THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
WARRANT
To Purchase Shares of Common Stock of
Evolve Software, Inc.
THIS CERTIFIES that, for value received [______________], is entitled, upon the
terms and subject to the conditions hereinafter set forth, to purchase from
Evolve Software, Inc., a Delaware corporation (the "COMPANY"), that number of
fully paid and nonassessable shares of the Company's Common Stock, par value
$0.001 per share ("COMMON STOCK") at the purchase price per share as set forth
in Section 1 below ("EXERCISE PRICE"). The number of shares and Exercise Price
are subject to adjustment as provided in Section 10 hereof.
Section 1. Number of Shares; Exercise Price; Term.
-------------------------------------------
1.1 Subject to adjustments as provided herein, this Warrant is exercisable
for up to [______________] shares (the "SHARES") of the Company's
Common Stock for an aggregate purchase price of $[______________], or
a purchase price of $1.00 per share.
1.2 Subject to the terms and conditions set forth herein, this Warrant
shall be exercisable during the term commencing on the date hereof and
ending on the seventh anniversary of the date of this Warrant, and
shall be void thereafter.
Section 2. Title to Warrant. This Warrant and all rights hereunder are
----------------
transferable, in whole or in part, at the office or agency of the
Company by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed.
Section 3. Exercise or Conversion of Warrant.
---------------------------------
3.1 The purchase rights represented by this Warrant are exercisable by the
registered holder hereof, in whole or in part, at any time, or from
time to time, during the term hereof as described in Section l above,
by the surrender of this Warrant and the Notice of Exercise or
Conversion annexed hereto duly completed and executed on behalf of the
holder hereof, at the office of the Company in Emeryville, California
(or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company), and subject to
Section 3.2 hereof, upon payment of the purchase price
of the shares thereby purchased in cash or check acceptable to the
Company, whereupon the holder of this Warrant shall be entitled to
receive a certificate for the number of shares so purchased and, if
this Warrant is converted in part, a new Warrant for the remaining
portion of this Warrant.
3.2 Notwithstanding any provisions herein to the contrary, if the Fair
Market Value (as hereinafter defined) is greater than the Exercise
Price (at the date of calculation, as set forth below), in lieu of
exercising this Warrant as hereinabove permitted, the holder may elect
to convert this Warrant, in whole or in part, into shares of Common
Stock equal to the value (as determined below) of the exercised
portion of this Warrant by surrender of such portion of this Warrant
for conversion at the office of the Company referred to in Section 3.1
above, together with the Notice of Exercise or Conversion, in which
event the Company shall issue to the holder that number of shares of
Common Stock computed using the formula below and, if this Warrant is
converted in part, a new Warrant for the remaining portion of this
Warrant.
CS = WCS x (FMV-EP)
--------------
FMV
Where, for purposes of this Section 3.2
CS equals the number of shares of Common Stock to be issued to the holder
WCS equals the number of shares of Common Stock purchasable under the
Warrant which are to be converted by the holder
FMV equals the Market Price, as defined in Section 10, of one share of the
Company's Common Stock
EP equals the Exercise Price (as adjusted to the date of such
calculation).
3.3 The Company agrees that, upon exercise or conversion of this Warrant
in accordance with the terms hereof, the shares so purchased shall be
deemed to be issued to such holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall
have been exercised or converted. The parties intend that in the event
this Warrant is converted into shares of Common Stock pursuant to
Section 3.2 above, the holder be entitled to "tack" the holding period
of this Warrant to the holding period of the shares issued upon such
conversion for purposes of the holding period requirements of Rule 144
under the Securities Act of 1933, as amended (the "Securities Act").
Certificates for shares purchased hereunder and, on partial exercise
or conversion of this Warrant, a new Warrant for the unexercised
portion of this Warrant shall be delivered to the holder hereof as
promptly as practicable after the date on which this Warrant shall
have been exercised or converted.
3.4 The Company covenants that all shares which may be issued upon the
exercise of rights represented by this Warrant will, upon exercise of
the rights represented by this Warrant and payment of the Exercise
Price or surrender of the appropriate number of
2
Shares, be fully paid and nonassessable and free from all taxes, liens
and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously or otherwise
specified herein).
3.5 The Company will reserve and keep available free from preemptive
rights, out of its authorized but unissued shares of Common Stock, the
full number of Shares deliverable upon the exercise of this Warrant in
full. The Company or, if appointed, a transfer agent (a "Transfer
Agent") will be irrevocably authorized and directed at all times to
reserve such number of authorized shares of Common Stock as are
required for such purpose. The Company will keep a copy of this
Warrant on file with each Transfer Agent. The Company will furnish
such Transfer Agent with a copy of all notices of adjustments and
certificates related thereto which are transmitted to the holder
pursuant to Section 11 hereof.
Section 4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise or
conversion of this Warrant. In lieu of any fractional share to which
such holder would otherwise be entitled, such holder shall be
entitled, at its option, to receive either (i) a cash payment equal to
the excess of fair market value for such fractional share above the
Exercise Price for such fractional share (as mutually determined by
the Company and the holder) or (ii) a whole share if the holder
tenders the Exercise Price for one whole share.
Section 5. Charges, Taxes and Expenses. Issuance of certificates for shares
---------------------------
upon the exercise or conversion of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company, and such
certificates shall be issued in the name of the holder of this Warrant
or in such name or names as may be directed by the holder of this
Warrant; provided, however, that in the event certificates for shares
are to be issued in a name other than the name of the holder of this
Warrant, this Warrant when surrendered for exercise or conversion
shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof and the Notice of Exercise or Conversion
duly completed and executed and stating in whose name and certificates
are to be issued; and provided further, that such assignment shall be
subject to applicable laws and regulations. Upon any transfer involved
in the issuance or delivery of any certificates for shares of the
Company's securities, the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
Section 6. No Rights as Shareholders. This Warrant does not entitle the
-------------------------
holder hereof to any voting rights, dividend rights or other rights as
a shareholder of the Company prior to the exercise or conversion
hereof.
Section 7. Exchange and Registry of Warrant. The Company shall maintain a
--------------------------------
registry showing the name and address of the registered holder of this
Warrant. This Warrant may be surrendered for exchange, transfer,
exercise or conversion in accordance with its terms, at the office of
the Company, and the Company shall be entitled to rely in all
respects, prior to written notice to the contrary, upon such registry.
3
Section 8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
-------------------------------------------------
by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory
to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new
Warrant of like tenor and dated as of such cancellation, in lieu of
this Warrant.
Section 9. Saturdays, Sundays, Holidays, etc. If the last or appointed day
----------------------------------
for the taking of any action or the expiration of any right required
or granted herein shall be a Saturday or a Sunday or shall be a legal
holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday or a Sunday or a legal
holiday.
Section 10. Adjustment of Exercise Price. The Exercise Price and the number
----------------------------
of Warrant Shares issuable on Exercise of each Warrant are subject to
adjustment from time to time as described in this Section 10. All
calculations under this Section 10 will be made to the nearest
one-hundredth of a cent or to the nearest one-hundredth of a share, as
the case may be.
10.1 Antidilution Adjustments. Subject to Section 10.3, the following
------------------------
adjustments shall be made:
(a) Common Stock Issued at Less than Market Value. If the Company issues
or sells any Common Stock other than Excluded Stock (as defined in
Section 10.4) without consideration or for consideration per share
less than the Market Price (as defined in Section 10.4) (provided,
however, that no sale of securities pursuant to a bona fide
underwritten public offering will be deemed to be for less than Market
Price), as of the day of such issuance or sale, the Exercise Price in
effect immediately prior to each such issuance or sale will
immediately (except as provided below) be reduced to the price
determined by multiplying the Exercise Price, in effect immediately
prior to such issuance or sale, by a fraction, (x) the numerator of
which shall be the sum of (i) the number of shares of Common Stock
issued and outstanding immediately prior to such issue, (ii) the
number of shares of Common Stock issuable upon conversion of shares of
Preferred Stock outstanding immediately prior to such issue, (iii) the
number of shares of Common Stock issuable upon exercise of outstanding
in-the-money Options and conversion of outstanding in-the-money
Convertible Securities prior to such issue and (iv) the number of
shares of Common Stock which the aggregate consideration received by
the Company for the total number of such additional shares of Common
Stock so issued or sold would purchase at the Market Price on the last
trading day immediately preceding such issuance or sale and (y) the
denominator of which shall be (i) the number of shares of Common Stock
issued and outstanding immediately prior to such issue, (ii) the
number of shares of Common Stock issuable upon conversion of shares of
Preferred Stock outstanding immediately prior to such issue, (iii) the
number of shares of Common Stock issuable upon exercise of outstanding
in-the-money Options and conversion of outstanding in-the-money
Convertible Securities prior to such issue, and (iv) the number of
shares of Common Stock so issued or sold. In such event, the number of
Shares issuable upon
4
the exercise of this Warrant shall be increased to the number obtained
by dividing (x) the product of (A) the number of Shares issuable upon
the exercise of this Warrant before such adjustment, and (B) the
Exercise Price in effect immediately prior to the issuance giving rise
to this adjustment by (y) the new Exercise Price determined in
accordance with the immediately preceding sentence. For the purposes
of any adjustment of the Exercise Price and the number of Shares
issuable upon exercise of each Warrant pursuant to this Section
10.1(a), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the amount of
the consideration received by the Company shall be deemed to be the
amount of the cash proceeds received by the Company for such Common
Stock before deducting therefrom any discounts or commissions allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock (otherwise than upon the
conversion of any shares of capital stock or other securities of the
Company) for a consideration in whole or in part other than cash,
including securities acquired in exchange therefor (other than
securities by their terms so exchangeable), the consideration other
than cash shall be deemed to be the fair value thereof as determined
by the Board of Directors, provided, however, that such fair value as
determined by the Board of Directors shall not exceed the aggregate
Market Price of the shares of Common Stock being issued as of the date
the Board of Directors authorizes the issuance of such shares.
(3) In the case of the issuance of (A) options, warrants or other rights
to purchase or acquire Common Stock (whether or not at the time
exercisable) or (B) securities by their terms convertible into or
exchangeable for Common Stock (whether or not at the time so
convertible or exchangeable) or options, warrants or rights to
purchase such convertible or exchangeable securities (whether or not
at the time exercisable):
(i) the aggregate maximum number of shares of Common Stock deliverable
upon exercise of such options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been issued at the time
such options, warrants or rights are issued and for a consideration
equal to the consideration (determined in the manner provided in
Sections 10.1(a)(1) and (2)), if any, received by the Company upon the
issuance of such options, warrants or rights plus the minimum purchase
price provided in such options, warrants or rights for the Common
Stock covered thereby;
(ii) the aggregate maximum number of shares of Common Stock deliverable
upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options, warrants or
other rights to purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such securities were issued or
such options, warrants or rights were issued and for a consideration
equal to the consideration, if any, received by the Company for any
such securities
5
and related options, warrants or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the
additional consideration (determined in the manner provided in Section
10.1(a)(1) and (2)), if any, to be received by the Company upon the
conversion or exchange of such securities, or upon the exercise of any
related options, warrants or rights to purchase or acquire such
convertible or exchangeable securities and the subsequent conversion
or exchange thereof;
(iii) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options, warrants or rights or conversion or
exchange of such convertible or exchangeable securities or any change
in the consideration to be received by the company upon such exercise,
conversion or exchange, but excluding changes resulting from the
antidilution provisions thereof (to the extent comparable to the
antidilution provisions contained herein), the Exercise Price and the
number of Shares issuable upon exercise of this Warrant as then in
effect shall forthwith be readjusted to such Exercise Price and number
of Shares as would have been obtained had an adjustment been made upon
the issuance of such options, warrants or rights not exercised prior
to such change, or of such convertible or exchangeable securities not
converted or exchanged prior to such change, upon the basis of such
change;
(iv) on the expiration or cancellation of any such options, warrants or
rights (without exercise), or the termination of the right to convert
or exchange such convertible or exchangeable securities (without
exercise), if the Exercise Price and the number of Shares issuable
upon exercise of this Warrant shall have been adjusted upon the
issuance thereof, the Exercise Price and the number of Shares issuable
upon exercise of this Warrant shall forthwith be readjusted to such
Exercise Price and number of Shares as would have been obtained had an
adjustment been made upon the issuance of such options, warrants,
rights or such convertible or exchangeable securities on the basis of
the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options, warrants or rights, or upon
the conversion or exchange of such convertible or exchangeable
securities; and
(v) if the Exercise Price and the number of Shares issuable upon exercise
of this Warrant shall have been adjusted upon the issuance of any such
options, warrants, rights or convertible or exchangeable securities,
no further adjustment of the Exercise Price and the number of Shares
issuable upon exercise of this Warrant shall be made for the actual
issuance of Common Stock upon the exercise, conversion or exchange
thereof; provided, however, that no increase in the Exercise Price
shall be made pursuant to subclauses (i) and (ii) of this Section
10.1(a)(3).
Notwithstanding anything to the contrary in this Section 10.1(a),
no adjustment will be required in respect of issuances of Common Stock (or
options to purchase Common Stock) pursuant to stock options granted prior to the
date hereof.
6
(b) Certain Repurchases of Common Stock. In case the Company effects a Pro
-----------------------------------
Rata Repurchase (as defined in Section 10.4) of Common Stock, then the
Exercise Price shall be reduced to the price determined by multiplying
the Exercise Price in effect immediately prior to the effective date
of such Pro Rata Repurchase by a fraction of which the numerator shall
be (x) the product of (A) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase (after giving
effect to the conversion of all outstanding in-the-money Convertible
Securities and the exercise of all outstanding in-the-money Options)
and (B) the Market Price of a share of Common Stock on the trading day
immediately preceding the first public announcement by the Company or
any of its Affiliates of the intent to effect such Pro Rata
Repurchase, minus (y) the aggregate purchase price of the Pro Rata
Repurchase, and of which the denominator shall be the product of (x)
the number of shares of Common Stock outstanding immediately prior to
such Pro Rata Repurchase (after giving effect to the conversion of
outstanding all in-the-money Convertible Securities and the exercise
of all outstanding in-the-money Options) minus the number of shares of
Common Stock so repurchased and (y) the Market Price per share of
Common Stock on the trading day immediately preceding the first public
announcement of such Pro Rata Repurchase. In such event, the number of
Shares issuable upon the exercise of this Warrant shall be increased
to the number obtained by dividing (x) the product of (A) the number
of Shares issuable upon the exercise of this Warrant before such
adjustment, and (B) the Exercise Price in effect immediately prior to
the Pro Rata Repurchase giving rise to this adjustment by (y) the new
Exercise Price determined in accordance with the immediately preceding
sentence.
(c) Business Combinations. Subject to Section 12 hereof, in case of any
---------------------
Change of Control (as defined in Section 10.4) or reclassification of
Common Stock (other than a reclassification of Common Stock referred
to in Section 10.1(d)), the Shares issued or issuable upon exercise of
this Warrant after the date of such Change of Control or
reclassification will be exchangeable for the number of shares of
stock or other securities or property (including cash) to which the
Shares issuable (at the time of such consolidation, merger, sale,
lease or conveyance) upon exercise of this Warrant immediately prior
to such Change of Control or reclassification would have been entitled
upon such Change of Control or reclassification; and in any such case,
if necessary, the provisions set forth herein with respect to the
rights and interests thereafter of the holder shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to
any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. In determining the kind
and amount of stock, securities or the property receivable upon
consummation of such Change of Control, if the holders of Common Stock
have the right to elect the kind or amount of consideration receivable
upon consummation of such Change of Control, then the holder shall
have the right to make a similar election upon exercise of this
Warrant with respect to the number of shares of stock or other
securities or property which the holder will receive upon exercise of
this Warrant.
(d) Stock Splits, Subdivisions, Reclassifications or Combinations. If the
-------------------------------------------------------------
Company shall (1) declare a dividend or make a distribution on its
Common Stock in shares of
7
Common Stock, (2) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (3) combine or
reclassify the outstanding Common Stock into a smaller number of
shares, the number of Shares issuable upon exercise of this Warrant at
the time of the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification
shall be proportionately adjusted so that the holder after such date
shall be entitled to purchase the number of Shares which such holder
would have owned or been entitled to receive after such date had this
Warrant been exercised immediately prior to such date. In such event
the Exercise Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted to the number
obtained by dividing (x) the product of (A) the number of Shares
issuable upon the exercise of this Warrant before such adjustment and
(B) the Exercise Price in effect immediately prior to the issuance
giving rise to this adjustment by (y) the new number of shares
issuable upon exercise of the Warrant determined pursuant to the
immediately preceding sentence.
(e) Other Distributions. In case the Company shall fix a record date for
the making of a distribution to all holders of shares of its Common
Stock (1) of shares of any class other than its Common Stock or (2) of
evidence of indebtedness of the Company or any subsidiary or (3) of
assets, or (4) of warrants or similar rights (in each case excluding
any dividends or distribution referred to in Section 10.1(d)), in each
such case the Exercise Price in effect on the record date will be
reduced by an amount equal, in the case of a distribution in cash, to
the amount thereof payable per share of the Common Stock, or in the
case of any other distribution, to the fair value thereof per share of
the Common Stock as determined by the Board of Directors. Such
reductions shall take effect on the record date for such distribution.
In such event, the number of Shares issuable upon the exercise of this
Warrant shall be increased to the number obtained by dividing (x) the
product of (A) the number of Shares issuable upon the exercise of this
Warrant before such adjustment, and (B) the Exercise Price in effect
immediately prior to the issuance giving rise to this adjustment by
(y) the new Exercise Price determined in accordance with the
immediately preceding sentence. In the event that such distribution is
not so made, the Exercise Price and the number of Shares issuable upon
exercise of this Warrant then in effect shall be readjusted, effective
as of the date when the Board determines not to distribute such
shares, evidences of indebtedness, assets, rights or warrants, as the
case may be, to the Exercise Price that would then be in effect and
the number of Warrant Shares that would then be issuable upon exercise
of this Warrant if such record date and distribution had not been
fixed.
(f) No adjustment in the Exercise Price or the number of Warrant Shares
issuable upon the exercise of each Warrant is required if the amount
of the adjustment is less than $0.01 or one-hundredth (1/100th) of a
share, as the case may be; provided, however, that any adjustments
which by reason of this Section 10.1(f) are not required to be made
will be carried forward and given effect in any subsequent adjustment.
(g) For the purposes of this Section 10.1, the term "shares of Common
Stock" shall include (1) the class of stock designated as the Common
Stock of the Company at the
8
date hereof or (2) any other class of stock resulting from successive
changes or reclassifications of such shares consisting solely of
changes in par value, or from no par value to par value.
(h) Notwithstanding the foregoing, in any case which this Section 10.1
provides that an adjustment becomes effective immediately after a
record date for an event, the Company may defer until the occurrence
of such event (1) issuing to the holder of any Warrant exercised or
converted after such record date and before the occurrence of such
event the additional securities issuable upon such exercise or
conversion after giving effect to such adjustment and (2) paying to
the holder any amount in cash in lieu of any fraction pursuant to
Section 4.
(i) If the Company takes any action affecting the Common Stock, other than
action described in this Section 10.1, which in the opinion of the
Board of Directors of the Company would materially adversely affect
the conversion rights of the holder of the Warrants, the Exercise
Price for the Warrants and/or the number of Warrant Shares received
upon exercise of the Warrant may be adjusted, to the extent permitted
by law, in such manner, if any, and at such time, as such Board may
determine in good faith to be equitable in the circumstances.
10.2 Voluntary Adjustment by the Company. The Company may at its option, at
-----------------------------------
any time during the term of the Warrants, reduce the then current
Exercise Price or increase the number of Shares for which the Warrant
may be exercised to any amount deemed appropriate by the Board of
Directors of the Company; provided, however, that if the Company
elects to make such adjustment, such adjustment will remain in effect
for at least a 15-day period, after which time the Company may, at its
option, reinstate the Exercise Price or number of Shares in effect
prior to such reduction, subject to any interim adjustments pursuant
to Section 10.1.
10.3 Miscellaneous. Except as provided in Section 10.1, no adjustment in
-------------
respect of any dividends or other payments or distributions made to
holders of securities issuable upon exercise of Warrants will be made
during the term of a Warrant or upon the exercise of a Warrant. To the
extent (but only to the extent) that the holder's rights hereunder
have been protected by the holder's exercise (at holder's election and
reasonable allocation) of its preemptive rights under any Pre-Emptive
Rights Agreement or similar agreement between the Company and the
holder hereof, no adjustments will be made to the Exercise Price or
the number of Warrant Shares.
10.4 Definitions. For purposes hereof, the following terms shall have the
-----------
following meanings:
"Change of Control" means (A) (i) the Corporation's sale of all
or substantially all of its business, assets or property
(including intellectual property) or (ii) any transaction or
series of related transactions resulting in a reorganization,
merger, or consolidation (whether or not the Corporation is the
entity surviving such transaction) in which holders of all voting
equity securities of the Corporation immediately prior to such
transaction will hold
9
(by reason of their holdings in the Corporation) less than 50% of
the voting equity securities of the Corporation or other entity
surviving such transaction or (B) a transaction or series of
related transactions in which a person or group (as defined in
Rule 13d-5(b)(1) under the Securities Exchange Act of 1934 (the
"Exchange Act")) (excluding Warburg Pincus Private Equity VIII,
L.P. and its affiliates) acquires beneficial ownership (as
determined in accordance with Rule 13d-3 under the Exchange Act)
of more than 50% of the voting equity securities of the
Corporation.
"Convertible Securities" means shall mean any evidences of
indebtedness, shares (other than Common Stock and Series A
Preferred Stock) or other securities convertible into or
exchangeable for Common Stock.
"Excluded Stock" means shares of Common Stock issued or issuable:
(i) upon conversion of shares of Series A Preferred Stock of the
Company, and upon the issuance of Options, including exercise or
conversion of Convertible Securities subject to such Options,
issued or issuable pursuant to the terms of the agreement or
agreements governing initial issuance and sale of Series A
Preferred Stock, or upon exercise or conversion of Options or
Convertible Securities outstanding as of the date hereof; (ii) to
officers, directors or employees of, or consultants to, the
Company pursuant to a stock grant, option plan or purchase plan
or other stock incentive program, including without limitation
sales of shares to such persons pursuant to restricted stock
purchase agreements approved by the Board of Directors; (iii) as
a dividend or distribution on the Series A Preferred Stock or in
connection with any stock split, stock dividend or similar
transaction; (iv) in connection with (1) equipment lease
financing transactions with institutions regularly engaged in
equipment leasing or (2) bank lending, if such transactions are
approved by the Board of Directors, and such issuance is not
principally for the purpose of raising additional equity capital
for the Company; provided however that the number of shares of
Common Stock so excluded in any fiscal year of the Company shall
not exceed 0.5% of the number of shares of Common Stock
outstanding (determined as of the date of issuance of such shares
of Common Stock), after giving effect to the conversion of all
outstanding shares Series A Preferred Stock and other
"in-the-money" (as such term is defined below) securities
convertible into Common Stock unless such grants are approved by
a majority of the Series A Directors present and voting; (v)
securities issued to customers or joint venture partners or in
connection with other strategic alliances approved by the Board
of Directors including a majority of the Series A Directors
present and voting which involve the grant of licenses or
localization, distribution, OEM, bundling, manufacturing or
resale rights with respect to the Company's products or
technology; (vi) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of
substantially all of the assets of the other corporation, or
other reorganization approved by the Board of Directors including
a majority of the Series A Directors present and voting; (vii) by
way of dividend or other
10
distribution on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by the foregoing
clauses (i), (ii), (iii), (iv), (v) or (v) or on shares of Common
Stock so excluded, provided that such issuance is made (x)
pursuant to obligations of the Company established in connection
with the original issuance of such securities or (y) to all
holders of the Company's capital stock in proportion to the
number of shares held.
"In-the-money" Options and Convertible Securities shall be deemed
to include all securities exercisable for or convertible into
shares of Common Stock with a fair market value equal to or
greater than the fair market value of the consideration which
must be paid or which must be foregone to effect such exercise or
conversion.
"Market Price" means, with respect to a particular security, on
any given day, the average of the daily closing prices for 10
consecutive trading days ending on the trading day prior to the
day in question or, in case no such reported sale takes place on
such day, the average of the last closing bid and asked prices
regular way, in either case on the principal national securities
exchange on which the applicable security is listed or admitted
to trading, or if not listed or admitted to trading on any
national securities exchange, (1) the average of the daily
closing prices for 10 consecutive trading days commencing on the
5th trading day prior to the day in question reported by the
NASDAQ Stock Market if such security is traded over-the-counter
and quoted in the NASDAQ Stock Market, or (2) if such security is
so traded, but not so quoted, the average of the closing reported
bid and asked prices of such security as reported by the NASDAQ
Stock Market or any comparable system, or (3) if such security is
not listed on the NASDAQ Stock Market or any comparable system,
the average of the closing bid and asked prices as furnished by
two members of the National Association of Securities Dealers,
Inc. selected from time to time by the Company for that purpose.
If such security is not listed and traded in a manner that the
quotations referred to above are available for the period
required hereunder, the Market Price per share of Common Stock
shall be deemed to be the fair value per share of such security
as determined in good faith by the Board of Directors of the
Company.
"Options" means rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible
Securities.
"Pro Rata Repurchases" means any purchase of shares of Common
Stock by the Company or any Affiliate (as defined in the
Preferred Stock Purchase Agreement) thereof, other than Warburg
Pincus Private Equity VIII, L.P. or any of its affiliates,
pursuant to any tender offer or exchange offer subject to Section
13(e) of the Exchange Act, or pursuant to any other offer
available to substantially all holders of Common Stock, whether
for cash, shares of capital stock of the Company, other
securities of the Company, evidences of indebtedness of the
Company or any other person or any other property (including,
without limitation, shares of capital stock, other securities or
11
evidences of indebtedness of a subsidiary of the Company), or any
combination thereof, effected while this Warrant is outstanding;
provided, however, that "Pro Rata Repurchase" shall not include
any purchase of shares by the Company or any Affiliate thereof
made directly or indirectly in accordance with the requirements
of Rule 10b-18 as in effect under the Exchange Act; and provided
further that "Pro Rata Purchase" shall not include any
reclassification or combination of Common Stock referred to in
Section 10.1(d). The "effective date" of a Pro Rata Repurchase
shall mean the date of acceptance of shares for purchase or
exchange under any tender or exchange offer which is a Pro Rata
Repurchase or the date of purchase with respect to any Pro Rata
Repurchase that is not a tender or exchange offer.
"Series A Directors" means directors of the Company elected by
holders of Series A Preferred Stock of the Company voting as a
separate class; provided however that commencing at such time as
no director elected by holders of Series A Preferred Stock of the
Company voting as a separate class continues to serve on the
Board of Directors, "Series A Directors" shall be deemed to refer
to all directors of the Company.
Section 11. Notice of Adjustments; Notices. Whenever the Exercise Price or
------------------------------
number of shares purchasable hereunder shall be adjusted pursuant to
Section 10 hereof, the Company shall issue a certificate signed by its
Chief Financial Officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated and the Exercise Price and number
of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed
(by first class mail, postage prepaid) to the holder of this Warrant
and to the Transfer Agent.
Section 12. Change of Control.
-----------------
(a) Exchange Right. In the event of a Trigger Date (as defined in Exhibit
--------------
A) the Company shall promptly notify the holder of the occurrence
thereof. In lieu of the application of Section 10.1(c), the holder may
in its sole discretion elect by delivering written notice to the
Company together with this Warrant after the occurrence of an
Initiation Date (as defined in Exhibit A) to cause the Company to
purchase this Warrant, in whole or in part, at a valuation based on a
computation of the option value of the Warrant using Black-Scholes
option valuation and making the assumptions described in the
Black-Scholes methodology described in Exhibit A (the "Exchange
Right"). The Company's obligation to purchase this Warrant pursuant to
this Section shall be conditioned, and shall occur, upon the
consummation of a Change of Control.
(b) Payment in Common Stock. In the event of a Change of Control of the
-----------------------
type described in clause (A) of the definition of Change of Control,
at the election of the Company all or any portion of such purchase
price may be paid in Common Stock (valued as set forth in Exhibit A),
provided the Company has ensured that the Common Stock paid in
exchange for this Warrant (including any securities issued in
12
respect of such Common Stock in the Change of Control) shall be freely
tradable on a national stock exchange or the Nasdaq National Market by
the holder pursuant to an effective registration statement under the
Securities Act, or pursuant to Rule 144 or Rule 145 under the
Securities Act without volume restrictions under applicable securities
laws or under contract. Except as set forth in the foregoing sentence,
the Company may pay the purchase price for the exchange of this
warrant in Common Stock only with the written consent of the holder
hereof.
Section 13. Miscellaneous.
-------------
13.1 Governing Law. This Warrant shall be binding upon any successors or
-------------
assigns of the Company. This Warrant shall constitute a contract under
the laws of Delaware and for all purposes shall be construed in
accordance with and governed by the laws of said state, without giving
effect to the conflict of laws principles.
13.2 Restrictions. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
------------
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
13.3 Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the holder relating hereto, the prevailing
party shall be entitled to reasonable attorneys' fees and expenses
incurred in enforcing this Warrant.
13.4 Amendments. This Warrant may be amended and the observance of any term
----------
of this Warrant may be waived only with the written consent of the
Company and Warburg or its successor in interest.
13.5 Notice. Any notice required or permitted hereunder shall be deemed
------
effectively given upon personal delivery to the party to be notified
or upon deposit with the United States Post Office, by certified mail,
postage prepaid and addressed to the party to be notified at the
address indicated below for such party, or at such other address as
such other party may designate by ten-day advance written notice.
13
IN WITNESS WHEREOF, Evolve Software, Inc. has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: _____________ ____, 2001
EVOLVE SOFTWARE, INC.
By:
Title: _______________________________
WARRANT HOLDER:
_______________________
_______________________
_______________________
By:
Title: ___________________________________
NOTICE OF EXERCISE OR CONVERSION
--------------------------------
To: Evolve Software, Inc.
1. (a) The undersigned hereby irrevocably elects to exercise the
Warrant, represented by the attached Warrant, to purchase ___ shares of Common
Stock (the "Shares") as provided for therein and upon confirmation from the
Company that such shares of Common Stock will be issued, agrees that it will
tender in payment for such shares of Common Stock payment of the purchase price
in full in the form of a wire transfer of immediately available funds to the
order of Evolve Software, Inc. in the amount of $_______, all in accordance with
the terms of the Warrant.
(b) The undersigned hereby irrevocably elects to convert its right to
acquire ___ Shares under the attached Warrant, pursuant to Section 3.2 of the
Warrant.
(c) The undersigned hereby irrevocably elects to exercise the Exchange
Right pursuant to Section 12 of the attached Warrant and to cause the Company to
purchase the Warrant in accordance with Section 12 thereof.
[Strike paragraphs that do not apply.]
2. Except in the case of paragraph (c), above, the undersigned requests
that a certificate for such Shares be registered in the name of _______________
whose address is _______________ and that such certificate will be delivered to
__________________ whose address is ____________________. If said number of
Shares is less than all of the Shares purchasable hereunder, the undersigned
requests that a new Warrant representing the right to purchase the remaining
balance of the Shares be registered in the name of ____________ whose address is
____________ and that such warrant will be delivered to ___________ whose
address is ______________.
3. If the Shares are being acquired for cash, the Shares to be received
by the undersigned upon exercise of the Warrant are being acquired for its own
account, not as a nominee or agent, and not with a view to resale or
distribution of any part thereof, and the undersigned has no present intention
of selling, granting any participation in, or otherwise distri-buting the same.
The undersigned further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to the Stock.
The undersigned believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Shares.
4. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in trans-actions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
5. The undersigned understands the instruments evidencing the Shares
may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
Dated: ____________________
____________________
(Insert Employer Identification
Number of Holder)
Signature ______________________
Note: Signature must conform in all
respect to name of holder as
specified on the face of the
Warrant in every particular,
without alteration or enlargement
or any change whatsoever, unless
the Warrant has been assigned.
ASSIGNMENT FORM
---------------
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_________________________________
(Please Print)
whose address is _________________________________
_________________________________
(Please Print)
Dated:_________________,_____.
Holder's Signature: __________________________________________
Holder's Address: __________________________________________
__________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
EXHIBIT A:
CHANGE OF CONTROL
SECTION 1: CERTAIN DEFINITIONS:
--------------------------------
"Trigger Date" shall mean, as determined by the Company, in connection with a
Change of Control, the earliest of the following dates: (i) the date of the
definitive documentation for such event; (ii) the date the Board of Directors
recommends that the stockholders tender their shares into a tender or exchange
offer that would result in a Change in Control or (iii) if none of the foregoing
has yet occurred, the Initiation Date.
"Initiation Date" shall mean, in connection with any Change of Control, (i) the
date that is the later of the date of shareholder or regulatory approval, if
such approvals are required, (ii) in connection with a tender or exchange offer,
the date that the minimum tender condition and all other material conditions to
such offer have been satisfied or (iii) if none of the foregoing has yet
occurred, the occurrence of a Change of Control.
SECTION 2: CHANGE OF CONTROL PURSUANT TO A MERGER OR ACQUISITION
-----------------------------------------------------------------
In the event of a Change of Control as a result of a merger or acquisition of
the Company, the following terms shall have the meanings set forth below:
"Acquiror" shall mean the third-party that has entered into such definitive
documentation with the Company or that has commenced such a tender or exchange
offer
"Acquiror's Share Price" shall mean the average of the Acquiror's closing stock
prices for the 10 trading day period immediately preceding the Initiation Date.
"Company Stock Price", for purposes of this Section 2, shall mean the average of
the Company's closing stock prices for the 10 trading day period immediately
preceding the Initiation Date.
In the event of a Change of Control as a result of a merger or acquisition of
the Company, the computation of the value of the Warrant shall use the
Black-Scholes calculation methods using the following assumptions:
1) Volatility of the closing sales price of the Common Stock for the
260-trading day period ending on the Trigger Date as reported by
Bloomberg;
2) Dividend Yield of 0.00%;
3) Interest Rate of 5.50%;
4) Exercise price will be the Exercise Price as adjusted and then in
effect for the Warrant at the time of the Trigger Date;
5) Term of the Warrant will be the remaining term of the Warrant from
the Trigger Date to the stated expiration date of the Warrant; and
6) The underlying security price for purposes of the Black-Scholes
model will be calculated as follows:
a) In the event of an "all cash" deal, the cash per share offered
to holders of the Company's Common Stock by the Acquiror;
b) In the event of an "all stock" deal:
x) in the event of a fixed exchange ratio transaction,
the price per share of the Company's Common Stock
arrived at by multiplying the Acquiror's Stock Price by
the number of Acquiror's shares being offered for 1
share of the Company's Common Stock;
y) in the event of a fixed value transaction, the value
offered by the Acquiror for 1 share of the Company's
Common Stock.
c) In the event of a transaction contemplating various forms of
consideration for each share of the Company's Common Stock, the
cash portion, if any, shall be valued as per paragraph a) above;
the stock portion shall be valued as per paragraph b) above, and
any other forms of consideration shall be valued by the Company
in good faith, without applying any discounts to such
consideration; provided, that in the event the Company's
stockholders are offered a choice of consideration, the value
offered per share shall be deemed the aggregate value of all
consideration offered for all of the outstanding shares of the
Company's Common Stock, divided by the total number of
outstanding shares of the Company's Common Stock.
SECTION 3: OTHER CHANGE OF CONTROL EVENTS
------------------------------------------
In all other Change of Control events, the computation of the option value of
each Warrant shall use the Black-Scholes calculation methods using the following
assumptions:
1) Volatility of the closing sales price of the Common Stock for the
260-trading day period ending on the Trigger Date as reported by
Bloomberg;
2) Dividend Yield of 0.00%;
3) Interest Rate of 5.50%;
4) Exercise price will be the Exercise Price as adjusted and then in
effect for the Warrant at the time of the Change of Control Event ;
5) Term of the Warrant will be the remaining term of the Warrant from
the Change in Control Event Date to the stated expiration date of the
Warrant; and
6) The underlying security price for purposes of the Black-Scholes
model will be calculated using the average of the closing market price
of the Company's Common Stock for the ten (10) trading days commencing
immediately after the date of the Change in Control event (for
purposes of this Section 3, "Company Stock Price").
SECTION 4: EXERCISABILITY; FORM OF PAYMENT
------------------------------------------
The holder can exercise the Exchange Right at any time during the ten (10)
business days following the Initiation Date and the Company shall provide
written notice to the holder immediately upon occurrence of the Initiation Date.
In the event the Company elects to exchange the Warrant for shares of Common
Stock of the Company pursuant to Section 12(b) thereof, the holder will receive
that number of shares of Common Stock arrived at by dividing the value of the
Warrant, as
determined above, by the Company Stock Price, determined in accordance with
Section 2 or Section 3, as applicable.
SECTION 5: GENERAL
------------------
Upon a calculation of the value of the Warrant based on the Black-Scholes
computations above, such value will not be discounted in any way. If the holder
disputes the valuation of the Warrant, the Company and the holder will choose a
mutually agreeable investment banking or appraisal firm to compute the valuation
of the Warrant using the guidelines above, and such valuation shall be final.
The fees and expenses of such firm shall be borne equally by the Company and the
holder.