SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
OCTOBER 9, 2001
Date of Report
(Date of earliest event reported)
EVOLVE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-31155 94-3219745
(Commission File No.) (IRS Employer Identification Number)
1400 65TH STREET, SUITE 100
EMERYVILLE, CALIFORNIA 94608
(Address of Principal Executive Offices)
510-428-6000
(Registrant's Telephone Number, Including Area Code)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
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The events described under Item 5 of this Current Report on Form 8-K may be
deemed a change of control within the meaning of Item 1 of Form 8-K.
ITEM 5. OTHER EVENTS
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On October 9, 2001, Evolve Software, Inc., a Delaware corporation (the
"Company") completed a private placement of certain securities pursuant to the
Series A Preferred Stock Purchase Agreement dated as of September 23, 2001 (the
"Purchase Agreement") attached hereto as Exhibit 10.1, by and among the Company,
Warburg Pincus Private Equity VIII, L.P. ("Warburg") and certain other investors
named in the Schedule of Purchasers to the Purchase Agreement (collectively, the
"Investors"). The execution of the Purchase Agreement was previously reported
in the Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 27, 2001, as amended on October 3, 2001.
SALE OF SERIES A PREFERRED STOCK. Pursuant to the Purchase Agreement,
(1) the Company issued and sold to the Investors an aggregate of 1,300,000
shares of the Company's Series A Preferred Stock (the "Series A Preferred
Stock") at a price of $10 per share, or an aggregate of $13,000,000 in cash; (2)
the Company issued to the Investors 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 in cash, which warrants are exercisable for up to one year under certain
circumstances, in the forms attached hereto as Exhibit 10.2 ("Preferred Stock
Warrants"); (3) the Company issued to the Investors warrants to purchase up to
6,500,000 shares of Common Stock at a price of $1.00 per share in the form
attached hereto as Exhibit 10.3 ("Common Stock Warrants") and (4) the Company
agreed to grant to the Investors 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. 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, subject to certain adjustments as set forth in the Certificate
of Designation of Series A Preferred Stock of the Company attached hereto as
Exhibit 10.4 (the "Certificate of Designation").
The number of shares of Common Stock into which the Series A Preferred
Stock is convertible will increase at the rate of 8.00% per year from the date
of issue. The Certificate of Designation also provides that the Series A
Preferred Stock has dividend, liquidation, conversion and voting rights in
preference to the Common Stock.
INTEREST OF INVESTOR. Of the aggregate of 1,300,000 shares of Series A
Preferred Stock issued and sold by the Company, 1,000,000 shares were purchased
by Warburg for a purchase price of $10,000,000 in cash. Warburg also acquired
(1) Preferred Stock Warrants to purchase additional 1,000,000 shares of
Preferred Stock, (2) a Common Stock Warrant to purchase up to 5,000,000 shares
of Common Stock and (3) the right to acquire additional Common Stock Warrants to
purchase up to 5,000,000 Stock upon exercise of the Preferred Stock Warrants
held by Warburg. 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 of the Company as of
September 27, 2001 (without taking into account the shares of Common Stock
issuable to the other Investors). Based on information set forth in Warburg's
Schedule 13-D report dated October 3, 2001, the aggregate purchase price for the
shares of Series A Preferred stock acquired by Warburg was paid out of the
working capital of Warburg.
CONVERSION OF SERIES A PREFERRED STOCK. Pursuant to the Certificate of
Designation, the Company may cause all of the shares of Series A Preferred Stock
to be automatically converted into Common Stock at any time after the fifth
anniversary of the date of initial issuance of such shares, provided that the
Company may only cause such automatic conversion if the closing price per share
of Common Stock for thirty (30) consecutive trading days ending within ten (10)
days of the date on which notice of such automatic conversion is given to the
holders of the Series A Preferred Stock shall have been at least $5.00, as
adjusted for any stock splits, stock dividends and similar events. All shares of
Series A Preferred Stock will also automatically convert into Common Stock at
the election of the holders of a majority of the outstanding shares of Series A
Preferred Stock. The Series A Preferred Stock may also be converted at any time
at the election of each holder.
VOTING. As set forth in the Certificate of Designation, holders of Series A
Preferred Stock are entitled to vote such stock on an as converted basis
(without giving effect to certain adjustments in the conversion ratio subsequent
to the Closing Date), together with the holders of Common Stock as a single
class with respect to all matters, except under specified circumstances
described below under "Board Representation" with respect to the election of
directors and under "Change of Control" with respect to certain Change of
Control transactions. In addition, the Company will not, without the affirmative
vote of the holders of a majority of the outstanding shares of Series A
Preferred Stock, (i) amend or repeal the provisions of the Certificate of
Designation; (ii) authorize or issue any shares of a class or series senior to
the Series A Preferred Stock or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock senior to the Series A Preferred Stock; (iii)
issue any bonds, debentures or notes or incur similar debt obligations, other
than trade debt in the ordinary course of business; (iv) pay any dividend on any
shares of stock junior to the Series A Preferred Stock or repurchase or redeem
any such shares of stock junior to the Series A Preferred Stock, except for
repurchases of unvested shares of stock at cost from employees, directors,
consultants and other service providers; (v) repurchase any outstanding shares
of stock, except for repurchase of shares held by employees pursuant to
repurchase agreements approved by the board of directors and redemption of
shares of Series A Preferred Stock; (vi) amend the bylaws to increase the
authorized number of directors of the Company to more than eight; or (vii)
authorize or issue any shares of any class or series of stock on parity with the
Series A Preferred Stock or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of stock on parity with the Series A Preferred Stock, provided that such
restriction shall no longer be applicable if Preferred Stock Warrants are not
exercised to purchase 500,000 or more shares of Series A Preferred Stock prior
to the six-month anniversary of the date of first issuance of Series A Preferred
Stock.
BOARD REPRESENTATION. The terms of the Series A Preferred Stock, as set
forth in the Certificate of Designation, provide for holders of the Series A
Preferred Stock to elect three members to the Board, voting separately as a
class. Except as described in the next sentence, this provision remains in
effect for so long as at least 75% of the shares of Series A Preferred Stock
issued by the Company outstanding. If less than 75% but at least 50% of the
shares of Series A Preferred Stock issued by the Company remain outstanding, or
if Warburg does not exercise Preferred Stock Warrants to purchase at least
500,000 shares of Series A Preferred Stock prior to expiration of such warrants,
the number of directors to be elected by holders of Series A Preferred Stock
voting separately shall be reduced to two. If less than 50% but at least 25% of
the shares of Series A Preferred Stock issued by the Company remain outstanding,
the number of directors to be elected by holders of the Series A Preferred Stock
voting separately shall be reduced to one. If less than 25% of the shares of
Series A Preferred Stock issued by the Company remain outstanding, the holders
of Series A Preferred Stock will no longer have the right to elect any members
of the board of directors voting separately. All other directors will be
elected by the holders of the Common Stock and the Series A Preferred Stock
voting as a single class. The initial designees of the holders of Series A
Preferred Stock, Cary Davis, Nancy Martin and Gayle Crowell, were appointed to
the Board effective as of the closing of the initial sale of Series A Preferred
Stock (the "Closing"). Mr. Davis and Dr. Martin are members and managing
directors of Warburg, Pincus LLC and are general partners of Warburg, Pincus &
Co. Ms. Crowell is a full-time adviser of Warburg, Pincus LLC.
CHANGE OF CONTROL. Under the Certificate of Designation, the Company may
not consummate any Change of Control Transaction, as defined the Certificate of
Designation, without the affirmative vote of holders of a majority of the
outstanding shares of Series A Preferred Stock, unless such transaction would
result in aggregate consideration paid in respect of such Series A Preferred
Stock equal to the original purchase price thereof, plus an internal rate of
return equal to at least 50%. In addition, in the event of any Change of
Control Transaction, holders of Common Stock Warrants will have the right to
deliver such warrants to the Company in exchange for payments equal to the
Black-Scholes value of such warrants at the time of such transaction, payable in
cash or, subject to certain conditions, Common Stock of the Company.
PREEMPTIVE RIGHTS. Effective as of the Closing under the Purchase Agreement
and subject to certain exceptions, the Company has granted to the Investors
rights to maintain their percentage ownership in the Company in the event of
future equity issuances by the Company. A copy of the form of Preemptive Rights
Agreement providing for such rights is attached as Exhibit 10.5 hereto.
REGISTRATION OF SHARES OF COMMON STOCK FOR RESALE. Effective as of the
Closing under the Purchase Agreement, subject to certain conditions, the Company
has agreed to prepare and file with the SEC, upon request of the holders of
Series A Preferred Stock after June 1, 2002, registration statements to enable
the resale of the shares of Common Stock issued or issuable upon conversion of
the Series A Preferred Stock (including Series A Preferred Stock issuable upon
exercise of the Preferred Stock Warrants), and upon exercise or conversion of
the Common Stock Warrants. A copy of the form of Registration Rights Agreement
providing for such rights is attached as Exhibit 10.6 hereto.
VOTING AGREEMENT. Warburg has entered into voting agreements (the "Voting
Agreements") with certain holders of shares of Common Stock and Series A
Preferred Stock of the Company and rights to purchase such shares (the "Voting
Agreement Signatories"). Pursuant to the Voting Agreements, the Voting Agreement
Signatories have agreed, among other things, to vote all shares of capital stock
of the Company they hold in favor of amending the Company's Amended and Restated
Certificate of Incorporation (1) to increase the number of authorized shares of
Common Stock of the Company by 90,000,000 shares, to an aggregate of 200,000,000
shares, and (2) to permit holders of Series A Preferred Stock to act by written
consent in lieu of a meeting of stockholders. The aggregate number of shares of
Common Stock of the Company held by all Voting Agreement Signatories (including
shares that may be acquired by such Voting Agreement Signatories within 60 days
of the date hereof) is 16,194,296, or 39.65% of all outstanding shares of Common
Stock of the Company as of September 27, 2001. The Voting Agreements expire on
upon the approval by the Company's stockholders of each of the matters described
therein. The form of such Voting Agreements is set forth as Exhibit 10.7 hereto.
The foregoing summary of the Purchase Agreement and the agreements and
transactions contemplated thereby is qualified in its entirety by reference to
the Purchase Agreement and the forms of Preferred Stock Warrants, Common Stock
Warrants, Certificate of Designation, Preemptive Rights Agreement, Registration
Rights Agreement and Voting Agreements, copies of which are set forth as
Exhibits 10.1 through 10.7 hereto and are incorporated herein by reference.
PRESS RELEASE. On October 11, 2001, the Company issued a press release
announcing the Closing. A copy of the press release is attached hereto as
Exhibit 99.1 and is incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits
10.1 Series A Preferred Stock Purchase Agreement, dated as of
September 23, 2001, by and among the Company, the Investors
and certain other persons.*
10.2 Form of Form A Subscription Warrant and Form of Form B
Subscription Warrant.*
10.3 Form of Warrant to Purchase Shares of Common Stock.*
10.4 Certificate of Designation of Series A Preferred Stock of
the Company.*
10.5 Preemptive Rights Agreement among the Company and the
Investors.*
10.6 Registration Rights Agreement among the Company, the
Investors and certain other stockholders in the Company.
10.7 Form of Voting Agreement between Warburg and certain
stockholders of the Company.
99.1 Press Release dated October 11, 2001.
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(*) Filed as an Exhibit to the Company's amended Current Report
on Form 8-K/A filed on October 3, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 24, 2001 EVOLVE SOFTWARE, INC.
By: /s/ Kenneth J. Bozzini
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Kenneth J. Bozzini
Chief Financial Officer, Vice President
of Finance
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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10.1 Series A Preferred Stock Purchase Agreement, dated as of
September 23, 2001, by and among the Company, the Investors and
certain other persons.*
10.2 Form of Form A Subscription Warrant and Form of Form B
Subscription Warrant.*
10.3 Form of Warrant to Purchase Shares of Common Stock.*
10.4 Form of Certificate of Designation of Series A Preferred Stock of
the Company.*
10.5 Form of Preemptive Rights Agreement among the Company and the
Investors.*
10.6 Registration Rights Agreement among the Company, the Investors
and certain other stockholders in the Company.
10.7 Form of Voting Agreement between Warburg and certain stockholders
of the Company.
99.1 Press Release dated October 11, 2001.
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(*) Filed as an Exhibit to the Company's amended Current Report on Form 8-K/A
filed on October 3, 2001.
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