as possible.
BY ORDER OF THE BOARD OF DIRECTORS
Lindley S. Branson
Secretary
March 31, 2000
<PAGE>
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 the Hyatt Regency, 1750 Welton Street, Denver, Colorado, 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 65,000,000 and to
increase the number of authorized shares of common stock, no par value, from
20,000,000 to 60,000,000; (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 31, 2000.
1
<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:
. 9,048,865 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 Common Percent Of
Stock Common
Name/Address Of Shareholder/Director Beneficially Owned Stock(1)
------------------------------------ ------------------ ----------
<S> <C> <C>
R. Steven Adams.............................. 608,683(2) 6.7%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Perry R. Evans............................... 119,196(3) 1.3%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
William R. Cullen............................ 127,164(4) 1.4%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Lindley S. Branson........................... 50,000(5) *
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Gwenael S. Hagan............................. 48,500(6) *
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Andre W. Durand.............................. 135,000(7) 1.5%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Robert J. Lewis.............................. 108,096(8) 1.2%
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Richard C. Jennewine......................... 60,000(9) *
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
Directors and Executive Officers as a Group
(9 persons)................................. 631,289(10) 7.0%
</TABLE>
- --------
* 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
<PAGE>
(2) Includes options for the purchase of 108,553 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 50,000 shares of common stock, but
excludes options for the purchase of 150,000 shares of common stock that
are not exercisable during the next 60 days.
(6) 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.
(7) 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.
(8) 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.
(9) 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.
(10) 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.
3
<PAGE>
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. All of the
nominees except for Lindley S. Branson were elected to the board of directors
at the 1999 Annual Meeting of Shareholders. Mr. Branson is not currently a
director.
Nominees for Director
William R. Cullen
Robert J. Lewis
Richard C. Jennewine
Perry R. Evans
Lindley S. Branson
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.
Directors, Nominees for Director and Executive Officers
Our directors, nominees for director, and executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Director Since Position
---- --- -------------- --------
<S> <C> <C> <C>
Perry R. 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 1996 Director
Richard C. 61 1996
Jennewine........... Director
Lindley S. Branson... 57 -- Vice President/General Counsel and a
nominee for Director
Gwenael S. Hagan..... 39 -- Vice President, Corporate Development
Andre W. Durand...... 32 -- General Manager, JabberIM
Commercialization
Simon D. Greenman.... 30 -- General Manager, AccelX Commerce
Services
Chris W. Fanjoy...... 34 -- Chief Technology Officer
</TABLE>
Perry R. Evans, has served as President of Webb 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 of Webb since April
1999 and a director since March 1998. From March 1998 to April 1999, Mr.
Cullen served as Chief Operating Officer of Webb. 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
4
<PAGE>
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 January 1996. 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 Tele-Communications,
Inc. ("TCI"), one of the largest cable television companies in the United
States. Mr. Lewis served as a Senior Vice President of Corporate Development
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 until his retirement in December 1999, Mr. Jennewine has been
President-International Operations and Managing Director 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, Mr. Jennewine
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 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 of
Webb 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. Mr.
Hagan's work with Microsoft encompassed competitive strategy development,
sales resource allocation, presentations and public relations.
Andre W. 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 D. 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, Mr. Greenman 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.
5
<PAGE>
Chris W. Fanjoy, has served as the Chief Technology Officer of Webb 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. Mr. Fanjoy 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 7 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 on
which such director serves. During 1999, the Audit Committee met 1 time and
the Compensation Committee met 5 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.
6
<PAGE>
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>
Long-Term
Annual Compensation Compensation
----------------------------- ------------------
Name and Principal Salary Bonus Other Securities
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 S. Hagan........ 1999 $160,000 $ 36,000 -- 50,000 shs.
Vice President,
Corporate 1998 $ 91,549 $ 13,800 -- 100,000 shs.(4)
Development 1997 -- -- -- --
Perry R. Evans(5)....... 1999 $153,976 $121,250 -- 580,000 shs.
President and a
Director 1998 -- -- -- --
Banking 1997 -- -- -- --
Andre W. 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.
(3) Includes 6,497 shares of common stock issued instead of cash compensation
and $42,194 for reimbursement of travel and living expenses. The common
stock dollar value was determined by multiplying the last sale price of
our common stock by the amount of common stock on the dates such shares
were earned.
(4) Includes options for the purchase of 250 shares of common stock initially
granted to Mr. Hagan on June 7, 1998 but repriced on November 20, 1998.
(5) Mr. Evans was elected President of Webb effective June 24, 1999 and Chief
Executive Officer effective February 1, 2000.
(6) Mr. Durand was elected General Manager of JabberIM Commercialization in
November 23, 1999. Mr. Durand joined Webb in November, 1998.
7
<PAGE>
Webb Stock Options
The following tables summarize the stock option grants and exercises during
1999 to or by the named officers and the value of all options held by the
named officers as of December 31, 1999. Unless otherwise noted, each of these
stock options is exercisable in one-third increments on the 12th, 24th, and
36th month after the date of grant.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Percent of Total
Number of Options Granted
Securities to Employees Exercise
Underlying During Year Ended Price Expiration
Name Options Granted December 31, 1999 ($/Share) Date
---- --------------- ----------------- --------- ----------
<S> <C> <C> <C> <C>
R. Steven Adams.......... 0 N/A N/A
Total................... 0 0%
William R. Cullen........ 0 N/A N/A
Total................... 0 0%
Gwenael S. Hagan......... 50,000 $9.25 10/14/2006
-------
Total................... 50,000 2.5%
Perry R. Evans........... 80,000 $12.25 03/10/2006
200,000 $13.69 06/1/2006
300,000 $9.25 10/14/2006
-------
Total................... 580,000 28.3%
Andre W. Durand.......... 0 N/A N/A
Total................... 0 0%
</TABLE>
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 S. Hagan........ 5,000 $93,750 43,500/106,500 $719,500/$1,619,375
Perry R. Evans.......... 0 $0 0/580,000 $0/$6,702,000
Andre W. 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 80,000 shares of our common stock at an exercise price of
$9.125 to Robert J. Lewis and Richard C. Jennewine for their services as
directors.
8
<PAGE>
Change of Control Agreements
We have entered into employment agreements with R. Steven Adams and our
executive officers, including William R. Cullen, Perry R. Evans, Lindley S.
Branson, Gwenael S. Hagan and Andre W. 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 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 R. 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 $130,000.
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.
9
<PAGE>
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 7 executive officers, 2 directors and 84
employees 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 3,267,962
shares of common stock were outstanding under the 1995 Plan, held by 93
persons, with per share exercise prices from $1.63 to $58.25 per share and a
weighted average exercise price of approximately $14.03 per share. In addition
an aggregate of 969,950 shares of common stock have been issued to 83 persons
at a weighted average exercise price of approximately $2.64 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.
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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.
STOCK OPTION AWARDS UNDER THE
WEBB INTERACTIVE SERVICES, INC. 1995 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Name and Position Number of Options
----------------- -----------------
<S> <C>
Perry R. Evans, President and nominee for director.......... 580,000
Lindley S. Branson, Vice President--General Counsel,
Secretary and nominee for director......................... 200,000
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 S. Hagan, Vice President--Business Development...... 145,000
Chris W. Fanjoy, Chief Technology Officer................... 200,000
Andre W. Durand, General Manager, JabberIM
Commercialization.......................................... 75,000
Simon D. 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, as a
group (2 persons).......................................... 200,000
Employees, excluding executive officers, as a group (84
persons)................................................... 1,467,962
</TABLE>
The last reported sale price for the common stock on the Nasdaq SmallCap
Market on March 24, 2000 was $39.25.
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"), 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.
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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.
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.
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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>
Number of Transactions Not
Name of Individual Form Late Reports Timely Reported
------------------ ---- ------------ ----------------
<S> <C> <C> <C>
Andre W. Durand........................... 4 2 2
</TABLE>
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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 January 1, 2002.
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 shareholders in Article IV of our
Articles of Incorporation. The Board approved the issuance of the series B
preferred stock because they believed such issuance was required to fund our
operations during at least the next year and would result in an 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 was 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.
The Bylaws of The Nasdaq Stock Market ("Nasdaq") which lists our outstanding
common stock, require shareholder 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 shareholder 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 shareholders 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
shareholders 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
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<PAGE>
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 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
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<PAGE>
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 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.
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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, 9,048,865 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 60,000,000 shares and thereby
increase the number of authorized shares of capital stock of the Company from
25,000,000 shares to 65,000,000 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 Webb's best interests
and in the best interests of 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.
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.
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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 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.
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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.
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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 December 2, 2000. 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 February 1, 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
March 31, 2000
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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.
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(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.
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
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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 number and kind of shares that are subject
to any Option (including any Option outstanding after
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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
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impose; in the case of an Incentive Stock Option, a provision implementing the
$100,000 Limitation; and any other terms or conditions which 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.
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
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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.
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,
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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;
(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
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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 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.
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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.
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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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".
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
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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) The "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 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.
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(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 (90th) day following the Effective Date
and (y) the two hundred and seventieth (270th) 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 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
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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 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
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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
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
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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
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
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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 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.
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(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 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
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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) 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
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<PAGE>
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 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
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<PAGE>
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 R. 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.
(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.
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<PAGE>
(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;
(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
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<PAGE>
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.
/s/ William R. Cullen
By: _________________________________
William R. Cullen
Chief Financial Officer
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<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 65,000,000. The shares are classified in two
classes, consisting of 60,000,000 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 March 31, 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 Hyatt Regency, 1750 Welton
Street, Denver, Colorado, at 2:30 p.m. Mountain Time, and at any adjournment
thereof.
<TABLE>
<S> <C>
1. PROPOSAL TO ELECT FIVE DIRECTORS
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
Perry Evans William R. Cullen Robert J. Lewis
Richard C. Jennewine Lindley S. Branson
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.
</TABLE>
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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>
This Proxy, when properly executed, will be voted in the manner directed on
the Proxy by 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.
