AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 21, 2001
REGISTRATION NO. 333-69612
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
AMENDMENT NO. 4 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
EVOLVE SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3219745
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
________________
1400 65TH STREET, SUITE 100
EMERYVILLE, CA 94608
(510) 428-6000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
________________
KENNETH J. BOZZINI
CHIEF FINANCIAL OFFICER
EVOLVE SOFTWARE, INC.
1400 65TH STREET, SUITE 100
EMERYVILLE, CA 94608
(510) 428-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
________________
COPY TO:
LARRY W. SONSINI, ESQ.
RAMSEY HANNA, ESQ.
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION
8(A), MAY DETERMINE.
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PROSPECTUS
(SUBJECT TO COMPLETION, DATED December 21, 2001)
7,661,097 SHARES
EVOLVE SOFTWARE, INC.
COMMON STOCK
________________
This prospectus relates to the public offering, which is not being
underwritten, of up to 2,216,749 shares of our Common Stock which are held by
VivCorp, Inc. and its transferees and up to 5,444,348 shares of our Common Stock
that may be issued to such stockholder after the date hereof. The selling
stockholder identified in this prospectus acquired or will acquire all of its
shares of our Common Stock in connection with the Company's acquisition of
substantially all the assets of such stockholder.
The prices at which such stockholder may sell the shares will be determined
by the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of the shares offered
pursuant to this prospectus.
Our Common Stock is listed on the Nasdaq National Market under the symbol
"EVLV." On December 20, 2001, the closing price for our Common Stock was $.31
per share.
________________
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
________________
The date of this Prospectus is December __, 2001.
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TABLE OF CONTENTS
PAGE
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Special Note Regarding Forward-Looking Statements . . . . . . . . . . 2
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Information About Evolve. . . . . . . . . . . . . . . . . . . . . . . 3
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Selling Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . 16
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . 17
Where You Can Find More Information . . . . . . . . . . . . . . . . . 18
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Information Incorporated by Reference . . . . . . . . . . . . . . . . 18
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by Evolve
Software, Inc., any selling stockholder or by any other person. You should rely
only on the information contained in or incorporated by reference in this
prospectus. Neither the delivery of this prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that information herein
is correct as of any time subsequent to the date hereof. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
security other than the securities covered by this prospectus, nor does it
constitute an offer to or solicitation of any person in any jurisdiction in
which such offer or solicitation may not lawfully be made. The information
contained in or incorporated by reference in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements within "Our Company," "Risk Factors," and elsewhere
in this prospectus constitute forward-looking statements. These statements
involve known and unknown risks, uncertainties, and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue" or
the negative of these terms or other comparable terminology. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements.
-2-
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information you should consider before
buying shares in this offering. You should read the entire prospectus carefully
before evaluating an investment in our stock.
INFORMATION ABOUT EVOLVE
We are a leading provider of Internet-based end-to-end solutions for
automating professional service organizations and optimizing the efforts of
other strategic workforces including the internal IT departments of Global 2000
companies. Our Evolve 4 software suite integrates and streamlines the core
processes that are critical to such organizations: managing project
opportunities, professional resources and service delivery. We license our
Evolve 4 solution directly to these organizations and provide them related
implementation, integration, training, maintenance and hosting with services.
On May 22, 2001, we entered into an Asset Acquisition Agreement with
VivCorp, Inc., a Delaware corporation (formerly Vivant! Corporation) providing
for our acquisition of certain assets of VivCorp. On June 29, 2001, in
connection with the closing of the acquisition, we issued to VivCorp 1,553,254
shares of our Common Stock and additional non-share consideration. In addition,
we purchased from VivCorp miscellaneous equipment with an aggregate purchase
price of $56,597 and assumed equipment lease obligations in the aggregate amount
of $140,000. We also entered into a Registration Rights Agreement with Vivant
pursuant to which we agreed to register the shares of our Common Stock issued to
VivCorp under the Securities Act of 1933, as amended. The number of shares
issued to VivCorp at the closing of the acquisition is subject to adjustment (by
issuance of additional shares or redemption of existing shares) based on the
market value of our Common Stock both at the time of the filing of this
Registration Statement on Form S-3 and at the time the registration of such
shares becomes effective. We subsequently issued to VivCorp an additional
663,495 shares. Finally, we have agreed to issue to VivCorp additional shares of
our Common Stock with a value of no less than $525,000 and no more than
$4,425,000 at specified times. The number of additional shares issued to VivCorp
will be determined based on the revenues we realize in future periods from the
sale of VivCorp's products, and on the market price of our Common Stock as of
the time the registration statement containing this prospectus is declared
effective and as of the times when future revenue-based share issuances become
due. In no event will the number of additional shares issuable to VivCorp exceed
5,444,348. For a more detailed summary of the provisions that will determine the
number of shares issued to VivCorp, please see the section entitled "Selling
Stockholder" below. The entire acquisition was valued at approximately
$3,130,000, exclusive of all contingent consideration.
We were incorporated in Delaware in February 1995. Our principal executive
offices are located at 1400 65th Street, Suite 100, Emeryville, CA 94608 and our
telephone number is (510) 428-6000. Our website is www.evolve.com. The
information on the website is not a part of this prospectus.
RECENT DEVELOPMENTS
Series A Preferred Stock Financing
On October 9, 2001, we completed a private placement of shares of our
Series A Preferred Stock pursuant to the Series A Preferred Stock Purchase
Agreement dated September 23, 2001, among us and certain investors. We issued
the following securities and rights to the investors participating in the Series
A Preferred financing:
- an aggregate of 1.3 million shares of our Series A Preferred Stock at
a price of $10.00 per share
- warrants to purchase up to an aggregate of 1,300,000 additional shares
of Series A Preferred Stock at a price of $10 per share
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- warrants to purchase up to 6,500,000 shares of Common Stock at a price
of $1.00 per share
- the right to receive additional Common Stock Warrants to purchase a
number of shares of Common Stock equal to 25% of the number of shares
of Common Stock into which the shares of Series A Preferred Stock
issued upon exercise of the Preferred Stock Warrants are convertible,
at the time such Preferred Stock Warrants are exercised.
We received an aggregate purchase price of $13,000,000 for the 1,300,000
shares of Series A Preferred Stock sold. If the Preferred Stock Warrants and
the Common Stock Warrants are exercised in full for cash, we will receive an
additional $26,000,000 in aggregate proceeds. Each share of Series A Preferred
Stock is convertible into Common Stock at an initial conversion price of $0.50,
or at an initial conversion rate of 20 shares of Common Stock for each share of
Series A Preferred Stock. The conversion rate accretes at a rate of 8.00% per
annum.
Of the aggregate of 1,300,000 shares of Series A Preferred Stock issued,
1,000,000 shares were purchased by Warburg Pincus Provate Equity VIII, L.P. for
a purchase price of $10,000,000 in cash. If all Preferred Stock Warrants and
Common Stock Warrants issued or issuable to Warburg were exercised in full and
if all shares of Series A Preferred Stock issued or issuable to Warburg were
converted into shares of Common Stock, Warburg would beneficially own 50,003,298
shares of Common Stock or 55.0% of all outstanding shares of Common Stock as of
September 27, 2001 (without taking into account the shares of Common Stock
issuable to the other investors).
Changes in Board and Management
In connection with the Series A Preferred Stock financing, we expanded our
Board of Directors to include three new directors selected by Warburg, Cary
Davis, Nancy Martin and Gayle Crowell. Ms. Crowell was appointed Chairman of the
Board. Mr. Davis and Ms. Martin are Members and Managing Directors of Warburg,
Pincus LLC and are Partners of Warburg, Pincus & Co. Ms. Crowell is a full-time
adviser of Warburg, Pincus LLC.
In addition, on October 15, 2001, we announced the appointment of Lin
Johnston as our new interim President and Chief Executive Officer. We also
announced that we are conducting an executive search to identify and recruit a
new permanent Chief Executive Officer.
-4-
RISK FACTORS
You should consider carefully the following risks before you decide to buy
our common stock , as well as the risk factors described in our Annual Report on
Form 10-K for the fiscal year ended June 30, 2001, under the caption "Business -
Factors that may Affect Future Results." If any of these risks actually
materializes, our business, financial condition or results of operations would
likely suffer. In such case, the trading price of our common stock could fall,
and you could lose all or part of the money paid to buy our common stock.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED.
It is difficult to evaluate our business and our prospects because our
revenue and income potential are unproven. We commenced recognizing sales
revenues in March of 1999. Because of our limited operating history, there may
not be an adequate basis for forecasts of future operating results, and we have
only limited insight into the trends that may emerge in our business and affect
our financial performance.
WE HAVE INCURRED LOSSES SINCE INCEPTION, AND WE MAY NOT BE ABLE TO ACHIEVE
PROFITABILITY.
We have incurred net losses and losses from operations since our inception
in 1995, and we may not be able to achieve profitability in the future. As of
September 30, 2001, we had an accumulated deficit of approximately $226.3
million. Since inception, we have funded our business primarily from the sale
of our stock and by borrowing funds, not from cash generated by our business.
Despite recent cost reductions, we expect to continue to incur significant sales
and marketing, research and development, and general and administrative
expenses. As is the case with many enterprise software companies, we have
experienced a sequential quarterly decline in revenue for the quarter ending
September 30, 2001, and may experience a further decline in the current quarter.
As a result, we expect to experience continued losses and negative cash flows
from operations. If we do achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis in the future.
OUR FUTURE OPERATING RESULTS MAY NOT FOLLOW PAST TRENDS DUE TO MANY FACTORS, AND
ANY OF THESE COULD CAUSE OUR STOCK PRICE TO FALL.
We believe that year-over-year comparisons of our operating results are not
a good indication of future performance. Although our operating results have
generally improved from year to year in the recent past, our future operating
results may not follow past trends. It is likely that in some future years our
operating results may be below the expectations of public market analysts and
investors due to factors beyond our control and, as a result, the price of our
common stock may fall.
Factors that may cause our future operating results to be below
expectations and cause our stock price to fall include:
- the lack of demand for and acceptance of our products, product
enhancements and services; for instance, as we expand our target
customer focus beyond the information technology service consultancies
and into internal information technology of corporate customers as
well as into overseas markets, we may encounter increased resistance
to adoption of our business process automation solutions;
- unexpected changes in the development, introduction, timing and
competitive pricing of our products and services or those of our
competitors;
-5-
- any inability to expand our direct sales force and indirect marketing
channels both domestically and internationally;
- difficulties in recruiting and retaining key personnel;
- unforeseen reductions or reallocations of our customers' information
technology infrastructure budgets; and
- any delays or unforeseen costs incurred in integrating technologies
and businesses we may acquire.
We plan to aggressively and prudently manage our operating expenses with a
focus on our research and development organization and our direct sales group.
Our operating expenses are based on our expectations of future revenues and are
relatively fixed in the short-term. If revenues fall below our expectations in
any quarter, and we are not able to quickly reduce our spending in response, our
operating results for that quarter would be lower than expected, and our stock
price may fall.
WE MAY NEED SUBSTANTIAL ADDITIONAL CAPITAL TO FUND CONTINUED BUSINESS OPERATIONS
AT THEIR CURRENT LEVELS IN FISCAL 2002 AND 2003 AND SUCH FINANCING MAY NOT BE
AVAILABLE ON FAVORABLE TERMS, IF AT ALL.
We require substantial amounts of capital to fund our business operations.
The rate at which our capital is utilized is affected by the level of our fixed
expenses (including employee related expenses and expenses relating to real
estate) and variable expenses. Substantial capital has been used to fund our
operating losses. Since inception, we have experienced negative cash flow from
operations and expect to experience significant negative cash flow from
operations for the foreseeable future. In September 2001 we signed a definitive
agreement for a private placement of our Series A Preferred Stock, which closed
on October 9, 2001, and resulted in proceeds of $13 million. This financing,
combined with the cost reductions we are undertaking and our existing credit
facilities, is expected to be sufficient to meet our working capital
requirements through the end of September 30, 2002. However, we may require
additional capital prior to that time if one or more of the following occur:
- our revenues from the sale of our products may fall below our current
expectations because of the current economic slowdown or otherwise.
- forecasted cash collections from customers may decline if some of our
customers become insolvent or encounter financial difficulties.
- we may be unable to reduce our operating expenses as rapidly and as
extensively as we hope. For instance, we may discover that we cannot
reduce our employee headcount as rapidly as we would like in the event
that we are unable to secure commitments from third parties to provide
integration and support services to our customers in lieu of providing
these services ourselves.
- we may be unable to comply with the financial and other covenants
required under our existing credit facilities, and these credit
facilities may be withdrawn as a result.
- we may encounter opportunities that we wish to pursue to acquire other
businesses or technologies for cash consideration.
Accordingly, we may require or seek to raise additional capital during the
2002 or 2003 fiscal years. We cannot be certain that additional financing will
be available on favorable terms, if at all.
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The investors participating in the private placement of our Series A
Preferred Stock hold warrants to purchase additional shares of our Series A
Preferred Stock and common stock which, if exercised in full, would result in
additional proceeds to us of $26 million. However, these warrants are
exercisable at prices in excess of the current market price of our common stock,
and we cannot predict whether they will be exercised. We have not commenced any
efforts to secure additional financing.
Further, the additional shares of our capital stock we may issue in any
such financings may result in additional dilution, which may be substantial. If
we need additional funds and cannot raise them on acceptable terms, we may not
be able to continue our operations at the current level or at all.
WE MAY LOSE EXISTING CUSTOMERS, OR BE UNABLE TO ATTRACT NEW CUSTOMERS, IF WE DO
NOT DEVELOP NEW PRODUCTS OR ENHANCE OUR EXISTING PRODUCTS.
If we are not able to maintain and improve our product-line and develop new
products, we may lose existing customers or be unable to attract new customers.
We may not be successful in developing and marketing product enhancements or new
products on a timely or cost-effective basis. These products, if developed, may
not achieve market acceptance.
A limited number of our customers expect us to develop product enhancements
that may address their specific needs. For instance, we have shared with some
of our customers our internal product roadmap that includes descriptions of new
functional enhancements such as improved time and expense management for future
releases of our software. If we fail to deliver these enhancements on a timely
basis, we risk damaging our relationship with these customers. We have
experienced delays in the past in releasing new products and product
enhancements and may experience similar delays in the future. These delays or
problems in the installation or implementation of our new releases may cause
some of these customers to forego additional purchases of our products or to
purchase those of our competitors.
WE MUST DIVERSIFY OUR CUSTOMER BASE IN ORDER TO ENHANCE OUR REVENUE AND MEET OUR
GROWTH TARGETS.
We have historically derived a substantial percentage of our revenues from
sales of our products and services to firms that provide technology-oriented
consulting, design and integration services, including a number of firms
specializing in Website design and e-commerce application development. Growth
among these "e-business" consultancies has recently slowed dramatically, and
many such firms have ceased operations or have encountered substantial
difficulties in raising capital to fund their operations. In anticipation of
these developments, we commenced a program to aggressively diversify our client
base, targeting both established consulting services companies and in-house
service departments of large corporations. While we have recorded a number of
significant customer wins in these areas, we may in the future encounter
significant challenges in further expanding our customer base. More established
corporations are often more reluctant to implement innovative enterprise
technologies such as ours, in part because they often have made substantial
investments in legacy applications and information systems. We may also
encounter extended sales cycles with such prospective customers, and slower
rates of adoption of our solutions within their organizations. As we reduce our
sales force headcount in order to reduce expenses, our sales capacity is
diminished which may impact our ability to diversify our customer base. All of
these factors may adversely affect our ability to sustain our revenue growth and
attain profitable operations.
FINANCIAL DIFFICULTIES OF SOME OF OUR CUSTOMERS MAY ADVERSELY AFFECT OUR
OPERATING RESULTS.
As discussed above, a substantial portion of our early customers were
e-business consultancies focusing on Web development and e-commerce integration.
As public valuations for many such businesses have declined substantially in
recent months, some of our customers may encounter difficulties in securing
additional financing to meet their obligations, or may seek to limit
expenditures to conserve their cash resources. As a result, we may encounter
difficulties in securing payment of certain customer obligations when due, and
may be compelled to increase our bad debt reserves. Any difficulties
encountered in collections from customers would also adversely affect our cash
flow, and would adversely impact our operating results.
-7-
WE REDUCED OUR WORKFORCE DURING THE SECOND HALF OF THE PRIOR FISCAL YEAR,
AND, IF WE FAIL TO MANAGE THIS REDUCTION IN WORKFORCE, OUR ABILITY TO GENERATE
NEW REVENUE, ACHIEVE PROFITABILITY AND SATISFY OUR CUSTOMERS COULD BE HARMED.
We reduced our workforce during the second half of the prior fiscal year
after growing significantly the first half of the year and in previous years.
Any failure to manage this reduction in workforce could impede our ability to
increase revenues and achieve profitability. We reduced our number of employees
from 326 at June 30, 2000, to 201 as of September 30, 2001.
As we reduce our sales force headcount in order to reduce expenses, our
sales capacity is reduced which may impact our revenue growth. As we reduce our
service employee headcount, including our consulting services, training and
technical support personnel, we may not be able to provide the same level of
customer responsiveness or expertise, and customer satisfaction may be impacted
as a result.
In order to manage our reduced workforce, we must:
- hire, train and integrate new personnel in response to attrition;
- continue to augment our management information systems;
- manage our sales and services operations, which are in several
locations; and
- expand and improve our systems and facilities.
IF THE MARKET FOR PROCESS AUTOMATION SOLUTIONS FOR PROFESSIONAL SERVICES
ORGANIZATIONS AND OTHER STRATEGIC WORKFORCES DOES NOT CONTINUE TO GROW, THE
GROWTH OF OUR BUSINESS WILL NOT BE SUSTAINABLE.
The future growth and success of our business is contingent on growing
acceptance of, and demand for, business process automation solutions for
professional services organizations and other strategic workforces.
Substantially all of our historical revenues have been attributable to the sale
of automation solutions for professional services organizations. This is a
relatively new enterprise application solution category, and it is uncertain
whether major services organizations and service departments of major
corporations will choose to adopt process automation systems. While we have
devoted significant resources to promoting market awareness of our products and
the problems our products address, we do not know whether these efforts will be
sufficient to support significant growth in the market for process automation
products. Accordingly, the market for our products may not continue to grow or,
even if the market does grow in the immediate term, that growth may not be
sustainable.
REDUCTIONS IN CAPITAL SPENDING BY CORPORATIONS COULD REDUCE DEMAND FOR OUR
PRODUCTS.
Historically, corporations and other organizations have tended to reduce or
defer major capital expenditures in response to slower economic growth or
recession. Market analysts have observed a significant reduction in the growth
of corporate spending on information technology projects in response to the
current economic slowdown. To the extent that current economic uncertainty
persists, some of the prospective customers in our current sales pipeline could
choose to postpone or reduce orders for our products, or may delay implementing
our solutions within their organizations. In addition, existing customers
seeking to reduce capital expenditures may cancel or postpone plans to expand
use of our products in additional operating divisions, or may defer plans to
purchase additional modules of our solutions. Any of the foregoing would have
an adverse impact on our revenues and our operating results, particularly if the
current period of volatility in the stock market and the general economy is
prolonged.
-8-
ANY INABILITY TO ATTRACT AND RETAIN SENIOR EXECUTIVE OFFICERS AND ADDITIONAL
PERSONNEL COULD AFFECT OUR ABILITY TO SUCCESSFULLY GROW OUR BUSINESS.
We recently initiated searches for several executive officers including a
permanent Chief Executive Officer and a Vice President of Engineering. Our
future performance will depend, in significant measure, on our ability to
recruit highly qualified individuals to serve in such positions and the ability
of these new executives to work effectively with other members of our management
team as well as key employees, customers and partners. In addition, if we are
unable to hire and retain a sufficient number of qualified personnel,
particularly in sales, marketing, research and development, services and
support, our ability to grow our business could be affected. The loss of the
services of our key engineering, sales, services or marketing personnel would
harm our operations. For instance, loss of sales and customer service
representatives could harm our relationship with the customers they serve, loss
of engineers and development personnel could impede the development of product
releases and enhancements and decrease our competitiveness, and departure of
senior management personnel could result in a loss of confidence in our company
by customers, suppliers and partners. None of our key personnel is bound by an
employment agreement, and we do not maintain key person insurance on any of our
employees. Because we, like many other technology companies, rely on stock
options as a component of our employee compensation, if the market price of our
common stock decreases or increases substantially, some current or potential
employees may perceive our equity incentives as less attractive. In that case,
our ability to attract and retain employees may be adversely affected.
IF WE FAIL TO EXPAND OUR RELATIONSHIPS WITH THIRD-PARTY RESELLERS AND
INTEGRATORS, OUR ABILITY TO GROW REVENUES COULD BE HARMED.
In order to grow our business, we must establish, maintain and strengthen
relationships with third-parties, such as information technology ("IT")
consultants and systems integrators as implementation partners, and hardware and
software vendors as marketing partners. If these parties do not provide
sufficient, high-quality service or integrate and support our software
correctly, our revenues may be harmed. In addition, these parties may offer
products of other companies, including products that compete with our products.
Our contracts with third-parties may not require these third-parties to devote
resources to promoting, selling and supporting our solutions. Therefore, we may
have little control over these third-parties. We cannot assure you that we can
generate and maintain relationships that offset the significant time and effort
that are necessary to develop these relationships, or that, even if we are able
to develop such relationships, these third-parties will perform adequately.
WE MAY NOT BE ABLE TO REDUCE OUR OPERATING EXPENDITURES AS AGGRESSIVELY AS
PLANNED AND WE MAY NEED TO IMPLEMENT ADDITIONAL RESTRUCTURING ACTIVITIES.
In response to the current uncertain economic environment and volatility in
the public equity markets, we recently implemented significant measures designed
to reduce our operating expenses and enhance our ability to attain operating
profitability. For example, from July 1, 2000, through September 30, 2001, we
reduced our employee headcount by 182 persons, with reductions in virtually all
areas of operations. We expect that our workforce reductions and other expense
containment measures will allow us to continue operations into the foreseeable
future.
In order to achieve operating profitability, we will need to maintain these
cost savings in future quarters, without adversely affecting our revenue growth.
Numerous factors could impede our ability to further manage our operating
expenses. For instance, we currently expect to achieve significant expense
reductions by limiting the headcount of our services organization; however, we
may not be able to achieve the desired savings if we cannot engage and qualify
third-party integration and support partners as rapidly as we hope. In
addition, if our revenue growth fails to meet our current expectations, we would
be forced to seek expense reductions in excess of our current plans, which may
not be achievable. Any of these developments could impede our ability to
achieve profitable operations in accordance with current expectations.
-9-
THE LENGTHY AND UNPREDICTABLE SALES CYCLES FOR OUR PRODUCTS AND RESISTANCE TO
ADOPTION OF OUR SOFTWARE COULD CAUSE OUR OPERATING RESULTS TO FALL BELOW
EXPECTATIONS.
Our operating results for future periods could be adversely affected
because of unpredictable increases in our sales cycles. Our products and
services have lengthy and unpredictable sales cycles varying from as little as
three months to as much as nine months, which could cause our operating results
to be below the expectations of analysts and investors. Since we are unable to
control many of the factors that will influence our customers' buying decisions,
it is difficult for us to forecast the timing and recognition of revenues from
sales of our solutions.
Customers in our target market often take an extended time evaluating our
products before purchasing them. Our products may have an even longer sales
cycle in international markets. During the evaluation period, a variety of
factors, including the introduction of new products or aggressive discounting by
competitors and changes in our customers' budgets and purchasing priorities, may
lead customers to not purchase or to scale down orders for our products.
As we target industry sectors and types of organizations beyond our core
market of IT services consultancies, we may encounter increased resistance to
use of business process automation solutions, which may further increase the
length of our sales cycles, increase our marketing costs and reduce our
revenues. Because we are pioneering a new solution category, we often must
educate our prospective customers on the use and benefit of our solutions, which
may cause additional delays during the evaluation process. These companies may
be reluctant to abandon investments they have made in other systems in favor of
our solution. In addition, IT departments of potential customers may resist
purchasing our solutions for a variety of other reasons, particularly the
potential displacement of their historical role in creating and running
software, and concerns that packaged software products are not sufficiently
customizable for their enterprises.
DIFFICULTIES WITH THIRD-PARTY SERVICES AND TECHNOLOGIES, AS WELL AS POWER
INTERRUPTIONS, COULD DISRUPT OUR BUSINESS, AND MANY OF OUR COMMUNICATION AND
HOSTING SYSTEMS DO NOT HAVE BACKUP SYSTEMS.
Many of our communications and hosting systems do not have backup systems
capable of mitigating the effect of service disruptions. Our success in
attracting and retaining customers for our Evolve application service provider
("ASP") offering and convincing them to increase their reliance on this solution
depends on our ability to offer customers reliable, secure and continuous
service. This requires that we provide continuous and error-free access to our
systems and network infrastructure. We rely on third-parties to provide key
components of our networks and systems. For instance, we rely on third-party
Internet service providers to host applications for customers who purchase our
solutions on an ASP basis. We also rely on third-party communications services
providers for the high-speed connections that link our Web servers and office
systems to the Internet. Any Internet or communications systems failure or
interruption could result in disruption of our service or loss or compromise of
customer orders and data. These failures, especially if they are prolonged or
repeated, would make our services less attractive to customers and tarnish our
reputation.
In addition, California has recently been experiencing electric power
supply shortages that has resulted in intermittent loss of power in the form of
rolling blackouts. While neither we nor our third-party Internet service
providers or communications services providers have experienced any power
failures to date that have prevented us from continuing our operations, the
recurrence of blackouts may affect our ability to operate our business.
-10-
Finally, our third-party Internet and communications services providers
have been and may continue to experience serious financial difficulties, which
could result in the disruption of our ASP offering to our customers as well as
potentially affecting our ability to operate our business. The financial
difficulties of these third-party providers, especially if they go unresolved,
would make our ASP offering less attractive to prospective and current customers
and could tarnish our reputation.
OUR MARKETS ARE HIGHLY COMPETITIVE, AND COMPETITION COULD HARM OUR ABILITY TO
SELL PRODUCTS AND SERVICES AND REDUCE OUR MARKET SHARE.
Competition could seriously harm our ability to sell additional software
solutions and subscriptions on prices and terms favorable to us. The markets
for our products are intensely competitive and subject to rapidly changing
technology. We currently compete against providers of automation solutions for
professional services organizations, such as Peoplesoft, Siebel and SAP. In
addition, we may, in the future, face competition from providers of enterprise
application software or electronic marketplaces. Companies in each of these
areas may expand their technologies or acquire companies to support greater
professional services automation functionality and capabilities. In addition,
"in-house" information technology departments of potential customers have
developed or may develop systems that substitute for some of the functionality
of our product line.
Some of our competitors' products may be more effective than our products
at performing particular functions or be more customized for particular customer
needs. Even if these functions are more limited than those provided by our
products, our competitors' software products could discourage potential
customers from purchasing our products. A software product that provides some
of the functions of our software solutions, but also performs other tasks may be
appealing to these vendors' customers because it would reduce the number of
different types of software necessary to effectively run their businesses.
Further, many of our competitors may be able to respond more quickly than we can
to changes in customer requirements.
Some of our competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly
than we can to new or emerging technologies and changes in customer
requirements. Our competitors have made and may also continue to make strategic
acquisitions or establish cooperative relationships among themselves or with
other software vendors. They may also establish or strengthen cooperative
relationships with our current or future partners, limiting our ability to
promote our products through these partners and limiting the number of
consultants available to implement our software.
OUR REVENUES DEPEND ON ORDERS FROM OUR TOP CUSTOMERS, AND IF WE FAIL TO SECURE
ONE OR MORE ORDERS, OUR REVENUES WILL BE REDUCED.
Historically, we have received a significant portion of our revenues in
each fiscal period from a small number of customers. For the twelve months ended
June 30, 2001, one customer accounted for 14% of our total revenues. For the
twelve months ended June 30, 2000, sales to two customers accounted for 19% and
13% of total revenues. In 1999 three customers represented 100% of our
revenues. Accordingly, the loss of a single customer or customer prospect may
have a substantial impact on our operating results if we depended on the sale of
our products to that customer to meet our financial performance targets during a
given fiscal period. Our agreements with existing customers often do not
include long-term commitments from customers to continue to purchase our
products. Moreover, a substantial percentage of new customer contracts are
typically signed in the last few weeks of each fiscal quarter, and prospects we
are pursuing have often made a decision not to purchase our products in the
final stages of the sales cycle. Accordingly, our ability to meet our financial
targets during each fiscal period is subject to substantial variation and
uncertainty, and the loss of one or more customers or customer prospects can
cause our operating results to fall below the expectations of investors and
analysts and adversely affect our stock price.
-11-
IF OUR PRODUCTS DO NOT STAY COMPATIBLE WITH WIDELY USED SOFTWARE PROGRAMS, OUR
REVENUES MAY BE ADVERSELY AFFECTED.
Our software products must work with widely used software programs. If
these software programs and operating environments do not remain widely used, or
we do not update our software to be compatible with newer versions of these
programs and systems, we may lose customers.
Our software operates only on a computer server running both the Microsoft
Windows NT or Sun Solaris operating system and database software from Microsoft
or Oracle. In order to increase the flexibility of our solution and expand our
client base, we must be able to successfully adapt it to work with other
applications and operating systems. For example, we are in the early stages of
customer deployment on the Sun Solaris operating system. Because this
development effort is not complete, we cannot be certain that we will avoid
significant technical difficulties that could delay or prevent completion of the
development effort.
Our software connects to and uses data from a variety of our customers'
existing software systems, including systems from Oracle and SAP. If we fail to
enhance our software to connect to and use data from new systems of these
products, we may lose potential customers.
THE COST AND DIFFICULTIES OF IMPLEMENTING OUR PRODUCTS COULD SIGNIFICANTLY HARM
OUR REPUTATION WITH CUSTOMERS AND HARM OUR FUTURE SALES.
If our customers encounter unforeseen difficulties or delays in deploying
our products and integrating them with their other systems, they may reverse
their decision to use our solutions, which would reduce our future revenues,
could impact the collection of outstanding receivables, and potentially damage
our reputation. Factors that could delay or complicate the process of deploying
our solutions include:
- customers may need to modify significant elements of their existing IT
systems in order to effectively integrate them with our solutions;
- customers may need to establish and implement internal business
processes within their organizations before they can make effective
use of our software;
- customers may need to purchase and deploy significant additional
hardware and software resources and may need to make significant
investments in consulting and training services; and
- customers may rely on third-party systems integrators to perform all
or a portion of the deployment and integration work, which reduces the
control we have over the implementation process and the quality of
customer service provided to the customer.
OUR SALES ARE CONCENTRATED IN THE IT SERVICES CONSULTING INDUSTRY, AND, IF OUR
CUSTOMERS IN THIS INDUSTRY DECREASE THEIR INFRASTRUCTURE SPENDING OR WE FAIL TO
PENETRATE OTHER INDUSTRIES, OUR REVENUES MAY DECLINE.
Sales to customers in the IT services consulting industry accounted for 65%
and 40% of our revenues in fiscal 2000 and 2001, respectively. Given the high
degree of competition and the rapidly changing environment in this industry,
there is no assurance that we will be able to continue sales in this industry at
current levels. Many of our customers and potential customers in the IT
services consultancy industry have witnessed drastic declines in their stock
prices, which could limit our current customers from purchasing additional
licenses of our software, and could prevent potential customers from making the
kinds of infrastructure investments that would allow them to purchase our
software in the first place. In addition, we intend to market our products to
professional services departments of large organizations in other industries.
Customers in these new industries are likely to have different requirements and
may require us to change our product design or features, sales methods, support
capabilities or pricing policies. If we fail to successfully address the needs
of these customers, we may experience decreased sales in future periods.
-12-
IF OUR PRODUCTS CONTAIN SIGNIFICANT DEFECTS OR OUR SERVICES ARE NOT PERCEIVED AS
HIGH QUALITY, WE COULD LOSE POTENTIAL CUSTOMERS OR BE SUBJECT TO DAMAGES.
Our products are complex and may contain currently unknown errors, defects,
integration problems or other types of failures, particularly since new versions
are frequently released. In the past we have discovered software errors in some
of our products after introduction. We may not be able to detect and correct
errors before releasing our products commercially. If our commercial products
contain errors, we may:
- need to expend significant resources to locate and correct the errors;
- be required to delay introduction of new products or commercial
shipment of products; or
- experience reduced sales and harm to our reputation from dissatisfied
customers.
Our customers also may encounter system configuration problems that require
us to spend additional consulting or support resources to resolve these
problems.
Some of our customers have indicated to us that they want a completely
integrated solution, including a single user interface and single database
platform. While our product roadmap calls for such an integrated solution, any
delays in delivering such a solution to our customers may cause them to
downgrade their opinion of our software or to abandon our software.
Because our customers use our software products for critical operational
and decision-making processes, product defects may also give rise to product
liability claims. Although our license agreements with customers typically
contain provisions designed to limit our exposure, some courts may not enforce
all or part of these limitations. Although we have not experienced any product
liability claims to date, we may encounter these claims in the future. Product
liability claims, whether or not they have merit, could:
- divert the attention of our management and key personnel from our
business;
- be expensive to defend; and
- result in large damage awards.
We do not have product liability insurance, and even if we obtain product
liability insurance, it may not be adequate to cover all of the expenses
resulting from such a claim.
OUR BUSINESS MAY SUFFER IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY.
Our success is dependent on our ability to develop and protect our
proprietary technology and intellectual property rights. We seek to protect our
software, documentation and other written materials primarily through a
combination of patent, trade secret, trademark and copyright laws,
confidentiality procedures and contractual provisions. While we have attempted
to safeguard and maintain our proprietary rights, we do not know whether we have
been or will be completely successful in doing so. Further, our competitors may
independently develop or patent technologies that are substantially equivalent
or superior to ours.
-13-
We have been issued a patent in the United States covering the enablement
of dynamically configurable software systems by our Evolve software server. We
also have two patent applications pending in the United States with respect to
the "Team Builder" functionality in our Resource Manager module and the time and
expense functionality of our Time and Expense module. There can be no assurance
that either of these two applications would survive a legal challenge to its
validity or provide significant protection to us. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of our products or obtain and use information that we regard as proprietary.
Policing unauthorized use of our products is difficult. While we are unable to
determine the extent to which piracy of our software products exists, software
piracy can be expected to be a persistent problem, particularly in foreign
countries where the laws may not protect proprietary rights as fully as in the
United States. We can offer no assurance that our means of protecting its
proprietary rights will be adequate or that our competitors will not reverse
engineer or independently develop similar technology.
IF OTHERS CLAIM THAT WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY, WE COULD
INCUR SIGNIFICANT EXPENSES OR BE PREVENTED FROM SELLING OUR PRODUCTS.
We cannot provide assurance that others will not claim that we are
infringing their intellectual property rights or that we do not in fact infringe
those intellectual property rights. We have not conducted a search for existing
intellectual property registrations, and we may be unaware of intellectual
property rights of others that may cover some of our technology.
Any litigation regarding intellectual property rights could be costly and
time-consuming and divert the attention of our management and key personnel from
our business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increases these risks. Claims
of intellectual property infringement might also require us to enter into costly
royalty or license agreements.
- We may not be able to obtain royalty or license agreements on terms
acceptable to us, or at all. We also may be subject to significant damages
or an injunction against use of our products. A successful claim of patent
or other intellectual property infringement against us would have an
immediate material adverse effect on our business and financial condition.
A SECURITIES LAWSUIT HAS BEEN FILED AGAINST US WHICH MAY RESULT IN LITIGATION
THAT IS COSTLY TO DEFEND AND THE OUTCOME OF WHICH IS UNCERTAIN AND MAY HARM OUR
BUSINESS.
We were named as defendants in a purported class action complaint which
have been filed allegedly on behalf of certain persons who purchased our common
stock in connection with our initial public offering. The complaint alleges
violations of the Securities Act of 1933. Primarily it alleges that there was
undisclosed compensation received by our underwriters in connection with our
initial public offering. We believe that the allegations against us are without
merit and intend to defend the litigation vigorously. However, we can provide no
assurance as to the outcome of this complaint. An unfavorable resolution of this
matter could have a material adverse effect on our business, results of
operations, or financial condition. In addition, the costs to us of defending
any litigation or other proceeding, even if resolved in our favor, could be
substantial.
SECURITY CONCERNS, PARTICULARLY RELATED TO THE USE OF OUR SOFTWARE ON THE
INTERNET, MAY LIMIT THE EFFECTIVENESS OF AND REDUCE THE DEMAND FOR OUR PRODUCTS.
Despite our efforts to protect the confidential and proprietary information
of our customers stored on our Evolve ASP solution via virtual private networks
and other security devices, there is a risk that this information will be
disclosed to unintended third-party recipients. To the extent our ability to
implement secure private networks, on our Evolve ASP service, is impaired by
technical problems, or by improper or incomplete procedural diligence by either
ourselves or our customers, sensitive information could be exposed to
inappropriate third-parties such as competitors of our customers, which may in
turn expose us to liability and detrimentally impact our customers' confidence
in our ASP service.
RISKS RELATING TO OUR STOCK
OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES HAVE SIGNIFICANT CONTROL OVER US
AND MAY APPROVE OR REJECT MATTERS CONTRARY TO YOUR VOTE OR INTERESTS.
Our executive officers and directors together with their affiliates
beneficially own, or have rights to acquire, an aggregate of approximately 57.5%
of our outstanding common stock. These stockholders, if acting together, will
be able to significantly influence all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or
similar transactions, even if other stockholders disagree. In particular,
Warburg Pincus Private Equity VIII, L.P. ("Warburg") owns or has the right to
acquire securities with voting power equivalent to 55.0% of our outstanding
capital stock. Furthermore, certain actions that we may wish to undertake
require the consent of holders of a majority of our outstanding shares of Series
A Preferred Stock, voting as a separate class. These actions include
authorization and sale of certain senior securities, certain transactions
involving a change of control of Evolve, the incurrence of significant
indebtedness and the payment of dividends. With respect to these and other
matters, the interests of the holders of our Series A Preferred Stock will not
necessarily be identical to those of holders of our common stock. For instance,
in the event of certain change of control transactions, the holders of Series A
Preferred Stock are entitled to payment of a liquidation preference prior to
payment of any consideration to the holders of our common stock. This may cause
the holders of Series A Preferred Stock generally, and Warburg in particular, to
favor or oppose a merger or sale of the Company or its assets in circumstances
where many holders of common stock have a contrary desire. In such an instance,
we may not be able to pursue the transaction in question even if it is supported
by many or most holders of our common stock.
-14-
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF COMMON STOCK COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE.
Sales of a substantial number of shares of our common stock in the public
market, or the appearance that such shares are available for sale, could
adversely affect the market price for our common stock. The market price of our
stock could also decline if one or more of our significant stockholders decided
for any reason to sell substantial amounts of our stock in the public market.
As of October 31, 2001, we had 40,830,111 shares of common stock outstanding.
Of these shares, 35,568,545 were freely tradable in the public market, either
without restriction or subject, in some cases, only to S-3 or S-8/S-3 prospectus
delivery requirements, and, in some cases, only to either manner of sale,
volume, or notice requirements of Rule 144 under the Securities Act of 1933, as
amended. An additional 3,044,817 shares will become eligible for sale, subject
only to the manner of sale requirements of Rule 144, as our right to repurchase
these shares lapses over time with the continued employment by Evolve of these
stockholders. The remaining 2,216,749 shares that were outstanding as of
October 31, 2001, will be freely tradable, subject only to Form S-3 delivery
requirements and possibly restrictions under Rule 144, upon the effectiveness of
this Form S-3 (as will an as-yet unspecified number of shares that are required
to be issued as of the date this Form S-3 becomes effective). As of October 31,
2001, we also had 4,941,832 shares subject to outstanding options under our
stock option plans (plus 215,000 options and warrants issued outside of any
plan), and 2,590,029 shares are available for future issuance under these plans.
We have registered the shares of common stock subject to outstanding options and
reserved for issuance under our stock option plans and 1,885,340 remaining
shares of common stock are reserved for issuance under our 2000 Employee Stock
Purchase Plan. Accordingly, shares underlying vested options will be eligible
for resale in the public market as soon as they are purchased. As of October
31, 2001, we also had warrants outstanding to purchase a total of 6,509,167 of
our common stock and a warrant to purchase up to 1.3 million shares of Series A
Convertible Preferred Stock, which in turn is convertible to up to 26 million
shares of common stock. If all the warrants for the Series A Convertible Stock
are exercised, an additional common stock warrant for up to 6,500,000 shares of
our common stock will be issued.
NASDAQ LISTING MAY BE AT RISK.
We have failed to maintain the minimum closing bid price of $1.00 over 30
consecutive trading days as required by the Nasdaq National Market. Nasdaq has
suspended this minimum bid price requirement through January 2, 2002, but has
indicated its intention to reinstate the requirement on that date. If we are
unable to demonstrate compliance with any Nasdaq requirement, the Nasdaq staff
may take further action with respect to a potential delisting of our stock. We
may appeal any such decision by the Nasdaq staff to the Nasdaq Listing
Qualifications Panel.
-15-
USE OF PROCEEDS
Evolve will not receive any of the proceeds from the sale of the shares of
common stock pursuant to this prospectus. All proceeds from the sale of the
shares will be for the account of the selling stockholder, as described below.
See "Selling Stockholder" and "Plan of Distribution" described below.
SELLING STOCKHOLDER
The shares covered by this prospectus may be offered by the selling
stockholder from time to time. The selling stockholder is VivCorp, Inc.
(formerly known as Vivant! Corporation). Cynthia B. Padnos, President and Chief
Executive Officer of VivCorp, and Brian Grossi and Christopher Greendale, the
principals of a major stockholder of VivCorp Inc., may be deemed to have voting
and dispositive power over the shares offered hereby.
On June 29, 2001, we acquired substantially all the assets of VivCorp for a
purchase price which included 1,553,254 shares of Evolve common stock,
additional non-share consideration and additional shares of Evolve Common Stock
to be determined by certain "earn-out" provisions of the Asset Acquisition
Agreement dated May 22, 2001, between us and the selling stockholder. We
subsequently issued an additional 663,495 shares of our common stock to VivCorp,
pursuant to certain provisions of the Asset Acquisition Agreement. In
conjunction with the acquisition, we also purchased certain physical assets of
Vivant under two separate purchase orders totaling $56,597, and we assumed
equipment lease obligations in the aggregate amount of $140,000. We also agreed
to use our best efforts to register for resale the shares of Evolve common stock
issued to VivCorp in the acquisition. We have filed this Registration Statement
to register such shares and fulfill our obligations to Vivant. The selling
stockholder has not had any material relationship within the past three years
with the Company or any of its predecessors or affiliates, except for the
transactions described in this paragraph. The 2,216,749 shares of our common
stock issued under the Asset Acquisition Agreement are the only shares of our
common stock presently owned by the selling stockholder. These issued shares
constitute approximately 5.4% of our outstanding common stock.
The additional 5,444,348 shares of our common stock included in this
prospectus may be issued to the stockholder pursuant to the provisions of the
Asset Acquisition Agreement. The number of additional shares issued to VivCorp
will be determined as follows:
- In the event that, based on the market price of our Common Stock as of
the date the registration statement containing this prospectus is
declared effective, the value of the 2,216,749 shares issued to
VivCorp to date is less than $1,338,750 or greater than $1,811,250,
additional shares will be issued or existing shares will be cancelled
such that the value of all shares held by VivCorp is $1,575,000.
- In addition to the shares described in the preceding paragraph, on the
first anniversary of closing of the purchase of the VivCorp assets, we
will issue to VivCorp 517,751 additional shares of Common Stock, but
only to the extent that these shares are not required to satisfy
claims we may have against VivCorp based on a breach of the Asset
Acquisition Agreement. The number of shares issuable to VivCorp will
be adjusted to equal a number of shares with a market value of
$525,000, if the market value of the shares issuable would otherwise
be greater than $603,750 or less than $446,250. The additional shares
issuable to Vivcorp under this provision is subject to an overall
limit on the number of shares issuable under the Asset Acquisition
Agreement, as described below.
- In addition, on the earlier of (1) the eighteen-month anniversary of
the date of execution of the first binding customer sales or licensing
agreement with respect to VivCorp's products, and (2) the second
-16-
anniversary of the closing of the purchase of the VivCorp's assets, we
will issue to VivCorp shares of our Common Stock with a value equal to
50% of our cash receipts from sale of VivCorp's products, subject to
certain deductions and exclusions. The value of these shares will be
based on the market value of our Common Stock as of the issuance date.
The number of shares issued under this provision is independent of the
number of shares issued under the mechanisms described under the two
preceding paragraphs, but is subject to the overall limit on the
number of shares issuable to Vivcorp described in the next paragraph
below.
- The aggregate number of additional shares that we may be obligated to
issue to VivCorp under all of the foregoing provisions will not exceed
5,444,348 shares. If and when this maximum number of shares is
reached, no further shares will be issued to Vivcorp under any of the
preceding provisions.
All of these shares may be offered under this prospectus. Pledgees, donees
or transferees of or other successors in interest to the selling stockholder, if
any, will be identified in a supplement to this prospectus. If the number of
shares of common stock transferred is material, the new holders of the shares
transferred will also be identified in a post-effective amendment to the
Registration Statement. Evolve may amend or supplement this prospectus from time
to time in the future to update or change this list of selling stockholders and
shares which may be resold. This prospectus also covers any additional shares of
common stock that become issuable in connection with the shares being registered
by reason of any stock dividend, stock split, recapitalization or other similar
transactions effected without the receipt of consideration that results in an
increase in the number of outstanding shares of our common stock.
PLAN OF DISTRIBUTION
We have been advised by the selling stockholder that it, or its pledgees,
donees, transferees or other successors in interest, (i) may sell all or a
portion of the shares offered hereby from time to time in the Nasdaq National
Market and that sales will be made at prices prevailing in the Nasdaq National
Market at the times of such sales; (ii) may also make private sales directly or
through a broker or brokers, who may act as agent or as principal; or (iii) may
choose to dispose of the shares offered hereby by gift to a third party or as a
donation to a charitable or other non-profit entity. In connection with any
sales, the selling stockholder and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholder (and, if such broker acts as agent for
the purchaser of such shares, from such purchaser). Usual and customary
brokerage fees will be paid by the selling stockholder. Broker-dealers may
agree with the selling stockholder to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for the selling stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholder. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above.
We have advised the selling stockholder that Regulation M promulgated under
the Exchange Act may apply to sales in the market and have informed it of the
possible need for delivery of copies of this prospectus. The selling
stockholder may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or any
discounts or concessions allowed to any such broker-dealers, and, if any such
broker-dealers purchase shares as principal, any profits received on the resale
of such shares, may be deemed to be underwriting discounts and commissions under
the Securities Act.
-17-
Upon our being notified by the selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a cross or block trade, a supplemental prospectus will be filed under
Rule 424(c) under the Securities Act, setting forth the name of the
participating broker-dealer(s), the number of shares involved, the price at
which such shares were sold by the selling stockholder, the commissions paid or
discounts or concessions allowed by the selling stockholder to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this prospectus.
There can be no assurance that the selling stockholder will sell any or all
of the shares of common stock offered hereunder.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-3, of which this prospectus is a part, under the Securities
Act with respect to the shares of common stock offered hereby. The prospectus
does not contain all of the information included in the registration statement.
You should refer to the copies of these documents referenced in this prospectus
filed as exhibits to the registration statement or otherwise filed by us with
the SEC for a more complete understanding of the matter involved. Each
statement concerning these documents is qualified in its entirety by such
reference.
We are also subject to the informational requirements of the Securities
Exchange Act of 1934. In accordance with the Exchange Act we file reports,
proxy statements and other information with the SEC. The registration
statement, including the attached exhibits and schedules, may be inspected and
copied at the public reference facilities maintained by the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago, IL
60661. Please call the SEC at 1-800-SEC-0330 for further information about the
public reference rooms. The SEC maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. Copies of the registration statement and
the reports, proxy and information statements and other information that we file
with the SEC may be obtained from the SEC's Internet address at
http://www.sec.gov.
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LEGAL MATTERS
The validity of the Shares of Common Stock offered hereby will be passed
upon for Evolve by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. As of the date of this prospectus, investment
partnerships composed of current and former members of and persons associated
with Wilson Sonsini Goodrich & Rosati, in addition to current individual members
of Wilson Sonsini Goodrich & Rosati, beneficially own an aggregate of 20,714
shares of Common Stock of the Company.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
our Annual Report on Form 10-K for the fiscal year ended June 30, 2001, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-18-
INFORMATION INCORPORATED BY REFERENCE
The following documents and information previously filed with the
Securities and Exchange Commission by us are hereby incorporated by reference in
this registration statement:
(1) Our amended Annual Report on Form 10-K/A for the fiscal year ended
June 30, 2001, filed pursuant to Section 13 of the Exchange Act.
(2) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2001, filed pursuant to Section 13 of the Exchange Act.
(3) Our Current Report on Form 8-K filed pursuant to Section 13 of the
Exchange Act on October 24, 2001.
(4) The description of our common stock contained in our registration
statement on Form 8-A filed July 26, 2000, pursuant to Section 12(g)
of the Exchange Act and declared effective August 9, 2000.
All reports and other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
prospectus and prior to the filing of a post-effective amendment which indicates
that all securities registered have been sold or which de-registers all
securities then remaining unsold, shall be deemed to be incorporated by
reference in this registration statement and to be part hereof from the date of
filing of such documents. You may request a copy of these filings, at no cost,
by writing: Director of Investor Relations, Evolve Software, Inc., at 1400 65th
Street, Suite 100, Emeryville, CA 94608, or by calling the Director of Investor
Relations at (510) 428-6000.
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EVOLVE SOFTWARE, INC.
7,661,097 SHARES
OF
COMMON STOCK
_________________________________________
PROSPECTUS
_________________________________________
DECEMBER __, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company will pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
for the Securities and Exchange Commission ("SEC") registration fee.
SEC Registration Fee . . . . $ 920
Accounting fees and expenses $10,000
Legal fees and expenses. . . $10,000
Miscellaneous. . . . . . . . $ 580
Total. . . . . . . $21,500
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article IX of our Amended and Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article VI of our Amended and Restated Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of us
if such person acted in good faith and in a manner reasonably believed to be in
and not opposed to our best interest, and, with respect to any criminal action
or proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.
We have entered into indemnification agreements with our directors and
executive officers, in addition to indemnification provided for in our Amended
and Restated Bylaws, and intend to enter into indemnification agreements with
any new directors and executive officers in the future. The indemnification
agreements may require us, among other things, to indemnify our directors and
officers against certain liability that may arise by reason of their status or
service as directors and officers (other than liabilities arising from willful
misconduct of a culpable nature), to advance their expenses incurred as a result
of any proceeding against them as to which they could be indemnified, and to
obtain directors' and officers' insurance, if available on reasonable terms.
II-1
ITEM 16. EXHIBITS.
Exhibit Description
Number
-------- ----------------------------------------------------------------------
4.1* Asset Acquisition Agreement by and between Evolve Software, Inc. and
Vivant! Corporation dated May 22, 2001
4.2* Registration Rights Agreement by and between Evolve Software, Inc. and
Vivant! Corporation dated June 29, 2001
5.1+ Opinion of counsel as to legality of securities being registered
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2+ Consent of Counsel
24.1+ Power of Attorney
____________________
* Incorporated by reference to our Current Report on Form 8-K filed on
July 17, 2001.
+ Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered, which remain unsold at the termination of
the offering.
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(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Emeryville, State of California, on this 21st of
December, 2001.
Evolve Software, Inc.
/s/ Kenneth J. Bozzini
-----------------------------------
Kenneth J. Bozzini
Chief Financial Officer and
Vice President, Finance
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
----------------------------- ---------------------------------------- -----------------
/s/ Lin Johnstone Interim President and Chief Operating December 21, 2001
----------------------------- Officer (Principal Executive Officer)
Lin Johnstone
Chief Financial Officer, Vice President,
/s/ Kenneth J. Bozzini Finance, Corporate Controller (Principal December 21, 2001
----------------------------- Financial Officer and Principal
Kenneth J. Bozzini Accounting Officer)
/s/ Gayle Crowell* Chairman December 21, 2001
-----------------------------
Gayle Crowell
/s/ Cary Davis* Director December 21, 2001
-----------------------------
Cary Davis
/s/ Jeffrey M. Drazan* Director December 21, 2001
-----------------------------
Jeffrey M. Drazan
/s/ Judith H. Hamilton* Director December 21, 2001
-----------------------------
Judith H. Hamilton
/s/ Nancy Martin* Director December 21, 2001
-----------------------------
Nancy Martin
/s/ John R. Oltman* Director December 21, 2001
-----------------------------
John R. Oltman
/s/ Paul Rochester* Director December 21, 2001
-----------------------------
Paul Rochester
*By: /s/ Kenneth J. Bozzini December 21, 2001
-----------------------------
Kenneth J. Bozzini
Attorney-in-Fact
II-4
EVOLVE SOFTWARE, INC.
REGISTRATION STATEMENT ON FORM S-3
----------------------------------
INDEX TO EXHIBITS
Exhibit
Number Description
-------- ----------------------------------------------------------------------
4.1* Asset Acquisition Agreement by and between Evolve Software, Inc. and
Vivant! Corporation dated May 22, 2001
4.2* Registration Rights Agreement by and between Evolve Software, Inc. and
Vivant! Corporation dated June 29, 2001
5.1+ Opinion of counsel as to legality of securities being registered
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2+ Consent of Counsel
24.1+ Power of Attorney
____________________
* Incorporated by reference to our Current Report on Form 8-K filed on
July 17, 2001.
+ Previously filed.
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