-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PyucKQMFISIHIWBYheNAeo+7NxpgCKj2LQU7WDhsOjYys7J9Rnhgwqa/gBHevK1F D12gYc4nqt6AWyq2+mzSeA== /in/edgar/work/20000919/0001045969-00-000689/0001045969-00-000689.txt : 20000923 0001045969-00-000689.hdr.sgml : 20000923 ACCESSION NUMBER: 0001045969-00-000689 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000913 ITEM INFORMATION: FILED AS OF DATE: 20000919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEBB INTERACTIVE SERVICES INC CENTRAL INDEX KEY: 0001011901 STANDARD INDUSTRIAL CLASSIFICATION: [7373 ] IRS NUMBER: 841293864 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-28462 FILM NUMBER: 725273 BUSINESS ADDRESS: STREET 1: 1800 GLENARM PLACE STREET 2: STE 700 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032969200 MAIL ADDRESS: STREET 1: 1800 GLENARM PL STREET 2: SUITE 800 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: ONLINE SYSTEM SERVICES INC DATE OF NAME CHANGE: 19960410 8-K 1 0001.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): September 13, 2000 ------------------ WEBB INTERACTIVE SERVICES, INC. ------------------------------- (Exact name of registrant as specified in its charter) Colorado ---------------------------------------- (State or other jurisdiction of incorporation) 0-28462 84-1293864 ------- ---------- (Commission File Number) (IRS Employer Identification No.) 1899 Wynkoop, Suite 600, Denver, CO 80202 - ----------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 296-9200 -------------- N/A ---------------------------------------------- (Former name or former address, if changed since last report) Series B-2 Convertible Preferred Stock. - -------------------------------------- On September 14, 2000, Webb Interactive Services, Inc. ("Webb") concluded separate letter agreements with Marshall Capital Management, Inc. ("Marshall") and Castle Creek Technology Partners LLC ("Castle Creek") whereby each of such companies agreed to exchange their shares of Webb's Series B Convertible Preferred Stock ("Series B Preferred Stock") (12,500 shares in the aggregate) for a similar number of shares of Webb's Series B-2 Convertible Preferred Stock ("Series B-2 Preferred Stock"). The Series B-2 Preferred Stock is convertible into shares of Webb's common stock at a fixed conversion price of $10.20408, subject to adjustment in the event that Webb does not complete the filing of a registration statement for the shares of common stock issuable upon conversion of the Series B-2 Preferred Stock by September 29, 2000 or that the registration statement is not declared effective by the Securities and Exchange Commission by December 31, 2000. The Series B Convertible Preferred Stock to be exchanged for the Series B-2 Preferred Stock is convertible into shares of Webb's common stock at a conversion price, currently $20.00, which was subject to reset on November 12, 2000. The November reset would be based on the then current market price for Webb's common stock, but not less than $8.00. The fixed conversion price for the Series B-2 Preferred Stock is slightly above what the conversion price for the Series B Preferred Stock would have been if the reset date for the Series B Preferred Stock was September 11, 2000, the date upon which each of the parties agreed in principle to the exchange. In connection with this transaction, Webb expects to incur non-cash charges of approximately $1.5 million. The common stock issuable upon conversion of the Series B-2 Preferred Stock is subject to registration rights. The foregoing is a summary only and it is not intended to be a complete description of the transaction, and it is qualified in its entirety by the Exhibits filed herewith. Sale of Assets of E-banking Business - ------------------------------------ Effective September 13, 2000, Webb completed the sale of the assets of its e-banking business to BNKR, Inc. ("BNKR"), a recently formed private company that offers e-banking services to medium and small sized banks, savings and loans and credit unions. Webb does not expect to incur a material profit or loss in connection with the sale of these assets. Item 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements. None (c) Exhibits: 2 10.1 Letter Agreement dated September 14, 2000 between Webb and Castle Creek. Included as exhibits to the Letter Agreement are the proposed form of Articles of Amendment setting forth the terms of the Series B-2 Convertible Preferred Stock, the form of Exchange Agreement and the form of Registration Agreement - filed herewith. 10.2 Letter Agreement dated September 14, 2000 between Webb and Marshall, including as exhibit the form of Exchange Agreement (copies of the Articles of Amendment and form of Registration Agreement which are exhibits to this Agreement, are not included as they are substantially the same as the similar exhibits to the Letter Agreement filed herewith as Exhibit 10.1)-- filed herewith. 10.3 Press Release dated September 18, 2000 regarding exchange of Preferred Stock - filed herewith. 10.4 Sale of Assets Agreement dated September 12, 2000 between Webb and BNKR, including the exhibits thereto - filed herewith. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 19, 2000 WEBB INTERACTIVE SERVICES, INC. By /s/ Lindley S. Branson -------------------------- Lindley S. Branson Its: Vice-President/General Counsel -4- EX-10.1 2 0002.txt LETTER AGREEMENT BETWEEN WEBB & CASTLE ROCK Exhibit 10.1 September 14, 2000 Castle Creek Technology Partners LLC 77 W. Wacker Drive Ste. 4040 Chicago, Illinois 60601 Attn: Michael L. Spolan Re: Series B Convertible Preferred Stock (the "Series B Preferred Stock") --------------------------------------------------------------------- Dear Mike: This confirms the agreement between Castle Creek Technology Partners LLC ("CC") and Webb Interactive Services, Inc. (the "Company") that was reached on September 14, 2000, regarding the exchange of the Company's Series B Preferred Stock held by CC for an equal number of shares of the Company's Series B-2 Convertible Preferred Stock (the "Series B-2 Preferred Stock") to be issued pursuant to Articles of Amendment substantially in the form attached hereto as Exhibit A (the "Series B-2 Articles of Amendment"). 1. Exchange of Stock. On or before September 29, 2000, CC will deliver to the ----------------- Company and the Company will accept, on the terms and subject to the conditions set forth herein and in the Exchange Agreement (as defined below), a certificate representing 6,250 shares of Series B Preferred Stock in exchange for a certificate representing 6,250 shares of Series B-2 Preferred Stock (the "Exchange"). 2. Exchange Agreement; Registration Agreement. Prior to or contemporaneously ------------------------------------------ with the consummation of the Exchange, the Company and CC will enter into (i) an exchange agreement substantially in the form attached hereto as Exhibit B (the "Exchange Agreement"), which shall contain schedules that do not vary materially from the schedules attached to the Securities Purchase Agreement (as defined below) and (ii) a registration agreement substantially in the form attached hereto as Exhibit C (the "Registration Agreement"). Upon the execution and delivery by both parties of the Exchange Agreement and the Registration Agreement: (A) the Securities Purchase Agreement, dated as of December 31, 1999, between the Company and each of the Purchasers named therein (the "Securities Purchase Agreement") shall be amended so that Schedule 3.17 thereto shall include only P. Evans, W. Cullen, L. Branson, G. Hagan and S. Greenman; and (B) the Registration Rights Agreement, dated as of December 31, 1999, between the Company and each of the Purchasers named therein (the "Registration Rights Agreement") shall be amended so that all references to "Preferred Shares", "Preferred Stock", "Articles of Incorporation", "Articles of Amendment" and "Conversion Shares" shall be deleted. Except as amended hereby, the Securities Purchase Agreement and the Registration Rights Agreement will continue in full force and effect in accordance with their respective terms. 3. 8-K Filing. The Company agrees to file a Form 8-K describing the Exchange ---------- in full and in a manner sufficient to permit CC to make sales under the Registration Statements numbered 333-87887 and 333-33352 declared effective February 16, 2000 and April 4, 2000, respectively and attaching this letter agreement and all exhibits hereto as soon as practicable and in no event later than the close of business on Tuesday, September 19, 2000 and to file as soon as possible and in any event within one business day following the occurrence of any event for which such a filing would be necessary to permit the continuance of such sales additional Forms 8-K or amendments thereto sufficient to permit such continued sales. 4. Conversion Price. The parties agree that the conversion price that will ---------------- apply to the Series B-2 Preferred Stock pursuant to the Series B-2 Articles of Amendment will be fixed at $10.20408 (subject to adjustment as described in the Series B-2 Articles of Amendment). Such conversion price will be reduced by $1.020408 (subject to adjustment as described in the Series B-2 Articles of Amendment) in the event that: (i) the Exchange is not effected on or before September 29, 2000, and such delay is not caused primarily by any act or failure to act on the part of CC or any other holder of the Series B-2 Preferred Stock, provided that if the Exchange is delayed as a result of the failure of the Company to satisfy any condition to the closing of the Exchange, such delay shall not be deemed to be caused by any act or failure to act by CC or any such holder, or (ii) the Company fails to file the registration statement required to be filed by it pursuant to the Registration Agreement (the "Exchange Registration Statement") on or before September 29, 2000, provided that, if such filing is delayed primarily as a result of the failure of any holder of the Series B-2 Preferred Stock to provide its comments (or to indicate that it has no comments) on the Exchange Registration Statement by the close of business on the business day immediately following such holder's receipt of a draft thereof, as long as the Company has provided each holder with such draft at least three business days prior to the filing thereof, such date shall be extended by the number of days beginning on the day following such business day and ending on the day on which each holder provides such comments (or indicates that it has none),or (iii) the Company fails to file a Form 8-K in the form required by paragraph 3 above on or before the close of business on Tuesday, September 19, 2000. Such Conversion Price, whether or not previously adjusted, shall be reduced or further reduced by $1.020408 (subject to adjustment as described in the series B-2 Articles of Amendment) in the event that the Exchange Registration Statement is not declared effective on or before December 31, 2000, provided that if the Exchange Registration Statement is not declared effective on or before such date primarily as a result of an act or failure to act by a holder of the B-2 Preferred -2- Stock, such date shall be extended by the number of days (if any) on which such act or failure to act was the primary cause of such delay. 5. Registration Default. If the Exchange Registration Statement is not -------------------- declared effective by the Securities and Exchange Commission on or before April 15, 2001 (a "Default Event"), the Company shall pay to CC an amount equal to the ------------- lesser of (x) two percent (2%) per thirty calendar day period (prorated for any period of less than thirty calendar days) and (y) the highest rate permitted by applicable law, times $6,250,000, accruing daily and compounded monthly, from ----- the date on which a Default Event occurs until the date on which such Default Event has been cured and is no longer continuing, provided that such amount will not accrue with respect to any day on which such Default Event was primarily caused by an act or failure to act by a holder of the Series B-2 Preferred Stock. 6. Acknowledgements. The parties acknowledge that the Company is negotiating ---------------- an agreement similar to this Agreement with the other holder of Series B Preferred Stock. The Company agrees that in no event will such other agreement contain terms that are more favorable to such holder than the terms hereof are to CC. Neither this Agreement nor such other agreement, nor any negotiations between the Company and either holder of Series B Preferred Stock, shall be deemed to result in such holders constituting a "group" as such term is used in Section 13(d) under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. The Company acknowledges and agrees that the Exchange will be effected in reliance upon the exemption from securities registration afforded by the provisions Section 3(a)(9) of the Securities Act of 1933, as amended (the "Act"), and that, as such, the holding period required by Rule 144 under the Act for sales of shares issuable pursuant to the Series B-2 Preferred Stock will begin on the date on which CC acquired the Series B Preferred Stock. 7. Entire Agreement; Amendments; Waiver. This Agreement constitutes the ------------------------------------ entire agreement between the parties with regard to the subject matter hereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and CC. 8. Governing Law; Jurisdiction. This Agreement shall be governed by and --------------------------- construed under the laws of the State of Illinois without regard to the conflict of laws provisions thereof. -3- If this letter correctly sets forth the agreement between CC and the Company with respect to the subject matter hereof, please sign in the space indicated below, whereupon this letter will constitute each party's binding agreement. WEBB INTERACTIVE SERVICES, INC. By: /s/ William R. Cullen ----------------------------- Name: William R. Cullen Title: Chief Financial Officer Accepted and Agreed: CASTLE CREEK TECHNOLOGY PARTNERS LLC By: Castle Creek Partners, L.L.C. Its: Investment Manager By: /s/ Michael L. Spolan --------------------------------------- Michael L. Spolan, Managing Director -4- Exhibit A 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 September ___, 2000. 3. These Articles of Amendment hereby amend Article [ ] of the Corporation's Articles of Incorporation by adding the following language at the end of such Article as follows: [_]. SERIES B-2 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-2 Convertible Preferred Stock" (the "Series B-2 Preferred Stock") and the face amount of each -------------------------- share of Series B-2 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 ------------ pursuant to the Securities Purchase Agreement, dated December 31, 1999, as amended by the Letter Agreement dated September 14, 2000, 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"), - ------------- -5- 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-2 Preferred Stock will not bear dividends. 3. PRIORITY. -------- (a) Payment upon Dissolution. ------------------------ (i) Upon the occurrence of (x) any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, commenced by the Corporation or by its creditors, as such, or relating to its assets or (y) the dissolution or other winding up of the Corporation whether total or partial, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy proceedings, or (z) any assignment for the benefit of creditors or any marshalling of the material assets or material liabilities of the Corporation (each, a "Liquidation ----------- Event"), no distribution shall be made to the holders of any shares of Junior - ----- Securities (as defined below) unless, following the payment of preferential amounts on all Senior Securities (as defined below), each Holder shall have received the Liquidation Preference (as defined below) with respect to each Preferred Share then held by such Holder. In the event that upon the occurrence of a Liquidation Event, and following the payment of preferential amounts on all Senior Securities (as defined below), the assets available for distribution to the Holders and the holders of Pari Passu Securities are insufficient to pay the Liquidation Preference with respect to all of the outstanding Preferred Shares and the preferential amounts payable to such holders, the entire assets of the Corporation shall be distributed ratably among the Preferred Shares and the shares of Pari Passu Securities in proportion to the ratio that the preferential amount payable on each such share (which shall be the Liquidation Preference in the case of a Preferred Share) bears to the aggregate preferential amount payable on all such shares. (ii) 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-2 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-2 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 -6- 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 3/rd/ Business Day being referred to herein as the "Disputed Share Calculation Date"). Such accountant's calculation shall be - -------------------------------- deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant. (c) Number of Conversion Shares; Conversion Price. --------------------------------------------- (A) The number of Conversion Shares to be delivered by the Corporation pursuant to a Conversion shall be determined by dividing (i) the aggregate Stated Value of the Preferred Shares to be converted by (ii) the Conversion Price (as defined below) in effect on the applicable Conversion Date. (B) "Conversion Price" shall be, subject to adjustment for the events ---------------- specified in Section 6 below, $10.20408 (the "Initial Conversion Price"), provided that if the Effective Date (as defined below) is not on or prior to December 31, 2000, the Initial Conversion Price shall thereafter be $9.183672; provided, further, that in the event that the Effective Date is not on or prior to April 15, 2001, the Initial Conversion Price shall thereafter be reduced by an additional .066% for each day following April 15, 2001, until the Effective Date. In the event that the delay in the Effective -7- Date is due to one of the Purchasers, the applicable adjustment date shall be delayed by the number of days by which the Effective Date has been so delayed. (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 for the Conversion Shares (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 of Conversion Shares required to be -8- 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 (10/th/) 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 -9- 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 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 later of December 31, 2000, or ten (10) days after the Effective Date (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 National or SmallCap 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 -10- 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 date hereof, or (v) the Registration Statement for the Conversion Shares (as defined in the Registration Rights Agreement) is not effective and available for the resale of all Conversion Shares issuable on the Determination Date upon the conversion or exercise of all Preferred Shares then outstanding (without regard to any limitations on such conversion), 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 (30/th/) day following the later of (a) the date on which the event specified (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. In the event that the Registration Statement for the Conversion Shares (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 issuable upon conversion or exercise of such Holder's Preferred Shares (without regard to any limitations on such conversion or exercise), for any period or periods on or after the Effective Date and before the Determination Date (collectively, a "Blackout Period"), the Determination Date (the "Original Determination Date") shall be delayed for a period of days equal to the Blackout Period (the Trading Day immediately following last day of such period being referred to herein as the "Delayed Determination Date") and the Delayed Determination Date shall be deemed to be the Determination Date for the purposes of these Articles of Amendment. 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 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 either the Nasdaq National or SmallCap Market (the "Cap --- Amount"), except - ------ -11- 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 into which the Preferred Shares then held by such Holder are convertible at the Conversion Price then in effect (without regard to any restrictions or limitations on such conversion) plus (B) the number of ---- Conversion Shares into which such Holder has previously converted Preferred Shares 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 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, 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 into a number of Conversion Shares which, in the aggregate, is less than such Holder's Cap Allocation Amount, then the difference between such Holder's Cap Allocation Amount and the number of Conversion Shares 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 -12- 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. (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 -13- 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). -14- (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 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 -15- 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 (3/rd/) 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 paragraph 5(a) hereof, 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 (as defined in the Securities Purchase Agreement) 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; -16- (iii) any material representation or warranty made by the Corporation in the Securities Purchase Agreement, as amended by the Letter Agreement dated September 14, 2000, 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 -17- 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-2 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 -18- Fax: 303-(303) 292-5039 Attention: William Cullen with a copy to: Gray, Plant, Mooty, Mooty & Bennett, P.A. 3400 City Center 33 South Sixth Street Minneapolis, MN 55402-3796 Telecopy: (612) 333-0066 Attention: Lindley S. Branson, Esq. and if to any Holder, to such address for such Holder as shall be designated by such Holder in writing to the Corporation. (c) Lost or Stolen Certificate. Upon receipt by the Corporation of -------------------------- evidence of the loss, theft, destruction or mutilation of a certificate representing Preferred Shares, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Corporation and the Transfer Agent, and upon surrender and cancellation of such certificate if mutilated, the Corporation shall execute and deliver to the Holder a new certificate identical in all respects to the original certificate. (d) No Voting Rights. Except as provided by applicable law and paragraph ---------------- 8(g) below, the Holders of the Preferred Shares shall have no voting rights with respect to the business, management or affairs of the Corporation; provided that the Corporation shall provide each Holder with prior notification of each meeting of stockholders (and copies of proxy statements and other information sent to such stockholders). (e) Remedies, Characterization, Other Obligations, Breaches and Injunctive ---------------------------------------------------------------------- Relief. The remedies provided to a Holder in these Articles of Amendment shall - ------ be cumulative and in addition to all other remedies available to such Holder under these Articles of Amendment or under any Transaction Document (as defined in the Securities Purchase Agreement), at law or in equity (including without limitation a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing contained herein shall limit such Holder's right to pursue actual damages for any failure by the Corporation to comply with the terms of these Articles of Amendment. The Corporation agrees with each Holder that there shall be no characterization concerning this instrument other than as specifically provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder hereof and shall not, except as expressly provided herein, be subject to any other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a material breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation agrees, in the -19- 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-2 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-2 Preferred Stock: (i) alter, change, modify or amend (x) the terms of the Series B-2 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-2 Preferred Stock; (ii) create any new class or series of capital stock having a preference over or ranking pari passu with the Series B-2 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-2 Preferred Stock; (iv) re-issue any shares of Series B-2 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-2 Preferred Stock as to the distribution of assets upon liquidation, dissolution or winding up of the Corporation; or (vii) issue any Series B-2 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-2 Preferred Stock agrees to allow the Corporation to alter or change the rights, preferences or privileges of the shares of Series B-2 Preferred Stock pursuant to the terms hereof, then the Corporation will deliver notice of such approved change to the holders of the Series B-2 Preferred -20- 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] -21- IN WITNESS WHEREOF, the Corporation has duly executed these Articles of Amendment as of the _______ day of September, 2000. WEBB INTERACTIVE SERVICES, INC. By:______________________________ Name: Title: -22- EXHIBIT A --------- NOTICE OF CONVERSION The undersigned hereby elects to convert shares of Series B-2 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 _______________________________________________________) -23- Exhibit B EXCHANGE AGREEMENT EXCHANGE AGREEMENT (this "Agreement"), dated as of September 14, 2000, --------- by and between WEBB INTERACTIVE SERVICES, INC., a Colorado corporation (the "Company"), and CASTLE CREEK TECHNOLOGY PARTNERS LLC ("CC"). - -------- -- The Company and CC wish to exchange the shares of Series B Convertible Preferred Stock of the Company (the "Series B Preferred Stock") currently held by CC for an equal number of shares of Series B-2 Convertible Preferred Stock (the "Series B-2 Preferred Stock") issued pursuant to Articles of Amendment in -------------------------- the form attached hereto as Exhibit A (the "Series B-2 Articles of Amendment"). -------------------------------- The Series B-2 Preferred Stock will be convertible pursuant to the terms of the Series B-2 Articles of Amendment into shares (the "Conversion Shares") of the ----------------- Company's common stock, no par value (the "Common Stock"). The Series B-2 ------------ Preferred Stock and the Conversion Shares are collectively referred to herein as the "Securities". Any capitalized term used herein that is not otherwise ---------- defined shall have the meaning specified therefor in the Series B-2 Articles of Amendment. The exchange contemplated hereby will be effected in reliance upon the exemption from securities registration afforded by the provisions Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities Act"). In -------------- order to induce CC to enter into this Agreement, the Company has agreed to effect the registration of the Conversion Shares under the Securities Act pursuant to a Registration Agreement, the form of which is attached as Exhibit B (the "Registration Agreement"). ---------------------- The Company and CC hereby agree as follows: 1. EXCHANGE. -------- 1.1 Agreement to Exchange. Upon the terms and subject to the --------------------- satisfaction or waiver of the conditions set forth herein, the Company and CC agree to exchange all of the Series B Preferred Stock currently held by CC for an equal number of shares of Series B-2 Preferred Stock (the "Exchange"). The -------- date on which the closing (the "Closing") of the Exchange occurs is hereinafter ------- referred to as the "Exchange Date". Subject to the satisfaction or waiver of the ------------- conditions set forth herein, the Exchange will be deemed to occur when CC delivers to the Company, on the terms and subject to the conditions set forth herein, a certificate representing 6,250 shares of Series B Preferred Stock in exchange for a certificate representing 6,250 shares of Series B-2 Preferred Stock. 1.2 Business Day. When used herein, "Business Day" shall mean any ------------ ------------ day on which the New York Stock Exchange (the "NYSE") and commercial banks in ---- the city of New York are open for business. -24- 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CC. ----------------------------------------------- CC hereby represents and warrants to the Company and agrees with the Company that, as of the date of this Agreement and as of the Exchange Date: 2.1 Authorization; Enforceability. CC is duly and validly organized, ----------------------------- validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization with full power and authority to effect the Exchange and to execute and deliver this Agreement. This Agreement and the Registration Agreement each constitutes CC's valid and legally binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) or public policy. 2.2 Information. The Company has provided CC with information regarding ----------- the business, operations and financial condition of the Company, and has granted to CC the opportunity to ask questions of and receive answers from representatives of the Company, its officers, directors, employees and agents concerning the Company and materials relating to the terms and conditions of the purchase and sale of the Securities. Neither such information nor any other investigation conducted by CC or any of its representatives shall modify, amend or otherwise affect CC's right to rely on the Company's representations and warranties contained in this Agreement. 2.3 Limitations on Disposition. CC acknowledges that, except as provided -------------------------- in the Registration Agreement, the Securities have not been and are not being registered under the Securities Act and may not be transferred or resold without registration under the Securities Act or unless pursuant to an exemption therefrom. 2.2 Legend. CC understands that the certificates representing the ------ Securities may bear at issuance a restrictive legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, and may not be offered or sold unless a registration statement under the Securities Act and applicable state securities laws shall have become effective with regard thereto, or an exemption from registration under such laws is available in connection with such offer or sale." Notwithstanding the foregoing, it is agreed that, as long as (A) the resale or transfer (including without limitation a pledge) of such Securities is registered pursuant to an effective registration statement and CC represents in writing to the Company that such Securities have been or are being sold pursuant to such registration statement, (B) such Securities have been publicly sold pursuant to Rule 144 ("Rule 144") and CC has delivered to the Company customary -------- Rule 144 broker's and seller's representation letters, or (C) such -25- Securities can be publicly sold pursuant to Rule 144(k) under the Securities Act, such Securities shall be issued without any legend or other restrictive language and, with respect to Securities upon which such legend is stamped, the Company shall issue new certificates without such legend to the holder promptly upon request. 2.6 No Conflict. The execution, delivery and performance by CC of this ----------- Agreement and the Registration Agreement (A) have been approved by all necessary action (corporate or other) on the part of CC and (B) will not result in (i) any material violation of any provisions of its charter, bylaws or any other governing document in effect on the date hereof, (ii) any material violation of any instrument or contract to which it is a party or by which it is bound, or (iii) the creation of any material lien, charge or encumbrance upon any of its assets. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. -------------------------------------------------------- The Company hereby represents and warrants to CC and agrees with CC that, as of the date of this Agreement and as of the Exchange Date: 3.1 Organization, Good Standing and Qualification. Each of the Company --------------------------------------------- and its subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite corporate power and authority to carry on its business as now conducted. Each of the Company and its subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. For purposes of this Agreement, the term "subsidiary" or "subsidiaries" shall mean any entity or entities in which the Company beneficially owns 20% or more of the voting equity thereof. 3.2 Authorization; Consents. The Company has the requisite corporate ----------------------- power and authority to enter into and perform its obligations under (i) this Agreement and (ii) the Registration Agreement (together, the "Transaction ----------- Documents"), to execute and file, and perform its obligations under the Series - --------- B-2 Articles of Amendment, to issue Series B-2 Preferred Stock to CC in accordance with the terms hereof and to issue and deliver Conversion Shares in accordance with the terms of the Series B-2 Articles of Amendment. All corporate action on the part of the Company by its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of, and the performance by the Company of its obligations under, the Transaction Documents and (ii) the authorization, execution and filing of, and the performance by the Company of its obligations under, the Series B-2 Articles of Amendment has been taken, and no further consent or authorization of the Company, its Board of Directors, its stockholders, any governmental agency or organization (other than such approval as may be required under the Securities Act and applicable state securities laws in respect of the Registration Agreement), or any other -26- person or entity is required (pursuant to any rule of the Nasdaq SmallCap Market, or otherwise). 3.3 Enforcement. Each of the Transaction Documents constitutes a valid ----------- and legally binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) or public policy. 3.4 Disclosure Documents; Agreements; Financial Statements; Other ------------------------------------------------------------- Information. The Company has filed with the Securities and Exchange Commission - ----------- (the "Commission"): (i) the Company's Annual Report on Form 10-KSB for the year ---------- ended December 31, 1999, (ii) Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2000 and June 30, 2000, (iii) all Current Reports on Form 8-K, if any, and any other reports, required to be filed with the Commission since December 31, 1999 and prior to the date hereof and (iv) the Company's definitive Proxy Statement for its 1999 Annual Meeting of Stockholders (collectively, the "Disclosure Documents"). The Company is not aware of any event occurring on or -------------------- prior to the Exchange Date (other than the transactions effected hereby) that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such date. Each Disclosure Document, as of the date of the filing thereof with the Commission, conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act") and, as of the date of ------------ such filing, such Disclosure Document did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements required to be filed as exhibits to the Disclosure Documents have been filed or incorporated by reference as required by the applicable provisions of the Exchange Act. Neither the Company nor any of its subsidiaries is in breach of any agreement to which it is a party or by which it is bound where such breach could have a material adverse effect on (i) the consolidated business, operations, properties, financial condition, prospects or results of operations of the Company and its subsidiaries taken as a whole, (ii) the transactions contemplated by the Transaction Documents or by the Series B-2 Articles of Amendment, (iii) the Securities or (iv) the ability of the Company to perform its obligations under the Transaction Documents or the Series B-2 Articles of Amendment (collectively, a "Material Adverse Effect"). Except as set forth in the Disclosure Documents, ----------------------- the Company has no liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business which, under generally accepted accounting principles, are not required to be reflected in such financial statements (including the footnotes to such financial statements) and which, individually or in the aggregate, are not material to the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. As of their respective dates, the financial statements of the Company included in the Disclosure Documents have been prepared in accordance with generally accepted accounting principles consistently applied at the times and during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the -27- extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end adjustments). The written information described in paragraph 2.3 does not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.5 Capitalization. The capitalization of the Company, including its -------------- authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company's stock option plans, the number of shares issuable and reserved for issuance pursuant to securities (other than the Series B-2 Preferred Stock) exercisable for, or convertible into or exchangeable for any shares of Common Stock and the number of shares initially to be reserved for issuance upon conversion and exercise of the Series B-2 Preferred Stock is set forth on Schedule 3.5 hereto. ------------ All of such outstanding shares of capital stock have been, or upon issuance will be, validly issued, fully paid and non-assessable. Except as set forth on Schedule 3.5, no shares of the capital stock of the Company are subject to - ------------ preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances created by or through the Company. Except as disclosed on Schedule 3.5, or as contemplated herein, there are no outstanding ------------ options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries. 3.6 Valid Issuance. The Series B-2 Preferred Stock is duly authorized and, -------------- when issued, sold and delivered in accordance with the terms hereof, (i) will be duly and validly issued, fully paid and nonassessable, free and clear of any taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or through the Company (collectively, "Encumbrances"), (ii) based in part upon the ------------ representations of CC in this Agreement, will be issued, sold and delivered in compliance with all applicable Federal and state securities laws and (iii) will be entitled to all of the rights, preferences and privileges set forth in the Series B-2 Articles of Amendment. The Conversion Shares are duly authorized and reserved for issuance and, when issued in accordance with the terms of the Series B-2 Articles of Amendment, will be duly and validly issued, fully paid and nonassessable, free and clear of any Encumbrances. The Company's Board of Directors (i) has determined that the Exchange and the consummation of the transactions contemplated by the Transaction Documents and by the Series B-2 Articles of Amendment (including without limitation the issuance of the Conversion Shares upon exercise of the Series B-2 Preferred Stock), are in the best interests of the Company and (ii) has approved the issuance of Conversion Shares upon exercise of the Series B-2 Preferred Stock. -28- 3.7 No Conflict with Other Instruments. Neither the Company nor any of ---------------------------------- its subsidiaries is in violation of any provisions of its charter, bylaws or any other governing document as amended and in effect on and as of the date hereof or in default (including, without limitation, the provisions of the Company's Articles of Incorporation that set forth the terms of the Series B Preferred Stock) (and no event has occurred which, with notice or lapse of time or both, would constitute a default) under any provision of any instrument or contract to which it is a party or by which it is bound (including, without limitation, any agreement between the Company and CC), or of any provision of any Federal, state or foreign judgment, writ, decree, order, statute, rule or governmental regulation applicable to the Company, which violation or default could reasonably be expected to have a Material Adverse Effect. The (i) execution, delivery and performance of the Transaction Documents, (ii) execution and filing of the Series B-2 Articles of Amendment and (iii) consummation of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Series B-2 Preferred Stock and the reservation for issuance and issuance of the Conversion Shares) will not, in any such case, result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or of any of its subsidiaries or the triggering of any preemptive or anti-dilution rights or rights of first refusal or first offer, or any similar rights (whether pursuant to a "poison pill" provision or otherwise), on the part of holders of the Company's securities. 3.8 Financial Condition; Taxes; Litigation. -------------------------------------- 3.8.1 The Company's financial condition is, in all material respects, as described in the Disclosure Documents, except for changes in the ordinary course of business and normal year-end adjustments that are not, in the aggregate, materially adverse to the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. There has been no material adverse change to the Company's business, operations, properties, financial condition, prospects or results of operations since the date of the Company's most recent audited financial statements contained in the Disclosure Documents. 3.8.2 The Company has filed all tax returns required to be filed by it and paid all taxes which are due, except for taxes which it reasonably disputes or which could not have a Material Adverse Effect. 3.8.3 Neither the Company nor any of its subsidiaries is the subject of any pending or, to the Company's knowledge, threatened inquiry, investigation or administrative or legal proceeding by the Internal Revenue Service, the taxing authorities of any state or local jurisdiction, the Commission or any state securities commission or other governmental or regulatory entity which could have a Material Adverse Effect. 3.8.4 Except as described in the Disclosure Documents, there is no claim, litigation or administrative proceeding pending, or, to the Company's knowledge, threatened -29- or contemplated, against the Company or any of its subsidiaries, or against any officer, director or employee of the Company or any such subsidiary in connection with such person's employment therewith that, individually or in the aggregate, could have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which could have a Material Adverse Effect. 3.9 Reporting Company; Form S-3. The Company is subject to the reporting --------------------------- requirements of the Exchange Act, has a class of securities registered under Section 12 of the Exchange Act, and has timely filed all reports required thereby. The Company is eligible to register for resale, in a secondary sale by a selling stockholder, shares of its Common Stock on a registration statement on Form S-3 under the Securities Act. To the Company's knowledge, there exist no facts or circumstances (including without limitation any required approvals or waivers of any circumstances that may delay or prevent the obtaining of accountant's consents) that would prohibit or delay the preparation and filing of a registration statement on Form S-3 with respect to the Registrable Securities (as defined in the Registration Agreement). 3.10 Acknowledgement of Dilution. The Company acknowledges that the --------------------------- issuance of Conversion Shares may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue Conversion Shares in accordance with the terms of the Series B-2 Articles of Amendment is unconditional and absolute regardless of the effect of any such dilution. 3.11 Intellectual Property. The Company and its subsidiaries each has the --------------------- right to use adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property rights necessary to conduct the business now operated by it, and is not aware of any infringement by a third party with respect to such rights or of any infringement by it or conflict with asserted rights of others that, in any such case, if determined adversely to the Company or any of its subsidiaries, could individually or in the aggregate have a Material Adverse Effect. 3.12 Registration Rights; Rights of Participation. Except as described on -------------------------------------------- Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any - ------------- person or entity any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority and (B) no person or entity, including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties, has any right of first refusal, preemptive right, right of participation, anti-dilutive right or any similar right to participate in, or to receive securities of the Company or other consideration as a result of, the transactions contemplated by the Transaction Documents which has not been waived or will not be waived or otherwise satisfied as of the Exchange Date. -30- 3.13 Listing on Nasdaq. The Common Stock is listed on the Nasdaq ------------------ National Market, and trading in the Common Stock on such market has not been - -------- suspended. The Company is, to its knowledge, in full compliance with the continued listing criteria of the Nasdaq National Market, and does not -------- reasonably anticipate that the Common Stock will lose its listing on the Nasdaq National Market, whether by reason of the transactions contemplated by the - -------- Transaction Documents, or otherwise and is not aware of any inquiry by or received any notice from the Nasdaq National Market regarding any failure or -------- alleged failure by the Company to comply with such criteria. 3.14 Fees. The Company is not obligated to pay any compensation or other ---- fee, cost or related expenditure to any underwriter, broker, agent or other representative or entity in connection with the transactions contemplated hereby. The Company will indemnify and hold harmless CC from and against any claim by any person or entity alleging that CC is obligated to pay any such compensation, fee, cost or related expenditure in connection with the transactions contemplated hereby. 3.15 Regulatory Permits. Each of the Company and its subsidiaries ------------------ possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct its business, except where the failure to so possess such certificates, authorizations or permits could not have a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which revocation or modification could have a Material Adverse Effect. 3.16 Key Employees. Each person whose name is set forth on Schedule 3.17 ------------- ------------- (each, a "Key Employee") is currently serving in the capacity indicated on such ------------ schedule on a full-time basis. The Company has no knowledge of any fact or circumstance (including without limitation (i) the terms of any agreement to which such person is a party or any litigation in which such person is or may become involved and (ii) any illness or medical condition that could reasonably be expected to result in the disability or incapacity of such person) that would limit or prevent any such person from serving in such capacity on a full-time basis in the foreseeable future, or of any intention on the part of any such person to limit or terminate his or her employment with the Company. Except as described on Schedule 3.17, no Key Employee has borrowed money pursuant to a ------------- currently outstanding loan that is secured by Common Stock or any right or option to receive Common Stock. 3.17 Environment. Except as disclosed in the Disclosure Documents (i) ----------- there is no environmental liability, nor factors likely to give rise to any environmental liability, affecting any of the properties of the Company or any of its subsidiaries that, individually or in the aggregate, would have a Material Adverse Effect and (ii) neither the Company nor any of the subsidiaries has violated any environmental laws applicable to it now or previously in effect ("Environmental Laws"), other than such violations or infringements that, ------------------ individually or in the aggregate, have not had and will not have a Material Adverse Effect. -31- 4. COVENANTS OF THE COMPANY. ------------------------ 4.1 Corporate Existence. The Company shall, so long as CC or any ------------------- affiliate of CC beneficially owns any Securities, maintain its corporate existence in good standing under the jurisdiction of its incorporation and shall pay all taxes owed by it when due except for taxes which the Company reasonably disputes. 4.2 Provision of Information. The Company shall, so long as CC or any ------------------------ affiliate of CC beneficially owns any Securities, provide CC with copies of all materials sent to stockholders, in each such case at the same time that it mails such materials to its stockholders. 4.3 Reporting Status. As long as CC or any affiliate of CC beneficially ---------------- owns any Securities and until the date on which any of the foregoing may be sold to the public pursuant to Rule 144(k) (or any successor rule or regulation), (i) the Company shall timely file with the Commission all reports required to be so filed pursuant to the Exchange Act and (ii) the Company shall not terminate its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination. The Company agrees to issue a press release describing the transactions contemplated by the Transaction Documents on Monday September 18, ---------------------- 2000, and to file with the Commission a Form 8-K in the form required by the - ---- Exchange Act and sufficient to permit CC to make sales under the Registration Statement numbered 333-87887 and 333-33352 declared effective February 16, 2000 and April 4, 2000, respectively, describing the terms of the transactions contemplated by the Transaction Documents, with this Agreement and all schedules and exhibits attached to such Form 8-K as an exhibit thereto, as soon as ---------- practicable and in no event later than the close of business on Tuesday, - ------------------------------------------------------------------------ September 19, 2000. - ------------------ 4.4 Reservation of Common Stock. The Company shall at all times following --------------------------- the Exchange Date have authorized and reserved for issuance to CC pursuant to the Series B-2 Preferred Stock, free from any preemptive rights, a number of shares of Common Stock equal to the number of Conversion Shares issuable upon conversion of the Series B-2 Preferred Stock (the "Reserved Amount"). --------------- 4.5 Quotation on Nasdaq. The Company shall (i) promptly following the ------------------- Closing, take such action as may be necessary to include all of the Conversion Shares that may be issued by the Company under the Series B-2 Preferred Stock on the Nasdaq National Market, and (ii) use its reasonable commercial efforts to -------- maintain the designation and quotation, or listing, of the Common Stock on the Nasdaq SmallCap Market, Nasdaq National Market or the New York Stock Exchange for a minimum of five (5) years following the Exchange Date. 4.6 No Adverse Action. The Company and its subsidiaries shall refrain, ----------------- while any Series B-2 Preferred Stock is outstanding, from taking any action or entering into any arrangement which in any way adversely affects the rights, privileges or benefits available -32- to a holder of Preferred Stock pursuant to the terms of the Series B-2 Articles of Amendment. 5. CONDITIONS TO CLOSING. --------------------- 5.1 Conditions to CC's Obligations at Closing. CC's obligations at the ------------------------------------------ Closing, including without limitation its obligation to exchange the Series B Preferred Stock for the Series B-2 Preferred Stock, are conditioned upon the satisfaction by the Company (or waiver by CC) of each of the following events as of the Exchange Date: 5.1.1 the representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as of such date as if made on such date; 5.1.2 the Company shall have complied with or performed in all material respects all of the agreements, obligations and conditions set forth in this Agreement that are required to be complied with or performed by the Company on or before the Closing; 5.1.3 the Exchange Date shall occur on a date that is not later than September 30, 2000; 5.1.4 the Company shall have delivered to CC a certificate, signed by an officer of the Company, certifying that the conditions specified in this paragraph 5.1 have been fulfilled as of the Closing, it being understood that CC may rely on such certificate as though it were a representation and warranty of the Company made herein; 5.1.5 the Company shall have delivered to CC an opinion of counsel for the Company, dated as of such date, in substantially the form set forth on Exhibit 5.1.5 hereto, and covering such additional matters as may reasonably be requested by CC; 5.1.6 the Company shall have delivered to CC duly executed certificates representing the Series B-2 Preferred Stock being exchanged; 5.1.7 the Company shall have executed and delivered the Registration Agreement; 5.1.8 the Common Stock shall be listed for trading on the Nasdaq National Market and no suspension of trading in the -------- -33- Common Stock on such market shall have occurred and be continuing as of the Exchange Date; 5.1.9 the Company shall have authorized and reserved for issuance the number of shares of Common Stock required to be reserved under paragraph 4.5 hereof, and shall have provided CC with reasonable evidence thereof; 5.1.10 the Company shall have duly filed the Series B-2 Articles of Amendment with the Secretary of State of the State of Colorado and a copy thereof certified by the Secretary of State of the State of Colorado shall have been delivered to CC and the Series B-2 Articles of Amendment shall not have been amended, modified or rescinded; and 5.1.11 since the date of this Agreement, there shall not have occurred, in the reasonable judgment of CC, a material adverse change in the business, operations, financial condition, properties, prospects or results of operation of the Company. 5.2 Conditions to Company's Obligations at the Closing. The Company's --------------------------------------------------- obligations at the Closing are conditioned upon the satisfaction (or waiver by the Company) of each of the following events as of the Exchange Date: 5.2.1 the representations and warranties of CC shall be true and correct in all material respects as of such date as if made on such date; and 5.2.2 CC shall have complied with or performed in all material respects all of the agreements, obligations and conditions set forth in this Agreement that are required to be complied with or performed by CC on or before the Closing. -34- 6. MISCELLANEOUS. ------------- 6.1 Survival. The representations and warranties made by the parties -------- herein shall survive the Closing notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties. The Company agrees that it will indemnify and hold harmless CC for any loss, claim, liability, damage or expense, as incurred by CC, arising out of or in connection with (a) a breach by the Company of any representation, warranty or agreement made in any Transaction Document, (b) any cause of action, suit or claim brought or made against such indemnitee (other than directly by the Company solely for breach of this Agreement, or the Registration Agreement by the indemnitee or by governmental or regulatory authorities), and arising out of or resulting from (whether in whole or in part) the execution, delivery, performance or enforcement of any Transaction Document or the Series B-2 Articles of Amendment), any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities or the status of the CC as an investor in the Company, except to the extent that such actual loss or damage results from a breach by such indemnitee of this Agreement or the Registration Agreement or from a CC's violation of law, or (c) any characterization concerning any Transaction Document or the Series B- 2 Articles of Amendment other than as expressly provided herein or therein, as the case may be, including, without limitation, any characterization that the exercise of CC rights and remedies under any of the Transaction Documents or the Series B-2 Articles of Amendment (or through a combination) results in a CC acting (or agreeing to act) other than independently and on its own behalf. The right to indemnification shall include the right to advancement of expenses as they are incurred. 6.2 Successors and Assigns. The terms and conditions of this ---------------------- Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Company may not assign it rights or obligations under this Agreement except as may be specifically provided by the Transaction Documents. 6.3 No Reliance. Each party acknowledges that (i) it has such ----------- knowledge in business and financial matters as to be fully capable of evaluating the Transaction Documents and the transactions contemplated hereby and thereby, (ii) it is not relying on any advice or representation of the other party in connection with entering into the Transaction Documents or such transactions (other than the representations made in the -35- Transaction Documents), (iii) it has not received from such party any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into the Transaction Documents or the performance of its obligations hereunder and thereunder, and (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and has entered into the Transaction Documents based on its own independent judgment and on the advice of its advisors as it has deemed necessary, and not on any view (whether written or oral) expressed by such party. 6.4 Injunctive Relief. The Company acknowledges that a breach by it ----------------- of its obligations hereunder will cause irreparable harm to CC and that the remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any such breach, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate and specific performance of such obligations without the necessity of showing economic loss. 6.5 Governing Law; Jurisdiction. This Agreement shall be governed by --------------------------- and construed under the laws of the State of Illinois without regard to the conflict of laws provisions thereof. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in City of Chicago, for the adjudication of any dispute hereunder or under any Transaction Document or the Series B-2 Articles of Amendment or in connection herewith or therewith or with any transaction contemplated hereby or thereby or discussed herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof (certified or registered mail, return receipt requested) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 6.6 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 6.7 Headings; Drafting. The headings used in this Agreement are used ------------------ for convenience only and are not to be considered in construing or interpreting this Agreement. The parties shall be deemed to have participated jointly in the drafting of the Transaction Documents, and no provision hereof or thereof shall be construed against any party as the drafter thereof. 6.8 Notices. Any notice, demand or request required or permitted to ------- be given by any party to any other party pursuant to the terms of this Agreement shall be in -36- writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) 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 a nationally-recognized overnight courier and (iii) on the Business 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 Company: WEBB Interactive Services, Inc. 1800 Glenarm Place, Suite 700 Denver, Colorado 80202 Tel: 303-296-9200 Fax: 303-292-5309 Attn: William Cullen with a copy to: Gray, Plant, Mooty, Mooty & Bennet, P.A. 3400 City Center 33 South Sixth Street Minneapolis, MN 55402-3796 Tel: 612-343-2827 Fax: 612-333-0066 Attn: Lindley S. Branson, Esq. and if to a CC, to such address as shall be designated by CC in writing to the Company. 6.9 Expenses. The Company and CC each shall pay all costs and -------- expenses that it incurs in connection with the negotiation, execution, delivery and performance of this Agreement; provided, however, that the Company shall -------- ------- reimburse CC at the Closing for all out-of-pocket expenses (including without limitation reasonable legal fees and expenses) incurred by it in connection its due diligence investigation of the Company and the negotiation, preparation, execution, delivery and performance of the Transaction Documents in an amount ------------ not to exceed Ten Thousand Dollars ($10,000). - -------------------------------------------- 6.10 Entire Agreement; Amendments; Waiver. The Transaction Documents ------------------------------------ constitute the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and CC. -37- [Remainder of Page Intentionally Left Blank] -38- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above written. WEBB INTERACTIVE SERVICES, INC. By: __________________________ Name: Title: CASTLE CREEK TECHNOLOGY PARTNERS LLC By: Castle Creek Partners, L.L.C. Its: Investment Manager By: _______________________________________ Michael L. Spolan, Managing Director -39- Exhibit C REGISTRATION AGREEMENT REGISTRATION AGREEMENT (this "Agreement"), dated as of September __, --------- 2000, by and between WEBB INTERACTIVE SERVICES, INC., a Delaware corporation (the "Company"), and Castle Creek Technology Partners LLC. ("CC"). ------- -- The Company has agreed with CC to exchange shares of the Company's Series B Convertible Preferred Stock, no par value (the "Series B Preferred Stock"), held ------------------------ by CC for an equal number of shares of the Company's Series B-2 Convertible Preferred Stock, no par value (the "Series B-2 Preferred Stock") pursuant to an -------------------------- Exchange Agreement, dated as of September ___, 2000. The Series B-2 Preferred Stock will be issued pursuant to Articles of Amendment in the form attached to the Exchange Agreement (the "Series B-2 Articles of Amendment"). In order to -------------------------------- induce CC to enter into the Exchange Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended (the "Securities Act"), and under applicable state securities laws. Capitalized -------------- terms used herein and not otherwise defined shall have the respective meanings set forth in the Exchange Agreement or the Series B-2 Articles of Amendment, as applicable. In consideration of CC entering into the Exchange Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. DEFINITIONS. ----------- For purposes of this Agreement, the following terms shall have the meanings specified: (a) "Business Day" shall have the meaning specified in the Exchange ------------ Agreement; (b) "Holder" means any person owning or having the right to acquire, ------ through conversion of the Series B-2 Preferred Stock, Registrable Securities, including initially CC and thereafter any permitted assignee thereof; (c) "Effective Date" means the date on which the Registration -------------- Statement is declared effective by the Securities and Exchange Commission (the "Commission"). ---------- (d) "Filing Deadline" means September 30, 2000; --------------- -40- (e) "Register", "registered" and "registration" refer to a -------- ---------- ------------ registration effected by preparing and filing a registration statement or statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act ("Rule 415") or any successor rule -------- providing for the offering of securities on a continuous or delayed basis ("Registration Statement"), and the declaration or ordering of ---------------------- effectiveness of the Registration Statement by the Commission; (f) "Registration Deadline" means December 31, 2000; and --------------------- (g) "Registrable Securities" means the Conversion Shares and any other ---------------------- shares of Common Stock issuable pursuant to the terms of the Series B- 2 Articles of Amendment, and any shares of capital stock issued or issuable from time to time (with any adjustments) in replacement of, in exchange for or otherwise in respect of the Conversion Shares. 2. MANDATORY REGISTRATION. ---------------------- (a) On or before the Filing Deadline, the Company shall prepare and file with the Commission a Registration Statement on Form S-3 as a "shelf" registration statement under Rule 415 covering the resale of the number of shares of Registrable Securities equal to the Reserved Amount (as defined in the Exchange Agreement). The Registration Statement shall state, to the extent permitted by Rule 416 under the Securities Act, that it also covers such indeterminate number of shares of Common Stock as may be required to effect conversion of the Series B-2 Preferred Stock in order to prevent dilution resulting from stock splits, stock dividends or similar events. (b) The Company shall use its best efforts to cause the Registration Statement to become effective as soon as practicable following the filing thereof, but in no event later than the Registration Deadline. The Company shall respond promptly to any and all comments made by the staff of the Commission on the Registration Statement (but in no event later than fifteen (15) Business Days following the Company's receipt thereof), and shall submit to the Commission, within three (3) Business Days after the Company learns that no review of the Registration Statement will be made by the staff of the Commission or that the staff of the Commission has no further comments on the Registration Statement, as the case may be, a request for acceleration of the effectiveness of the Registration Statement to a time and date not later than forty eight (48) hours after the submission of such request. The Company shall maintain the effectiveness of the Registration Statement until the earlier to occur of (i) the date on which all of the Registrable Securities have been sold pursuant to the Registration Statement and (ii) the date on which all of the remaining Registrable Securities (in the reasonable opinion of counsel to the Holders) may be immediately sold to the public without registration and without regard to the amount of Registrable Securities which may be sold by a Holder thereof at a given time (the period beginning on the Registration Deadline and ending on the earlier of such dates being referred to herein as the "Registration Period"). ------------------- -41- (c) If the Registration Statement is not declared effective by the Commission on or before April 15, 2001 (a "Default Event"), the Company shall ------------- pay to each Holder an amount equal to the lesser of (x) two percent (2%) per thirty calendar day period (prorated for any period of less than thirty calendar days) and (y) the highest rate permitted by applicable law, times the Stated ----- Value of the Series B-2 Preferred Stock initially issued to such Holder, accruing daily and compounded monthly, from the date on which a Default Event occurs until the date on which such Default Event has been cured and is no longer continuing, provided that if the date the registration statement is --------------------------------------------------------- declared effective is delayed due primarily to the act or failure to act of CC, - ------------------------------------------------------------------------------- the April 15 deadline shall be extended by the number of days caused by such act - -------------------------------------------------------------------------------- or failure to act. The amounts paid or payable by the Company hereunder shall - ----------------- be in addition to any other remedies available to each Holder at law or in equity or pursuant to the terms hereof or the Exchange Agreement, or otherwise. Payments of such amounts pursuant hereto shall be made in immediately available funds within five (5) Business Days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, payments shall be made at the end of each thirty-day period. 3. PIGGYBACK REGISTRATION. ----------------------- If at any time prior to the expiration of the Registration Period, (i) the Company proposes to register shares of Common Stock under the Securities Act in connection with the public offering of such shares for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan or employee stock award or a registration on Form S-4 under the Securities Act or any successor or similar form registering stock issuable upon a reclassification, a business combination involving an exchange of securities or an exchange offer for securities of the issuer or another entity, or a registration statement on Form S-3 covering the resale of securities issued in connection with a corporate acquisition) (a "Proposed Registration") and (ii) --------------------- a registration statement covering the sale of all of the Registrable Securities is not then effective and available for sales thereof by the Holders, the Company shall, at such time, promptly give each Holder written notice of such Proposed Registration. Each Holder shall have twenty (20) days from its receipt of such notice to deliver to the Company a written request specifying the amount of Registrable Securities that such Holder intends to sell and such Holder's intended method of distribution. Upon receipt of such request, the Company shall use its best efforts to cause all Registrable Securities which the Company has been requested to register to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Holder; provided, however, that the Company shall have the right to postpone or -------- ------- withdraw any registration effected pursuant to this Section 3 without obligation to the Holder. If, in connection with any underwritten public offering for the account of the Company or for shareholders of the Company that have contractual rights to require the Company to register shares of Common Stock, the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement -42- because, in the judgment of such underwriter(s), marketing or other factors dictate such limitation is necessary to facilitate such offering, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which each Holder has requested inclusion hereunder as such underwriter(s) shall permit. Any such exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in the Registration Statement, in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in the Registration Statement. 4. OBLIGATIONS OF THE COMPANY. -------------------------- In addition to performing its obligations hereunder, including without limitation those pursuant to paragraphs 2(a) and 2(b) above, the Company shall: (a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of the Securities Act or to maintain the effectiveness of the Registration Statement during the Registration Period, or as may be reasonably requested within a reasonable time prior to any proposed sale by a Holder in order to incorporate information concerning such Holder or such Holder's intended method of distribution; (b) secure the listing of all Registrable Securities on the Nasdaq SmallCap Market prior to the date on which the Registration Statement relating to such Registrable Securities becomes effective; (c) furnish to each Holder such number of copies of the prospectus included in such Registration Statement, including a preliminary prospectus, if any, in conformity with the requirements of the Securities Act, and such other documents as such Holder may reasonably request in order to facilitate the disposition of such Holder's Registrable Securities; (d) use all commercially reasonable efforts to register or qualify the Registrable Securities under the securities or "blue sky" laws of such jurisdictions within the United States as shall be reasonably requested from time to time by a Holder, and do any and all other acts or things which may be necessary or advisable to enable such Holder to consummate the public sale or other disposition of the Registrable Securities in such jurisdictions; provided that the Company shall not be required in connection -43- therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdiction; (e) in the event of an underwritten public offering of the Registrable Securities, enter into (together with all Holders proposing to distribute Registrable Securities through such underwriting) and perform its obligations under an underwriting agreement, in usual and customary form reasonably acceptable to the Company, with the managing underwriter of such offering; (f) notify each Holder immediately upon the occurrence of any event as a result of which the prospectus included in such Registration Statement, as then in effect, contains an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and as promptly as practicable, prepare, file and furnish to each Holder a reasonable number of copies of a supplement or an amendment to such prospectus as may be necessary so that such prospectus does not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (g) use all commercially reasonable efforts to prevent the issuance of any stop order or other order suspending the effectiveness of such Registration Statement and, if such an order is issued, to obtain the withdrawal thereof at the earliest possible time and to notify each Holder of the issuance of such order and the resolution thereof; (h) furnish to each Holder, on the date that such Registration Statement becomes effective, (x) a letter, dated such date, of outside counsel representing the Company (and reasonably acceptable to such Holder) addressed to such Holder, confirming the effectiveness of the Registration Statement and, to the knowledge of such counsel, the absence of any stop order, and (y) in the case of an underwriting, (A) an opinion addressed to the underwriters, dated such date, of such outside counsel, in such form and substance as is required to be given to such underwriters, and (B) a letter addressed to such underwriters, dated such date, from the Company's independent certified public accountants, in such form and substance as is required to be given by the Company's independent certified public accountants to such underwriters; (i) provide each Holder and its representatives the opportunity to conduct a reasonable inquiry of the Company's financial and other records during normal business hours and make available its officers, directors and employees for questions regarding information which such Holder may reasonably request in order to fulfill any due diligence obligation on its part; and (j) permit counsel retained for such purpose by each Holder to review the Registration Statement and all amendments and supplements thereto, and any comments made by the staff of the Commission and the Company's responses thereto, -44- within a reasonable period of time prior to the filing thereof with the Commission (or, in the case of comments made by the staff of the Commission, within a reasonable period of time following the receipt thereof by the Company) and amend such materials in accordance with the comments of such counsel. 5. OBLIGATIONS OF EACH HOLDER. -------------------------- In connection with the registration of the Registrable Securities pursuant to the Registration Statement, each Holder shall: (a) furnish to the Company in writing such information regarding itself and the intended method of disposition of Registrable Securities as the Company shall reasonably request in order to effect the registration thereof; (b) upon receipt of any notice from the Company of the happening of any event of the kind described in paragraphs 4(f) or 4(g), immediately discontinue any sale or other disposition of Registrable Securities pursuant to the Registration Statement until the filing of an amendment or supplement as described in paragraph 4(f) or withdrawal of the stop order referred to in paragraph 4(g); (c) in the event of an underwritten offering of the Registrable Securities, enter into a customary and reasonable underwriting agreement and execute such other documents as the managing underwriter for such offering may reasonably request; (d) to the extent required by applicable law, deliver a prospectus to the purchaser of Registrable Securities; (e) notify the Company when it has sold all of the Registrable Securities theretofore held by it; and (f) promptly notify the Company in the event that any information supplied by such Holder in writing for inclusion in the Registration Statement or related prospectus is untrue or omits to state a material fact required to be stated therein or necessary to make such information not misleading in light of the circumstances then existing. 6. INDEMNIFICATION. --------------- In the event that any Registrable Securities are included in a Registration Statement under this Agreement: (a) To the extent permitted by law, the Company shall indemnify and hold harmless each Holder, the officers, directors, employees and agents of such Holder, and each person, if any, who controls such Holder within the meaning of the Securities -45- Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), against -------- any losses, claims, damages, liabilities or reasonable out-of-pocket expenses (whether joint or several) (collectively, including legal or other expenses reasonably incurred in connection with investigating or defending same, "Losses"), insofar as any such Losses arise out of or are based upon (i) any ------ untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus, if any, or final prospectus contained therein or any amendments or supplements thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Subject to the provisions of paragraph 6(c) below, the Company will reimburse such Holder, and each such officer, director, employee, agent or controlling person for any legal or other expenses as reasonably incurred by any such entity or person in connection with investigating or defending any Loss; provided, however, that the foregoing indemnity shall not apply to amounts paid in settlement of any Loss if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be obligated to indemnify any person for any Loss to the extent that such Loss arises out of or is based upon and in conformity with written information furnished by such person expressly for use in such Registration Statement; and provided, further, that the Company shall not be required to indemnify any person to the extent that any Loss results from such person selling Registrable Securities (i) to a person to whom there was not sent or given, at or prior to the written confirmation of the sale of such shares, a copy of the prospectus, as most recently amended or supplemented, if the Company has previously furnished or made available copies thereof or (ii) during any period following written notice by the Company to such Holder of an event described in paragraph 4(f) or 4(g). (b) To the extent permitted by law, each Holder, acting severally and not jointly, shall indemnify and hold harmless the Company, the officers, directors, employees, agents and representatives of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act or the 1934 Act, against any Losses to the extent (and only to the extent) that any such Losses arise out of or are based upon and in conformity with written information furnished by such Holder expressly for use in such Registration Statement; and such Holder will reimburse any legal or other expenses as reasonably incurred by the Company and any such officer, director, employee, agent, representative, or controlling person, in connection with investigating or defending any such Loss; provided, however, that the foregoing indemnity shall not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of such Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this paragraph 6(b) exceed the net proceeds resulting from the sale of the Registrable Securities sold by such Holder under the Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any -46- indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the reasonably incurred fees and expenses of one such counsel to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate under applicable standards of professional conduct due to actual or potential conflicting interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6 with respect to such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 6 or with respect to any other action unless the indemnifying party is materially prejudiced as a result of not receiving such notice. (d) In the event that the indemnity provided in paragraph 6(a) or 6(b) is unavailable or insufficient to hold harmless an indemnified party for any reason, the Company and each Holder agree, severally and not jointly, to contribute to the aggregate Losses to which the Company or such Holder may be subject in such proportion as is appropriate to reflect the relative fault of the Company and such Holder in connection with the statements or omissions which resulted in such Losses; provided, however, that in no case shall such Holder be responsible for any amount in excess of the proceeds resulting from the sale of the Registrable Securities sold by it under the Registration Statement. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company or by such Holder. The Company and each Holder agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph 6(d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to indemnification or contribution from any person who is not guilty of fraudulent misrepresentation. For purposes of this Section 6, each person who controls a Holder within the meaning of either the Securities Act or the Exchange Act and each officer, director, employee or agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act and each officer, director, employee or agent of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph 6(d). (e) The obligations of the Company and each Holder under this Section 6 shall survive the conversion of the Series B Preferred Stock in full, the -47- completion of any offering of Registrable Securities pursuant to a Registration Statement under this Agreement, or otherwise. 7. REPORTS. ------- With a view to making available to each Holder the benefits of Rule 144 under the Securities Act ("Rule 144") and any other similar rule or regulation of the Commission that may at any time permit such Holder to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) file with the Commission in a timely manner all reports and other documents required to be filed by the Company under the Securities Act and the 1934 Act; and (c) furnish to such Holder, so long as such Holder owns any Registrable Securities, forthwith upon written request (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, and the 1934 Act, (ii) to the extent not publicly available through the Commission's EDGAR database, a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing such Holder of any rule or regulation of the Commission which permits the selling of any such securities without registration. 8. MISCELLANEOUS. ------------- (a) Expenses of Registration. All expenses, other than underwriting ------------------------ discounts and commissions and fees and expenses of counsel to the Holder, incurred in connection with the registrations, filings or qualifications described herein, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, the fees and disbursements of counsel for the Company, and the fees and disbursements incurred in connection with the opinion and letter described in paragraph 4(h) hereof, shall be borne by the Company. (b) Amendment; Waiver. Any provision of this Agreement may be amended ----------------- only pursuant to a written instrument executed by the Company and the Holder. Any waiver of the provisions of this Agreement may be made only pursuant to a written instrument executed by the party against whom enforcement is sought. The failure of any party to exercise any right or remedy under this Agreement or otherwise, or the delay by any party in exercising such right or remedy, shall not operate as a waiver thereof. (c) Notices. Any notice, demand or request required or permitted to ------- be given by any party to any other party pursuant to the terms of this Agreement shall be in -48- writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) 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 a nationally-recognized overnight courier and (iii) on the day actually received after deposit in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed to the parties as follows: If to the Company: WEBB Interactive Services, Inc. 1800 Glenarm Place, Suite 700 Denver, Colorado 80202 Tel: 303-296-9200 Fax: 303-292-5309 Attn: William Cullen with a copy to: Gray, Plant, Mooty, Mooty & Bennet, P.A. 3400 City Center 33 South Sixth Street Minneapolis, MN 55402-3796 Tel: 612-343-2827 Fax: 612-333-0066 Attn: Lindley S. Branson, Esq. and if to any Holder, to such address as shall be designated by such Holder in writing to the Company. (d) Termination. This Agreement shall terminate on the earlier to ----------- occur of (a) the end of the Registration Period and (b) the date on which all of the Registrable Securities have been publicly distributed; but any such termination shall be without prejudice to (i) the parties' rights and obligations arising from breaches of this Agreement occurring prior to such termination and (ii) the indemnification and contribution obligations under this Agreement. (e) Assignment. Upon the transfer of Series B-2 Preferred Stock or ---------- Registrable Securities by a Holder, the rights of such Holder hereunder with respect to the securities so transferred shall be assigned automatically to the transferee thereof as long as: (i) the Company is, within a reasonable period of time following such transfer, furnished with written notice of the name and address of such transferee, (ii) the transferee agrees in writing with the Company to be bound by all of the provisions hereof and (iii) such transfer is made in accordance with the applicable requirements of the -49- Articles of Amendment; provided, however, that the registration rights granted -------- ------- in this Agreement shall not be transferred to any person or entity that receives any such security pursuant to an effective registration statement under the Securities Act or pursuant to a transaction under Rule 144 or any successor provision thereto. (f) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, and all of which together shall be deemed one and the same instrument. This Agreement, once executed by a party, may be delivered to any other party hereto by facsimile transmission. (g) Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Illinois without regard to the conflict of laws provisions thereof. -50- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above written. WEBB INTERACTIVE SERVICES, INC. By: __________________________ Name: Title: CASTLE CREEK TECHNOLOGY PARTNERS LLC By: Castle Creek Partners, L.L.C. Its: Investment Manager By: ______________________________ Michael L. Spolan, Managing Director -51- EX-10.2 3 0003.txt LETTER AGREEMENT BETWEEN WEBB & MARSHALL Exhibit 10.2 September 14, 2000 Marshall Capital Management, Inc. 11 Madison Avenue New York, New York 10010 Attn: Allan Weine Re: Series B Convertible Preferred Stock (the "Series B Preferred Stock") --------------------------------------------------------------------- Dear Al: This confirms the agreement between Marshall Capital Management, Inc. ("Marshall") and Webb Interactive Services, Inc. (the "Company") that was reached on September 14, 2000, regarding the exchange of the Series B Preferred Stock held by Marshall for an equal number of shares of Series B-2 Convertible Preferred Stock (the "Series B-2 Preferred Stock")to be issued pursuant to Articles of Amendment substantially in the form attached hereto as Exhibit A (the "Series B-2 Articles of Amendment"). 1. Exchange of Stock. On or before September 29, 2000, Marshall will deliver ----------------- to the Company and the Company will accept, on the terms and subject to the conditions set forth herein and in the Exchange Agreement (as defined below), a certificate representing 6,250 shares of Series B Preferred Stock in exchange for a certificate representing 6,250 shares of Series B-2 Preferred Stock (the "Exchange"). 2. Exchange Agreement; Registration Agreement. Prior to or contemporaneously ------------------------------------------ with the consummation of the Exchange, the Company and Marshall will enter into (i) an exchange agreement substantially in the form attached hereto as Exhibit B (the "Exchange Agreement") which shall contain schedules that do not vary materially from the schedules attached to the Securities Purchase Agreement (as defined below) and (ii) a registration agreement substantially in the form attached hereto as Exhibit C (the "Registration Agreement"). Upon the execution and delivery by both parties of the Exchange Agreement and the Registration Agreement: (A) the Securities Purchase Agreement, dated as of December 31, 1999, between the Company and each of the Purchasers named therein (the "Securities Purchase Agreement") shall be amended so that Schedule 3.17 thereto shall include only P. Evans, W. Cullen, L. Branson, G. Hagan and S. Greenman; and (B) the Registration Rights Agreement, dated as of December 31, 1999, between the Company and each of the Purchasers named therein (the "Registration Rights Agreement") shall be amended so that all references to "Preferred Shares", "Preferred Stock", "Articles of Incorporation", "Articles of Amendment" and "Conversion Shares" shall be deleted. Except as amended hereby, the Securities Purchase Agreement and the Registration Rights Agreement will continue in full force and effect in accordance with their respective terms. 3. 8-K Filing. The Company agrees to file a Form 8-K describing the Exchange ---------- in full and in a manner sufficient to permit Marshall to make sales under the Registration Statement numbered 333-33352 and declared effective April 4, 2000, and attaching this letter agreement and all exhibits hereto as soon as practicable and in no event later than the close of business on September 19, 2000 and to file as soon as possible, and in any event within one Business Day following the occurrence of any event for which such a filing would be necessary to permit the continuance of such sales, additional Forms 8-K or amendments thereto sufficient to permit such continued sales. 4. Conversion Price. The parties agree that the conversion price that will ---------------- apply to the Series B-2 Preferred Stock pursuant to the Series B-2 Articles of Amendment will be fixed at $10.20408 (subject to adjustment as described in the Series B-2 Articles of Amendment). Such conversion price will be reduced by $1.020408 (subject to adjustment as described in the Series B-2 Articles of Amendment) in the event that: (i) the Exchange is not effected on or before September 29, 2000, and such delay is not caused primarily by any act or failure to act by Marshall or any other holder of the Series B-2 Preferred Stock, provided that if the Exchange is delayed as a result of the failure of the Company to satisfy any condition to the closing of the Exchange, such delay shall not be deemed to be caused by any act or failure to act by Marshall or any such holder, (ii) the Company fails to file the registration statement required to be filed by it pursuant to the Registration Agreement (the "Exchange Registration Statement") on or before September 29, 2000, provided that, if such filing is delayed primarily as a result of the failure of any holder of the Series B-2 Preferred Stock to provide its comments (or to indicate that it has no comments) on the Exchange Registration Statement by the close of business on the Business Day immediately following such holder's receipt of a draft thereof, and as long as the Company has provided each holder with such draft at least three (3) Business Days prior to the filing thereof, such date shall be extended by the number of days beginning on the day following such Business Day and ending on the day on which each holder provides such comments (or indicates that it has none), or (iii) the Company fails to file a Form 8-K in the form required by paragraph 3 above on or before September 19, 2000. Such Conversion Price, whether or not previously adjusted, shall be reduced or further reduced by $1.020408 (subject to adjustment as described in the Series B-2 Articles of Amendment) in the event that the Exchange Registration Statement is not declared effective on or before December 31, 2000, provided that if the Exchange Registration Statement is not declared effective on or before such date primarily as a result of an act or failure to act by a holder of the B-2 Preferred Stock, such date shall be extended by the number of days (if any) on which such act or failure to act was the primary cause of such delay. 5. Registration Default. If the Exchange Registration Statement is not declared -------------------- effective by the Securities and Exchange Commission on or before April 15, 2001 (a "Default Event"), the Company shall pay to Marshall an amount equal to the ------------- lesser of (x) two -2- percent (2%) per thirty calendar day period (prorated for any period of less than thirty calendar days) and (y) the highest rate permitted by applicable law, times $6,250,000, accruing daily and compounded monthly, from the date on which - ----- a Default Event occurs until the date on which such Default Event has been cured and is no longer continuing, provided that such amount will not accrue with respect to any day on which such Default Event was primarily caused by an act or failure to act by a holder of the B-2 Preferred Stock. 6. Acknowledgements. The parties acknowledge that the Company is negotiating an ---------------- agreement similar to this Agreement with the other holder of Series B Preferred Stock. The Company agrees that in no event will such other agreement contain terms that are more favorable to such holder than the terms hereof are to Marshall. Neither this Agreement nor such other agreement, nor any negotiations between the Company and either holder of Series B Preferred Stock, shall be deemed to result in such holders constituting a "group" as such term is used in Section 13(d) under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. The Company acknowledges and agrees that the Exchange will be effected in reliance upon the exemption from securities registration afforded by the provisions Section 3(a)(9) of the Securities Act of 1933, as amended (the "Act"), and that, as such, the holding period required by Rule 144 under the Act for sales of shares issuable pursuant to the Series B-2 Preferred Stock will begin on the date on which Marshall acquired the Series B Preferred Stock. 7. Entire Agreement; Amendments; Waiver. This Agreement constitutes the entire ------------------------------------ agreement between the parties with regard to the subject matter hereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and Marshall. 8. Governing Law; Jurisdiction. This Agreement shall be governed by and --------------------------- construed under the laws of the State of New York without regard to the conflict of laws provisions thereof. -3- If this letter correctly sets forth the agreement between Marshall and the Company with respect to the subject matter hereof, please sign in the space indicated below, whereupon this letter will constitute each party's binding agreement. WEBB INTERACTIVE SERVICES, INC. By: /s/ William R. Cullen ------------------------------ Name: William R. Cullen Title: Chief Financial Officer Accepted and Agreed: MARSHALL CAPITAL MANAGEMENT, INC. By: /s/ Allan Weine ------------------------------ Allan Weine, President -4- Exhibit B --------- EXCHANGE AGREEMENT EXCHANGE AGREEMENT (this "Agreement"), dated as of September 14, 2000, by --------- and between WEBB INTERACTIVE SERVICES, INC., a Colorado corporation (the "Company"), and MARSHALL CAPITAL MANAGEMENT, INC. ("Marshall"). ------- -------- The Company and Marshall wish to exchange the shares of Series B Convertible Preferred Stock of the Company (the "Series B Preferred Stock") currently held by Marshall for an equal number of shares of Series B-2 Convertible Preferred Stock (the "Series B-2 Preferred Stock") issued pursuant -------------------------- to Articles of Amendment in the form attached hereto as Exhibit A (the "Series ------ B-2 Articles of Amendment"). The Series B-2 Preferred Stock will be convertible - ------------------------- pursuant to the terms of the Series B-2 Articles of Amendment into shares (the "Conversion Shares") of the Company's common stock, no par value (the "Common ----------------- ------ Stock"). The Series B-2 Preferred Stock and the Conversion Shares are - ----- collectively referred to herein as the "Securities". Any capitalized term used ---------- herein that is not otherwise defined shall have the meaning specified therefor in the Series B-2 Articles of Amendment. The exchange contemplated hereby will be effected in reliance upon the exemption from securities registration afforded by the provisions Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities Act"). In -------------- order to induce Marshall to enter into this Agreement, the Company has agreed to effect the registration of the Conversion Shares under the Securities Act pursuant to a Registration Agreement, the form of which is attached as Exhibit B (the "Registration Agreement"). ---------------------- The Company and Marshall hereby agree as follows: 1. EXCHANGE. -------- 1.1 Agreement to Exchange. Upon the terms and subject to the satisfaction --------------------- or waiver of the conditions set forth herein, the Company and Marshall agree to exchange all of the Series B Preferred Stock currently held by Marshall for an equal number of shares of Series B-2 Preferred Stock (the "Exchange"). The date -------- on which the closing (the "Closing") of the Exchange occurs is hereinafter ------- referred to as the "Exchange Date". Subject to the satisfaction or waiver of the ------------- conditions set forth herein, the Exchange will be deemed to occur when Marshall delivers to the Company, on the terms and subject to the conditions set forth herein, a certificate representing 6,250 shares of Series B Preferred Stock in exchange for a certificate representing 6,250 shares of Series B-2 Preferred Stock. -5- 1.2 Business Day. When used herein, "Business Day" shall mean any day on ------------ ------------ which the New York Stock Exchange (the "NYSE") and commercial banks in the city ---- of New York are open for business. 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MARSHALL. ----------------------------------------------------- Marshall hereby represents and warrants to the Company and agrees with the Company that, as of the date of this Agreement and as of the Exchange Date: 2.1 Authorization; Enforceability. Marshall is duly and validly organized, ----------------------------- validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization with full power and authority to effect the Exchange and to execute and deliver this Agreement. This Agreement and the Registration Agreement each constitutes Marshall's valid and legally binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) or public policy. 2.2 Information. The Company has provided Marshall with information ----------- regarding the business, operations and financial condition of the Company, and has granted to Marshall the opportunity to ask questions of and receive answers from representatives of the Company, its officers, directors, employees and agents concerning the Company and materials relating to the terms and conditions of the purchase and sale of the Securities. Neither such information nor any other investigation conducted by Marshall or any of its representatives shall modify, amend or otherwise affect Marshall's right to rely on the Company's representations and warranties contained in this Agreement. 2.3 Limitations on Disposition. Marshall acknowledges that, except as -------------------------- provided in the Registration Agreement, the Securities have not been and are not being registered under the Securities Act and may not be transferred or resold without registration under the Securities Act or unless pursuant to an exemption therefrom. 2.2 Legend. Marshall understands that the certificates representing the ------ Securities may bear at issuance a restrictive legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, and may not be offered or sold unless a registration statement under the Securities Act and applicable state securities laws shall have become effective with regard thereto, or an exemption from registration under such laws is available in connection with such offer or sale." Notwithstanding the foregoing, it is agreed that, as long as (A) the resale or transfer (including without limitation a pledge) of such Securities is registered pursuant to an -6- effective registration statement and Marshall represents in writing to the Company that such Securities have been or are being sold pursuant to such registration statement, (B) such Securities have been publicly sold pursuant to Rule 144 ("Rule 144") and Marshall has delivered to the Company customary Rule -------- 144 broker's and seller's representation letters, or (C) such Securities can be publicly sold pursuant to Rule 144(k) under the Securities Act, such Securities shall be issued without any legend or other restrictive language and, with respect to Securities upon which such legend is stamped, the Company shall issue new certificates without such legend to the holder promptly upon request. 2.6 No Conflict. The execution, delivery and performance by Marshall of ----------- this Agreement and the Registration Agreement (A) have been approved by all necessary action (corporate or other) on the part of Marshall and (B) will not result in (i) any material violation of any provisions of its charter, bylaws or any other governing document in effect on the date hereof, (ii) any material violation of any instrument or contract to which it is a party or by which it is bound, or (iii) the creation of any material lien, charge or encumbrance upon any of its assets. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. -------------------------------------------------------- The Company hereby represents and warrants to Marshall and agrees with Marshall that, as of the date of this Agreement and as of the Exchange Date: 3.1 Organization, Good Standing and Qualification. Each of the Company --------------------------------------------- and its subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite corporate power and authority to carry on its business as now conducted. Each of the Company and its subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. For purposes of this Agreement, the term "subsidiary" or "subsidiaries" shall mean any entity or entities in which the Company beneficially owns 20% or more of the voting equity thereof. 3.2 Authorization; Consents. The Company has the requisite corporate ----------------------- power and authority to enter into and perform its obligations under (i) this Agreement and (ii) the Registration Agreement (together, the "Transaction ----------- Documents"), to execute and file, and perform its obligations under the Series - --------- B-2 Articles of Amendment, to issue Series B-2 Preferred Stock to Marshall in accordance with the terms hereof and to issue and deliver Conversion Shares in accordance with the terms of the Series B-2 Articles of Amendment. All corporate action on the part of the Company by its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of, and the performance by the Company of its obligations under, the Transaction Documents and (ii) the authorization, execution and filing of, and the performance by the Company of its obligations under, the Series B-2 Articles of Amendment has been taken, and no further consent or authorization of the Company, its Board of Directors, its stockholders, any governmental agency or organization (other than such approval as may be required under the Securities Act and -7- applicable state securities laws in respect of the Registration Agreement), or any other person or entity is required (pursuant to any rule of the Nasdaq National Market, or otherwise). 3.3 Enforcement. Each of the Transaction Documents constitutes a valid ----------- and legally binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) or public policy. 3.4 Disclosure Documents; Agreements; Financial Statements; Other ------------------------------------------------------------- Information. The Company has filed with the Securities and Exchange Commission - ----------- (the "Commission"): (i) the Company's Annual Report on Form 10-KSB for the year ---------- ended December 31, 1999, (ii) Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2000 and June 30, 2000, (iii) all Current Reports on Form 8-K, if any, and any other reports, required to be filed with the Commission since December 31, 1999 and prior to the date hereof and (iv) the Company's definitive Proxy Statement for its 1999 Annual Meeting of Stockholders (collectively, the "Disclosure Documents"). The Company is not aware of any event occurring on or -------------------- prior to the Exchange Date (other than the transactions effected hereby) that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such date. Each Disclosure Document, as of the date of the filing thereof with the Commission, conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act") and, as of the date of ------------ such filing, such Disclosure Document did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements required to be filed as exhibits to the Disclosure Documents have been filed or incorporated by reference as required by the applicable provisions of the Exchange Act. Neither the Company nor any of its subsidiaries is in breach of any agreement to which it is a party or by which it is bound where such breach could have a material adverse effect on (i) the consolidated business, operations, properties, financial condition, prospects or results of operations of the Company and its subsidiaries taken as a whole, (ii) the transactions contemplated by the Transaction Documents or by the Series B-2 Articles of Amendment, (iii) the Securities or (iv) the ability of the Company to perform its obligations under the Transaction Documents or the Series B-2 Articles of Amendment (collectively, a "Material Adverse Effect"). Except as set forth in the Disclosure Documents, ----------------------- the Company has no liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business which, under generally accepted accounting principles, are not required to be reflected in such financial statements (including the footnotes to such financial statements) and which, individually or in the aggregate, are not material to the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. As of their respective dates, the financial statements of the Company included in the Disclosure Documents have been prepared in accordance with generally accepted accounting principles consistently applied at the times and during the periods involved (except (i) as may be otherwise indicated in such financial -8- statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end adjustments). The written information described in paragraph 2.3 does not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.5 Capitalization. The capitalization of the Company, including its -------------- authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company's stock option plans, the number of shares issuable and reserved for issuance pursuant to securities (other than the Series B-2 Preferred Stock) exercisable for, or convertible into or exchangeable for any shares of Common Stock and the number of shares initially to be reserved for issuance upon conversion and exercise of the Series B-2 Preferred Stock is set forth on Schedule 3.5 hereto. ------------ All of such outstanding shares of capital stock have been, or upon issuance will be, validly issued, fully paid and non-assessable. Except as set forth on Schedule 3.5, no shares of the capital stock of the Company are subject to - -------------- preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances created by or through the Company. Except as disclosed on Schedule 3.5, or as contemplated herein, there are no outstanding ------------ options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries. 3.6 Valid Issuance. The Series B-2 Preferred Stock is duly authorized and, -------------- when issued, sold and delivered in accordance with the terms hereof, (i) will be duly and validly issued, fully paid and nonassessable, free and clear of any taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or through the Company (collectively, "Encumbrances"), (ii) based in part upon the ------------ representations of Marshall in this Agreement, will be issued, sold and delivered in compliance with all applicable Federal and state securities laws and (iii) will be entitled to all of the rights, preferences and privileges set forth in the Series B-2 Articles of Amendment. The Conversion Shares are duly authorized and reserved for issuance and, when issued in accordance with the terms of the Series B-2 Articles of Amendment, will be duly and validly issued, fully paid and nonassessable, free and clear of any Encumbrances. The Company's Board of Directors (i) has determined that the Exchange and the consummation of the transactions contemplated by the Transaction Documents and by the Series B-2 Articles of Amendment (including without limitation the issuance of the Conversion Shares upon exercise of the Series B-2 Preferred Stock), are in the best interests of the Company and (ii) has approved the issuance of Conversion Shares upon exercise of the Series B-2 Preferred Stock. -9- 3.7 No Conflict with Other Instruments. Neither the Company nor any of ---------------------------------- its subsidiaries is in violation of any provisions of its charter, bylaws or any other governing document as amended and in effect on and as of the date hereof (including without limitation the provisions of the Company's Articles of Incorporation that set forth terms of the Series B Preferred Stock) or in default (and no event has occurred which, with notice or lapse of time or both, would constitute a default) under any provision of any instrument or contract to which it is a party or by which it is bound (including without limitation any agreement between the Company and Marshall), or of any provision of any Federal, state or foreign judgment, writ, decree, order, statute, rule or governmental regulation applicable to the Company, which violation or default could reasonably be expected to have a Material Adverse Effect. The (i) execution, delivery and performance of the Transaction Documents, (ii) execution and filing of the Series B-2 Articles of Amendment and (iii) consummation of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Series B-2 Preferred Stock and the reservation for issuance and issuance of the Conversion Shares) will not, in any such case, result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or of any of its subsidiaries or the triggering of any preemptive or anti-dilution rights or rights of first refusal or first offer, or any similar rights (whether pursuant to a "poison pill" provision or otherwise), on the part of holders of the Company's securities. 3.8 Financial Condition; Taxes; Litigation. -------------------------------------- 3.8.1 The Company's financial condition is, in all material respects, as described in the Disclosure Documents, except for changes in the ordinary course of business and normal year-end adjustments that are not, in the aggregate, materially adverse to the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. There has been no material adverse change to the Company's business, operations, properties, financial condition, prospects or results of operations since the date of the Company's most recent audited financial statements contained in the Disclosure Documents. 3.8.2 The Company has filed all tax returns required to be filed by it and paid all taxes which are due, except for taxes which it reasonably disputes or which could not have a Material Adverse Effect. 3.8.3 Neither the Company nor any of its subsidiaries is the subject of any pending or, to the Company's knowledge, threatened inquiry, investigation or administrative or legal proceeding by the Internal Revenue Service, the taxing authorities of any state or local jurisdiction, the Commission or any state securities commission or other governmental or regulatory entity which could have a Material Adverse Effect. 3.8.4 Except as described in the Disclosure Documents, there is no claim, litigation or administrative proceeding pending, or, to the Company's knowledge, threatened -10- or contemplated, against the Company or any of its subsidiaries, or against any officer, director or employee of the Company or any such subsidiary in connection with such person's employment therewith that, individually or in the aggregate, could have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which could have a Material Adverse Effect. 3.9 Reporting Company; Form S-3. The Company is subject to the reporting --------------------------- requirements of the Exchange Act, has a class of securities registered under Section 12 of the Exchange Act, and has timely filed all reports required thereby. The Company is eligible to register for resale, in a secondary sale by a selling stockholder, shares of its Common Stock on a registration statement on Form S-3 under the Securities Act. To the Company's knowledge, there exist no facts or circumstances (including without limitation any required approvals or waivers of any circumstances that may delay or prevent the obtaining of accountant's consents) that would prohibit or delay the preparation and filing of a registration statement on Form S-3 with respect to the Registrable Securities (as defined in the Registration Agreement). 3.10 Acknowledgement of Dilution. The Company acknowledges that the --------------------------- issuance of Conversion Shares may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue Conversion Shares in accordance with the terms of the Series B-2 Articles of Amendment is unconditional and absolute regardless of the effect of any such dilution. 3.11 Intellectual Property. The Company and its subsidiaries each has the --------------------- right to use adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property rights necessary to conduct the business now operated by it, and is not aware of any infringement by a third party with respect to such rights or of any infringement by it or conflict with asserted rights of others that, in any such case, if determined adversely to the Company or any of its subsidiaries, could individually or in the aggregate have a Material Adverse Effect. 3.12 Registration Rights; Rights of Participation. Except as described on -------------------------------------------- Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any - ------------- person or entity any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority and (B) no person or entity, including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties, has any right of first refusal, preemptive right, right of participation, anti-dilutive right or any similar right to participate in, or to receive securities of the Company or other consideration as a result of, the transactions contemplated by the Transaction Documents which has not been waived or will not be waived or otherwise satisfied as of the Exchange Date. -11- 3.13 Listing on Nasdaq. The Common Stock is listed on the Nasdaq ------------------ National Market, and trading in the Common Stock on such market has not been suspended. The Company is, to its knowledge, in full compliance with the continued listing criteria of the Nasdaq National Market, and does not reasonably anticipate that the Common Stock will lose its listing on the Nasdaq National Market, whether by reason of the transactions contemplated by the Transaction Documents, or otherwise and is not aware of any inquiry by or received any notice from the Nasdaq National Market regarding any failure or alleged failure by the Company to comply with such criteria. 3.14 Fees. The Company is not obligated to pay any compensation or other ---- fee, cost or related expenditure to any underwriter, broker, agent or other representative or entity in connection with the transactions contemplated hereby. The Company will indemnify and hold harmless Marshall from and against any claim by any person or entity alleging that Marshall is obligated to pay any such compensation, fee, cost or related expenditure in connection with the transactions contemplated hereby. 3.15 Regulatory Permits. Each of the Company and its subsidiaries ------------------ possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct its business, except where the failure to so possess such certificates, authorizations or permits could not have a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which revocation or modification could have a Material Adverse Effect. 3.16 Key Employees. Each person whose name is set forth on Schedule 3.17 ------------- ------------- (each, a "Key Employee") is currently serving in the capacity indicated on such ------------ schedule on a full-time basis. The Company has no knowledge of any fact or circumstance (including without limitation (i) the terms of any agreement to which such person is a party or any litigation in which such person is or may become involved and (ii) any illness or medical condition that could reasonably be expected to result in the disability or incapacity of such person) that would limit or prevent any such person from serving in such capacity on a full-time basis in the foreseeable future, or of any intention on the part of any such person to limit or terminate his or her employment with the Company. Except as described on Schedule 3.17, no Key Employee has borrowed money pursuant to a -------------- currently outstanding loan that is secured by Common Stock or any right or option to receive Common Stock. 3.17 Environment. Except as disclosed in the Disclosure Documents (i) ----------- there is no environmental liability, nor factors likely to give rise to any environmental liability, affecting any of the properties of the Company or any of its subsidiaries that, individually or in the aggregate, would have a Material Adverse Effect and (ii) neither the Company nor any of the subsidiaries has violated any environmental laws applicable to it now or previously in effect ("Environmental Laws"), other than such violations or infringements that, ------------------ individually or in the aggregate, have not had and will not have a Material Adverse Effect. -12- 4. COVENANTS OF THE COMPANY. ------------------------ 4.1 Corporate Existence. The Company shall, so long as Marshall or any ------------------- affiliate of Marshall beneficially owns any Securities, maintain its corporate existence in good standing under the jurisdiction of its incorporation and shall pay all taxes owed by it when due except for taxes which the Company reasonably disputes. 4.2 Provision of Information. The Company shall, so long as Marshall or ------------------------ any affiliate of Marshall beneficially owns any Securities, provide Marshall with copies of all materials sent to stockholders, in each such case at the same time that it mails such materials to its stockholders. 4.3 Reporting Status. As long as Marshall or any affiliate of Marshall ---------------- beneficially owns any Securities and until the date on which any of the foregoing may be sold to the public pursuant to Rule 144(k) (or any successor rule or regulation), (i) the Company shall timely file with the Commission all reports required to be so filed pursuant to the Exchange Act and (ii) the Company shall not terminate its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination. The Company agrees to issue a press release describing the transactions contemplated by the Transaction Documents on Monday September 18, 2000, and to file with the Commission a Form 8-K in the form required by the Exchange Act and sufficient to permit Marshall to make sales under the Registration Statement numbered 333-87887 and 333-33352 declared effective February 16, 2000 and April 4, 2000, respectively, describing the terms of the transactions contemplated by the Transaction Documents, with this Agreement and all schedules and exhibits attached to such Form 8-K as an exhibit thereto, as soon as practicable and in no event later than the close of business on Tuesday, September 19, 2000. 4.4 Reservation of Common Stock. The Company shall at all times following --------------------------- the Exchange Date have authorized and reserved for issuance to Marshall pursuant to the Series B-2 Preferred Stock, free from any preemptive rights, a number of shares of Common Stock equal to the number of Conversion Shares issuable upon conversion of the Series B-2 Preferred Stock (the "Reserved Amount"). --------------- 4.5 Quotation on Nasdaq. The Company shall (i) promptly following the ------------------- Closing, take such action as may be necessary to include all of the Conversion Shares that may be issued by the Company under the Series B-2 Preferred Stock on the Nasdaq National Market, and (ii) use its reasonable commercial efforts to maintain the designation and quotation, or listing, of the Common Stock on the Nasdaq SmallCap Market, Nasdaq National Market or the New York Stock Exchange for a minimum of five (5) years following the Exchange Date. 4.6 No Adverse Action. The Company and its subsidiaries shall refrain, ----------------- while any Series B-2 Preferred Stock is outstanding, from taking any action or entering into any arrangement which in any way adversely affects the rights, privileges or benefits available -13- to a holder of Preferred Stock pursuant to the terms of the Series B-2 Articles of Amendment. 5. CONDITIONS TO CLOSING. --------------------- 5.1 Conditions to Marshall's Obligations at Closing. Marshall's ----------------------------------------------- obligations at the Closing, including without limitation its obligation to exchange the Series B Preferred Stock for the Series B-2 Preferred Stock, are conditioned upon the satisfaction by the Company (or waiver by Marshall) of each of the following events as of the Exchange Date: 5.1.1 the representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as of such date as if made on such date; 5.1.2 the Company shall have complied with or performed in all material respects all of the agreements, obligations and conditions set forth in this Agreement that are required to be complied with or performed by the Company on or before the Closing; 5.1.3 the Exchange Date shall occur on a date that is not later than September 30, 2000; 5.1.4 the Company shall have delivered to Marshall a certificate, signed by an officer of the Company, certifying that the conditions specified in this paragraph 5.1 have been fulfilled as of the Closing, it being understood that Marshall may rely on such certificate as though it were a representation and warranty of the Company made herein; 5.1.5 the Company shall have delivered to Marshall an opinion of counsel for the Company, dated as of such date, in substantially the form set forth on Exhibit 5.1.5 hereto, and covering such additional matters as may reasonably be requested by Marshall; 5.1.6 the Company shall have delivered to Marshall duly executed certificates representing the Series B-2 Preferred Stock being exchanged; 5.1.7 the Company shall have executed and delivered the Registration Agreement; 5.1.8 the Common Stock shall be listed for trading on the Nasdaq National Market and no suspension of trading in the -14- Common Stock on such market shall have occurred and be continuing as of the Exchange Date; 5.1.9 the Company shall have authorized and reserved for issuance the number of shares of Common Stock required to be reserved under paragraph 4.5 hereof, and shall have provided Marshall with reasonable evidence thereof; 5.1.10 the Company shall have duly filed the Series B-2 Articles of Amendment with the Secretary of State of the State of Colorado and a copy thereof certified by the Secretary of State of the State of Colorado shall have been delivered to Marshall and the Series B-2 Articles of Amendment shall not have been amended, modified or rescinded; and 5.1.11 since the date of this Agreement, there shall not have occurred, in the reasonable judgment of Marshall, a material adverse change in the business, operations, financial condition, properties, prospects or results of operation of the Company. 5.2 Conditions to Company's Obligations at the Closing. The Company's --------------------------------------------------- obligations at the Closing are conditioned upon the satisfaction (or waiver by the Company) of each of the following events as of the Exchange Date: 5.2.1 the representations and warranties of Marshall shall be true and correct in all material respects as of such date as if made on such date; and 5.2.2 Marshall shall have complied with or performed in all material respects all of the agreements, obligations and conditions set forth in this Agreement that are required to be complied with or performed by Marshall on or before the Closing. 6. MISCELLANEOUS. ------------- 6.1 Survival. The representations and warranties made by the parties -------- herein shall survive the Closing notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties. The Company agrees that it will indemnify and hold harmless Marshall for any loss, claim, liability, damage or expense, as incurred by Marshall, arising out of or in connection -15- with (a) a breach by the Company of any representation, warranty or agreement made in any Transaction Document, (b) any cause of action, suit or claim brought or made against such indemnitee (other than directly by the Company solely for breach of this Agreement, or the Registration Agreement by the indemnitee or by governmental or regulatory authorities), and arising out of or resulting from (whether in whole or in part) the execution, delivery, performance or enforcement of any Transaction Document or the Series B-2 Articles of Amendment), any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities or the status of the Marshall as an investor in the Company, except to the extent that such actual loss or damage results from a breach by such indemnitee of this Agreement or the Registration Agreement or from a Marshall's violation of law, or (c) any characterization concerning any Transaction Document or the Series B- 2 Articles of Amendment other than as expressly provided herein or therein, as the case may be, including, without limitation, any characterization that the exercise of Marshall rights and remedies under any of the Transaction Documents or the Series B-2 Articles of Amendment (or through a combination) results in a Marshall acting (or agreeing to act) other than independently and on its own behalf. The right to indemnification shall include the right to advancement of expenses as they are incurred. 6.2 Successors and Assigns. The terms and conditions of this ---------------------- Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Company may not assign it rights or obligations under this Agreement except as may be specifically provided by the Transaction Documents. 6.3 No Reliance. Each party acknowledges that (i) it has such ----------- knowledge in business and financial matters as to be fully capable of evaluating the Transaction Documents and the transactions contemplated hereby and thereby, (ii) it is not relying on any advice or representation of the other party in connection with entering into the Transaction Documents or such transactions (other than the representations made in the Transaction Documents), (iii) it has not received from such party any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into the Transaction Documents or the performance of its obligations hereunder and thereunder, and (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and has entered into the Transaction Documents based on its own independent judgment and on the advice of its advisors as it has deemed necessary, and not on any view (whether written or oral) expressed by such party. 6.4 Injunctive Relief. The Company acknowledges that a breach by it ----------------- of its obligations hereunder will cause irreparable harm to Marshall and that the remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any such -16- breach, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate and specific performance of such obligations without the necessity of showing economic loss. 6.5 Governing Law; Jurisdiction. This Agreement shall be governed by --------------------------- and construed under the laws of the State of Illinois without regard to the conflict of laws provisions thereof. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in City of Chicago, for the adjudication of any dispute hereunder or under any Transaction Document or the Series B-2 Articles of Amendment or in connection herewith or therewith or with any transaction contemplated hereby or thereby or discussed herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof (certified or registered mail, return receipt requested) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 6.6 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 6.7 Headings; Drafting. The headings used in this Agreement are used ------------------ for convenience only and are not to be considered in construing or interpreting this Agreement. The parties shall be deemed to have participated jointly in the drafting of the Transaction Documents, and no provision hereof or thereof shall be construed against any party as the drafter thereof. 6.8 Notices. Any notice, demand or request required or permitted to ------- be given by any party to any other party pursuant to the terms of this Agreement shall be in writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) 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 a nationally-recognized overnight courier and (iii) on the Business 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 Company: WEBB Interactive Services, Inc. -17- 1800 Glenarm Place, Suite 700 Denver, Colorado 80202 Tel: 303-296-9200 Fax: 303-292-5309 Attn: William Cullen with a copy to: Gray, Plant, Mooty, Mooty & Bennet, P.A. 3400 City Center 33 South Sixth Street Minneapolis, MN 55402-3796 Tel: 612-343-2827 Fax: 612-333-0066 Attn: Lindley S. Branson, Esq. and if to a Marshall, to such address as shall be designated by Marshall in writing to the Company. 6.9 Expenses. The Company and Marshall each shall pay all costs and -------- expenses that it incurs in connection with the negotiation, execution, delivery and performance of this Agreement; provided, however, that the Company shall -------- ------- reimburse Marshall at the Closing for all out-of-pocket expenses (including without limitation reasonable legal fees and expenses) incurred by it in connection its due diligence investigation of the Company and the negotiation, preparation, execution, delivery and performance of the Transaction Documents in -- an amount not to exceed Ten Thousand Dollars ($10,000). - ------------------------------------------------------ 6.10 Entire Agreement; Amendments; Waiver. The Transaction Documents ------------------------------------ constitute the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and Marshall. [Remainder of Page Intentionally Left Blank] -18- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above written. WEBB INTERACTIVE SERVICES, INC. By: __________________________ Name: Title: MARSHALL CAPITAL MANAGEMENTS, INC. By: __________________________ Allan Weine, President -19- EX-10.3 4 0004.txt PRESS RELEASE DATED SEPTEMBER 18, 2000 Exhibit 10.3 FOR IMMEDIATE RELEASE Contact: Kim Durand Webb Interactive Services Inc. 303-308-3251 kdurand@webb.net Diana Garelik Webb Interactive Services Inc. 303-308-3222 dgarelik@webb.net Webb Interactive Services Announces Agreement with Preferred Shareholders Denver, CO - September 18, 2000 - Webb Interactive Services (Nasdaq: WEBB, "Webb") announced today that the Company has agreed to exchange $12,500,000 of outstanding Series B Convertible Preferred Stock from Marshall Capital Management, Inc., a subsidiary of Credit Suisse First Boston ("Marshall"), and Castle Creek Technology Partners, LLC, ("Castle Creek"), for a like amount of Series B-2 Convertible Preferred Stock. The conversion price for the Series B-2 Stock has been set at $10.20, which equates to 1,225,000 shares of common stock. The price is a slight premium to the average closing bid price for the 10 trading days preceding the date the parties agreed to this exchange. A registration statement for the shares issuable upon conversion of the Series B-2 preferred stock will be filed with the SEC before the end of this month. Under the terms of the Series B Convertible Preferred Stock issued earlier this year, Marshall and Castle Creek could have been eligible to receive up to approximately 1,550,000 shares of Webb common stock beginning November 13, 2000, at a conversion price as low as $8.00 per share. Bill Cullen, Chief Financial Officer of Webb, commented, "Our goal for this exchange was to create a foundation of certainty and confidence to Webb's financing picture. We're very pleased with the cooperation of our private investors in concluding an arrangement that was fair and reasonable for all concerned, and which fully aligns our long-term interests and theirs in growing the value of Webb's business going forward." About Webb Interactive Webb Interactive Services, Inc. (http://www.webb.net) provides innovative online commerce communication solutions that help small businesses generate leads, increase buyer-seller interaction and strengthen customer relationships. Webb has pioneered an advanced XML-based technology platform, upon which application modules that lead the convergence of instant messaging and commerce are built. About Jabber.com Jabber.com, Inc. (http://www.jabber.com), a subsidiary of Webb Interactive Services (Nasdaq: WEBB), is the premiere provider of enterprise and carrier- grade Jabber solutions, products and services. Jabber is the only open source instant messaging (IM) platform which leverages XML and a distributed architecture designed to extend and bridge IM applications while providing a foundation for any application requiring real-time messaging. Information and statements in this report, other than historical information, should be considered forward-looking and reflect management's current views of future events and financial performance that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially include, but are not limited to, the following: . general economic conditions and developments within the Internet and Intranet industries; . product development and technology changes; . competition and pricing pressures; . length of the sales cycle; . variability of sale order flow, and; . management growth. -2- EX-10.4 5 0005.txt SALE OF ASSETS AGREEMENT DATED 09-12-2000 Exhibit 10.4 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT ARTICLE I DEFINITIONS.................................................. 1 1.1 "Assets"..................................................... 1 1.2 "Receivables"................................................ 1 1.3 "Contracts".................................................. 1 1.4 "Books and Records".......................................... 1 1.5 "Intellectual Property Rights"............................... 2 1.6 "Closing Date"............................................... 2 1.7 "Liabilities and Obligations"................................ 2 ARTICLE II PURCHASE AND SALE........................................... 2 2.1 Purchase Price............................................... 2 2.2 No Assumption of Liabilities................................. 3 2.3 Indemnification against Non-Assumed Liabilities.............. 3 2.4 Non-Compete and Non-Solicitation............................. 4 2.5 Payment at Closing........................................... 4 2.6 Accounts Receivable.......................................... 4 2.7 Co-Location Agreement........................................ 4 2.8 Stockholders' Agreement and Stockholders' Irrevocable Proxy.. 4 ARTICLE III DELIVERIES BY PARTIES...................................... 5 3.1 Seller's Deliveries.......................................... 5 3.2 Purchaser's Deliveries....................................... 5 ARTICLE IV CLOSING..................................................... 6 ARTICLE V INVESTIGATION................................................ 5 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE SELLER................ 6 6.1 Seller....................................................... 6 6.2 Title........................................................ 6 6.3 Liabilities.................................................. 7 6.4 Non-Breach, Etc.............................................. 7 6.5 Contracts.................................................... 6 6.6 Hardware/Software............................................ 8 6.7 Assets Complete, Etc......................................... 8 6.8 Litigation................................................... 7 6.9 Intellectual Property........................................ 7 6.10 Conduct of Business.......................................... 8 6.11 Licenses and Permits......................................... 8 6.12 Material Change.............................................. 9 6.13 Disclosure................................................... 10 6.14 Access to Information........................................ 10 6.15 Knowledge.................................................... 10
i 6.16 High Degree of Risk; Projections............................. 10 6.17 Reliance by Purchaser........................................ 9 6.18 Purpose of Purchase and Financial Condition.................. 9 6.19 Legend....................................................... 9 ARTICLE VII REPRESENTATIONS AND WARRANTIES BY PURCHASER................ 10 7.1 Organization and Standing.................................... 10 7.2 No Conflict.................................................. 10 7.3 Authority.................................................... 12 7.4 Litigation, etc.............................................. 12 7.5 Authorized Capital........................................... 12 7.6 Issued and Outstanding Stock................................. 11 7.7 Share Status................................................. 11 7.8 Disclosure................................................... 11 7.9 HP Services.................................................. 11 ARTICLE VIII COVENANTS OF THE SELLER................................... 13 8.1 Action by Seller............................................. 13 8.2 Fees......................................................... 12 8.3 Further Assurances........................................... 12 8.4 Best Efforts................................................. 12 8.5 No Shop...................................................... 12 8.6 Co-Lease Agreement........................................... 13 8.7 Notification of Breaches or Potential Breaches............... 13 ARTICLE IX NO BROKERS OR FINDERS....................................... 13 ARTICLE X CONDITIONS PRECEDENT OF PURCHASER............................ 15 10.1 Representations and Warranties True at Closing............... 15 10.2 Compliance with the Agreement................................ 15 10.3 Seller's Certificate......................................... 14 10.4 Deliveries................................................... 14 10.5 Injunction................................................... 14 10.6 Casualty..................................................... 14 10.7 Adverse Development.......................................... 14 10.8 Employee Arrangements........................................ 14 10.9 Investigations............................................... 14 ARTICLE XI CONDITIONS PRECEDENT OF THE SELLER.......................... 16 11.1 Representations and Warranties True at Closing............... 15 11.2 Purchaser's Compliance with the Agreement.................... 15 11.3 Purchaser's Certificate...................................... 15 11.4 Deliveries................................................... 15 11.5 Injunction................................................... 15 11.6 Casualty..................................................... 15 11.7 Adverse Development.......................................... 15
ii 11.8 Investigations............................................... 15 ARTICLE XII NATURE AND SURVIVAL OF REPRESENTATIONS..................... 16 ARTICLE XIII NOTICES................................................... 16 ARTICLE XIV MODIFICATION............................................... 17 ARTICLE XV EXPENSES.................................................... 17 ARTICLE XVI ASSIGNMENT................................................. 17 ARTICLE XVII MINNESOTA LAW TO GOVERN................................... 17 ARTICLE XVIII COUNTERPARTS............................................. 17 ARTICLE XIX HEADINGS................................................... 18 LIST OF EXHIBITS....................................................... 19
iii ASSET PURCHASE AGREEMENT ------------------------ AGREEMENT, (hereinafter, together with the Exhibits annexed hereto the "Agreement") made and entered into as of the 12th day of September, 2000, by and among BNKR, Inc., a Delaware corporation ("Purchaser"), and Webb Interactive Services, Inc., a Colorado corporation, ("Seller"). WITNESSETH: WHEREAS, Seller owns and operates an e-banking business located in Denver, Colorado (the "Business"). WHEREAS, Purchaser desires to purchase and acquire all the assets and business of the Business, excluding only its cash and accounts receivable, and Seller is willing to sell said assets and business to Purchaser, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the purchase and sale of the assets and of the premises and the mutual promises, covenants and conditions hereinafter set forth, Seller and Purchaser hereby agree as follows: ARTICLE I DEFINITIONS ----------- As used herein, the following terms shall have the meanings set forth below, and where said meanings are intended, said terms shall be capitalized: 1.1 "Assets" shall mean only the assets of Seller listed on Exhibit A ------ --------- attached hereto. 1.2 "Receivables" shall mean Seller's accounts receivable arising in ----------- connection with the Business in the ordinary course of Seller's business through the Closing Date. 1.3 "Contracts" shall mean all of Seller's right, title and interest in --------- and to all contracts, commitments and agreements which relate to the Assets of the Business, all of which are listed on an Exhibit B attached hereto. --------- 1.4 "Books and Records" shall mean all of Seller's books and records ----------------- relating to the Assets or the Business (other than Seller's tax returns) including without limitation, lists of customers and suppliers, and records with respect to pricing, volume, payment history, cost, mailing lists, distribution and customer lists, sales, purchasing and materials, and including any such records which are maintained on computer. 1.5 "Intellectual Property Rights" shall mean all copyrights, trademarks, ---------------------------- trade names, trade secrets, proprietary information and know-how utilized by Seller in the Business listed on Exhibit C attached hereto. --------- 1.6 "Closing Date" shall mean the date on which the Closing hereunder is ------------ held. The Closing shall be held at 10:00 a.m., then current Minnesota time, on September 12, 2000, or at such other time or date as the parties may mutually agree upon in writing, unless delayed by a party for failure to satisfy conditions precedent to said party's obligations hereunder, in which case Closing shall be held as soon as practicable after such conditions are satisfied. 1.7 "Liabilities and Obligations" shall mean any indebtedness, claim, --------------------------- obligation or liability of any kind of Seller. ARTICLE II PURCHASE AND SALE ----------------- 2.1 Purchase Price. On the Closing Date, subject to the terms and -------------- conditions set forth in this Agreement, Seller agrees to sell assign, transfer and convey to Purchaser, and Purchaser agrees to purchase, the Assets, for an amount (the "Purchase Price") equal to 181,176 shares of Purchaser's common stock, $.01 par value, having an agreed value of $4.25 per share, $770,000 in the aggregate, plus a cash payment of $39,700. In the event that the terms of the first funding by Purchaser following the Closing (other than the bridge funding for approximately $1,500,000, which is currently being negotiated,or any subsequent bridge financings not to exceed $500,000 in the aggregate) is at an effective offering price ("Effective Price") of less than $3.68 per share of common stock, immediately following the closing of such funding, Purchaser shall issue to Seller such number of additional shares of Purchaser's common stock as is necessary to cause the value of the total number of shares of Purchaser's common stock delivered to Seller for the purchase of the Business to equal $666,728, such value based on the Effective Price. If the securities sold in such offering are securities of Purchaser which are convertible into Purchaser's common stock and no other securities are sold with such convertible securities and the convertible securities do not provide for the payment of interest or dividends, other than dividends payable equally to all of Purchaser's securities holders, the conversion price for the convertible securities shall be deemed to be the Effective Price. If the funding includes securities other than Purchaser's common stock or securities convertible into Purchaser's common stock, which convertible securities do not entitle the holders thereof to any interest or dividend payments other than those available to all of Purchaser's securities holders, Purchaser and Seller shall negotiate in good faith to determine the Effective Price. If the parties cannot agree on the Effective Price within thirty (30) days of the closing of the funding, Purchaser and Seller shall each indicate in writing what they believe to be the Effective Price and shall submit the determination of the Effective Price to arbitration in Minneapolis, Minnesota in accordance with the rules 2 of the American Arbitration Association. The determination of the Effective Price pursuant to such arbitration shall be binding on the parties. The party's whose stated Effective Price is furthest from the price established in arbitration, shall pay the cost of such arbitration. If the difference between the stated Effective Price for each of the parties is equal, the cost of the arbitration shall be borne equally by the parties. 2.2 No Assumption of Liabilities. Purchaser shall not assume or become ---------------------------- liable for any Liabilities and Obligations of Seller; except only that Purchaser shall be responsible for liabilities arising under the Contracts, but only with respect to actions and transactions occurring under the Contracts from and after the Closing Date (the "Post-Closing Contract Liabilities"). Without limiting the generality of the foregoing, it is specifically understood and agreed as follows: (a) Although Purchaser is contemplating hiring all or most of the employees of Seller relating to the Business, Purchaser has no obligation to hire any of Seller's employees. In any event, Seller shall be responsible for any and all Liabilities and Obligations owed to its employees through the Closing Date, including but not limited to any termination payments, accrued vacation pay, unpaid wages, and otherwise. All such obligations of Seller to employees shall be satisfied, or arrangements for the satisfaction thereof acceptable to Purchaser shall be made, on or before the Closing Date. (b) Purchaser has no obligation with respect to warranties for services rendered by Seller before the Closing Date. Seller shall satisfy all such obligations at its expense. If requested by Seller, Purchaser will provide service on Seller's behalf at Purchaser's then standard charge for such service. 2.3 Indemnification against Non-Assumed Liabilities. Excepting solely the ----------------------------------------------- Post-Closing Contract Liabilities, if any, Seller shall indemnify, defend and hold Purchaser harmless from and against all claims, demands, losses, expenses, and liabilities, including but not limited to reasonable attorneys' fees, arising in any fashion out of any non-assumed Liabilities or Obligations of Seller. 2.4 Non-Compete and Non-Solicitation. At the closing, Purchaser and Seller -------------------------------- shall enter into a Non-Compete and Non-Solicitation Agreement in the form of Exhibit D attached hereto, pursuant to which Seller will agree not to compete - --------- with Purchaser nor to solicit its employees for a period of two years after the Closing. 2.5 Payment at Closing. The Purchase Price shall be paid as follows: ------------------ 3 (a) By payment of $39,700 at Closing (the payment at Closing shall be made in the form of a cashiers or certified check or by wire transfer); and (b) By delivery of a stock certificate (the "Stock Certificate") for 181,176 shares of Purchaser's common stock, $.01 par value. All payments made hereunder are subject to the terms and conditions herein set forth, and will be made by Purchaser in reliance upon the representations, warranties, covenants and agreements contained herein. 2.6 Accounts Receivable. Seller is retaining the Receivables. Seller ------------------- agrees that any actions taken to collect the Receivables shall be taken in a manner intended to minimize problems or disruption in the ongoing customer relationships of the Business. 2.7 Co-Location Agreement. At the Closing, Purchaser and Seller shall --------------------- enter into a co-location hosting agreement for the hardware and software of the Business, such agreement to be for a period of up to one year following the Closing and shall be in accordance with the co-location agreement set forth in Exhibit E attached hereto. It is understood that Purchaser will be responsible - --------- for all technical support, hardware and software related to the Assets purchased. During the term of the co-location agreement, Seller will remain responsible for Internet connectivity, router and firewall performance and availability. 2.8 Stockholders' Agreement and Stockholder's Irrevocable Proxy. At the ----------------------------------------------------------- Closing, Seller shall enter into the Agreement set forth in Exhibit H attached --------- hereto wherein Seller agrees to be bound by the terms of Purchasers Stockholders' Agreement dated May 8, 2000. At the Closing, Seller shall deliver an opinion of counsel to the effect that the Agreement To Be Bound is duly authorized and constitutes a legal valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms. At the Closing, Seller will execute an Irrevocable Proxy in the form attached hereto as Exhibit I. ARTICLE III DELIVERIES BY PARTIES --------------------- 3.1 Seller's Deliveries. On the Closing Date, subject to the terms and ------------------- conditions set forth in this Agreement, Seller shall make the following deliveries: (a) Bill of Sale, Assignments and other instruments of conveyance reasonably requested by Purchaser; 4 (b) A current certified search showing all financing statements on file against the Assets, together with appropriate releases or termination statements for any security interests in the Assets; (c) Non-Compete and Non-Solicitation Agreement duly executed by Seller; (d) Co-Location Agreement duly executed by Seller; (e) Agreement to Be Bound to Stockholders' Agreement; (f) Opinion of Counsel described in Section 2.8; (g) Irrevocable Proxy; and (h) All other items or documents necessary or appropriate hereunder. 3.2 Purchaser's Deliveries. On the Closing Date, subject to the terms and ---------------------- conditions set forth in this Agreement, Purchaser shall make the following deliveries: (a) Payment of the cash portion of the Purchase Price payable at Closing. (b) Delivery of the Stock Certificate. (c) Non-Compete and Non-Solicitation Agreement duly executed by Purchaser. (d) Co-Location Agreement duly executed by Purchaser. (e) All other items or documents necessary or appropriate hereunder. ARTICLE IV CLOSING ------- The Closing hereunder shall take place at the offices of Gray, Plant, Mooty, Mooty and Bennett, P.A. on September 12, 2000, or at such other place as may be mutually agreed upon in writing by Purchaser and Seller. 5 ARTICLE V INVESTIGATION ------------- From and after the date hereof and through the Closing Date, Seller shall afford to the officers and representatives of Purchaser free access to the properties and records of Seller as they relate to the Business in order that Purchaser may have full opportunity to make such investigation at reasonable times as it shall desire of the Assets and of the Business, and Seller shall provide to Purchaser reasonable assistance in the conduct of said investigation by Purchaser. ARTICLE VI REPRESENTATIONS AND WARRANTIES ------------------------------ OF THE SELLER ------------- Seller represents and warrants to Purchaser that, except as specifically set forth on Exhibit F attached hereto, entitled Representations and Warranties: --------- ------------------------------- Exceptions and Disclosures, the following statements are true and correct as of - -------------------------- the date of this Agreement and will be true and correct on the Closing Date as if made on said Date: 6.1 Seller. Seller is a corporation duly organized and existing and in ------ good standing under the laws of the state of Colorado and is entitled to own or lease its properties and to carry on its business, including the Business, as and in the places where such properties are now owned, leased or operated, or such business is now conducted. Seller has full power and authority to sell, convey, assign, transfer and deliver the Assets as herein provided, and all corporate and other proceedings necessary to be taken by Seller in connection with the transactions provided for by this Agreement and necessary to make the same effective have been duly and validly taken, and this Agreement has been duly and validly executed and delivered by Seller and constitutes a valid and binding obligation of Seller enforceable in accordance with its terms. 6.2 Title. Except as set forth on Exhibit F Seller has good and ----- --------- marketable title to the Assets, free and clear of any mortgages, liens, security interests, pledges, easements or encumbrances of any kind or nature whatsoever. At the Closing, Seller will convey good and marketable title to the Assets to be sold hereunder, free and clear of any and all mortgages, liens, security interests, pledges, easements, or encumbrances of any kind or nature whatsoever. 6.3 Liabilities. As of the date of this Agreement, Seller is not subject ----------- to and does not have any Liabilities and Obligations with respect to the Assets, except as disclosed in Exhibit F. 6.4 Non-Breach, Etc. The execution and delivery of this Agreement and the ---------------- consummation of the transactions contemplated hereby by Seller will not (a) violate or breach Seller's Articles of Incorporation or Bylaws, (b) result in a breach of any of the terms or conditions of, or constitute a default under, any mortgage, note, bond, indenture, 6 agreement, license or other instrument or obligation (including any "Contracts") to which Seller is now a party or by which it or any of its properties or assets may be bound or affected, or (c) violate any order, writ, injunction or decree of any court, administrative agency or governmental body. 6.5 Contracts. Except as listed in Exhibit B, Seller is not a party to --------- --------- any written or oral: (i) contract, agreement or understanding for the sale of products or performance of services relating to the Business; (ii) license or franchise agreement relating to the Business, either as licensor or licensee or franchisor or franchisee, including any related to intellectual property, or distributor, dealership or sales agency contract, agreement or understanding; (iii) contract or agreement granting to any person the right to use any property or property right of Seller relating to the Business (iv) other material contract or agreement relating to the Business. Seller has provided to Purchaser true, current, correct and complete copies of all of the Contracts, including all items specified in the preceding paragraph. Seller has performed all obligations required to be performed by it to date under, and Seller and, to Seller's knowledge, each other party to each Contract is not in default under, each of the Contracts, all of which are in full force and effect and enforceable by Seller in accordance with their terms. There is no event, which after notice or lapse of time or both, which would constitute a default under any such Contracts. The consummation of the transactions contemplated under this Agreement will not give rise to any violation or any default or event or condition which, after notice or lapse of time or both, would constitute a default under any such Contracts on the part of Seller. Upon request of Purchaser, Seller shall assign to Purchaser any or all of the Contracts. Except as stated on Exhibit B each of said Contracts are assignable --------- without consent. 6.6 Hardware/Software. Except as may be set forth on Exhibit F, all ----------------- --------- Hardware and Software included in the Assets are in good condition and repair, ordinary wear and tear excepted. 6.7 Assets Complete, Etc. The Assets which will be acquired by Purchaser --------------------- at Closing include all Assets used in or necessary for the operation of the Business. 6.8 Litigation. There are no claims, actions, suits, proceedings or ---------- investigations (whether or not purportedly on behalf of Seller) pending or threatened 7 against or affecting the Business or the Assets, at law or in equity or admiralty or before or by any federal, state, municipal or other governmental department, commission, board, agency or instrumentality, domestic or foreign, nor has any such action, suit, proceeding or investigation been pending during the 12-month period preceding the date hereof. There is no reasonable basis for any claim, action, suit, proceeding or investigation against or affecting the Business or the Assets. Seller is not operating under or subject to, or in default with respect to, any order, writ, injunction or decree of any court or federal, state, municipal or other governmental department, commission, board, agency or instrumentality, domestic or foreign. 6.9 Intellectual Property. Exhibit C lists all domain names, service --------------------- --------- marks, patents, trademarks, trade names, trademark and trade name registrations, brand names, copyrights and copyright registrations, all pending applications for any of the foregoing, and any other proprietary rights, inventions, trade secrets, or know-how or processes (hereinafter the foregoing are collectively referred to as "Intellectual Property") used in the operation of the Business. The use by Seller of any such Intellectual Property, and the conduct by Seller of the Business, does not infringe on the rights of any third party, and no claim has been asserted to such effect or otherwise affecting any Intellectual Property of Seller. The Intellectual Property to be assigned, transferred or conveyed to Purchaser hereunder constitutes all the Intellectual Property used by Seller in the conduct of the Business, or in connection with the Assets. To Seller's knowledge, no third party is infringing upon the Intellectual Property of Seller. 6.10 Conduct of Business. From the date of this Agreement and until the ------------------- Closing Date, with respect to the Business, Seller will not have: (i) incurred any Liabilities or Obligations (absolute or contingent), except for Liabilities and Obligations disclosed in the Exhibits attached hereto, and except for such Liabilities and Obligations as have arisen in the ordinary course of business of Seller, none of which newly arisen Liabilities and Obligations have a material adverse effect upon the Assets or the Business; (ii) mortgaged, pledged or subjected to any lien, charge or other encumbrance, any of the Assets, tangible or intangible; (iii) sold or transferred any assets included in the Assets; (iv) sold, assigned or transferred any Intellectual Property, or other intangible assets of Seller or relating to the Assets of the Business, or included in the Assets; (v) suffered any extraordinary losses or waived any rights of substantial value relating to the Business or the Assets; 8 (vi) suffered any damage, destruction or loss to any Assets, whether or not covered by insurance; (vii) made or suffered any amendment or termination of any Contracts. 6.11 Licenses and Permits. All licenses, permits, franchises, approvals and -------------------- governmental authorizations required for the Business, the Assets, or their operations, are listed on Exhibit G. No other licenses, permits, franchises, --------- approvals or other governmental authorizations are required for the Business, the Assets or their operations as heretofore conducted by Seller. True, current, correct and complete copies of such licenses, permits, franchises, approvals, and governmental authorizations have been delivered by Seller to Purchaser. Seller has performed in all material respects all obligations required to be performed by it to date under, and is not in default under, any such licenses, permits, franchises, approvals, or governmental authorizations or the laws, regulations and requirements of the licensing and permit authorities. All such licenses, permits, franchises, approvals, and governmental authorizations are in full force and effect. Except as set forth on Exhibit G, all such licenses, --------- permits, franchises, approvals, and governmental authorizations will be assigned to Purchaser at the Closing. Seller will use its best efforts to assist Purchaser in having any such licenses, permits, franchises, approvals, and governmental authorizations assigned to Purchaser or issued in Purchaser's name, as appropriate. 6.12 Material Change. Since the date of this Agreement there has been no --------------- material change in the condition, financial or otherwise, of the Business or the Assets, except changes occurring in the ordinary course of business, which changes have not materially adversely affected the Assets or the Business. 6.13 Disclosure. No representation or warranty made by Seller herein or in ---------- any agreements, certificates or documents delivered in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty not misleading. 6.14 Access to Information. Seller has been given full access to --------------------- information regarding the Purchaser (including the opportunity to meet with officers of Purchaser, and to review all the documents that Seller may have requested) and has utilized such access to its satisfaction for the purpose of obtaining information necessary to make an informed investment decision. 6.15 Knowledge. Seller has sufficient knowledge and experience in financial --------- and business matters that Seller is capable of evaluating the merits and risks of investing in Purchaser's securities. 6.16 High Degree of Risk; Projections. Seller understands that the purchase -------------------------------- of Purchaser's securities is a speculative investment and involves a high degree of economic 9 risk. Any financial projections or other materials provided by Purchaser regarding its future performance are merely projections or estimates, based on various assumptions. Purchaser's actual results will vary. There can be no assurance that Purchaser will achieve any of its financial projections or estimates of performance. 6.17 Reliance by Purchaser. Seller has been advised that Purchaser's --------------------- securities are not registered under the Securities Act of 1933, as amended (the "Act") or state securities laws and are being sold pursuant to exemptions from --- the Act and such laws, and that Purchaser's reliance upon such exemptions is predicated in part on the representations of the Seller contained herein. 6.18 Purpose of Purchase and Financial Condition. Seller acknowledges that ------------------------------------------- Purchaser's securities are being purchased for the Seller's own account and for investment without the intention of reselling or redistributing the same, that no agreement has been made with others regarding such securities and that Seller's financial condition is such that it is not likely that it will be necessary to dispose of any of such securities in the foreseeable future. 6.19 Legend. Unless otherwise determined by Purchaser, the Stock ------ Certificate for Purchaser's securities shall be imprinted with the following legend and Seller agrees to comply with the terms thereof: The securities evidenced by this certificate have not been registered either under any applicable federal law and rules or applicable state law and rules. No sale, offer to sell, or transfer of these securities may be made unless a registration statement under the Securities Act of 1933, as amended, and any applicable state law with respect to such securities is then in effect or an exemption from the registration requirements of such law is then, in fact, applicable to such securities. Accordingly, these securities may not be sold, transferred or otherwise disposed of without (i) the opinion of counsel satisfactory to the corporation that such transfer may lawfully be made without registration under the Securities Act of 1933 and the securities laws of any other applicable state securities laws; or (ii) such registration. The Corporation will furnish without charge to each shareholder upon request a full statement of (1) the designations, preferences, limitations, and relative rights of the shares of each class or series of stock authorized to be issued by the Corporation, so far as they have been determined, and (2) the authority of the board of Directors to fix and determine the relative rights and preferences of subsequent classes or series of stock. The securities represented by this certificate are also subject to additional restrictions on transfer, as set forth in the Stockholders' 10 Agreement dated as of May 8, 2000, as may be amended from time to time, copies of which will be furnished by BNKR, Inc. or any successor thereto upon request and without charge. ARTICLE VII REPRESENTATIONS AND WARRANTIES BY PURCHASER ------------------------------------------- Purchaser represents and warrants to Seller that the following statements are true and correct as of the date of this Agreement and will be true and correct on the Closing Date as if made on said date: 7.1 Organization and Standing. Purchaser is a corporation duly organized, ------------------------- existing and in good standing under the laws of the State of Delaware. 7.2 No Conflict. The execution and delivery of this Agreement and the ----------- consummation of the transactions contemplated hereby will not (a) result in a breach of any of the terms or conditions of, or constitute a default under, any mortgage, note, bond, indenture, agreement, license or other instrument or obligation to which Purchaser is a party or by which it or any of its properties or assets may be bound or affected, or (b) violate any order, writ, injunction or decree of any court, administrative agency or governmental body, or (c) conflict with or result in the breach of the terms, conditions or provisions of the Articles of Incorporation or By-Laws of the Purchaser. 7.3 Authority. Purchaser has full power and authority to enter into this --------- Agreement and to carry out the transactions contemplated hereby, and all corporate and other proceedings required to be taken by Purchaser in connection with this Agreement and the transactions contemplated hereby and necessary to make the same effective have been duly and validly taken. This Agreement constitutes a valid and binding obligation of Purchaser and is enforceable in accordance with its terms. 7.4 Litigation, etc. There are no material claims, actions, suits, orders, --------------- proceedings or investigations (whether or not purportedly on behalf of the Purchaser) pending or, to the best of the Purchaser's knowledge, threatened against or affecting the Purchaser, at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, agency or instrumentality, domestic or foreign, nor has any such action, suit, proceeding or investigation been pending during the 12-month period preceding the date hereof; and the Company is not operating under or subject to, or in default with respect to, any order, writ, injunction or decree of any court or federal, state, municipal or other governmental department, commission, board, agency or instrumentality, domestic or foreign. 7.5 Authorized Capital. As of the date of this Agreement, there are ------------------ 35,000,000 shares of Common Stock and 15,000,000 shares of Preferred Stock authorized under the Certificate of Incorporation of the Purchaser. Under the Certificate of Incorporation the Board of Directors of the Company has the authority to designate the 11 Preferred Stock in more than one class and more than one series of stock. Of the 15,000,000 shares of authorized Preferred Stock, 3,300,000 shares have been designated as Series A Convertible Preferred Stock. 7.6 Issued and Outstanding Stock. As of the date of this Agreement and ---------------------------- before giving effect to the issuance of the Purchaser's securities hereunder, all of the issued and outstanding capital stock of the Company consists of the following: (i) 3,300,000 shares of issued and outstanding Series A Convertible Preferred Stock of the Purchaser; and (ii) 2,306,845 shares of issued and outstanding voting Common Stock of the Purchaser. 7.7 Share Status. Upon receipt of the Stock Certificate, the shares ------------ represented thereby will be duly authorized, validly issued, fully paid and nonassessable. 7.8 Disclosure. No representation or warranty made by Purchaser herein or ---------- in any agreements, certificates or documents delivered in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty not misleading. 7.9 HP Services. Purchaser hereby agrees, commencing immediately upon ----------- completion of the Closing, to provide on behalf of Seller the services to be provided by Seller to HP Rocky Mountain Federal Credit Union ("HP"), pursuant to Seller's existing agreement with HP, a copy of which has been provided to Purchaser (the "HP Agreement"). The services will be provided by Purchaser for a monthly fee of $2.00 per enrolled user, which fee shall be paid by Seller within 30 days of each month that the services are provided and shall be prorated for any portion of a month for which the services are provided. Seller may terminate this agreement upon termination of its agreement with HP or five days written notice to Purchaser. The services provided pursuant to this undertaking shall be the same as those provided to HP by Seller prior to the Closing. In the event that Seller renews or extends the term of the Agreement without Purchaser's written consent, Purchaser may refuse to provide the services on behalf of Seller following the HP Agreement. ARTICLE VIII COVENANTS OF THE SELLER ----------------------- 8.1 Action by Seller. Seller will not take or permit to be taken any ---------------- action or do or permit to be done anything in the conduct of the Business or otherwise, which would be contrary to or in breach of any of the terms, conditions or provisions of this Agreement, or which would cause any of the representations and warranties of Seller to be untrue as of the Closing Date or any time thereafter. 12 8.2 Fees. Seller shall pay all fees and disbursements of counsel and ---- accountants for Seller arising in connection with this Agreement and the transactions contemplated hereby. 8.3 Further Assurances. On the Closing Date, and from time to time ------------------ thereafter, at the request of Purchaser, Seller will execute and deliver to Purchaser all such assignments, endorsements and other documents, and take such other action as Purchaser may reasonably request in order more effectively to transfer and assign to Purchaser the Assets transferred to Purchaser pursuant to this Agreement, to confirm the title of Purchaser thereto and to assist Purchaser in exercising its rights with respect thereto and under this Agreement. 8.4 Best Efforts. Seller shall use its best efforts to obtain at the ------------ earliest practical date after the date hereof, and prior to the Closing Date, all necessary consents to the transactions contemplated by this Agreement, including consents from parties to Contracts and from governmental entities. 8.5 No Shop. For a period of 30 days after the execution and delivery of ------- this Agreement, Seller will not directly or indirectly, solicit, initiate or encourage the submission of any proposal or offer from any third party relating to any acquisition or purchase (other than in the ordinary course of business) of all or any portion of the Assets or of the Business, or participate in any negotiations regarding or furnish to any other third party any information with respect to, or otherwise cooperate in any way with, or assist to participate in, facilitate or encourage any effort or attempt by any third person to do or seek any of the foregoing transactions. Seller shall notify Purchaser promptly of any such proposal or offer, inquiry or contact with any third party, and shall in any such notice indicate in reasonable detail the identity of the third party making such proposal, offer, inquiry or contact. 8.6 Co-Lease Agreement. Seller hereby agrees, commencing immediately upon ------------------ completion of the Closing and for a period of up to six (6) months thereafter, to set aside and make available for Purchaser the space within Seller's corporate offices located at 1899 Wynkoop, Denver, Colorado 80202, currently utilized by the Business immediately prior to the closing, at a monthly rent of $5,266. The monthly rent consists of $1,612 to reimburse Seller for its rental rate for such space; $1,225 for parking space for BNKR's employees (based on a total of 9 employees); $1,552 telephone and Internet connectivity for BNKR's employees (based on a total of 9 employees); and $878 to reimburse Seller for the pro-rata portion of Seller's general overhead expenses for its facilities. Purchaser may terminate the original term of this co-lease Agreement by giving Seller sixty (60) days written notice of the termination of this co-lease Agreement and of all of Seller's co-lease obligations hereunder. Purchaser shall be responsible for insuring its property located in Seller's facilities. In no event shall Seller have any liability to Purchaser with respect to this co-lease agreement, except for Seller's gross negligence and in the event of any such liability, such liability shall be limited to the amount paid by Purchaser to Seller pursuant to this co-lease agreement. In no event will Seller be liable 13 pursuant to this co-lease agreement for indirect damages, including, without limitation, consequential damages or lost profits. 8.7 Notification of Breaches or Potential Breaches. Seller shall give ---------------------------------------------- prompt notice to Purchaser or (i) the occurrence or nonoccurrence of any event which is likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate, and (ii) any failure of Seller to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by any of them hereunder; provided, however, that delivery of any such notice pursuant to this section shall not limit or otherwise affect the remedies available hereunder to the Purchaser. ARTICLE IX NO BROKERS OR FINDERS --------------------- Seller and Purchaser represent and warrant to each other that each did not directly or indirectly engage any person, corporation or partnership to bring about the consummation of the transactions contemplated herein, and, that no person, corporation or partnership is entitled to a broker's commission, finder's fee or any similar compensation upon the consummation of the transactions contemplated herein. If this representation and warranty is breached by either Seller or Purchaser, the breaching party shall indemnify and hold harmless the other party from any and all claims, demands, liabilities and obligations (and any and all expenses and costs incurred in connection with or in defending against the same), which may arise due to any third party's claim as a broker or finder. ARTICLE X CONDITIONS PRECEDENT OF PURCHASER --------------------------------- The obligations of Purchaser hereunder are subject to the conditions that, on or before the Closing Date: 10.1 Representations and Warranties True at Closing. The representations ---------------------------------------------- and warranties of Seller contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof or in connection with the transactions contemplated hereby shall be true on and as of the Closing Date as though such representations and warranties were made at and as of such date. 10.2 Compliance with the Agreement. Seller shall have performed and ----------------------------- complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing Date. 14 10.3 Seller's Certificate. Seller shall deliver to Purchaser a certificate -------------------- of an officer of Seller dated the Closing Date, certifying in such detail as Purchaser may request to the fulfillment of the conditions specified in sections 10.1 and 10.2. 10.4 Deliveries. The documents required under Section 3.1 hereof shall be ---------- tendered by Seller for delivery to Purchaser at the Closing. 10.5 Injunction. On the Closing Date, there shall be no effective ---------- injunction, writ, preliminary restraining order or any order of any nature issued by a court of competent jurisdiction directing that the transactions provided for herein or any of them not be consummated as herein provided. 10.6 Casualty. Prior to the Closing Date, the Business and the Assets, or -------- any portion thereof, shall not have been adversely affected in any material way as a result of any fire, accident, flood or other casualty or act of God or the public enemy. 10.7 Adverse Development. There shall have been no developments in the ------------------- Business, or in the Assets, between the date hereof and the Closing Date which would have a materially adverse effect on the Business or the Assets. 10.8 Employee Arrangements. Purchaser shall have reached arrangements or --------------------- employment agreements on terms satisfactory to Purchaser with Michael Murphy. Scott Daniel and Michael Welk. 10.9 Investigations. Purchaser shall be satisfied with the results of its -------------- legal, accounting, business and other due diligence review of the Business and the Assets, and shall be satisfied that there are no circumstances or matters, whether discovered in due diligence or otherwise arising, which affect adversely the basis upon which Purchaser determined to enter into the transactions contemplated hereby with Seller. ARTICLE XI CONDITIONS PRECEDENT OF THE SELLER ---------------------------------- The obligations of the Seller hereunder are subject to the conditions that, on or before the Closing Date: 11.1 Representations and Warranties True at Closing. The representations ---------------------------------------------- and warranties of Purchaser contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof or in connection with the transactions contemplated hereby, shall be true on and as of the Closing Date as though such representations and warranties were made at and as of such date. 15 11.2 Purchaser's Compliance with the Agreement. Purchaser shall have ----------------------------------------- performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing Date. 11.3 Purchasers' Certificate. Purchaser shall deliver to the Seller a ----------------------- certificate of an officer or authorized signer of Purchaser, dated the Closing Date, certifying in such detail as the Seller may request to the fulfillment of the conditions specified in sections 11.1 and 11.2. 11.4 Deliveries. The documents required under Section 3.2 hereof shall be ---------- tendered by Purchaser for delivery to Seller at the Closing. 11.5 Injunction. There shall be no effective injunction, restraining order ---------- or order of any nature issued by a court of competent jurisdiction which shall direct that this Agreement, or any of the transactions provided for herein, not be consummated as herein provided. 11.6 Casualty. Prior to the Closing Date, the Purchaser's business, or -------- any portion thereof, shall not have been adversely affected in any material way as a result of any fire, accident, flood or other casualty or act of God or the public enemy. 11.7 Adverse Development. There shall have been no developments in the ------------------- Purchaser's business between the date hereof and the Closing Date which would have a material adverse effect on Purchaser's business. 11.8 Investigations. Seller shall be satisfied with the results of its -------------- legal, accounting, business and other due diligence review of Purchaser's business and shall be satisfied that there are no circumstances or matters, whether discovered in due diligence or otherwise arising, which affect adversely the basis upon which Seller determine to enter into the transactions contemplated hereby with Purchaser ARTICLE XII NATURE AND SURVIVAL OF REPRESENTATIONS -------------------------------------- All statements contained in any documents, certificates or other instruments delivered by or on behalf of Seller or Purchaser pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed representations and warranties by Seller or Purchaser hereunder. All representations and warranties and agreements made by Seller or Purchaser in this Agreement or in any documents, certificates, or other instruments delivered pursuant hereto shall survive the Closing hereunder (and any investigation at any time made by or on behalf of Seller or Purchaser). 16 ARTICLE XIII NOTICES ------- All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed first-class postage prepaid: (a) To the Seller: Webb Interactive Services, Inc. 1899 Wynkoop Suite 600 Denver, Colorado 80202 Attn: General Counsel (b) To Purchaser: BNKR, Inc. 7805 Telegraph Road Suite 300 Bloomington, Minnesota 55438 with a copy thereof to: Gray, Plant, Mooty, Mooty & Bennett, P.A. 3400 City Center 33 So. Sixth Street Minneapolis, Minnesota 55402 Attn: Jeffrey C. Anderson or to such other address or to such other person as Purchaser or Seller shall have last designated by notice to the other. ARTICLE XIV MODIFICATION ------------ This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and shall not be modified or amended except by an instrument in writing signed by or on behalf of the parties hereto. 17 ARTICLE XV EXPENSES -------- Whether or not the transactions contemplated hereby are consummated, each of the parties hereto shall pay its own expenses incurred in connection with the authorization, preparation, execution or performance of this Agreement and all transactions contemplated hereby, including without limitation all fees and expenses of agents, representatives, counsel and accountants. ARTICLE XVI ASSIGNMENT ---------- This Agreement shall not be assignable by any party hereto without the prior written consent of the other party. ARTICLE XVII MINNESOTA LAW TO GOVERN ----------------------- This Agreement shall be governed by and construed and enforced in accordance with the internal laws, as opposed to the choice of law rules, of the State of Minnesota. ARTICLE XVIII COUNTERPARTS ------------ This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 18 ARTICLE XIX HEADINGS -------- The headings in this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision thereof. Reference to numbered "articles," "sections," "paragraphs" and "subparagraphs," and to lettered "Exhibits" refer to articles, sections, paragraphs and subparagraphs of -------- this Agreement and Exhibits annexed thereto. -------- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. PURCHASER CORPORATION: BNKR, Inc. By /s/ Ronald G. Buck ------------------------------------ Its Chairman of the Board ------------------------------------ SELLER CORPORATION: Webb Interactive Services, Inc. By /s/ Lindley S. Branson ------------------------------------ Its Vice President/General Counsel ------------------------------------ 19 LIST OF EXHIBITS ---------------- A. Assets B. Contracts C. Intellectual Property D. Non-Compete and Non-Solicitation Agreement E. Co-Location Agreement F. Representations and Warranties: Exceptions and Disclosures G. Licenses and Permits H. Agreement To Be Bound I. Irrevocable Proxy 20 Exhibit A Assets
Manu. Model Serial Description Compaq ProLiant 5500 D903CLC10222 SQL1 Inflow Compaq ProLiant 5500 D906CLC10076 SQL2 Inflow Compaq ProSignia 300 6616HUN20921 PDC Inflow Cisco 2600 SHN030800QG Priv circuit router Inflow Cisco 2501 Not available HP-OBSS-CPE Loveland Cisco 2501 251041090 HP-OBSS-INF Inflow Cisco 2912 FAA0317J0PY Private switch Inflow Cisco 2912 FAA0317J0NZ Public switch Inflow Cisco 2503 25103490 RFCU backup router Wynkoop Cisco 3620 RFCU Router Inflow Cisco 2912 FAA0301408N Circuit switch Inflow Compaq ProLiant 850R D734BND10102 RFCU Mail Inflow Compaq ProLiant 1600 D721BJM10918 RFCU EBS Inflow Compaq ProLiant 850R D724BND10104 RFCU WWW Inflow Compaq ProLiant 3000 D907BX620023 COOP WWW1 Inflow Compaq ProLiant 3000 D928CMH1A234 COOP WWW2 Inflow Compaq ProLiant 3000 D3907BX626005 COOP EBS1 Inflow Compaq ProLiant 3000 D907BX620064 COOP EBS2 Inflow Compaq StorageWorks D901HUQ10193 Fiber Array Inflow Compaq Proliant 3000 7852BVX20244 OBSSEBS1 Inflow Compaq Proliant 3000 7905BVXZ0127 OBSSWEB1 Inflow Compaq Proliant 800 D934CNL1A011 TRANSACTION1 Inflow Compaq Proliant 800 D931CNL1A115 TRANSACTION2 Inflow Compaq Fiber Channel Hub Inflow
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Manu. Model Serial Description DELL POWEREDGE 2200 (ASSET) 938 EBS ICON generic (ASSET) 960 OFX COMPAQ DESK PRO EP 6912CCL6A142 WEB COMPAQ DESK PRO EP 6909CCL6B173 SQL COMPAQ DESK PRO EP 6911CCL6F236 EBS COMPAQ DESK PRO EP 6911CCL6F224 EBS COMPAQ DESK PRO EP 6833BYQ3L197 EBS COMPAQ DESK PRO EP 6912CCL6110 STAGE COMPAQ PROLIANT 1600 D938CNK1K174 EBBSQL1 COMPAQ PROLIANT 850R D719BND10069 EBBWEB1 COMPAQ PROLIANT 2500 D721BJM10272 RFCUEBS1 COMPAQ PROSIGNIA 500 6613HUH10792 EDEVWEB
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Manu. Model Serial COMPAQ DESKPRO EN 6907CD47B854 COMPAQ DESKPRO EN 6914CD64B044 COMPAQ DESKPRO EP 6937CJN41317 GATEWAY SOLO 5150 BC599370115 GATEWAY SOLO 5150 BC599031151 ICON generic (ASSET) 321 ICON generic (ASSET) 51 ICON generic (ASSET) 127 ICON generic (ASSET) 316 COMPAQ DESKPRO EN 6011CR23E058 COMPAQ DESKPRO EN
---------------------------------------- Asset tags are used when Seller doesn't have a serial number for the item. ---------------------------------------- Included in the Assets being transferred are the Contracts and Intellectual Property described in Exhibits B and C to the Agreement. 23 Exhibit B Contracts --------- 1) RFCU "Electronic Banking Service Contract," dated May 28, 1997. 2) RFCU "Electronic Banking Service Contract Modification," dated October 1, 1999. 3) RFCU "Professional Services Contract," dated January 1, 1998, with the following associated active task orders: a) Task Order number RFCU-17, "OFX", dated November 16, 1999. b) Task Order number RFCU-20, "Online Enrollment - Bill Pay", dated June 2, 2000. c) Task Order number RFCU-21, "Online Enrollment - E-banking," dated June 2, 2000. 4) CO-OP "Online Banking Service Agreement," dated February 10, 1999.* 5) CO-OP Task Order number CO-OP 01 (under "Online Banking Service Agreement," dated February 10, 1999), "System Enhancements for Pilot," dated October 26, 1999.* _______________ * At the time of the Closing, the CO-OP has not agreed to the assignment of these agreements. Prior to the completion of the assignment of these agreements, Seller agrees to continue to hold these agreements, but to cooperate with Purchaser to make available to Purchaser to the fullest extent reasonably possible the rights and benefits of such agreements. Purchaser shall reimburse Seller for any costs or expenses Seller incurs subsequent to the Closing with respect to such agreements, unless and until Purchaser shall give Seller fifteen (15) days' written notice that Purchaser no longer desires to have Seller make the rights and benefits of such agreements available to Purchaser. 24 Edify/S1 Software
Product Date Customer Number Description Quantity Unit Price Extension 6/12/97 RFCU 201000 Workforce agents, 1 to 30 30 $ 1,600.00 $ 48,000.00 6/13/97 RFCU 371000 Electronic Banking System 1 $ 135,000.00 $ 135,000.00 6/14/97 RFCU 371200 Bill payment module: Checkfree 1 $ 50,000.00 $ 50,000.00 6/15/97 RFCU 201000 Workforce agents, 1 to 30 - backup 30 $ 1,500.00 $ 48,000.00 purposes only 6/16/97 RFCU 371000 EBS - backup purposes only 1 $ 135,000.00 $ 135,000.00 6/17/97 RFCU 371200 Bill payment module: Checkfree - backup 1 $ 50,000.00 $ 50,000.00 purposes only 6/18/97 RFCU 70000 Discount 1 $ (97,860.00) $ (97,860.00) 6/19/97 RFCU 70000 Discount - backup system discount 1 $(209,700.00) $(209,700.00) Subtotal $ 158,440.00 12/15/98 CO-OP 571025 Electronic banking system 1 $ 124,000.00 $ 124,000.00 12/16/98 CO-OP 571200 EBS Checkfree Bill Payment System 1 $ 62,000.00 $ 62,000.00 (SFM-model processing) 12/17/98 CO-OP 571125 EBS Server Expansion 1 $ 10,000.00 $ 10,000.00 12/18/98 CO-OP 571040 EBS Branding Tool 1 $ 29,000.00 $ 29,000.00 12/19/98 CO-OP 501000 Workforce agents, 30 to 60 40 $ - $ - Subtotal $ 225,000.00 4/19/99 RFCU 181800 MIFST - OFX module 1 $ - $ - 5/6/99 HPRMFCU 571130 EBS Expansion Module 1 $ - $ - 5/7/99 HPRMFCU none FI Sign on Fee ($0 - 100M assets) 1 $ 5,000.00 $ 5,000.00 5/8/99 HPRMFCU 501000 Workforce Agents 11 $ 1,040.00 $ 11,440.00 Subtotal $ 16,440.00 8/12/99 RFCU 501000 EWF software agents 10 $ 1,040.00 $ 10,400.00 9/10/99 HPRMFCU 501000 EWF software agents 10 $ 1,040.00 $ 10,400.00 1/4/00 HPRMFCU 501000 EWF software agents 10 $ 1,040.00 $ 10,400.00 2/9/00 RFCU 501000 EWF software agents 20 $ - $ - 3/1/00 HPRMFCU 501000 EWF software agents 30 $ - $ - 3/31/00 RFCU 501000 EWF software agents 40 $ - $ -
25 Maintenance is being paid on these items at the rate of 15% per year. The CO-OP agreement dated December 14, 1998 allows Seller to add CO-OP CUs for a FI sign-on fee of $5K (for FIs with under $1B in assets) plus $1.50 per subscriber. The separate agreement for individual FIs dated February 25, 1998 allow Seller to add five more individual FIs for FI sign-on fees of less than $15K (for those FIs with assets under $300M) with no per-subscriber fee. 26 Exhibit C Intellectual Property --------------------- All Software code and know-how developed by Seller and being used in connection with the Business. To the extent that any of such code or know-how is also being used in Seller's non-Business activities, Seller and Purchaser shall each have the unrestricted right to use such property. 27 EXHIBIT D NON-COMPETE AND NON-SOLICITATION AGREEMENT This Non-Compete and Non-Solicitation Agreement (this "Agreement") is made as of September 12, 2000, by and between BNKR, Inc., a Delaware corporation ("Purchaser") and Webb Interactive Services, Inc., a Colorado corporation ("Seller"). RECITALS Concurrently with the execution and delivery of this Agreement, Purchaser is purchasing from Seller substantially all of the assets (the "Assets") pursuant to the terms and conditions of that certain Asset Purchase Agreement dated September 12, 2000, (the " Purchase Agreement"). Section 2.4 of the Purchase Agreement requires that a non-compete and non-solicitation agreement be executed and delivered by Seller as a condition to the purchase of the Assets by Purchaser. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. DEFINITIONS Capitalized terms not expressly defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement. 2. NON-COMPETITION; NON-SOLICITATION As an inducement for Purchaser to enter into the Purchase Agreement and as additional consideration for the consideration to be paid to Seller under the Purchase Agreement, Seller agrees that: (a) For a period of two (2) years after the Closing: (i) Except as provided in subsection 2(c) hereof, neither Seller nor any of its subsidiaries will directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, or control of any business whose products or activities compete in whole or in part with the online e-banking business (the "Business") of Seller, the Assets of which Purchaser has acquired in accordance with the terms of the Purchase Agreement; provided, however, that Seller may purchase or otherwise acquire up to (but not more than) five percent (5%) of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934. Seller agrees that this covenant is reasonable with respect to its duration, geographical area, and scope. 28 (ii) Seller will not, directly or indirectly, either for itself or any other person, (A) induce or attempt to induce any employee of the Business who becomes an employee of Purchaser to leave the employ of Purchaser, (B) in any way interfere with the relationship between Purchaser and any such employee, or (C) induce any customer, supplier, licensee, or business relation of the Business at the time of the Closing that does business with Purchaser to cease doing business with Purchaser. (b) In the event of a breach by Seller of any covenant set forth in Subsection 2(a) of this Agreement, the term of such covenant will be extended by the period of the duration of such breach. (c) Notwithstanding the foregoing, Seller may continue to provide e-banking services to HP Rocky Mountain Federal Credit Union ("HP") pursuant to Seller's existing agreement with HP. Seller may not, however, provide e-banking services to HP following the current term of the agreement without obtaining Purchaser's prior written consent thereto. 3. REMEDIES If Seller breaches the covenants set forth in Section 2 of this Agreement, Purchaser will be entitled to the following remedies: (a) Damages from Seller; and (b) In addition to its right to damages and any other rights it may have, to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Section 2 of this Agreement, it being agreed that money damages alone would be inadequate to compensate the Purchaser and would be an inadequate remedy for such breach. (c) The rights and remedies of the Purchaser pursuant to this Agreement are cumulative and not alternative. 4. GOVERNING LAW This Agreement will be governed by the laws of the State of Minnesota without regard to conflicts of laws principles. 5. SEVERABILITY Whenever possible each provision and term of this Agreement will be interpreted in a manner to be effective and valid but if any provision or term of this Agreement is held to be prohibited by or invalid, then such provision or term will be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement. If any of the covenants set forth in Section 2 of this Agreement are held to be unreasonable, arbitrary, or against public policy, such covenants will be 29 considered divisible with respect to scope, time, and geographic area, and in such lesser scope, time and geographic area, will be effective, binding and enforceable against Seller. 6. ENTIRE AGREEMENT This Agreement, and the Purchase Agreement constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior written and oral agreements and understandings between Purchaser and Seller with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. WEBB INTERACTIVE SERVICES, INC.: By_____________________________ Its___________________________ BNKR, INC.: By______________________________ Its____________________________ 30 Exhibit E WEBB INTERACTIVE SERVICES CO-LOCATION AGREEMENT - --------------------- THIS WEB SITE HOSTING AGREEMENT ("Agreement") between WEBB Interactive Services, Inc. ("WEBB"), a Colorado corporation with principal offices located at 1899 Wynkoop, Suite 600, Denver, Colorado 80202 and BNKR, Inc., a Delaware corporation with principal offices located at 7805 Telegraph Road, Suite 300, Bloomington, Minnesota 55438 ("BNKR") dated as of September 12, 2000. WEBB and BNKR are referred to collectively as "the Parties." Background ---------- WHEREAS, BNKR has acquired from WEBB the assets of WEBB's e-banking business (the "E-Banking Business") in accordance with the terms and conditions of that certain Asset Purchase Agreement dated September 12, 2000 (the "Purchase Agreement"). WHEREAS, BNKR desires to continue to locate the hosting equipment acquired from WEBB pursuant to the Purchase Agreement at WEBB's network operations facilities and to obtain from WEBB certain services necessary to continue to utilize WEBB's network operations facilities to provide hosting services for the e-banking business acquired from WEBB. In consideration of the foregoing, the Parties agree as follows: 1. Definitions "Facilities" shall mean the facility-related items set forth on Schedule I attached hereto. "Network Services" shall mean the network services-related items set forth on Schedule I attached hereto. 2. Co-Location Services 2.1 Co-Location Commitment by WEBB. Commencing on September 13, 2000, ------------------------------- through September 12, 2001, and subject to the terms of this Agreement, WEBB agrees to provide space within its network operations facilities for the Facilities, such space and the capacity for the Facilities to be substantially the same as the space and capacity provided for such items by WEBB immediately prior to the Closing of the Purchase Agreement. In addition, while BNKR will be responsible for all technical support and the maintenance of the hardware and software relating to the hosting of the E-banking Business, during the term of this co-location commitment, WEBB shall remain responsible 31 for Network Services. BNKR shall have the right to terminate this Agreement prior to the original one year term, by giving WEBB sixty (60) days written notice of the termination of this Agreement and of all of WEBB's co-location obligations hereunder. 2.2 Fee. During the Term of this Agreement, BNKR shall pay WEBB for the ---- Facilities and Network Services a monthly fee of $7,562, such fee to be paid on the last business day of the month for which the fee is due. In addition to WEBB's other remedies, if BNKR fails to pay WEBB any amounts when due under this Agreement, BNKR will pay interest on that amount at the rate of 1.5 % per month or such lesser maximum rate of interest permitted under applicable law. In the event of any such failure to pay, WEBB may also terminate its co-location obligation as set forth herein by giving BNKR fifteen (15) days written notice thereof. 3. Warranty and Disclaimer WEBB HEREBY DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING WITHOUT LIMITATION, (A) ANY WARRANTY AS TO BANDWITH, AVAILABILITY OR ACCURACY; AND (B) ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. . 4. Limited Liability Any liability of WEBB, pursuant to this Agreement, including without limitation, any liability for damages caused or allegedly caused by failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, communication, theft or destruction of, or unauthorized access to, alteration or use of records, whether for breach of contract, tortuous behavior, negligence, or under any other cause of action, shall be limited to the amount paid by or on behalf of BNKR to WEBB, pursuant to this Agreement. IN NO EVENT WILL WEBB BE LIABLE FOR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION, CONSEQUENTIAL DAMAGES OR LOST PROFITS. 5. General 5.1 The waiver by either party of a breach of or a default under any provision of this Agreement by the other party shall not be construed as a waiver of any subsequent breach of the same or any other provision of this Agreement nor shall any delay or omission on the part of either party to exercise or avail itself of any right or remedy it has or may have hereunder operate as a waiver of any right or remedy by such party. 5.2 This Agreement and the Purchase Agreement contain the full understanding of the parties with respect to the Facilities and Network Services and supersedes all prior understandings and writings relating thereto. No 32 waiver, consent modification, amendment or change of the terms of this Agreement shall be binding unless in writing and signed by WEBB and BNKR. 5.3 This Agreement shall be governed by the laws of the State of Minnesota. 5.4 Neither BNKR nor WEBB will be deemed to be in default of any provision of this Agreement or for any failure in performance, resulting from acts or events beyond the reasonable control of BNKR or WEBB, as the case may be, including, without limitation, acts of God, civil or military authority, civil disturbance, war, strikes, fires, other catastrophes, telecommunication outages, equipment malfunctions or other such major events beyond BNKR's or WEBB's reasonable control. WEBB Interactive Services, Inc. BNKR, Inc. By:_______________________________ By_______________________________ Name:_____________________________ Name:____________________________ Title:____________________________ Title:___________________________ Date:_____________________________ Date:____________________________ 33 33 SCHEDULE I Electronic Banking Business Unit Monthly Network Operations and Facilities/Charges
Monthly Fees Billed Facilities Related Expenses 3 legacy racks* $650/month $2,145 2 new racks* $750/month 1,650 20 AC circuits $10/month 220 ------ Circuit-related charges 4,015 DSI to ATT/CheckFree 248 5 ISDN lines $85/month 468 3 Modem lines $50/month 165 DS1 to HPOBSS 755 ------ Bandwidth-related charges 1,636 Main Verio feed (allocated) 1,155 ------ Total: 6,806 Webb Network Services Expenses Firewall Services 420 Routing Services 168 DNS Services 168 ------ Total: 756 Total Monthly Expenses $7,562 ======
_______________ * The racks are and will remain the property of Webb following termination of this Co-Location Agreement. 34 Exhibit F Exceptions and Disclosures -------------------------- None 35 Exhibit G Licenses and Permits -------------------- None 36 Exhibit H BNKR, INC. AGREEMENT TO BE BOUND WHEREAS, Webb Interactive Services, Inc. is acquiring shares of common stock of BNKR, Inc. (the "Shares") in connection with the sale of its e-banking business to BNKR, Inc. (the "Transaction"); and WHEREAS, the Shares are subject to terms and conditions of that certain Stockholders' Agreement dated as of May 8, 2000, as amended, among BNKR, Inc. and those certain investors listed on Schedule I thereto (the "Stockholders' Agreement"). NOW, THEREFORE, it is hereby agreed: 1. The undersigned agrees that it shall be deemed a "Holder" as that term is defined in the Stockholders' Agreement and is bound by the terms and conditions of the Stockholders' Agreement; and 2. The undersigned hereby acknowledges that the Shares will bear the following legends: "These shares have been purchased for investment within the meaning of the Securities Act of 1933 as amended ("Act") and applicable state securities laws, and they may not be sold, offered for sale, pledged, or otherwise transferred without an effective registration statement under the Act and applicable state securities laws or an opinion of counsel satisfactory to the company to the effect that the proposed transaction will be exempt from registration. The Corpora tion will furnish without charge to each shareholder upon request a full statement of (1) the designations, preferences, limitations, and relative rights of the shares of each class or series of stock authorized to be issued by the Corporation, so far as they have been determined, and (2) the authority of the board of directors to fix and determine the relative rights and preferences of subsequent classes or series of stock. The securities represented by this certificate are also subject to additional restrictions on transfer, as set forth in the Stockholders' Agreement dated as of May 8, 2000, as may be amended from time to time, copies of which will be 37 furnished by BNKR, Inc. or any successor thereto upon request and without charge." Effective the 12/th/ day of September, 2000. WEBB INTERACTIVE SERVICES, INC. By:_____________________________ Its:____________________________ 38 Exhibit I IRREVOCABLE PROXY ----------------- The undersigned hereby appoints the person serving as the Chief Executive Officer of, BNKR, Inc., a Delaware corporation (the "Company"), from time to time or, in the absence of a Chief Executive Officer, the person serving as the President of the Company from time to time (the "Attorney-in-fact"), with the power to appoint his substitute, as proxy of the undersigned to vote and give consents with respect to all shares of common stock, $0.01 par value (the "Common Stock") of the Company, now owned or, if applicable, to be issued or transferred to him pursuant to the exercise of any stock options granted pursuant to the Company's 2000 Stock Option Plan, which the undersigned would otherwise be entitled to vote (upon issuance to him, if applicable), as fully as the undersigned could vote and give consents in person at any special or annual meeting of stockholders of the Company or with respect to any actions taken by the written consent of stockholders of the Company, upon any and all matters to come before the stockholders of the Company pertaining to either (a) the sale of all or substantially all of the Company's assets, (b) the sale of all or substantially all of the outstanding equity securities of the Company, (c) a Liquidation (as defined in the Stockholders' Agreement executed by and among the Company and the signators thereto dated as of May 8, 2000) or (d) the sale of any securities of the Company to the public. The undersigned hereby acknowledges that this proxy is irrevocable and is given for valuable consideration and is coupled with an interest. This proxy shall be deemed to have been made and given at Minneapolis, Minnesota and shall be interpreted in accordance with the laws of the State of Delaware. This proxy shall be in effect irrevocably until (i) twenty-five (25) years from the date hereof, (ii) until such time as an underwritten public offering of shares of common stock of the Company, consummated pursuant to a registration statement, is declared effective under Federal securities law, or (iii) the Common Stock owned by the undersigned represents five percent (5%) or more of the Company's issued and outstanding capital stock. IN WITNESS WHEREOF, the undersigned has executed this proxy this 12th day of September, 2000. WEBB INTERACTIVE SERVICES, INC. By: ________________________________ Its: _________________________ 39 -----END PRIVACY-ENHANCED MESSAGE-----