SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE

SECURITIES EXCHANGE ACT OF 1934

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Preliminary Proxy Statement

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Definitive Proxy Statement

Definitive Additional Materials

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Soliciting Material Pursuant to Section 240.14a-12

EVOLVE SOFTWARE, INC.

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(2)

Aggregate number of securities to which transaction applies:

(3)

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EVOLVE SOFTWARE, INC.

150 SPEAR STREET, 11TH FLOOR

SAN FRANCISCO, CA 94105

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD DECEMBER 17, 2002

To our stockholders:

          Notice is hereby given that the annual meeting of stockholders of Evolve Software, Inc., a Delaware corporation, will be held on Tuesday, December 17, 2002 at 10:00 a.m.  local time, at the principal executive offices of the Company located at 150 Spear Street, 11th Floor, San Francisco, CA 94105, for the following purposes:

1.

To elect three Class II directors to serve a term of three years or until their successors are duly elected and qualified.  Our board of directors intends to present the following nominees for election as directors: John R.  Oltman, Paul Rochester and Barry Taylor;

2.

To approve our amended and restated certificate of incorporation to effect a reverse stock split of our common stock in a ratio of one-for-twenty, one-for-thirty and one-for-forty; the final ratio to be determined in the sole discretion of the board of directors, and to decrease the authorized number of shares of our common stock from 200 million shares to 100 million shares;

3.

To ratify our Certificate of Designation of Series B Preferred Stock;

4.

To ratify the appointment of PricewaterhouseCoopers LLP as our independent public accountants for the fiscal year ending June 30, 2003; and

5.

To transact such other business as may properly come before the meeting or any adjournment thereof.

               The foregoing items of business are more fully described in the proxy statement accompanying this notice.

               Only holders of record of our common stock, Series A Preferred Stock and Series B Preferred Stock at the close of business on October 21, 2002 are entitled to receive notice of and to vote at the meeting or any adjournment of the meeting.  For ten days prior to the meeting, any stockholder can examine a complete list of the registered stockholders entitled to vote at the meeting for any purpose germane to the meeting during ordinary business hours at our offices at 150 Spear Street, 11th Floor, San Francisco, CA 94105.

               All stockholders are cordially invited to attend the meeting in person.  However, to assure your representation at the meeting, you are urged to mark, sign, date and return the enclosed proxy as promptly as possible in the postage prepaid envelope enclosed for that purpose.  Any stockholder of record attending the meeting may vote in person even if he or she returned a proxy.

Arthur T.  Taylor

Chief Financial Officer and Secretary

San Francisco, CA

November __, 2002

ANNUAL MEETING OF STOCKHOLDERS

OF

EVOLVE SOFTWARE, INC.

PROXY STATEMENT

Information Concerning Solicitation and Voting

               The enclosed proxy is solicited on behalf of Evolve Software, Inc., a Delaware corporation ("we," "us" or the "Company"), for the annual meeting of stockholders to be held on Tuesday, December 17, 2002 at 10:00 a.m.  local time at our principal executive offices, located at 150 Spear Street, 11th Floor, San Francisco, CA 94105, or any adjournment thereof, for the purposes set forth herein and in the accompanying notice of annual meeting of stockholders.  Our telephone number is (415) 229-3700.  Any questions regarding the contents of this statement may be directed to Arthur T.  Taylor, Chief Financial Officer and Secretary of the Company.  These proxy materials will be first mailed on or about November __, 2002.

Voting Securities

               Only holders of record of our common stock, Series A Preferred Stock and Series B Preferred Stock as of the close of business on October 21, 2002 (the "record date") will be entitled to vote at the meeting or any adjournment of the meeting.  As of the record date, there were 46,515,611 shares of common stock, 1,875,000 shares of Series A Preferred Stock and 750,000 shares of Series B Preferred Stock issued and outstanding.  Stockholders may vote in person or by proxy.  Each share of common stock issued and outstanding on the record date is entitled to one vote on the matters presented herein.  Each share of Series A Preferred Stock issued and outstanding on the record date is entitled to 20 votes on the matters presented herein.  Each share of Series B Preferred Stock is entitled to approximately 52.63 votes on the matters presented herein, other than on proposal 3, for which the Series B Preferred Stock is not entitled to a vote.  Only holders of our Series A Preferred Stock may vote on our nominee for Series A Director, Barry Taylor. There is no cumulative voting in the election of directors.

Solicitation of Proxies

               We will pay the cost of soliciting proxies.  In addition to soliciting stockholders by mail and through our regular employees, we will request banks, brokers and other custodians, nominees and fiduciaries to solicit their customers who have our stock registered in street name, and will reimburse such banks, brokers and other custodians, nominees and fiduciaries for their reasonable, out-of-pocket costs.  Our officers, directors and others may solicit proxies personally or by telephone, facsimile or electronic mail, without additional compensation.  We have engaged MacKenzie Partners, a professional solicitation firm, to assist in the solicitation of proxies at a cost of approximately $3,000, plus reasonable expenses.

Voting of Proxies

               All valid proxies received prior to the meeting will be voted at the meeting.  All shares represented by a proxy will be voted in accordance with the stockholder's specification on the proxy.  If the proxy is signed, but no choice has been indicated, your proxy will be voted "FOR" the matters set forth on the proxy.  Your shares will be voted as the proxy holders may determine in their sole discretion with respect to any matter that properly comes before the meeting that are not described in this proxy statement.  A stockholder giving a proxy has the power to revoke such proxy at any time prior to the time it is voted by:

• delivering to our Secretary a written instrument revoking the earlier submitted proxy;

• delivering to our Secretary a valid proxy with a later date; or

• attending the meeting and voting in person.

Quorum, Abstentions and Broker Non-Votes

               The presence in person or represented by proxy of a majority of the voting power of our common stock, Series A Preferred Stock and Series B Preferred Stock issued and outstanding on the record date, voting together as a single class, is necessary to constitute a quorum for the transaction of business at the meeting.  Absent controlling authority in the State of Delaware to the contrary, we will count both abstentions and broker non-votes for purposes of determining whether a quorum exists for transacting business at the meeting on all matters on which a vote is taken.

               Brokers and other institutions that are members of the New York Stock Exchange who are the record holders of our stock, but whose customers are the beneficial holders of our stock, may vote on all of the proposals without an instruction from the beneficial holder of our stock as to how to vote the shares, provided that such brokers or other institutions deliver copies of the proxy statement and annual report to stockholders to such beneficial holders within 15 days prior to the meeting.  In the event we do receive a broker non-vote with respect to a proposal at the meeting, such broker non-vote will have no effect on the outcome of the proposal, other than on proposal 2, for which it will have the effect of a vote against the proposal.

               Election of one of the Class II directors will require a plurality of the votes cast by the Series A Preferred Stock, and election of the other two Class II directors will require a plurality of the votes cast by the Series A Preferred Stock, Series B Preferred Stock and common stock voting together as a single class.  If you indicate "WITHHOLD AUTHORITY TO VOTE" for any nominee on your proxy card, your vote will not count either for or against the election of the nominee.

               Approval of Proposal 2 requires the affirmative vote of a majority of the outstanding common stock voting as a seperate class, a majority of the outstanding voting power of the Series A Preferred Stock and Series B Preferred Stock, voting together as a single class and a majority of the Series A Preferred Stock, Series B Preferred Stock and common stock, voting together as a single class.

               Approval of Proposal 3 requires the affirmative vote of a majority of the votes represented at the meeting with respect to that proposal by the common stock and Series A Preferred Stock, voting together as a single class.

               Approval of Proposal 4 requires the affirmative vote of a majority of the votes represented at the meeting with respect to that proposal.  If you abstain from voting with respect to any of these proposals, your abstention will be treated as a vote "AGAINST" that proposal.

Stock Ownership of Certain Beneficial Owners and Management

          The table below sets forth certain information as of the record date with respect to the beneficial ownership of our common stock by:

• each of our directors and director nominees;

• each of our executive officers included in the Summary Compensation Table beginning on page 16 of this proxy statement (the "named executive officers");

• all persons known to us to beneficially own more than 5% of our common stock; and

• all directors and executive officers as a group.

          We have relied exclusively upon information provided to us by our directors and executive officers and copies of documents sent to us that have been filed with the Securities and Exchange Commission by others for purposes of determining the number of shares each person beneficially owns.  Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission and generally includes those persons who have voting or investment power with respect to the securities.  Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them.  Percentage ownership in the table below is based on 46,515,611 shares of common stock outstanding on the record date.  Shares of our stock subject to options or warrants that are exercisable within 60 days of the record date and shares of our common stock issuable upon conversion of our Series A Preferred Stock and Series B Preferred Stock that are issued and outstanding on the record date are also deemed outstanding for purposes of calculating the percentage ownership of that person, and if applicable, the percentage ownership of executive officers and directors as a group, but are not treated as outstanding for the purpose of calculating the percentage ownership of any other person.  Unless otherwise indicated, the address for each stockholder listed in the table below is c/o Evolve Software, Inc., 150 Spear Street, 11th Floor, San Francisco, CA 94105. 

_______________

*

Represents less than 1%.

(1)

Includes: (a) shares of common stock issuable upon conversion of 1,500,000 shares of Series A Preferred Stock held by Warburg Pincus Private Equity VIII, L.P.  as of the date of this proxy statement; (b) shares of common stock issuable upon conversion of 500,000 shares of Series B Preferred Stock held by Warburg Pincus Private Equity VIII, L.P.  as of the date of this proxy statement; (c) 7,500,000 shares of common stock issuable upon exercise of warrants; and (d) 3,298 shares of common stock held by a member and managing director of Warburg Pincus LLC.  Warburg Pincus & Co.  is the general partner of Warburg Pincus Private Equity VIII, L.P.  Warburg Pincus Private Equity VIII, L.P.  is managed by Warburg Pincus LLC.  Lionel I. Pincus is the managing partner of Warburg Pincus & Co.  and may be deemed to control both Warburg Pincus & Co.  and Warburg Pincus Private Equity VIII, L.P.

(2)

Includes: (a) shares of common stock issuable upon conversion of 134,381 shares of Series B Preferred Stock held by Sierra Ventures VI, L.P.  as of the date of this proxy statement; and (b) shares of common stock issuable upon conversion of 13,399 shares of Series B Preferred Stock held by SV Associates VI, L.P.  as of the date of this proxy statement.

(3)

Includes: (a) shares of common stock issuable upon conversion of 136,400 shares of Series A Preferred Stock and 47,485 shares of Series B Preferred Stock held by Sierra Ventures VII, L.P.  as of the date of this proxy statement; (b) shares of common stock issuable upon conversion of 13,600 shares of Series A Preferred Stock and 4,735 shares of Series B Preferred Stock held by Sierra Ventures Associates VII, LLC as of the date of this proxy statement; (c) 682,000 shares of common stock issuable upon exercise of warrants held by Sierra Ventures VII, L.P.; and (d) 68,000 shares of common stock issuable upon exercise of warrants held by Sierra Ventures Associates VII, LLC.

(4)

Includes (a) shares of common stock issuable upon conversion of 52,335, 2,849, 11,493, and 900 shares of Series A Preferred Stock held, respectively, by Index Ventures I (Delaware) L.P., Index Venture I Parallel Entrepreneur Fund (Jersey) L.P., Index Ventures I GmbH & Co.  Kg and Index Ventures Management SA.; (b) 261,675, 14,245, 57,465 and 4,500 shares of common stock issuable upon exercise of warrants held, respectively, by Index Ventures I (Delaware) L.P., Index Venture I Parallel Entrepreneur Fund (Jersey) L.P., Index Ventures I GmbH & Co.  Kg and Index Ventures Management SA.

(5)

Includes: (a) those shares identified in footnote (1) above, other than those shares included in paragraph (d) thereof; and (b) 82,500 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.  Mr.  Davis is a general partner of Warburg Pincus & Co. and a member of Warburg Pincus LLC, affiliates of Warburg Pincus Private Equity VIII, L.P.  Mr.  Davis disclaims beneficial ownership of the shares held by Warburg Pincus Private Equity VIII, L.P., except to the extent of his pecuniary interest therein.

(6)

Includes: (a) those shares identified in footnote (1) above, other than those shares included in paragraph (d) thereof; and (b) 82,500 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.  Dr.  Martin is a general partner of Warburg Pincus & Co.  and a member of Warburg Pincus LLC, affiliates of Warburg Pincus Private Equity VIII, L.P.  Dr.  Martin disclaims beneficial ownership of the shares held by Warburg Pincus Private Equity VIII, L.P., except to the extent of her pecuniary interest therein.

(7)

(8)

Includes: (a) those shares identified in footnotes (2) and (3) above; (b) 82,500 shares issuable within 60 days from the date of this proxy statement upon the exercise of options; and (c) 36,549 shares of common stock subject to our right of repurchase, which right lapses over time.  Mr.  Drazan is a general partner of  SV Associates VI, L.P., which is the general partner of Sierra Ventures VI, L.P.  Mr.  Drazan is also a manager of Sierra Ventures Associates VII, LLC, which is the general partner of Sierra Ventures VII, L.P.  Mr.  Drazan disclaims beneficial ownership of the shares held by Sierra Ventures VI, L.P., SV Associates VI, L.P., Sierra Ventures VII, L.P.  and Sierra Ventures Associates VII, LLC, except to the extent of his pecuniary interest therein.

(9)

Includes 1,002,500 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.

(10)

Includes 375,000 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.

(11)

Includes: (a) 124,167 shares issuable within 60 days from the date of this proxy statement upon the exercise of options; and (b) 357,645 shares owned by JRO Consulting, Inc., of which Mr.  Oltman is the President.

(12)

Includes 327,683 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.

(13)

 Includes 275,000 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.

(14)

Includes 250,000 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.

(15)

Includes: (a) 127,500 shares issuable within 60 days from the date of this proxy statement upon the exercise of options; and (b) 31,250 shares of common stock subject to our right of repurchase, which right lapses over time.

(16)

Includes 125,000 shares issuable within 60 days from the date of this proxy statement upon the exercise of options.

(17)

Includes, without duplicating the shares beneficially owned by Mr.  Davis and Dr.  Martin, the shares beneficially owned and listed in footnotes (5), (6), (8), (9), (11), (13) and (15).

PROPOSAL 1

Election of Directors

          Our certificate of incorporation provides that our board of directors shall be divided into three classes, with each class of directors serving staggered three-year terms.  The term of office of the Class II directors shall extend until the 2002 annual meeting of stockholders, the term of office of the Class III directors shall extend until the 2003 annual meeting of stockholders and the term of office of the Class I directors shall extend until the 2004 annual meeting of stockholders, or until such director's earlier death, resignation or removal or until his or her successor is elected and qualified.  There are currently two directors in Class I and Class III and three directors in Class II.  The Class II directors elected at the meeting will hold office until the 2005 annual meeting of stockholders, or until such director's earlier death, resignation or removal from office.

          Of the three Class II directors to be elected at the meeting, one of the directors is to be elected by the Series A Preferred Stock (the "Series A Director"), and the other two directors are to be elected by holders of common stock, Series A Preferred Stock and Series B Preferred Stock voting together as a single class (the "General Directors").

          Barry Taylor is our nominee for the Series A Director and John R.  Oltman and Paul Rochester are our nominees for the General Directors to be elected at the meeting.  In the event that Messrs.  Taylor, Rochester or Oltman become unavailable or decline to serve as directors at the time of the meeting, the proxy holders will vote the proxies in their discretion for the nominee or nominees who are designated by the board of directors to fill the vacancy.  It is not expected that any of Messrs.  Taylor, Rochester or Oltman will be unavailable to serve on our board of directors.

Vote Required

          The two nominees for General Directors and the one nominee for the Series A Director receiving the highest number of affirmative votes of the shares entitled to be cast for such nominees at the meeting shall be elected as directors.  Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum, but have no other effect.

Nominees and Other Directors

          The following table sets forth the name and age of each of the nominees for our Class II directors and each of our directors whose term of office continues after the meeting, the principal occupation of each during the past five years and the period during which each has served as one of our directors.  There are no family relationships among any of our directors or executive officers.

Name

Principal Occupation

Age

Director
Since

Class II Director Nominees

John R. Oltman

Mr.  Oltman has served on our board of directors since August 1999, and served as Chairman of the Board from November 1999 to October 2001.  Mr.  Oltman has been President of JRO Consulting, Inc.  since January 1995, in which role he serves as director, advisor and investor in leading technology companies and investment firms.  Mr.  Oltman serves on the board of directors of Lante Corporation, a provider of technology consulting services.  Mr.  Oltman received his B.S.  from the University of Illinois in 1967 and an M.B.A.  from Northwestern University's Kellogg School of Management in 1970.

57

1999

Paul Rochester

Mr.  Rochester has served on our board of directors since July 2000.  Mr.  Rochester has been Vice President and General Manager of Professional Services at Sun Microsystems, a worldwide provider of computer systems, software and services, from September 1995 to September 2002.  Mr.  Rochester holds a B.S.  in Applied Science from Queens University in Canada and an M.B.A.  in Marketing and Finance from the University of Ottawa in Canada.

55

2000

Barry Taylor

55

2002

Incumbent Class III Directors Serving for a Term Expiring in 2003

Gayle Crowell

Ms.  Crowell was appointed chairman of our board of directors in October 2001 in connection with the purchase of shares of our Series A Preferred Stock by Warburg Pincus Private Equity VIII, L.P.  She joined Warburg Pincus in May 2001 as a consultant for its Technology Group.  Prior to joining Warburg Pincus, Ms.  Crowell was President, Chief Executive Officer and Chairman of RightPoint, a provider of real-time personalization solutions, from February 1998 until January 2000 until it was acquired by E.piphany.  From 1994 to 1998, Ms.  Crowell was Senior Vice President and General Manager of Worldwide Operations for Mosaix, Inc., a global provider of software and services.  Ms.  Crowell is currently a director of Indus International, Inc., a provider of enterprise asset management and supply chain software for capital-intensive industries.  Ms.  Crowell received her B.S.  from the University of Nevada, Reno.

52

2001

Linda Zecher

Ms.  Zecher has served as our President, Chief Executive Officer and a director since March 2002.  Prior to joining us, Ms.  Zecher was the Vice President of E-Business Applications at Oracle Services Industries, a subsidiary of Oracle Corporation, a supplier of information management software, from October 1996 to March 2002.  Ms.  Zecher received a B.A.  in Earth Sciences from Ohio State University.

49

2002

Incumbent Class I Directors Serving for a Term Expiring in 2004

Cary Davis

Mr.  Davis joined our board of directors in October 2001.  Mr.  Davis has served as a general partner of Warburg Pincus & Co.  and a Member and Managing Director of Warburg Pincus LLC since January 1999, and has been employed at Warburg Pincus LLC since October 1994.  Mr.  Davis is currently a director of Dice Inc., an online recruiting service provider.  Mr.  Davis holds a B.A.  from Yale University and an M.B.A.  from Harvard Business School.

36

2001

Jeffrey M. Drazan 

Mr.  Drazan has served on our board of directors since November 1998.  Mr.  Drazan has been a general partner of Sierra Ventures, a venture capital firm, since 1984.  Mr.  Drazan currently serves on the board of directors of Vina Technologies, Inc., a developer of multiservice broadband access communications equipment.  Mr.  Drazan holds a B.S.  in Engineering from Princeton University and an M.B.A.  from New York University's Graduate School of Business Administration.

44

1998

Board and Committee Meetings

               During the fiscal year ended June 30, 2002, our board of directors held 12 meetings.  We currently have an audit committee and a compensation committee of our board of directors.  We do not have a nominating committee or a committee performing the functions of a nominating committee.

               During fiscal 2002, our audit committee met four times.  During fiscal 2002, our audit committee initially consisted of Messrs.  Oltman and Drazan and Judith Hamilton, until November 2001 when Mr.  Drazan resigned from the audit committee and was replaced by Mr.  Davis.  In March 2002, Ms.  Hamilton resigned from the board of directors and the audit committee.  In May 2002 Mr.  Rochester was appointed to the audit committee.  The audit committee reviews our internal accounting procedures, consults with and reviews the services provided by our independent accountants and makes recommendations to the board of directors regarding the selection of independent accountants.

               During fiscal 2002, our compensation committee met six times.  During fiscal 2002, the compensation committee initially consisted of Messrs.  Drazan and Oltman until Ms.  Crowell joined the compensation committee in October 2001.  The compensation committee reviews and recommends to the board of directors the salaries, incentive compensation and benefits of our officers and employees and administers our stock plans and employee benefit plans.

               All directors have attended no less than 75% of the total number of meetings of the board of directors and committees on which they served.

Board Recommendation

               OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL THREE OF THE NOMINEES FOR CLASS II DIRECTORS NAMED ABOVE.

PROPOSAL 2

               Approval of Our Amended and Restated Certificate of Incorporation

General

               In February 2002, we received notice from the Nasdaq National Market that our common stock would be delisted for failing to meet the $1.00 minimum bid price requirement.  The notice indicated that if we transferred our listing to the Nasdaq SmallCap Market, we would be given a 180-day grace period from delisting for failing to meet the $1.00 minimum bid price requirement and up to an additional 180-day grace period from delisting if, among other things, our stockholders' equity exceeded $5 million.  In July 2002, our board of directors approved a transfer of our listing from the Nasdaq National Market to the Nasdaq SmallCap Market to avail ourselves to the grace periods.  On August 21, 2002, we received notice that we had been granted the additional 180-day grace period, or until February 10, 2003 to regain compliance with the $1.00 minimum bid price requirement for at least ten consecutive trading days.  As a result, our board of directors is unanimously recommending that our stockholders approve three amended and restated certificates of incorporation in substantially the form attached as Appendix C to this proxy statement to:

• effect a reverse stock split of one-for-twenty, one-for-thirty and one-for-forty, with the final ratio to be determined by the board of directors in its sole and absolute discretion at any time prior to February 1, 2003, and

• reduce the authorized number of shares of our common stock from 200 million to 100 million.

Purpose

               The board of directors is recommending that our stockholders approve our amended and restated certificates of incorporation for the following reasons:

• the board believes that a reverse stock split is the most effective means to avoid a delisting of our common stock from the Nasdaq SmallCap Market for failing to meet or exceed the $1.00 minimum bid price requirement of the Nasdaq SmallCap Market; and

• the board believes a higher stock price may help generate investor interest in our common stock and help us attract and retain employees and other service providers.

               Nasdaq Listing.  Our common stock is quoted on the Nasdaq SmallCap Market under the symbol "EVLV." On October 31, 2002, the closing bid price for our common stock was $__ per share.  If our stockholders do not approve our amended and restated certificates of incorporation to effect the reverse stock split, and the bid price for our common stock does not otherwise increase to $1.00 or more for ten consecutive trading days, we expect that our common stock will be delisted from the Nasdaq SmallCap Market, in which case, the market for our common stock may be significantly diminished and you may not be able to sell our common stock.

               Potential Increased Investor Interest.  In recommending the approval of our amended and restated certificates of incorporation, our board of directors considered that our common stock may not appeal to brokerage firms that are reluctant to recommend lower priced stocks to their clients.  Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks.  In addition, our board of directors believes that most institutional investors are reluctant to invest in lower priced stocks.  Our board of directors further believes that a higher stock price would help us attract and retain employees and other service providers, as some potential employees and service providers may be less willing to work for a company with a low stock price and market capitalization.  Our board of directors is targeting a stock price after the reverse stock split of around $3.00 per share. However, we cannot assure you that our stock will trade around $3.00 per share immediately following the reverse stock split or ever.

Certain Risks Associated With the Reverse Stock Split

               Although we believe that the reverse stock split will be beneficial to our stockholders, we cannot assure you that:

• the per share bid price for our common stock following the reverse stock split will meet or exceed the minimum bid price required by the Nasdaq SmallCap Market for ten consecutive days prior to February 10, 2003;

• our common stock will not be delisted from the Nasdaq SmallCap Market for failing to meet any of the other continued listing standards;

• the reverse stock split will result in a per share price that will attract institutional and other investors;

• the reverse stock split will result in a per share price that will increase our ability to attract and retain employees and other service providers; or

• the liquidity of our common stock will be improved.

Principal Effects of the Amended and Restated Certificate of Incorporation

               Corporate Matters.  If approved and effected, the amendment and restatement of our certificate of incorporation would have the following effects:

• depending on the final reverse stock split ratio selected by the board of directors,  every one share of common stock owned by a stockholder would be combined into ¹/_^20th, ¹/_^30th or  ¹/_^40th of a share, provided that all fractions of a share to which such holder would be entitled , will be aggregated into whole shares of common stock to the maximum extent possible;

• the number of shares of our common stock issued and outstanding will be reduced proportionately based on the reverse stock split ratio selected by the board of directors;

• the number of shares of our common stock into which our Series A Preferred Stock and Series B Preferred Stock are convertible into immediately prior to the reverse stock split would be reduced proportionately;

• the relative voting power of the common stock in relation to the Series A Preferred Stock and Series B Preferred Stock will remain the same;

• the number of authorized shares of our common stock will be reduced from 200 million shares to 100 million shares;

• it will eliminate the provision pertaining to holders of our Series A Preferred Stock who have not already waived the application of such provision, that provides that a liquidation will occur in the event that a person acquires beneficial ownership of more than 50% of our voting equity securities;

• the number of our stockholders of record will be reduced to approximately 500 in the event any of the three reverse stock split ratios are effected

• based on the reverse stock split ratio selected by our board of directors, proportionate adjustments will be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options and warrants; and

• the number of shares reserved under our existing employee benefit plans will be reduced proportionately based on the reverse stock split ratio approved by our board of directors.

               If approved and effected, the reverse stock split will be effected simultaneously for all of our outstanding common stock and at the same ratio.  The reverse stock split will affect all of our common stockholders uniformly, and should not materially effect any common stockholder's beneficial ownership interest in our common stock.  As described below, stockholders who would otherwise be entitled to receive a fractional share after aggregating all fractions of a share to which they would otherwise be entitled, will be entitled to a cash payment in lieu of such fraction of a share.  Such cash payments will reduce the number of post-split stockholders to the extent there are stockholders holding fewer than 20, 30 or 40 shares, as the case may be.  The reverse stock split is not being effected as the first step in a going private transaction under Rule 13e-3 of the Securities Exchange Act of 1934.  However, we cannot assure you that neither we nor any of our affiliates will not take steps in  the future that will result in a going private transaction under Rule 13e-3. This, however, is not the purpose for which we are affecting the reverse stock split.  The common stock combined pursuant to the reverse stock split will remain fully paid and nonassessable.

               Fractional Shares.  No scrip or fractional certificates will be issued in connection with the reverse stock split.  Stockholders who otherwise would be entitled to receive fractional shares because they hold a number of shares that are not evenly divisible by the reverse stock split ratio approved by our board of directors will be entitled, upon surrender of certificate(s) representing such shares, to a cash payment in lieu thereof.  The cash payment will equal the product obtained by multiplying (a) the fraction to which the stockholder would otherwise be entitled by (b) the per share closing sales price of our common stock on the day immediately prior to the effective time of the reverse stock split, as reported on the Nasdaq SmallCap Market.  The ownership of a fractional interest will not give the holder any voting, dividend or other rights, except to receive payment for such fractional interest as described above.

               Stockholders should be aware that under the escheat laws of the various jurisdictions where stockholders reside, where Evolve is domiciled and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective time of the reverse stock split may be required to be paid to the designated agent for each such jurisdiction.  Thereafter, stockholders otherwise entitled to receive such funds may have to obtain them directly from the state to which they were paid.

               If approved and effected, the reverse stock split may result in some stockholders owning "odd lots" of less than 100 shares of our common stock.  Brokerage commissions and other costs of transactions in odd lots are often somewhat higher than the costs of transactions in "round lots" of even multiples of 100 shares.

               Authorized Shares.  Despite the fact that the approval of the amendment and restatement of our certificate of incorporation would reduce the number of authorized shares of our common stock by 100 million shares, the proportion of our authorized but unissued shares of our common stock in relation to our issued and outstanding shares of common stock will be increased as a result of the reverse stock split.  Authorized but unissued shares will be available for issuance, and we may issue such shares in equity financings or otherwise.  If we issue additional shares of common stock, the ownership interest of our current stockholders may be diluted.

               Accounting Matters.  The reverse stock split will not affect the par value of our common stock.  As a result, as of the effective time of the reverse stock split, the stated capital on our balance sheet attributable to our common stock will be proportionately reduced based on the reverse stock split ratio approved by our board of directors, and the additional paid in capital account on the balance sheet will be credited with the amount by which the stated capital is reduced.  The per share net income or loss and net book value of our common stock will be restated because there will be fewer shares of our common stock outstanding.

               Potential Anti-Takeover Effect.  Although the increased proportion of authorized but unissued shares of common stock to outstanding shares of common stock following the filing of the amended and restated certificate of incorporation could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances of stock that would dilute the stock ownership of a person seeking to effect a change in the composition of our board of directors or contemplating a tender offer or other transaction for the combination of us with another company), the amendment and restatement of our certificate of incorporation proposal is not being proposed in response to any effort of which we are aware to accumulate our common stock or obtain control of Evolve.

Procedure for Effecting the Reverse Stock Split and Exchange of Stock Certificates

               If our stockholders approve the proposal to approve our amended and restated Certificate of incorporation and if our board of directors decides to implement the reverse stock split on or prior to February 1, 2003, we will file an amended and restated certificate of incorporation with the Secretary of State of Delaware and the reverse stock split will be effected at the time specified in the certificate.  Beginning at the effective time, each certificate representing old shares of common stock will be deemed for all corporate purposes to represent the new combined shares of common stock.  The text of the amended and restated certificate of incorporation to effect the reverse stock split and to reduce the number of authorized shares of our common stock from 200 million to 100 million, would be in substantially the form attached to this proxy statement as Appendix B; provided that the text of the form of amended and restated certificate of incorporation would be subject to modification to include such changes as may be required by the Secretary of State of Delaware and as the board of directors deems necessary or advisable to effect the reverse stock split, including the insertion of an effective time and the applicable reverse stock split ratio approved by the board of directors within the range approved by our Stockholders.

               As soon as practicable after the effective time of the reverse stock split, stockholders will be notified that the reverse stock split has been effected.  We expect that our transfer agent, Computershare, will act as the exchange agent for purposes of implementing the exchange of stock certificates.  Stockholders will be requested to surrender to the exchange agent certificates representing our common stock in exchange for new certificates representing our common stock in accordance with the procedures set forth in the letter of transmittal to be sent by our transfer agent.  No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder's outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the exchange agent.  Any share certificates submitted for transfer, whether pursuant to a sale, other disposition or otherwise, will automatically be exchanged for a new certificate representing our common stock.  STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

No Dissenters' Rights

               Under the Delaware General Corporation Law, our stockholders are not entitled to dissenters' rights with respect to the reverse stock split, and we will not independently provide stockholders with any such right.

Federal Income Tax Consequences of the Reverse Stock Split

               The following summary of certain material federal income tax consequences of the reverse stock split does not purport to be a complete discussion of all of the possible federal income tax consequences of the reverse stock split and is included for general information only.  Further, it does not address any state, local or foreign income or other tax consequences.  Also, it does not address the tax consequences to holders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, nonresident alien individuals, broker-dealers and tax-exempt entities.  The discussion is based on the provisions of the United States federal income tax law as of the date of this proxy statement, which is subject to change retroactively as well as prospectively.  This summary also assumes that the common stock was and will be held as a "capital asset," as defined in the Internal Revenue Code of 1986.  The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder.  Each stockholder is urged to consult with such stockholder's own tax advisor with respect to the tax consequences of the reverse stock split.

               Other than the cash payments for fractional shares discussed below, no gain or loss should be recognized by a stockholder upon such stockholder's exchange of stock certificates pursuant to the reverse stock split.  The aggregate tax basis of the new shares received in the reverse stock split (including any fraction of a new share deemed to have been received) will be the same as the stockholder's aggregate tax basis in the shares exchanged.  In general, stockholders who receive cash in exchange for their fractional share interests in the new combined shares as a result of the reverse stock split will recognize gain or loss based on their adjusted basis in the fractional share interests redeemed.  The stockholder's holding period for the new combined shares will include the period during which the stockholder held the common stock surrendered in the reverse stock split.

               Our view regarding the tax consequences of the reverse stock split is not binding on the Internal Revenue Service or the courts.  ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT TO ALL OF THE POTENTIAL TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE STOCK SPLIT.

Vote Required

               Approval of our Amended and Restated Certificate of Incorporation requires the affirmative vote of a majority of the outstanding shares of our common stock, voting as a single class, a majority of our Series A Preferred Stock, voting as a single class,  a majority of the voting power our Series A Preferred Stock and Series B Preferred Stock, voting together as a single class and a majority of the voting power of the common stock, Series A Preferred Stock, voting together as a single class.

Board Recommendation

               OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, INCLUDING THE AMENDMENTS TO EFFECT THE REVERSE STOCK SPLIT  RATIOS THEREIN.

PROPOSAL 3

Ratification of Our Certificate of Designation of Series B Preferred Stock

General

               In August 2002, we raised $7.5 million from the sale of our Series B Preferred Stock to Warburg Pincus Private Equity VIII, L.P., Sierra Ventures VII, L.P., Sierra Ventures Associates VII, LLC and another investor.  To issue our Series B Preferred Stock to these investors, we had to file a certificate of designation of Series B Preferred Stock, or Certificate of Designation, designating 750,000 shares of our authorized preferred stock as Series B Preferred Stock.  In order to raise the capital quickly and to avoid the need to obtain stockholder approval for the issuance of our Series B Preferred Stock to these investors, as would have otherwise been required under the rules of the Nasdaq Stock Market, our investors and us agreed that we would seek stockholder ratification of our Certificate of Designation so that the provision in Section 3(c) of the Certificate of Designation pertaining to adjustments to the conversion price for dilutive issuances of securities by us would become effective.  The Certificate of Designation is attached hereto as Appendix D.  Section 3(c) of our Certificate of Designation generally provides that if we issue securities for a price per share less than the conversion price of our Series B Preferred Stock, or $0.19, that the conversion price of our Series B Preferred Stock would also decrease, in an amount dependent upon the number of securities we issued and at the price we issued them.  A reduction in the conversion price of our Series B Preferred Stock would generally result in our Series B Preferred Stock being convertible into more shares of our common stock but does not otherwise increase the relative voting power of the Series B Preferred Stock.  If Proposal 2 is approved by our stockholders and the reverse stock split is effected, the conversion price of our Series B Preferred Stock will increase.  For example, if a one-for-twenty reverse stock split were to be effected by our board of directors, the conversion price of our Series B Preferred Stock would be increased to $3.80.  Failure by our stockholders to ratify the Certificate of Designation would result in there being no adjustment to the conversion price of our Series B Preferred Stock in the event that we issue securities at a price per share less than the conversion price of our Series B Preferred Stock, as more fully set forth in the Certificate of Designation.

Vote Required

               Ratification of our Certificate of Designation of our Series B Preferred Stock requires the affirmative vote of a majority of the votes cast by our common stock and Series A Preferred Stock voting together as a single class.

Interested Parties

               The following table sets forth the ownership of our shares of Series B Preferred Stock by certain of our stockholders. 

Stockholder

Number of Shares of Series B Preferred Stock

Warburg Pincus Private Equity VIII (1)(2)

500,000

Sierra Ventures VI, L.P. (3)

134,381

Sierra Ventures VII, L.P. (3)

47,485

SV Associates VI, L.P. (3)

13,399

Sierra Ventures Associates VII, LLC (3)

4,735

(1)

Cary Davis and Nancy Martin, two of our directors, are general partners of Warburg Pincus Private Equity VIII, L.P. Barry Taylor is also affiliated with Warburg Pincus Private Equity VIII, L.P.

(2)

Gayle Crowell, our chairperson of the board, is a full time advisor of Warburg Pincus LLC, an affiliate of Warburg Pincus Private Equity VIII, L.P.

(3)

Jeffrey M.  Drazan, one of our directors, is a general partner of SV Associates VI, L.P., which is the general partner of Sierra Ventures VI, L.P.  Mr.  Drazan is also a manager of Sierra Ventures Associates VII, LLC, which is the general partner of Sierra Ventures VII, L.P.

Board Recommendation

               OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF OUR CERTIFICATE OF DESIGNATION OF OUR SERIES B PREFERRED STOCK.

PROPOSAL 4

Ratification of Appointment of

PricewaterhouseCoopers LLP

               Our board of directors has selected PricewaterhouseCoopers LLP, independent public accountants, to audit our financial statements for our fiscal year ending June 30, 2003, and recommends that stockholders ratify this appointment.  In the event that stockholders do not ratify the appointment of PricewaterhouseCoopers LLP by our board of directors, our board of directors will reconsider its selection.  Representatives of PricewaterhouseCoopers LLP will be present at the annual meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to answer appropriate questions.

Vote Required

               The ratification of the appointment of PricewaterhouseCoopers LLP requires the affirmative vote of a majority of the votes represented at the meeting.

Board Recommendation

               OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.

EXECUTIVE COMPENSATION AND OTHER MATTERS

Executive Compensation

               The following table sets forth information concerning the compensation of:

• each person who served as our chief executive officer during fiscal 2002;

• the two other most highly compensated executive officers at the end of fiscal 2002; and

• two of our former executive officers who were not serving as executive officers at the end of fiscal 2002 (collectively, the "named executive officers"). 

Annual Compensation

Long-Term Compensation Awards

Name and Principal Position

Fiscal Year

Salary ($)

Bonus ($)

Other Annual
Compensation
($) (1)

Securities
Underlying
Options (#)

John P. Bantleman (2)

2002

70,750

190,337

204,772

--

     Former President and Chief

2001

255,000

110,625

--

416,667

     Executive Officer

2000

234,579

265,625

--

--

Lin Johnstone (3)

2002

235,777

--

--

250,000

     Former Interim President and Chief

     Executive Officer

Linda Zecher

2002

82,533

16,600

--

5,000,000

     President and Chief Executive Officer

Kenneth J. Bozzini (4)

2002

175,000

30,000

--

360,000

     Former Chief Financial Officer

2001

153,750

18,938

--

90,000

2000

94,167

24,084

--

50,000

Kurt Heikkinen (5)

2002

184,448

85,000

46,250

125,000

     Former Vice President,

2001

170,417

28,500

--

250,000

     Engineering and Customer Service

2000

80,000

20,000

--

--

Janice Ryan (6)

2002

154,886

25,000

--

125,000

     Former Interim Vice President, Sales

Robert Gillette

2002

93,182

12,500

25,000

1,200,000

     Vice President of Engineering and

     Chief Technical Officer

_______________

(1)

Under applicable Securities and Exchange Commission rules, perquisites are not required to be included if the aggregate value of the perquisites is less than the lesser of $50,000 or 10% of the executive officer's salary and bonus.

(2)

Mr. Bantleman resigned in October 2001.  We made severance payments of $204,772 to Mr.  Bantleman.

(3)

Ms. Johnstone resigned in March 2002.

(4)  

Mr. Bozzini resigned in August 2002.

(5)  

Mr. Heikkinen resigned in May 2002.  We made severance payments of $46,250 to Mr.  Heikkinen.

(6)  

Ms. Ryan resigned in March 2002.

(7)  

Mr.  Gillette was paid $25,000 for relocation expenses.

               The following table provides information concerning grants of options to purchase our common stock made during fiscal 2002 to the named executive officers.

Option Grants in Fiscal 2002

Potential Realizable Value at Assumed Annual
Rates of Stock Price Appreciation  (2)

Name

Number of Securities Underlying Options
Granted (#)

% of Total
Options Granted to Employees in
Fiscal Year

Exercise Price
($/share) (1)

Expiration
Date

5% ($)

10% ($)

John P. Bantleman

--

--

--

--

--

--

Lin Johnstone

250,000

2.07

0.34

12/12/06

23,484

51,893

Kenneth J. Bozzini

180,000
180,000

2.98

0.34
0.34

12/12/06
12/12/11

38,488
97,537

16,908
37,363

Kurt Heikkinen

125,000

1.03

0.34

12/12/06

11,742

25,947

Janice Ryan

125,000

1.03

0.34

12/12/11

26,728

67,734

Robert Gillette

1,200,000

9.93

0.33

01/16/12

249,042

631,122

_______________

Aggregated Option Exercises in Fiscal 2002 and Fiscal Year-End Option Values

Number of Securities
Underlying Unexercised
Options at June 30, 2002 (#)

Value of Unexercised
In-the-Money Options
at June 30, 2002 ($) (1)

Name

Shares
Acquired on
Exercise (#)

Value
Realized
($)

Exercisable

Unexercisable

Exercisable

Unexercisable

John P. Bantleman

--

--

--

--

--

--

Lin Johnstone

--

--

250,000

--

--

--

Linda Zecher

--

--

--

5,000,000

--

--

Kenneth J. Bozzini

--

--

55,912

402,421

--

--

Kurt Heikkinen

--

--

375,000

--

--

--

Janice Ryan

--

--

125,000

--

--

--

Robert Gillette

--

--

--

1,200,000

--

--

_______________

(1)      

Based on a the closing sales price of $0.13 per share of our common stock on June 28, 2002,  none of the options held by the named executive officers were in-the-money.

Compensation of Directors

Compensation Committee Interlocks and Insider Participation

Executive Officers

               The following persons were serving as one of our executive officers as of the date of this proxy statement:

NAME

AGE

POSITION

Linda Zecher

49

President and Chief Executive Officer

Arthur Taylor

46

Vice President, Chief Financial Officer and Secretary

Robert Gillette

45

Vice President of Engineering and Chief Technical Officer

Lisa Campbell

39

Vice President of Marketing

Timothy Cannon, Ph.D.

48

Vice President of Business Development and Services

               Arthur Taylor joined us in July 2002 as our Vice President and Chief Financial Officer.  Prior to joining us, from March 2001 to July 2002, Mr.  Taylor was Vice President and Chief Financial Officer for Docent, Inc., an eLearning enterprise software company.  From August 1998 to March 2001, Mr.  Taylor was Vice President and Corporate Treasurer for 3Com Corporation, a high technology networking company.  From June 1997 to July 1998, Mr.  Taylor was Chief Financial Officer, Treasurer, and Vice President, Finance for ReSound Corporation, a hearing health care company.  Prior to that Mr.  Taylor held several senior financial management positions at Allergan, Inc., an eye and skin care pharmaceutical and medical device company.  Mr.  Taylor received a Bachelor of Science in Business Administration from San Diego State University and an MBA from the University of Southern California.  Mr.  Taylor is also a Certified Management Accountant.

               Robert Gillette joined us in January 2002 as our Vice President of Engineering and Chief Technology Officer.  Prior to joining us, from April 2000 to October 2001, Mr.  Gillette was the Senior Vice President, Engineering for GlobalSight, a multi-lingual content management tool company.  From August 1997 to April 2000, Mr.  Gillette was Senior Vice President, Engineering and Chief Technical Officer for Callidus Software, an enterprise incentive management software company.  Mr.  Gillette received a B.A.  in Comparative Language Study from Vassar College.

               Lisa Campbell joined us in April 2002 as our Vice President of Marketing.  Prior to joining us, from May 2001 to April 2002, Ms.  Campbell was the Vice President of Marketing and Product Management for NONSTOP Solutions, a provider of demand chain software applications.  From March 2000 to May 2001, Ms.  Campbell was Chief Marketing Officer for RedCelcius, Inc., a CRM enterprise software company.  From August 1999 to March 2000, Ms.  Campbell was Vice President of Marketing for iMedeon, a field service automation software company focused on selling to the utility industry.  From April 1997 to May 1999, Ms.  Campbell was Vice President of Marketing for Firstwave, a CRM enterprise software company.  Ms.  Campbell received a B.A.  from Boston College and an M.B.A.  with a concentration in Marketing from Babson College.

               Timothy Cannon, Ph.D.  joined us in April 2002 as our Vice President Business Development and Sales.  Prior to joining us, from April 1999 to April 2002, Mr.  Cannon was the Vice President of CRM Applications for Oracle Services Industries.  From 1985 to 1999 Mr.  Cannon was Director of Sales for Compaq, a personal computer manufacturer.  Mr.  Cannon received an M.E.  in Civil Engineering Management and a B.S.  in Civil Engineering from the University of Florida, an M.B.A.  with a concentration in Finance from the University of New Orleans and a Ph.D.  in Information Technology from George Mason University.

Compensation Plans

               Amended and Restated 2000 Stock Plan

               Our Amended and Restated 2000 Stock Plan, or the 2000 Plan, provides for the grant of incentive stock options to employees, including officers and employee directors, and for the grant of nonstatutory stock options and stock purchase rights to employees, directors and consultants.  As of October 21, 2002, the total number of shares of common stock reserved for issuance under the 2000 Plan was 25,000,000 shares.  Through October 21, 2002, no shares of common stock have been issued under the 2000 Plan, and as of that date there were options to purchase an aggregate of 10,736,322 shares of common stock issued and outstanding.  A number of shares is added to the 2000 Plan on an annual basis equal to the least of the aggregate number of shares subject to grants made in the previous year, 10,000,000 shares or such other amount as determined by the board of directors.  Unless terminated earlier, the 2000 Plan will terminate automatically on August 9, 2010.  The administrator of our 2000 Plan has the power to determine the:

• terms of the options or stock purchase rights granted, including the exercise price of the options or stock purchase rights;

• number of shares subject to each option or stock purchase right;

• vesting schedule of each option or stock purchase right; and

• form of consideration payable upon the exercise of each option or stock purchase right.

               Options and stock purchase rights granted under the 2000 Plan are generally not transferable by the optionee, and each option and stock purchase right is exercisable during the lifetime of the optionee only by the optionee.  Options granted under the 2000 Plan must generally be exercised within three months after the end of the optionee's status as an employee, director or consultant of us, or within 12 months after such optionee's termination by death or disability, but in any event not later than the expiration of the option's term.

               The exercise price of all incentive stock options granted under the 2000 Plan must be at least equal to the fair market value of our common stock on the date of grant.  The exercise price of nonstatutory stock options and stock purchase rights granted under the 2000 Plan is determined by the administrator, but with respect to nonstatutory stock options intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Internal Revenue Code, the exercise price must be at least equal to the fair market value of our common stock on the date of grant.  With respect to any participant who owns stock possessing more than 10% of the voting power of all classes of our outstanding capital stock, the exercise price of any incentive stock option granted must be at least equal to 110% of the fair market value on the grant date and the term of such incentive stock option must not exceed five years.  The term of all other options granted under the 2000 Plan may not exceed ten years.

               The 2000 Stock Plan provides that if we merge with or into another corporation, or sell substantially all of our assets, each option and stock purchase right must be assumed or an equivalent option or stock purchase right substituted for by the successor corporation.  If the outstanding options and stock purchase rights are not assumed or substituted for by the successor corporation, the options shall become fully vested and the optionees shall have the right to exercise such options or stock purchase rights.  If an option or stock purchase right becomes fully vested and exercisable in the event of a merger or sale of assets, the administrator must notify the optionee that the option or stock purchase right is fully exercisable for a period of 15 days from the date of the notice, and the option or stock purchase right will terminate upon the expiration of the 15-day period.

               Amended and Restated 2000 Employee Stock Purchase Plan

               As of October 21, 2002, a total of 2,429,089 shares of our common stock have been reserved for issuance under our Amended and Restated 2000 Employee Stock Purchase Plan, or Purchase Plan.  The number of shares of our common stock reserved for issuance under the Purchase Plan is subject to annual increases equal to the least of the aggregate number of shares issued pursuant to Purchase Plan in the previous year, 1,000,000 shares, or such amount as determined by our board of directors.  As of October 21, 2002, 557,258 shares had been issued under our Purchase Plan.

               The Purchase Plan, which is intended to qualify under Section 423 of the Internal Revenue Code, is implemented by a series of overlapping offering periods of 24-month durations, with new offering periods, other than the first offering period, commencing on or about February 1 and August 1 of each year.  Each offering period consists of four consecutive purchase periods of approximately six months' duration, at the end of which, an automatic purchase is made for participants.  Participants generally may not purchase more than 5,000 shares, or such other number of shares established by our board of directors, on any purchase date or purchase stock having a value measured at the beginning of the offering period greater than $25,000 in any calendar year.

               Employees are eligible to participate in the Purchase Plan if they are customarily employed by us or any participating subsidiary for at least 20 hours per week and more than five months in any calendar year.  However, any employee who immediately after grant of a purchase right under the Purchase Plan would own stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock, or whose rights to purchase stock under all of our purchase plans accrues at a rate that exceeds $25,000 worth of stock for each calendar year may not be granted an option to purchase stock under this plan.  The Purchase Plan permits participants to purchase common stock through payroll deductions of up to 15% of the participant's base compensation.

               Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each purchase period.  The price of stock purchased under the Purchase Plan is generally 85% of the lower of the fair market value of our common stock at the beginning of the offering period or at the end of the purchase period.  Participants may end their participation at any time during an offering period, and they will be paid their payroll deductions to date.  Participation ends automatically upon termination of employment with us.

               In the event the fair market value at the end of a purchase period is less than the fair market value at the beginning of the offering period, the participants will be withdrawn from the current offering period following exercise and automatically re-enrolled in a new offering period.  The new offering period will use the lower fair market value as of the first date of the new offering period to determine the purchase price for future purchase periods.

               Rights granted under the Purchase Plan are not transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided under the plan.  The Purchase Plan provides that, in the event of our merger with or into another corporation or a sale of substantially all our assets, each outstanding option may be assumed or substituted for by the successor corporation.  If the successor corporation refuses to assume or substitute for the outstanding options, the offering period then in progress will be shortened and a new exercise date will be set.  The new exercise date will be set prior to the proposed date of the merger or sale of assets.

               Our board of directors has the authority to amend or terminate the Purchase Plan, except that no such action may adversely affect any outstanding rights to purchase stock under the Purchase Plan.  Our board of directors has the exclusive authority to interpret and apply the provisions of the Purchase Plan.  The Purchase Plan will terminate automatically in 2010, unless terminated earlier.

               Amended and Restated 2002 Nonstatutory Stock Option Plan

               Our Amended and Restated 2002 Nonstatutory Stock Option Plan, or 2002 Plan, provides for the grant of nonstatutory stock options to employees, officers, directors and consultants.  We may only make option grants to newly hired officers and directors as inducements to provide services to us.  As of October 21, 2002, the total number of shares of common stock reserved for issuance under the 2002 Plan was 3,500,000 shares.  Through October 21, 2002, no shares of common stock had been issued under the 2002 Plan, and as of that date there were options to purchase an aggregate of 2,250,000 shares of common stock issued and outstanding.  Unless terminated earlier, the 2002 Plan will terminate automatically on April 24, 2012.  The administrator of the 2002 Plan has the power to determine:

• terms of the options granted, including the exercise price of the  options or stock purchase rights;

• number of shares subject to each option;

• vesting schedule of each option; and

• form of consideration payable upon the exercise of each option.

               Options granted under the 2002 Plan are generally not transferable by the optionee, and each option is exercisable during the lifetime of the optionee only by the optionee.  Options granted under the 2002 Plan must generally be exercised within 30 days after the termination of the optionee's status as an employee, officer, director or consultant of us, or within six months after such optionee's termination by death or disability, but in any event, not later than the expiration of the option's term.

               With respect to any participant who owns stock possessing more than 10% of the voting power of all classes of our outstanding capital stock, the exercise price of any option granted must be at least equal to 110% of the fair market value on the grant date.  With respect to any other participant the exercise price of any option granted may not be less than 85% of the fair market value on the date of grant, other than in connection with a merger or other similar corporate transaction.

               The 2002 Plan provides that if we merge with or into another corporation, or sell substantially all of our assets, each option must be assumed or an equivalent option substituted for by the successor corporation.  If the outstanding options are not assumed or substituted for by the successor corporation, the options shall become fully vested and exercisable by the optionees.  If an option becomes fully vested and exercisable in connection with a merger or sale of assets, the administrator must notify the optionee that the option is fully exercisable for a period of at least 15 days from the date of the notice, and the option will terminate upon the expiration of the 15-day period.

               1995 Stock Option Plan, as Amended

               Our 1995 Stock Option Plan, as amended, was adopted by our board of directors and by our stockholders in 1995, and it was last amended in 2000.  The 1995 Stock Option Plan was terminated as to new issuances in August 2000, upon the commencement of the 2000 Stock Plan.  As of October 21, 2002, we had reserved a total of 5,833,333 shares of our common stock for issuance upon the exercise of options granted under the plan.  The 1995 Stock Option Plan provides for the granting to our employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, and for the granting to employees, officers, directors and consultants of nonstatutory stock options.  No further option grants will be made under the 1995 Stock Option Plan.

               Options granted under our 1995 Stock Option Plan are not generally transferable by the optionee, and each option is exercisable during the lifetime of the optionee only by the optionee.  Options granted under the 1995 Stock Option Plan must generally be exercised within three months of the termination of optionee's status as an employee, officer, director or consultant, or within 12 months after his or her termination by death or disability, but in no event may the option be exercised after the expiration of the option's term.

               Options granted under our 1995 Stock Option Plan will accelerate and become fully vested in the event we are acquired, unless the successor corporation assumes or substitutes other options in their place.

               401(k) Plan

               In April 1996, we adopted a 401(k) plan to provide eligible employees with a tax preferential savings and investment program.  Eligible participants may elect to reduce their current compensation up to the lesser of 15% of eligible compensation and the statutorily prescribed annual limit and have such reduction contributed to the 401(k) plan.  At the direction of each participant, the trustee of the 401(k) plan invests the assets of the 401(k) plan in selected investment options.  Contributions by participants to the 401(k) plan, and income earned on the plan contributions, are generally not taxable to the participants until withdrawn.

               The following table summarizes our equity compensation plans as of October 21, 2002:

Equity Compensation Plan Information

Number of Securities

remaining available for

Number of Securities to

Weighted average

future issuance under

be issued upon exercise

exercise price of

equity compensation plans

of outstanding options,

outstanding options,

(excluding securities

Plan Category

warrants and rights

warrants and rights

reflected in column (a))

(a)

(b)

(c)

Equity Compensation plans

approved by security holders

11,079,976 

$ 0.55

14,263,678

Equity Compensation plans not

approved by security holders

6,250,000 

$ 0.24

1,250,000

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Sale of Series A Preferred Stock

               Pursuant to a Series A Preferred Stock Purchase Agreement between Evolve and certain investors, we issued the following securities in October 2001 to the following venture funds affiliated with certain of its directors:

(1)

Consists of; (a) Index Venture, I (Jersey) L.P; (b)  Index Ventures I (Delaware) L.P.; (c) Index Ventures I Parallel Entrepreneur Fund (Jersey) L.P.; (d) Index Ventures I Gmbh & Co. Kg; and (e) Index Venture Management SA on Behalf of Index Employee Co - Investment Plan.

               The Series A Preferred Stock was sold at $10 per share.  The exercise price per share of the warrants to purchase Series A Preferred Stock was $10, and the exercise price of the warrants to purchase common stock was $1 per share.  All of the warrants to purchase Series A Preferred Stock have either been exercised or have expired.  The warrants to purchase common stock are all exercisable for seven years from the date of issue.  None of the warrants to purchase common stock have been exercised.

               Each share of Series A Preferred Stock was 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.  The number of shares of common stock into which each share of Series A Preferred Stock is convertible accretes at a rate of 8.00% per year.  As of the date of this proxy statement, the conversion price of the Series A Preferred Stock had decreased to $0.37 per share.

               In March 2002, we issued the following securities to the following venture funds affiliated with certain of our directors upon the exercise of warrants to purchase Series A Preferred Stock:

               We issued the foregoing securities pursuant to agreements under which we made representations, warranties and covenants and provided the purchasers with registration rights and preemptive rights, among other privileges.

               Jeffrey M.  Drazan, a director of the Company, is a manager of Sierra Ventures Associates VII, LLC, which is the general partner of Sierra Ventures VII, L.P.

               Cary Davis and Nancy Martin, directors of the Company, are partners of Warburg Pincus & Co.  and Managing Directors of Warburg Pincus LLC, the general partner of Warburg Pincus Private Equity VIII, L.P., and Gayle Crowell, a director of the Company, is a full-time advisor to of Warburg Pincus LLC.  Mr.  Davis, Dr.  Martin and Ms.  Crowell were each appointed to our Board of Directors upon the closing of the sale of our Series A Preferred Stock in October 2001.

               Pursuant to a Series B Preferred Stock Purchase Agreement between Evolve and certain investors, Evolve issued 500,000 shares of Series B Preferred Stock, 181,866 shares of Series B Preferred Stock and 18,134 shares of Series B Preferred Stock to Warburg Pincus Private Equity VIII, L.P., Sierra Ventures VII, L.P.  and Sierra Ventures Associates VII, LLC, respectively.  The purchase price for the Series B Preferred Stock was $10 per share.  Each share of Series B Preferred Stock was convertible into common stock at an initial conversion price of $0.19, or at an initial conversion rate of approximately 53 shares of common stock for each share of Series B Preferred Stock, subject to certain adjustments as set forth in the Certificate of Designation of Series B Preferred Stock of the Company.  The number of shares of common stock into which each share of Series B Preferred Stock is convertible accretes at a rate of 8.00% per year.  We issued the foregoing securities pursuant to agreements under which we made representations, warranties and covenants and provided the purchasers with registration rights and preemptive rights, among other privileges.

Stock Option Issuances

Since June 2001, we have issued the following options to our executive officers and directors named below:

               In October 2001, we entered into a Separation and Consulting Agreement with John Bantleman, our former President and Chief Executive Officer, pursuant to which it was agreed that he would resign his employment and his position on our board of directors effective October 5, 2001 and begin tenure as a consultant to us through December 31, 2001.  We agreed to pay Mr.  Bantleman all accrued salary and all accrued and unused vacation time through October 5, 2001, as well as health insurance benefits through March 1, 2002.  As compensation for Mr.  Bantleman's consulting work for us, we paid him a lump sum of $130,500.  Additionally, because we closed a financing in excess of $10 million within the first 30 days after his departure, we paid Mr.  Bantleman two additional payments of $65,250 on each of April 1, 2002 and July 1, 2002.  We also agreed to allow options to purchase 104,166 shares of common stock (which were in addition to options that were vested as of Mr.  Bantleman's termination date and which represents an additional 25% of the 416,667 options covered under three stock option agreements) to immediately vest and to allow 312,500 shares purchased under three restricted stock purchase agreements (which were in addition to shares that were vested as of Mr.  Bantleman's termination date and which represents an additional 25% of the 1,250,000 shares purchased under such restricted stock purchase agreements) to immediately vest.  Further, we forgave promissory notes that Mr.  Bantleman issued to us totaling $175,000 (plus approximately $15,337 accrued interest as of September 30, 2001).

               On November 8, 2001, we entered into a severance agreement with Joseph Fuca, our former Vice President, Sales, pursuant to which we agreed to pay Mr.  Fuca three months of his base salary as a severance payment plus an additional $15,000.  We also agreed to pay Mr.  Fuca all accrued salary and all accrued and unused vacation through his employee termination date, as well as to pay his COBRA premiums through his severance period.  We further agreed to accelerate the vesting of an option to purchase 100,000 shares of our common stock issued to Mr.  Fuca and to make such option exercisable for 15 months following his termination date.

               On November 9, 2001, we entered into a severance agreement with James Bozzini, our former Chief Operating Officer and Vice President, Finance, pursuant to which, we agreed to pay Mr.  Bozzini four months of his base salary as a severance payment.  We also agreed to pay Mr.  Bozzini all accrued salary and all accrued and unused vacation through his employee termination date, as well as to pay his COBRA premiums through his severance period.  We further agreed to accelerate the vesting of an option to purchase 250,000 shares of our common stock issued to Mr.  Bozzini and to make such option exercisable for 15 months following his termination date.

               On November 12, 2001, we entered into a severance agreement with David Hsieh, our former Vice President, Marketing, pursuant to which it was agreed that his employee termination date would be November 16, 2001.  We agreed to pay Mr.  Hsieh three months of his base salary as a severance payment.  We also agreed to pay Mr.  Hsieh all accrued salary and all accrued and unused vacation through his employee termination date, as well as to pay his COBRA premiums for three months.

               On May 23, 2002, we entered into a severance agreement with Kurt Heikkinen, our former Vice President, Engineering and Customer Service, pursuant to which, we agreed to pay Mr.  Heikkinen three months of his base salary as a severance payment.  We also agreed to pay Mr.  Heikkinen all accrued salary and all accrued and unused vacation through his employee termination date, as well as to pay his COBRA premiums for four months.  We further agreed to accelerate the vesting of all of Mr.  Heikkinen's stock options and make such options exercisable for 15 months following his termination date.

               On June 12, 2002, we entered into a severance agreement with Kenneth J.  Bozzini, our former Vice President, Finance and Chief Financial Officer, pursuant to which it was agreed that his employee termination date would be August 1, 2002.  We agreed to pay Mr.  Bozzini six months of his base salary as a severance payment.  We also agreed to pay Mr.  Bozzini all accrued salary and all accrued and unused vacation through his employee termination date, as well as to pay his COBRA premiums for three months.  We further agreed to accelerate the vesting of Mr.  Bozzini's stock options by an additional 12 months and make such options exercisable for 15 months following his termination date.

               On September 30, 2002, we entered into a severance agreement with Dale Royal, our former Vice President, Sales, pursuant to which we agreed to pay Mr.  Royal four weeks of his base salary as a severance payment.  We also agreed to pay Mr.  Royal all accrued salary and all accrued and unused vacation through his employee termination date, as well as to pay his COBRA premiums for one month.

Promissory Note Amendments

               In November 2001, we agreed to amend certain promissory notes that were issued to us by our executive officers and directors, in order to purchase our common stock.  Each of the promissory notes was amended to provide that the note was non-recourse to the maker of the note, so that the only recourse we would have to ensure the note was repaid was to retire the stock issued to such persons.  The promissory notes were also amended to provide that the notes would mature on the earlier to occur of the fourth anniversary of the note and 15 months from such person's termination of employment with or service to us.  The promissory notes of the following executive officers and in the original principal amounts indicated were amended:

Name

Original Principal Amount of Promissory Note

John Bantleman (1)

$  975,000

$  375,000

James Bozzini (2)

$  900,000

Kenneth J. Bozzini (3)

$  6,250

Jeffrey M. Drazan

$  375,000

$  100,000

Joseph Fuca (4)

$  937,500

Kurt Heikkinen

$  75,000

$  187,500

$  270,000

JRO Consulting, Inc. (5)

$  100,000

Paul Rochester

$  375,000

(1)

The amendment to Mr.  Bantleman's promissory note provides that the note will mature 15 months from his termination of employment with us.

(2)

The amendment to Mr.  J.  Bozzini's promissory note provides that the note will mature 15 months from his termination of employment with us.

(3)

The amendment to Mr.  K.  Bozzini's promissory note provides that the note will mature on the earlier to occur of November 18, 2003 and 15 months fromhis termination of employment with us.

(4)

The amendment to Mr.  Fuca's promissory notes provides that the notes will mature 15 months from his termination of employment with us.

(5)

John R.  Oltman is the President of JRO Consulting, Inc.

Change of Control

               On October 9, 2001, Warburg Pincus Private Equity VIII, L.P.  purchased 1,000,000 shares of our Series A Preferred Stock at a price of $10 per share, with the purchase price paid in cash at the closing of the sale of such shares.  Based on the information set forth in a Schedule 13D, as amended, the aggregate purchase price of $10,000,000 paid for the shares of Series A Preferred Stock was paid out of the working capital of Warburg Pincus Private Equity VIII, L.P.  In addition, we issued Series A Preferred Stock warrants to Warburg Pincus Private Equity VIII, L.P.  to purchase up to an aggregate of 1,000,000 shares of our Series A Preferred Stock at an exercise price of $10 per share and seven-year common stock warrants to purchase up to 5,000,000 shares of common stock at an exercise price of $1.00 per share.

               On March 26, 2002, we issued Warburg Pincus Private Equity VIII, L.P.  an additional 500,000 shares of Series A Preferred Stock at a price of $10 per share, with the purchase price of $5,000,000 paid in cash, upon exercise of certain of the Preferred Stock warrants.  Upon exercise of the Series A Preferred Stock warrants, Warburg Pincus Private Equity VIII, L.P.  received additional seven-year common stock warrants to purchase up to an aggregate of 2,500,000 shares of our common stock at an exercise price of $1.00 per share.

               On August 20, 2002, Warburg Pincus Private Equity VIII, L.P.  purchased 500,000 shares of our Series B Preferred Stock at a price of $10 per share, with the purchase price paid in cash at the closing of the sale of such shares.  Based on the information set forth in a Schedule 13D/A, the aggregate purchase price of $5,000,000 paid for the shares of Series B Preferred Stock was paid out of the working capital of Warburg Pincus Private Equity VIII, L.P.

               According to its Schedule 13D/A, Warburg is presently the beneficial owner of 61.5% of the outstanding shares of our common stock.

AUDIT COMMITTEE REPORT

               The audit committee oversees our financial reporting process on behalf of the board of directors.  Management has the primary responsibility for our financial statements and the overall reporting process, including our system of financial controls.  In fulfilling its oversight responsibilities during fiscal 2002, the audit committee periodically:

• reviewed and discussed the audited financial statements with our management;

• reviewed the unaudited and audited financial statements with management and our independent public accountants, PricewaterhouseCoopers LLP;

• discussed the accounting principles, significant assumptions, estimates and matters of judgment used in preparing the financial statements with management and PricewaterhouseCoopers LLP;

• reviewed our financial controls and financial reporting process; and

• reviewed significant financial reporting issues and practices, including changes in accounting principles and disclosure practice.

               The audit committee also reviewed with PricewaterhouseCoopers LLP, which is responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted accounting principles, their judgment as to the quality, and not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the audit committee under generally accepted accounting principles.  The audit committee periodically met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls and the overall quality of our financial reporting.

               In addition, the audit committee has discussed with PricewaterhouseCoopers LLP their independence from management and us, including the matters in the written disclosures required by the Independence Standards Board and discussed with PricewaterhouseCoopers LLP any matters required to be discussed by Statement on Auditing Standards No.  61 (Communications with Audit Committees).  The audit committee also considered the compatibility of PricewaterhouseCoopers LLP's (non-audit services, principally tax advisory services,) with the standards for auditor independence.  The audit committee discussed with PricewaterhouseCoopers LLP the overall scope and plans for their audit.

               The directors who serve on the audit committee are all "independent" for purposes of the rules of the Nasdaq Stock Market, and further all of them meet the financial literacy and expertise tests recommended by the Blue Ribbon Committee on Improving the effectiveness of Corporate Audit Committees.  During fiscal 2002, the audit committee met four times, with all members in attendance at each meeting.

               In reliance on the reviews and discussions referred to above and representations by management that the financial statements were prepared in accordance with generally accepted accounting principles, the audit committee recommended to the board of directors that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended June 30, 2002.  The audit committee also recommended to the board of directors the selection of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending June 30, 2003.

The Audit Committee of the

Board of Directors For Fiscal 2002

John R.  Oltman

Cary Davis

Paul Rochester

AUDIT AND RELATED FEES

Audit Fees

               Fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of our annual financial statements for the fiscal year ended June 30, 2002 and for reviews of the financial statements included in our quarterly reports for that fiscal year were $201,400, of which $86,000 had been billed through June 30, 2002.

Financial Information Systems Design and Implementation Fees

               We did not engage PricewaterhouseCoopers LLP to provide advice to us regarding financial information systems design and implementation during the fiscal year ended June 30, 2002.

All Other Fees

               During our fiscal year ended June 30, 2002, the aggregate fees billed by PricewaterhouseCoopers LLP for professional services other than audit fees was $152,150, which consisted of $80,600 for assistance with our Series A Preferred Stock financing, $18,700 associated with our Vivant! Acquisition and $52,850 for various matters relating to SEC compliance, all of which had been billed through June 30, 2002.

               The audit committee considered and determined that the provision of the services other than the services described under "Audit Fees" is compatible with maintaining the independence of the independent auditors.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Summary of Compensation Policies for Executive Officers

               Our compensation program's goals are to:

• attract, retain and motivate highly-qualified executive officers who can provide operational and strategic excellence that will produce continuing success for us;

• align compensation for our executive officers with our business objectives and performance; and

• align incentives for our executive officers with the interests of our stockholders to enhance financial performance and stockholder value.

               We emphasize performance-based compensation that is competitive with the marketplace, and the importance of clearly communicating performance objectives.  The compensation committee annually reviews our compensation practices by comparing them to surveys of other companies against which we compete in business or for talent, and other companies of comparable size and complexity.  The compensation committee also examines emerging trends and practices in the broader software market.  The compensation committee then sets objective compensation parameters based on this review.

               Our compensation program for all employees includes both cash and equity-based elements.  Because it is most directly linked to our stockholders' interests, equity-based compensation is emphasized in our compensation programs.  Consistent with competitive practices, we also use a cash bonus plan based on achievement of financial performance and key operational objectives.

Cash Compensation

               Salary.  We set a base salary range for each executive officer, including the Chief Executive Officer, by reviewing the base salary for comparable positions of a broad peer group, including competing companies similar in size and companies against which we compete in business or for talent.  We set individual salaries for each executive officer relative to this range based on sustained individual performance, contribution to our results and internal comparison of duties and responsibilities.

               Cash Bonus.  To help recruit, retain and motivate executives with market-competitive incentives, in fiscal 2002, we provided a cash bonus program for executives, based on performance.  In fiscal 2003, we will employ similar performance measures for cash bonus incentives.

Equity-Based Compensation

               Executive equity grants are determined using the Black-Scholes method of evaluating our stock option grants against a Black-Scholes evaluation of grants by our peer group competitors.  Options granted to executive officers are subject to vesting over time.  Initial or "new-hire" options are typically granted to executive officers when they first join our company.  All options that we grant are issued with an exercise price at the then-current fair market value and thus become valuable only if the executive officer continues to serve our company and the price of our stock subsequently increases.

Compensation of The Chief Executive Officer

               Our Chief Executive Officer's salary and performance stock option grants follow the policies set forth above.  Our CEO's base annual salary for fiscal 2001 was $255,000, compared to $200,000 in fiscal 2000.  For fiscal 2003, our CEO's target annual incentive will be consistent with market cash incentives.  Our CEO's compensation package is designed to be strongly aligned with the interests of stockholders by making her cash incentives directly tied to achieving specific targets and by granting stock options that become valuable only if she continues to serve at the Company and the price of our stock subsequently rises.

Tax Deductibility

               We are subject to Section 162(m) of the Internal Revenue Code, which imposes a limitation on the deductibility of nonperformance-based compensation in excess of $1,000,000 paid to any of our named executive officers.  We believe that compensation resulting from the exercise of stock options granted by us is deductible as performance-based compensation.  We intend to comply with the provisions of Section 162(m) so as to preserve the related federal income tax deductions, although individual exceptions may occur.  We, however, have not sought to qualify our cash bonus plan for executives under Section 162(m) as deductible compensation. 

The Compensation Committee of the

Board of Directors

Gayle Crowell

John R.  Oltman

Jeffrey M.  Drazan

COMPARISON OF STOCKHOLDER RETURN

               Set forth below is a line graph comparing the cumulative total return on our common stock with the cumulative total return of the Nasdaq Composite Index and the J.P.  Morgan H&Q Technology Index on a quarterly basis for the period commencing on August 10, 2000 (the date of our initial public offering) and ending on June 30, 2002.  The graph assumes that $100.00 was invested on August 10, 2000 in our common stock and in each index, and that all dividends were reinvested.  No cash dividends have been declared on our common stock.  Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

8/10/00

9/00

12/00