PREEMPTIVE RIGHTS AGREEMENT
THIS PREEMPTIVE RIGHTS AGREEMENT is made as of this ___ day of October, 2001 by
and among Evolve Software, Inc., a Delaware corporation (the "COMPANY"), and the
entities listed on the signature pages hereto (the "STOCKHOLDERS").
Recitals
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A. The Company and the Stockholders and certain other investors have
entered into a Series A Preferred Stock Purchase Agreement dated September 23,
2001 (the "PURCHASE AGREEMENT"), pursuant to which the Company has agreed to
sell, and the Stockholders have agreed to purchase up to an aggregate of
1,400,000 shares of Series A Preferred Stock of the Company (the "PREFERRED
STOCK"), warrants (the "PREFERRED STOCK WARRANTS") to purchase up to an
additional 1,400,000 shares of Series A Preferred Stock and warrants (the
"COMMON STOCK WARRANTS") up to 7,000,000 shares of Common Stock of the Company.
B. In order to induce the Stockholders to enter into the Purchase
Agreement, the Company wishes to grant to the Stockholders the rights set forth
in this Agreement.
Agreement
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NOW, THEREFORE, the parties hereby agree as follows:
1. Preemptive Rights.
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The Company hereby grants to each Stockholder a right (the "PREEMPTIVE
RIGHT") to purchase all or any part of its Pro Rata Share of any New Securities
(as hereinafter defined) that the Company may, from time to time, propose to
sell and issue. For purposes of this Section 2, "PRO RATA SHARE" shall mean the
ratio of (x) the sum of the number of shares of Common Stock issuable upon the
conversion of all shares of Preferred Stock held by such Stockholder plus the
number of shares of Common Stock issuable upon conversion of Preferred Stock
issuable or issued upon conversion of Preferred Stock Warrants held by such
Stockholder plus the number of shares of Common Stock issuable or issued upon
the exercise of Common Stock Warrants held by such Stockholder, to (y) the sum
of the total number of shares of Common Stock then outstanding plus the total
number of shares of Common Stock issuable upon the conversion or exchange of the
total number of shares of Preferred Stock and other securities convertible into
or exchangeable or exercisable for Common Stock then outstanding. This
Preemptive Right shall be subject to the following provisions:
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a. "NEW SECURITIES" shall mean any capital stock of the Company,
whether or not authorized on the date hereof; provided, however, that "NEW
SECURITIES" shall not include the following:
(i) shares of capital stock of the Company issuable upon
conversion or exercise of any currently outstanding securities or any New
Securities issued in accordance with this Agreement;
(ii) securities issuable pursuant the Purchase Agreement or upon
the exercise or conversion of any security issued pursuant to the Purchase
Agreement;
(iii) securities issued 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;
(iv) securities issued as a dividend or distribution on Preferred
Stock or in connection with any stock split, stock dividend or similar
transaction;
(v) securities issued upon exercise or conversion of warrants to
purchase shares of Common Stock issued 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 the issuance of such warrants is not principally for the purpose
of raising additional equity capital for the Corporation; provided however that
the number of shares of New Securities so excluded in any fiscal year of the
Company shall not exceed 0.5% of the number of shares of Common Stock of the
Company outstanding and the number of New Securities so excluded in the
aggregate shall not exceed 1.5% of the number of shares of Common Stock
outstanding, in each case determined as of the date of issuance of such New
Securities, after giving effect to the conversion of all outstanding shares
Series A Preferred Stock and other securities convertible into Common Stock
unless such grants are approved by a majority of the present and voting
directors of the Company elected by the holders of Series A Preferred Stock;
(vi) securities issued to customers, vendors or joint venture
partners or in connection with other strategic alliances approved by the Board
of Directors which involve the grant of licenses or localization, distribution,
OEM, bundling, manufacturing or resale rights with respect to the Company's
products or technology; provided that the aggregate number of shares of Common
so issued subsequent to the date hereof shall not exceed 2,000,000 shares (as
adjusted for stock splits, stock dividends and similar events);
(vii) securities issued in a firm-commitment underwritten public
offering pursuant to a registration statement filed under the Securities Act of
1933, as amended, provided that the Company shall have used its best efforts to
make a Pro Rata Share of such securities available to each Stockholder;
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(viii) securities issued pursuant to business combination
transactions or acquisition of technology or other assets of other business; and
(ix) securities issued by way of dividend or other distribution on
shares excluded from the definition of New Securities by the foregoing clauses
(i), (ii), (iii), (iv), (v), (vi) (vii) and (viii), 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 outstanding capital stock in proportion to the number of shares held.
b. Notice. In the event that the Company proposes to undertake an
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issuance of New Securities, it shall give each Stockholder written notice (the
"NOTICE") of its intention, describing the type of New Securities, the price,
and the material t
terms and conditions upon which the Company proposes to issue the same to
any person. Such Stockholder shall have fifteen (15) business days after
issuance of such notice to agree to purchase all or any portion of its pro rata
share of such New Securities at the price and upon the terms specified in the
notice (which terms shall be no less favorable than those offered to the third
party purchaser) by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
c. Sale by Company. In the event that any New Securities subject to
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the Preemptive Right are not purchased by a Stockholder within the period
specified above, the Company shall have one hundred twenty (120) days thereafter
to sell (or enter into an agreement pursuant to which the sale of New Securities
that had been subject to the Preemptive Right shall be closed, if at all, within
sixty (60) days from the date of said agreement) the New Securities with respect
to which the rights of the Stockholders were not exercised at a price and upon
terms and conditions, including manner of payment, no more favorable to the
purchasers thereof than specified in the Notice. In the event the Company has
not sold all offered New Securities within such one hundred twenty (120) day
period (or sold and issued New Securities in accordance with the foregoing
within sixty (60) days from the date of such agreement) the Company shall not
thereafter issue or sell any New Securities, without first offering a portion of
such New Securities to the Stockholders in the manner provided above.
d. Termination. Each Stockholder's rights pursuant to this Section 2
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shall terminate and be without further effect upon such time as such Stockholder
(together with its Affiliates) holds less than 10% of the total number of shares
of Common Stock of the Company, after giving effect to the conversion of all
shares of Preferred Stock and other securities of the Company convertible into
or exchangeable for Common Stock.
2. Notices. Any notice required or permitted to be given to a party
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pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon personal delivery or on the first business day after deposit with
a guaranteed overnight messenger service or on the fifth business day after
deposit in the U.S. mail, registered or certified, with postage prepaid and
properly addressed to the party to be notified or, if by facsimile, on the first
business day after receipt of the
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appropriate confirmation of receipt. Mailed notices shall be addressed, and
sent, (i) if to the Company, at 0000 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxx,
Xxxxxxxxxx 00000, attention: General Counsel and (ii) if to a Purchaser, at such
Purchaser's address as reflected on the signature pages hereto.
3. Severability. If for any reason any provision of this Agreement
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shall be determined to be invalid or inoperative, the validity and effect of the
other provisions hereof shall not be effected thereby, provided that not such
severability shall be effective if it causes a material detriment to any party.
4. Applicable Law. This Agreement shall be governed by and construed
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in accordance with the laws of the State of Delaware applicable to contracts
between Delaware residents entered into and to be performed entirely within the
State of Delaware.
5. Amendment. Any provision of this Agreement may be amended, waived or
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modified only upon the written consent of the (i) Company and (ii) the party to
be charged with such amendment, waiver or modification.
6. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
parts, and all of which together shall constitute one instrument.
7. Entire Agreement. This Agreement constitutes the full and entire
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understanding and agreement between the parties regarding the subject matter
hereof.
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IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective
upon the date set forth above.
"COMPANY"
EVOLVE SOFTWARE, INC.
By:_____________________________________
Xxxx X. Xxxxxxxxx, President
"PURCHASER"
Signature:______________________________
Name of Signer:_______________________
Name of Purchaser:____________________
Address:________________________________
SIGNATURE PAGE TO PREEMPTIVE RIGHTS AGREEMENT
