EVOLVE SOFTWARE INC, S-1/A, 2000-03-21

EVOLVE SOFTWARE INC
S-1/A, 2000-03-21
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on March 21, 2000
Registration No. 333-

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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Evolve Software, Inc.
(Exact name of Registrant as specified in its charter)

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<S> <C> <C>
Delaware 7372 94-3219745
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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615 Battery St., 4th Floor
San Francisco, CA 94111
(415) 439-4000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

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John Bantleman
President & Chief Executive Officer
Evolve Software, Inc.
615 Battery St., 4th Floor
San Francisco, CA 94111
(415) 439-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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Copies to:
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Barry E. Taylor, Esq. William H. Hinman, Jr., Esq.
Ramsey Hanna, Esq. Shearman & Sterling
Wilson Sonsini Goodrich & Rosati 1550 El Camino Real, Suite 100
Professional Corporation Menlo Park, CA 94025
650 Page Mill Road (650) 330-2200
Palo Alto, CA 94304
(650) 493-9300
</TABLE>

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.

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EVOLVE SOFTWARE, INC.

CROSS-REFERENCE SHEET

Showing Location in Prospectus of Information
Required by Items of Form S-1

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Form S-1 Registration
Statement Heading Heading or Location in Prospectus
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<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Forepart of the Registration Statement;
Cover Page of Prospectus... Outside Front Cover Page of Prospectus

2. Inside Front and Outside
Back Cover Pages of Inside Front Cover Page; Outside Back Cover
Prospectus................. Page

3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges.. Prospectus Summary; Risk Factors

4. Use of Proceeds............. Prospectus Summary; Use of Proceeds

5. Determination of Offering
Price...................... Underwriting

6. Dilution.................... Dilution

7. Selling Security Holders.... Not Applicable

8. Plan of Distribution........ Underwriting

9. Description of Securities to Outside Front Cover Page; Prospectus
be Registered.............. Summary; Capitalization; Description of
Capital Stock

10. Interests of Named Experts
and Counsel................ Legal Matters

11. Information with Respect to Inside and Outside Cover Pages; Prospectus
the Registrant............. Summary; Risk Factors; Use of Proceeds;
Dividend Policy; Capitalization; Dilution;
Selected Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Shares
Eligible for Future Sale; Consolidated
Financial Statements

12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................ Not Applicable
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH , 2000

[EVOLVE LOGO]

Common Stock

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Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on The Nasdaq
Stock Market's National Market under the symbol "EVLV."

The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.

Investing in our common stock involves risks. See "Risk Factors" on Page 7.

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Underwriting
Price to Discounts and Proceeds to
Public Commissions Evolve
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Per Share.................................. $ $ $
Total...................................... $ $ $
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Delivery of the shares of common stock will be made on or about , 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful and complete. Any representation to the contrary is
a criminal offense.

Credit Suisse First Boston Deutsche Banc Alex. Brown

The date of this prospectus is , 2000.
<PAGE>

[Description of inside front cover graphic]

The company's slogan, "Evolve. How Professional Services Get Connected,"
appears in large type. An arrow directly under this text points to a large
screen shot of ServiceSphere's Resource Manager module framed in a circle. On
the bottom right of the circle is another arrow pointing to a smaller circle
containing the Evolve logo.

[Description of inside front cover gatefold graphic]

The title "Connecting the Service Chain" spans both pages of the front
gatefold cover.

The top left of the first page contains the Evolve logo with a sidebar
containing the following text "Our ePlatform solution helps services providers
and acquirers improve the effectiveness of their internal operations and
connects them to their clients, partners and suppliers through Services.com in a
collaborative transactional environment."

In the center of the page is a circle with the Services.com logo inside of it.
To the left of the circle are three smaller circles labeled "O", "R" and "D"
with curved arrows connecting each one running counter-clockwise forming a
larger circle. In the middle of this circle is the word "ServiceSphere". Below
the circle are the words "Services Acquirer." The arrow from the "R" to the "D"
overlaps with a portion of the left edge of the larger circle labeled
Services.com. Inside the intersection of the circles is the word "sXML". On the
right of the large circle labeled Services.com is another set of three circles
labeled "O", "R" and "D" again connected by curved arrows between them running
counter-clockwise with the words "ServiceSphere" in the center. Below this
circle are the words "Services Provider". The arrow from the "D" to the "O"
overlaps with a portion of the right edge of the larger circle labeled
Services.com. Inside the intersection of the circles is the word "sXML".

On the top perimeter of the large circle labeled Services.com is a curved
arrow running from right to left around one-third of the diameter with the text
"Collaborative Commerce" above the arrow.

On the bottom perimeter is a curved arrow running from left to right with the
text "Collaborative Commerce" below the arrow.

The top right corner of the second page contains the word "ePlatform" with a
sidebar under it containing a legend:

The first legend item is a circle containing the letter "O" followed by the
text "Opportunity Manager". Under this is a bullet with the text "Reduces the
time to identify and close a qualified opportunity" followed underneath by
another bullet with the text "Improves Managerial Visibility".

The second legend item is a circle containing the letter "R" followed by the
text "Resource Manager". Under this text is a bullet with the text "Optimizes
resource utilization" followed underneath by another bullet with the text
"Improves resource retention".

The third legend item is a circle containing the letter "D" followed by the
text "Delivery Manager". Under this text is a bullet with the text "Increases
billing accuracy and payment efficiency" followed underneath by another bullet
with the text "Optimizes financial performance".

Under this legend is the Services.com logo with a bullet underneath with the
text "Services providers more effectively market their capabilities and respond
to requests from services acquirers" Followed underneath by another bullet with
the text "Services acquirers define and communicate their business requirements
to a qualified group of services providers". Under this text is another bullet
with the text "Services providers and acquirers seamlessly and securely interact
throughout the entire services engagement".

Under all the graphics is a text box listing all customers of Evolve in
alphabetical order and containing the text "Over 40,000 Professionals managed."
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TABLE OF CONTENTS
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Page
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Prospectus Summary....................................................... 3

Risk Factors............................................................. 7

Special Note Regarding Forward- Looking Information...................... 18

Use of Proceeds.......................................................... 19

Dividend Policy.......................................................... 19

Capitalization........................................................... 20

Dilution................................................................. 21

Selected Financial Data.................................................. 22

Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23

Business................................................................. 34
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Page
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Management................................................................. 48

Certain Relationships and Related Transactions............................. 59

Principal Stockholders..................................................... 63

Description of Capital Stock............................................... 65

Shares Eligible for Future Sale............................................ 68

Underwriting............................................................... 70

Notice to Canadian Residents............................................... 73

Legal Matters.............................................................. 74

Experts.................................................................... 74

Where You Can Find More Information........................................ 74

Index to Financial Statements.............................................. F-1
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.

Dealer Prospectus Delivery Obligation

Until , 2000 (25 days after commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should carefully
read the entire prospectus and the risk factors beginning on page 7 before
evaluating an investment in our stock.

Unless otherwise stated, the terms "Evolve", "we" or "us" as used in this
prospectus refer to Evolve Software, Inc.

Evolve Software, Inc.

We are a leading provider of Internet-based end-to-end solutions for
automating professional services organizations. Our ServiceSphere process
automation solution facilitates the management of project opportunities,
professional resources, and service delivery and provides enterprise-wide
visibility of business performance. Our recently launched Services.com offering
extends the capabilities of our ServiceSphere solution to integrate the
business processes of services providers and acquirers in an efficient,
collaborative, transactional environment. Our solution combines the efficiency
gains of core business process automation with the benefits of an online
marketplace, creating an ePlatform for the professional services industry. We
have licensed our solution to 23 customers, each of whom has purchased more
than $250,000 in products and services from us, and who collectively license
our solution to manage over 40,000 services professionals. Our customers
include Cambridge Technology Partners, DMR Consulting Group, Novell, Razorfish,
Whittman-Hart, and Zefer.

The US professional services market is projected to generate $2.1 trillion
in revenues in 2000, according to Benchmarking Partners. This market includes
the information technology, management consulting, advertising, media, public
relations, architecture, construction, engineering, financial services, law,
tax, audit, and health care sectors. We believe that the unique nature of the
professional services industry has created an opportunity for the development
and delivery of an ePlatform that is designed to serve members of the service
chain - providers and acquirers of professional services. Unlike product-based
businesses, professional services organizations are inherently virtual,
collaborative and people-centric. This creates complex operational and
management challenges for services organizations, both within their enterprise
and in dealing with other service chain members, which traditional enterprise
software applications have not addressed.

Our ePlatform solution consists of three business process modules that
integrate and automate the core processes that are critical to the operational
effectiveness of services organizations. Our Opportunity Manager module assists
in identifying, managing, and prioritizing project opportunities across the
entire services organization. Our Resource Manager module facilitates
allocation of resources to optimize utilization and resource retention. Our
Delivery Manager module enables flexible and integrated time and expense
tracking, billing and analysis to improve profitability and customer
satisfaction. These modules will be tightly integrated with our Services.com
offering to create an efficient collaborative online transactional environment
that connects providers and acquirers of professional services with other
members of the service chain.

Our objective is to become the leading ePlatform provider for automating the
service chain. The key elements of our strategy include:

. Extending our market position among information technology services
organizations;

. Enhancing our technology leadership;

. Capitalizing on network effects to connect the service chain;

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. Expanding our solution acquisition, deployment, and pricing options;

. Increasing the deployment of our solution throughout a customer's
organization; and

. Expanding into new geographic markets and services industries.

We were incorporated in Delaware in February 1995. Our principal executive
offices are located at 615 Battery Street, 4th Floor, San Francisco, CA 94111
and our telephone number is (415) 439-4000.

Evolve, "Evolve. Connect. Thrive.", ServiceSphere, Services.com, "Connecting
the Service Chain", sXML and the Evolve Logo are our trademarks. All other
trademarks or service marks appearing in this prospectus are trademarks or
service marks of the respective companies that own them.

4
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The Offering

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Common stock offered in this offering...... shares

Common stock outstanding after this shares
offering..................................

Use of proceeds from this offering......... For general corporate purposes,
including working capital, for
repayment of indebtedness and for
potential acquisitions. See "Use
of Proceeds."

Proposed Nasdaq National Market symbol..... EVLV
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The number of shares of common stock outstanding after this offering is
based on the number of shares outstanding as of March 15, 2000 and gives effect
to the conversion of all shares of our preferred stock into common stock upon
the closing of this offering. This number excludes:

. 2,927,445 shares of common stock that we may issue upon exercise of
options outstanding as of March 15, 2000 with a weighted average exercise
price of $0.38;

. 4,255,450 shares of common stock issuable under our active stock plans;
and

. 983,944 shares that we may issue upon exercise of warrants outstanding as
of March 15, 2000 at a weighted average exercise price of $1.27 per
share.

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Except as otherwise indicated, the information in this prospectus assumes:

. the conversion of all outstanding shares of preferred stock into an
aggregate of 30,169,986 shares of common stock upon the closing of this
offering and the presentation of preferred stock on an as converted to
common stock basis;

. a one for three reverse stock split of our stock effective upon the
closing of this offering;

. no exercise of the underwriters' option to purchase additional
shares after the closing of the offering; and

. the issuance of 3,666,667 shares of our common stock upon completion of
our acquisition of InfoWide, Inc.

5
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Summary Financial Data
(in thousands, except per share data)

The following tables summarize our financial data. You should read the
summary financial data below in conjunction with our financial statements and
the related notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," beginning on page 23. The as adjusted
balance sheet data reflect our sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share, after
deducting estimated underwriting discounts, commissions and offering expenses.

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December 31, 1999
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Actual As Adjusted
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(unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................ $17,505 $
Restricted cash...................................... 2,000
Working capital...................................... 16,804
Total assets......................................... 25,792
Long-term debt and capital lease obligations, net of
current portion..................................... 3,954
Total stockholders' equity........................... 12,977
</TABLE>

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should
carefully consider the following risks and all other information contained in
this prospectus before purchasing our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties that we do not presently know about or that we currently deem
immaterial may also impair our business operations. Any of the following risks
could materially harm our business, financial condition or operating results,
and cause the trading price of our common stock to decline. As a result, you
could lose all or part of your investment.

Risks Related to Our Business

Our business is difficult to evaluate because our operating history is limited.

It is difficult to evaluate our business and our prospects because our
revenue and income potential are unproven. We did not begin selling our first
products until the fourth quarter of 1998 and commenced recognizing sales
revenues in the first quarter of 1999. Because of our limited operating
history, there may not be an adequate basis for forecasts of future operating
results. To date, we have encountered the risks frequently encountered by early
stage companies, particularly companies in new and rapidly evolving markets.
Our business strategy may not be successful and we may not be able to
successfully address these risks.

We have incurred losses since inception, and we may not be able to achieve
profitability.

We have incurred net losses and losses from operations since our inception
in 1995, and we may not be able to achieve profitability in the future. As of
December 31, 1999, we had an accumulated deficit of approximately $47.9
million. Since inception, we have funded our business primarily from the sale
of our stock and by borrowing funds, not from cash generated by our business.
We expect to continue to incur significant sales and marketing, research and
development, and general and administrative expenses. As a result, we expect to
experience continued losses and negative cash flows from operations. If we do
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis in the future.

Our future operating results may not follow past trends due to many factors,
and any of these could cause our stock price to fall.

We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of future performance. Although our operating results
have generally improved from quarter to quarter in the recent past, our future
operating results may not follow past trends. It is likely that in some future
quarters our operating results may be below the expectations of public market
analysts and investors due to factors beyond our control, and as a result, the
price of our common stock may fall.

Factors that may cause our future operating results to be below expectations
and cause our stock price to fall include:

. The lack of demand for and acceptance of our products, product
enhancements and services;

. Unexpected changes in the development, introduction, timing and
competitive pricing of our products and services and those of our
competitors;

. Any inability to expand our direct sales force and indirect marketing
channels both domestically and internationally;

. Any failure to attract and retain of key personnel, particularly in our
development, sales, services and support groups;

. The budgeting cycles of our customers;

. Our compensation policies that tend to compensate sales personnel more
for achieving annual quotas, typically in the latter half of the fiscal
year; and

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. The timing and integration of and costs related to technologies and
businesses we may acquire in the future.

We plan to significantly increase our operating expenses to expand our
administration, information technology infrastructure, consulting and training,
maintenance and technical support, research and development and sales and
marketing groups. Our operating expenses are based on our expectations of
future revenues and are relatively fixed in the short term. If revenues fall
below our expectations in any quarter and we are not able to quickly reduce our
spending in response, our operating results would be lower than expected and
our stock price may fall.

We may lose existing customers or be unable to attract new customers if we do
not develop new products or enhance our existing products.

If we are not able to maintain and improve our product line and develop new
products, we may lose existing customers or be unable to attract new customers.
We may not be successful in developing and marketing product enhancements or
new products on a timely or cost-effective basis. These products, if developed,
may not achieve market acceptance.

We have commitments to certain of our customers to develop product
enhancements that address their specific needs. If we fail to deliver these
enhancements on a timely basis, we risk damaging our relationship with these
customers. We have experienced delays in the past in releasing new products and
product enhancements and may experience similar delays in the future. These
delays or problems in the installation or implementation of our new releases
may cause customers to forego purchases of our products or to purchase those of
our competitors.

The growth of our business depends on the growth of the market for process
automation solutions for professional services organizations.

All of our historical revenues have been attributable to the sale of
automation solutions for professional services organizations. This is a
relatively new enterprise application solution category, and it is uncertain
whether major services organizations will choose to adopt process automation
systems. While we have devoted significant resources to promoting market
awareness of our products and the problems such products address, we do not
know whether these efforts will be sufficient to support significant growth in
the market for process automation products. Accordingly, the market for our
products may not continue to grow or, even if the market does grow in the
immediate term, that growth may not be sustainable.

Our Services.com offering is unproven and may not achieve customer acceptance.

We believe that our Services.com offering is a key factor in our ability to
extend our solution beyond the enterprise to manage the relationships and
interactions between professional services users, suppliers and subcontractors.
Services.com was announced in February 2000 and has not yet commenced
commercial operation. To date there are no binding customer commitments to use
Services.com, and we cannot be certain that any of our current or future
customers will choose to use Services.com, or that Services.com will contribute
to an expansion of our customer base. Moreover, market demand for eMarketplaces
linking multiple buyers and suppliers is in its nascence, and it is impossible
to predict whether such eMarketplaces will succeed in displacing entrenched
methods of doing business or capture a significant portion of market trade
volumes. Customers may therefore be reluctant to employ Services.com or any
other Evolve solutions that extend beyond the enterprise. Moreover, we cannot
predict whether customers will support our economic model for the
intermediation services offered by Services.com. We currently anticipate
earning a percentage of all service fees generated by service interactions
brokered or managed by Services.com. We cannot be certain that customers will
be willing to incur such transaction fees, or that the fees earned will be
provided an adequate return on the expenditures required to create, launch,
support and promote the service.

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In addition, the technology and business models underlying Services.com are
unproven. Without prior operating history, we cannot be sure that our website
infrastructure will be able to adequately support large transaction volumes or
perform critical functions.

If we fail to establish, maintain or expand our relationships with third
parties, our ability to grow revenues could be harmed.

In order to grow our business, we must establish, maintain and strengthen
relationships with third parties, such as information technology (IT)
consultants and systems integrators as implementation partners, hardware and
software vendors as marketing partners, and content providers for our
Services.com offering. If these parties do not provide sufficient, high-quality
service or integrate and support our software correctly, our revenues may be
harmed. In addition, these parties may offer products of other companies,
including products that compete with our products. Our contracts with third
parties may not require these parties to devote resources to promoting, selling
and supporting our solutions. Therefore we may have little control over these
third parties. We cannot assure you that we can generate and maintain
relationships that offset the significant time and effort that are necessary to
develop these relationships, or that, even if we are able to develop such
relationships, these parties will perform adequately.

Our services revenues have a substantially lower margin than our software
license revenues, and an increase in services revenues relative to license
revenues could harm our gross margins.

Our Solutions and Subscriptions revenues each consist of fees we charge
customers to license our software as well as fees for services we provide to
customers. Revenues derived from services we provide have substantially lower
gross margins than revenues we derive from licensing our software. The relative
contribution of services we provide to our overall revenues is subject to
significant variation based on the structure and pricing of arrangements we
enter into with customers in the future, and the extent to which our partners
provide implementation, integration, training and maintenance services required
by our customers. An increase in the percentage of total revenues generated by
the services we provide could adversely affect our overall gross margins.

Difficulties with third-party services and technologies could disrupt our
business and undermine our reputation.

Our success in attracting and retaining customers for our Services.com and
Application Service Provider (ASP) offerings and convincing them to increase
their reliance on these solutions depends on our ability to offer customers
reliable, secure and continuous service. This requires that we provide
continuous and error-free access to our systems and network infrastructure. We
rely on third parties to provide key components of our networks and systems.
For instance, we rely on third-party Internet Service Providers to host
applications for customers who purchase our solutions on a subscription basis.
We also rely on third-party communications services providers for the high-
speed connections that link our Web servers and office systems to the Internet.
Many of our systems do not have redundant backup systems capable of mitigating
the effect of service disruptions. Any Internet or communications systems
failure or interruption could result in disruption of our service or loss or
compromise of customer orders and data. Such failures, especially if they are
prolonged or repeated, would make our service less attractive to customers and
tarnish our reputation.

Our markets are highly competitive and competition could harm our ability to
sell products and services and reduce our market share.

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expand their technologies or acquire companies to support greater professional
services automation functionality and capabilities. In addition, "in-house"
information technology departments of potential customers have developed or may
develop systems that substitute for some of the functionality of our ePlatform.

Some of our competitors' products may be more effective than our products at
performing particular functions or be more customized for particular customer
needs. Even if these functions are more limited than those provided by our
products, our competitors' software products could discourage potential
customers from purchasing our products. A software product that provides some
of the functions of our software solutions, but also performs other tasks may
be appealing to these vendors' customers because it would reduce the number of
different types of software necessary to effectively run their business.
Further, many of our competitors may be able to respond more quickly than we
can to changes in customer requirements.

Some of our competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly
than we can to new or emerging technologies and changes in customer
requirements. Our competitors have made and may also continue to make strategic
acquisitions or establish cooperative relationships among themselves or with
other software vendors. They may also establish or strengthen cooperative
relationships with parties with our current or future partners, thereby
limiting our ability to promote our products through these partners and
limiting the number of consultants available to implement our software.

Our operating results may vary significantly due to our lengthy and
unpredictable sales cycles for our products and resistance to adoption of our
software.

Because our products and services have lengthy and unpredictable sales
cycles, it is difficult for us to forecast the timing and recognition of
revenues from sales of our solutions. Since we are unable to control many of
the factors that will influence our customers' buying decisions, lengthy and
unpredictable sales cycles could cause our operating results to be below the
expectations of analysts and investors.

Customers in our target market often take an extended time evaluating our
products before purchasing them. Our products may have an even longer sales
cycle in international markets. During the evaluation period, a variety of
factors, including the introduction of new products or aggressive discounting
by competitors and changes in our customers' budgets and purchasing priorities,
may lead customers to not purchase or scale down orders of our products.

In addition, because we are pioneering a new solution category, we often
must educate our prospective customers regarding the use and benefit of our
solutions, which may cause additional delays during the evaluation and
acceptance process. These companies may be reluctant to abandon investments
they have made in other systems in favor of our solution. In addition, IT
departments of potential customers may resist purchasing our solutions for a
variety of other reasons, particularly the potential displacement of their
historical role in creating and running software and concerns that packaged
software products are not sufficiently customizable for their enterprises.

Our revenues depend on orders from our top customers, and if we fail to
complete one or more orders, our revenues will be reduced.

To date, we have received a significant portion of our revenues from a small
number of large orders from our top customers. For the year ended June 30,
1999, our initial customers, Whittman-Hart, Netscape and Becton Dickinson
accounted for 58%, 32% and 10% of our total revenues, respectively. For the six
months ended December 31, 1999, Novell, Whittman-Hart, Cambridge Technology
Partners and Lante accounted for 31%, 18%, 14% and 10%, of our total revenues,
respectively. Our operating results may be harmed if we are not able to
complete one or more substantial product sales in any future period or attract
new customers.

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We depend on the continued services of our executive officers, and the loss of
key personnel or any inability to attract and retain additional personnel could
affect our ability to successfully grow our business.

Our future success will depend in large part on our ability to hire and
retain a sufficient number of qualified personnel, particularly in sales,
marketing, research and development, service and support. If we are unable to
do so, this inability could affect our ability to grow our business.
Competition for qualified personnel in high technology is intense, particularly
in the San Francisco Bay Area where our principal offices are located. Our
future success also depends upon the continued service of key engineering,
sales, services and marketing staff. The loss of the services of our key
personnel would harm our operations. None of our key personnel are bound by an
employment agreement, and we do not maintain key person insurance on any of our
employees. Because we, like many other technology companies, rely on stock
options as a component of our employee compensation, if the market price of our
common stock increases or decreases substantially, some current or potential
employees may perceive our equity incentives as less attractive. In that case,
our ability to attract and retain employees may be adversely affected.

Our future success depends upon the continued service of our executive
officers, who are listed in the section entitled "Management," particularly
John Bantleman, our President and Chief Executive Officer. None of our
executive officers are bound by an employment agreement for any specific term.
Our business could be harmed if we lost the services of one or more of our
executive officers or key employees, or if one or more of them decides to join
a competitor or otherwise compete directly or indirectly with us.

Our executive management team has limited experience working together, which
may make it difficult to conduct and grow our business.

Our Chief Operating Officer, our Vice President, Marketing and Business
Development and our Vice President, Marketplace Services have been employed by
us only since November 1999; our Vice President, Worldwide Customer Service has
been employed by us only since December 1999; and our Vice President, Strategy
has been employed by us only since March 2000. Therefore, there has been little
or no opportunity to evaluate the effectiveness of our executive management
team as a combined unit. In addition, we intend to recruit a Chief Financial
Officer, a Vice President of Worldwide Sales and other key executives. The
failure of executive management to function effectively as a team may have an
adverse effect on our ability to develop and market our products, maintain
customer relationships, present a cohesive culture and compete effectively.

Our acquisitions could be difficult to integrate, disrupt our business and
dilute stockholder value.

We intend to make investments in or acquire complementary companies,
products and technologies. For example, we expect to complete our acquisition
of InfoWide, Inc. in March 2000. We have limited organizational experience in
acquiring and integrating business and will need to develop the relevant skills
if we are to be successful in any such endeavor. We could have difficulty in
assimilating the operations of InfoWide or any other company we buy. In
addition, we may be unsuccessful in retaining the key personnel of any acquired
company. Moreover, we currently do not know and cannot predict the accounting
treatment of any such acquisition, in part because we cannot be certain what
accounting regulations, conventions or interpretations may prevail in the
future. If we acquire complementary technologies or products, we could
experience difficulties assimilating the acquired technology or products into
our operations. These difficulties could disrupt our ongoing business, distract
our management and employees and increase our expenses. Furthermore, we may
have to incur debt or issue equity securities to pay for any future
acquisitions, the issuance of which could be dilutive to our existing
stockholders.

11
<PAGE>

If our products do not stay compatible with widely used software programs, our
revenues may be adversely affected.

Our ePlatform must work with widely used software programs. If these
software programs and operating environments do not remain widely used, or we
do not update our software to be compatible with newer versions of these
programs and systems, we may lose customers.

In order to operate our software, it must be installed on both a computer
server running the Microsoft Windows NT or Sun Solaris operating systems and a
computer server running database software from Microsoft or Oracle. If we fail
to obtain access to these software products, we may be unable to build and
enhance our products on schedule.

Our software connects to and uses data from a variety of our customers'
existing software systems, including systems from Oracle and SAP. If we fail to
enhance our software to connect to and use data from new systems of these
products, we may lose potential customers.

The cost and difficulties of implementing our products could significantly harm
our reputation with customers, diminishing our ability to license additional
products to our customers.

Implementation of our ServiceSphere ePlatform may be complex, time consuming
and expensive. Failure by customers to successfully deploy our product or
integrate it with other software systems could damage our reputation with
existing and future customers and reduce future revenues. In many cases, our
customers must interact with, modify or replace significant elements of their
existing computer systems. The costs of our products and services represent
only a portion of the related hardware, software, development, training and
consulting costs. The significant involvement of third parties, including
system integrators, could reduce the control we have over the implementation of
our product and the quality of customer service provided to organizations that
use our solutions.

Our sales are concentrated in the IT services industry and if our customers in
this industry decrease their infrastructure spending, or we fail to penetrate
other industries, our revenues may decline.

We expect to continue to direct our sales and marketing efforts primarily
toward companies in the IT services industry. Sales to customers in the IT
services industry accounted for substantially all of our revenues in fiscal
1999 and in the six months ended December 31, 1999. If we fail to continue
increasing penetration in this industry our operating results may suffer. Given
the high degree of competition and the rapidly changing environment in this
industry, there is no assurance that we will be able to continue sales in this
industry at current levels. In addition, we intend to market our product in
professional services organizations in other industries. Customers in these new
industries are likely to have different requirements and may require us to
change our product design or features, sales methods, support capabilities or
pricing policies. If we fail to successfully address the needs of these
customers, we may experience decreased sales in future periods.

If we lose key licenses we may be required to develop or license alternatives
which may cause delays or reductions in sales or shipments.

We rely on software that we have licensed from third parties, including
Paradigm Software Technologies, Poet Software and Inprise/Borland to perform
key functions of our ServiceSphere ePlatform, and we rely on these and other
third parties to support their products for our development and customer
support efforts. These companies could terminate our licenses if we breach our
agreements with them, or they could discontinue support of the products we
license from them. This could result in delays or reductions of sales or
shipments of our ePlatform until alternative software can be developed or
licensed.

12
<PAGE>

If our products contain significant defects or our services are not perceived
as high quality, we could lose potential customers or be subject to damages.

Our products are complex and may contain currently unknown errors, defects
or failures, particularly since new versions are frequently released. In the
past we have discovered software errors in some of our products after
introduction. We may not be able to detect and correct errors before releasing
our products commercially. If our commercial products contain errors, we may:

. need to expend significant resources to locate and correct the error;

. be required to delay introduction of new products or commercial shipment
of products; or

. experience reduced sales and harm to our reputation from dissatisfied
customers.

Our customers also may encounter system configuration problems that require
us to spend additional consulting or support resources to resolve these
problems.

Because our software products are used for critical operational and
decision-making processes by our customers, product defects may also give rise
to product liability claims. Although our license agreements with customers
typically contain provisions designed to limit our exposure, some courts may
not enforce all or part of these limitations. Although we have not experienced
any product liability claims to date, we may encounter these claims in the
future. Product liability claims, whether or not successful, could:

. divert the attention of our management and key personnel from our
business;

. be expensive to defend; and

. result in large damage awards.

We do not have product liability insurance, and even if we obtain product
liability insurance, it may not be adequate to cover all of the expenses
resulting from such a claim. In addition, if our customers do not find our
services to be of high quality, they may elect to use other training,
consulting and product integration firms rather than contract for our services.
If customers are dissatisfied with our services, we may lose revenues.

Our business may suffer if we are not able to protect our intellectual
property.

Our success is dependent on our ability to develop and protect our
proprietary technology and intellectual property rights. We seek to protect our
software, documentation and other written materials primarily through a
combination of patent, trade secret, trademark and copyright laws,
confidentiality procedures and contractual provisions. While we have attempted
to safeguard and maintain our proprietary rights, we do not know whether we
have been or will be completely successful in doing so. Further, our
competitors may independently develop or patent technologies that are
substantially equivalent or superior to ours.

We have two patent applications pending in the United States with respect to
certain aspects of our software. None of these patents have been issued, and
there can be no assurance that any patents will be issued pursuant to these
applications or that, if granted, such patent would survive a legal challenge
to their validity or provide significant protection to us. Despite our efforts
to protect our proprietary rights, unauthorized parties may attempt to copy
aspects of our products or obtain and use information that we regard as
proprietary. Policing unauthorized use of our products is difficult. While we
are unable to determine the extent to which piracy of our software products
exists, software piracy can be expected to be a persistent problem,
particularly in foreign countries where the laws may not protect proprietary
rights as fully as in the United States. We can offer no assurance that our
means of protecting its proprietary rights will be adequate or that our
competitors will not reverse engineer or independently develop similar
technology.

13
<PAGE>

If others claim that we are infringing their intellectual property, we could
incur significant expenses or be prevented from selling our products.

We cannot provide assurance that others will not claim that we are
infringing their intellectual property rights or that we do not in fact
infringe those intellectual property rights. We have not conducted a search for
existing intellectual property registrations and we may be unaware of
intellectual property rights of others that may cover some of our technology.

Any litigation regarding intellectual property rights could be costly and
time-consuming and divert the attention of our management and key personnel
from our business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require us to enter into costly
royalty or license agreements.

We may not be able to obtain royalty or license agreements on terms
acceptable to us, or at all. We also may be subject to significant damages or
an injunction against use of our products. A successful claim of patent or
other intellectual property infringement against us would have an immediate
material adverse effect on our business and financial condition.

We have grown very quickly and if we fail to manage our growth, our ability to
generate new revenues and achieve profitability would be harmed.

We have grown significantly since our inception and will need to grow
quickly in the future. Any failure to manage this growth could impede our
ability to increase revenues and achieve profitability. Evolve has increased
its number of employees from 58 at December 31, 1998 to 177 employees as of
March 15, 2000. In order to manage growth effectively, we must:

. hire, train and integrate new personnel;

. continue to augment our management information systems;

. manage our sales and services operations, which are in several locations;
and

. expand and improve our systems and facilities.

We intend to expand operations internationally but we may encounter a number of
problems in doing so which could limit our future growth.

We may not be able to successfully market, sell, deliver and support our
products and services internationally. Any failure to build and manage
effective international operations could limit the future growth of our
business. Entry into international markets will require significant management
attention and financial resources to open international offices and hire
international sales and support personnel. Localizing our products is difficult
and may take longer than we anticipate due to difficulties in translation and
delays we may experience in recruiting and training international staff. We
currently have no experience in developing local versions of our products, as
well as marketing, selling and supporting our products and services overseas.
Doing business internationally involves greater expense and many additional
risks, particularly:

. unexpected changes in regulatory requirements, taxes, trade laws,
tariffs, intellectual property rights and labor regulations;

. changes in a specific country's or region's political or economic
conditions;

. greater difficulty in establishing, staffing and managing foreign
operations; and

. fluctuating exchange rates.

14
<PAGE>

Privacy and security concerns, particularly related to the use of our software
on the Internet, may limit the effectiveness of and reduce the demand for our
products.

Our ePlatform solution relies on the use of confidential and sensitive
customer data that is collected or accessed on the Internet. Our collection and
use of such data for service professional profiling and other purposes may
raise privacy and security concerns. Our customers generally have implemented
security measures to protect customer and personnel data from disclosure or
interception by third parties. However, the security measures may not be
effective against all potential security threats. If a well-publicized breach
of customer data security were to occur, our ePlatform solution may be
perceived as less desirable, impacting our future sales and profitability.

In addition, due to privacy concerns, several legislative initiatives are
pending in the United States that would limit the use of data collection and
customer profiling technologies. The European Union and some European countries
have already adopted some restrictions on the use of personal data. If major
countries or regions adopt legislation or other restrictions on the use of
customer data collection and profiling, our solutions would be less useful to
our customers, and our sales and profits could decrease.

Potential imposition of governmental regulation or taxation on electronic
commerce could limit our growth.

The adoption of new laws or the adaptation of existing laws to the Internet
may decrease the growth in the use of the Internet, which could in turn
decrease the demand for our solutions, increase our cost of doing business or
otherwise have a material adverse impact on our business. Few laws or
regulations currently directly apply to access to commerce on the Internet.
Federal, state, local and foreign governments are considering a number of
legislative and regulatory proposals relating to Internet commerce. As a
result, a number of laws or regulations may be adopted regarding Internet user
privacy, taxation, pricing, quality of products and services, and intellectual
property ownership. How existing laws will be applied to the Internet in areas
such as property ownership, copyright, trademark, trade secret and defamation
is uncertain. The recent growth of Internet commerce has been attributed by
some to the lack of sales and value-added taxes on interstate sales of goods
and services over the Internet. Numerous state and local authorities have
expressed a desire to impose such taxes on sales to businesses in their
jurisdictions. The Internet Tax Freedom Act of 1998 prevents imposition of such
taxes through October 2001. If the federal moratorium on state and local taxes
on Internet sales is not renewed, or if it is terminated before its expiration,
sales of goods and services over the Internet could be subject to multiple
overlapping tax schemes, which could substantially hinder the growth of
Internet-based commerce, including use of our Services.com offering.

If we need additional financing to maintain and expand our business, financing
may not be available on favorable terms, if at all.

We expect to incur net losses before amortization charges for the
foreseeable future. We may need additional funds to expand or meet all of our
operating needs. If we need additional financing, we cannot be certain that it
will be available on favorable terms, if at all. Further, if we issue
additional shares of our capital stock, stockholders will experience additional
dilution, which may be substantial. If we need funds and cannot raise them on
acceptable terms, we may not be able to continue our operations at the current
level or at all.

Risks Associated with this Offering

Our securities have no prior market and we cannot assure you that our stock
price will not decline after the offering.

Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained after completion of
the offering. The initial public offering price may not be indicative of the
prices that will prevail in the public market after the offering, and the
market price of the common stock could fall below the initial public offering
price. The initial public offering price will be

15
<PAGE>

determined through negotiations between representatives of the underwriters and
us and may not be representative of the price of our common stock after this
offering. The market price of our common stock could fluctuate significantly
after this offering in response to any of the following:

. changes in financial estimates or investment recommendations by
securities analysts following our business;

. quarterly variations in our operating results falling below analysts' or
investors' expectations in any given period;

. general economic and information technology services market conditions;

. changes in economic and capital market conditions for Internet and other
information technology services companies;

. changes in market valuations of, or earnings and other announcements by,
providers of Internet and other information technology services;

. announcements by us or our competitors of new solutions, service
offerings, acquisitions or strategic relationships;

. changes in business or regulatory conditions; and

. trading volume of our common stock.

Many companies' equity securities, including equity securities of Internet
and other technology companies, have experienced extreme price and volume
fluctuations in recent years. Often, these fluctuations are unrelated to the
companies' operating performance. Elevated levels in market prices for
securities, often reached following these companies' initial public offerings,
may not be sustainable and many not bear any relationship to operating
performance. Our common stock may not trade at the same levels as other
Internet stocks, and Internet stocks in general may not sustain their current
market prices. In the past, following periods of market volatility,
stockholders have instituted securities class action litigation. If we were
involved in securities litigation, it could have a substantial cost and divert
resources and the attention of executive management from our business.

We have broad discretion to use the offering proceeds and how we invest these
proceeds may not yield a favorable return.

We intend to use the proceeds from the offering for general corporate
purposes, including working capital and capital expenditures and may use a
portion of the proceeds to acquire other businesses, products or technologies.
Our management may spend the proceeds from the offering in ways with which the
stockholders may not agree. Pending any such uses, we plan to invest the net
proceeds of the offering in investment-grade, interest-bearing securities. We
cannot predict that such investments will yield a favorable return.

Shares eligible for future sale after the offering could cause our stock price
to fall.

If our stockholders sell substantial amounts of our common stock in the
public market following the offering, the market price of our common stock
could fall. Such sales also might make it more difficult for Evolve to sell
equity or equity-related securities in the future at a time and price that we
deem appropriate.

Based upon the number of our shares outstanding as of March 15, 2000, upon
completion of the offering, we will have outstanding shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants after March 15, 2000. Of
these shares, the shares sold in the offering will be freely
tradable. Approximately $50 million shares of common stock will be available
for sale in the public 180 days after the date of this prospectus or
afterwards.

After the offering, the holders of 30,169,986 million shares of common stock
and warrants to purchase common stock, which represent % of our
outstanding stock after completion of the offering, will be

16
<PAGE>

entitled to certain rights to have the resale of their shares registered under
the Securities Act of 1933. If these holders, by exercising their registration
rights, cause a large number of securities to be registered and sold in the
public market, such sales could materially and adversely affect the market
price for our common stock. In addition, if we were to include in a
registration statement shares held by these holders pursuant to the exercise of
their registration rights, such sales may impede our ability to raise needed
capital.

Our officers, directors and affiliated entities will have significant control
over us and may approve or reject matters contrary to your vote.

Our executive officers and directors, together with their affiliates, will
beneficially own an aggregate of approximately [ ]% of our outstanding
common stock following the completion of the offering. These stockholders, if
acting together, will be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or similar transactions even if other stockholders
disagree.

We do not intend to pay dividends and you may not experience a return on
investment without selling shares.

We have never declared or paid any cash dividends on our capital stock.
Therefore, you will not experience a return on your investment in our common
stock without selling your shares since we currently intend on retaining future
earnings to fund our growth and do not expect to pay dividends in the
foreseeable future.

We have implemented anti-takeover provisions that could discourage or prevent a
takeover, even if an acquisition would be beneficial to our stockholders.

Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would be beneficial to our
stockholders. These provisions include:

. establishment of a classified board of directors requiring that not all
members of the board may be elected at one time;

. authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;

. prohibiting cumulative voting in the election of directors, that would
otherwise allow less than a majority of stockholders to elect director
candidates;

. limitation on the ability of stockholders to call special meetings of
stockholders;

. prohibiting stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and

. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings.

In addition, Section 203 of the Delaware General Corporations Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of our company.

New investors in our common stock will experience immediate and substantial
dilution.

If you purchase shares of our common stock, you will incur immediate and
substantial dilution in pro forma net tangible book value. You will pay a price
per share that substantially exceeds the value of our assets after subtracting
our liabilities. You will contribute % of the total amount paid to fund us
but will own only % of our outstanding shares. If the holders of outstanding
options or warrants exercise those options or warrants, you will suffer further
dilution.

17
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This prospectus contains forward-looking statements in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and elsewhere. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "expect," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks
outlined under "Risk Factors" beginning on page 7, that may cause our or our
industry's actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual future results.

18
<PAGE>

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the shares of
common stock offered by us at an assumed initial public offering price of
$ per share will be approximately $ million, after deducting
estimated underwriting discounts, commissions and offering expenses. If the
underwriters exercise in full their option to purchase an additional
shares of common stock, we estimate that such net proceeds will be
approximately $ million.

We intend to use the net proceeds of this offering as follows:

. repayment of approximately $3.8 million in outstanding indebtedness;

. regional, national and international sales and marketing activities;

. expanding customer service and operating capabilities;

. continued enhancement of our core technologies and expansion of our
ePlatform;

. development of business infrastructure; and

. the acquisition of complementary businesses, products and technologies.

We expect to use the remainder of the net proceeds for other general
corporate purposes, including working capital and capital expenditures. The
amounts actually expended for such working capital purposes may vary
significantly and will depend on a number of factors, including the amount of
our future revenues and the other factors described under "Risk Factors."
Accordingly, we will retain broad discretion in the allocation of the net
proceeds of this offering. Although we regularly evaluate, in the ordinary
course of business, potential acquisitions of complementary businesses,
products or technologies, other than our pending acquisition of InfoWide, we
have no other specific understandings, commitments or agreements with respect
to any acquisition of or investment in complementary businesses, products or
technologies. Pending such uses, we will invest the net proceeds of this
offering in interest-bearing, investment grade securities.

DIVIDEND POLICY

We have never paid any cash dividends on our capital stock. We currently
intend to retain all of our earnings to finance our operations and do not
anticipate paying cash dividends on our capital stock in the foreseeable
future. We may incur indebtedness in the future that may prohibit or restrict
the payment of dividends.

19
<PAGE>

CAPITALIZATION

The table below sets forth the following information:

. our actual capitalization as of December 31, 1999;

. our pro forma capitalization after giving effect to (1) amendments to our
charter to increase the authorized number of shares of common stock; (2)
the conversion of all outstanding shares of our preferred stock into
shares of common stock; and (3) the completion of our acquisition of
InfoWide, Inc.; and

. our pro forma as adjusted capitalization after giving effect to (1) the
sale by us of shares of common stock being offered at the initial
public offering price of $ per share, less the estimated underwriting
discounts and commissions and estimated offering expenses.

<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(unaudited)
(in thousands, except per
share data)
<S> <C> <C> <C>
Long-term obligations.......................... $ 3,954 $ 3,954 $
-------- -------- -----
Stockholders' equity:
Preferred stock, $.01 par value; shares
authorized: 100,000,000 actual, and
10,000,000 pro forma and pro forma as
adjusted; shares outstanding: 90,529,958
actual, none pro forma and pro forma as
adjusted.................................... 905 --
Common stock: $.01 par value, shares
authorized: 50,000,000 actual, and
120 million pro forma and pro forma as
adjusted; shares outstanding: 14,851,196
actual, 48,694,516 pro forma and pro
forma as adjusted .......................... 149 487
Additional paid-in capital in excess of par
value......................................... 91,818 125,358
Notes Receivable from Stockholders............. (4,499) (4,499)
Unearned stock-based compensation.............. (27,525) (27,525)
Accumulated deficit............................ (47,871) (50,871)
-------- -------- -----
Total stockholders' equity................... 12,977 42,950
-------- -------- -----
Total capitalization......................... $ 16,931 $ 46,904 $
======== ======== =====
</TABLE>

This table excludes the following shares as of December 31, 1999:

. 2,359,018 shares that we may issue upon the exercise of options at a
weighted average exercise price of $.49 per share;

. 2,027,535 shares available for issuance upon the exercise of options that
have been or may be granted under our active stock plans;

. 8,046,831 preferred shares convertible into 3,282,277 common shares, that
we may issue upon the exercise of warrants at a weighted average exercise
price of $.98 per share; and

. 600,000 common shares that we may issue upon the exercise of warrants at
a weighted average exercise price of $2.17 per share.

20
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted by the
difference between the public offering price per share of our common stock and
the pro forma as adjusted net tangible book value per share of our common stock
immediately after this offering. Our pro forma net tangible book value at
December 31, 1999, was approximately $ million, or $ per share of
common stock. Pro forma net tangible book value per share represents total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock outstanding at December 31, 1999, and assumes the
conversion of our currently outstanding shares of preferred stock into
shares of common stock upon the closing of this offering and the issuance of
3,666,667 shares of common stock upon the consummation of our proposed
acquisition of InfoWide, Inc. Assuming our sale of shares of common stock
at an assumed initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses, our pro forma as adjusted net tangible book value at
December 31, 1999, would have been $ million, or $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution of $ per share
to new investors purchasing shares in this offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $
Pro forma net tangible book value per share at December 31,
1999...................................................... $
Increase per share attributable to new investors...........
Pro forma as adjusted net tangible book value per share after
the offering................................................
------ ------
Dilution per share to new investors.......................... $
======
</TABLE>

The following table shows, on a pro forma as adjusted basis at December 31,
1999, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price paid per share by existing
stockholders and by new investors purchasing common stock in this offering,
after adjustment for:

. the conversion of our currently outstanding shares of preferred stock
into common stock;

. the issuance of 3,666,667 shares of common stock upon the consummation of
our proposed acquisition of InfoWide, Inc.; and

. our sale of shares of common stock at an assumed initial public
offering price of $ per share, before deducting estimated
underwriting discounts and commissions and estimated offering expenses
payable by us.

<TABLE>
<CAPTION>
Total
Shares Purchased Consideration
---------------- ----------------
Number Amount Average Price
(000's) Percent (000's) Percent Per Share
-------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ $
New investors................
-------- ----- -------- ----- --------
Total...................... 100.0% 100.0%
===== =====
</TABLE>

This discussion assumes no exercise of any stock options or warrants
outstanding as of December 31, 1999. At that date, there were 2,359,018 shares
that we may issue upon the exercise of outstanding options at a weighted
average exercise price of $.49 per share and 3,282,277 shares of common stock
that we may issue upon the exercise of outstanding warrants at a weighted
average exercise price of $.98 per share and 600,000 common shares that we may
issue upon the exercise of outstanding warrants at a weighted average price of
$2.17. If holders exercise these outstanding options or warrants, there will be
further dilution of per share to new investors. Additionally, there were
2,027,535 shares available for issuance upon the exercise of options that have
been or may be granted under our active stock plans after December 31, 1999,
and in January 2000, our active stock plans were amended to allow us to issue
an additional 4,125,000 shares.

21
<PAGE>

SELECTED FINANCIAL DATA

You should read the following selected financial data with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 21 and our financial statements and related notes beginning
on page F-1. The statement of operations data for the years ended June 30,
1997, 1998 and 1999 and the six-month period ended December 31, 1999 and the
balance sheet data at June 30, 1998 and 1999 and December 31, 1999, are derived
from the financial statements and notes audited by PricewaterhouseCoopers LLP
appearing elsewhere in this prospectus. The statement of operations data for
the period ended June 30, 1995 and the year ended June 30, 1996 are derived
from audited financial statements not appearing in this prospectus. Historical
results are not necessarily indicative of results that may be expected for any
future period. Our results of operations for the six months ended December 31,
1999, are not necessarily indicative of the results we may achieve for the
entire year. Selected financial data for the six months ended December 31, 1998
has been derived from our unaudited financial statements for such period
included elsewhere in this prospectus. The unaudited financial information
includes adjustments consisting only of normal recurring adjustments that we
consider necessary for a fair presentation of the information in accordance
with GAAP.

<TABLE>
<CAPTION>
Inception Six Months Ended
through Year Ended June 30, December 31,
June 30, ------------------------------------ --------------------
1995 1996 1997 1998 1999 1998 1999
--------- ------- ------- -------- -------- ----------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ -- $ -- $ -- $ -- $ 517 $ -- $ 2,087
Cost of revenues........ -- -- -- 635 -- 1,366
----- ------- ------- -------- -------- ------- --------
Gross margin (loss)..... -- -- -- -- (118) -- 721
Operating expenses
Research and
development........... 219 2,354 4,341 6,138 5,057 2,183 3,392
Sales and marketing.... 1 628 1,194 1,253 3,876 1,253 4,880
General and
administrative........ 224 1,445 2,372 1,834 1,857 817 1,657
Stock-based charges.... -- -- -- -- 218 3,872
----- ------- ------- -------- -------- ------- --------
Total operating
expenses............ 444 4,427 7,907 9,225 11,008 4,253 13,801
----- ------- ------- -------- -------- ------- --------
Operating loss.......... (444) (4,427) (7,907) (9,225) (11,126) (4,253) (13,080)
Other income (expense),
net.................... 4 3 (186) (1,357) (345) (435) 218
----- ------- ------- -------- -------- ------- --------
Net loss................ $(440) $(4,424) $(8,093) $(10,582) $(11,471) $(4,688) $(12,862)
===== ======= ======= ======== ======== ======= ========
Basic and diluted loss
per share.............. -- $(19.32) $ (6.06) $ (4.64) $ (3.60) $ (1.61) $ (2.89)
Shares used in computing
basic and diluted loss
per share.............. -- 229 1,336 2,282 3,182 2,920 4,448
Pro forma basic and
diluted loss per
share.................. -- -- -- -- $ (0.78) -- $ (0.45)
Shares used in computing
pro forma basic and
diluted loss per
share.................. -- -- -- -- 14,799 -- 28,469
</TABLE>

<TABLE>
<CAPTION>
June 30,
-------------------------------------- December 31,
1995 1996 1997 1998 1999 1999
---- ------ ------- -------- ------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............. $294 $5,881 $10,702 $ 2,076 $ 2,840 $17,505
Restricted cash.......... -- -- -- -- -- 2,000
Working capital.......... 119 5,022 9,997 1,180 1,000 16,804
Total assets............. 472 7,175 12,673 3,075 4,087 25,792
Long-term debt and
capital lease
obligations, net of
current portion......... -- 547 13,384 14,235 3,899 3,954
Total stockholders'
(deficit) equity........ 268 5,669 (1,526) (12,194) (3,155) 12,977
</TABLE>

See note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing basic and diluted loss
per share data.

22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with our financial statements and
related notes. This discussion and analysis contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including but not limited to those discussed in
"Risk Factors" starting on page 7 and elsewhere in this prospectus.

Overview

We are a leading provider of Internet-based end-to-end platforms for
automating professional service organizations. We license ServiceSphere, our
ePlatform solution, directly to services organizations and provide related
implementation, integration, training and maintenance services.

Evolve was founded in February 1995. From our inception through December
1998 our activities, funded by the capital we raised, consisted primarily of
building our business infrastructure, recruiting personnel and developing our
software and service offerings. Our ServiceSphere ePlatform was first made
commercially available in March 1999. We recognized our first revenues from our
ServiceSphere ePlatform during the quarter ended March 31, 1999. Our revenues
increased during each sequential quarter for the remainder of 1999. We have
incurred substantial losses since inception and we anticipate that we will
continue to incur operating losses as we make the investments necessary to
expand our business. Our accumulated deficit at December 31, 1999, was $47.9
million.

Our headcount increased from 58 employees at January 1, 1999, to 177
employees at March 15, 2000, as we continued to invest in developing our
technology and building a direct sales force, a marketing group and a
professional services organization. Specifically, in the six months ended March
15, 2000, we expanded the depth of our management team with the addition of a
Chief Operating Officer, a Vice President of Marketing and Business
Development, a Vice President of Marketplace Services, a Vice President of
Worldwide Customer Service, and a Vice President of Strategy. Our
infrastructure expenditures also increased significantly in 1999, as we
expanded our facilities and enhanced our information systems.

Sources of Revenue and Revenue Recognition

We generate revenues primarily from the sale of our ServiceSphere ePlatform
solutions and subscriptions. We began recognizing revenues from sales of our
ePlatform during the quarter ended March 31, 1999. Through December 31, 1999,
all of our ePlatform revenues were derived from sales within the United States
through our direct sales force. We classify our ePlatform revenues as either
"Solutions revenues" or "Subscriptions revenues" to reflect the way in which we
operate our business and the way in which we position our software and services
to our customers.

Solutions revenues consist of fees for licensing our ServiceSphere ePlatform
and for providing the implementation, integration, training and consulting
services associated with the initial deployment of the ePlatform. Customers pay
a one-time license fee for our software based on the number of software modules
licensed and the number of professional "resources" (typically employees or
contractors of the customer) managed. Customers are charged additional license
fees to increase the number of professional resources managed on our ePlatform
or to purchase additional software modules. Implementation services included in
our Solutions revenues typically consist of evaluating our customers' business
practices and organizational structure, converting and integrating legacy
databases and information systems, installing the software systems and training
our customers' staff. Some customers also request consulting services to
develop and install interfaces between our ePlatform and legacy third party
enterprise software applications. These services have typically been performed
by our internal professional services organization on primarily a fixed fee
basis. We

23
<PAGE>

intend to extend our service partnerships by encouraging certain customers to
purchase some of these services from other professional services organizations
with which we have business relationships. We believe this trend will have a
positive impact on our gross margins by decreasing the percentage of our
professional services revenues compared to our software license revenues. A
future component of our Solutions revenues will be the transactional fees we
expect to derive from our Services.com offering.

Subscriptions revenues consist of fees derived from:

. Maintenance agreements that entitle customers to software upgrades and
technical support over a stated term, generally twelve months. In many
cases, maintenance services for an initial term of twelve months or more
have been bundled together with fees classified as Solutions revenues. In
subsequent years, customers pay separately for maintenance, normally at
the beginning of the maintenance period.

. Application service provider (ASP) agreements, under which we host our
ePlatform solutions on behalf of customers on servers we own and
maintain. We offer access to the customer via the Internet and charge a
monthly fee for this service. We began selling ASP-based services in the
quarter ended December 31, 1999, and we expect to derive an increasing
proportion of our revenues from our ASP offering in the future.

. Software subscription agreements that involve commitments to deliver
additional software releases and enhancements to the customer over the
life of the agreement. Revenues generated by software subscription
agreements are recognized ratably over the term of each agreement.

We recognize revenues in accordance with the provisions of American
Institute of Certified Public Accounts (AICPA) Statement of Position (SOP) 97-
2, "Software Revenue Recognition." This was amended by SOP 98-4, "Deferral of
the Effective Date of Certain Provisions of SOP 97-2" and SOP 98-9,
"Modification of SOP 97-2 With Respect to Certain Transactions." Under SOP 97-2
as amended, we recognize revenues when all of the following conditions are met:

. we have signed a non-cancelable agreement with the customer;

. we have delivered the software product to the customer or made it
available to the customer on our ASP hosting facilities;

. the amount of fees to be paid by the customer is fixed or determinable;
and

. we believe that collection of these fees is probable.

We do not have vendor specific objective evidence of fair value for the
implementation integration and training services included in our typical
customer license agreements, as these services to date have never been sold
separately. Accordingly, our Solutions revenues, including implementation,
integration and training services and license fees, are recognized ratably on a
straight line basis over the period during which the services are provided,
which is generally between six and nine months.

We have vendor specific objective evidence of fair value for the maintenance
services we provide based on the renewal rates for maintenance in future years
as specified in most of our customer contracts. As a result, we defer the
maintenance revenues at the outset of the customer arrangement and recognize
them ratably over the period during which the maintenance is to be provided,
which normally commences on the date the software is delivered.

For ASP software arrangements we do not have vendor specific objective
evidence of fair value for the elements of the contracts. Accordingly, fees
from such arrangements will be recognized on a monthly basis as the hosting
service is provided.

We account for software subscription arrangements where, as part of the
contract with the customer, we agree to deliver to the customer additional
software releases in the future, as subscriptions for no extra charge. All the
revenues from these customers are recognized ratably over the term of the
contract. Additionally, in

24
<PAGE>

software arrangements where the amount of fees to be paid by the customer is
deemed not to be fixed or determinable, due to extended payment terms, we
recognize revenues when the fees become due and payable by the customer.

We anticipate that in the future we will derive revenues from our
Services.com offering, which will collect fees based on the value of the
transactions conducted or managed on the network. These transaction fees will
be recognized when the services are ordered on the network and as they are
provided.

Cost of Revenues and Operating Expenses

Cost of Revenues

Our cost of revenues includes the costs associated with our Solutions and
Subscriptions revenues. The cost of our Solutions revenues consists principally
of payroll related costs for employees and consultants involved in providing
services for implementation, training and consulting. The cost of our Solutions
revenues also includes royalties due to third parties for integrated
technology, the printing costs of product documentation, duplication costs for
software media and shipping costs. The cost of our Subscriptions revenues
consists primarily of the payroll related costs for employees involved in
providing support services to customers under maintenance contracts as well as
payroll costs for employees and consultants involved in providing services for
implementation, training and consulting for customers under subscription. The
gross margin associated with our Solutions revenues may fluctuate based on the
ratio of the licenses to services in our software arrangements with customers.

Operating Expenses

Our operating expenses consist of three general categories: research and
development, sales and marketing and general and administrative. In addition,
our operating expenses include two non-cash categories: stock-based charges and
amortization of goodwill and other intangible assets. We classify all charges
to these operating expense categories based on the nature of the expenditures.
Although each of these categories includes expenses that are unique to the
category type, there are expenditures that are typically included in each of
these categories, such as salaries, employee benefits, travel and entertainment
expenses and third party professional fees. In addition, certain common costs
such as communication, rent, depreciation for office furniture and equipment
and facilities costs are allocated to each of the functional areas based on
headcount. The sales and marketing category includes expenditures specific to
that category such as sales commissions, public relations and advertising,
trade shows and marketing collateral materials. Software development costs
incurred prior to the establishment of technological feasibility are included
in research and development costs as incurred. We expect that all three
categories of operating expenses will continue to increase in future quarters
as we hire additional employees and make the investments necessary to expand
our business

In connection with the granting of stock options and the sales of restricted
stock to our employees and the granting of equity instruments to non-employees
for services rendered, we recorded deferred stock-based charges totaling
approximately $31 million as of December 31, 1999. This amount represents the
difference between the exercise or purchase price at which the stock options
were granted or the restricted stock was issued, and the deemed fair value of
our common stock for accounting purposes on the date of grant or issuance. This
amount is included as a component of stockholders' equity and, in accordance
with the method described in Financial Accounting Standards Board
Interpretation No. 28, is being amortized on an accelerated basis by charges to
operations over the vesting period of the options and restricted stock, which
is generally four years. This resulted in an expense of $218,000 for the year
ended June 30, 1999, and an expense of $3.2 million for the six months ended
December 31, 1999. The remaining unamortized and unearned stock-based
compensation at December 31, 1999 will be amortized as follows: $8.7 million
for the six months ending June 30, 2000; $11.5 million for the year ending June
30, 2001; $4.8 million for the year ending June 30, 2002; $1.9 million for the
year ending June 30, 2003 and $133,000 for the year ending June 30, 2004. We
expect to record significant additional stock-based compensation for stock
options granted and restricted stock issued subsequent to December 31, 1999.

25
<PAGE>

Acquisition of InfoWide, Inc.

On March 9, 2000, we signed a definitive agreement to acquire InfoWide,
Inc., a private software company that has developed an Internet-based solution
for recording and billing time and expenses. We will issue 3.7 million shares
of our common stock to the stockholders of InfoWide as purchase consideration.
The acquisition will be accounted for as a purchase. We expect to record
approximately $30.4 million in goodwill, purchased technology and other
intangible assets upon completion of this transaction.

Quarterly Results of Operations

The following table sets forth, for the periods presented, certain quarterly
financial results for the five quarters ended December 31, 1999. The
information for each of these quarters is unaudited and has been prepared on
the same basis as our audited financial statements appearing elsewhere in this
prospectus. In the opinion of management, all necessary adjustments, consisting
only of normal nonrecurring adjustments, have been included to present fairly
the unaudited quarterly results when read in conjunction with our financial
statements and related notes included elsewhere in this prospectus. We have
experienced and expect to continue to experience fluctuations in operating
results from quarter to quarter. Historical operating results are not
necessarily indicative of the results that may be expected for any future
period.

<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1999 1999 1999 1999
-------- -------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data
Revenues
Solutions...................... $ -- $ 37 $ 113 $ 338 $ 1,079
Subscriptions.................. -- 179 188 195 475
------- ------- ------- ------- -------
Total........................ -- 217 301 533 1,554
Cost of revenues
Solutions...................... -- 140 105 185 459
Subscriptions.................. -- 188 202 461 261
------- ------- ------- ------- -------
Total........................ -- 328 307 646 720
Gross margin (loss).......... -- (112) (6) (113) 834
Operating expenses:
Research and development....... 1,098 1,347 1,527 1,649 1,743
Sales and marketing............ 741 1,169 1,454 1,959 2,921
General and administrative..... 518 501 539 667 990
Stock-based charges............ -- 75 143 816 3,056
------- ------- ------- ------- -------
Total operating expenses..... 2,357 3,092 3,663 5,091 8,710
------- ------- ------- ------- -------
Operating loss................... (2,357) (3,204) (3,669) (5,204) (7,876)
Non-operating revenue and
expenses
Interest income................ 27 107 108 47 363
Interest expense............... (404) (97) (99) (96) (93)
Other income (expense)......... 17 32 39 (1) (2)
------- ------- ------- ------- -------
Total........................ (360) 42 48 (50) 268
Net loss..................... $(2,717) $(3,162) $(3,621) $(5,254) $(7,608)
======= ======= ======= ======= =======
</TABLE>

26
<PAGE>

Revenues

Our total quarterly revenues increased from $217,000 for the quarter ended
March 31, 1999 to $1.6 million for the quarter ended December 31, 1999. This
revenue growth is attributable to increased sales of our Solutions offerings.
Our initial customer, Whittman-Hart, accounted for 69%, 50%, 28% and 15% of
total revenues during the quarters ended March 31, 1999, June 30, 1999,
September 30, 1999, and December 31, 1999, respectively. We did not recognize
any revenues in the quarter ended December 31, 1998 because our solution was
first made commercially available during the quarter ended March 31, 1999.

Cost of Revenues

Our total cost of revenues will fluctuate quarter to quarter depending on
the number of customer implementations underway, which affects the amount of
service and consulting resources assigned to our customers. We began
implementing our first customer solutions during the quarter ended March 31,
1999. Cost of Solutions revenues consists primarily of payroll related costs
for employees and consultants involved in providing services for
implementation, training and consulting and, to a lesser extent, licenses fees
paid to third parties under technology license arrangements. The improvement in
Solutions gross profit over the course of 1999 was the result of a greater
number of customer sales being recognized ratably in each quarter. We expect
future costs of Solutions revenues to fluctuate as we continue to aggressively
invest in building our professional services organization.

Cost of Subscriptions revenues consists primarily of payroll related costs
for employees involved in providing support services to customers under
maintenance contracts as well as payroll-related costs for employees and
consultants involved in providing services for implementation, training and
consulting for customers under software subscription agreements. The costs of
Subscriptions revenues increased significantly during the quarter ended
September 30, 1999, due to the use of third party resources in assisting in
their implementation.

Operating Expenses

Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with our product
development efforts including fees paid to third parties for consulting
services. Research and development expenses increased sequentially on a
quarterly basis from $1.1 million for the quarter ended December 31, 1998 to
$1.7 million for the quarter ended December 31, 1999. The increase in research
and development expenses is attributable to an increase in the number of
research and development personnel from 34 at December 31, 1998 to 39 at
December 31, 1999, consulting expenses associated with the implementation of
several engineering projects and the use of contractors to supplement our
staff. We believe that investments in product development are essential to our
future success and expect that the absolute dollar amount of research and
development expenses will increase in future periods.

Sales and Marketing. Sales and marketing expenses consist primarily of
employee salaries, benefits and commissions, and the costs of advertising,
website development, trade shows, seminars, promotional materials and other
sales and marketing programs. Sales and marketing expenses increased in each
quarter from $741,000 for the quarter ended December 31, 1998 to $2.9 million
for the quarter ended December 31, 1999. The increase in sales and marketing
expenses was primarily attributable to our building an internal direct sales
team and a corresponding sales infrastructure. Our first commercial solution
was released during the quarter ended March 31, 1999, and our personnel in
sales and marketing increased from 12 employees as of December 31, 1998 to 30
as of December 31, 1999. We expect that the absolute dollar amount of sales and
marketing expenses will continue to increase due to the planned growth of our
sales force, including the establishment of additional domestic and
international sales offices and due to expected additional increases in
marketing programs including advertising, public relations, website development
and other brand and promotional activities.

27
<PAGE>

General and Administrative. General and administrative expenses consist
primarily of employee salaries and related expenses for executive, finance and
administrative personnel including information systems and recruiters. General
and administrative expenses increased from $518,000 in the quarter ended
December 31, 1998 to $990,000 in the quarter ended December 31, 1999. The
increase in general and administrative expenses was primarily attributable to
an increase in the number of executive, finance and administrative employees
from 11 as of December 31, 1998 to 20 as of December 31, 1999. We expect
general and administrative expenses to increase in absolute dollars in future
periods.

Stock-Based Charges. Stock-based charges consist of amortization of deferred
non-cash charges in connection with stock option grants and sales of restricted
stock to our employees at exercise or sales prices below the deemed accounting
fair market value of our common stock and compensation related to equity
instruments issued to non-employees for services rendered. We have recorded
stock-based compensation charges of $75,000 in the quarter ended March 31,
1999, $143,000 in the quarter ended June 30, 1999, $816,000 in the quarter
ended September 30, 1999, and $3.1 million in the quarter ended December 31,
1999. Included in the stock-based charges for the quarter ended September 30,
1999, was $651,000 related to the issuance of warrants to a related party.

Interest Income and Interest Expense

Interest income fluctuated during the five quarters shown primarily as a
result of changes in our average cash balances. We closed significant preferred
financing rounds during the quarters ended December 31, 1998 and September 30,
1999. This resulted in higher average cash balances in the following quarters.
Interest expense for the four quarters ended December 31, 1999 is primarily
attributable to interest on equipment leases and nonconvertible notes.

Fluctuations in Quarterly Operating Results

We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of future performance. Although our operating results
have generally improved from quarter to quarter in the recent past, our future
operating results may not follow past trends. It is likely that in some future
quarters our operating results may be below the expectation of public market
analysts and investors due to factors beyond our control, and as a result, the
price of our common stock may fall. Factors that may cause our future operating
results to be below expectations and cause our stock price to fall include:

. The demand for and acceptance of our products, product enhancements and
services;

. Unexpected changes in the development, introduction, timing and
competitive pricing of our products and services and those of our
competitors;

. Any inability to expand our direct sales force and indirect marketing
channels both domestically and internationally;

. Any failure to attract and retain key personnel, particularly in our
development, sales, services and support groups;

. The budgeting cycles of our customers;

. Our compensation policies that tend to compensate sales personnel more
for achieving annual quotas, typically in the latter half of the fiscal
year; and

. The timing and integration of and costs related to technologies and
businesses we may acquire in the future.

28
<PAGE>

Results of Operations

Six Months Ended December 31, 1998 and 1999

Revenues

Total revenues were $2.1 million for the six months ended December 31, 1999.
We did not generate any revenues for the six months ended December 31, 1998.
This growth in revenues reflects the beginning of commercial sales of our
ePlatform in the first quarter of 1999, and the subsequent growth of our sales.
For the six months ended December 31, 1999, Novell, Whittman-Hart, Cambridge
Technology Partners and Lante accounted for 31%, 18%, 14% and 10%, of our total
revenues, respectively.

Solutions revenues, which comprise fees for licenses and related services,
were $1.4 million, or 68% of total revenues for the six months ended December
31, 1999. Subscriptions revenues, which comprise fees for maintenance and
software subscriptions, were $670,000, or 32% of total revenues for the six
months ended December 31, 1999.

Cost Of Revenues

Total cost of revenues were $1.4 million for the six months ended December
31, 1999. There were no costs of revenues for the six months ended December 31,
1998, as we did not commence selling our solution until the first quarter of
1999.

Cost of Solutions revenues was $644,000 for the six months ended December
31, 1999, which consisted primarily of payroll related costs for employees and
consultants involved in providing services for implementation, training and
consulting and, to a lesser extent, license fees paid to third parties under
technology license arrangements. The cost of Subscriptions revenues was
$722,000 for the six months ended December 31, 1999, which represented
primarily payroll related costs for employees and third-party consultants
involved in providing support services to customers under maintenance contracts
and software subscription contracts.

Operating Expenses

Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with our product
development efforts. Research and development expenses increased to $3.4
million for the six months ended December 31, 1999, from $2.2 million for the
six months ended December 31, 1998. The increase was primarily due to an
increase in the number of employees engaged in research and development from 34
employees as of December 31, 1998, to 39 employees as of December 31, 1999. We
believe that investments in product development are essential to our future
success and expect that the absolute dollar amount of research and development
expenses will increase in future periods.

Sales and Marketing. Sales and marketing expenses consist primarily of
employee salaries, benefits and commissions, and the costs of advertising,
public relations, website development, trade shows, seminars, promotional
materials and other sales and marketing programs. Sales and marketing expenses
increased to $4.9 million for the six months ended December 31, 1999, from $1.3
million for the six months ended December 31, 1998. The increase in sales and
marketing expenses was primarily attributable to an increase in the number of
direct sales, pre-sales support and marketing employees from 12 as of December
31, 1998 to 30 as of December 31, 1999. We expect that the absolute dollar
amount of sales and marketing expenses will continue to increase due to the
planned growth of our sales force, including the establishment of sales offices
in additional domestic and international locations. In addition, we commenced a
marketing campaign in January 2000 that will lead to increases in advertising
and marketing expenditures and other promotional activities.

29
<PAGE>

increased to $1.7 million for the six months ended December 31, 1999, from
$817,000 for the six months ended December 31, 1998. The increase in general
and administrative expenses was primarily attributable to an increase in the
number of executive, finance and administrative employees from 11 as of
December 31, 1998 to 20 as of December 31, 1999. We expect general and
administrative expenses to increase in absolute dollars in future periods.

Stock-Based Charges. Stock-based charges consist of amortization of deferred
compensation in connection with stock option grants and sales of restricted
stock to our employees at exercise or sales prices below the deemed fair market
value of our common stock, and compensation related to equity instruments
issued to non-employees for services rendered. We recorded stock-based
compensation expense of $3.2 million for the six months ended December 31,
1999. We issued warrants to a related party that resulted in a charge of
$651,000 in the quarter ended September 30, 1999.

Interest Income and Interest Expense

Interest income for the six months ended December 31, 1999, was $410,000
compared to $62,000 for the same period in the prior year. The increase was
attributable primarily to the completion of a private equity funding round in
September 1999. Interest expense for the six months ended December 31, 1999,
was $189,000 compared $501,000 for the same period in the prior year. This was
largely a result of the conversion of certain convertible debt instruments to
preferred stock during the six months ended June 30, 1999.

Income Taxes

From inception through December 31, 1999, we incurred net losses for federal
and state tax purposes and have not recognized any tax provision or benefit. As
of December 31, 1999, we had $29.0 million of federal and state net operating
loss carry-forwards to offset future taxable income. The federal net operating
loss carry-forwards begin to expire on varying dates through 2019 and the state
net operating loss carry-forwards on varying dates through 2004. Given our
limited operating history, our losses incurred to date and the difficulty in
accurately forecasting our future results, we do not believe that the
realization of the related deferred income tax asset meets the criteria
required by generally accepted accounting principles. Therefore, we have
recorded a 100% valuation allowance against the deferred income tax asset.

Years Ended June 30, 1998 and 1999

Revenues

Our total revenues were $517,000 for the year ended June 30, 1999, generated
by the first commercial sales of our ServiceSphere ePlatform solution. Revenues
comprised $150,000 of Solutions revenues and $367,000 of Subscriptions revenues
for the year ended June 30, 1999. For the year ended June 30, 1999, Solutions
revenues and Subscriptions revenues accounted for 29% and 71% of total
revenues, respectively. Whittman-Hart, Netscape and Becton Dickinson, at 58%,
32% and 10% of total revenues, respectively, accounted for all our revenues
during the period. We did not recognize any revenues in the year ended June 30,
1998.

Cost of Revenues

Cost of revenues was $635,000 for the year ended June 30, 1999. Cost of
Solutions revenues was $245,000 and the cost of Subscriptions revenues was
$390,000 for the year ended June 30, 1999. We did not have any cost of revenues
in the year ended June 30, 1998.

30
<PAGE>

Operating Expenses

Research and Development. Research and development expenses decreased to
$5.1 million for the year ended June 30, 1999, from $6.1 million for the year
ended June 30, 1998. The decrease in research and development expenses was
related primarily to a restructuring in our engineering efforts as we
discontinued the development a client-server based software architecture and
concentrated our efforts on developing our Internet-based ePlatform.

Sales and Marketing. Sales and marketing expenses increased to $3.9 million
for the year ended June 30, 1999 from $1.3 million for the year ended June 30,
1998. The increase in sales and marketing expenses resulted primarily from
building our direct sales force and investing in our sales and marketing
infrastructure, which involved significant personnel-related expenses,
recruiting fees, travel expenses and related facility and equipment costs.

General and Administrative. General and administrative expenses increased to
$1.9 million for the year ended June 30, 1999 from $1.8 million for the year
ended June 30, 1998. The increase in general and administrative expenses
resulted primarily from the addition of executive, finance and administrative
personnel to support the growth of our business.

Stock-Based Charges. We recorded stock-based charges of $218,000 for the
year ended June 30, 1999, related to stock transactions with employees. We did
not have stock-based charges in the year ended June 30, 1998.

Interest Income and Interest Expense

Interest income decreased to $277,000 for the year ended June 30, 1999, from
$420,000 for the year ended June 30, 1998 as a result of the decline in our
average cash position. We had cash and cash equivalents balances of $2.8
million as of June 30, 1999, compared to $2.1 million as of June 30, 1998.
Interest expense decreased to $697,000 for the year ended June 30, 1999, from
$1.8 million for the year-ended June 30, 1998. This was largely a result of the
conversion of certain convertible debt instruments to preferred stock during
the year ended June 30, 1999.

Years Ended June 30, 1997 and 1998

Revenues and Cost of Revenues

We do not have any revenues or cost of revenues, for the years ended June
30, 1997 and 1998 as we did not commence selling our solutions until the first
quarter of 1999.

Operating Expenses

Research and development expenses were $6.1 million and $4.3 million for the
years ended June 30, 1998 and 1997, respectively. The increase in this expense
category was due to an increase in personnel costs associated with our
engineering efforts. Sales and marketing expenses increased to $1.3 million for
the year ended June 30, 1998 from $1.2 million for the year ended June 30,
1997. General and administrative expenses were $1.8 million and $2.4 million
for the years ended June 30, 1998 and 1997, respectively, as our headcount
decreased from 14 to 8 persons.

Interest Income and Interest Expense

Interest income increased from $310,000 for the year ended June 30, 1997 to
$420,000 for the year ended June 30, 1998. Interest expense increased from
$495,000 in the year ended June 30, 1997 to $1.8 million for the year ended
June 30, 1998, due primarily to the issuance of $12.7 million in convertible
debt instruments during the year ended June 30, 1998.

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<PAGE>

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through private
sales of common and preferred stock, with net proceeds totaling approximately
$56.8 million. We have also raised $12.7 million in funding through the
issuance of convertible debt instruments, of which $3.5 million in principal
remains outstanding as debt and is now non-convertible. As of December 31,
1999, we had $17.5 million in cash and cash equivalents, which excludes $2
million of restricted cash held as security for our operating lease
commitments.

Net cash used in operating activities totaled $5.4 million for the six
months ended December 31, 1999. Net cash used in operating activities for the
three years in the period ended June 30, 1999, 1998 and 1997 was $8.3 million,
$ 8.3 million and $7.2 million, respectively. Cash used in operating activities
for each period resulted primarily from net losses in those periods and, to a
lesser extent, changes in working capital such as an increase in deferred
revenues at June 30, 1999, and December 31, 1999, of approximately $2.0 million
and $3.4 million respectively.

Net cash used in investing activities since our inception in February 1995
through December 31, 1999, has totaled approximately $5.2 million, of which
$4.9 million occurred in the six months ended December 31, 1999. Investing
activities in the six months ended December 31, 1999, consist primarily of the
purchase of short-term investments of $2.3 million, and a restricted
certificate of deposit for $2.0 million used to secure a letter of credit for
our new corporate headquarters.

Net cash provided by financing activities totaled $24.9 million for the six
months ended December 31, 1999. Net cash provided by financing activities for
the years ended June 30, 1999 and 1997 was $9.1 million and $12.2 million
respectively. Net cash generated from financing activities consists primarily
of net proceeds from our sales of preferred stock or the proceeds from the
issuance of convertible debt. For the year ended June 30, 1998, net cash used
in financing activities was $307,000, that primarily represented the payments
of our capital lease obligations.

We also have a $1.9 million equipment lease line with Phoenix Growth
Capital. Under the equipment lease line, we are entitled to lease equipment
with payment terms extending over 36 months. The ability to lease new equipment
expired on March 15, 2000, and our current borrowings of $694,000 bear interest
rates in the range of 10% to 16%. We intend to seek additional equipment lease
financings in the future.

We signed a lease for new headquarters facilities in November 1999. Lease
payments under the agreement are expected to commence in June 2000 and continue
for seven years, resulting in aggregate lease expenses of approximately
$338,000 per quarter. We also expect to incur commitments for capital
expenditures in 2000 of approximately $4.0 million related to the build-out of
this facility.

We anticipate a substantial increase in our capital expenditures and lease
commitments consistent with anticipated growth in operations, infrastructure
and personnel, including possible acquisitions. We believe that our current
cash and cash equivalents, together with the proceeds of this offering, will be
sufficient to meet our anticipated liquidity needs for working capital and
capital expenditures for at least 12 months. If we require additional capital
resources to grow our business internally or to acquire complementary
technologies and businesses at any time in the future, we may seek to sell
additional equity or debt securities or secure an additional bank line of
credit. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. We cannot provide assurance
that any financing arrangements will be available in amounts or on terms
acceptable to us in the future.

Qualitative and Quantitative Disclosure about Market Risk

The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the risk factors section of this
prospectus.

32
<PAGE>

Foreign Currency Exchange Rate Risk

To date, all of our recognized revenues have been denominated in U.S.
dollars and from customers in the United States, and we have had no exposure to
foreign currency exchange rate changes. We expect, however, that future
Solutions and Subscriptions revenues may also be derived from international
markets and may be denominated in the currency of the applicable market. As a
result, our operating results may become subject to significant fluctuations
based upon changes in the exchange rates of certain currencies in relation to
the U.S. dollar. Furthermore, to the extent that we engage in international
sales denominated in U.S. dollars, an increase in the value of the U.S. dollar
relative to foreign currencies could make our products less competitive in
international markets. Although we intend to monitor our exposure to currency
fluctuations, and, when appropriate, may use financial hedging techniques in
the future to minimize the effect of these fluctuations, we cannot assure you
that exchange rate fluctuations will not adversely affect our financial results
in the future.

Interest Rate Risk

As of December 31, 1999, we had $21.8 million of cash and highly liquid
short-term investments. Declines of interest rates over time would reduce our
interest income from our short-term investments. As of December 31, 1999, we
had total short term and long term debt outstanding of $245,000 and $4.0
million, respectively, which accrued interest at the prime rate. Therefore, we
are subject to exposure to interest rate risk for these borrowings based on
fluctuations in the prime rate.

Equity Risk

We do not own any equity securities. Therefore, we are not subject to any
direct equity price risk.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," that requires companies to
record derivative financial instruments on their balance sheets as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative instrument and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
In June 1999, the FASB issued SFAS No. 137, "Accounting For Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133," that amends SFAS No. 133 to be effective for all fiscal
quarters or all fiscal years beginning after June 15, 2000.

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<PAGE>

BUSINESS

Overview

We are a leading provider of Internet-based end-to-end solutions for
automating professional services organizations. Our ServiceSphere process
automation solution facilitates the management of project opportunities,
professional resources, and service delivery, and provides enterprise-wide
visibility of business performance. Our recently launched Services.com offering
extends the capabilities of our ServiceSphere solution to integrate the
internal business processes of services providers and acquirers in an
efficient, collaborative, transactional environment. Our solution combines the
efficiency gains of core business process automation with the benefits of an
online marketplace, creating an ePlatform for the professional services
industry. We have licensed our solution to 23 customers, each of whom has
purchased more than $250,000 in products and services from us, and who
collectively license our solution to manage over 40,000 services professionals.
Our customers include Cambridge Technology Partners, DMR Consulting Group,
Novell, Razorfish, Whittman-Hart, and Zefer.

Industry Background

Growth of the Internet as a Business Communication, Collaboration and
Transactional Medium

The Internet has emerged as the fastest-growing communications,
collaboration, and transactional medium in history. Its rapid and broad
acceptance is enabling new opportunities to streamline complex business
processes and to conduct transactions more efficiently. Forrester Research
estimates that 93% of firms will conduct business on the Internet by 2002 and
that business-to-business eCommerce will grow from $406 billion in 2000 to $2.7
trillion in 2004.

Businesses worldwide invest heavily in information technology to manage and
streamline their operations. A number of business process automation solutions
have been developed that incorporate limited Internet functionality to
facilitate communications and data entry and retrieval from remote locations.
These business process automation solutions, or eProcess solutions, have
typically focused on automating relatively simple, linear, product-based
processes such as manufacturing and sales force management. Businesses also
look to Internet-based systems to facilitate external communications and
transactions with suppliers, customers and partners. More recently, Internet-
based marketplaces, or eMarketplaces, have emerged to aggregate and facilitate
commercial transactions between multiple buyers and suppliers of various
products and services. For relatively simple product procurement transactions,
eMarketplaces have allowed companies to realize efficiency gains by providing
broad access to product and pricing information and by reducing many of the
administrative costs of transacting with other businesses.

A new breed of end-to-end Internet-based business platforms, or ePlatforms,
is now beginning to emerge, combining the business process efficiency gains of
eProcess solutions with the transactional capabilities of eMarketplaces.
Because they integrate disparate and disconnected processes both within and
between businesses, these ePlatforms solutions are well positioned to address
the challenges of industries characterized by product and service
customization, complex business processes, collaborative design, production and
fulfillment workflows, and significant dependence on information exchange.

The Global Services Market

The professional services industry, which according to Benchmarking Partners
is projected to generate revenues of over $2.1 trillion in the United States in
2000, represents one of the largest segments of the global economy. This market
includes the information technology, management consulting, advertising, media,
public relations, architecture, construction, engineering, financial services,
law, tax, audit, and health care sectors. In addition, major manufacturing and
product companies often have large internal service organizations.

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<PAGE>

We believe that professional services firms and the companies they serve are
under increasing competitive and operational pressure due to the following
trends:

. emergence of the Internet as a vehicle for service delivery;

. growing complexity of professional services projects;

. increasingly sophisticated, more demanding services acquirers;

. increasingly competitive market for skilled services professionals;

. increased acceptance of project outsourcing; and

. economic globalization.

We believe the professional services industry is unique in a number of ways.
Unlike product-oriented industries producing homogeneous products using
standard components and processes, professional services organizations create
information-based deliverables using human resources with unique knowledge,
skills, abilities and availability. The process of providing professional
services requires extensive collaboration between services providers and
clients in the definition of project needs and in the sourcing, delivery and
acceptance of services. Perhaps most importantly, professional services firms
are increasingly "virtual" organizations, delivering services through a
complex, dynamic network of resources and providers.

Professional Services Organizations are not Optimally Managed

Services organizations have invested in enterprise resource planning (ERP)
applications and other enterprise software applications to automate back-office
business processes such as benefits management, payroll administration and
general ledger accounting. However, they have found that traditional enterprise
applications are difficult to adapt to the specific requirements of services
organizations. Traditional enterprise applications cannot capture the unique
and changing characteristics of the professionals that are a services
organization's core resource. Traditional ERP applications can manage and
execute simple purchase and sale transactions, but cannot support the
inherently collaborative nature of service project definition and delivery.
Moreover, traditional applications have not been architected to address the
complex and distributed processes that connect managers, employees and
contractors within the virtual services organization.

As a result, these basic processes generally continue to be performed
manually, with spreadsheets, phones and email being the principal tools used.
Some professional services organizations have attempted to internally develop
systems to manage the complexities of their operations. While providing modest
efficiency gains, these nonintegrated, function-specific systems have often
failed to meet the challenges of large and growing organizations with diverse,
dynamic, and distributed business process needs. These systems are often
cumbersome and inflexible and are only capable of managing isolated processes
within the service chain. The lack of effective process automation solutions
often results in misallocated resources, high overhead costs, missed revenue
opportunities and dissatisfaction among clients, partners and employees.

The Opportunity for an ePlatform to Automate and Connect the Service Chain

We believe that the unique nature of the professional services industry has
created an opportunity for the creation and delivery of ePlatforms that are
specifically designed to serve services acquirers, providers and professionals.
According to Forrester Research, service-related business-to-business
electronic commerce will grow from approximately $22 billion in 1999 to
approximately $220 billion in 2003, representing a compound annual growth rate
of 78%. By automating and connecting the business processes of services
organizations and their customers, ePlatforms can enable real-time
collaboration and transactions across the service chain, resulting in
significant improvement in operating margins. According to Benchmarking
Partners, an integrated end-to-end solution for managing the service chain can
yield over a $20 million benefit (net present value) over three years for a
firm of 1000 professionals through improved staffing efficiencies, increased
resource utilization, reduced attrition and reduced cost of sales.

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<PAGE>

The professional services market is especially suited for ePlatform
solutions because services providers and services acquirers share many
identical core business processes for managing service opportunities, resources
and delivery. Internal services organizations such as information technology
departments find that the challenges of balancing project demand against
resource availability, managing internal and external services resources, and
accurately assessing the financial impact of projects are the same as those
faced by large professional services firms. In an attempt to address these
challenges, many services acquirers are beginning to be required by their
"customers" - other departments within the organization - to implement the same
business practices as leading services providers. We believe the similarity in
the processes of both acquirers and providers creates a significant opportunity
for a single ePlatform solution to automate the entire service chain and
successfully meet the needs of all market participants.

We believe that an effective ePlatform for the professional services
industry must provide:

. an architecture that is designed to capture the inherently virtual,
collaborative, and people-centric characteristics of the service chain;

. a set of application modules integrating core service business processes;

. an ability to rapidly deploy the solution across the enterprise;

. integration with existing back-office information systems;

. analysis of key performance indicators and industry benchmarks for
professional services providers;

. ability for a highly distributed and mobile workforce to access the
ePlatform locally or remotely through multiple Internet access devices;

. an online marketplace that facilitates efficient transactions across the
service chain;

. the ability to deploy in either self-hosted or ASP models; and

. a collaborative and integrated online environment that connects the
service chains of multiple participants.

The Evolve Solution

We are a leading provider of Internet-based end-to-end solutions for
automating professional services organizations. Our ePlatform solution,
ServiceSphere, integrates the core processes that are critical to professional
services organizations: managing project opportunities, professional resources
and service delivery. By integrating these processes, ServiceSphere provides
enterprise-wide visibility of business performance resulting in enhanced
revenue opportunities, increased operational efficiency and improved
productivity. Through Services.com, we intend to extend the capabilities of our
ePlatform solution to integrate the internal business processes of providers
and acquirers with an efficient, collaborative, transactional environment.

We believe our ServiceSphere ePlatform provides the following benefits to
businesses across the service chain:

Increased Operational Efficiency. ServiceSphere is designed to allow our
customers to achieve significant cost savings and productivity enhancements by
offering the ability to view and manage all of the core processes involved in
providing services across their entire organization. Our solution is accessible
to professionals and managers throughout a services organization, allowing them
to communicate and collaborate throughout a project. Using our solution,
services providers can rapidly match service professionals with projects to
balance supply and demand for personnel resources within the extended
enterprise. Our ServiceSphere technology also automates and improves workflow
processes and monitors key project metrics to provide enterprise-wide
visibility of business performance.

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<PAGE>

Real-time Communication and Collaboration Across the Service Chain. Our
solution allows for the real-time, collaborative sale, management, and delivery
of services through a dynamic and complex network of resources and providers.
By connecting not only the internal professional services organization, but
also the entire external service chain to our solution, we allow our customers
to leverage the Internet to communicate in real-time about changes in project
requirements and timing, as well as resource characteristics and availability.

Improved Retention of Service Professionals. By providing professionals with
real-time access and input into their skill profiles, staffing preferences and
assignments schedules, we believe ServiceSphere helps close the gap between
professional development and project staffing needs, improving service
professionals' levels of satisfaction and retention. Improving retention of
service professionals reduces recruitment and training expenses, protects key
knowledge assets and can have a significant impact on operating results of
services providers.

Expanded Qualified Revenue Opportunities. We believe our ePlatform enables
service providers to expand their revenue opportunities. Our Services.com
network aims to create an efficient environment in which service providers can
effectively market to a much larger base of prospective customers. Our
ePlatform provides tools that significantly reduce the complexity inherent in
assessing and matching resource capabilities and available revenue
opportunities.

Enhanced Client Satisfaction. Our solution improves client satisfaction by
more effectively matching client needs with the most knowledgeable and
experienced available resources for their project. In addition, ServiceSphere
facilitates timely completion of projects by enabling project managers to
collaborate with the service provider team and the client and make better
decisions more quickly. We believe that collaborative management is essential
to increasing client satisfaction and generating repeat business.

The Evolve Strategy

Our objective is to become the leading ePlatform provider for automating the
service chain. We intend to achieve our goal by gaining broad market acceptance
for our ePlatform and building the largest network of service chain
participants engaging in Internet-based professional services transactions.

Key elements of our strategy include:

Extend Market Position Among IT Services Organizations and Leverage
Leadership into Other Vertical Markets. We currently target our solution
primarily at professional services organizations specializing in IT consulting.
We chose to initially target the IT services market because of its large size
and because IT services professionals face particularly complex collaboration
and transactional processes in selling, managing, and delivering their
services. We intend to build on our existing customer base to further penetrate
the IT services sector. We also intend to leverage our market position as well
as our core competencies and technologies, to target other vertical industries
such as management consulting and advertising.

Capitalize on Technology Leadership and Expand Product Offerings. We have
acquired substantial domain expertise in developing solutions addressing the
core business process automation needs of the professional services industry,
and we have implemented a technical architecture that meets the need of
professional services organizations for flexible and scalable solutions and
that can rapidly be configured to meet these needs. The ServiceSphere
architecture is designed for rapid and cost-effective implementation and
configuration without source code adaptations. We will continue to enhance our
technology and expand our service offerings to meet the evolving needs of our
customers and promote broad market adoption and increased usage of our
ePlatform solution. We expect to devote significant resources to building,
expanding and continuing to tightly integrate our ePlatform functionality, as
well as enhancing integration with complementary systems.

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<PAGE>

Leverage Network Effects to Connect the Extended Service Chain. We believe
that our ePlatform solution creates significant network efficiencies, leading
to increased benefits to each service chain participant as our network grows.
We expect that organizations currently using our ePlatform will encourage the
other participants in their services chain to join our network and adopt our
ePlatform solution to enhance collaboration and transaction efficiency. We
ultimately will expand our network across vertical markets in adjacent
industries. The benefits of joining our network will become increasingly
compelling as the number of organizations connected to the platform increases.

Encourage Continued Adoption of Our ePlatform Through Expanded Acquisition,
Deployment and Pricing Options. We make our platform accessible to a broad
range of businesses by providing a range of acquisition and deployment options,
all based on the same technology platform and using our scalable value-based
pricing model. In addition to our self-hosted, licensed acquisition and
deployment model, we intend to promote use of our ServiceSphere solution on an
ASP subscription basis, whereby we manage and maintain the systems hosting the
application on behalf of the customer, and make the ePlatform available to the
customer via the Internet. We believe that this market strategy will enhance
our ability to build the largest Internet-based network of professional
services organizations.

Leverage our Installed Base to Increase Sales of Complementary Services and
Increase Penetration of Customer Organizations. We intend to leverage the
success of existing deployments to encourage adoption of ServiceSphere across
additional workgroups and divisions within our customers' organizations. We
also will continue to encourage customers to deploy additional software modules
and extend their use of ServiceSphere to begin sourcing and providing services
through Services.com.

Expand Globally. We believe that the Internet provides a platform to
integrate the fragmented nature of many international markets for professional
services. Further, we believe that our existing domain knowledge and
technologies can be applied to professional service markets worldwide. We
intend to capitalize on our domain expertise and on our experience in assisting
our customers with overseas implementations of our solutions to aggressively
expand internationally. We plan to establish additional sales offices, create
an international sales force, and form strategic international partnerships.

Products and Services

Our ePlatform solution helps professional services organizations improve the
effectiveness of their internal operations and connects them to their clients,
partners and suppliers. Our ePlatform captures the inherently virtual,
collaborative, and people-centric characteristics of the service chain by
employing the universal accessibility of the Internet, an intuitive interface,
and applications functionality encapsulating our extensive domain expertise.
Our highly configurable rules engine allows the platform to be deployed by a
wide variety of customers supporting different business practices with no
source code changes. This enables us to address the different needs of a
diverse base of customers ranging from small emerging service firms to large
complex global services organizations across a variety of vertical markets.

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<PAGE>

ServiceSphere

ServiceSphere is a proven, scalable and robust solution that can be deployed
on a self-hosted as well as on an ASP basis. The ServiceSphere ePlatform
automates and integrates the key processes that are critical to professional
services operational effectiveness. ServiceSphere comprises the following
modules:

<TABLE>
<CAPTION>
Module Feature Benefits

- --------------------------------------------------------------------------------

<C> <C> <S>
Opportunity Manager . Track opportunity from . Reduces the time to
qualification through identify and close a
service engagement qualified opportunity
[graphic depicting integrated . Model project specifications . Leverages experience
ePlatform modules] and create pricing proposals base to rapidly
create, price and
configure projects
. Review and manage . Improves managerial
opportunity pipelines visibility, enabling
strategic enterprise-
wide decision making
. Incorporate internal and . Focuses sales
competitive benchmarks into activities on highly
the project selection probable engagements
process

- --------------------------------------------------------------------------------

Resource Manager . Match resource profiles and . Enables collaborative
availability with project team building,
requirements building dynamic
teams that adapt to
changing customer
requirements
[graphic depicting integrated . Monitor and review . Optimizes resource
ePlatform modules] organization wide capacity utilization
plan
. Share and evaluate partner . Optimizes resource
resources and projects allocation across a
network of service
providers
. Develop, manage and evaluate . Facilitates personal
resource skills, development,
qualifications and increasing job
preferences satisfaction
improving resource
retention

- --------------------------------------------------------------------------------

Delivery Manager . Capture, review and approve . Improves accuracy and
time and expenses reduces cost of
tracking projects
[graphic depicting integrated . Monitor and review projects . Facilitates improved
ePlatform modules] with customers and partners customer interaction
and satisfaction
. Generate invoices using . Increases billing
multiple billing methods accuracy and payment
efficiency
. Provide sophisticated . Optimizes financial
financial analysis and performance
reporting across the service
chain
</TABLE>

Services.com

Services.com, which we introduced in February 2000, will be a significant
extension of the Evolve ePlatform. Services.com is an online, collaborative
transactional environment that connects providers and acquirers of professional
services, providing efficiencies and cost savings to both.

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<PAGE>

The key functions offered by Services.com will include:

. Collaborative Commerce - Services providers will be able to more
effectively market their capabilities and to respond to requests for
proposals posted by services acquirers. Services acquirers will be able
to define and communicate their business requirements to all network
participants or to a qualified group of services providers. Services.com
will allow participants to connect and interact in real time to integrate
the management of project opportunities, professional resources and
services delivery in an efficient transactional environment.

. Content - Services.com will offer access to relevant information to
support services acquisition and provision decisions, including analyst
and user-generated ratings; business news, market and investment
research; and reports on best practices, methodologies and industry
trends.

Services.com is accessible to professional services organizations over the
Internet, and can be used independently of our ePlatform. The tools and
features of Services.com will be optimized to integrate with our ServiceSphere
application modules. This functionality allows organizations that have
implemented our ePlatform to seamlessly and securely interact and transact with
other network participants. We believe our ePlatform will allow service chain
participants to build more flexible and collaborative business relationships.

Professional Services

As of March 15, 2000, our professional services organization consisted of 63
employees. We provide implementation consulting, technical support, end-user
training, and change management to ensure our customers receive the guidance
and support they need to implement and operate our ePlatform solutions. Our
professional services organization has developed implementation methodologies
that allow our customers to rapidly configure and deploy our ePlatform to
support their unique business practices.

In addition to professional services, we offer product maintenance to our
customers. Maintenance services are typically subject to an annual, renewable
contract and are typically priced as a percentage of product license fees. We
bundle maintenance services with our ASP offering in a single monthly
subscription fee. Customers receiving maintenance services also receive product
upgrades as they are released throughout the life of the maintenance contracts.

Customers

Our current customers include both eBusiness consultants and the services
organizations of traditional software and hardware companies. As of March 15,
2000, we had licensed our solution to 23 customers, each of whom had purchased
more than $250,000 in products and services and who have collectively licensed
our solutions to manage over 40,000 professionals:

<TABLE>
<S> <C>
Banyan Systems Portal Software
Becton Dickinson Razorfish
Cambridge Technology Partners R.R. Donnelley & Sons
Computer Task Group Scient
DMR Consulting Group ThoughtWorks
Ericsson Whittman-Hart & USWeb/CKS
Exodus Communications Xcelerate
Groundswell XOR
Lante Xpedior
Mainspring Communications Xuma Technologies
Netscape Communications Zefer
Novell
</TABLE>

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<PAGE>

The following are case studies of certain Evolve customers who have deployed
our ePlatform to automate their service chain:

Exodus Communications

Exodus is a leading provider of complex Internet hosting for enterprises
with mission-critical Internet operations. Exodus was looking for a solution to
manage its professional services organization as well as its relationships with
its outside services provider partners. Our Opportunity Manager and Resource
Manager modules were selected because the applications can be hosted and
because Exodus concluded that Evolve's ePlatform offers more extensive features
and functionality than competing offerings. By using our ePlatform, Exodus
expects to be able to manage its workforce more effectively and streamline and
optimize interactions with its services provider partners.

Novell

Novell is a leading worldwide provider of Net services software that is
rapidly expanding its professional services organization to provide customers
with comprehensive education, consulting and technical support programs.
ServiceSphere was evaluated to help achieve Novell's strategic goal to grow its
global services resources by 500% in 2000. Novell has licensed all three
modules of our ePlatform. This ensures that it has the tools to keep up with
the challenges of building, scaling and integrating a large professional
services organization within a traditionally product-oriented enterprise. The
first two modules were implemented around the world in less than three months.
Plans are underway to deploy the third module worldwide in 2000.

Scient

Scient is leading a new category of professional services called systems
innovation and is focused on building highly scalable, innovative eBusiness
systems that help companies go to market rapidly and build competitive
differentiation. Scient selected Evolve to provide a solution to support the
growth of its professional services organization. Scient is using our Resource
Manager, including connectors to its PeopleSoft human resource system and other
systems, to assist in its efforts to build project teams efficiently and to
streamline operations in its dynamic environment.

Whittman-Hart & USWeb/CKS

Whittman-Hart & USWeb/CKS is a leading global Internet professional services
firm that helps clients perform and strengthen the integration of their
business models, brands, systems and processes. Whittman-Hart & USWeb/CKS has
more than 8,500 employees in 13 countries worldwide. Whittman-Hart chose our
ePlatform because they believed our solution could scale to address the
mission-critical processes of a $1 billion services firm. Whittman-Hart also
needed a solution that would integrate effectively with its other enterprise
applications that were simultaneously deployed--human resources, financial,
knowledge management and recruiting. Today, Evolve is used to manage more than
3,300 professionals at Whittman-Hart.

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<PAGE>

Technology

[LOGO TO COME]

At the core of our ePlatform solution is a highly adaptable, scalable,
multi-tier, distributed, Internet-based architecture. Our architecture includes
the following components:

ePlatform Server

Our Java-based ePlatform application server includes the Opportunity,
Resource and Delivery modules that employ extensive professional services
domain knowledge . When deployed together, these modules provide a fully
integrated, end-to-end service chain automation solution. Alternatively,
companies can deploy these modules individually on an as-needed basis. Some of
these key features of the server include:

. The option of running multiple application servers to provide scalability
for large sophisticated organizations;

. Patent-pending resource matching algorithms that reduce the time required
to staff projects.

. A flexible object-based design allowing rapid incorporation of new
features and functionality; and

. Java-based portability which provides flexibility to support multiple
operating environments.

Our ePlatform includes the following functional elements:

Presentation Interface

We have the flexibility to provide access to a broad set of users by
employing different presentation interfaces:

. Internet Browser - an ease-of-use interface that allows services
organizations to manage and share information through a secure intranet
or Internet connection;

. Java Client - a more functionally sophisticated interface for power-users
needing to work quickly with complex queries and dashboards providing
highly graphical presentation of management data; and

. Handheld Devices - an interface for mobile access to time and expense
entry through popular personal digital assistants such as Palm devices.

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<PAGE>

Our architecture is designed to allow us to quickly develop and introduce new
presentation interfaces that leverage new and emerging access technologies.

sXML

Our ePlatform employs XML (eXtensible Mark-up Language), a common
information exchange standard for electronic commerce. We are in the process of
developing Services XML (sXML), an advanced version of the XML standard
optimized for exchanging information on service opportunities, resources and
delivery.

Analytics Engine

We have the ability to report on key data through a sophisticated analytics
engine. These reports are available through our browser-based report center,
which provides views of the entire service chain, such as opportunity and
revenue pipelines, utilization and profitability analysis, and resource supply
and demand planning.

Application Connectors

Our system provides connectors that support common industry standards and
technologies such as JDBC (Java DataBase Connectivity); ODBC (Open DataBase
Connectivity); SQL (Structured Query Language) and Java. These connectors allow
for integration with:

. External databases;

. Third party reporting tools that complement our built-in browser-based
report center capabilities; and

. Other enterprise applications such as financial, human resource and sales
force automation systems.

Business Rules Repository

Our ePlatform is designed to capture and store business information, rules
and standards in a single, centralized repository that can be accessed by all
functional modules. This centralized information structure allows for rapid
initial deployment and also facilitates adaptation to changes in the customer's
organization and processes without source code modifications. We also believe
this architecture will allow us to more easily extend our solution to other
vertical industries beyond IT.

Security Controller

Our integrated security and administration features store profiles and
access rules within a centralized repository. Customers can specify individual
access rules for employees based on their position within their organization,
as well as for customers, partners and other external parties. Our systems
supports the Lightweight Directory Access Protocol (LDAP) security standard for
universal sign-on and authentication functions.

Workflow Manager

Our platform incorporates an integrated messaging system that notifies users
when actions, information or approvals are required. This system helps to
streamline approval processes, monitor resources and facilitate collaboration
among project team participants.

Research and Development

We believe that our introduction of new and enhanced products will be a key
factor for future success. As part of our efforts to generate ideas for
enhancing our existing products and for developing new ones, we maintain an
ongoing dialogue with our customers who are facing new professional services
automation

43
<PAGE>

challenges. We have devoted and expect to continue to devote significant
resources to developing new and enhanced products, including new releases of
our ServiceSphere ePlatform and our Services.com offering.

Our research and development expenses were $5.1 million and $3.4 million in
fiscal 1999 and the six months ended December 31, 1999. We expect that research
and development expenses will increase in absolute dollars and may increase as
a percentage of revenues in future periods as we hire additional research and
development personnel to develop our products and services. We expect that we
will have to respond quickly to rapid technological change, changing customer
needs, frequent product introductions and evolving industry standards that may
render existing products and services obsolete. We currently have a number of
product development initiatives underway, but we cannot be certain that any
enhanced or new products will be embraced by existing or new customers.

Sales and Marketing

We sell our solutions through our direct sales organization which includes
personnel in the metropolitan areas of Atlanta, Boston, Chicago, Dallas, New
York and San Francisco. In the future, we intend to enhance our market presence
through alliances with systems integrators and service partners.

In selling our products, we typically approach both business users and
information technology professionals with an integrated team from our sales and
professional services organizations. Initial sales activities typically include
a demonstration of our product capabilities followed by one or more detailed
technical reviews. Our sales process requires that we work closely with
targeted customers to identify short-term professional services automation
needs and long-term goals. Our sales team, which includes both sales and
technical professionals, then works with the customer to develop a proposal to
address these needs. In many cases, we collaborate with our customers' senior
management team, including the chief executive officer, chief information
officer, chief operating officer and chief financial officer. The level of
customer analysis and financial commitment required for many of our product
implementations has caused our sales cycle to range from two to nine months.

We use a variety of marketing programs to build market awareness of our
company, our brand name and our products, as well as to attract potential
customers. These programs include advertising, market research, product and
strategy updates with industry analysts, public relations activities, direct
mail programs, telemarketing and telesales, seminars, trade shows, speaking
engagements and Web-based marketing. Our marketing organization also produces
marketing materials in support of sales to prospective customers that include
brochures, data sheets, white papers, presentations and demonstrations. We plan
to continue to expand our marketing organization and marketing budget to
broaden our market presence. We also seek to establish relationships and
alliances with major industry vendors that will add value to our products and
enhance our market presence.

Intellectual Property and Proprietary Rights

Our success is dependent on our ability to develop and protect our
proprietary technology and intellectual property rights. We seek to protect our
software, documentation and other written materials primarily through a
combination of patent, trade secret, trademark and copyright laws,
confidentiality procedures and contractual provisions. For example, we license
rather than sell our software and require licensees to enter into license
agreements that impose certain restrictions on the licensees' ability to use
the software. In addition, we seek to avoid disclosure of our trade secrets,
by, among other things, requiring persons with access to our proprietary
information to execute confidentiality agreements with us and by restricting
access to our source code.

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<PAGE>

may attempt to copy aspects of our products or obtain and use information that
we regard as proprietary. Policing unauthorized use of our products is
difficult. While we are unable to determine the extent to which piracy of our
software products exists, software piracy can be expected to be a persistent
problem, particularly in foreign countries where the laws may not protect
proprietary rights as fully as in the United States. We can offer no assurance
that our means of protecting our proprietary rights will be adequate or that
our competitors will not independently develop similar technology.

It is also possible that third parties will claim that we have infringed
their current or future products or technologies. We expect that enterprise
applications software developers will increasingly be subject to infringement
claims as the number of products in different industry segments overlap. Any
claims, with or without merit, could be time-consuming, result in costly
litigation, prevent product shipment, cause delays, or require us to enter into
royalty or licensing agreements, any of which could harm our business. Patent
litigation in particular has complex technical issues and inherent
uncertainties. In the event an infringement claim against us was successful and
we could not obtain a license on acceptable terms or license a substitute
technology or redesign to avoid infringement, our business could be harmed.

We rely on software that we have licensed from Paradigm Software
Technologies, Poet Software and Inprise/Borland to perform key functions of our
ServiceSphere ePlatform. These companies could discontinue their support of
these products, or they could terminate our licenses if we breach our
agreements with them. This could result in delays or reductions of sales or
shipments of our ePlatform until alternative software could be developed or
licensed.

We indemnify some of our customers against claims that our products infringe
upon the intellectual property rights of others. We could incur substantial
costs in defending our company and our customers against infringement claims.
In the event of a claim of infringement, we or our customers may be required to
obtain one or more licenses from third parties. We cannot assure you that such
licenses could be obtained from third parties at a reasonable cost, or at all.
Defense of any lawsuit or failure to obtain any such required license could
have a material adverse effect on our business.

Competition

Competition could seriously harm our ability to sell additional software
solutions and subscriptions on prices and terms favorable to us. The markets
for our products are intensely competitive and subject to rapidly changing
technology. We currently compete against other providers of automation
solutions for professional services organizations such as Changepoint and Niku.
In addition, we may in the future face competition from providers of enterprise
application software, or electronic marketplaces. Companies in each of these
areas may expand their technologies or acquire companies to support greater
professional service automation functionality and capability. In addition, "in
house" information technology departments of potential customers have developed
or may develop systems that substitute for some of the functionality of our
ePlatform.

Some of our competitors' products may be more effective than our products at
performing particular functions or be more customized for particular needs.
Even if these functions are more limited than those provided by our products,
our competitors' software products could discourage potential customers from
purchasing our products. A software product that provides some of the functions
of our solutions, but also performs other tasks, may be appealing to some
customers because it would reduce the number of different types of software
necessary to effectively run their business. Further, our competitors may be
able to respond more quickly than we can to changes in customer requirements.

45
<PAGE>

competitors have made and may also continue to make strategic acquisitions or
establish cooperative relationships among themselves or with other software
vendors. They may also establish or strengthen cooperative relationships with
our current or future partners, thereby limiting our ability to promote our
products through these partners and limiting the number of consultants
available to implement our software.

We believe that the primary competitive factors in our market include:

. a critical mass of prominent referenceable customers that have
successfully implemented the solutions;

. an underlying software infrastructure that fully encapsulates the
virtual, collaborative, and people-centric characteristics of the service
chain;

. an eMarketplace that integrates with process automation functionality;

. product quality, performance, features, functionality, and usability;

. customer service and support; and

. ease of integration with customers' business processes.

We believe our current products compete favorably with respect to these
factors, although our market is relatively new and evolving rapidly. We may not
be able to maintain our competitiveness in the face of significant competition.

Employees

As of March 15, 2000, Evolve had a total of 177 employees. Of these
employees:

. 44 were engaged in sales and marketing

. 42 were in research and development

. 63 were in professional services and customer support

. 28 in finance, administration and corporate operations

In addition, as of March 15, 2000, we also employed an additional 22 full-
time consultants in our research and development organization.

Our future performance depends in significant part on our continuing ability
to attract, train and retain highly qualified technical, sales, service,
marketing, managerial and administrative personnel. None of our employees is
represented by a labor union. We have not experienced any work stoppages and
consider our relations with our employees to be good.

Facilities

We currently lease approximately 25,000 square feet of office space for our
headquarters in one building in San Francisco, California. In November 1999, we
entered into a lease for a new 50,000 square foot corporate headquarters
facility in Emeryville, California, which we intend to occupy commencing in
June 2000. In connection with the relocation of our corporate headquarters, we
expect to incur capital expenditures of approximately $4 million in the fourth
quarter of fiscal 2000 and the first quarter of fiscal 2001. We also lease
sales offices near Atlanta, Boston, Chicago, Dallas, and New York. We believe
that our facilities are adequate for our current needs. We may need to locate
additional space to meet our needs in the future.

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<PAGE>

Legal Proceedings

From time to time, we may become involved in litigation relating to claims
arising from our ordinary course of business. In January 2000, PeopleSoft, Inc.
filed an action in the California Superior Court alleging certain claims
arising out of our employment of former employees of PeopleSoft, and seeking an
injunction to preclude additional hiring of PeopleSoft employees. We believe
PeopleSoft's claims are without merit, and we are in the process of contesting
these claims. This litigation, whether or not determined or settled in the
Company's favor, may be costly and may divert the efforts and attention of the
Company's management from normal business operations. We believe that there are
no other claims or actions pending or threatened against us, the ultimate
disposition of which would have a material adverse effect on us.

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<PAGE>

MANAGEMENT

Executive Officers and Directors

Our executive officers and directors, and their ages as of March 15, 2000
are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
John P. Bantleman........ 40 President, Chief Executive Officer and Director
James J. Bozzini......... 33 Chief Operating Officer
Marc C. Ferrie........... 36 Senior Vice President, Engineering
Vice President, Marketing and Business
Mark L. Davis............ 38 Development
J. Russell DeLeon........ 34 Vice President, Finance and Administration,
General Counsel, Corporate Secretary and
Treasurer
Kurt M. Heikkinen........ 32 Vice President, Worldwide Customer Service
Jeff A. McClure.......... 34 Vice President, Marketplace Services
Anil K. Gupta............ 39 Vice President, Strategy
John R. Oltman(1)(2)..... 54 Chairman of the Board
Jeffrey M. Drazan(1)(2).. 41 Director
Judith H. Hamilton(1).... 55 Director
</TABLE>
- --------
(1) Member of Audit Committee

(2) Member of Compensation Committee

John P. Bantleman has served as President since October 1997, and as Chief
Executive Officer and as Director since November 1998. Prior to joining Evolve,
Mr. Bantleman served as Executive Vice President of Marketing and Product
Management at Logic Works from October 1996 to May 1997, a provider of
development tools for enterprise-wide client-server and data warehouse
applications. From 1982 to 1996, he was employed by LBMS, where he served as
President and Chief Executive Officer after serving in various other management
positions. Mr. Bantleman holds a B.S. degree in Computer Science from City
University, London, England.

James J. Bozzini has served as Chief Operating Officer since November 1999.
From 1991 to 1999, Mr. Bozzini held various executive positions at PeopleSoft,
Inc., including Senior Vice President of Worldwide Services Operations from
January 1998 to July 1999 and Vice President, Customer Services from December
1995 until December 1997. From 1991 to 1995, he held various executive
positions at PeopleSoft, including Vice President of Professional Services and
Director of European Operations. From 1988 to 1991, Mr. Bozzini also held
various positions at Andersen Consulting. Mr. Bozzini holds a B.S. in Business
from California State University, Chico.

Marc C. Ferrie has served as Senior Vice President, Engineering since
January 1998. Prior to joining Evolve, Mr. Ferrie served from July 1997 to
December 1997 as President and Vice President of Engineering of Omnis Software.
From 1988 to 1997, he was employed at Ingres Corporation, where he held various
positions, including Vice President of Engineering from January 1995 to June
1997, Vice President of Product Management from 1993 to 1995, and Vice
President of Customer Services for France from 1990 to 1993. Mr. Ferrie holds
an M.S. degree in Computer Science and Artificial Intelligence from the
University of Rene Descartes Paris V, and an M.S. degree in Sociology from the
University La Sorbonne, Paris, France.

Mark L. Davis has served as Vice President, Marketing and Business
Development since November 1999. Prior to joining Evolve, Mr. Davis served as
Vice President of Marketing, Alliances, and Customer Service at ConvergeNet
Technologies, Inc. from January 1999 through the company's acquisition by Dell
Computer in November 1999. From January 1998 to January 1999, he was a Vice
President of Marketing at Storage Technology Corporation, a $2.3 billion
enterprise storage company. From 1991 to 1998, Mr. Davis held various
management positions at Sun Microsystems, Inc., including Group Manager,
Outbound Marketing and Acting Director of Marketing from May 1997 to January
1998; Manager, Marketing Strategy and Programs from

48
<PAGE>

January 1996 to May 1997; and Product Line Manager from February 1995 to
January 1996. Mr. Davis holds an M.B.A., with honors, from Dartmouth College's
Amos Tuck School of Business, and B.S. and B.A. degrees, with honors, in
Computer Science and Business Administration from Trinity University.

J. Russell DeLeon joined Evolve as Vice President, General Counsel and
Corporate Secretary in May 1995, and was appointed Treasurer in October 1997,
and Vice President, Finance and Administration in November 1998. Prior to
joining Evolve, Mr. DeLeon worked as an associate in the business, corporate
finance and intellectual property groups at Morrison & Foerster, an
international law firm. Mr. DeLeon, a member of the State Bar of California,
holds a B.A. degree in Philosophy from UC Berkeley and a J.D. from Harvard Law
School.

Kurt M. Heikkinen has served as Vice President, Worldwide Customer Service
since December 1999. Prior to joining Evolve, Mr. Heikkinen held various
positions at PeopleSoft, Inc. From August 1999 to November 1999, he served as
General Manager of the Human Resource Management Solutions ("HRMS") product
division; from October 1997 until August 1999 he served as Vice President,
Global Support Services; from July 1996 until October 1997 he served as
Development Manager, Asia Pacific HRMS; and from March 1994 until July 1996 he
was a Senior Account Manager. Mr. Heikkinen holds a B.S. degree from the
University of Wisconsin, Milwaukee.

Jeff A. McClure has served as Vice President, Marketplace Services since
February 2000. He joined Evolve as Director of ASP operations in November 1999.
From 1996 to 1999, Mr. McClure served in executive positions at PeopleSoft,
Inc. From April 1999 until November 1999, he was Vice President, Advantage
Programs and Services. From June 1998 until April 1999, he was Vice President,
Product Knowledge Services, and from October 1996 through June 1999, he was
Director, Service Alliances. Before PeopleSoft, Mr. McClure served as a
principal in a financial systems consultancy, and before that he served in
various roles at Apple Computer, Inc., including Business Solutions Evangelist.
Mr. McClure holds a B.S. in Business Administration from California State
University, Chico.

Anil K. Gupta joined Evolve as Vice President, Strategy in March 2000. Mr.
Gupta served as Vice President, Marketing of Broadbase Software, Inc. from
August 1999 to March 2000. From January 1999 to August 1999, Mr. Gupta served
as Vice President of Marketing at Niku Corporation. From May 1995 to December
1998, Mr. Gupta held various marketing positions at Baan N.V., including Vice
President of Marketing for the Baan Supply Chain Solutions. From June 1993 to
May 1995, Mr. Gupta served as Director of Industry Marketing at Oracle
Corporation. Mr. Gupta holds a B.S. degree in Electrical Engineering from The
Birla Institute of Technology and Science in Pilani, India and an M.B.A. degree
from Santa Clara University.

John R. Oltman has served on our Board of Directors since August 1999, and
has served as Chairman of the Board of Directors since November 1999. Mr.
Oltman has been President of JRO Consulting, Inc. since 1995, in which role he
serves as director, advisor and investor in leading technology companies and
investment firms. Mr. Oltman also currently serves as the Vice-Chairman of
Lante Corporation and Chairman of XOR, Inc. Mr. Oltman also serves as a
director for Exult, Inc., Alysis Technologies, Inc., InaCom Corp. and Premier
Systems Integrators, Inc. From February 1996 through August 1997, Mr. Oltman
served as Chairman and senior member of the Executive Committee of TSW
International, a global leader in asset care software and services. From July
1991 to November 1995, Mr. Oltman served as the Chairman and Chief Executive
Officer of SHL Systemhouse, a large provider of client/server systems
integration and technology outsourcing. Before joining SHL Systemhouse, Mr.
Oltman was a worldwide managing partner responsible for systems integration and
outsourcing services at Andersen Consulting. Mr. Oltman holds a B.S. degree
from the University of Illinois and an M.B.A. degree from Northwestern
University's Kellogg School of Management.

Jeffrey M. Drazan has served on our Board of Directors since November 1998.
Mr. Drazan has been a General Partner of Sierra Ventures since 1984. Prior to
joining Sierra Ventures, Mr. Drazan was employed by AT&T, where he held various
management positions within the operating divisions of AT&T Long Lines,

49
<PAGE>

AT&T Information Systems, and Bell Laboratories. He currently serves on the
Board of Directors of Vertel Corporation, a telecommunications software vendor,
Fairmarket, an auction services company and other private companies. Mr. Drazan
holds an M.B.A. from New York University's Graduate School of Business
Administration and a B.S. Degree in Engineering from Princeton University.

Judith H. Hamilton has served on our Board of Directors since March 1999.
Ms. Hamilton has served as President and Chief Executive Officer of Classroom
Connect, an Internet company focusing on K-12 education, since January 1999.
Prior to this, she served as President and Chief Executive Officer of First
Floor, Inc., an Internet marketing enterprise from April 1996 to July 1998. Ms.
Hamilton also served as President and Chief Executive Officer of Dataquest,
Inc. from July 1992 to March 1996. She currently serves on the Board of
Directors of R.R. Donnelley & Sons Company, a financial printing services
company, Software.com, Inc., an Internet messaging software developer, and
Lante Corporation, a consulting firm. Ms. Hamilton holds a B.A. Degree in
History and Political Science from Indiana University and has engaged in post-
graduate studies in International Relations at Boston University in Heidelberg,
Germany as well as in Executive Management at the UCLA Graduate School of
Management.

Board of Directors

Our Board of Directors currently consists of four members. Each director
holds office until his or her term expires or until his or her successor is
duly elected and qualified. Upon completion of this offering, our amended and
restated certificate of incorporation and bylaws will provide for a classified
Board of Directors. In accordance with the terms of our certificate, our Board
of Directors will be divided into three classes whose terms will expire at
different times. The three classes will be comprised of the following
directors:

. Class I consists of Jeffrey M. Drazan, who will serve until the annual
meeting of stockholders to be held in 2001;

. Class II consists of John R. Oltman, who will serve until the annual
meeting of stockholders to be held in 2002; and

. Class III consists of John P. Bantleman and Judith H. Hamilton, who will
serve until the annual meeting of stockholders to be held in 2003.

At each annual meeting of stockholders beginning with the 2001 annual
meeting, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election and until their successors have been duly
elected and qualified. Any additional directorships resulting from an increase
in the number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of an equal number of directors.

Committees of the Board of Directors

Audit Committee

The audit committee consists of Jeffrey M. Drazan, John R. Oltman and Judith
H. Hamilton. 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.

Compensation Committee

The compensation committee consists of Jeffrey M. Drazan and John R. Oltman.
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.

The Board of Directors selects the directors who will serve as members of
these committees and may reduce or enlarge the size of the committees or change
the scope of their responsibilities. The Board of

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<PAGE>

Directors has no current plans to take any of these actions. The rules of The
Nasdaq Stock Market's National Market, on which our common stock is listed,
require us to maintain an audit committee consisting of at least two directors
who are not employees of Evolve.

Compensation Committee Interlocks and Insider Participation

Our Board of Directors established the compensation committee in December
1998. Prior to establishing the compensation committee, our Board of Directors
as a whole performed the functions delegated to the compensation committee. No
member of our compensation committee has served as a member of the Board of
Directors or compensation committee of any entity that has one or more
executive officers serving as a member of our Board of Directors or
compensation committee. Since the formation of the compensation committee, none
of its members has been our officer or employee.

Employee directors, which currently include only John P. Bantleman, are
eligible to participate in our 2000 Employee Stock Purchase Plan.

Director Compensation

Our Board of Directors will be reimbursed for expenses incurred in attending
any meeting of the Board of Directors or any committee thereof. We have adopted
a policy whereby each new non-employee director will receive a grant of a stock
option to purchase 166,667 shares of our common stock on the date on which such
person becomes a director. The options will vest over four (4) years. Twenty-
five percent (25%) of the shares subject to such options will vest on the first
anniversary of the date on which the person becomes a director, and 1/48th of
the total number of shares vesting each month thereafter. Our directors may
also be given the opportunity from time to time to purchase shares of our
common stock pursuant to restricted stock purchase agreements.

Executive Compensation

The following Summary Compensation Table sets forth all compensation paid or
accrued during our fiscal year ended June 30, 1999, to our President and Chief
Executive Officer, and each of our other most highly compensated officers whose
compensation exceeded $100,000 for the period. In accordance with the rules of
the SEC, the compensation described in this table does not include perquisites
and other personal benefits received by the executive officers named in the
table below that do not exceed the lesser of $50,000 or 10% of the total salary
and bonus reported for these officers. Since the end of our 1999 fiscal year,
we have added several additional executive officers. For a list of our current
executive officers and certain members of our senior management, see "--
Executive Officers and Directors" above.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------- ------------
Restricted
Stock All Other
Name and Principal Position Salary ($) Bonus ($) Awards (#) Compensation
- --------------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
John P. Bantleman.............. 187,500 135,520 1,366,667(1) --
President, Chief Executive
Officer
Marc C. Ferrie................. 162,500 35,363 633,333(2) --
Senior Vice President,
Engineering
J. Russell DeLeon.............. 105,000 25,613 183,500(3) --
Vice President, Finance and
Administration, General
Counsel, Corporate Secretary
and Treasurer
</TABLE>

51
<PAGE>

- --------
(1) As of June 30, 1999, Mr. Bantleman had purchased, in aggregate, 1,666,667
shares of restricted stock that had a value of $250,000 (based on a value
of $0.15 per share, the fair market value of our common stock at the end of
fiscal 1999 as determined in good faith by our Board of Directors). On
February 1, 1999, Mr. Bantleman purchased 1,366,667 shares of restricted
stock for $205,000, which shares are scheduled to vest over a four-year
period in equal amounts on the 15th day of each month commencing December
15, 1998. On January 31,1998, Mr. Bantleman purchased 300,000 shares of
restricted stock for $270,000. Dividends were not paid on any of the
restricted stock during fiscal 1999.

(2) As of June 30, 1999, Mr. Ferrie had purchased, in aggregate, 633,333 shares
of restricted stock that had a value of $95,000 (based on a value of $0.15
per share, the fair market value of our common stock at the end of fiscal
1999 as determined in good faith by our Board of Directors), which shares
were purchased on February 1, 1999, and are scheduled to vest over a four-
year period in equal amounts on the 15th day of each month commencing
December 15, 1998. Dividends were not paid on any of the restricted stock
during fiscal 1999.

(3) As of June 30, 1999, Mr. DeLeon had purchased, in aggregate, 246,000 shares
of restricted stock that had a value of $36,900 (based on a value of $0.15
per share, the fair market value of our common stock at the end of fiscal
1999, as determined in good faith by our Board of Directors). On February
1, 1999, Mr. DeLeon purchased 183,500 shares of restricted stock for
$27,525, which shares are scheduled to vest over a four-year period in
equal amounts on the 15th day of each month commencing December 15, 1998.
On May 15, 1995, Mr. DeLeon purchased 62,500 shares of restricted stock for
$9,375. Dividends were not paid on any of the restricted stock during
fiscal 1999.

Stock Option Grants in Fiscal 1999

No stock options were granted to the executive officers named in the table
above during the fiscal year ended June 30, 1999.

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

The following table sets forth for the named executive officers exercisable
and unexercisable options held by them as of June 30, 1999. The named executive
officers did not exercise any options during the fiscal year ended June 30,
1999. All options granted to these executive officers in the last fiscal year
were granted under the 1995 Stock Option Plan, as amended. All options were
granted at a fair market value as determined by our Board of Directors on the
date of grant.

The "Value of Unexercised In-the-Money Options at June 30, 1999" is based on
a value of $0.15 per share, the fair market value of our common stock as of
June 30, 1999, as determined in good faith by our Board of Directors, less the
per share exercise price, multiplied by the number of shares issued upon
exercise of the option. As of June 30, 1999, none of the unexercised options
were "In-the-Money."

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at June 30, 1999 In-the-Money Options at
Acquired on (#) June 30, 1999 ($)
Exercise Value -------------------------- -------------------------
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John P. Bantleman....... -- -- -- -- -- --
Marc C. Ferrie.......... -- -- 100,000(1) -- -- --
J. Russell DeLeon....... -- -- 34,167 -- -- --
</TABLE>
- --------
(1) These options were immediately exercisable pursuant to a right of early
exercise; however, as a condition of exercise, the optionee must enter into
a restricted stock purchase agreement granting us the right to repurchase
any unvested portion of the shares issuable by such exercise at their cost
in the event of the optionee's termination of employment.

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<PAGE>

Employee Benefit Plans

2000 Stock Plan

As of the date of this prospectus, no options or stock purchase rights have
been granted under the 2000 Stock Plan. The 2000 Stock Plan provides for the
grant of incentive stock options to employees, including officers and employee
directors, and for the grant of non-statutory stock options and stock purchase
rights to employees, directors and consultants.

The total number of shares of common stock currently reserved for issuance
under the 2000 Stock Plan equals 3,000,000 shares, which includes:

. the shares of common stock that have been reserved but unissued under the
1995 Stock Option Plan, as amended, as of the effective date of the
offering (as of March 15, 2000, there were 114,319 shares reserved but
unissued under the 1995 Stock Option Plan, as amended); and

. any shares returned to the 1995 Stock Option Plan, as amended, as a
result of termination of options under the 1995 Stock Option Plan, as
amended.

A number of shares will be added to the 2000 Stock Plan on an annual basis
equal to the lesser of: (i) the aggregate number of shares issued in the
previous year, or (ii) a lesser amount determined by our Board of Directors.

Unless terminated sooner, the 2000 Stock Plan will terminate automatically
ten years from the effective date of this offering.

The administrator of our 2000 Stock 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;

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

. the vesting schedule of each option or stock purchase right; and

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

Options and stock purchase rights granted under our 2000 Stock 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 Stock Plan must generally be exercised within
three months after the end of optionee's status as an employee, director or
consultant of Evolve, or within twelve months after such optionee's termination
by death or disability, but not later than the expiration of the option's term.

In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement grants Evolve a repurchase
option, exercisable for any unvested stock purchase rights, upon the voluntary
or involuntary termination of the purchaser's employment or consulting
relationship with Evolve for any reason, including death or disability. The
purchase price for shares repurchased pursuant to the restricted stock purchase
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to Evolve. The repurchase
option lapses at a rate determined by the administrator.

The exercise price of all incentive stock options granted under the 2000
Stock Plan must be at least equal to the fair market value of the common stock
on the date of grant. The exercise price of nonstatutory stock options and
stock purchase rights granted under the 2000 Stock 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

53
<PAGE>

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 Stock 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 optionees shall become fully vested in and 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.

2000 Employee Stock Purchase Plan

A total of 2,000,000 shares of common stock have been reserved for issuance
under our 2000 Employee Stock Purchase Plan, plus annual increases equal to the
lesser of (i) the aggregate number of shares issued pursuant to the 2000
Employee Stock Purchase Plan in the previous year, or (ii) a lesser amount
determined by our Board. As of the date of this prospectus, no shares had been
granted under our 2000 Employee Stock Purchase Plan.

The plan, which is intended to qualify under Section 423 of the Internal
Revenue Code, will be implemented by a series of overlapping offering periods
of 24 months' duration, with new offering periods, other than the first
offering period, commencing on or about January 1 and July 1 of each year. Each
offering period will consist of four consecutive purchase periods of
approximately six months' duration, at the end of which, an automatic purchase
will be made for participants. The initial offering period is expected to
commence on the date of this offering and end on December 31, 2001. The initial
purchase period is expected to begin on the date of this offering and end on
June 30, 2000. Participants generally may not purchase more than 1,000 shares,
or such other number of shares established by the committee or 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 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 (i) immediately
after grant owns stock possessing 5% or more of the total combined voting power
or value of all classes of our capital stock, or (ii) whose rights to purchase
stock under all of our employee stock 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 2000 Employee Stock 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 2000 Employee Stock Purchase Plan is generally 85% of the
lower of the fair market value of the common stock (i) at the beginning of the
offering period or (ii) 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

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<PAGE>

periods. 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.

Rights granted under the 2000 Employee Stock 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 2000 Employee Stock
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.

The Compensation Committee 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. The Compensation Committee
has the exclusive authority to interpret and apply the provisions of the
purchase plan. The 2000 Employee Stock Purchase Plan will terminate
automatically in 2010, unless terminated earlier.

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 amended in 1996, 1998,
1999 and 2000. As of March 15, 2000, we had reserved a total of 10,000,000
shares of our common stock for issuance under the plan. The 1995 Stock Option
Plan, as amended, provides for the granting to our employees of incentive stock
options within the meaning of Section 422 of the United States tax code, and
for the granting to employees, including officers and directors, non-employee
directors and consultants of non-statutory stock options. No further grants
will be made under the 1995 Stock Option Plan following completion of this
offering.

Options granted under our 1995 Stock Option Plan, as amended, 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, as amended, must generally be exercised within three
months of the end of optionee's status as our employee or consultant, or within
twelve months after his or her termination by death or disability, but in no
event later than the expiration of the option's ten year term.

Options granted under our 1995 Stock Option Plan, as amended, 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 or the statutorily prescribed annual limit, currently $10,000, 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 plan contributions, are generally not taxable
to the participants until withdrawn.

Change of Control, Severance and Employee Arrangements

In February 2000, we entered into restricted stock purchase agreements with
each of Messrs. DeLeon, Heikkinen, McClure and Gupta. Pursuant to such
agreements, each of these executive officers purchased shares of our common
stock at a price of $1.50 per share. Mr. DeLeon purchased 133,333 shares for an
aggregate purchase price of $200,000; Mr. Heikkinen purchased 50,000 shares for
an aggregate purchase price of $75,000; Mr. McClure purchased 108,333 shares
for an aggregate purchase price of $162,500; and

55
<PAGE>

Mr. Gupta purchased 500,000 shares for an aggregate purchase price of $750,000.
The purchase price for each of the foregoing stock purchases was paid for with
a promissory note from each of the respective officers to us. Under the terms
of the stock purchase agreements, we have the right to repurchase from these
executive officers shares that have not been released from our repurchase
option at a price of $1.50 per share. With respect to shares purchased by Mr.
DeLeon, our right to repurchase lapses as to 1/48 of the total number of shares
purchased on the last day of each month beginning in February 2000. With
respect to shares purchased by Mr. Heikkinen, our right to repurchase lapses as
to 9/48 of the total number of shares purchased on November 1, 2000, and each
month thereafter 1/48 of the shares will be released from our repurchase
option. With respect to shares purchased by Mr. McClure, our right to
repurchase lapses as to 8/48 of the total number of shares purchased on October
1, 2000, on each month thereafter 1/48 of the shares will be released from our
repurchase option. With respect to shares purchased by Mr. Gupta, our right to
repurchase lapses as to 6/48 of the total number of shares purchased on
September 10, 2000, and each month thereafter 1/48 of the shares will be
released from our repurchase option.

In November 1999, we entered into restricted stock purchase agreements with
certain of our executive officers. Pursuant to such agreements, each of the
executive officers purchased shares of our common stock at a price of $0.60 per
share. Mr. Bantleman purchased 833,333 shares for an aggregate purchase price
of $500,000; Mr. Bozzini purchased 1,500,000 shares for an aggregate purchase
price of $900,000; Mr. Ferrie purchased 266,667 shares for an aggregate
purchase price of $160,000; Mr. Davis purchased 666,667 shares for an aggregate
purchase price of $400,000; Mr. Heikkinen purchased 450,000 shares for an
aggregate purchase price of $270,000; and Mr. DeLeon purchased 83,333 shares
for an aggregate purchase price of $50,000. The purchase price for each of the
foregoing stock purchases was paid with a promissory note from each of the
respective executive officers to us. Under the terms of the November 1999 stock
purchase agreements, we have the right to repurchase shares from our executive
officers that have not been released from our repurchase option at a price of
$0.60 per share. With respect to shares purchased by Messrs. Bantleman, Ferrie
and DeLeon, our right to repurchase lapses as to 1/48 of the total number of
shares purchased by each of these executive officers on the first day of each
month beginning in October 1999. With respect to shares purchased by Messrs.
Bozzini, Davis and Heikkinen, our right to repurchase lapses as to 25% of the
total number of shares purchased by each of these officers on November 1, 2000,
November 22, 2000 and December 6, 2000, respectively, and each month after that
1/48 of the shares will be released from our repurchase option.

In February 1999, we entered into restricted stock purchase agreements with
Messrs. Bantleman, Ferrie and DeLeon. Pursuant to such agreements, each of
these executive officers purchased shares of our common stock at a price of
$0.15 per share. Mr. Bantleman purchased 1,366,667 shares for an aggregate
purchase price of $205,000; Mr. Ferrie purchased 633,333 shares for an
aggregate purchase price of $95,000; and Mr. DeLeon purchased 183,500 shares
for an aggregate purchase price of $27,525. The purchase price for each of the
foregoing stock purchases was paid with a promissory note from each of the
respective executive officers to us. Under the February 1999 stock purchase
agreements, we have the right to repurchase shares from Messrs. Bantleman,
Ferrie and DeLeon that have not been released from our repurchase option at a
price of $0.15 per share. Our right to repurchase lapses as to 1/48 of the
total number of shares purchased by each of these executive officers on the
15th day of each month beginning in January 1999.

All of the above stock purchase agreements with our executive officers
provide that in the event of a change of control of Evolve: (1) if the officer
voluntarily terminates his employment before the first anniversary of the
change of control, our right of repurchase will lapse with respect to stock
that would have otherwise been released only to such termination date, without
any acceleration or continued vesting of the stock beyond the date of the
officer's voluntary termination; (2) if the officer's position is eliminated
and if he is not offered a similar position with comparable pay, our repurchase
option will lapse with regard to all of the stock; (3) if the officer is
involuntarily terminated by the acquiring party before the first year
anniversary of such acquisition, our repurchase right will lapse with respect
to, and there will be an acceleration of vesting of, that stock that would have
otherwise been released as of the second anniversary of the acquisition; and
(4) upon completion of the officer's first year of employment after the
acquisition, our repurchase right will lapse with respect to, and there will be
an acceleration of vesting in, that stock that would have otherwise been
released as

56
<PAGE>

of the second anniversary of the acquisition. We have also entered into
agreements with each of Messrs. Bantleman, Ferrie and DeLeon dated February 1,
1999, that provide similar acceleration provisions with respect to all shares
of restricted stock held by such executive officers. Also, in connection with
the hiring of James J. Bozzini as our Chief Operating Officer in November 1999,
we entered into an employment agreement and a restricted stock purchase
agreement with Mr. Bozzini that provide similar acceleration provisions with
respect to all shares of restricted stock held by Mr. Bozzini except that, in
the event of any acquisition of Evolve before the first anniversary of
employment of Mr. Bozzini, our right to repurchase will lapse with respect to,
and there will be an acceleration of vesting in, that stock that would have
otherwise been released as of his first anniversary of employment; then the
above four provisions will be applied as if the acquisition had occurred on Mr.
Bozzini's first anniversary of employment.

In January 1998 we entered into a restricted stock purchase agreement with
Mr. Bantleman. Pursuant to the agreement, Mr. Bantleman purchased 300,000
shares of our stock at a price of $0.90 per share for an aggregate purchase
price of $270,000 in exchange for a promissory note. We have the right to
repurchase these shares from Mr. Bantleman that have not been released from our
repurchase option at a price of $0.90 per share. Our right to repurchase lapsed
with respect to 20% of the shares on October 20, 1999, and each month after
that 1/60 of the total number of shares purchased will be released from our
repurchase option. In the event of a change of control of Evolve, our
repurchase right will lapse immediately prior to the consummation of such
transaction with respect to all of the shares purchased by Mr. Bantleman under
this agreement.

Options granted under our 1995 Stock Option Plan, as amended, will
accelerate and become fully vested in the event we merge into or with another
company or sell substantially all our assets, unless the successor corporation
assumes the options or substitutes equivalent options in their place.

Our 2000 Employee Stock 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 shall be assumed or substituted for a new
option by the successor corporation. If the successor corporation refuses to
assume or substitute a new option for the outstanding options, any purchase
periods then in progress will be shortened and a new exercise date will be set
before the date of the proposed sale or merger. All options of an employee will
be automatically exercised on that new exercise date unless that employee
withdraws from the offering period.

Options and stock purchase rights granted under our 2000 Stock Plan will
accelerate and become fully vested in the event we merge into or with another
company or sell substantially all our assets, unless the successor corporation
assumes the options or stock purchase rights or substitutes equivalent options
or stock purchase rights in their place.

Limitations on Directors' and Officers' Liability and Indemnification

Our amended and restated certificate of incorporation to be filed upon
completion of this offering limits the liability of our directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability associated with any of
the following:

. any breach of their duty of loyalty to the corporation or its
stockholders;

. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. unlawful payments of dividends or unlawful stock repurchases or
redemption; or

. any transaction from which the director derived an improper personal
benefit.

This limitation of our directors' liability does not apply to liabilities
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission.

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<PAGE>

Our amended and restated certificate of incorporation and bylaws also
provide that we shall indemnify our directors and executive officers and may
indemnify our other officers and employees and other agents to the fullest
extent permitted by law. We believe that indemnification under our bylaws
covers at least negligence and gross negligence on the part of indemnified
parties. Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in such capacity, regardless of whether our bylaws would permit
indemnification.

We have entered into indemnification agreements with each of our directors
containing provisions that require us to, among other things, indemnify such
directors against liabilities that may arise by reason of their status or
service as directors (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to cover our
directors under any of our liability insurance policies applicable to our
directors. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than compensation agreements and other arrangements, which are
described as required in "Management," and the transactions described below,
since we were formed, there has not been nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:

. in which the amount involved exceeded or will exceed $60,000; and

. in which any director, executive officer, holder of more than 5% of our
common stock on an as-converted basis or any member of their immediate
family had or will have a direct or indirect material interest.

We believe that each of the transactions described below were on terms no
less favorable than could have been obtained from unaffiliated third parties.
All future transactions between us and any director or executive officer will
be subject to approval by a majority of the disinterested members of our Board
of Directors.

Preferred Stock Sales

From July 1, 1996 through December 31, 1999, in a series of private
transactions, we issued securities as follows:

<TABLE>
<CAPTION>
Purchase
Security Date of Issuance Shares Price
-------- ---------------- ------ --------
<S> <C> <C> <C>
Series F Preferred Stock........... 11/25/98 5,544,390 $1.96
Series G Preferred Stock........... 11/25/98 and 12/15/98 9,333,333 $1.07
Series H Preferred Stock........... 9/28/99 and 12/3/99 11,904,763 $2.10
</TABLE>

We issued these securities pursuant to purchase agreements (except for terms
relating to date and price), under which we made representations, warranties
and covenants, and provided the purchasers with certain registration rights,
information rights, among other provisions. Listed below for holders of 5% or
more of our common stock and our directors, officers and entities affiliated
with our directors and our officers are the securities they purchased in the
above financings:

<TABLE>
<CAPTION>
Shares of Preferred
Stock Purchased
----------------------
Investor Series G Series H
-------- --------- ---------
<S> <C> <C>
Sierra Ventures VI, L.P........................... 9,053,333(1) 2,380,952(2)
The Goldman Sachs Group, Inc...................... -- 3,809,524(3)
John R. Oltman.................................... -- 47,619(4)
Jeffrey M. Drazan................................. 116,667 23,810
</TABLE>
- --------
(1) Includes 8,230,303 shares held by Sierra Ventures VI, L.P. and 823,030
shares held by its general partner, Sierra Associates VI, L.P. Jeffrey M.
Drazan, a Director of Evolve, is a general partner of Sierra Ventures VI,
L.P. Mr. Drazan disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest in these shares arising from his
interest in Sierra Ventures VI, L.P.

(2) Includes 2,164,531 shares held by Sierra Ventures VI, L.P. and 216,421
shares held by its general partner, Sierra Associates VI, L.P. Jeffrey M.
Drazan, a Director of Evolve, is a general partner of Sierra Ventures VI,
L.P. Mr. Drazan disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest in these shares arising from his
respective interest in Sierra Ventures VI, L.P.

(3) Includes 3,571,429 shares held by The Goldman Sachs Group, Inc. ("GSG") and
238,095 shares held by Stone Street Fund 1999, L.P., an affiliate of GSG
that shares voting and investing power with GSG.

(4) Represents 47,619 shares held by JRO Consulting, Inc. John R. Oltman, the
President of JRO Consulting, Inc. and a director of Evolve, is the
beneficial owner of these shares.

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<PAGE>

Stockholder Rights Agreement

We have entered into an agreement with the preferred stockholders described
above pursuant to which these and other preferred stockholders will have
registration rights with respect to their shares of common stock following this
offering. For a description of these registration rights, see "Description of
Capital Stock" below. Upon the completion of this offering, all shares of our
outstanding preferred stock will be automatically converted into an equal
number of shares of common stock.

Common Stock Purchases and Sales

In February 2000, we entered into a restricted stock purchase agreement with
Ms. Hamilton, one of our directors. Pursuant to this agreement, Ms. Hamilton
purchased 166,667 shares of our common stock at a price of $1.50 per share for
an aggregate purchase price of $250,000. The purchase price was paid with a
promissory note that accrues interest at the rate of 6.56% per year. We have
the right to repurchase shares that have not been released from our repurchase
option at a price of $1.50 per share. Our right to repurchase lapses as to 25%
of the total number of shares on March 6, 2001, and each month thereafter 1/48
of the shares will be released from our repurchase option.

In February 2000, we entered into restricted stock purchase agreements with
each of Messrs. DeLeon, Heikkenen, McClure and Gupta. Pursuant to such
agreements, each of these executive officers purchased shares of our common
stock at a price of $1.50 per share. Mr. DeLeon purchased 133,333 shares for an
aggregate purchase price of $200,000; Mr. Heikkinen purchased 50,000 shares for
an aggregate purchase price of $75,000; Mr. McClure purchased 108,333 shares
for an aggregate purchase price of $162,500; and Mr. Gupta purchased 500,000
shares for an aggregate purchase price of $750,000. The purchase price for each
of the foregoing stock purchases was paid for with a promissory note from each
of the respective officers that accrues interest at the rate of 6.56% per year.
Under the terms of the stock purchase agreements, we have the right to
repurchase from these executive officers shares that have not been released
from our repurchase option at a price of $1.50 per share. With respect to
shares purchased by Mr. DeLeon, our right to repurchase lapses as to 1/48 of
the total number of shares purchased on the first day of each month beginning
in February 2000. With respect to shares purchased by Mr. Heikkinen, our right
to repurchase lapses as to 9/48 of the total number of shares purchased on
November 1, 2000, and each month thereafter 1/48 of the shares will be released
from our repurchase option. With respect to shares purchased by Mr. McClure,
our right to repurchase lapses as to 8/48 of the total number of shares
purchased on October 1, 2000, and each month thereafter 1/48 of the shares will
be released from our repurchase option. With respect to shares purchased by Mr.
Gupta, our right to repurchase lapses as to 6/48 of the total number of shares
purchased on September 10, 2000, and each month thereafter 1/48 of the shares
will be released from our repurchase option.

In November 1999, we entered into restricted stock purchase agreements with
each of Messrs. Bantleman, Bozzini, Ferrie, Davis, Heikkinen and DeLeon.
Pursuant to such agreements, each of these executive officers purchased shares
of our common stock at a price of $0.60 per share. Mr. Bantleman purchased
833,333 shares for an aggregate purchase price of $500,000; Mr. Bozzini
purchased 1,500,000 shares for an aggregate purchase price of $900,000; Mr.
Ferrie purchased 266,667 shares for an aggregate purchase price of $160,000;
Mr. Davis purchased 666,667 shares for an aggregate purchase price of $400,000;
Mr. Heikkinen purchased 450,000 shares for an aggregate purchase price of
$270,000; and Mr. DeLeon purchased 83,333 shares for an aggregate purchase
price of $50,000. The purchase price for each of the foregoing stock purchases
was paid with a promissory note to us from each of the respective officers that
accrues interest at the rate of 6.08% per year. Under the terms of the stock
purchase agreements, we have the right to repurchase from our executive
officers shares that have not been released from our repurchase option at a
price of $0.60 per share. With respect to shares purchased by Messrs.
Bantleman, Ferrie and DeLeon, our right to repurchase lapses as to 1/48 of the
total number of shares purchased by each of these executive officers on the
first day of each month beginning in October 1999. With respect to shares
purchased by Messrs. Bozzini, Davis and Heikkinen, our right to repurchase
lapses as to 25% of the total number of shares purchased by each of these
officers on November 1, 2000, November 22, 2000 and December 6, 2000,
respectively, and each month thereafter 1/48 of the shares will be released
from our repurchase option.

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<PAGE>

In November 1999, we sold 166,667 shares of restricted common stock to
Jeffrey M. Drazan, one of our directors, at a price of $0.60 per share for an
aggregate purchase price of $100,000. The purchase price for the foregoing
stock purchase was paid with a promissory note to us from Mr. Drazan that
accrues interest at the rate of 6.08% per year. We have the right to repurchase
from Mr. Drazan any shares that have not been released from our repurchase
option at a price of $0.60 per share. Our right to repurchase will lapse with
respect to 25% of the shares purchased by Mr. Drazan on November 18, 2000, and
each month thereafter 1/48 of the total number of shares purchased by Mr.
Drazan will be released from our repurchase option.

In November 1999, we sold 166,667 shares of our restricted common stock to
The Goldman Sachs Group, Inc. at a price of $0.60 per share for an aggregate
purchase price of $100,000. The purchase price was paid with a promissory note
that accrues interest at the rate of 6.08% per year. We have the right to
repurchase shares that have not been released from our repurchase option at a
price of $0.60 per share. Our right to repurchase will lapse with respect to
25% of the shares on November 18, 2000, and each month thereafter 1/48 of the
total number of shares purchased will be released from our repurchase option.

In October 1999, we sold 666,667 shares of restricted common stock to JRO
Consulting, Inc. at a price of $0.15 per share for an aggregate purchase price
of $100,000. The purchase price was paid with a promissory note that accrues
interest at the rate of 7.0% per year. John R. Oltman, the President of JRO
Consulting, Inc., is a director of Evolve and the beneficial owner of these
shares. We have the right to repurchase shares from JRO Consulting, Inc. that
have not been released from our repurchase option at a price of $0.15 per
share. Our right to repurchase lapses as to 1/48 of the total number of shares
purchased by JRO Consulting, Inc. on the last day of each month beginning in
September 1999.

In February 1999, we entered into restricted stock purchase agreements with
each of Messrs. Bantleman, Ferrie and DeLeon. Pursuant to these agreements,
these executive officers purchased shares of our common stock at a price of
$0.15 per share. Mr. Bantleman purchased 1,366,667 shares for an aggregate
purchase price of $205,000; Mr. Ferrie purchased 633,333 shares for an
aggregate purchase price of $95,000; and Mr. DeLeon purchased 183,500 shares
for an aggregate purchase price of $27,525. The purchase price for each of the
foregoing stock purchases was paid with a promissory note to us from each of
the respective executive officers that accrues interest at the rate of 5.0% per
year. Under the terms of these agreements, we have the right to repurchase
shares from Messrs. Bantleman, Ferrie and DeLeon that have not been released
from our repurchase option at a price of $0.15 per share. Our right to
repurchase lapses as to 1/48 of the total number of shares purchased by each of
these executive officers on the 15th day of each month beginning in January
1999.

In January 1998 we entered into a restricted stock purchase agreement with
Mr. Bantleman. Pursuant to the agreement, Mr. Bantleman purchased 300,000
shares of our stock at a price of $0.90 per share for an aggregate purchase
price of $270,000 in exchange for a promissory note that accrues interest at
the rate of 5.69% per year. We have the right to repurchase these shares from
Mr. Bantleman that have not been released from our repurchase option at a price
of $0.90 per share. Our right to repurchase lapsed with respect to 20% of the
shares on October 20, 1998, and each month thereafter 1/60 of the total number
of shares purchased will be released from our repurchase option.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors.
Such indemnification agreements require us to indemnify our directors to the
fullest extent permitted by Delaware law. We believe that these agreements are
necessary to attract and retain qualified persons as directors. For a
description of the limitation of our directors' liability and our
indemnification of such directors, see "--Limitation on Directors' and
Officers' Liability and Indemnification" above.

61
<PAGE>

Employee and Related Party Loans

As described above, we entered into promissory notes with each of (i) our
executive officers, Messrs. Bantleman, Bozzini, Davis, Ferrie, DeLeon, McClure,
Gupta and Heikkinen; (ii) our directors, Mr. Drazan and Ms. Hamilton; (iii) JRO
Consulting, Inc.; and (iv) The Goldman Sachs Group, Inc., for amounts they each
borrowed to purchase our restricted stock.

We loaned Mr. Ferrie $90,000 on November 17, 1999, Mr. DeLeon $7,179 on
November 18, 1999, and Mr. McClure $135,000 on December 14, 1999, each loan
pursuant to promissory notes that accrue interest at a rate of 6.00%, 6.08% and
6.20%, respectively, per year. These amounts were borrowed to exercise
incentive stock options to purchase shares of our common stock.

We also loaned Mr. Bantleman $20,000 on March 9, 1999, $40,000 on June 30,
1999, and $40,000 on September 30, 1999. These loans are secured by shares of
our common stock held by Mr. Bantleman.

Each of the promissory notes described above do not require periodic
interest payments. The principal amount and accrued interest on the loan will
be due on the earliest of the fourth anniversary of the loan, one year after
termination for death or disability, or thirty (30) days after termination for
any other reason.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of March 15, 2000 and as adjusted
to reflect the sale of common stock offered hereby by the following:

. each stockholder known by us to own beneficially more than 5% of our
common stock;

. each of our executive officers named in the compensation table above;

. each of our directors; and

. all directors and executive officers as a group.

Except as otherwise indicated, we believe that the beneficial owners of the
common stock listed below, on the information furnished by such owners, have
sole voting power and investment power with respect to such shares. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. In computing the number of shares beneficially owned by a
person and the percent ownership of that person, shares of common stock subject
to options or warrants held by that person that are currently exercisable or
will become exercisable within 60 days after March 15, 2000 are deemed
outstanding, while such shares are not deemed outstanding for purposes of
computing percent ownership of any other person. Percent of beneficial
ownership is based upon 52,175,861 shares of our common stock outstanding prior
to this offering and shares of common stock outstanding after this
offering. Unless otherwise indicated in the footnotes below, the persons and
entities named in the table have sole voting and investment power with respect
to all shares beneficially owned, subject to community property laws where
applicable. The address for those individuals for which an address is not
otherwise indicated is Evolve Software, Inc., 615 Battery Street, Suite 400,
San Francisco, California 94111. To our knowledge, except as indicated in the
footnotes to the table and under applicable community property laws, the
stockholders named in the table have sole voting and investment power over all
shares listed in the table.

<TABLE>
<CAPTION>
Percent of Shares Outstanding
Shares Beneficially ------------------------------------
Name and Address of Owned Prior to Prior to
Beneficial Owners Offering Offering After Offering
- ------------------- ------------------- --------------- -----------------
<S> <C> <C> <C>
Sierra Ventures VI,
L.P.(1)................ 11,434,286 21.9% %
3000 Sand Hill Rd.
Building 4, Suite 210
Menlo Park, CA 94025
The Goldman Sachs Group,
Inc.(2)................ 3,809,524 7.3
85 Broad St.
New York, NY 10004
John P. Bantleman(3).... 2,500,000 4.8
Marc Ferrie(4).......... 1,000,000 1.9
John R. Oltman.......... 714,287 1.4
J. Russell DeLeon(5).... 501,834 1.0
Jeffrey M. Drazan(6).... 236,905 *
Judith Hamilton(7)...... 166,667 *
All directors and
officers as a group (11
persons)(8)............ 8,619,691 16.5
</TABLE>
- --------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 10,394,835 shares held by Sierra Ventures VI, L.P. and 1,039,451
shares held by its general partner, Sierra Associates VI, L.P. Jeffrey M.
Drazan, a Director of Evolve, is a general partner of Sierra Ventures VI,
L.P. Mr. Drazan disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest in these shares arising from his
interest in Sierra Ventures VI, L.P.

(2) Includes 3,571,429 shares held by The Goldman Sachs Group, Inc. ("GSG")
and 238,095 shares held by Stone Street Fund 1999, L.P., an affiliate of
GSG that shares voting and investing power with GSG.

(3) Includes 1,906,111 shares subject to our right of repurchase, which lapses
over time.

63
<PAGE>

(4) Includes 774,306 shares subject to our right of repurchase, which lapses
over time.

(5) Includes 314,351 shares subject to our right of repurchase, which lapses
over time.

(6) Includes 166,667 shares subject to our right of repurchase, which lapses
over time.

(7) Includes 714,287 shares subject to our right of repurchase, which lapses
over time. Of these shares, 47,619 shares are held by JRO Consulting, Inc.
Mr. Oltman, the President of JRO Consulting, Inc. is the beneficial owner
of these shares.

(8) Includes the shares beneficially owned by the persons and entities
described in footnotes (3)--(7).

64
<PAGE>

DESCRIPTION OF CAPITAL STOCK

We will file our amended and restated certificate of incorporation
immediately before the completion of this offering. The following description
of our capital stock is intended as a summary only and is not complete. You
should read the full text of our amended and restated certificate of
incorporation and our bylaws, which were filed with the registration statement
of which this prospectus is a part.

General

Upon the completion of this offering, we will be authorized to issue
120,000,000 shares of common stock, par value $0.001 per share, and 10,000,000
shares of preferred stock, par value $0.001 per share. After this offering
there will be shares of our common stock outstanding and shares if the
underwriters exercise their over-allotment option in full.

Common Stock

As of March 15, 2000, and assuming the conversion of all outstanding shares
of preferred stock into common stock, there were 52,175,861 shares of common
stock outstanding that were held of record by approximately 482 stockholders.
There will be shares of common stock outstanding (assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options after March 15, 2000) after giving effect to the sale of
our common stock in this offering. There are outstanding options to purchase a
total of 2,943,278 shares of our common stock. See "Management--Stock Plans"
for a description of our stock plans.

The holders of our common stock are entitled to one vote per share held of
record on all matters submitted to a vote of the stockholders. Our amended and
restated certificate of incorporation to be filed concurrently with completion
of this offering, does not provide for cumulative voting in the election of
directors. Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by our Board of
Directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, holders of our common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of preferred stock, if any, then
outstanding. Holders of our common stock have no preemptive or other
subscription or conversion rights. There are no redemption or sinking fund
provisions applicable to our common stock.

Preferred Stock

Upon the completion of this offering and filing of our amended and restated
certificate of incorporation, our Board of Directors will be authorized,
without action by the stockholders, to issue 10,000,000 shares of preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof. These rights, preferences and privileges may include
dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of any series, all or any of which
may be greater than the rights of the common stock. It is not possible to state
the actual effect of the issuance of all shares of preferred stock upon the
right of holders of our common stock until our Board of Directors determines
the specific rights of the holders of any preferred stock that may be issued.
However, the effect might include, among other things: (a) restricting
dividends on the common stock; (b) diluting the voting power of the common
stock; (c) impairing the liquidation rights of the common stock; and (d)
delaying or preventing a change in our control without further action by the
stockholders. Upon the closing of this offering, no shares of preferred stock
will be outstanding and we have no present plans to issue any shares of
preferred stock.

65
<PAGE>

Warrants

As of March 15, 2000, there were warrants outstanding to purchase a total
of: (i) 600,000 shares of our common stock, (ii) 16,667 shares of our Series B
Preferred Stock, (iii) 10,000 shares of our Series E Preferred Stock, (iv)
322,277 shares of our Series F Preferred Stock, and (v) 11,667 shares of our
Series G Preferred Stock. All but one of these outstanding warrants will expire
on the effective date of this offering. The warrant to purchase 8,333 shares of
our Series B Preferred Stock at $3.00 per share will expire on the earlier of
the fifth anniversary of the effective date of this offering or October 5,
2005.

Registration Rights

Pursuant to an Amended and Restated Stockholder Rights Agreement dated
December 3, 1999, we entered into with holders of 30,169,986 shares of our
common stock (assuming conversion of all outstanding shares of preferred
stock), the holders of these shares are entitled to certain registration rights
regarding these shares. The registration rights provide that if we propose to
register any securities under the Securities Act, either for our own account or
for the account of other security holders exercising registration rights, they
are entitled to notice of the registration and are entitled to include shares
of their common stock in the registration. This right is subject to conditions
and limitations, including the right of the underwriters in an offering to
limit the number of shares included in the registration. The holders of these
shares may also require us to file up to two registration statements under the
Securities Act at our expense with respect to their shares of common stock. We
are required to use our best efforts to effect this registration, subject to
conditions and limitations. Furthermore, the holders of these shares may
require us to file additional registration statements on Form S-3, subject to
conditions and limitations. These rights terminate on the fifth anniversary of
the effective date of this offering.

Charter Provisions and Delaware Laws That May Have an Anti-Takeover Effect

Some provisions of Delaware law and our amended and restated certificate of
incorporation and bylaws could make the following more difficult:

. acquisition of us by means of a tender offer;

. acquisition of us by means of a proxy contest or otherwise; or

. removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions are also
designed to encourage persons seeking to acquire control of us to first
negotiate with our Board of Directors. We believe that the benefits of
increased protection of our potential ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantages of discouraging such proposals because negotiation of such
proposals could result in an improvement of their terms.

Election and Removal of Directors. Effective with the first annual meeting
of stockholders following completion of this offering, our amended and restated
bylaws provide for the division of our Board of Directors into three classes,
as nearly equal in number as possible, with the directors in each class serving
for a three-year term, and one class being elected each year by our
stockholders. This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us and may maintain the incumbency of the Board of Directors,
as it generally makes it more difficult for stockholders to replace a majority
of the directors. For more information on the classified board, see the Section
entitled "Management--Executive Officers and Directors."

Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our restated bylaws establish advance notice procedures with respect
to stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the Board of
Directors or a committee thereof.

66
<PAGE>

Stockholder Meetings. Under our amended and restated certificate of
incorporation and bylaws, only our Board of Directors, Chairman of the Board or
Chief Executive Officer may call special meetings of stockholders.

Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless the
"business combination" or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with
affiliates and associates, owns or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions not approved in advance by the
Board of Directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.

Elimination of Stockholder Action By Written Consent. Our amended and
restated certificate of incorporation eliminates the right of stockholders to
act by written consent without a meeting.

Elimination of Cumulative Voting. Our amended and restated certificate of
incorporation and bylaws do not provide for cumulative voting in the election
of directors. Cumulative voting provides for a minority stockholder to vote a
portion or all of its shares for one or more candidates for seats on the Board
of Directors. Without cumulative voting, a minority stockholder will not be
able to gain as many seats on our Board of Directors based on the number of
shares of our stock that such stockholder holds than if cumulative voting were
permitted. The elimination of cumulative voting makes it more difficult for a
minority stockholder to gain a seat on our Board of Directors and to influence
the Board of Directors's decision regarding a takeover.

Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the Board of Directors to issue preferred stock
with voting or other rights or preferences that could impede the success of any
attempt to change the control of Evolve. These and other provisions may have
the effect of deterring hostile takeovers or delaying changes in control or
management of Evolve.

Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services, L.L.C.

Listing

We have applied for listing of our common stock on The Nasdaq Stock Market's
National Market under the symbol "EVLV."

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of our common stock in the
public market could adversely affect the market price of our common stock.

Upon completion of this offering, based on shares outstanding as of March
15, 2000 we will have outstanding shares of common stock, assuming (1) the
issuance of shares of common stock in this offering, (2) no exercise of the
underwriters' over-allotment option, and (3) no exercise of options after March
15, 2000. All of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act. However,
the sale of any of these share if purchased by "affiliates" as that term is
defined in Rule 144 are subject to certain limitations and restrictions that
are described below.

The remaining 52,175,861 shares of common stock held by existing
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act. These shares are "restricted
shares" as that term is defined in Rule 144 and therefore may not be sold
publicly unless they are registered under the Securities Act or are sold
pursuant to Rule 144 or another exemption from registration. In addition, our
directors and officers as well as certain other stockholders and optionholders
have entered into "lock-up agreements" with the underwriters. These lock-up
agreements provide that, except under limited exceptions, the stockholder may
not offer, sell, contract to sell, pledge or otherwise dispose of any of our
common stock or securities that are convertible into or exchangeable for, or
that represent the right to receive, our common stock for a period of 180 days
after the effective date without the prior written consent of Credit Suisse
First Boston Corporation. Accordingly, substantially all of the remaining
52,175,861 shares will become eligible for sale on , 2000, the 181st
day after the effective date subject to Rules 144 and 701, assuming an
effective date of , 2000.

As of March 15, 2000, there were a total of 2,943,278 shares of common stock
subject to outstanding options, 1,474,292 of which were vested, and nearly all
of which are subject to lock-up agreements. Immediately after the completion of
the offering, we intend to file registration statements on Form S-8 under the
Securities Act to register all of the shares of common stock issued or reserved
for future issuance under our 1995 Stock Option Plan, as amended, our 2000
Stock Plan, and our 2000 Employee Stock Purchase Plan. On the date 180 days
after the effective date of the offering, the date that the lock-up agreements
expire, a total of shares of our common stock subject to outstanding
options will be vested. After the effective dates of the registration
statements on Form S-8, shares purchased upon exercise of options granted
pursuant to our 1995 Stock Option Plan, as amended, our 2000 Stock Plan, and
our 2000 Employee Stock Purchase Plan generally would be available for resale
in the public market.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year, including the holding period of any prior
owner except an affiliate of us, would be entitled to sell, within any three-
month period, a number of shares that does not exceed the greater of:

. 1% of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering;
or

. the average weekly trading volume of our common stock on The Nasdaq
Stock Market's National Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice filing and the availability of current
public information about us.

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<PAGE>

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
generally including the holding period of any prior owner other than an
"affiliate," is entitled to sell such shares without complying with the manner
of sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this offering.

Rule 701

In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.

The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons
other than "affiliates," as defined in Rule 144, subject only to the manner of
sale provisions of Rule 144. Securities issued in reliance on Rule 701 may be
sold by "affiliates" under Rule 144 without compliance with its one year
minimum holding period requirement.

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<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation and Deutsche Bank
Securities, Inc. are acting as representatives, the following respective
numbers of shares of common stock:

<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Deutsche Bank Securities, Inc......................................
----
Total............................................................
====
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or this
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us... $ $ $ $
Expenses payable by us.... $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof.

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<PAGE>

Our officers, directors and stockholders have agreed that they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, enter into a
transaction that would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any such aforementioned
transaction is to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make
any such offer, sale, pledge or disposition, or to enter into any such
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.

The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in this offering. The number of shares available for
sale to the general public in this offering will be reduced to the extent these
persons purchase the reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.

We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "EVLV."

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include:

. the information set forth in this prospectus and otherwise available to
the underwriters;

. the history and the prospects for the industry in which we compete;

. the ability of our management;

. the prospects for our future earnings;

. the present state of our development and our current financial condition;

. the general condition of the securities markets at the time of this
offering; and

. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.

The representatives, on behalf of the underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions, and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.

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<PAGE>

These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions will
be allocated by the underwriters that will make internet distributions on the
same basis as other allocations.

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<PAGE>

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws that
will vary depending on the relevant jurisdiction, and that may require resales
to be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the common stock.

Representations of Purchasers

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under the securities laws, (ii) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (iii) the purchaser has reviewed the text above under "Resale
Restrictions."

Rights of Action (Ontario Purchasers)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or these persons outside of Canada.

Notice to British Columbia Residents

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be
in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.

Taxation and Eligibility for Investment

Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in the
common stock in their particular circumstances and with respect to the
eligibility of the common stock for investment by the purchaser under relevant
Canadian legislation.

73
<PAGE>

LEGAL MATTERS

The validity of the common stock offered under this prospectus will be
passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Legal matters will be passed upon for the
underwriters by Shearman & Sterling, Menlo Park, California. As of the date of
this prospectus, WS Investment Company 99B and WS Investment Company 95A, each
an investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, Professional
Corporation, in addition to certain current individual members of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, beneficially own an
aggregate of 47,024 shares of Common Stock of Evolve Software, Inc.

EXPERTS

The audited financial statements of Evolve Software, Inc. as of December 31,
1999 and for the six months ended December 31, 1999, and as of June 30, 1999
and 1998 and for each of the three years in the period ended June 30, 1999,
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent public accountants, given on the
authority of said firm as experts in auditing and accounting.

The financial statements of Infowide, Inc. (a development stage company) as
of December 31, 1998 and 1999 and for the period from April 15, 1998
(inception) to December 31, 1998, the year ended December 31, 1999 and the
period from April 15, 1998 (inception) to December 31, 1999 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein (which report expresses an unqualified
opinion and includes an explanatory paragraph concerning InfoWide, Inc.'s being
in the development stage and certain factors which raise substantial doubt
about the ability of InfoWide, Inc. to continue as a going concern), and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, Washington, D.C.,
a registration statement on Form S-1 under the Securities Act with respect to
the shares of common stock offered under this prospectus. This prospectus,
which constitutes a part of the registration statement, does not contain all of
the information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to us and our common
stock, reference is made to the registration statement and to the exhibits and
schedules filed therewith. Statements contained in this prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance reference is made to the copy of the contract or
other document filed as an exhibit to the registration statement, each
statement being qualified in all respects by this reference. A copy of the
registration statement may be inspected by anyone without charge at the Public
Reference Section of the Commission in Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of all or any portion of the
registration statement may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
prescribed fees. The Commission also maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.

Upon completion of the offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act and, in
accordance with this law, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the website of the SEC referred to above.

74
<PAGE>

EVOLVE SOFTWARE, INC.

INDEX TO FINANCIAL STATEMENTS

EVOLVE SOFTWARE, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2

Balance Sheets as of June 30, 1998 and 1999 and December 31, 1999 and pro
forma Stockholders' Equity as of December 31, 1999...................... F-3

Statements of Operations for the years ended June 30, 1997, 1998 and 1999
and for the six months ended December 31, 1998 (unaudited) and 1999..... F-4

Statements of Stockholders' Equity (Deficit) for the year ended June 30,
1997, 1998 and 1999 and for the six months ended December 31, 1999...... F-5

Statements of Cash Flows for the year ended June 30, 1997, 1998 and 1999
and for the six months ended December 31, 1998 (unaudited) and 1999..... F-6

Notes to Financial Statements............................................ F-7

INFOWIDE, INC.

Independent Auditors' Report............................................. F-22

Balance Sheets as of December 31, 1998 and December 31, 1999............. F-23

Statements of Operations for the period from April 15, 1998 to
December 31, 1998 and for year ended December 31, 1999 and for the
period from April 15, 1998 to December 31, 1999......................... F-24

Statements of Shareholders' Equity (Deficit) for the period from
April 15, 1998 to December 31, 1999..................................... F-25

Statements of Cash Flows for the period from April 15, 1998 to December
31, 1998 and for the year ended December 31, 1999 and for the period
from April 15, 1998 to December 31, 1999................................ F-26

Notes to Financial Statements............................................ F-27

EVOLVE SOFTWARE, INC.

Unaudited Pro Forma Combined Financial Information....................... F-32

Unaudited Pro Forma Combined Balance Sheet at December 31, 1999.......... F-33

Unaudited Pro Forma Combined Statements of Operations.................... F-34

Notes to Unaudited Pro Forma Combined Financial Information.............. F-35
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Evolve Software, Inc.

The reverse stock split described in Note 12 of the notes to the financial
statements is not effective at March 17, 2000. When it is effective, we will be
in a position to furnish the following report:

In our opinion, the accompanying balance sheets and the related statements
of operations and statements of stockholders' equity (deficit) and of cash
flows present fairly, in all material respects, the financial position of
Evolve Software, Inc. at June 30, 1998 and 1999 and December 31, 1999, and the
results of its operations and its cash flows for the years ended June 30, 1997,
1998 and 1999, and for the six months ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

March 7, 2000
San Jose, California

F-2
<PAGE>

EVOLVE SOFTWARE, INC.

BALANCE SHEETS
(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Pro forma
Stockholders'
June 30 Equity
------------------ December 31, December 31,
1998 1999 1999 1999
-------- -------- ------------ -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 2,076 $ 2,840 $ 17,505
Restricted cash................. -- -- 2,000
Short term investments.......... -- -- 2,264
Accounts receivable, net of
allowance for doubtful
accounts of none, none and
$78............................ -- 78 2,521
Prepaid expenses and other
current assets................. 138 340 173
-------- -------- --------
Total current assets.......... 2,214 3,258 24,463
Property and equipment, net...... 635 521 930
Deposits and other assets........ 206 109 94
Note receivable from related
party........................... 20 60 100
Interest due on receivable from
stockholders.................... -- 139 205
-------- -------- --------
Total assets.................. $ 3,075 $ 4,087 $ 25,792
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable................ $ 282 $ 285 $ 1,131
Accrued liabilities............. 339 671 2,050
Capital lease obligations,
current portion................ 363 371 245
Deferred revenues............... 50 931 4,233
-------- -------- --------
Total current liabilities..... 1,034 2,258 7,659
Deferred revenues, less current
portion......................... -- 1,085 1,202
Capital lease obligations, less
current portion................. 389 238 143
Long term debt................... 13,746 3,661 3,811
Note payable to related party.... 100 -- --
-------- -------- --------
Total liabilities............. 15,269 7,242 12,815
-------- -------- --------
Commitments and contingencies
(Note 5)
Stockholders' equity (deficit)
Convertible preferred stock,
$0.01 par value;
100,000,000 shares authorized:
98,577,500 shares designated.
Shares issued and outstanding:
10,182,500, 54,815,669, and
90,529,958 shares as of June
30, 1998 and 1999 and December
31, 1999, respectively.
Liquidation prefererence of
$57,424........................ 102 548 905 --
Common stock, $0.01 par value;
50,000,000 shares authorized;
shares issued and outstanding:
4,226,191, 8,342,804 and
14,851,196 shares as of June
30, 1998 and 1999, and
December 31, 1999,
respectively and 48,694,516
shares issued and outstanding
pro forma...................... 43 84 149 487
Additional paid-in capital...... 11,882 32,846 91,818 125,358
Notes receivable from
stockholders................... (683) (1,265) (4,499) (4,499)
Unearned stock-based
compensation................... (359) (27,525) (27,525)
Accumulated deficit............. (23,538) (35,009) (47,871) (50,871)
-------- -------- -------- -------
Total stockholders' equity
(deficit).................... (12,194) (3,155) 12,977 42,950
-------- -------- -------- -------
Total liabilities and
stockholders' equity
(deficit).................... $ 3,075 $ 4,087 $ 25,792
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

EVOLVE SOFTWARE, INC.

STATEMENTS OF OPERATIONS
(in thousands)

<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
--------------------------- --------------------
1997 1998 1999 1998 1999
------- -------- -------- ----------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Solutions................. $ -- $ -- $ 150 $ -- $ 1,417
Subscriptions............. -- -- 367 -- 670
------- -------- -------- ------- --------
Total revenues.......... -- -- 517 -- 2,087
Cost of revenues:
Solutions................. -- -- 245 -- 644
Subscriptions............. -- -- 390 -- 722
------- -------- -------- ------- --------
Total cost of revenues...... -- -- 635 -- 1,366
------- -------- -------- ------- --------
Gross margin (loss)..... -- -- (118) -- 721
Operating expenses:
Research and development.. 4,341 6,138 5,057 2,183 3,392
Sales and marketing....... 1,194 1,253 3,876 1,253 4,880
General and
administrative........... 2,372 1,834 1,857 817 1,657
Stock-based charges....... -- -- 218 -- 3,872
------- -------- -------- ------- --------
Total operating
expenses............... 7,907 9,225 11,008 4,253 13,801
------- -------- -------- ------- --------
Loss from operations........ (7,907) (9,225) (11,126) (4,253) (13,080)
Interest income............. 310 420 277 62 410
Interest expense............ (495) (1,772) (697) (501) (189)
Other income (expense),
net........................ (1) (5) 75 4 (3)
------- -------- -------- ------- --------
Net loss................ $(8,093) $(10,582) $(11,471) $(4,688) $(12,862)
======= ======== ======== ======= ========
Net loss per common share--
basic and diluted.......... $ (6.06) $ (4.64) $ (3.60) $ (1.61) $ (2.89)
======= ======== ======== ======= ========
Shares used in net loss per
common share calculation--
basic and diluted.......... 1,336 2,282 3,182 2,920 4,448
======= ======== ======== ======= ========
Pro forma net loss per
share--basic and diluted
(unaudited) ............... $ (0.78) $ (0.45)
======== ========
Shares used in pro forma net
loss per share
calculation--basic and
diluted (unaudited) ....... 14,799 28,469
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

EVOLVE SOFTWARE, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)

<TABLE>
<CAPTION>
Convertible
Preferred Notes Total
Stock Common Stock Additional Receivable Unearned Stockholders'
------------- -------------- Paid-In from Stock-Based Accumulated Equity
Shares Amount Shares Amount Capital Stockholders Compensation Deficit (Deficit)
------ ------ ------ ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, June 30,
1996.................... 9,313 $ 93 3,765 $ 38 $10,662 $ (261) $ (4,863) $ 5,669
Exercise of preferred
Series D warrants, net
of issuance costs of
$10..................... 840 8 -- -- 821 -- -- 829
Issuance of preferred
Series E for cash, net
issuance costs of $18... 30 1 -- -- 41 -- -- 42
Exercise of common stock
options................. -- -- 72 1 16 -- -- 17
Issuance of common stock
options to non-
employees............... -- -- -- -- 10 -- -- 10
Repurchase of common
stock................... -- -- (95) (1) (13) 14 -- --
Net loss................ -- -- -- -- -- -- (8,093) (8,093)
------ ---- ------ ---- ------- ------- -------- -------- --------
Balances, June 30,
1997.................... 10,183 102 3,742 38 11,537 (247) -- (12,956) (1,526)
Repurchase of common
stock................... -- -- (233) (2) (208) 14 -- (196)
Issuance of common
stock................... -- -- 500 5 445 (450) -- --
Exercise of common stock
options................. -- -- 217 2 96 -- -- 98
Issuance of common stock
options to non-
employees............... -- -- -- -- 12 -- -- 12
Net loss................ -- -- -- -- -- -- (10,582) (10,582)
------ ---- ------ ---- ------- ------- -------- -------- --------
Balances, June 30,
1998.................... 10,183 102 4,226 43 11,882 (683) -- (23,538) (12,194)
Repurchase of common
stock................... -- -- (276) (3) (219) 222 -- --
Issuance of common
stock................... -- -- 3,992 40 740 (780) -- --
Exercise of common stock
options................. -- -- 401 4 106 (24) -- 86
Issuance of common stock
options to non-
employees............... -- -- -- -- 20 -- -- 20
Preferred Series F
issued upon conversion
of promissory notes..... 16,633 166 -- -- 10,490 -- -- 10,656
Issuance of preferred
Series G for cash and
conversion of debt, net
of issuance costs of
$770.................... 28,000 280 -- -- 9,250 -- -- 9,530
Unearned stock-based
compensation............ 577 (577) --
Amortization of unearned
stock-based
compensation............ 218 218
Net loss................ -- -- -- -- -- -- (11,471) (11,471)
------ ---- ------ ---- ------- ------- -------- -------- --------
Balances, June 30,
1999.................... 54,816 548 8,343 84 32,846 (1,265) (359) (35,009) (3,155)
Repurchase of common
stock................... (200) (2) (28) 30 -- --
Repayment on notes
receivable.............. 24 24
Issuance of common
stock................... 5,133 51 3,237 (3,288) -- --
Exercise of common stock
options................. 1,575 16 105 121
Issuance of common stock
options to non-
employees............... 16 16
Issuance of preferred
Series H for cash, net
of issuance costs of
$39..................... 35,714 357 24,604 24,961
Issuance of warrants for
stock-based settlement.. 651 651
Unearned stock-based
compensation............ 30,387 (30,387) --
Amortization of unearned
stock-based
compensation............ 3,221 3,221
Net loss................ (12,862) (12,862)
------ ---- ------ ---- ------- ------- -------- -------- --------
Balance, December 31,
1999.................... 90,530 $905 14,851 $149 $91,818 $(4,499) $(27,525) (47,871) $ 12,977
====== ==== ====== ==== ======= ======= ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

EVOLVE SOFTWARE, INC.

STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Six months ended
Year Ended June 30, December 31,
--------------------------- --------------------
1997 1998 1999 1998 1999
------- -------- -------- ---------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................... $(8,093) $(10,582) $(11,471) $(4,688) $(12,862)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Loss on disposal of fixed
assets.................... 69 48 7 -- --
Amortization of debt
issuance costs............ 49 568 -- -- --
Common stock options
issued to non-employees... 10 12 20 -- 16
Allowance for doubtful
accounts.................. -- -- -- -- 78
Depreciation and
amortization.............. 613 439 384 205 186
Accrued interest........... 279 1,081 571 431 150
Stock-based charges........ 218 3,872
Changes in assets and
liabilities:
Accounts receivable....... -- -- (78) (223) (2,521)
Notes receivable.......... -- -- -- (1,000) --
Prepaid expenses and
other current assets..... (9) (29) (201) (58) 167
Note receivable from
related party............ -- (20) (40) 12 (40)
Interest due on notes
receivable from
stockholders............. -- -- (61) (108) (66)
Deposits and other
assets................... (68) 37 19 118 15
Accounts payable.......... (134) 155 3 257 846
Accrued liabilities....... 79 (28) 331 (45) 1,379
Deferred revenues......... -- -- 1,966 2,200 3,419
------- -------- -------- ------- --------
Net cash used in
operating activities.... (7,205) (8,319) (8,332) (2,899) (5,361)
------- -------- -------- ------- --------
Cash flows from investing
activities:
Purchase of short term
investments............... -- -- -- -- (2,264)
Purchases of property and
equipment................. (198) -- (41) (49) (595)
Restricted cash on lease... -- -- -- -- (2,000)
------- -------- -------- ------- --------
Net cash used in
investing activities.... (198) -- (41) (49) (4,859)
------- -------- -------- ------- --------
Cash flows from financing
activities:
Payments under capital
lease obligations......... (417) (288) (379) (188) (221)
Repayment of notes payable
to related party.......... -- -- (100) (4) --
Proceeds from (repayment
of) long-term debt........ (19) (21) -- 7 --
Proceeds from payment on
note receivable........... -- -- -- -- 24
Proceeds from issuance of
preferred stock, net of
issuance costs............ 871 -- 9,530 9,530 24,961
Proceeds from issuance of
convertible debt.......... 12,675 -- -- -- --
Proceeds from exercise of
common stock options...... 17 98 86 19 121
Payments of debt issuance
costs..................... (902) -- -- -- --
Payments on repurchase of
common stock.............. -- (96) -- -- --
------- -------- -------- ------- --------
Net cash provided by
financing activities 12,225 307 9,137 9,364 24,885
------- -------- -------- ------- --------
Increase/(decrease) in cash
and cash equivalents ...... 4,822 (8,626) 764 6,416 14,665
Cash and cash equivalents at
beginning of period........ 5,880 10,702 2,076 2,076 2,840
------- -------- -------- ------- --------
Cash and cash equivalents at
end of period ............. $10,702 $ 2,076 $ 2,840 $ 8,492 $ 17,505
======= ======== ======== ======= ========
Supplemental disclosure of
cash flow information:
Cash paid during the
period for interest....... $ 166 $ 123 $ 121 $ 59 $ 39
======= ======== ======== ======= ========
Supplemental schedule of
noncash investing and
financing activities:
Assets acquired under
capital leases............ $ 230 $ 368 $ 235 $ 22 $ --
======= ======== ======== ======= ========
Notes receivable from
stockholder in exchange
for common stock.......... $ -- $ 450 $ 804 $ 218 $ 3,288
======= ======== ======== ======= ========
Repurchase of common stock
issued for notes
receivable................ $ 14 $ 14 $ 222 $ -- $ 30
======= ======== ======== ======= ========
Repurchase of common stock
for notes payable......... $ -- $ 100 $ -- $ -- $ --
======= ======== ======== ======= ========
Conversion of convertible
debt into Series F
preferred stock........... $ -- $ -- $ 10,656 $10,656 $ --
======= ======== ======== ======= ========
Conversion of convertible
debt into non-convertible
promissory note........... $ -- $ -- $ 3,500 $ 3,500 $ --
======= ======== ======== ======= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

1. Formation and Business of the Company

Evolve Software, Inc. (the "Company") was incorporated under the laws of the
state of Delaware in February 1995 for the purpose of designing, developing,
marketing and supporting enterprise application software products. The Company
commenced development of its product, ServiceSphere, in September 1997. This
product was released in early 1999 and enables professional service
organizations to integrate and automate the selling, managing and delivery of
professional services.

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Unaudited interim results

The accompanying interim financial statements for the six months ended
December 31, 1998 are unaudited. The unaudited interim financial statements
have been prepared on the same basis as the annual financial statements and, in
the opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly in all material respects the
Company's results of operations and its cash flows for the six months ended
December 31, 1998. The financial data and other information disclosed in these
notes to financial statements related to these periods are unaudited.

Cash and cash equivalents

Cash and cash equivalents consist of highly liquid investments with original
or remaining maturities of three months or less at the purchase date.
Substantially all cash and cash equivalents are on deposit with three financial
institutions.

Investments

The Company classifies all of its investments as "available for sale" in
accordance with the provisions of Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"),
"Accounting for Certain Investments in Debt and Equity Securities."
Accordingly, the Company states its investments at estimated fair value, with
unrealized gains and losses reported in stockholders' equity. The cost of
securities sold is based on the specific identification method. Such securities
are anticipated to be used for current operations and are, therefore,
classified as current assets. At December 31, 1999, the unrealized holding
gains and losses were not significant. For the six months ended December 31,
1999 there were no realized gains or losses.

Property and equipment

Computers and software are stated at cost, and are depreciated using the
straight-line basis over three years. Furniture and fixtures are stated at
cost, and are depreciated on the straight-line basis over five years. When
assets are sold or retired, the cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in the statement of
operations.

F-7
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Income taxes

Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities and the
net operating loss and credit carryforwards using enacted tax rates. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

Fair value of financial instruments

Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, short term investments, accounts
receivable, accounts payable and accrued liabilities, approximate fair value
because of their short maturities.

Restricted cash

At December 31, 1999, cash balances of $2.0 million were restricted from
withdrawal and held by a bank in the form of a certificate of deposit. The
certificate of deposit serves as collateral supporting standby letters of
credit issued to the Company's landlord for the Emeryville, California facility
as security deposits.

Concentrations

Cash and cash equivalents are maintained with three major financial
institutions in the United States. Deposits held with banks may exceed the
amount of insurance provided on such deposits. Generally, these deposits may be
redeemed upon demand and therefore, bear minimum risk.

At June 30, 1997, 1998, and 1999 the Company had no customers that had
significant accounts receivable balances. At December 31, 1999, accounts
receivable was comprised primarily of three customers, which represented 34%,
22%, and 19% of accounts receivable.

Revenue recognition

The Company derives revenues from fees for licenses and services ("Solutions
revenue") and fees from maintenance, application service provider and
subscription agreements ("Subscription revenue").

The Company recognizes revenues in accordance with the provisions of
American Institute of Certified Public Accountants (AICPA) Statement of
Position (SOP) 97-2, "Software Revenue Recognition." This was amended by SOP
No. 98-4, "Deferral of the Effective Date of Certain Provisions of SOP 97-2"
and SOP 98-9, "Modification of SOP 97-2 With Respect to Certain Transactions."
Under SOP 97-2 as amended, the Company recognizes revenues when all of the
following conditions are met:

. The Company has signed a non-cancellable agreement with the customer

. The Company has delivered the software product to the customer

. The amount of fees to be paid by the customer is fixed or determinable
and

. The Company believes that collection of these fees is probable

Generally, the Company has vendor specific objective evidence of fair value
for the maintenance element of software arrangements based on the renewal rates
for maintenance in future years as specified in the contracts. In such cases,
the Company defers the maintenance revenue at the outset of the arrangement and
recognizes it ratably over the period during which the maintenance is to be
provided, which normally commences on the date the software is delivered.

F-8
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company does not have vendor specific objective evidence of fair value
for services specified in software arrangements, as the services are never sold
separately. Accordingly the remaining software revenue allocated to the
software license and services are recognized ratably on a straight line basis
over the period during which the services are provided, which is generally
between six and nine months.

The Company also expects that it will begin to recognize revenue from its
application service provider ("ASP") business, whereby it provides the
software, and provides maintenance and other services to the customer but also
hosts the software on its own servers making the solution available to the
customer via the Internet. In such situations, customers pay a monthly fee for
the term of the contract in return for access to our software, maintenance and
other services such as implementation, training, consulting and hosting. For
such ASP software arrangements the Company does not have vendor specific
objective evidence of fair value for the elements of the contract and
accordingly fees from such arrangements will be recognized on a monthly basis
as the hosting service is provided.

In software arrangements where, as part of the contract with the customer,
the Company has agreed to deliver unspecified additional software products in
the future, it has accounted for the arrangement as a subscription and all the
revenue from the software arrangement is recognized ratably over the term of
the contracts. Additionally, in software arrangements where the amount of fees
to be paid by the customer is deemed not to be fixed or determinable, generally
due to extended payment terms, the Company recognizes revenue when such fees
become due and payable by the customer.

Stock-Based Charges

The Company follows the disclosure provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." The Company has elected to continue accounting for stock-based
compensation issued to employees using Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly,
pro forma disclosures required under SFAS 123 have been presented. Under APB
No. 25, compensation expense is based on the difference, if any, on the date of
grant, between the fair value of the Company's stock and the exercise price of
the option. Stock, stock options, and warrants for stock issued to non-
employees have been accounted for in accordance with the provisions of SFAS 123
and Emerging Issue Task Force Issue No. 96-18, "Accounting for Equity
instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services." The Company presents stock-based
compensation expense as a separate line item in its consolidated statements of
operations for the year ended June 30, 1999 and for the six months ended
December 31, 1999.

Segment information

In 1998, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." Under the new standard the Company is
required to use the "management" approach in reporting its segments. The
management approach designates that the internal organization that is used by
management for making operating decisions and assessing performance be the
source of the Company's segments. The Company believes that it operates in only
one segment, professional services software and uses only one measure of
profitability for internal reporting purposes.

Comprehensive Income

The Company follows SFAS No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in financial statements. The Company's
total comprehensive loss was the same as its net loss for the years ended June
30, 1997, 1998 and 1999 and for the six months ended December 31, 1998 and
1999.

F-9
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Software development costs

Costs incurred in the research, design and development of products are
expensed as incurred until technological feasibility has been established. To
date, the establishment of technological feasibility of the Company's products
and general release substantially coincide. As a result, the Company has not
capitalized any software development costs since such costs have not been
significant.

Net loss per share

Basic net loss per common share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding during the
period. Diluted net loss per common share is computed by dividing the net loss
for the period by the weighted average number of common and common equivalent
shares outstanding during the period. Common equivalent shares, composed of
common shares issuable upon the exercise of stock options and warrants and upon
conversion of convertible preferred stock, are included in the diluted net loss
per common share calculation to the extent these shares are dilutive. A
reconciliation of the numerator and denominator used in the calculation of
basic and diluted net loss per common share follows (in thousands except per
share amount):

<TABLE>
<CAPTION>
Six months ended
Year Ended June 30 December 31,
--------------------------- --------------------
1997 1998 1999 1998 1999
------- -------- -------- ---------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Numerator
Net loss.................. $(8,093) $(10,582) $(11,471) $(4,688) $(12,862)
======= ======== ======== ======= ========
Denominator
Weighted average common
shares................... 3,779 3,999 5,798 4,237 9,953
Weighted average unvested
common shares subject to
repurchase............... (2,443) (1,717) (2,616) (1,317) (5,505)
------- -------- -------- ------- --------
Denominator for basic and
diluted calculation...... 1,336 2,282 3,182 2,920 4,448
======= ======== ======== ======= ========
</TABLE>

Unaudited pro forma net loss per share has been computed as described above
and also gives effect to the conversion of convertible preferred stock that
will automatically convert upon completion of the Company's initial public
offering (using the if-converted method). Pro forma basic and diluted net loss
per share is as follows (in thousands, except per share amount):

<TABLE>
<CAPTION>
Six months
Year Ended ended
June 30 December 31,
---------- ------------
1999 1999
---------- ------------
(unaudited)
<S> <C> <C>
Numerator
Net loss............................................. $(11,471) $(12,862)
======== ========
Shares used in computing basic and diluted net loss
per share........................................... 3,182 4,448
Adjusted to reflect the effect of the assumed
conversion of all convertible preferred stock from
the date of issuance................................ 11,617 24,021
-------- --------
Weighted Average shares used in computing pro forma
basic and diluted net loss per share................ 14,799 28,469
======== ========
</TABLE>

F-10
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Unaudited pro forma Stockholders' Equity

Upon the closing of the Company's IPO, all outstanding convertible preferred
stock will be converted automatically into common stock. The pro forma effect
of this conversion has been presented as a separate column in the Company's
balance sheet, assuming the conversion had occurred as of December 31, 1999.
The unaudited pro forma Stockholders Equity also takes into account the 3.7
million shares of common stock to be issued in connection with the acquisition
of InfoWide in March 2000.

New accounting pronouncements

3. Property and Equipment, Net

<TABLE>
<CAPTION>
June 30, December 31,
--------------- ------------
1998 1999 1999
------ ------- ------------
<S> <C> <C> <C>
Computers...................................... $1,024 $ 1,153 $ 1,612
Software....................................... 228 258 383
Furniture and fixtures......................... 234 254 265
------ ------- -------
1,486 1,665 2,260
Less: Accumulated depreciation................. (851) (1,144) (1,330)
------ ------- -------
$ 635 $ 521 $ 930
====== ======= =======
</TABLE>

The Company leases certain computers, furniture and fixtures, and software
under capital leases. The total cost and accumulated amortization of these
assets as of June 30, 1998, 1999 and December 31, 1999 are as follows:

<TABLE>
<CAPTION>
June 30, December 31,
-------------- ------------
1998 1999 1999
------ ------ ------------
<S> <C> <C> <C>
Computers....................................... $ 927 $1,066 $1,066
Software........................................ 129 135 135
Furniture and fixtures.......................... 216 216 216
------ ------ ------
1,272 1,417 1,417
Less: accumulated amortization.................. (487) (597) (666)
------ ------ ------
$ 785 $ 820 $ 751
====== ====== ======
</TABLE>

F-11
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Accrued Liabilities

<TABLE>
<CAPTION>
June 30, December 31,
--------- ------------
1998 1999 1999
---- ---- ------------
<S> <C> <C> <C>
Accrued compensation and related expenses............. $229 $553 $1,644
Taxes payable......................................... -- 19 166
Other................................................. 110 99 240
---- ---- ------
$339 $671 $2,050
==== ==== ======
</TABLE>

5. Commitments and Contingencies

Capital leases

Future minimum lease payments under capital leases at December 31, 1999 are
as follows:

<TABLE>
<S> <C>
Year ended December 31,
2000.............................................................. $ 285
2001.............................................................. 122
2002.............................................................. 29
-----
Total minimum lease payments........................................ 436
Less amount representing interest................................... (48)
-----
Present value of minimum lease payment.............................. 388
Less current portion of capital lease obligations................... (245)
-----
$ 143
=====
</TABLE>

During the six months ended December 31, 1999, the Company had asset leasing
availability of $1.9 million under one master lease agreement which expires
March 15, 2000. A total of $581,000 has been drawn down as of December 31,
1999, leaving $1.3 million available to lease equipment.

Operating leases

The Company leases its office facilities under operating leases. Future
minimum obligations under noncancelable operating leases at December 31, 1999
are as follows:

<TABLE>
<S> <C>
December 31,
2000............................................................. $ 1,516
2001............................................................. 1,387
2002............................................................. 1,429
2003............................................................. 1,472
2004............................................................. 1,516
Thereafter....................................................... 3,107
-------
$10,427
=======
</TABLE>

Rent expense under operating leases for the years ended June 30, 1997, 1998
and 1999 and six months ended December 31, 1999 was $446,000, $446,000,
$483,000 and $325,000, respectively.

F-12
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Contingencies

From time to time, the Company may become involved in litigation relating to
additional claims arising from the ordinary course of business. In January
2000, PeopleSoft, Inc. filed an action in the California Superior Court
alleging certain claims arising out of our employment of former employees of
PeopleSoft, and seeking an injunction to preclude additional hiring of
PeopleSoft employees. The Company believes PeopleSoft's claims are without
merit, and the Company is in the process of contesting these claims. This
litigation, whether or not determined or settled in the Company's favor, may be
costly and may divert the efforts and attention of the Company's management
from normal business operations.

6. Long-Term Debt

On March 13, 1997 and April 11, 1997, the Company issued Senior Subordinated
Convertible Notes totaling $12.7 million. The notes were issued in $25,000
units and bore interest of 8.5% per annum, payable upon conversion or maturity
of the notes. In December 1998, the Company converted its outstanding Senior
Subordinated Convertible Notes with principal of $12.7 million and accrued
interest of $1.8 million into 16,633,169 shares of Series F preferred stock and
uncollateralized non-convertible promissory notes with principal of $3.5
million due on the earlier of November 15, 2008 or at the election of the
lenders upon the closing of an acquisition transaction or an initial public
offering with proceeds to the Company of $20.0 million or more. The non-
convertible promissory notes accrue interest at 8.5% per annum. Accrued
interest at December 31, 1999 on the non-convertible notes amounted to
$310,000.

In addition, the warrants originally issued in association with the
convertible debt for an aggregate exercise price of $636,000 were converted
into warrants to purchase 966,831 shares of Series F preferred stock (see Note
8).

In October 1998, the Company received a $1.0 million convertible bridge loan
from an investor. This bridge loan accrued interest at a rate of 8% per annum.
In November and December 1998, the Company issued 28,000,000 shares of Series G
preferred stock to the investor for total proceeds of $10.0 million by
conversion in exchange for the $1.0 million bridge loan and $9.0 million in
cash. The Company also granted to the purchaser of the Series G preferred stock
a warrant to purchase up to 7,000,000 shares of Series G preferred stock for an
aggregate exercise price of $5.0 million. The value of this warrant has been
accounted for as a cost of issuance. At December 31, 1999, the warrant remains
unexercised.

F-13
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

7. Income Taxes

The tax effects of temporary differences that give rise to significant
portions of federal tax assets are as follows:

<TABLE>
<CAPTION>
June 30,
------------------ December 31,
1998 1999 1999
-------- -------- ------------
<S> <C> <C> <C>
Net operating loss carryforwards............... $ 6,688 $ 11,309 $ 13,580
Depreciation................................... (16) 77 180
Capitalized start-up costs--net................ 3,635 1,945 2,800
Accrued liabilities............................ 78 121 126
Research and development credit................ 135 1,823 2,700
-------- -------- --------
Total deferred assets........................ 10,520 15,275 19,386
Less valuation allowance....................... (10,520) (15,275) (19,386)
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>

Due to the uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against its deferred tax assets. At such time as it is determined that it is
more likely than not that the deferred tax assets are realizable, the valuation
allowance will be reduced.

At December 31, 1999, the Company has federal and state net operating loss
carryforwards of approximately $34.8 million and $31.7 million, respectively,
available to reduce future taxable income. These carryforwards expire through
2019 and 2004, respectively. In addition, the Company has research and
development tax credit carryforwards of approximately $2.0 million and
$700,000, respectively, for federal and state income tax purposes at December
31, 1999. The research and development tax credit carryforwards expire in 2019.

The Company's ability to utilize its net operating loss carryforwards to
offset future taxable income is subject to restrictions attributable to equity
transactions that result in change in ownership as defined in the Tax Reform
Act of 1986. These restrictions will limit, on an annual basis, the Company's
future use of its net operating loss carryfowards and research and development
tax credit.

8. Stockholders' Equity

Common stock

In fiscal 1999, the Company increased its authorized capital stock to
50,000,000 shares of common stock and 100,000,000 shares of preferred stock.
Each share of common stock is entitled to one vote. The holders of common stock
are also entitled to receive dividends whenever funds are legally available and
when declared by the Board of Directors, subject to the prior rights of holders
of all classes of preferred stock outstanding. As of December 31, 1999, no
dividends have been declared. At December 31, 1999, 9,611,576 unvested shares
of common stock were subject to repurchase.

F-14
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Preferred stock

Under the Company's Certificate of Incorporation, as amended in September
1999, the Company is authorized to issue 100,000,000 shares of preferred stock.
From inception through December 31, 1999, the Company issued preferred stock as
follows:

<TABLE>
<CAPTION>
Amount Common
Original net of Shares Issued and Par Value Liquidation Stock
Issue Price Issuance Authorized Outstanding Amount Preference Equivalents
----------- -------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Series A................ $0.40 $ 452 1,167,500 1,167,500 $0.01 $ 467 389,167
Series B................ $1.00 3,062 3,125,000 3,075,000 0.01 3,075 1,025,000
Series C................ $1.00 995 1,000,000 1,000,000 0.01 1,000 333,333
Series D................ $1.00 2,918 2,940,000 2,940,000 0.01 2,940 980,000
Series E................ $2.00 3,967 2,030,000 2,000,000 0.01 4,000 666,667
Series F ............... $0.65 10,942 17,600,000 16,633,169 0.01 10,942 5,544,390
Series G................ $0.36 9,530 35,000,000 28,000,000 0.01 10,000 9,333,333
Series H................ $0.70 24,961 35,715,000 35,714,289 0.01 25,000 11,904,763
------- ---------- ---------- ------- -----------
$56,827 98,577,500 90,529,958 $57,424 $30,176,653
======= ========== ========== ======= ===========
</TABLE>

Dividends:

The holders of outstanding Series A, Series B, Series C, Series D, Series E,
Series F, Series G, and Series H are entitled to receive in any fiscal year,
when, if and as declared by the Board of Directors, noncumulative dividends in
cash at an annual rate of 10% of the original issuance price per share. Such
dividends will be declared or paid prior and in preference to any declaration
or payment of any dividend on the common stock. As of December 31, 1999, no
dividends have been declared.

Voting Rights:

Each share of Series A, Series B, Series C, Series D, Series E, Series F,
Series G, and Series H preferred stock entitles a holder to the number of votes
per share equal to the number of shares of common stock into which each shares
of Series A, Series B, Series C, Series D, Series E, Series F, Series G, and
Series H preferred stock is then convertible.

Liquidation Preference:

In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series G and Series H preferred stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus of funds to the holders of Series A, Series B, Series C,
Series D, Series E, and Series F preferred stock and common stock, an amount
equal to the Series G and Series H Original Issue Price for each share of
Series G and Series H preferred stock plus any declared but unpaid dividends on
such shares. After payments are made to holders of Series G and H preferred
stock, the holders of Series F Preferred stock are entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds to
the Series A, Series B, Series C, Series D, and Series E and common stock an
amount equal to the Series F Original Issue Price of each share of Series F
preferred stock then held by them, plus any declared but unpaid dividends on
such shares. After such payments have been made, the holders of Series A, B, C,
D and E preferred stock are entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Company to the
holders of common stock, and amount equal to their respective original issuance
price, plus any declared but unpaid dividends. After payment has been made to
the holders of the Preferred stock of their respective liquidation preferences,
the holders of the Preferred stock and common stock are entitled to receive the
remaining assets of the Company in proportion to the number of shares of common
stock which would be held by each holder if all shares of Preferred stock were
converted into common stock.

F-15
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Conversion:

Each share of Series A, Series B, Series C, Series D, Series E, Series F,
Series G, and Series H preferred stock are convertible, at the option of the
holder into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $0.70 in the case of the Series H stock, and $0.36
in the case of Series A, Series B, Series C, Series D, Series E, Series F, and
Series G preferred stock by the applicable Conversion Price. The Conversion
Price are initially equal to $2.10 in the case of the Series H stock, and $1.08
in the case of Series A, Series B, Series C, Series D, Series E, Series F, and
Series G preferred stock.

Each share of Series A, Series B, Series C, Series D, Series E, Series F and
Series G Preferred stock are automatically converted into shares of common
stock at the then effective applicable conversion price, in the event of a
public offering for a price greater than $3.00 per share at an aggregate
offering price of not less than $10.0 million, or at the election of the
holders of a majority of the outstanding shares of Preferred stock.

Each share of Series H Preferred stock are automatically converted into
shares of common stock at the then effective applicable conversion price, in
the event of a public offering for a price greater than $4.20 per share at an
aggregate offering price of not less than $20.0 million, or at the election of
the holders of a majority of the outstanding share of Preferred stock.

Warrants

In October 1995, in connection with an equipment lease agreement, the
Company granted the lessor warrants to purchase 25,000 shares of Series B
preferred stock at an exercise price equal to $1.00 per share. These warrants
are exercisable through October 6, 2005. As of December 31, 1999, all of the
warrants remain outstanding.

In November 1995, in connection with a lease agreement for office space, the
Company granted the lessor a warrant for 200,000 shares of the Company's Series
B preferred stock at an exercise price of $1.00 per share, exercisable through
May 31, 1996 and 25,000 shares of the Company's Series B preferred stock at an
exercise price of $1.00 per share, exercisable through January 1, 2001. As of
December 31, 1999, 25,000 of these warrants remained outstanding, 75,000 were
exercised in prior periods and 125,000 were expired.

In February 1997, the Company granted an investor warrants to purchase
30,000 shares of Series E preferred stock at an exercise price of $2.00 per
share, exercisable through February 2002. As of December 31, 1999, all of the
warrants remain outstanding. The value of these warrants are immaterial to the
financial statements.

In January 1998, in conjunction with the common stock repurchase, the
Company granted a stockholder and outside director warrants to purchase 233,333
shares of common stock at $60.00 per share. The warrants vested ratably over a
five year term, on the condition that the stockholder continue service to the
Company as an employee, consultant, officer or director. The warrants were
canceled during fiscal 1999. The value of the warrants are immaterial to the
financial statements.

In March and April 1997, in conjunction with the issuance of the 8.5% Senior
Subordinated Convertible Notes, the Company issued warrants to purchase 422,500
shares of common stock to noteholders and warrants to purchase 21,200 shares of
common stock to the managers of the offering. All of these warrants were to
purchase the shares at the lesser of $6.00 per share or the conversion price.
The value of these warrants was $903,000 and represented a discount to the face
value of the debt. In December 1998, in conjunction with the conversion of the
8.5% Senior Subordinated Convertible Notes into Series F preferred stock at
$0.6534 per share, the remaining unamortized discount of $285,000 was offset to
equity. At the same time, the Company

F-16
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

issued 16,633,169 shares of Series F preferred stock and $3.5 million of non-
convertible promissory notes with interest at 8.5% per annum to holders of the
notes, and a warrant to purchase 966,831 shares of Series F preferred stock to
the managers of the offering.

In November 1998, the Company granted seven investors warrants to purchase
5,536,363, 35,000, 70,000, 553,637, 70,000, 700,000 and 35,000 shares of Series
G preferred stock valued at $770,000 at a purchase price of $0.7143 per share.
The warrants will terminate on the earlier of five years from the date of
issuance or upon the initial public offering of the Company with gross proceeds
from the offering of $10.0 million and per share price to the public of no less
than $1.00 per share. As of December 31, 1999, all of the warrants remain
outstanding.

In December 1998, in connection with a Company's license and service
agreement, the Company granted a licensee warrants to purchase 133,333 shares
of the Company's common stock at an exercise price of $6.00 per share,
exercisable upon the payment of $4.0 million in program license fees. The
warrants will terminate on the earlier of five years from the date of issuance
or upon the initial public offering of the Company. As of December 31, 1999,
all of the warrants remain outstanding. The value of these warrants are
immaterial to the financial statements.

In September 1999, the Company granted an investor warrants to purchase
466,667 shares of common stock valued at $651,000 at a purchase price of $1.08
per share. The warrants will terminate on the earlier of seven years from the
date of issuance or upon the initial public offering of the Company. As of
December 31, 1999, all warrants are outstanding.

The fair value of the warrants were estimated using the Black-Scholes
option-pricing model. The estimates were made based on the full contractual
terms of the warrants at their appropriate ranges of risk-free interest rates,
expected volatility and expected lives, and a zero annual dividend yield.

9. Stock Options

Under the terms of the 1995 Stock Option Plan (the "Plan"), eligible
employees, directors and consultants can receive options to purchase shares of
the Company's common stock at a price not less than 100% and 85% of the fair
value on the grant date for incentive stock options and nonqualified stock
options, respectively. The Company originally authorized 833,333 shares of
common stock for issuance under the Plan. By September 1999, the Company had
increased the number of shares issuable under the Plan to 6,666,667. The
options granted under the Plan are exercisable over a maximum term of ten years
from the date of grant and generally vest over a four to five year period.
Options are exercisable immediately but have a right of repurchase which
generally lapses ratably over four to five years. In some instances, fully
vested options are granted. Options granted under the Plan are subject to
various restrictions as to resale and right of first refusal by the Company.

F-17
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

A summary of the activity under the Plan is set forth below:

<TABLE>
<CAPTION>
Outstanding Options
---------------------------------------------
Weighted
Shares Exercise Aggregate Average
Available Number of Price per Price Exercise
for Grant Shares Share (in thousands) Price
---------- ---------- --------- -------------- --------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1996.. 47,322 771,278 $.15-$.30 $ 125 $.16
Additional shares
authorized............. 333,333
Options granted......... (373,840) 373,840 $.60-$.90 256 $.69
Options exercised....... -- (72,410) $.15-$.60 (17) $.24
Options canceled........ 188,427 (188,427) $.15-$.60 (37) $.20
---------- ---------- ------
Balance, June 30, 1997.. 195,242 884,281 $.15-$.90 327 $.37
Options granted......... (502,066) 502,066 $.90 452 $.90
Options exercised....... -- (216,743) $.15-$.90 (98) $.45
Options canceled........ 274,619 (274,619) $.15-$.90 (160) $.58
---------- ---------- ------
Balance, June 30, 1998.. (32,205) 894,985 $.15-$.90 $ 521 $.58
Additional shares
authorized............. 2,166,667
Options granted......... (1,770,764) 1,770,764 $.15-$.90 363 $.21
Options exercised....... -- (401,169) $.15-$.90 (109) $.27
Options canceled........ 408,288 (408,288) $.15-$.90 (202) $.48
---------- ---------- ------
Balance, June 30, 1999.. 771,986 1,856,292 $.15-$.90 $ 573 $.30
Additional shares
authorized............. 3,333,333
Options granted......... (2,364,333) 2,364,333 $.15-$.60 1,250 $.54
Options exercised....... -- (1,575,058) $.15-$.90 (617) $.39
Options canceled........ 286,549 (286,549) $.15-$.90 (52) $.18
---------- ---------- ------
Balance, December 31,
1999................... 2,027,535 2,359,018 $.15-$.90 $1,154 $.49
========== ========== ======
</TABLE>

Options exercisable without the right of repurchase at June 30, 1997, 1998
and 1999 and December 31, 1999 are, 525,119, 481,068, 561,384, and 390,278,
respectively.

The following table summarizes information with respect to stock options and
warrants outstanding at December 31, 1999:

<TABLE>
<CAPTION>
Options
Outstanding Options Exercisable
-------------------------- ------------------
Weighted Average Number Exercisable
Weighted Average Number Remaining at December 31, Weighted Average
Exercise Price of Shares Contractual Life 1999 Exercise Price
- ---------------- --------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
$.15...... 678,285 8.06 266,968 $.15
$.30...... 6,666 6.39 6,666 $.30
$.60...... 1,564,560 9.82 55,764 $.60
$.90...... 109,507 7.96 60,880 $.90
--------- -------
$.48...... 2,359,018 9.22 390,278 $.33
========= =======
</TABLE>

The following information concerning the Company's stock option plan is
provided in accordance with Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation ("SFAS No. 123"). The Company has
continued to account for its plan in accordance with APB No. 25.

F-18
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The weighted average fair value per share of the options granted for the
years ended June 30, 1997, 1998 and 1999 and the six months ended December 31,
1999 is $.20, $.27, $.05 and $.14, respectively. The fair value of each stock
option is estimated on the date of grant using the minimum value option-
pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
June 30,
----------------------- December 31,
1997 1998 1999 1999
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Risk-free interest rate................. 6.00% 6.00% 5.81% 6.19%
Expected life........................... 6 years 6 years 5 years 5 years
Expected dividends...................... -- -- -- --
</TABLE>

The following pro forma net loss information has been prepared following
the provision of SFAS 123.

<TABLE>
<CAPTION>
For the year ended June Six months
30, ended
--------------------------- December 31,
1997 1998 1999 1999
------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net loss:
As reported...................... $(8,093) $(10,582) $(11,471) $(12,862)
Pro forma........................ $(8,169) $(10,715) $(11,561) $(13,182)
</TABLE>

In connection with the granting of stock options and the sales of
restricted stock to our employees and the granting of equity instruments to
non-employees for services rendered, we recorded deferred stock-based charges
totaling approximately $30.4 million as of December 31, 1999. This amount
represents the difference between the exercise or purchase price at which the
stock options were granted or the restricted stock was issued, and the deemed
fair value of our common stock for accounting purposes on the date of grant or
issuance. This amount is included as a component of stockholders' equity and,
in accordance with the method described in Financial Accounting Standards
Board Interpretation No. 28, is being amortized on an accelerated basis by
charges to operations over the vesting period of the options and restricted
stock, which is generally four years. This resulted in an expense of $218,000
for the year ended June 30, 1999, and an expense of $3.2 million for the six
months ended December 31, 1999. The remaining unamortized and unearned stock-
based compensation at December 31, 1999, will be amortized as follows: $8.7
million for the six months ending June 30, 2000; $11.5 million for the year
ending June 30, 2001; $4.8 million for the year ending June 30, 2002; $1.9
million for the year ending June 30, 2003 and $133,000 for the year ending
June 30, 2004. We expect to record additional significant stock-based
compensation for stock options granted and restricted stock issued subsequent
to December 31, 1999.

10. Related Party Transactions

During the year ended June 30, 1998, the Company loaned two of its officers
and directors an aggregate of $450,000. Each of the loans is due five years
from the date of issuance, relates to the purchase of common stock of the
Company, and are collateralized by the pledge of common stock of the Company.
In addition, the loans may be prepaid in part or in full without notice or
penalty, and are represented by a promissory note which bears interest at the
Applicable Federal Rate at the date of issuance (ranging from 5.69% to 6.39%
per annum). Interest on these notes is due on maturity.

On January 1, 1998, in connection with the repurchase of common stock, the
Company canceled a loan to an officer and director for $14,000 and forgave the
related interest receivable of $3,514. In addition, the Company also issued a
$96,243 note in exchange for these shares of common stock. The note bears
interest of 7.75% per annum. In January 1999, the Company repaid the note and
related interest of $7,459.

F-19
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

On June 30, 1998, the Company loaned a stockholder, who is also an executive
officer of the Company, $19,691. The loan was due on December 31, 1998 and was
represented by a promissory note bearing interest of 7% per annum. Interest was
due upon maturity of the note. The loan was repaid during fiscal 1999. On
March 9, 1999, June 30, 1999 and September 30, 1999, the Company issued
additional loans to the stockholder for $20,000, $40,000 and $40,000,
respectively, with interest bearing at a rate of 6% per annum. The principal
and accrued interest are due on the earlier of June 30, 2001, thirty days after
termination other than for death or disability, or one year after termination
for death or disability. The loans are represented by two promissory notes and
are collateralized by all shares of the Company's common stock held by the
borrower.

During the year ended June 30, 1999, the Company loaned seven of its
officers and directors an aggregate of $780,025 under the Company's Restricted
Stock Purchase agreements with the officers and directors. All of the loans
relate to the purchase of common stock of the Company and are collateralized by
the pledge of common stock of the Company. In addition, the loans may be
prepaid in part or in full without notice or penalty, and are presented by
promissory notes which bear interest ranging from 5% to 7%. The notes are due
four to five years from date of issuance.

On March 1, 1999, the Company loaned a former employee $24,003 pursuant to
the terms of a severance agreement for the purposes of exercising the
employee's stock options for 52,330 shares of common stock of the Company. The
loan bears interest at a rate of 5% per annum and was repaid in full as of
December 31, 1999.

During the year ended June 30, 1999, the Company exercised its right to
repurchase 829,168 shares of common stock from two stockholders under the right
to repurchase option of the Restricted Stock Purchase agreements entered into
by the Company and the two stockholders. In connection with the repurchase of
common stock, the Company canceled the related stockholder loans for an
aggregate amount of $221,000.

During the six months ended December 31, 1999, the Company loaned twenty
three of its officers, directors, employees, investors and vendors an aggregate
of $3.3 million under the Company's Restricted Stock Purchase agreements. All
of the loans relate to the purchase of common stock of the company
collateralized by the pledge of common stock of the Company. In addition, the
loans may be prepaid in part or in full without notice or penalty, and are
represented by promissory notes which bear interest ranging from 6% to 7%. The
notes are due three to five years from date of issuance.

11. Employee Savings Plan

The Company has a savings plan (the "Savings Plan") that qualifies as a
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a percentage (not to
exceed 15%) of their eligible pretax earnings up to the Internal Revenue
Service's annual contribution limit. All employees of the Company are eligible
to participate in the Savings Plan. The Company is not required to contribute
to the Savings Plan and has made no contributions since the inception of the
Savings Plan.

12. Subsequent Events

Initial Public Offering

On March 13, 2000, the Company approved the issuance and sale in an
underwritten public offering of the Company's common stock.

F-20
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Stock Split

On March 13, 2000, the Company approved a 1 for 3 reverse split of its
common stock, which will be effected prior to the closing of the public
offering. All common stock data and common stock option plan information has
been restated to reflect the reverse split.

In addition, the conversion prices of the Company's convertible preferred
stock have also been adjusted to reflect the effect of the reverse split.

Stock Plans

In January 2000, the Company's Board of Directors authorized an increase of
4,500,000 shares to be issued under the Company's stock plans. As of March
2000, 3,333,333 of these shares were granted to employees and 333,333 shares
were reserved for option grants to ex-employees of InfoWide, Inc.

Acquisition of InfoWide, Inc.

On March 9, 2000, the Company agreed to acquire InfoWide, Inc. in exchange
for 3.7 million shares of common stock of the Company. The acquisition is
expected to close by March 31, 2000 and will be accounted for as a purchase.

The Company expects to incur costs associated with the acquisition of
goodwill of approximately $3.1 million which will be recorded primarily as
goodwill, purchased technology and other intangible assets which will have an
estimated useful life of three years.

F-21
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
InfoWide, Inc.:

We have audited the accompanying balance sheets of InfoWide, Inc. (a
development stage company) (the "Company") as of December 31, 1998 and 1999,
and the related statements of operations, shareholders' equity (deficit) and
cash flows for the period from April 15, 1998 (inception) to December 31, 1998
and the year ended December 31, 1999 and for the period from April 15, 1998
(inception) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1998 and 1999,
and the results of its operations and its cash flows for the period from April
15, 1998 (inception) to December 31, 1998, the year ended December 31, 1999 and
for the period from April 15, 1998 (inception) to December 31, 1999 in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
enterprise engaged in developing and marketing automated information sharing
services. As discussed in Note 1 to the financial statements, the Company's
operating losses since inception, its negative working capital and
shareholders' deficit raise substantial doubt about its ability to continue as
a going concern. Management's plans concerning these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP

San Jose, California
March 10, 2000

F-22
<PAGE>

INFOWIDE, INC
(A Development Stage Company)

BALANCE SHEETS

December 31, 1998 and 1999
(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
1998 1999
----- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 98 $ 21
Accounts receivable.......................................... -- 14
Prepaid expenses and other assets............................ 16 1
----- -------
Total current assets....................................... 114 36
PROPERTY AND EQUIPMENT, net.................................... 88 148
DEPOSIT........................................................ 60 41
----- -------
TOTAL...................................................... $ 262 $ 225
===== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accrued expenses............................................. $ -- $ 92
Notes payable to related parties............................. -- 390
----- -------
Total current liabilities.................................. -- 482
----- -------
DEPOSIT FROM RELATED PARTY..................................... 30 20
COMMITMENTS (Note 3)
SHAREHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock--Series A, par value: $0.0001 per
share; 5,500,000 shares authorized; shares issued and
outstanding: 3,923,079 in 1998 and 4,923,079 in 1999........ 510 640
Convertible preferred stock--Series B, par value: $0.0001 per
share; 2,500,000 shares authorized; shares issued and
outstanding: none in 1998 and 948,720 in 1999............... -- 370
Common stock--par value: $0.0001 per share; 18,000,000 shares
authorized; shares issued and outstanding: 5,333,333 in 1998
and 1999.................................................... 9 496
Deferred compensation........................................ -- (303)
Deficit accumulated during the development stage............. (287) (1,480)
----- -------
Total shareholders' equity (deficit)....................... 232 (277)
----- -------
TOTAL...................................................... $ 262 $ 225
===== =======
</TABLE>

See notes to financial statements.

F-23
<PAGE>

INFOWIDE, INC.
(A Development Stage Company)

STATEMENTS OF OPERATIONS
(In thousands)

<TABLE>
<CAPTION>
Period from Period from
April 15, 1998 April 15, 1998
(Inception) to Year Ended (Inception) to
December 31, December 31, December 31,
1998 1999 1999
-------------- ------------ --------------
<S> <C> <C> <C>
NET SALES........................... $ -- $ 26 $ 26
COSTS AND EXPENSES:
Cost of sales..................... -- 36 36
General and administrative........ 91 303 394
Research and development.......... 200 724 924
Sales and marketing............... 1 152 153
----- ------- ------
Total costs and expenses........ 292 1,215 1,507
----- ------- ------
LOSS FROM OPERATIONS................ (292) (1,189) (1,481)
INTEREST INCOME (EXPENSE), Net...... 5 (4) 1
----- ------- ------
NET LOSS............................ $(287) $(1,193) (1,480)
===== ======= ======
</TABLE>

See notes to financial statements.

F-24
<PAGE>

INFOWIDE, INC.
A Development Stage Company

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

Period from April 15, 1998 (Inception) through December 31, 1999
(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Series B
Series A Convertible Deficit
Convertible Preferred Accumulated
Preferred Stock Stock Common Stock Deferred During the
---------------- -------------- ---------------- Compen- Development
Shares Amount Shares Amount Shares Amount sation Stage Total
--------- ------ ------- ------ --------- ------ -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
to founders for cash at
$0.0014 per share in
April 1998............. $-- $-- 5,333,333 $ 8 $ -- $ -- $ 8
Issuance of Series A
preferred stock at
$0.13 per share in May
1998................... 3,923,079 510 510
Issuance of stock
options to
consultants............ 1 1
Net loss................ (287) (287)
--------- ---- ------- ---- --------- ---- ----- ------- -------
BALANCES, December 31,
1998................... 3,923,079 510 -- -- 5,333,333 9 -- (287) 232
Issuance of Series A
preferred stock at
$0.13 per share in
March 1999............. 1,000,000 130 130
Issuance of Series B
preferred stock at
$0.39 per share in May
1999................... 948,720 370 370
Issuance of stock
options to
consultants............ 166 166
Deferred compensation... 321 (321) --
Amortization of deferred
stock compensation..... 18 18
Net loss................ (1,193) (1,193)
--------- ---- ------- ---- --------- ---- ----- ------- -------
BALANCES, December 31,
1999................... 4,923,079 $640 948,720 $370 5,333,333 $496 $(303) $(1,480) $ (277)
========= ==== ======= ==== ========= ==== ===== ======= =======
</TABLE>

See notes to financial statements.

F-25
<PAGE>

INFOWIDE, INC.
(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(In thousands)

<TABLE>
<CAPTION>
Period from Period from
April 15, 1998 Year April 15, 1998
(inception) to Ended (Inception) to
December 31, December 31, December 31,
1998 1999 1999
-------------- ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss........................... $(287) $(1,193) $(1,480)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization..... 7 45 52
Amortization of deferred
compensation and noncash
compensation to consultants...... 1 184 185
Changes in assets and liabilities:
Prepaid expenses and other
assets.......................... (16) 15 (1)
Accounts receivable.............. -- (14) (14)
Accrued expenses................. -- 92 92
Deposit from related party....... 30 (10) 20
Deposit.......................... (60) 19 (41)
----- ------- -------
Net cash used in operating
activities..................... (325) (862) (1,187)
----- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES--
Purchases of property and
equipment......................... (95) (105) (200)
----- ------- -------
Net cash used in investing
activities..................... (95) (105) (200)
----- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of preferred stock........ 510 500 1,010
Issuance of common stock........... 8 -- 8
Notes payable to related parties... -- 390 390
----- ------- -------
Net cash provided by financing
activities..................... 518 890 1,408
----- ------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................ 98 (77) 21
CASH AND CASH EQUIVALENTS, Beginning
of period.......................... -- 98 --
----- ------- -------
CASH AND CASH EQUIVALENTS, End of
period............................. $ 98 $ 21 21
===== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--
Cash paid during the period for
interest.......................... $ -- $ -- $ --
===== ======= =======
</TABLE>

See notes to financial statements.

F-26
<PAGE>

INFOWIDE, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Period From April 15, 1998 (Inception) To December 31, 1998 and Year Ended
December 31, 1999

1. Organization and Summary Of Significant Accounting Policies

Organization--InfoWide, Inc. (the "Company") was incorporated on April 15,
1998 under the laws of the state of Delaware. The Company has developed a web-
hosted, rent on demand financial management package designed for professional
services organizations. The Company is subject to the risks associated with a
development stage enterprise, including the need to refine its product
technology, extend its marketing and distribution channels and continue to
raise financing.

Commercial selling commenced from August 1999; as of December 31, 1999, the
Company is considered to be a development stage enterprise because revenues
through that date have not been significant. The accompanying financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company's continuation as a going concern is dependent upon
its ability to generate enough cash flow to meet its obligations on a timely
basis, to comply with the terms of its financing agreements, and to attain
successful operations. The Company's operating losses since inception, its
negative working capital and shareholders' deficit raise substantial doubt
about its ability to continue as a going concern. The Company plans to finance
its operations with proceeds from the sale of equity securities and,
ultimately, with revenues from product sales. In the event that the Company is
unsuccessful in raising sufficient funding or there are other unexpected
adverse developments affecting cash flow, the Company will have to
significantly reduce its operating expenses or curtail operations.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Cash and Cash Equivalents--The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.

Concentration of Credit Risk--Financial instruments that potentially subject
the Company to concentration of credit risk consist of cash and cash
equivalents. Cash and cash equivalents consist primarily of interest-bearing
accounts and are regularly monitored by management.

Property and Equipment--Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over their respective
useful lives of three to five years.

Software Development Costs--The costs for the development of new software
products are expensed as incurred until technological feasibility has been
established, at which time any additional costs would be capitalized in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software To Be Sold, Leased or Otherwise
Marketed." Because the Company believes its current process for developing
software is essentially completed concurrently with the establishment of
technological feasibility, no costs have been capitalized to date.

Income Taxes--The Company accounts for income taxes using the asset and
liability approach for financial reporting. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes and operating loss and tax credit carryforwards. A
valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets recorded will not be recognized.

F-27
<PAGE>

INFOWIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Stock-Based Compensation--The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

Comprehensive Income (Loss)--The Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from nonowner sources. Comprehensive loss was the same as net loss for the
period from April 15, 1998 (inception) to December 31, 1998 and the year ended
December 31, 1999.

New Accounting Pronouncement--In June 1998, the Financial Accounting
Standards Board issued SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments and for hedging activities. SFAS 133 requires that
entities recognize all derivatives as either assets or liabilities and measure
those instruments at fair value. The Company is in the process of studying the
impact of SFAS 133 on its financial position, results of operations and cash
flows. The Company will adopt SFAS 133 in the first quarter of the year ending
December 31, 2001.

2. Property and Equipment, Net

Property and equipment at December 31, 1998 and 1999 consists of (in
thousands):
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Computers and accessories...................................... $66 $101
Furniture and equipment........................................ 7 42
Software....................................................... 22 34
Telephones..................................................... -- 23
--- ----
95 200
Accumulated depreciation and amortization...................... (7) (52)
--- ----
$88 $148
=== ====
</TABLE>

3. Lease Commitments

The Company leases it's office facilities under a noncancelable operating
lease. Rent expense for the period from April 15, 1998 (inception) to December
31, 1998 and the year ended December 31, 1999 was $67,000 and $117,000,
respectively.

Future minimum lease commitments are as follows (in thousands):

<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
2000................................................................. $121
2001................................................................. 51
----
Total.............................................................. $172
====
</TABLE>

The Company also subleases part of its office space under a sublease
agreement with an entity which is owned by three of the Company's preferred
shareholders. This entity also made a deposit to the Company on the leased
facility. Sublease income for the period from April 15, 1998 (inception) to
December 31, 1998 and the year ended December 31, 1999 amounted to $31,000 and
$58,000, respectively.

F-28
<PAGE>

INFOWIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Notes Payable to Related Parties

Notes payable include $40,000 payable to a shareholder and $350,000
payable to an entity which is owned by three preferred shareholders of the
Company. The notes bear interest at 6% per annum and are payable on demand.
Also see Note 9.

5. Convertible Preferred Stock

Significant terms of the Series A and Series B preferred stock are as
follows:

. Each share is convertible into one share of common stock at the holder's
option, subject to adjustment for issuances of common stock, as defined.
Each share of preferred stock shall automatically be converted into
common stock upon closing of a public offering with gross proceeds to the
Company of at least $7.5 million or on a date specified by written
agreement of the holders of a majority of the then outstanding shares of
preferred stock.

. The holders of the Series A and Series B preferred stock are entitled to
receive noncumulative dividends of $0.0078 and $0.0234, respectively, per
share per annum, when and as declared by the Board of Directors.
Dividends on preferred stock are payable prior and in preference to any
dividends on common stock. No dividends have been declared or paid since
inception.

. Upon liquidation dissolution or winding up of the Company, the holders of
Series A and Series B preferred stock will be entitled to receive an
amount per share equal to (a) in the case of the Series A preferred
stock, the sum of (i) $0.13 for each outstanding share of Series A
preferred stock and (ii) an amount equal to declared but unpaid dividends
on such shares, and (b) in the case of Series B preferred stock the sum
of (i) $0.39 for each outstanding share of Series B preferred stock and
(ii) an amount equal to declared but unpaid dividends on such shares.

. The holders of the preferred stock have been granted a right of first
offer with respect to future sales of the Company's shares as defined.

. Each share has voting rights equivalent to the number of shares of common
stock into which it is convertible.

6. Common Stock

During the period ended December 31, 1998, the Company sold 5,333,333 shares
of common stock to the founder of the Company, resulting in net proceeds of
$8,000. 75% of all the shares are subject to the Company's option to repurchase
the shares in the event the founder is terminated from the Company without
cause. Such repurchase right expires ratably at 2.0833% of purchased shares
after each month of continuous services. At December 31, 1999, 1,777,813 shares
were subject to repurchase at a weighted average price of $0.014 per share.

7. Stock Option Plan

Under the Company's 1999 Stock Option Plan (the "Plan"), the Company may
grant options to purchase up to 3,000,000 shares of common stock to employees,
directors and consultants. The options generally vest over a period of four
years and expire no more than ten years from the date of grant. Generally,
holders of the options may exercise shares prior to vesting under a restricted
stock purchase agreement which allows the Company the option to repurchase any
unvested shares from the holder upon the holder's termination. The Company's
repurchase option terminates in accordance with the vesting schedule contained
in the holder's original option agreement.

F-29
<PAGE>

INFOWIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company grants fully vested options for common stock to nonemployees for
services performed. During the period from April 15, 1998 (inception) to
December 31, 1998 and the year ended December 31, 1999, the amount of stock-
based compensation expense related to such options was $1,000 and $166,000,
respectively.

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
Weighted
Average
Options Exercise
Outstanding Price
----------- --------
<S> <C> <C>
Balance, April 15, 1998............................... -- $ --
Granted (weighted average minimum value of $0.02 per
share)............................................... 170,000 $0.02
---------
Balance, December 31, 1998............................ 170,000
Granted (weighted average minimum value of $0.42 per
share)............................................... 1,180,000 $0.04
Cancelled............................................. (30,000) $0.02
--------- -----
Balance, December 31, 1999............................ 1,320,000 $0.04
========= =====
</TABLE>

At December 31, 1999, 1,680,000 shares were available for future grants
under the plan.

Additional information regarding options outstanding as of December 31, 1999
is as follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Exercisable Price
-------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.02 310,000 9.08 $0.02 310,000 $0.02
0.04 1,010,000 9.80 0.04 1,010,000 0.04
--------- ---------
1,320,000 9.57 $0.04 1,320,000 0.04
========= =========
</TABLE>

During the year ended December 31, 1999, in connection with the grant of
certain stock options, the Company recorded deferred stock compensation of
$321,000, representing the difference between the exercise price of the options
and the estimated fair value of the Company's common stock on the date of
grant. Such amounts are being amortized over the vesting period of the related
options, generally 48 months.

Additional Stock Plan Information

The Company accounts for its stock-based awards using the intrinsic value
method in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and its related interpretations.

SFAS No. 123, "Accounting for Stock-Based Compensation," (SFAS 123) requires
the disclosure of pro forma net loss had the Company adopted the minimum value
method. Under SFAS 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including expected time to exercise, which greatly affects the
calculated values. The Company's calculations were made using the minimum value
method with the following weighted average assumptions: expected life, five
years; risk free interest rate, 5.5%; and no dividends during the expected
term.

F-30
<PAGE>

INFOWIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company's calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. If the computed fair values of the
stock option awards had been amortized to expense over the vesting period of
the awards, pro forma net loss would have been $287,000 and $1,195,000,
respectively for the period from April 15, 1998 (inception) to December 31,
1998 and the year ended December 31, 1999.

At December 31, 1999, the Company had reserved shares of common stock for
future issuance as follows:

<TABLE>
<S> <C>
Conversion of convertible preferred stock.......................... 5,871,799
Issuance under stock option plan................................... 3,000,000
---------
Total............................................................ 8,871,799
=========
</TABLE>

8. Income Taxes

No income tax benefit was recorded during the period from April 15, 1998
(inception) to December 31, 1998 and the year ended December 31, 1999 due to
the Company's net losses. At December 31, 1998 and 1999, the net deferred tax
assets generated by net operating loss carryforwards totaling approximately
$120,000 and $460,000, respectively, have been fully reserved due to the
uncertainty surrounding the realization of such benefits.

At December 31, 1999, the Company has net operating loss carryforwards of
approximately $1,400,000 available to offset future federal and state taxable
income.

Federal and California tax rules impose substantial restrictions on the
utilization of net operating loss carryforwards in the event of an "ownership
change," as defined by the Internal Revenue Code. Any such ownership change
could significantly limit the Company's ability to utilize its tax
carryforwards.

9. Subsequent Events

On January 15, 2000 the Company borrowed approximately $1,216,000 from a
related entity (See Note 4) to finance its working capital needs. The
borrowing carries interest at the rate of 5.74% and the principal and interest
are to be repaid on August 1, 2000. In the event that another stock issuance
occurs during the term of the borrowing, the related party has the right to
convert the obligation into common stock under terms and conditions as defined
in the secured note. The borrowing is secured by substantially all of the
Company's assets.

On March 9, 2000 the shareholders of the Company entered into an agreement
and plan of reorganization with Evolve Software, Inc. to acquire the Company
in a stock-for-stock transaction expected to be consummated in March 2000.

* * * * *

F-31
<PAGE>

EVOLVE SOFTWARE, INC.

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information for Evolve
Software, Inc, (the "Company") consists of the Unaudited Pro Forma Combined
Statements of Operations for the year ended June 30, 1999 and the six months
ended December 31, 1999 and the Unaudited Pro Forma Combined Balance Sheet as
of December 31, 1999. This pro forma financial information gives effect to
Evolve's acquisition of InfoWide, Inc. which is to be accounted for as a
purchase.

The definitive terms of the InfoWide acquisition were agreed to on March 9,
2000 and the acquisition is expected to be consummated by March 31, 2000. The
stockholders of InfoWide will receive 3.7 million shares of Evolve common
stock. The unaudited pro forma combined balance sheet gives effect to the
InfoWide acquisition as if it had occurred on December 31, 1999, by
consolidating the balance sheet of InfoWide with the balance sheet of Evolve at
December 31, 1999. The unaudited pro forma combined statements of operations
for the year ended June 30, 1999 and for the six months ended December 31, 1999
gives effect to the acquisition as if it had occurred on July 1, 1998 by
consolidating the results of operations of InfoWide with the results of
operations of Evolve.

The unaudited pro forma combined statement of operations is not necessarily
indicative of the operating results that would have been achieved had the
transactions been in effect as of the beginning of the periods presented and
should not be construed as being representative of future operating results.
The historical financial statements of the Company, and InfoWide are included
elsewhere in this Prospectus and the unaudited pro forma combined financial
information presented herein should be read in conjunction with those financial
statements and related notes.

F-32
<PAGE>

EVOLVE SOFTWARE, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET AT DECEMBER 31, 1999
(in thousands)

<TABLE>
<CAPTION>
Evolve Pro Forma
Software InfoWide Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents........ $ 17,505 $ 21 $ 17,526
Restricted cash.................. 2,000 2,000
Short term investments........... 2,264 2,264
Accounts receivable.............. 2,521 14 2,535
Prepaid expenses and other
current assets.................. 173 1 174
-------- ------- ------- --------
Total current assets........... 24,463 36 24,499
Property and equipment, net........ 930 148 1,078
Goodwill, purchased technology and
other intangible assets........... $30,400(A) 30,400
Deposits and other assets.......... 94 41 135
Note receivable from related
party............................. 100 100
Interest due on receivable from
stockholders...................... 205 205
-------- ------- ------- --------
Total assets................... $ 25,792 $ 225 $30,400 $ 56,417
======== ======= ======= ========

Liabilities and Stockholders'
Equity (Deficit)
Current liabilities:
Accounts payable................. $ 1,131 $ 1,131
Accrued liabilities.............. 2,050 $ 112 $ 150(B) 2,312
Note payable to related party.... 390 390
Capital lease obligations,
current portion................. 245 245
Deferred revenues, current
portion......................... 4,233 4,233
-------- ------- ------- --------
Total current liabilities...... 7,659 502 150 8,311
Capital lease obligations, less
current portion................... 143 143
Long term debt..................... 3,811 3,811
Deferred revenues, less current
portion........................... 1,202 1,202
-------- ------- ------- --------
Total liabilities.............. 12,815 502 150 13,467
-------- ------- ------- --------
Stockholders' equity (deficit)
Convertible preferred stock...... 905 1 (1)(B) 905
Common stock..................... 445 1 36(B) 482
Additional paid in capital....... 91,522 1,504 31,432(B) 124,458
Notes receivable from
stockholders.................... (4,499) (4,499)
Unearned stock-based charges..... (27,525) (303) 303(B) (27,525)
Accumulated deficit.............. (47,871) (1,480) (1,520) (50,871)
-------- ------- ------- --------
Total stockholders' equity
(deficit)..................... 12,977 (277) 30,250 42,950
-------- ------- ------- --------
Total liabilities and
stockholders' equity (deficit).. $ 25,792 $ 225 $30,400 $ 56,417
======== ======= ======= ========
</TABLE>

F-33
<PAGE>

EVOLVE SOFTWARE, INC.

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Six months ended December 31, 1999
----------------------------------------
Evolve Pro Forma
Software InfoWide Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues.............................. 2,087 26 -- 2,113
Cost of revenues...................... 1,366 36 -- 1,402
-------- ----- ------ --------
Gross margin (loss)................... 721 (10) -- 711
Operating expenses
Research and development............ 3,392 450 -- 3,842
Sales and marketing................. 4,880 141 -- 5,021
General and administrative.......... 1,657 102 -- 1,759
Stock based charges................. 3,872 18 -- 3,890
Amortization of purchased technology
and other intangibles.............. -- -- 5,066 5,066
-------- ----- ------ --------
Total operating expenses.......... 13,801 711 5,066 19,578
-------- ----- ------ --------
Loss from operations.................. (13,080) (721) (5,066) (18,867)
Interest income (expense), net........ 218 (4) -- 218
-------- ----- ------ --------
Net loss............................ $(12,862) $(725) (5,066) $(18,649)
======== ===== ====== ========
Net loss per share.................... (2.30)
--------
Shares used in net loss per share
calculation.......................... 8,115
--------
</TABLE>

<TABLE>
<CAPTION>
Year ended June 30, 1999
----------------------------------------
Evolve Pro Forma
Software InfoWide Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues.............................. 517 -- -- 517
Cost of revenues...................... 635 -- -- 635
-------- ----- ------- -------
Gross margin (loss)................... (118) -- -- (118)
Operating expenses
Research and development............ 5,057 474 -- 5,531
Sales and marketing................. 3,876 12 -- 3,888
General and administrative.......... 1,857 274 -- 2,131
Stock based charges................. 218 -- -- 218
Amortization of purchased technology
and other intangibles.............. -- -- 10,133 10,133
-------- ----- ------- -------
Total operating expenses.......... 11,008 760 10,133 21,901
-------- ----- ------- -------
Loss from operations.................. (11,126) (760) (10,133) (22,019)
Interest income (expense), net........ (345) 5 -- (340)
-------- ----- ------- -------
Net loss............................ $(11,471) $(755) (10,133) (22,359)
======== ===== ======= =======
Net loss per share.................... (3.26)
Shares used in net loss per share
calculation.......................... 6,849
</TABLE>

F-34
<PAGE>

EVOLVE SOFTWARE, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Note 1--Basis of Presentation: The pro forma combined financial information
gives effect to Evolve's acquisitions of InfoWide, which is expected to be
consummated March 31, 2000. The acquisition will be accounted for as a
purchase. InfoWide stockholders and option holders will receive an aggregate
total of 3.7 million shares of Evolve common stock. The pro forma combined
financial information has been prepared on the basis of assumptions described
in the following notes and include assumptions relating to the allocation of
the consideration paid for the assets and liabilities based on estimates of
their fair values. The Unaudited Pro Forma Combined Statement of Operations for
the year ended June 30, 1999 and the six months ended December 31, 1999 gives
effect to the acquisitions as if they had taken place on July 1, 1998. The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 1999 gives effect
to the InfoWide acquisition as if it had taken place on December 31, 1999. The
pro forma combined financial information is not necessarily indicative of what
the actual financial results would have been had the transactions taken place
on July 1, 1998 and do not purport to be indicative of the results of the
future operations.

Note 2--Purchase Price Allocation: The unaudited pro forma combined
information reflects a total purchase price for the InfoWide acquisition of
$33.2 million including the estimated value of the Evolve shares to be issued
upon the expected consummation of the InfoWide acquisition and estimated
transaction costs. The preliminary allocation of the purchase price using
balances as of December 31, 1999 is estimated below:

<TABLE>
<CAPTION>
$ '000
-------
<S> <C>
Net liabilities assumed............................................ $ (250)
In-process research and development................................ 3,000
Goodwill and purchased technology.................................. 28,400
Assembled workforce................................................ 1,000
Covenants not to compete........................................... 1,000
-------
$33,150
=======
</TABLE>

The amount allocated to the purchased in process research and development
has been determined initially based on management's expectations of the product
percentage of completion, the expected costs to develop the in process
technology into a commercially viable product and the resulting net cash flows
from the sale of the product. The amount allocated to in process research and
development and purchased technology is our preliminary estimate and will be
finalized based on an appraisal to be completed by an independent third party
using established valuation techniques.

Note 3--Unaudited Pro Forma Combined Net Loss Per Share: The net loss per
share and shares used in computing the net loss per share for the year ended
June 30, 1999 and the six months ended December 31, 1999 are based upon the
Evolve historical weighted average common shares outstanding together with the
shares issued in the transaction as if such shares were issued July 1, 1998.
Common stock issuable upon the conversion of convertible preferred stock and
exercise of Evolve stock options and warrants has been excluded as the effect
would be anti-dilutive.

Note 4--Purchase Adjustments: The following adjustments were applied to the
pro forma combined financial information: (A) To reflect amortization of the
goodwill, purchased technology and other intangibles related to the InfoWide
acquisition over the estimated useful lives of three years, as if the
acquisition occurred on July 1, 1998. (B) To reflect the issuance of shares in
the InfoWide acquisition and to record estimated transaction costs and other
assets and liabilities at their fair values. The amount allocated to in-process
research and development for the InfoWide acquisition has not been included in
the unaudited pro forma combined statement of operations as it is nonrecurring.
This amount will be expensed in the period the acquisition is consummated.

F-35
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Evolve Software, Inc. in
connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC registration fee................................................ $17,160
NASD filing fee..................................................... 7,000
Nasdaq Stock Market's National Market listing fee...................
Printing and engraving costs........................................
Legal fees and expenses.............................................
Accounting fees and expenses........................................
Blue Sky fees and expenses..........................................
Transfer Agent and Registrar fees...................................
Miscellaneous expenses..............................................
-------
Total............................................................. $
=======
</TABLE>

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.

Article Ninth of the registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.

Article 6 of the registrant's Amended and Restated Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of
the registrant if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.

The registrant has entered into indemnification agreements with its
directors, in addition to indemnification provided for in the registrant's
Amended and Restated Bylaws, and intends to enter into indemnification
agreements with any new directors in the future.

The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of the registrant and its executive officers and directors,
and by the registrant of the underwriters for some liabilities, including
liabilities arising under the Securities Act, in connection with matters
specifically provided in writing by the underwriters for inclusion in the
Registration Statement.

Item 15. Recent Sales of Unregistered Securities

Since July 1, 1996, we have issued unregistered securities to a limited
number of persons as described below (all share numbers and exercise prices in
this Item 15 have been adjusted for our one for three stock split to become
effective immediately prior to the effectiveness of this initial public
offering.

(a) On July 1, 1996, we sold an aggregate of 176,667 shares of our Series E
Preferred Stock for $6.00 per share to a group of private investors for
an aggregate purchase price of $1,060,000.

(b) From July 1, 1996 through March 15, 2000, we sold an aggregate of
3,608,743 shares of our common stock at exercise prices ranging from
$0.05 to $0.50 per share to employees, consultants, directors and other
service providers pursuant to our 1995 Stock Option Plan, as amended.

II-1
<PAGE>

(c) On February 5, 1997, we issued a warrant to purchase 10,000 shares of
our Series E Preferred Stock at an exercise price of $6.00 per share to
a commercial lender.

(d) On March 13, 1997 and April 10, 1997, we issued 8.5% senior
subordinated convertible promissory notes to various private investors
in the aggregate amount of $12,675,000. Except for $3,500,000 million,
which was restructured on December 15, 1998, as 8.5% nonconvertible
debt due within thirty days of the effectiveness of this initial public
offering, the principal (plus accrued interest of approximately
$1,689,000) on these notes were converted into 5,544,390 shares of
Series F Preferred Stock in conjunction with our Series G Preferred
Stock Financing on November 25, 1998.

(e) On March 13, 1997 and April 10, 1997, in conjunction with the issuance
of the 8.5% senior subordinated convertible promissory notes, we issued
warrants to purchase 443,700 shares of our common stock at the lesser
of $6.00 and the conversion price of the convertible debt financing.
These warrants were cancelled in conjunction with our Series G
Preferred Stock Financing on November 25, 1998.

(f) On April 10, 1997, we issued a warrant to Index Securities, S.A., a
private investor, to purchase $636,000 of conversion stock. On November
25, 1998, the warrant was reissued to Index Securities, S.A. in
conjunction with our sale of Series G Preferred Stock, as a warrant to
purchase 322,277 shares of our Series F Preferred Stock at an exercise
price of $1.97 per share, for an aggregate purchase of $636,000.

(g) On October 16, 1998, we issued a $1,000,000 convertible promissory note
to Sierra Ventures VI, L.P. in consideration for a $1,000,000 loan. On
November 25, 1998 this note was converted into 933,333 shares of Series
G Preferred Stock in conjunction with our Series G Preferred Stock
Financing.

(h) On November 25, 1998, and December 15, 1998, we sold an aggregate of
8,400,000 shares of our Series G Preferred Stock for $1.07 per share to
Sierra Ventures VI, and certain of its affiliates, for an aggregate
purchase price of $9,000,000. On November 25, 1998, in conjunction with
our Series G Preferred Stock Financing, we issued warrants to Sierra
Ventures VI, L.P. and various private investors to purchase 2,333,333
shares of our Series G Preferred Stock for $2.14 per share, for an
aggregate purchase price of $5,000,000.

(i) On December 15, 1998, we issued a warrant to purchase up to 133,333
shares of our common stock at an exercise price of $6.00 per share.

(j) On September 14, 1999, we issued a warrant to an investor to purchase
466,667 shares of our common stock for $1.07 per share for an aggregate
purchase price of $500,000.

(k) On September 28, 1999, and December 3, 1999, we sold an aggregate of
11,904,763 shares of our Series H Preferred Stock for $2.10 per share
to a group of private investors for an aggregate purchase price of
$25,000,002.

For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of prospectus included herein.

The sales of the above securities were deemed to be exempt from registration
in reliance on Rule 701 promulgated under Section 3(b) under the Securities Act
as transactions pursuant to a compensatory benefit plan or a written contract
relating to compensation, or in reliance on Section 4(2) of the Securities Act
or Regulation D promulgated thereunder as transactions by an issuer not
involving any public offering. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about Evolve or had access, through
employment or other relationships, to such information.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
1.1* Form of Underwriting Agreement

3.1+ Amended and Restated Certificate of Incorporation of the Registrant

3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be adopted upon completion of this offering

3.3* Bylaws of the Registrant

4.1* Form of stock certificates

5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation

10.1+ Form of Indemnification Agreement between the Registrant and each of
its directors

10.2* Paradigm Technologies License Agreement

10.3 Office Building Lease, 615 Battery Street, San Francisco, CA.

10.4 Office Building Lease, 1400 65th Street, Emeryville, CA.

10.5 1995 Stock Option Plan, as amended

10.6+ 2000 Stock Plan

10.7+ 2000 Employee Stock Purchase Plan

10.8+ Employment Offer Letter for John P. Bantleman

10.9+ Employment Offer Letter for James J. Bozzini

10.10+ Employment Offer Letter for Marc C. Ferrie

10.11+ Employment Offer Letter for Mark L. Davis

10.12+ Employment Offer Letter for Kurt M. Heikkinen

10.13+ Employment Offer Letter for Jeff A. McClure

10.14+ Employment Offer Letter for Anil K. Gupta

23.1 Consent of PricewaterhouseCoopers, LLP, Independent Accountants

23.2 Consent of Deloitte & Touche, LLP, Independent Accountants

23.3* Consent of Counsel (see Exhibit 5.1)

24.1 Power of Attorney (see page II-6)

27.01 Financial Data Schedule

</TABLE>

- --------
* To be filed by amendment.

+ Previously filed.

(b)Financial Statement Schedules

No financial statement schedules have been included because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

II-3
<PAGE>

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Francisco, State of California, on the 21st day of March, 2000.

Evolve Software, Inc.

By /s/ John P. Bantleman
-----------------------------------
John P. Bantleman,
President and Chief Executive
Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<C> <S> <C>
/s/ John P. Bantleman* President and Chief March 21, 2000
____________________________________ Executive Officer
John P. Bantleman (Principal Executive
Officer)

/s/ J. Russell DeLeon Vice President, Finance March 21, 2000
____________________________________ and Administration,
J. Russell DeLeon General Counsel,
Secretary, Treasurer
(Principal Financial
and Accounting
Officer)

/s/ Jeffrey M. Drazan* Director March 21, 2000
____________________________________
Jeffrey M. Drazan

/s/ Judith H. Hamilton* Director March 21, 2000
____________________________________
Judith H. Hamilton

/s/ John R. Oltman* Director, Chairman of March 21, 2000
____________________________________ the Board
John R. Oltman

*By: /s/ J. Russell DeLeon March 21, 2000
____________________________________
Attorney-in-Fact
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
1.1* Form of Underwriting Agreement

3.1+ Amended and Restated Certificate of Incorporation of the Registrant

3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be adopted upon completion of this offering

3.3* Bylaws of the Registrant

4.1* Form of stock certificates

5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation

10.1+ Form of Indemnification Agreement between the Registrant and each of
its directors

10.2* Paradigm Technologies License Agreement

10.3 Office Building Lease, 615 Battery Street, San Francisco, CA.

10.4 Office Building Lease, 1400 65th Street, Emeryville, CA.

10.5 1995 Stock Option Plan, as amended, and form of agreements thereunder

10.6+ 2000 Stock Plan

10.7+ 2000 Employee Stock Purchase Plan

10.8+ Employment Offer Letter for John P. Bantleman

10.9+ Employment Offer Letter for James J. Bozzini

10.10+ Employment Offer Letter for Marc C. Ferrie

10.11+ Employment Offer Letter for Mark L. Davis

10.12+ Employment Offer Letter for Kurt M. Heikkinen

10.13+ Employment Offer Letter for Jeff A. McClure

10.14+ Employment Offer Letter for Anil K. Gupta

23.1 Consent of PricewaterhouseCoopers, LLP, Independent Accountants

23.2 Consent of Deloitte & Touche, LLP, Independent Accountants

23.3* Consent of Counsel (see Exhibit 5.1)

24.1 Power of Attorney (see page II-5)

27.01 Financial Data Schedule

</TABLE>
- --------
* To be filed by amendment.

+ Previously filed

<PAGE>

EXHIBIT 3.2

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

EVOLVE SOFTWARE, INC.

Evolve Software, Inc., a corporation organized and existing under the laws of
the State of Delaware, does hereby certify:

1. The name of the corporation is Evolve Software, Inc. The corporation
was originally incorporated under the name "Cortez Software International, Inc."
The original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on February 24, 1995.

2. Pursuant to Sections 242 and 228 of the General Corporation Law of the
State of Delaware, the amendments and restatement herein set forth have been
duly approved by the Board of Directors and stockholders of Evolve Software,
Inc., Inc.

3. Pursuant to Section 245 of the General Corporation Law of the State of
Delaware, this Amended and Restated Certificate of Incorporation restates and
integrates and amends the provisions of the Certificate of Incorporation of this
corporation.

4. The text of the Restated Certificate of Incorporation as is hereby
restated and amended to read in its entirety as follows:

FIRST

The name of the Corporation is Evolve Software, Inc., Inc. (the
"Corporation").

SECOND

The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805. The name of its registered
agent at such address is The Prentice-Hall Corporation System, Inc. in New
Castle County.

THIRD

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
<PAGE>

FOURTH

A. The total number of shares which the Corporation shall have authority
to issue is 130,000,000 shares of capital stock. Upon the filing of this Amended
and Restated Articles of Incorporation (the "Filing Date"), each outstanding
three (3) shares of Common Stock shall be combined into one (1) share of Common
Stock.

B. Of such authorized shares, one-hundred and twenty million (120,000,000)
shares shall be designated "Common Stock", and have a par value of $.001.

C. Of such authorized shares, ten million (10,000,000) shares shall be
designated "Preferred Stock", and have a par value of $.001. The Preferred
Stock may be issued from time to time in one or more series. The Board of
Directors of the Corporation is authorized to determine or alter the powers,
preferences and rights and the qualifications, limitations or restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock, and
within the limitations or restrictions stated in any resolution or resolutions
of the Board of Directors originally fixing the number of shares constituting
any series, to increase or decrease (but not below the number of shares of any
such series then outstanding) the number of shares of any such series subsequent
to the issuance of shares of that series, to determine the designation of any
series, and to fix the number of shares of any series. In case the number of
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

FIFTH

The Corporation is to have perpetual existence.

SIXTH

Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins.

SEVENTH

The number of directors which constitute the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.

EIGHTH

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
<PAGE>

NINTH

To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.

Neither any amendment nor repeal of this Article, nor the adoption of any
provision of this Restated Certificate of Incorporation inconsistent with this
Article, shall eliminate or reduce the effect of this Article in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.

TENTH

Section 1. At each annual meeting of stockholders, directors of the
Corporation shall be elected to hold office until the expiration of the term for
which they are elected, and until their successors have been duly elected and
qualified; except that if any such election shall be not so held, such election
shall take place at stockholders' meeting called and held in accordance with the
Delaware General Corporation Law. The directors of the Corporation shall be
divided into three classes as nearly equal in size as is practicable, hereby
designed Class I, Class II and Class III. The term of office of the initial
Class I directors shall expire at the next succeeding annual meeting of
stockholders, the term of office of the initial Class II directors shall expire
at the second succeeding annual meeting of stockholders and the term of office
of the initial Class III directors shall expire at the third succeeding annual
meeting of the stockholders. For the purposes hereof, the initial Class I,
Class II and Class III directors shall be those directors so designated by the
incorporator. At each annual meeting of stockholders, directors to replace
those of a Class whose terms expire at such annual meeting shall be elected to
hold office until the third succeeding annual meeting and until their respective
successors shall have been duly elected and qualified. If the number of
directors is hereafter changed, any newly created directorships or decrease in
directorships shall be so apportioned among the classes as to make all classes
as nearly equal in number as if practicable.

Section 2. The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of the
Corporation.

Section 3. Vacancies occurring on the Board of Directors for any reason
may be filled by vote of a majority of the remaining members of the Board of
Directors, although less than a quorum, at any meeting of the Board of
Directors. A person so elected by the Board of Directors to fill a vacancy
shall hold office until the next succeeding annual meeting of stockholders of
the Corporation and until his or her successor shall have been duly elected and
qualified.

ELEVENTH

Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the
<PAGE>

statutes) outside of the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation.

TWELFTH

The stockholders of the Corporation may not take action by written consent
in lieu of a meeting but must take any actions at a duly called annual or
special meeting.

THIRTEENTH

Notwithstanding any other provisions of this Restated Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of the
capital stock required by law or this Restated Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds (2/3) of the combined
voting power of all of the then outstanding shares of the Corporation entitled
to vote shall be required to alter, amend or repeal Articles TENTH, TWELFTH or
THIRTEENTH or any provision thereof, unless such amendment shall be approved by
a majority of the directors of the Corporation not affiliated or associated with
any person or entity holding (or which has announced an intention to obtain) 20%
or more of the voting power of the Corporation's outstanding capital stock.

FOURTEENTH

The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

[Signature Page to follow]
<PAGE>

IN WITNESS WHEREOF, Evolve Software, Inc., Inc., has caused this Amended
and Restated Certificate of Incorporation to be executed by John Bantleman, its
President and Chief Executive Officer attested by J. Russell DeLeon, its
Secretary, this ___ day of March, 2000.

EVOLVE SOFTWARE, INC.

______________________________
John Bantleman, President

ATTEST

____________________________
J. Russell DeLeon, Secretary

<PAGE>

EXHIBIT 10.3

OFFICE LEASE

BETWEEN

PROSPECT FARMS,
a California limited partnership ("LESSOR")

AND

CORTEZ SOFTWARE INTERNATIONAL, INC.
a Delaware corporation ("LESSEE")
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
----
<S> <C>
1. Description of Demised Premises...................................... 1

2. Term of Lease........................................................ 1

3. Rent................................................................. 2
A. Base Monthly Rental.......................................... 2
B. Lessee's Share of Property Taxes............................. 3
C. Lessee's Share of Operating Expenses......................... 4
D. Late Charge.................................................. 5
E. Security Deposit............................................. 5
4. Use of Premises...................................................... 6

5. Alterations, Mechanics' Liens........................................ 6

6. Waste, Nuisance...................................................... 7

7. Compliance with Law.................................................. 7

8. Insurance Hazards.................................................... 7

9. Indemnification, Insurance........................................... 8

10. Signs................................................................ 9

11. Utilities............................................................ 9

12. Personal Property Taxes.............................................. 9

13. Work to be Performed by Lessor Prior to Commencement of Term......... 9

14. Restoration of the Premises.......................................... 10

15. Repairs and Maintenance by Lessor.................................... 10

16. Repairs and Maintenance by Lessee.................................... 10

17. Entry by Lessor...................................................... 10
</TABLE>
-i-
<PAGE>

18. Estoppel Certificates................................................ 11

19. Removal of Trade Fixtures of Lessee at End of Term................... 11

20. Surrender of Lease................................................... 11

21. Holding Over......................................................... 11

22. Grace Period......................................................... 11

23. Remedies of Lessor Upon Default...................................... 12

24. Attorneys' Fees on Default........................................... 13

25. Insolvency........................................................... 14

26. Assignment or Subletting............................................. 14

27. Transfer by Lessor - Release From Liability.......................... 15

28. Damage to or Destruction of Premises................................. 16

29. Condemnation......................................................... 16

30. Subordination........................................................ 18

31. Effect of Exercise of or Failure to Exercise Privilege by a Party.... 19

32. Waiver............................................................... 19

33. Notices.............................................................. 19

34. Representations...................................................... 20

35. Captions............................................................. 20

36. Successors and Assigns............................................... 20

37. California Law....................................................... 20

38. Severability......................................................... 20
</TABLE>

-ii-
<PAGE>

39. Authority............................................................ 20

40. Tenant Improvement Work.............................................. 20

41. Right of First Negotiation........................................... 21

42. Quiet Enjoyment...................................................... 21

43. Common Areas......................................................... 21

44. Hazardous Materials.................................................. 21
</TABLE>

-iii-
<PAGE>

615 BATTERY STREET
OFFICE LEASE
------------

THIS LEASE is executed in San Francisco, California, as of September
1, 1995, between PROSPECT FARMS, a California limited partnership ("Lessor") and
CORTEZ SOFTWARE INTERNATIONAL, Inc., a Delaware corporation ("Lessee").

IT IS AGREED between the parties hereto as follows:

1. Description of Demised Premises. Lessor hereby leases to Lessee, and
--------------------------------
Lessee hires from Lessor, under the terms and conditions hereinafter set forth,
the Second, Third and Fourth floors of the building located at 615 Battery
Street, San Francisco, California, consisting of approximately 24,975 rentable
square feet, and more particularly shown on Exhibit A, attached hereto ("demised
premises" or "premises"). Any square footage stated above is approximate only
and in the event the actual square footage shall be greater or less than the
amounts stated, no rental or other adjustments shall be made between the
parties.

2. Term of Lease. With regard to the premises leased on the Third
--------------
and Fourth floor, the term of this lease shall commence upon the substantial
completion by Lessor of the tenant improvements it is constructing therein, as
described in paragraph 40 hereof. With regard to the premises leased on the
Second floor, the term of this lease shall commence on the later of (a) January
1, 1996 or (b) the substantial completion by Lessor of the tenant improvements
it is constructing therein; provided, however, in the event Lessee accepts
possession thereof prior thereto, the commencement date shall occur on the date
possession is accepted. Said lease shall terminate on the day before the 60th
month anniversary of the Second floor commencement date.

Lessee shall promptly respond to any Lessor request and/or requirement
consistent with paragraph 40 hereof so that the tenant improvements Lessor is
constructing may be constructed with a target date of November 6, 1995 for the
Fourth floor, December 1, 1995 for the Third floor, and January 1, 1996 for the
Second floor.

In the event the commencement date for the Third and Fourth floors has
not occurred on or before February 1, 1996, for reasons not attributable to
Lessee, or the commencement date for the Second floor has not occurred on or
before April 1, 1996, for reasons not attributable to Lessee, the date Lessee is
otherwise obligated to commence payment of base monthly rental shall be delayed
by one half of one day for each day that the term commencement date is delayed
beyond March 1, 1996 with respect to the Third and Fourth floors and April 1,
1996 with respect to the Second

-1-
<PAGE>

floor. In addition, in the event the commencement date for the Third and Fourth
floors has not occurred on or before June 1, 1996, for reasons not attributable
to Lessee, or the commencement date for the Second floor has not occurred on or
before August 1, 1996, for reasons not attributable to Lessee, Lessee may elect
to terminate this lease with respect to the portion of the premises for which
the term has not commenced and, in such event, Lessee shall be refunded any
payments made with respect thereto.

As used herein, "substantial completion" shall mean (i) Lessor has
substantially completed the tenant improvements in accordance with Paragraph 40
of this lease, (ii) Lessor has delivered legal possession of the premises to
Lessee, and (iii) Lessor has obtained all approvals and permits from the
appropriate governmental authorities required for the legal occupancy of the
premises.

So long as such access does not interfere with or delay Lessor's
construction of the tenant improvements it is obligated to construct hereunder,
Lessee shall have reasonable rights of access to the premises prior to the
commencement date for the purpose of installing its equipment, data,
telecommunications systems and trade fixtures. Such access shall be subject to
all the terms and conditions of this lease except for the obligation to pay
rent.

3. Rent.
-----

A. Base Monthly Rental. Throughout the term of the lease, Lessee
--------------------
agrees to pay to Lessor, without deduction or offset, at such place or places as
may be designated from time to time by Lessor, the following base monthly rental
for the premises:

Second Floor: $11,793.75 per month
Third Floor: $12,140.63 per month
Fourth Floor: $11,446.88 per month

Said base rental shall be payable in monthly installments, in advance on the
first day of each and every month. All base monthly rental and other payments
due hereunder shall be equitably prorated to reflect the actual commencement
date and termination date of the lease term.

Upon Lessee's execution of this lease, Lessee shall deliver to Lessor
the sum of $23,587.51 as advance payment of base monthly rental, to be applied
against the first month's rent due hereunder for the Third and Fourth floors.
Sixty (60) days after Lessee's execution of this lease, Lessee shall deliver to
Lessor the additional sum of $11,793.75, as advance payment of base monthly
rental, to be applied against the first month's rent due hereunder for the
Second floor.

-2-
<PAGE>

B. Lessee's Share of Property Taxes. Lessee shall pay to Lessor, as
--------------------------------
additional rent, 50% of any increase over the real property taxes levied for the
1995-1996 tax year against the real property and improvements of which the
premises are a part, (Assessor's Block #174, Lot #4) which payment, if any,
shall be pro-rated on a monthly basis for any partial lease year following the
1995-1996 tax year. Payment of additional rental under this paragraph shall be
made in two equal installments, on the first day of November and the first day
of March of each year following the 1995-1996 tax year.

In addition thereto, if during the term of this lease an assessment,
whether general or special, is levied against the aforesaid real property and
improvements of which the premises are a part, then Lessee shall pay as
additional rental, a proportionate share of any increase over the assessments
levied against the aforesaid real property and improvements in the 1995-1996 tax
year. The proportionate share of such assessment payable by Lessee (whether
Lessor elects to make payment in annual installments or in a lump sum) shall be
50% ("Lessee's share" or "its share"). Lessee shall pay one-twelfth (1/12) of
its share of such assessment on the first day of each and every month of the
term of this lease, commencing with the month in which the first installment of
such assessment is due and payable (or would have become due and payable if
Lessor elected to pay such assessment in a lump sum).

The parties recognize that during the term of this lease or any
extension thereof the present real property tax may be wholly or partly replaced
or supplemented by another form of tax. In such event, Lessee shall further pay
its share (of any increase over the real property taxes levied for the 1995-1996
tax year) of any such tax, levy or assessment (other than federal, state or city
and county net income taxes or estate, gift or other similar taxes) which, now
or in the future and whether or not now customary or within the contemplation of
the parties hereto, may be charged to Lessor and is: (i) levied upon, allocable
to, or measured by the rental payable hereunder; (ii) levied upon or with
respect to the possession, leasing, operation, management or occupancy by Lessee
of the premises or any portion thereof; or (iii) levied upon or measured by the
value of Lessee's personal property or leasehold improvements.

Notwithstanding the foregoing, Lessee shall not be required to pay any
portion of any tax or assessment expense (i) in excess of the amount which would
be payable if such tax or assessment expense were paid in installments over the
longest possible term; (ii) imposed on land and improvements other than on or
related to the assessor's parcel described above; (iii) attributable to
inheritance transfer, franchise or state taxes; (iv) occasioned by or relating
to a voluntary or involuntary change of ownership or other conveyance of the
premises or (v) attributable to

-3-
<PAGE>

improvements or alterations by Lessor or other tenants in the building that are
not usable by or beneficial to Lessee; it being understood and agreed, however,
that Lessee shall pay for any tax or assessment expense solely attributable to
improvements or alterations made to the demised premises.

C. Lessee's Share of Operating Expenses. During the entire term
-------------------------------------
hereof, Lessee shall pay to Lessor, as additional rent, 60% of any increase in
the cost of operating and maintaining the building of which the premises are a
part over the costs incurred for the calendar year 1996; including the following
costs by way of illustration: water and sewer charges, insurance premiums,
utilities (other than individually metered utilities), janitorial services,
labor, air conditioning and heating maintenance, supplies, materials, equipment,
tools, maintenance costs and upkeep of common areas. Payment of the additional
rental under this paragraph shall be made in monthly installments on the same
day that base monthly rental is due hereunder, based upon Lessor's reasonable
estimate of Lessee's share of any increase in such operating expenses over the
costs incurred for the calendar year 1996. Lessor shall deliver to Lessee,
within 120 days after the expiration of each calendar year, a detailed statement
showing the actual operating expenses incurred during the preceding calendar
year. If Lessee's payments during such preceding calendar year exceed Lessee's
share as indicated on such statement, Lessor shall refund the amount of such
overage within thirty (30) days after Lessor's delivery of the statement to
Lessee. If Lessee's payments during such preceding calendar year were less than
Lessee's share as indicated on such statement, Lessee shall pay to Lessor the
amount of the deficiency within thirty (30) days after Lessor's delivery of the
statement to Lessee. Within thirty (30) days after receipt by Lessee of Lessor's
statement of operating expenses, Lessee shall have the right to inspect the
books of Lessor for the purpose of verifying the information contained in the
statement. Operating expenses shall be adjusted to reflect a 95% occupancy of
the building of which the premises are a part during any periods in which the
building is not at least 95% occupied.

Notwithstanding anything in this lease to the contrary, in no event
shall any portion of the following be included as operating expenses: property
taxes, costs of tenant improvements, real estate brokers commissions, costs
occasioned by fire or other casualty, or by the exercise of the power of eminent
domain, costs which could properly be capitalized under generally accepted
accounting principles to the extent that Lessee's share of the total cost of
such capital item exceeds the annual amortized cost of the item based on its
useful life determined in accordance with generally accepted accounting
principles, costs for which Lessor has a right of reimbursement from others,
costs which Lessee pays directly to a third person, costs incurred in connection
with negotiations or disputes with other occupants of the building, interest
charges and fees incurred on debt payments on mortgages, rent under ground
leases, costs occasioned by the act, omission or violation of law by Lessor, any
other occupant of the building, or their respective agents, employees or

-4-
<PAGE>

contractors, costs to correct any construction defect in the premises or the
building, costs for insurance in excess of Lessor's current coverage unless such
costs are required by law, necessitated by reason of increased replacement
costs, or necessitated solely because of Lessee's particular use of the
premises, increases in insurance costs caused by the activities of other
occupants of the building, insurance deductible and/or co-insurance payments,
costs arising from the violation by Lessor or any occupant of the building
(other than Lessee) of the terms and conditions of any lease or other agreement,
depreciation, amortization or other expense reserves, costs incurred in
connection with presence of any hazardous materials (except to the extent the
cost is caused by the release or emission or the hazardous materials in question
by Lessee in violation of law), any fee, profit or compensation retained by
Lessor or its affiliates for the management of the building in excess of the
management currently charged by Lessor or otherwise usual and customary.

D. Late Charge. In the event base monthly rent is not paid within
-----------
five (5) days of the applicable due date, and other sums due hereunder are not
paid within the time period specified hereunder or five (5) days after the date
Lessee receives an invoice therefor, whichever date occurs later, Lessee shall
pay to Lessor a late fee equal to 5% of the amount due. In addition, Lessee
shall pay interest on any such amounts, with interest accruing from the date due
to the date paid, at 10% per annum.

E. Security Deposit. Lessee shall pay to Lessor upon the execution of
----------------
this lease as security for the faithful performance by Lessee of all of the
terms and conditions of this lease to be kept and performed by Lessee during the
term hereof a sum equal to two months Base Monthly Rental. Said sum shall be
held by Lessor and is herein called the "security deposit". Unless specifically
required by law, such security deposit shall not be considered to be held in
trust and Lessor shall not be required to segregate the security deposit or to
pay interest or any other return on the security deposit Lessor shall have the
fight {but no obligation so to do) at any time or times to apply the security
deposit, or any portion thereof, to any rent, additional rent, or other
obligation of Lessee hereunder. If Lessor elects to make such application,
Lessor shall notify Lessee in writing of the nature and amount thereof and
Lessee shall thereupon be obligated to deposit with Lessor an amount sufficient
to return the security deposit to an amount equal to the full amount specified
in the first sentence of this paragraph. If Lessee fails to do so within five
(5) days after Lessor has given such notice, Lessor at its option may resort to
any or all remedies available to it for nonpayment of rent. Following the
termination of the term of this lease, or, if Lessee has held over beyond such
termination, following the end of any period Lessee has so held over, provided
Lessee has vacated the premises, Lessor shall return said security deposit to
Lessee, after deducting any amounts therefrom necessary to cure any defaults by
Lessee; provided, however, any such return shall not be construed as an
admission by Lessor that Lessee has performed all of its obligations hereunder.

-5-
<PAGE>

Notwithstanding the foregoing, but provided Lessee has paid its rent
and other sums due under this lease in a prompt and timely manner and further
provided Lessee is not otherwise in default under the terms and conditions of
this lease, Lessor shall refund to Lessee one-half of the security deposit at
the end of the thirtieth month after the Second floor commencement date.

4. Use of Premises. The demised premises are leased to Lessee for the
---------------
following purpose or purposes:

General office purposes, including, without limitation, development,
sales, management, administration, and other legal related uses.

Lessee shall not use, or permit said premises or any part thereof, to
be used for any purpose or purposes other than the purpose or purposes for which
the said premises are hereby leased.

5. Alterations, Mechanics' Liens. Lessee shall not make any alterations
-----------------------------
to the demised premises, or any part thereof (excepting normal office
decorations and the installation or removal of Lessee's trade fixtures,
furniture, equipment and other personal property), without the written consent
of Lessor first being had and obtained. In addition, in no event shall Lessee
make any alterations to the demised premises, or any part thereof, which
alterations would necessitate expenditures or work by Lessor, or which would
require Lessor to bring the demised premises or other portions of the building
in which the demised premises are located into compliance with any governmental
codes, laws, rules, regulations or ordinances.

Any additions to, or alterations of, the demised premises, except
furniture, trade fixtures, equipment and other personal property, shall become
at once a part of the realty and belong to Lessor. Lessee shall keep the demised
premises and the property in which the demised premises are situated free from
any liens arising out of any work performed, material furnished, or obligations
incurred by Lessee. Lessee agrees that if it shall make any alterations or
additions to the demised premises, it will not take such action until five (5)
days after the giving of Lessor notice and/or after receipt by it of the written
consent of Lessor, if required by this paragraph, in order that Lessor may post
appropriate notices to avoid any possible liability with respect to mechanics'
liens or other such claims. Lessee shall at all times permit such notices to be
posted and to remain posted until the completion and acceptance of such work.

Lessee's trade fixture, furniture, equipment and other personal
property installed in the premises ("Lessee's property") shall at all times be
and remain Lessee's property. Except for items which cannot be removed without
structural injury to the

-6-
<PAGE>

premises, at any time Lessee may remove Lessee's property from the premises,
provided that Lessee repairs all damage caused by such removal. Lessor shall
have no lien or other interest whatsoever in any item of Lessee's property.

Upon request, Lessor shall advise Lessee in writing whether it
reserves the right to require Lessee to remove any alterations from the premises
upon the termination of this lease.

Subject to Lessor's review and approval of all plans therefor, Lessor
hereby consents to the installation by Lessee of its network and communications
cabling and its security system.

6. Waste, Nuisance. Lessee shall not commit any waste upon the demised
----------------
premises, or any nuisance (public or private) or other act or thing of any kind
whatsoever, which may disturb the quiet enjoyment or cause unreasonable
annoyance of any other tenant in the building in which the demised premises may
be located.

7. Compliance with Law. Except as otherwise set forth in Paragraph 40
---------------------
hereof with respect to the initial buildout of the premises, Lessee shall, at
its sole cost and expense, comply with all requirements of all municipal, state,
and federal authorities now in force, or which may hereafter be in force,
pertaining to the demised premises, and/or to Lessee's use or alteration
thereof. Lessee shall additionally be responsible for complying with such rules,
regulations, and requirements affecting areas outside of the demised premises to
the extent such compliance is caused by or results from Lessee's particular use
or alteration of its premises. However, notwithstanding the foregoing, Lessee
shall not be required to construct or to pay the cost of complying with any
covenants, conditions, restrictions and encumbrances ("CC&R's), any underwriter
or insurance organization requirements, or any laws requiring construction of
improvements in the premises which are properly capitalized under generally
accepted accounting principles, unless such compliance is necessitated solely
because of Lessee's particular use of or alteration to the premises.

8. Insurance Hazards. Lessee shall promptly reimburse Lessor for any
------------------
increase in the existing rate of insurance upon the building in which the
demised premises may be located by reason of Lessee's particular use of the
premises. Lessee shall not sell, or permit to be kept, used, or sold, in or
about the premises, any article which may be prohibited by Lessor's fire
insurance policies. Lessee shall, at Lessee's sole cost and expense, comply with
any and all requirements, pertaining to the demised premises, of any insurance
organization or company, and necessary for the maintenance of fire and public
liability insurance, covering said building and appurtenances.

-7-
<PAGE>

9. Indemnification, Insurance.
---------------------------

A. Lessee hereby waives any and all claims against Lessor for damages
by reason of any personal injury or property damage to any person or persons
whomsoever (including Lessee, Lessee's agents and servants, employees, or third
persons) in or about the demised premises, the buildings of which the demised
premises are a part, and the sidewalks and other areas appurtenant thereto.
Lessee further expressly agrees to indemnify, defend and hold Lessor harmless
from and against any claims, demands, obligations, liabilities, causes of
action, expenses (including attorneys' fees) occasioned by or connected, in any
way whatsoever, with the condition, use or misuse of the demised premises, the
building of which the demised premises are a part and the areas appurtenant
thereto, which is occasioned by any negligent or intentional act or omission of
Lessee and Lessee's agents, servants, employees, and invitees.

B. Lessee further agrees, at Lessee's sole cost and expense,
forthwith upon the execution hereof to procure and keep in effect during the
entire term hereof a policy or policies of commercial general liability
insurance, insuring Lessee from legal liability for personal injury, death or
damage to person or damage to property, however arising, with a combined single
limit of not less than Two Million Dollars ($2,000,000.00) as to any one
occurrence, which policy or policies shall include Lessor as an additional
insured. Lessee further shall require the company issuing such policy to notify
Lessor in writing prior to any cancellation thereof. In the event Lessee fails
to keep such insurance in full force and effect, Lessor may pay the necessary
premiums therefor and the repayment thereof shall be deemed to be a part of the
rental due hereunder payable as such on the next date upon which rental becomes
due. The procuring of insurance within the minimum limits herein set forth shall
not be deemed satisfaction of Lessee's obligations under Paragraph 9(A) hereof
and the indemnities therein contained shall extend to the full amount of any
claim or liability to which the indemnity relates.

C. As long as both of their respective insurers so permit, Lessor and
Lessee hereby mutually waive their respective rights of recovery against each
other for any damages and losses insured by fire, extended coverage and other
property insurance policies existing for the benefit of the respective parties.
Each party shall obtain any special endorsements, if required by its insurer, to
evidence compliance with the aforementioned waiver.

D. Lessor shall maintain throughout the term of this lease a standard
form policy of "all risk, extended coverage" casualty insurance of the type and
in an amount equal to the type currently carried on the building.

-8-
<PAGE>

10. Signs. Lessee shall have the right to place and maintain neat and
------
appropriate signs of the name of Lessee's business at the entrance of the
demised premises, provided Lessor consents in writing to the shape, size, color
and location thereof. Lessor agrees to act reasonably in giving consent to the
maintenance of a sign, appropriate to and identifying Lessee's business, and to
permit Lessee to replace said sign from time to time. Lessee, upon request of
Lessor, shall immediately remove any sign or decoration which Lessee has placed
or permitted to be placed upon the exterior of the premises or upon the windows
facing any street upon which the premises abut without the consent of Lessor and
which, in the opinion of Lessor, is inappropriate or objectionable and, if
Lessee fails so to do, Lessor, in addition to any rights it may have hereunder,
may enter upon the premises and remove such sign without liability whatsoever.
Lessor expressly reserves the exclusive right to the use of the exterior side
walls, rear walls, and roof of the demised premises and Lessee shall not be
permitted to place any sign or advertisement thereon or any other matter or
property without the written consent of Lessor.

11. Utilities. Throughout the lease term, Lessor shall provide light,
----------
power and water to the demised premises to the extent that Lessee's demand
therefor is not in excess of normal usage for general office space. Lessor shall
also provide standard building janitorial service (including normal trash
removal) to the premises five days a week (through Able Building Maintenance Co.
or another reputable janitorial company), excluding normal holidays, and
heating, air conditioning and ventilating service to the premises Monday through
Friday, excluding customary holidays, during the hours of 7:00 a.m. to 7:00 p.m.
In addition, Lessor shall provide Lessee with access to the premises twenty-four
hours a day, seven days a week. Lessee shall reimburse Lessor for the increased
costs of such utilities and services pursuant to paragraph 3.C. hereof. After-
hours HVAC and other utilities shall be supplied at Lessee's request, at
Lessor's actual cost thereof, as established and adjusted by Lessor from time to
time.

12. Personal Property Taxes. All property taxes assessed by any
------------------------
governmental body upon the property of Lessee including equipment, fixtures and
leasehold improvements made by Lessee, shall be paid by Lessee, and, should
those taxes be applied in any manner do the real property taxes, Lessee, upon
demand, will pay those property taxes to Lessor who in turn will pay them to the
proper tax collector.

13. Work to be Performed by Lessor Prior to Commencement of Term. Except
--------------------------------------------------------------
for constructing the tenant improvements described in Paragraph 40 of this
lease, Lessor shall not be required to perform any work upon the demised
premises of any type or nature prior to the commencement of the term.

-9-
<PAGE>

14. Restoration of the Premises. Lessee agrees that prior to the
---------------------------
expiration of the lease term, or upon the earlier termination of the lease, or
upon Lessee's abandonment of the leased premises, whichever occurs first, Lessee
will leave the premises in their condition as of the date possession thereof was
originally delivered to Lessee, reasonable wear and tear excepted, and if Lessee
made any alterations or improvements to the premises, with or without Lessor's
consent as required by the terms of this lease, Lessee will in all cases restore
the premises to their original condition as of the inception of the lease term
unless the Lessor has expressly agreed, in writing, that a particular alteration
or improvement need not be removed.

15. Repairs and Maintenance by Lessor. Lessor shall at Lessor's sole cost
----------------------------------
and expense, subject to reimbursement pursuant to paragraph 3.C. of this lease,
maintain in good condition and repair the roof, sidewalls, foundation, window
frames and windows, the common areas used by Lessee and other tenants of the
building containing the demised premises, the building elevator, the HVAC system
serving the demised premises, and all plumbing and electrical facilities
provided by Lessor, unless any damage thereto is caused by the negligence or
intentional misconduct of Lessee, its agents, employees or invitees.

16. Repairs and Maintenance by Lessee. Except as set forth in Paragraph
----------------------------------
15, or as otherwise provided by Lessor in connection with its operation of the
building of which the premises are a part, Lessee shall, at Lessee's cost, keep
and maintain the demised premises and appurtenances and every part thereof, in
good and sanitary order, condition and repair. Lessee further agrees that
Sections 1940-1942 of the Civil Code of the State of California do not apply to
this leasehold.

17. Entry by Lessor. Lessee shall permit Lessor and its agents to enter
----------------
into and upon said premises at all reasonable times for the purpose of
inspecting the same or for the purpose of maintaining the building in which the
demised premises are situated, or for the purpose of making repairs,
alterations, or additions to any other portion of said building, including the
erection and maintenance of such scaffolding, canopies, fences, and props as may
be required, or for the purpose of posting notices of nonliability for
alterations, additions or repairs all without any liability to Lessee for any
loss of occupation or quiet enjoyment of the premises thereby occasioned.
Notwithstanding the foregoing, except in the case of emergency, Lessor and its
agents shall provide Lessee with twenty-four hours notice prior to entry of the
premises. Any such entry by Lessor and its agents shall comply with all
reasonable security measures of Lessee and shall not impair Lessee's operations
more than reasonably necessary.

18. Estoppel Certificates. Lessee shall at any time and from time to
----------------------
time, within 10 business days from receipt of Lessor's written request, execute,
acknowledge, and deliver to Lessor a statement in writing certifying that this
lease is unmodified and in full force and effect (or if there has been any
modification thereof that the

-10-
<PAGE>

same is in full force and effect as modified and stating the modification or
modifications) and that there are no defaults existing (or if there is any
claimed default stating the nature and extent thereof) and stating the dates to
which the rent and other charges have been paid in advance. It is expressly
understood and agreed that any such statement delivered pursuant to this section
may be relied upon by any prospective purchaser of the estate of Lessor, or any
lender or prospective assignee of any lender on the security of the demised
premises or the property of which it is a part or any part thereof, and any
third person. The provisions of this Paragraph 18 shall be reciprocal and,
within ten business days after request by Lessee, Lessor shall execute a similar
estoppel certificate in favor of Lessee.

19. Removal of Trade Fixtures of Lessee at End of Term. Lessee may remove
---------------------------------------------------
all trade fixtures and equipment installed on the demised premises by Lessee at
the expiration of the term of this lease, provided that they may be removed
without damage to the demised premises.

20. Surrender of Lease. The voluntary or other surrender of this lease by
-------------------
Lessee, accepted by Lessor, or the mutual cancellation hereof, shall not work a
merger and shall, at the option of Lessor, terminate all or any existing
subleases or subtenancies or operate as an assignment to Lessor of all or any of
such subleases or subtenancies.

21. Holding Over. Any holding over after the expiration of the term
-------------
hereof with the consent of the Lessor shall be construed to be a tenancy from
month to month at a rental equal to 150% of one-twelfth (1/12) of the last total
annual rental in force and effect.

22. Grace Period.
-------------

A. No default or breach shall exist on the part of Lessor of any of
the covenants and conditions governing it unless and until Lessee shall serve
upon Lessor a written notice specifying with particularity wherein said default
or breach is alleged to exist and the failure on the part of Lessor to perform
or observe said covenant or condition, as the case may be, within thirty (30)
days after the giving of such notice as provided herein.

B. If Lessor shall be delayed or prevented from the performance of
any act required by this lease by reason of acts of God, strikes, lockouts,
labor troubles, inability to procure materials, restrictive governmental laws,
or regulations or other cause, without fault and beyond the reasonable control
of Lessor (financial inability excepted), performance of such act shall be
excused for the period of the delay;, and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.

-11-
<PAGE>

C. Notwithstanding anything to the contrary in this lease, if the
premises should become untenantable as a consequence of cessation of utilities
or other services required to be provided to the premises by Lessor,
interference with access to the premises, or legal restrictions, and in any of
the foregoing cases the untenantability persists for more than thirty (30)
consecutive calendar days, Lessee shall thereafter be entitled to an equitable
abatement of rent to the extent of the interference with Lessee's use of the
premises occasioned thereby. If the interference renders the premises
untenantable for more than 120 consecutive calendar days, Lessee shall have the
right to terminate this lease.

23. Remedies of Lessor Upon Default.
--------------------------------

A. Except as otherwise provided in paragraph 23.E, if Lessee breaches
the lease before the end of the term or if its right to possession is terminated
by Lessor because of a breach of the lease, the lease terminates. Upon such
termination Lessor may recover from Lessee:

(1) The worth at the time of award of the unpaid rent which had
been earned at the time of termination;

(2) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Lessee proves could have been
reasonably avoided;

(3) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss as Lessee proves could be reasonably avoided;

(4) Any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform its obligations
under the lease or which in the ordinary course of things would be likely to
result therefrom.

B. The "worth at the time of award" of the amount referred to in
paragraphs (1) and (2) of subdivision A is computed by allowing interest at the
maximum interest rate allowed by law. The worth at the time of award of the
amount referred to in paragraph (3) of subdivision A is computed by discounting
that amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent (1%).

-12-
<PAGE>

C. Efforts by Lessor to mitigate the damages caused by the Lessee's
breach of the lease do not waive Lessor's right to recover damages under this
section.

D. Nothing in this section affects the right of Lessor to
indemnification for liability arising prior to the termination of the lease for
personal injuries or property damage where the lease provides for such
indemnification.

E. If Lessee has breached this lease the lease continues in effect
for so long as the Lessor does not terminate Lessee's right to possession, and
Lessor may enforce all its rights and remedies under the lease, including the
right to recover the rent as it becomes due under the lease. The following do
not constitute a termination of Lessee's right to possession:

(1) Acts of maintenance or preservation or efforts to relet the
property.

(2) The appointment of a receiver upon initiative of Lessor to
protect Lessor's interest under the lease.

F. If Lessee shall be in default in the performance of any covenant
on its part to be performed under this lease, then, after notice and without
waiving or releasing Lessee from the performance thereof, Lessor may, but shall
not be obligated to, perform any such covenant and, in exercising any such
right, pay necessary and incidental costs and expenses in connection therewith.
All sums so paid by Lessor, together with interest thereon at the maximum rate
of interest permitted by law, shall be deemed additional rent and shall be
payable to Lessor on the next rent paying day.

G. Notwithstanding anything to the contrary in this lease, Lessee
shall not be deemed to have breached this lease or be in default hereunder, and
Lessor shall not be entitled to cure any breach by Lessee under this lease, on
account of (i) Lessee's failure to pay any sum due to Lessor under this lease,
unless Lessee's failure to pay continues for five (5) days after delivery of
written notice of delinquency; or (ii) Lessee's failure to perform any other
covenant of this lease (other than a covenant to pay money to Lessor) unless
Lessee's failure to perform such covenant continues for thirty (30) days after
Lessee's receipt of written notice, or such longer time as may reasonably be
required to cure the default.

24. Attorneys' Fees on Default. In the event of the bringing of any
---------------------------
action by either party hereto as against the other hereon or hereunder, or by
reason of the breach of any covenant or condition on the part of the other
party, or arising out of this lease, then and in that event the party in whose
favor final judgment shall be entered shall be entitled to have and recover of
and from the other reasonable attorneys' fees to be fixed by the court wherein
such judgment is entered.

-13-
<PAGE>

25. Insolvency.
-----------

A. The appointment of a receiver to take possession of all or
substantially all of the assets of Lessee, or

B. A general assignment by Lessee for the benefit of creditors, or

C. Any action taken or suffered by Lessee under any insolvency or
bankruptcy act, shall constitute a breach of this lease by Lessee and a default
hereunder.

Notwithstanding the foregoing, Lessee shall not be deemed to have
breached this lease or be in default hereunder solely as a consequence of the
filing of an involuntary bankruptcy petition, the appointment of a receiver, the
attachment of any interest in this lease or of Lessee's other assets or the
exercise by any third party of any other remedy with respect to Lessee, Lessee's
interest in this lease or Lessee's other assets, unless the petition, receiver,
attachment or other remedy is not discharged within sixty (60) days after the
filing or commencement thereof.

26. Assignment or Subletting. Lessee shall not assign this lease or any
-------------------------
interest herein and shall not sublet the premises or any part thereof or any
right or privilege appurtenant thereto or permit any other person (the agents
and servants of Lessee excepted) to occupy or use the premises or any portion
thereof without the written consent of Lessor first being had and obtained,
which consent shall not be unreasonably withheld if the proposed assignee or
subtenant meets Lessor's financial requirements, is of good business reputation,
would be compatible with the other tenants of the building and meets such other
reasonable requirements as may be established by Lessor. A consent to one
assignment, subletting, or occupation and use by another person shall not be
deemed to be a consent to any other or further assignment, subletting, or
occupation nor a waiver of the provisions of this paragraph, except as to the
specific instance covered thereby. Any such assignment, subletting or occupation
without consent shall be void and shall at the option of Lessor terminate this
lease. This lease and any interest in it shall not be assignable as to the
interest of Lessee by operation of law without the written consent of Lessor.

In the case of an individual Lessee, the subsequent incorporation of
Lessee's business and transfer of rights hereunder to a corporation shall
constitute a prohibited assignment within the meaning of this paragraph.

-14-
<PAGE>

In the event Lessor shall consent to any assignment or subletting,
Lessee shall in all events remain fully liable on this lease and shall not be
released from performing any of the terms, covenants, and conditions of this
lease.

In the event Lessee shall assign this lease or any interest herein or
sublease any portion of the premises, then, on a monthly basis, 50% any sums of
money, or other economic consideration received by Lessee from the transferee,
including higher rent, bonuses, key money or the like, which exceed, in the
aggregate, the total sums which Lessee pays Lessor under this lease with respect
to the premises so subleased or assigned (after deducting from such
consideration received by Lessee the reasonable costs to Lessee to effectuate
the assignment or sublease, including without limitation, reasonable attorneys'
fees, brokerage or leasing commissions, and remodelling costs) shall be payable
to Lessor as additional rental under this lease without affecting or reducing
any other obligation of Lessee hereunder. The agreement to pay such sums is the
result of negotiations between the parties hereto in which the parties agree
that the delivery of said sums to Lessor and has been bargained for by Lessee in
consideration of the other economic benefits provided by Lessor to Lessee under
this lease.

Lessee agrees to reimburse Lessor for all reasonable expenses,
including reasonable attorneys' fees, incurred by Lessor in connection with any
requested assignment.

Notwithstanding the foregoing, Lessor agrees to give its consent to
any sublease or assignment of this lease to (i) a subsidiary, affiliate,
division or corporation controlling, controlled by or under common control with
Lessee, (ii) a successor corporation related to Lessee by merger, consolidation,
non-bankruptcy reorganization or government action, (iii) a purchaser of
substantially all of Lessee's assets located on the premises, or (iv) Invision
Company, provided, however, that in all events Lessee shall remain liable
hereunder and any such assignee and/or sublessee shall agree in writing to be
jointly and severally liable with Lessee with respect to Lessee's obligations
hereunder. For purposes of this lease, a sale of Lessee's capital stock shall
not be deemed an assignment, subletting or other transfer of this lease or the
premises requiring Lessor's consent.

27. Transfer by Lessor - Release From Liability. In the event Lessor
-------------------------------------------
sells or transfers the demised premises or any part thereof and as a part of
that transaction assigns its interest as Lessor in and to this lease, then, from
and after the effective date of that sale, assignment, or transfer, but provided
the purchaser or transferee assumes in writing the Lessor's obligations under
this lease, the Lessor shall have no further liability under this lease to the
Lessee except as to matters of liability which shall have accrued and are
unsatisfied as of that date, it being intended that the covenants and
obligations contained in this lease on the part of Lessor shall be

-15-
<PAGE>

binding upon Lessor and its successors and assigns only during and in respect of
their own periods of ownership of the fee.

28. Damage to or Destruction of Premises. In the event of a partial
------------------------------------
destruction of the premises from any cause covered by Lessor's standard fire and
extended coverage insurance, Lessor shall forthwith repair the premises provided
the cost of repair does not exceed said insurance proceeds and such repairs can
be made within sixty (60) days under the laws and regulations of state, county
and/or municipal authorities, but such partial destruction shall in no way annul
or void this lease, except that Lessee shall be entitled to a proportionate
reduction of base monthly rental and additional rental while such repairs are
being made; such proportionate reduction to be based upon the extent to which
the making of such repairs interferes with the business carried on by the Lessee
in said premises. If such partial destruction was caused by any risk not covered
by Lessor's insurance or if the cost of repair exceeds the insurance proceeds
payable, or if such repairs cannot be made within sixty (60) days, Lessor may,
at its option, make such repairs, the rent shall be abated as provided above,
and the lease shall remain in full force and effect. If the Lessor does not
elect to make repairs which it is not obligated to make, this lease may be
terminated by Lessor or Lessee. In the event the building in which the demised
premises are situated is destroyed to the extent of not less than fifty percent
(50%) of the replacement cost thereof, Lessor may elect to terminate this lease,
whether the demised premises are injured or not and without liability to the
Lessee. A total destruction of the building in which the said premises may be
situated, shall terminate this lease. The provisions of subdivision 2 of Section
1932 of the California Civil Code, and of Subdivision 4 of Section 1933 of that
Code, shall not apply to this lease, and Lessee waives the benefits of such
provisions.

Notwithstanding anything to the contrary in this lease, Lessee shall
have the option to terminate this lease in the event either of the following
occurs: (i) the premises cannot be or are not in fact fully repaired by Lessor
within nine (9) months after the date of any damage or destruction not caused by
the negligence or intentional misconduct of Lessee, Lessee's agents, employees
or invitees or (ii) if the premises are damaged by any peril within twelve (12)
months of the last day of the lease term and cannot or are not in fact
substantially restored within six (6) months after the date of such damage,
provided such damage was not caused by the negligence or intentional misconduct
of Lessee, Lessee's agents, employees or invitees.

29. Condemnation.
-------------

A. Throughout the lease, the word "condemn" is synonymous with the
phrase "right of eminent domain", i.e., the fight of people or government to
take property for government or public use and shall include the intention to
condemn

-16-
<PAGE>

expressed in writing as well as the filing of any action or proceedings for
condemnation.

B. In the event any action or proceeding is commenced for the
condemnation of the demised premises or any part thereof, or of the property of
which the demised premises are a part, or if Lessor is advised in writing by any
agency or entity or body having the right or power of condemnation of its
intention to condemn, then and in any of said events, Lessor may:

(1) Without any obligation or liability to Lessee, and without
affecting the validity and existence of this lease other than as hereinafter
provided, agree to sell and/or convey to the condemnor without first requiring
that any action or proceeding be instituted or, if such action or proceeding has
been instituted, without requiring any trial or hearing thereof, and Lessor is
expressly empowered to stipulate to judgment therein any part or portion of the
demised premises sought by the condemnor free from this lease and the rights of
Lessee hereunder.

(2) Terminate this lease and all rights of Lessee hereunder as to
the portion of the premises condemned; effective as of the date that title to
such portion of the premises vests in the governmental agency initiating the
condemnation action.

(3) Continue this lease in full force and effect, provided that
such condemnation does not result in a taking of the demised premises. In the
event this lease is continued in full force and effect and by reason of the
condemnation a modification or alteration of the building of which the demised
premises is a part must be undertaken and such modification or alteration
interferes with Lessee's use of the premises, then Lessee shall be entitled to a
reasonable abatement of base monthly rental and additional rental during the
period of such modification or alteration in proportion to the extent such work
shall interfere with the use of the premises by Lessee.

C. In the event a portion of the demised premises is condemned and
taken and such condemnation and taking materially affects Lessee's use of the
premises, Lessee shall have the option either of terminating its obligations
under this lease or continuing the lease in full force and effect with respect
to such portion of the premises as is not taken. In the latter event, the base
monthly rental and additional rental for the remainder of the term shall be
reduced to the extent such condemnation interferes with Lessee's use of the
premises.

D. If as a result of any such condemnation proceedings a leasehold
interest or a right of possession only is so condemned or taken under the power
of eminent domain and is for a period of time less than the remaining term of
the lease,

-17-
<PAGE>

this lease shall continue in full force and effect and the award shall be
payable to Lessor. In such event, the base monthly rental and additional rental
shall abate in proportion to the extent such condemnation interferes with
Lessee's use of the premises. In addition, Lessee shall have the option to
terminate this lease in the event such taking is scheduled to continue or
continues for more than 120 consecutive calendar days.

E. All compensation and damages awarded for the taking of the demised
premises or the common facilities, or any portion or portions thereof, shall,
except as otherwise herein provided, belong to and be the sole property of
Lessor, and Lessee shall not have any claim or be entitled to any award for
diminution in value of its leasehold hereunder or for the value of any unexpired
term of this lease, provided, however, that Lessee shall be entitled to any
award that may be made for the taking of or injury to, or on account of any cost
or loss Lessee may sustain in the removal of, Lessee's merchandise, fixtures,
equipment, and furnishings and for the value of any condemned improvements
Lessee has the right to remove from the premises together with the unamortized
value, allocable to the remainder of the lease term, of any improvements
installed at Lessee's expense which are not removable, and Lessee's moving
costs.

F. If this lease is terminated, as a whole or in part, pursuant to
any of the provisions of this paragraph, all rentals and other charges payable
by Lessee to Lessor hereunder and attributable to the demised premises taken
shall be paid up to the date upon which actual physical possession is taken by
the condemnor, and the parties shall thereupon be released from all further
liability in relation thereto.

30. Subordination. This lease and the leasehold estate created hereby are
--------------
and shall be, at the option and upon written declaration of Lessor, subject,
subordinate, and inferior to the lien and estate of any liens and encumbrances,
renewals, extensions or replacements thereof now or hereafter imposed by Lessor
upon the demised premises or any part thereof, or upon the building of which the
demised premises are a part. Lessor expressly reserves the right, at Lessor's
option and declaration, to place liens and encumbrances on and against the
demised premises or any part thereof and/or the building of which the demised
premises are a part that are superior in lien and effect to this lease and the
estate created hereby. Lessee shall, forthwith upon the written request of
Lessor so to do, execute and deliver to such person or institution as Lessor may
direct, an agreement of subordination of whatsoever covenants or conditions as
are designated by Lessor or by any title company issuing any policy of title
insurance insuring the lien, estate, and effect of said lien or encumbrance.
Lessee agrees to attorn to any successor owner of the leased premises.

-18-
<PAGE>

Notwithstanding the foregoing, prior to the lease commencement date,
Lessor shall obtain from any lenders or ground lessors of the building a
written agreement in form reasonably satisfactory to Lessee providing for
recognition of Lessee's interest under this lease in the event of a foreclosure
of the lender's security interest or termination of the ground lease. Further,
as a condition to the subordination of Lessee's leasehold interest to a ground
lease or instrument of security, Lessor shall obtain from any such ground
lessor's or lenders, a written recognition agreement in form reasonably
satisfactory to Lessee providing that Lessee's rights of occupancy shall not be
disturbed in the event of a termination of the ground lease or a foreclosure of
the loan, and that in the event of such termination or foreclosure, Lessee shall
receive all of the services provided for under this lease.

31. Effect of Exercise of or Failure to Exercise Privilege by a Party.
------------------------------------------------------------------
Neither the exercise nor failure to exercise any right, option, or privilege
hereunder by a party shall exclude the party from exercising any and all other
rights, privileges and options hereunder, nor shall it relieve the other party
from any obligation to perform each and every covenant and condition on the
other party's part to be performed hereunder, or from damages or other remedy
for failure to perform or meet the obligations of this lease.

32. Waiver. The waiver by a party of any breach of any term, covenant or
-------
condition herein contained shall not be deemed to be a waiver of that term,
covenant, or condition or any subsequent breach of it or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant or condition of this lease, other than failure
of Lessee to pay the particular rental so accepted, regardless of Lessor's
knowledge of that preceding breach at the time of the acceptance of that rent.

33. Notices. All notices to be given to Lessee may be given in writing
--------
personally or by depositing the notices in the United States mail, postage paid,
and addressed:

if to Lessee: at the leased premises

or at such other location as Lessee may from time to time designate in writing;

if to Lessor: 320 Jackson Street
San Francisco, California 94111

or at such other place or places as Lessor may from time to time designate in
writing. All notices shall be deemed given when personally delivered or three
business days after the date when postmarked.

-19-
<PAGE>

34. Representations. This lease represents the entire agreement of the
----------------
parties with respect to the parties' rights and duties under this lease. Lessee
acknowledges that, except as specifically set forth herein, neither Lessor nor
any agent, servant or representative of Lessor, or any person purporting to act
on Lessor's behalf, has made any representation, warranty, or statement with
respect to the condition of the premises, the zoning applicable thereto, the
cost of any tenant improvements to be made by Lessee, or any other matter
relating to this lease agreement. With respect to such matters, Lessee is
relying upon Lessee's own independent investigation and sources of information.

35. Captions. The titles or headings to the paragraphs of this lease are
---------
descriptive only, are not a part of this lease, and shall have no effect on the
construction or interpretation hereof.

36. Successors and Assigns. The covenants and conditions herein contained
-----------------------
shall, subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators, and assigns of all the parties hereto.

37. California Law. This lease shall be construed and interpreted in
---------------
accordance with the laws of the State of California.

38. Severability. The unenforceability, invalidity, or illegality of any
-------------
of the provisions of this lease shall not render the other provisions
unenforceable, invalid, or illegal.

39. Authority. The individuals executing this lease on behalf of Lessor
----------
and Lessee warrant and represent that they are authorized to enter into this
lease on behalf of the entity they represent and that when executed, this lease
will be valid and enforceable against such entity in accordance with all of the
terms and conditions contained herein.

40. Tenant Improvement Work. In connection with preparing of the premises
------------------------
for Lessee's occupancy, Lessor shall construct improvements as set forth in
Exhibit B, attached hereto. Lessor shall select the contractor to perform such
work and Lessor shall provide a tenant improvement allowance of up to $291,375
for the combined Third and Fourth floors and $145,687.50 for the Second floor,
to be used in connection with said improvements. Except as otherwise
specifically set forth in Exhibit B, any additional costs incurred in preparing
the premises for Lessee's occupancy shall be at Lessee's sole cost and expense
and any such sum payable by Lessee shall be delivered to Lessor prior to the
commencement of any construction work.

-20-
<PAGE>

41. Right of First Negotiation. Subject to the existing rights of other
---------------------------
tenants in the building as set forth in Exhibit C, attached hereto, and provided
Lessee is not then in default under the terms of the lease and this lease is in
full force and effect, Lessee shall have a right of first negotiation to lease
other non-ground floor portions of the building that become available for lease
during the term hereof, on the terms and conditions hereinafter set forth:

At any time such additional premises become available for lease,
Lessor shall notify Lessee of the rental rate and other terms and conditions
Lessor has established for such additional premises. Upon receiving such notice,
Lessee shall have fifteen (15) days in which to negotiate with Lessor for the
lease thereof, on such terms and conditions as are mutually acceptable to both
Lessor and Lessee. In the event a written agreement pertaining thereto is not
entered into within said fifteen (15) day period, Lessor thereafter shall have
the right to lease such additional premises to a third party on substantially
the same terms stated in Lessor's notice. If Lessor does not lease such
additional premises within ninety (90) days after the expiration of said fifteen
(15) day period, any further transactions shall be deemed a new determination by
Lessor to lease such additional premises and the provisions of this paragraph
shall again be applicable.

42. Quiet Enjoyment. Notwithstanding anything to the contrary in this
---------------
lease, so long as Lessee is not in default under this lease, Lessee shall
lawfully and quietly hold, occupy and enjoy the premises during the lease term
without hinderance or interference from Lessor or any person or persons claiming
by, through or under Lessor.

43. Common Areas. Subject to such rules and regulations as may be
-------------
established by Lessor, Lessee shall have the right, throughout the lease term,
to use all areas and facilities outside the premises and within the boundaries
of the building which are set aside by Lessor for the general non-exclusive use
of Lessor, Lessee and other tenants of the building, including without
limitation, lobbies, stairwells, elevators, restrooms, loading areas, trash
areas, sidewalks and walkways.

44. Hazardous Materials. Lessor shall be responsible for any legally
--------------------
required removal or remediation of hazardous materials from the premises or
the building of which the premises are a part, unless such removal or
remediation is of hazardous materials brought on to the premises or released by
Lessee, Lessee's agents, officers, employees or customers. Furthermore, Lessor
shall indemnify, defend, protect and hold Lessee, its agents, officers,
directors and shareholders, harmless from and against all demands for the
removal of hazardous materials which Lessor is required to remove pursuant to
the proceeding sentence. This paragraph 44 constitutes the entire agreement of
Lessor and Lessee regarding hazardous materials. As used in this lease,
"hazardous materials" shall mean any material which is now or hereafter
regulated by

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<PAGE>

any governmental authority, posing a hazard to the environment or human health,
and which is legally required to be removed or remediated.

IN WITNESS WHEREOF, the parties have executed this lease on the day and
year first above written.

LESSOR
------

PROSPECT FARMS, a California limited
partnership

By: /s/ Harry Hilp
------------------------------------
Harry Hilp, General Partner

LESSEE
------

CORTEZ SOFTWARE INTERNATIONAL, INC.,
a Delaware Corporation

By: /s/ ^^^
------------------------------------
, President

By: /s/ ^^^
------------------------------------
, Secretary

-22-
<PAGE>

EXHIBIT A

FLOOR PLAN - 2ND FLOOR P23

FLOOR PLAN - 3RD FLOOR P24

FLOOR PLAN - 4TH FLOOR P25
<PAGE>

EXHIBIT B
---------

WORK LETTER

1. Lessor shall construct the tenant improvements (the "Improvements") in
accordance with the preliminary plans ("Preliminary Plans") attached hereto as
Schedule 1 and in accordance with the terms of this work letter.
- ----------

2. Lessor shall cause to prepared, as quickly as possible, final plans,
specifications and working drawings for the Improvements ("Final Plans"), as
well as an estimate of the total cost for the Improvements ("Cost Estimate"),
all of which conform to or represent logical evolutions of or developments from
the Preliminary Plans. The Final Plans and Cost Estimate shall be delivered to
Lessee immediately upon completion. Within five business days after receipt
thereof, Lessee shall either approve the Final Plans and Cost Estimate or
deliver to Lessor specific written changes thereto that are necessary, in
Lessee's opinion, to conform such plans to the Preliminary Plans or to reduce
costs. If Lessee desires changes, Lessor shall not unreasonably withhold its
approval of such changes and the parties shall confer and negotiate in good
faith to reach agreement on modifications to the Final Plans, and the Cost
Estimate as a consequence of such changes. As soon as approved by Lessor and
Lessee, Lessor shall submit the Final Plans to all appropriate governmental
agencies and thereafter Lessor shall use its best efforts to obtain the required
governmental approvals as soon as practicable.

3. After the Final Plans have been approved by Lessor and Lessee as
provided above, neither party shall have the right to require extra work or
change orders with respect to the construction of the Improvements without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed. All change orders shall specify any change in the Cost
Estimate as a consequence of the change order.

4. Lessor shall cause three general contractors to bid for the
construction of the Improvements. If Lessee so desires, Lessee may also select a
general contractor, reasonably acceptable to Lessor, to bid the work. Said bid
obtained from the contractor selected by Lessee shall be obtained in a prompt
and timely manner and so as not to delay the construction of the Improvements.
All bids will be opened together, with Lessor selecting the general contractor
to construct the Improvements (the "General Contractor"). The General Contractor
is the contractor only of Lessor and Lessee shall have no liability to the
General Contractor on the construction contract.

-26-
<PAGE>

5. Lessor shall thereafter cause the Contractor to commence construction
of the Improvements and shall diligently prosecute such construction to
completion. The Improvements shall be constructed by Lessor in accordance with
all rules, regulations, codes, ordinances, statutes, and laws of any
governmental or quasi-governmental authority and in accordance with the Final
Plans as mended.

6. When the improvements are complete, Lessor shall deliver possession of
the premises to Lessee.

7. The following items shall be provided at Lessor's sole cost and expense
and the Tenant Improvement Allowance shall not be used therefore:

a. Costs incurred to remove hazardous materials from the premises or
surrounding areas;

b. Costs incurred in making areas outside of the premises comply with
The Americans With Disabilities Act; and

c. Interest and other costs of financing construction.

d. Costs to bring the premises into compliance with any CC&R's and/or
underwriters' requirements.

e. The following code related construction costs.

(i) Elevator lobbies: smoke control doors/mechanism and smoke
detectors.

(ii) Corridor: existing corridors shall be upgraded to one hour
rating; fire caulking required around penetrations (may mean fire/smoke
dampers).

(iii) Doors: twenty minute doors in corridor. New lever handles
on all existing doors.

(iv) Ceiling: existing acoustical tile may have to be seismically
braced.

(v) Lighting: double switching installed in perimeter offices
per Title 24.

(vi) Stair Rails: New guard rail and hand rail to meet ADA and
code requirements.

-27-
<PAGE>

8. In the event the cost of the Improvements exceeds the Tenant
Improvement Allowance described in Paragraph 40 of the lease, then Lessor, at
Lessee's request, shall increase the Allowance by the amount of such excess, but
in no event shall the Allowance be increased by more than 10% of the original
Allowance. In such event, the increased amount of up to 10% shall be treated as
a loan from Lessor to Lessee, fully amortized, with interest at 10% per annum,
through level monthly payments over the entire lease term and with such payments
commencing on the applicable commencement date for the floor for which the
excess Improvement Allowance has been allocated.

9. Lessee shall have the right to use a portion of the allowance for the
Second floor for the Improvements on the Third and Fourth floors, or use a
portion of the allowance for the Third and Fourth floors for the Improvements on
the Second floor.

-28-
<PAGE>

EXHIBIT C
---------

1. Russian Hill Recording has a right to extend its Lease to approximately
January 1, 2009.

-29-

<PAGE>

EXHIBIT 10.4

. 1400 65/th/ STREET, EMERYVILLE, CALIFORNIA .

. OFFICE BUILDING NET LEASE .

BASIC LEASE INFORMATION

Date of Lease: November 3, 1999

Landlord: BEP-EMERYVILLE, L.P.

Landlord's Address: c/o Ellis Partners, Inc.
433 California Street, Suite 610
San Francisco, California 94104
Attention: James F. Ellis

Tenant: EVOLVE SOFTWARE, INC.

Tenant's Address: Prior to the Term Commencement Date:

615 Battery Street, Suite 400
San Francisco, CA 94111
Attn: John Bantleman

After the Term Commencement Date:
1400 65/th/ Street
Emeryville, CA 94608
Attn: John Bantleman

Building: EmeryTech Building located at 1400-65/th/ Street,
Emeryville, California

Leased Premises: Approximately 51,261 rentable square feet on the entire
East-Hi-Bay and the ground floor of the West-Hi-Bay of the
Building.

Rentable Area: Approximately 51,261 rentable square feet

Scheduled Term

i
<PAGE>

Commencement Date: March 1, 2000

Scheduled Term
Expiration Date: February 28, 2007

Option to Extend: Number of Extension Periods: One (1)
Years per Extension Period: Five (5)

Base Rent (NNN): $112,774.20.00 (calculated on the basis of $2.20 per month
per rentable square foot); beginning in the second year of
the Term, Base Rent (NNN) shall increase at three percent
(3%) per annum

Tenant's Proportionate
Share: Approximately thirty-four and twenty-four one hundredths
percent (34.24%)

Parking Spaces: 153 (subject to additional spaces pursuant to Section
9.01 of the Lease)

Security Deposit: $2,000,000.00 (subject to Section 5.14 of the Lease)

Guarantor: None

Landlord's Broker: CB Richard Ellis

Tenant's Broker: Colliers International

ii
<PAGE>

The foregoing BASIC LEASE INFORMATION is incorporated herein and made a part of
the LEASE to which it is attached. If there is any conflict between the BASIC
LEASE INFORMATION and the LEASE, the BASIC LEASE INFORMATION shall control.

"LANDLORD":

BEP-EMERYVILLE, L.P.,
a Delaware limited partnership

By: EPI Investors 103 LLC,
a California limited liability company
Its: General Partner

By: Ellis Partners, Inc.,
a California corporation
Its: Managing Member

By:
--------------------------
Name:
--------------------------
Title:
--------------------------

"TENANT":

EVOLVE SOFTWARE, INC.,
a Delaware corporation

By:
--------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

PAGE
----
<C> <C> <S> <C>
Article 1. Definitions......................................... 1

1.01. Definitions......................................... 1
1.02. "Additional Rent"................................... 1
1.03. "Base Expenses"..................................... 1
1.04. "Base Rent"......................................... 1
1.05. "Base Year"......................................... 1
1.06. "Basic Operating Cost".............................. 1
1.07. "Building".......................................... 1
1.08. "Building Standard Improvements".................... 1
1.09 "Common Areas"...................................... 1
1.10. "Computation Year".................................. 1
1.11 "Landlord's Broker"................................. 1
1.12. "Landlord's Contribution"........................... 1
1.13. "Landlord's Work"................................... 2
1.14. "Leased Premises"................................... 2
1.15. "Net Rent".......................................... 2
1.16. "Permitted Use"..................................... 2
1.17. "Project"........................................... 2
1.18. "Rent".............................................. 2
1.19. "Rentable Area"..................................... 2
1.20. "Security Deposit".................................. 2
1.21. "Substantial Completion"............................ 2
1.22. "Tenant Extra Improvements"......................... 3
1.23. "Tenant Improvements"............................... 3
1.24. "Tenant's Broker"................................... 3
1.25. "Tenant's Physical Possession Date"................. 3
1.26. "Tenant's Proportionate Share"...................... 3
1.27. "Term".............................................. 3
1.28. "Term Commencement Date"............................ 3
1.29. "Term Expiration Date".............................. 3
1.30. Other Terms......................................... 3

Article 2. Leased Premises..................................... 3

2.01. Lease............................................... 3
2.02. Acceptance of Leased Premises....................... 3
2.03. Right To Relocate Leased Premises................... 3
2.04. Reservation of Rights............................... 4

Article 3. Term, Use and Rent.................................. 4
</TABLE>
i
<PAGE>

<TABLE>
<CAPTION>
<C> <C> <S> <C>
3.01. Term................................................ 4
3.02. Use................................................. 4
3.03. Base Rent........................................... 4
3.04. Tenant's Proportionate Share of Basic
Operating Cost...................................... 5
3.05. Basic Operating Cost................................ 7

Article 4 Landlord's Covenants................................ 9

4.01. Basic Services...................................... 9
4.02. Extra Services...................................... 10
4.03. Window Coverings.................................... 11
4.04. Graphics and Signage................................ 11
4.05. Tenant Extra Improvements........................... 12
4.06. Repair Obligation................................... 12
4.07. Peaceful Enjoyment.................................. 12

Article 5 Tenant's Covenants.................................. 12

5.01. Payments by Tenant.................................. 12
5.02. Tenant Improvements................................. 12
5.03. Taxes on Personal Property and Tenant
Extra Improvements.................................. 13
5.04. Repairs by Tenant................................... 13
5.05. Waste............................................... 13
5.06. Assignment or Sublease.............................. 13
5.07. Alterations, Additions and Improvements............. 15
5.08. Compliance With Laws and Insurance Standards........ 16
5.09. No Nuisance; No Overloading......................... 16
5.10. Furnishing of Financial Statements; Tenant's
Representations..................................... 16
5.11. Entry by Landlord................................... 17
5.12. Nondisturbance and Attornment....................... 17
5.13. Estoppel Certificate................................ 17
5.14. Security Deposit.................................... 17
5.15. Surrender........................................... 17
5.16. Tenant's Remedies................................... 19
5.17. Rules and Regulations............................... 19

Article 6 Environmental Matters............................... 19

6.01. Hazardous Materials Prohibited...................... 19
6.02. Limitations on Assignment and Subletting............ 20
6.03. Right of Entry...................................... 21
6.04. Notice to Landlord.................................. 21
</TABLE>
ii
<PAGE>

Article 7. Insurance, Indemnity, Condemnation, Damage
and Default......................................... 21

7.01. Landlord's Insurance................................ 21
7.02. Tenant's Liability Insurance........................ 21
7.03. Tenant's Additional Insurance Requirements.......... 22
7.04. Indemnity and Exoneration........................... 23
7.05. Waiver of Subrogation............................... 24
7.06. Condemnation........................................ 24
7.07. Damage or Destruction............................... 25
7.08. Default by Tenant................................... 26

Article 8. Options to Renew and Terminate...................... 30
*
8.01. Option to Renew..................................... 30

Article 9. Miscellaneous Matters............................... 32

9.01. Parking............................................. 32
9.02. Brokers............................................. 32
9.03. No Waiver........................................... 33
9.06. Transfers by Landlord............................... 33
9.07. Attorneys' Fees..................................... 33
9.08. Termination; Merger................................. 34
9.09 Amendments; Interpretation.......................... 34
9.10. Severability........................................ 34
9.11. Notices............................................. 34
9.12. Force Majeure....................................... 34
9.14. Successors and Assigns.............................. 35
9.15. Further Assurances.................................. 35
9.16. Incorporation of Prior Agreements................... 35
9.17. Applicable Law...................................... 35
9.18. Time of the Essence................................. 35
9.19. No Joint Venture.................................... 35
9.20. Authority........................................... 35
9.21. Declaration of Covenants, Conditions
and Restrictions.................................... 35
9.22. Offer............................................... 36
9.23. Building Access..................................... 36
</TABLE>
iii
<PAGE>

9.24. Exhibits; Addenda.................................. 35
9.25 Approvals.......................................... 35
9.26. Depreciation....................................... 35
9.27. Sublease to Reel.com............................... 35
</TABLE>
iv
<PAGE>

EXHIBITS:

Exhibit A-1 - Site Plan of the Leased Premises
Exhibit A-2 - Floor Plan of the Leased Premises
Exhibit B - Initial Improvement of the Leased Premises
Exhibit B-1- Preliminary Plans
Exhibit B-2- Warm Shell Specifications
Exhibit C - Confirmation of Term of Lease
Exhibit D - Confidentiality Agreement
Exhibit E - Building Rules and Regulations
Exhibit F - Estimated Budget
<PAGE>

OFFICE BUILDING NET LEASE

THIS LEASE, made as of the date specified in the BASIC LEASE INFORMATION
sheet, by and between the landlord specified in the BASIC LEASE INFORMATION
sheet ("Landlord") and the tenant specified in the BASIC LEASE INFORMATION sheet
("Tenant").

Article 1

Definitions

1.01. Definitions: Terms used herein shall have the following meanings:

1.02. "Additional Rent" shall mean all monetary obligations of Tenant
under this Lease other than the obligation for payment of Net Rent.

1.03. "Base Rent" shall mean the sums due from time to time as rental
for the Leased Premises.

1.04. [Intentionally Deleted]

1.05. "Basic Operating Cost" shall have the meaning given in Section
3.05.

1.06. "Building" shall mean the building and other improvements
associated therewith identified on the Basic Lease Information sheet, commonly
known as EmeryTech and having a Rentable Area of approximately 149,834 square
feet of office space, all as generally identified on Exhibit A-1 hereto which is
-----------
made a part hereof.

1.07. "Building Standard Improvements" shall mean the standard
materials ordinarily used by Landlord in the improvement of the Leased Premises.

1.08. "Common Areas" shall mean (a) the areas on individual floors of
the Building devoted to non-exclusive uses such as common corridors, lobbies,
fire vestibules, elevator foyers, stairways, elevators, electric and telephone
closets, restrooms, mechanical closets, janitor closets and other similar
facilities for the benefit of all tenants (and invitees) on the particular floor
and other floors and (b) other areas of the Project available for the use and
benefit of all tenants (and invitees).

1.09. "Computation Year" shall mean a fiscal year consisting of the
calendar year commencing January 1st of each year during the Term, commencing in
the year 2000 and continuing through the Term with a short or stub fiscal year
in (i) in the year 2000 for the period between the Term Commencement Date and
December 31 of such year and (ii) any partial fiscal year in which the Lease
expires or is terminated for the period between January 1 of such year and the
date of lease termination or expiration.

1
<PAGE>

1.10. "Landlord's Broker" shall mean the individual or corporate broker
identified on the Basic Lease Information sheet as the broker for Landlord.

1.11. "Landlord's Contribution" shall have the meaning given in Exhibit
-------
B.
- -

1.12. "Landlord's Work" shall mean the improvements to the Leased
Premises and the Common Areas to be installed at Landlord's expense pursuant to

Exhibit B attached hereto.
- ---------

1.13. "Leased Premises" shall mean the floor area more particularly
shown on the floor plan attached hereto as Exhibit A-2, containing the Rentable
-----------
Area (as such term is defined in Section 1.18 below) specified on the Basic
Lease Information sheet.

1.14. "Net Rent" shall mean the total of Base Rent and Tenant's
Proportionate Share of Basic Operating Cost.

1.15. "Permitted Use" shall mean general office, and any other related
lawful use; provided, however, that Permitted Use shall not include (a) offices
or agencies of any foreign government or political subdivision thereof; (b)
offices of any agency or bureau of any state, county or city government; (c)
offices of any health care professionals; (d) schools or other training
facilities which are not ancillary to corporate, executive or professional
office use; or (e) retail or restaurant uses.

1.16. "Project" shall mean the Building situated at 1400 65/th/ Street,
Emeryville, California, the parking areas affiliated therewith, and the real
property on which the Building and the parking areas are located.

1.17. "Rent" shall mean Net Rent plus Additional Rent.

1.18. "Rentable Area" shall mean the area or areas of space in the
Building determined in accordance with the Standard Method for Measuring Floor
Area in Office Buildings as most recently published by the Building Owners and
Managers Association International (ANSI-Z65.1-1996) and including a
proportionate allocation of the square footage of the Building's elevator and
mechanical equipment areas, telephone and electrical rooms, janitorial service
areas, public lobbies and corridors, which method of measurement shall be
subject to reasonable revision by Landlord from time to time. The Rentable Area
of the Leased Premises has been calculated on the basis of the foregoing
definition and the application of a twelve percent (12%) load factor to the
useable area determined in accordance with such definition, and prior to the
execution of this Lease, Tenant has had an opportunity to verify Landlord's
calculation of Rentable Area and make its own measurements thereof. It is
agreed for all purposes of this Lease to be the amount stated on the Basic Lease
Information sheet.

1.19. "Security Deposit" shall mean the amount specified on the Basic
Lease Information sheet to be paid by Tenant to Landlord and held and applied
pursuant to Section 5.14.

1.20. "Substantial Completion" shall mean (and the Leased Premises
shall be deemed "Substantially Complete") when (i) installation of Landlord's
Work and the Tenant Improvements

2
<PAGE>

(and any Tenant Extra Improvements installed by Landlord's contractor, or, if
permitted by Landlord, any Tenant Extra Improvements installed by Tenant's
contractor within the time schedule established by Landlord's contractor or
consultant for performance of such work) has occurred; (ii) the parking
facilities are available for use by Tenant and its employees and Tenant has
direct access from the street to the elevator lobby on the floor (or floors)
where the Leased Premises are located; (iii) basic services (as described in
Section 4.01) are available to the Leased Premises; (iv) Landlord's architect
has issued a certificate of Substantial Completion with respect to the Leased
Premises; (v) the Common Areas of the Project have been completed and are
available for use by Tenant and other tenants of the Building; and (vi) a
certificate of occupancy or its equivalent or a temporary occupancy permit for
the Leased Premises has been issued by appropriate governmental authorities.
Substantial Completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" items or similar corrective work.

1.21. "Tenant Extra Improvements" shall mean the improvements to the
Leased Premises approved by Landlord and to be installed at Tenant's expense
pursuant to Exhibit B, if any.
---------

1.22. "Tenant Improvements" shall mean the tenant improvements and the
Tenant Extra Improvements (if any) installed or to be installed for Tenant by
Landlord pursuant to Exhibit B subject to the Landlord's Contribution.
---------

1.23. "Tenant's Broker" shall mean the individual or corporate broker
identified on the Basic Lease Information sheet as the broker for Tenant.

1.24. "Tenant's Physical Possession Date" shall mean February 1, 2000
or thirty (30) days prior to the Term Commencement Date, whichever is later.

1.25. "Tenant's Proportionate Share" is specified on the Basic Lease
Information sheet and is based on the percentage which the Rentable Area of the
Leased Premises bears to the total Rentable Area of the Project, subject to
adjustment in the event of the remeasurement of the Building or the Project as
permitted under Section 1.17 above.

1.26. "Term" shall mean the period commencing with the Term
Commencement Date and ending at midnight on the Term Expiration Date.

1.27. "Term Commencement Date" shall mean the date when the Term
commences as determined pursuant to Section 3.01 hereof.

1.28. "Term Expiration Date" shall mean the date when the Term shall
end as determined pursuant to Section 3.01 hereof, unless sooner terminated
pursuant to the terms of this Lease or unless extended pursuant to the
provisions of Section 8.01.

1.29. Other Terms. Other terms used in this Lease and on the Basic
Lease Information sheet shall have the meanings given to them herein and
thereon.

3
<PAGE>

Article 2.
Leased Premises

2.01. Lease. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Leased Premises upon all of the terms, covenants and
conditions set forth in this Lease.

2.02. Acceptance of Leased Premises. Tenant acknowledges that: (a) it
has been advised by Landlord, Landlord's Broker and Tenant's Broker, if any, to
satisfy itself with respect to the present and future suitability of the Leased
Premises for Tenant's intended use; (b) Tenant has made such inspection and
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to Tenant's occupancy of the
Leased Premises and the term of this Lease; and (c) neither Landlord nor
Landlord's Broker nor any of Landlord's agents has made any oral or written
representations or warranties with respect to the condition, suitability or
fitness of the Leased Premises other than as may be specifically set forth in
this Lease. Except as specifically otherwise set forth in this Lease, Tenant
accepts the Leased Premises in its AS IS condition existing on the date Tenant
executes this Lease, subject to all matters of record and applicable laws,
ordinances, rules and regulations. Tenant acknowledges that neither Landlord
nor Landlord's Broker nor any of Landlord's agents has agreed to undertake any
alterations or additions or to perform any maintenance or repair of the Leased
Premises except for the routine maintenance and janitorial work specified herein
and except as may be expressly set forth in Exhibit B. Notwithstanding the
---------
foregoing and anything to the contrary in this Lease, (i) prior to the Term
Commencement Date, Landlord shall complete the Landlord's Work and Substantially
Complete the Tenant Improvements, all in accordance with the provisions of

Exhibit B, and (ii) Landlord warrants that (A) for a period of one (1) year from
- ---------
the date of Substantial Completion of each component of the Tenant Improvements
and the Landlord Improvements, each such component shall remain in good
condition and repair and free of defects, and (B) as of the Term Commencement
Date, the roof and all other portions of the Leased Premises shall be in good
condition and working order and free of defects. In the event that it is
determined that the foregoing warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessor's sole
cost, rectify such violation. Lessee's failure to give written notice to Lessor
of patent defects within one hundred eighty (180) days after the Term
Commencement Date shall cause the conclusive presumption that Lessor has
complied with all of Lessor's obligations hereunder (except that Lessor shall
remain obligated to correct any latent defects). Notwithstanding the foregoing,
the cost of the Tenant Improvements shall include the cost incurred within the
Leased Premises, prior to the Term Commencement Date, of causing the Tenant
Improvements to be constructed in accordance with the terms of this Lease
including applicable government rules and regulations.

2.03. [Intentionally Deleted].

2.04. Reservation of Rights. Landlord reserves the right from time to
time, so long as the parking facilities and reasonable access and basic services
to the Leased Premises remain available, to install, use, maintain, repair,
relocate and/or replace pipes, conduits, wires and equipment within and around
the Building and to do and perform such other acts and make such other changes
in, to or with respect to the Building or the Project (including without
limitation with respect to the driveways, parking areas, walkways and entrances
to the Project) as Landlord may, in the exercise

4
<PAGE>

of sound business judgment, and good property management practices, determine to
be appropriate. In connection therewith, Landlord shall have the right to close
temporarily any of the Common Areas so long as reasonable access to the parking
facilities and the Leased Premises remains available. The Landlord shall provide
Tenant with not less than twenty-four (24) hours prior notice (except in cases
of emergency) and shall use reasonable efforts to conduct its activities in a
manner which is least disruptive to Tenant's use.

2.05. Associated Rights Granted to Tenant.

(a) Tenant shall have the right to install on the roof, in
areas specified by Landlord in Landlord's sole and absolute discretion, and at
Tenant's sole cost, the following equipment (the "Equipment"):

(1) Satellite Dish. One satellite dish with a diameter
--------------
no greater than two (2) feet.

(2) Supplemental HVAC. A supplemental HVAC for the
-----------------
specific, limited purpose of cooling a single server room within the Leased
Premises of not more than 1,000 square feet in size and which shall be part of
the Tenant Improvements.

(b) In installing the Equipment, Tenant shall adhere to
industry standards for installation and workmanship, all work to be completed to
Landlord's reasonable satisfaction. All engineering and design work shall be
undertaken by Tenant, at its sole expense. Upon termination of the Lease, Tenant
shall, if so requested by Landlord, remove the Equipment and shall repair, to
Landlord's reasonable satisfaction, any damage caused by the installation or
removal of the Equipment. To maintain any roof warranty of the Building, Tenant
shall use such roofing contractors as directed by Landlord.

(c) Tenant shall, at its sole cost, immediately repair and
restore to its prior condition any damage to the Leased Premises, the Building
or the Project caused by the installation, operation or maintenance of the
Equipment. If Tenant fails to repair and restore damage caused to the Leased
Premises, the Building or the Project within a reasonable time, Landlord shall
have the right to repair and restore such damage and receive reimbursement from
Tenant of all costs incurred by Landlord.

(d) No installation of the Equipment shall be made by Tenant
without the prior written consent of Landlord, which shall not be unreasonably
withheld. Tenant shall obtain all necessary governmental permits required for
any installation, alteration, addition, or improvement approved by Landlord and
shall comply with all applicable governmental law, regulations, ordinances, and
codes.

Article 3.
Term, Use and Rent

3.01. Term. Except as otherwise provided in this Lease, the Term shall
commence on the Scheduled Term Commencement Date, and shall continue in full
force for the Term. Landlord shall use reasonable efforts to deliver the Leased
Premises to Lessee on or before the Scheduled Term

5
<PAGE>

Commencement Date. Provided that Landlord uses such reasonable efforts, if the
Leased Premises are not Substantially Complete by the Scheduled Term
Commencement Date for any reason, Landlord shall not be subject to any claims,
damages or liabilities by reason thereof, but (i) the Term Commencement Date
shall become the earlier of (a) the day when the Leased Premises are
Substantially Complete, or (b) the day when the Leased Premises would have been
Substantially Complete but for Tenant Delay (as defined in Exhibit B), and (ii)
the Term Expiration Date shall become the date which will allow for the same
length of term as originally contemplated on the Basic Lease Information sheet
(plus any partial month). Landlord shall provide Tenant as much notice as
circumstances allow of the date when Landlord expects to achieve Substantial
Completion, based upon the progress of the Tenant Improvements. Tenant's
obligation to pay Rent and its other obligations under this Lease shall commence
upon the Term Commencement Date (except as expressly otherwise provided herein
with respect to obligations arising earlier). When the Term Commencement Date
and the Term Expiration Date have been ascertained, the parties shall promptly
execute a Confirmation of Term of Lease substantially in the form attached as
Exhibit C. Tenant shall be given physical possession of the Leased Premises on
- ---------
the Tenant's Physical Possession Date in order for Tenant to install furniture,
equipment, cabling and fixtures, and otherwise to prepare the Leased Premises
for occupancy. From the Tenant's Physical Possession Date through the Term
Commencement Date, Tenant shall be subject to all of the covenants in this
Lease, except that Tenant shall not be obligated to pay Rent. Tenant's
obligation to pay Rent shall commence in accordance with Section 3.03 below. In
the event the Term Commencement Date shall not have occurred for any reason
whatsoever (other than a Tenant Delay or a delay of a type described in Section
9.12 of this Lease) on or before August 1, 2000, then Tenant may terminate this
Lease upon written notice to Landlord whereupon any monies previously paid by
Tenant to Landlord shall be reimbursed to Tenant; provided, however, that the
August 1, 2000 date may not be extended for more than thirty (30) days on
account of delays of a type described in Section 9.12 of this Lease.

3.02. Use. Tenant shall use the Leased Premises solely for the
Permitted Use and for no other use or purpose, except as permitted by Landlord
pursuant to Landlord's written consent, which consent will not be unreasonably
withheld. It shall not be deemed unreasonable for Landlord to withhold its
consent to a proposed change of use if the proposed use is one set forth in
Section 1.15(a) through (e).

3.03. Base Rent.

(a) Tenant shall pay the Base Rent to Landlord in accordance
with the Basic Lease Information sheet and in the manner described below. Tenant
shall pay the Base Rent for the first (1/st/) month of the Term upon execution
of this Lease. Commencing with the first day of the second (2/nd/) calendar
month of the Term, Tenant shall pay the Net Rent (consisting of Base Rent plus,
when applicable in accordance with Section 3.04 below, Tenant's Proportionate
Share of Basic Operating Cost) in monthly installments on or before the first
day of each calendar month during the Term and any extensions or renewals
thereof, in advance without demand and without any reduction, abatement,
counterclaim or setoff, in lawful money of the United States at Landlord's
address specified on the Basic Lease Information sheet or at such other address
as may be designated by Landlord in the manner provided for giving notice under
Section 9.11 hereof.

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(b) If the Term commences on other than the first day of a
month, then the Base Rent provided for such partial month shall be prorated
based upon a thirty (30)-day month and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date
together with the other amounts payable on that day. If the Term terminates on
other than the last day of a calendar month, then the Net Rent provided for such
partial month shall be prorated based upon a thirty (30)-day month and the
prorated installment shall be paid on the first day of the calendar month in
which the date of termination occurs.

3.04. Tenant's Proportionate Share of Basic Operating Cost.

(a) Commencing on the Term Commencement Date and continuing
through the remainder of the Term, Tenant shall pay to Landlord Tenant's
Proportionate Share of the Basic Operating Cost attributable to each Computation
Year.

(b) During the first Computation Year, on or before the first day
of each month during such Computation Year, Tenant shall pay to Landlord one-
twelfth (1/12th) of Landlord's estimate of the amount payable by Tenant under
Section 3.04(a) as set forth in Landlord's written notice to Tenant delivered on
or before the Term Commencement Date. During the last month of each Computation
Year (or as soon thereafter as practicable), Landlord shall give Tenant notice
of Landlord's estimate of the amount payable by Tenant under Section 3.04(a) for
the following Computation Year. On or before the first day of each month during
the following Computation Year, Tenant shall pay to Landlord one-twelfth (1/12)
of such estimated amount, provided that if Landlord fails to give such notice in
the last month of the prior year, then Tenant shall continue to pay on the basis
of the prior year's estimate until the first day of the calendar month next
succeeding the date such notice is given by Landlord; and from the first day of
the calendar month following the date such notice is given, Tenant's payments
shall be adjusted so that the estimated amount for that Computation Year will be
fully paid by the end of that Computation Year. If at any time or times Landlord
determines that the amount payable under Section 3.04(a) for the current
Computation Year will vary from its estimate given to Tenant, Landlord, by not
less than thirty (30) days' notice to Tenant, may revise its estimate for such
Computation Year, and subsequent payments by Tenant for such Computation Year
shall be based upon such revised estimate.

(c) Within sixty (60) days following the end of each Computation
Year, Landlord shall deliver to Tenant a statement of amounts payable under
Section 3.04(a) for such Computation Year prepared by Landlord's agent. If such
statement shows an amount owing by Tenant that is less than the payments for
such Computation Year previously made by Tenant, Landlord shall credit such
amount to the next payment(s) of Net Rent falling due under this Lease. If such
statement shows an amount owing by Tenant that is more than the estimated
payments for such Computation Year previously made by Tenant, Tenant shall pay
the deficiency to Landlord within thirty (30) days after delivery of such
statement. If, within one (1) year of Tenant's receipt of Landlord's statement,
Tenant notifies Landlord that Tenant desires to audit or review Landlord's
statement, Landlord shall cooperate with Tenant to permit such audit or review
during normal business hours. Landlord shall make available in the San Francisco
Bay Area at Landlord's, or at Landlord's election at Landlord's property
manager's place of business, such books and records as are reasonably necessary
for Tenant to conduct and complete such audit, which books and records shall be
prepared and maintained in accordance with generally accepted accounting
principles applied on a consistent basis. Tenant shall

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have the right to make copies of such books and records at Tenant's sole cost
and expense. Tenant shall bear all other costs and expenses associated with
Tenant's audit (including fees of Tenant's auditor) except as otherwise provided
below. If Tenant conducts a review (rather than an audit as described below) of
Landlord's books and records, Tenant may thereafter cause the same to be audited
at any time within thirty (30) days of completion of such review; provided,
however, that Tenant must notify Landlord of its desire to audit Landlord's
statement within ninety (90) days of Tenant's receipt of Landlord's statement.
Within ten (10) business days of completion of any audit, if Tenant desires to
challenge Landlord's statement, then Tenant shall provide Landlord with a copy
of Tenant's auditor's report. Within thirty (30) days of Landlord's receipt of
Tenant's auditor's report, Landlord shall notify Tenant as to whether Landlord
agrees or disagrees with the conclusions reached in Tenant's auditor's report.
Landlord's failure to respond shall be deemed to constitute a disagreement with
the Tenant's auditor's report. After Landlord's notice, Landlord and Tenant
shall endeavor to resolve any disagreements regarding Tenant's auditor's report.
In the event such audit reveals a discrepancy in Tenant's favor, and Landlord
agrees with the conclusions of Tenant's auditor, then Landlord shall credit the
amount of such discrepancy to the next payment(s) of Net Rent falling due under
this Lease, and if such discrepancy exceeds five percent (5%) of the amount
property payable by Tenant for the Computation Year covered by the audit,
Landlord also shall pay all reasonable costs of the audit. In the event such
audit reveals a discrepancy in Landlord's favor, Tenant shall pay the amount of
the discrepancy to Landlord within ten (10) business days of completion of the
audit. Any such audit may only be conducted by an independent locally or
nationally recognized accounting firm or a locally or nationally recognized real
estate management or consulting firm that is not being compensated by Tenant on
a contingency fee basis. The failure of Tenant to notify Landlord that Tenant
desires an audit within one (1) year of Tenant's receipt of Landlord's statement
under this Section 3.04(c) shall constitute an acceptance by Tenant of
Landlord's statement and a waiver by Tenant of its right to audit for such
Computation Year. If Tenant commences an audit in accordance with this Section
3.04(c), then such audit and the Tenant's auditor's report must be completed
within forty-five (45) days of Tenant's notice to Landlord of Tenant's desire to
audit. Failure of Tenant to complete the audit within such forty-five (45) day
period shall constitute an acceptance by Tenant of Landlord's statement for such
Computation Year. The respective obligations of Landlord and Tenant under this
Section 3.04(c) shall survive the Term Expiration Date, and, if the Term
Expiration Date is a day other than the last day of a Computation Year, the
adjustment in Tenant's Proportionate Share of Basic Operating Cost pursuant to
this Section 3.04(c) for the Computation Year in which the Term Expiration Date
occurs shall be prorated in the proportion that the number of days in such
Computation Year preceding the Term Expiration Date bears to three hundred
sixty-five (365).

(d) Landlord shall have the same remedies for a default in the
payment of Tenant's Proportionate Share of Basic Operating Cost as for a default
in the payment of Base Rent. If any review or audit conducted by another tenant
of the Project reveals an overcharge which also is applicable to Tenant, then
without regard to whether Tenant has exercised its review and audit rights
hereunder, Landlord shall promptly notify Tenant of the discrepancy and credit
the excess amount against the next payment(s) of Net Rent. In the event that
Landlord modifies any statement of Basic Operating Costs for a particular
Computation Year after Tenant's review and audit rights for such Computation
Year have lapsed, Tenant's review and audit rights shall be reinstated for the
time periods and upon the terms set forth in Section 3.04(c).

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(e) If the parties cannot agree on the results of Tenant's audit
within sixty (60) days following delivery of Tenant's auditor's report to
Landlord, then either party may commence arbitration with respect to the matters
disputed in Tenant's audit by notice to the other party ("Arbitration Notice").
The failure of Tenant to provide an Arbitration Notice within one hundred twenty
(120) days of Tenant's delivery of the Tenant's auditor's report to Landlord
shall constitute a waiver by Tenant of its right to arbitrate hereunder, and
except for such adjustments as have been agreed to by Landlord, Landlord's
statement provided under Section 3.04(c) shall be conclusive and binding to
Tenant. Within thirty (30) days of the Arbitration Notice, Landlord and Tenant
shall jointly select an arbitrator, who shall be unaffiliated in any manner with
either Landlord or Tenant and shall have been active over the five (5) year
period ending on the date of such appointment in the leasing of comparable
commercial properties in the vicinity of the Building. Neither Landlord nor
Tenant shall consult with such arbitrator as to his or her opinion as to the
disputed matters prior to the appointment. The determination of the arbitrator
shall be limited solely to issues raised by Tenant's auditor's report or by
Landlord's response to Tenant's auditor's report. Such arbitrator may hold
hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary. In addition, Landlord or Tenant may submit
to the arbitrator with a copy to the other party within five (5) business days
after the appointment of the arbitrator any data and additional informa tion
that such party deems relevant to the determination by the arbitrator and the
other party may submit a reply in writing within five (5) business days after
receipt of such data and additional information. The arbitrator shall conduct
such evidentiary hearings as the arbitrator deems necessary or appropriate, and
shall conduct such arbitration in accordance with the commercial rules of the
American Arbitration Association, insofar as the same are not expressly
inconsistent with the provisions of this Section 3.04(e).

(1) The arbitrator shall, within thirty (30) days of his or
her appointment, reach a decision as to the disputed matters in Tenant's
auditor's report, and shall notify Landlord and Tenant of such determination.

(2) The decision of the arbitrator shall be binding upon
Landlord and Tenant.

(3) If Landlord and Tenant fail to agree upon and appoint
such arbitrator, then the appointment of the arbitrator shall be made by the
American Arbitration Association.

(4) If Landlord and Tenant fail to agree upon other matters
relating to the arbitration, then the rules of the American Arbitration
Association shall govern such arbitration.

(5) The cost of arbitration shall be paid by the
substantially unsuccessful party. As used herein, Landlord shall only be deemed
to be the substantially unsuccessful party if the discrepancy in Tenant's favor
is greater then five percent (5%) of Tenant's Proportionate Share of Basic
Operating Cost paid by Tenant for the Computation Year being audited.

(6) The arbitration proceeding and all evidence given or
discovered pursuant thereto shall be maintained in confidence by all parties.

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<PAGE>

(7) Judgment upon the award rendered by the arbitrator may
be entered by either party into any court having jurisdiction, or application
may be made to such court for a judicial recognition of the award or an order of
enforcement thereof, as the case may be.

3.05. Basic Operating Cost.

(a) Basic Operating Cost shall mean all commercially reasonable
and necessary expenses and costs (but not specific costs which are separately
billed to and paid by particular tenants of the Project ) as determined by
Landlord in its reasonable opinion of every kind and nature which Landlord shall
pay or become obligated to pay because of or in connection with the management,
ownership, maintenance, repair, preservation and operation of the Project and
its supporting facilities directly servicing the Project (determined in
accordance with generally accepted accounting principles, consistently applied)
including, but not limited to, the following:

(1) Wages, salaries and related expenses and benefits of all
on-site and off-site employees and personnel engaged in the operation,
maintenance, repair and security of the Project, to the extent such charges are
directly allocable to services rendered by the employees and personnel for the
benefit of the Project.

(2) Costs of Landlord's office (or of a property management
office if Landlord is not the property manager) and office operation in the
Project (provided, however, if such office is used for business activities other
than Project management, only a reasonable allocation of such cost may be
included in Basic Operating Cost), as well as the costs of operation of a room
for delivery and distribution of mail to tenants of the Building.

(3) All supplies, materials, equipment and equipment rental
used in the operation, maintenance, repair and preservation of the Project.

(4) Utilities, including water, sewer and power, telephone,
communication and cable television facilities, lighting, heating, air
conditioning and ventilating the entire Project; provided, however that the
Leased Premises shall be (A) separately metered for lights and convenience
power, and (B) separately metered using Landlord's energy management system for
the Project for air conditioning and ventilation.

(5) All maintenance, janitorial and service agreements for
the Project and the equipment therein, including, without limitation, alarm
and/or security service, window cleaning, elevator maintenance, sidewalks,
landscaping, Building exterior and service areas; provided, however, that Tenant
shall have the right to employ its own janitor to clean the Leased Premises, in
which event Tenant shall not be charged by Landlord for janitorial services to
the Leased Premises but Tenant shall be responsible for its prorata share of
janitorial services to the Common Areas.

(6) A management cost recovery in an amount not to exceed
the lesser of four percent (4%) of all Rent (excluding such management cost
recovery) derived from the Project or the actual costs charged by the property
manager.

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<PAGE>

(7) Day-to-day ordinary and reasonable legal and accounting
services incurred to the extent attributable to the normal operation of the
Project, excluding those expenses incurred in lease negotiations, termination of
leases, extension of leases or legal costs incurred in proceedings by or against
any specific tenant.

(8) All insurance costs, including, but not limited to, the
cost of all risk property and liability coverage and rental income and
earthquake insurance applicable to the Project and Landlord's personal property
used in connection therewith, as well as commercially reasonable deductible
amounts applicable to such insurance; provided, however, that Landlord may, but
shall not be obligated to, carry earthquake insurance.

(9) Repairs, replacements and general maintenance (except
for repairs paid by proceeds of insurance or by Tenant or other tenants of the
Project or third parties, and alterations attributable solely to tenants of the
Project other than Tenant).

(10) All real estate or personal property taxes, possessory
interest taxes, business or license taxes or fees, service payments in lieu of
such taxes or fees, annual or periodic license or use fees, excises, transit
charges, housing fund assessments, open space charges, assessments, bonds,
levies, fees or charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind which are assessed, levied, charged,
confirmed or imposed by any public authority upon the Project (or any portion or
component thereof), its operations, this Lease, or the Rent due hereunder (or
any portion or component thereof), except: (i) inheritance or estate taxes
imposed upon or assessed against the Project, or any part thereof or interest
therein, and (ii) Landlord's personal or corporate income, gift, franchise or
transfer taxes.

(11) Amortization in accordance with generally accepted
accounting principles, consistently applied (together with reasonable financing
charges) of capital improvements made to the Project subsequent to the Term
Commencement Date which are designed to improve the operating efficiency of the
Project (provided that the amortized amount shall not exceed the anticipated
cost savings), or which may be required by governmental authorities pursuant to
laws not in effect on the Term Commencement Date, including those improvements
required for energy conservation and for the benefit of individuals with
disabilities ("ADA Improvements") or for energy conservation.

(b) With respect to subsection 3.05(a)(11) above, to the best of
Landlord's knowledge, the Project is in compliance with the Americans with
Disabilities Act and state law applicable to access by disabled persons
(collectively, "ADA") . ADA Improvements, as defined in subsection 3.05(a)(11)
above, includes ADA compliance work in any part of the Project required by
governmental authorities due to changes in law, rules or regulations after the
date of this Lease. ADA Improvements, for the purposes of Section 3.05(a)(11),
shall not include any ADA compliance work in other tenant's spaces in the
Project which is triggered by virtue of tenant improvement work in such space.
Tenant shall not be responsible for the cost of improvements for ADA compliance
work triggered by multi-tenanting of the Building. Tenant shall be responsible
for one hundred percent (100%) of the cost of ADA compliance work triggered by
the Tenant Improvements (or any subsequent alterations or additions made by
Tenant). Tenant shall promptly reimburse Landlord for any costs incurred by
Landlord with respect thereto. If not otherwise paid for by Tenant, Landlord

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<PAGE>

shall be entitled to deduct from Landlord's Contribution any amount incurred by
Landlord with respect to ADA compliance work triggered by the Tenant
Improvements. Notwithstanding the foregoing, Landlord and not Tenant shall be
responsible for ADA compliance work exterior to the Leased Premises triggered by
the Tenant Improvements which Landlord was obligated to comply with on the Term
Commencement Date.

(c) In the event any of the Basic Operating Costs are not allocable
solely to the Building or are not provided on a uniform basis, Landlord shall
make an appropriate and equitable adjustment, in Landlord's commercially
reasonable judgment, to the relevant cost allocations to the Building and Tenant
shall pay its proportionate share of such Basic Operating Costs allocable solely
to the Building and 100% of such Basic Operating Costs allocable solely to the
Leased Premises.

(d) Notwithstanding any other provision of this Lease to the
contrary, in the event that the Project is not fully occupied during any year of
the Term, an adjustment shall be made in computing Basic Operating Cost for such
year so that Basic Operating Cost shall be computed as though the Project had
been 95% occupied during such year. Exhibit F to this Lease sets forth
---------
Landlord's good faith, itemized estimate of the Basic Operating Costs for the
Building.

(e) The following items shall be excluded from Basic Operating Costs:
(i) depreciation on the Building and the Project; (ii) debt service; (iii)
rental under any ground or underlying lease; (iv) attorneys' fees and expenses
incurred in connection with lease negotiations with prospective Project tenants
or alleged defaults with other Project tenants; (v) the cost of any improvements
or equipment which would be properly classified as capital expenditures (except
for any capital expenditures expressly included in Section 3.05(a)(11)); the
-------------------
cost of decorating, improving for tenant occupancy, painting or redecorating
portions of the Building or Project to be demised to tenants; (vii) advertising
expenses relating to vacant space; or (viii) real estate brokers' or other
leasing commissions. Notwithstanding anything to the contrary in this Lease,
"Basic Operating Costs" shall not include and Tenant shall in no event have any
obligation to perform or to pay directly, or to reimburse Landlord for, all or
any portion of the following repairs, maintenance, improvements, replacements,
premiums, claims, losses, fees, charges, costs and expenses (collectively,
"Costs"): (a) Costs occasioned by the act, omission or violation of any law by
Landlord, any other occupant of the Project, or their respective agents,
employees or contractors; (b) Costs occasioned by casualties or by the exercise
of the power of eminent domain; (c) Costs to correct any construction defect in
the Project or to comply with any covenant, condition, restriction,
underwriter's requirement or law applicable to the Project on the Term
Commencement Date; (d) Costs of any renovation, improvement, painting or
redecorating of any portion of the Project not made available for Tenant's use;
(e) earthquake insurance to the extent such premiums are not commercially
reasonable and insurance Costs for coverage not customarily paid by tenants of
similar projects in the vicinity of the Leased Premises, increases in insurance
Costs caused by the activities of another occupant of the Project, insurance
deductibles in excess of $10,000 per year, and co-insurance payments; (f) Costs
incurred in connection with the presence of any Hazardous Material, except to
the extent caused by the release or emission of the Hazardous Material in
question by Tenant, its agents, employees, contractors or invitees; (g) expense
reserves; (h) Costs of structural repairs to the Project; (i) Cost which could
reasonably be allocated to other buildings in the Project; and (j) any tax or
assessment expense or any increase therein (i) levied on Landlord's rental
income, unless such tax or assessment expense is imposed in lieu of real
property taxes; (ii) in excess of the

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amount which would be payable if such tax or assessment expense were paid in
installments over the longest permitted term; or (iii) attributable to
Landlord's inheritance, transfer, estate or state taxes.

Article 4.
Landlord's Covenants

4.01. Basic Services. Landlord shall operate the Project to a standard
of quality consistent with that of other similar-class office projects in the
Emeryville office market, and, subject to Tenant's obligation to pay Tenant's
Proportionate Share of Basic Operating Cost, Landlord shall:

(a) Administer improvement of the Leased Premises in accordance
with Exhibit B (if any).
---------

(b) Furnish Tenant during Tenant's occupancy of the Leased
Premises the following basic services:

(1) Hot and cold water at those points of supply provided
for general use of other tenants in the Project; central heat and air
conditioning in season, during the Building hours of operation (which shall
be specified in the rules and regulations for the Project adopted pursuant
to Section 5.17, but in any case shall be not less than 7:00 a.m. to 6:00
p.m. weekdays and 8:00 a.m. to 1:00 p.m. Saturdays, excluding public
holidays) and at such temperatures and in such amounts as are considered
reasonably required for the comfortable use and occupancy of the Leased
Premises (which shall not be less than 65 degrees Fahrenheit or greater
than 76 degrees Fahrenheit, provided that the outdoor temperature is not
greater than 95 degrees Fahrenheit) or, in all events, as may be permitted
or controlled by applicable laws, ordinances, rules and regulations.

(2) Structural and exterior maintenance (including exterior
glass and glazing) and routine maintenance, repairs and electric lighting
service for all public areas and service areas of the Project in the manner
and to the extent reasonably deemed by Landlord to be standard.

(3) Janitorial service to both the Common Areas and the
Leased Premises on a five (5) day per week basis, excluding holidays.

(4) Electric lighting service throughout the Leased Premises
and electrical facilities to provide sufficient power for standard size
personal computers, network servers and equipment comparable thereto, and
other standard office machines of similar low electrical consumption, but
not including electricity required for special lighting in excess of
Building Standard Improvements, and any other item of electrical equipment
which consumes electricity in amounts in excess of standard office
equipment, which standard shall be not less than 3 watts per rentable
square foot for convenience power and 1.5 watts per rentable square foot
for lighting, and not more than a total of 6 watts per rentable square foot
for convenience power and lighting combined. Electric power within the
Leased Premises,

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<PAGE>

except for the HVAC system, shall be separately metered at Tenant's expense
(or as a cost deducted from the Landlord's Contribution for Tenant
Improvements). Electric power for the HVAC system within the Leased
Premises shall be separately metered to Tenant through Landlord's energy
management system for the Project and billed directly to Tenant by Landlord
(without profit or mark-up).

(5) Building Standard lamps, bulbs, starters and ballasts used in
the Leased Premises.

(6) Public and handicap elevator service serving the floors on
which the Leased Premises are situated, including freight elevator service
when prearranged with Landlord, subject to such rules and regulations as
Landlord shall promulgate from time to time.

(c) Landlord shall not be liable for damages to either person or
property, nor shall Landlord be deemed to have evicted Tenant, nor shall there
be any abatement of Rent, nor shall Tenant be relieved from performance of any
covenant on its part to be performed under this Lease by reason of any (i)
deficiency in the provision of basic services; (ii) breakdown of equipment or
machinery utilized in supplying services; or (iii) curtailment or cessation of
services due to causes or circumstances beyond the reasonable control of
Landlord or by the making of the necessary repairs or improvements, unless such
deficiency, breakdown, curtailment or cessation is due to the active gross
negligence or willful misconduct of Landlord; provided, however, there shall be
an abatement of Net Rent in the event and to the extent that there is a material
diminishment in Tenant's ability to conduct its business at the Leased Premises
as a result of the presence of any Hazardous Materials which does not result
from Tenant's or Tenant's agents', employees', contractors', invitees' or
licensees' release or emission of such Hazardous Material persisting for more
than eleven (11) consecutive days, or as a result of the absence of (A)
electrical lighting services and/or electrical facilities or services for more
than forty-eight (48) hours, or (B) water for more than seventy-two (72) hours,
and in the event said interference persists for one hundred eighty (180) days,
Tenant may, at its option, terminate this Lease by written notice to Landlord.
Landlord shall use reasonable diligence to make such repairs as may be required
to machinery or equipment within the Project to provide restoration of services
and, where the cessation or interruption of service has occurred due to
circumstances or conditions beyond Project boundaries, to cause the same to be
restored, by diligent application or request to the provider thereof. In no
event shall any mortgagee or the beneficiary under any deed of trust referred to
in Section 5.12 be or become liable for any default of Landlord under this
Section 4.01(c).

4.02. Extra Services. Landlord shall provide to Tenant at Tenant's
sole cost and expense (and subject to the limitations hereinafter set forth) the
following extra services:

(a) If Tenant does not elect to provide its own janitorial
services for the Leased Premises, such extra cleaning and janitorial services
required if Tenant Improvements necessitate extra cleaning efforts or are not
consistent in quality and quantity with Building Standard Improvements
(provided, however, that Landlord has notified Tenant in connection with
approvals of Tenant's plans and specifications under Exhibit B that Landlord's
approval is conditioned upon the application of this Section 4.02(a));

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<PAGE>

(b) Additional air conditioning and ventilating capacity required
by reason of any electrical, data processing or other equipment, facilities or
services required to support the same, in excess of the amounts provided for in
Section 4.01(b)(4) above, when prearranged with Landlord;

(c) Heating, ventilation, air conditioning or extra electrical
service provided by Landlord to Tenant (i) during hours other than the Building
hours of operation specified in the rules and regulations for the Project
adopted pursuant to Section 5.17, which shall provide for Building hours of
operation of not less than 7:00 A.M. to 6:00 P.M., Monday through Friday
(excluding holidays) and from 8:00 A.M. to 1:00 P.M. on Saturday, or (ii) on
Saturdays after 1:00 P.M., Sundays, or holidays, all said heating, ventilation
and air conditioning or extra electrical service to be furnished pursuant to
such uniform procedures as may be established from time to time by Landlord for
the Building; provided, however, that because Tenant will be billed by Landlord
for Tenant's actual use of the air conditioning system within the Leased
Premises, the only additional charge for air conditioning under this Section
4.02(c) (i.e. other than the additional direct charges for actual use) shall be
the five percent (5%) management fee referenced in the last sentence of this
Section 4.02 which is intended to compensate Landlord for use of the air
conditioning system during hours other than the Building hours of operation and
shall be applied against the additional direct charges for actual use.

(d) Maintaining and replacing non-Building Standard lamps, bulbs,
starters and ballasts (whether or not the light fixtures were installed by
Landlord as part of the Tenant Improvements);

(e) Repair and maintenance service which is the obligation of
Tenant under this Lease, where either Tenant requests that the same be performed
by Landlord or where Tenant has failed to perform its obligation in a timely
manner;

(f) Repair, maintenance or janitorial service to the Leased
Premises, the Common Areas or the Project parking area which is required as a
result of the acts or omissions of Tenant, its agents, employees, contractors,
invitees or licensees; and

(g) Any basic service in amounts determined by Landlord to exceed
the amounts required to be provided under Section 4.01(b), but only if Landlord
elects to provide such additional or excess service.

For the purposes of this Section 4.02, if, in Landlord's
reasonable opinion, Tenant's use of electrical and/or water service at the
Leased Premises is excessive, Landlord may install a separate meter(s) at the
Leased Premises to measure the amount of electricity and/or water consumed by
Tenant therein; provided, however, that Tenant's use of electrical services
shall not be excessive if it does not exceed the total amount provided for in
Section 4.01(b)(4). The cost of such installation and of such excess electricity
and/or water (at the rates charged for such services by the local public
utility) shall be paid by Tenant to Landlord upon receipt by Tenant of a bill
therefor.

The cost chargeable to Tenant for all extra services shall
constitute Additional Rent and shall include a management fee payable to
Landlord of five percent (5%). Additional Rent shall be paid monthly by Tenant
to Landlord concurrently with the payment of Base Rent.

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<PAGE>

4.03. Window Coverings. All window coverings for the Leased Premises
shall be those provided by Landlord as Building Standard Improvements. Tenant
shall not place or maintain any window coverings, blinds, curtains or drapes
other than those supplied by Landlord on any exterior window without Landlord's
prior written approval, which Landlord shall have the right to grant or withhold
in its absolute and sole discretion.

4.04. Graphics and Signage. Landlord shall provide identification of
Tenant's name and suite numerals (i) on a building directory in the Building
lobby and (ii) at the main entrance door to the Leased Premises. Landlord
reserves the right to exclude any other names from the building directory. All
signs, notices, advertisements and graphics of every kind or character, visible
in or from the Common Areas or the exterior of the Leased Premises shall be
subject to Landlord's prior written approval, which Landlord shall have the
right to withhold in its absolute and sole discretion. Landlord may remove,
without notice to and at the expense of Tenant, any sign, notice, advertisement
or graphic of any kind inscribed, displayed or affixed in violation of the
foregoing requirement. All approved signs, notices, advertisements or graphics
shall be printed, affixed or inscribed at Tenant's expense by a person selected
by Landlord. Landlord shall be entitled to revise the Project graphics and
signage standards at any time at Tenant's sole cost and expense; provided,
however, after the initial such revision, any further revision shall be at
Landlord's sole cost and expense. Notwithstanding the foregoing, Tenant shall
have exterior signage on southeast corner of the East-Hi-Bay of the Building
subject to Landlord's reasonable approval (which may require that such signage
is commensurate with Tenant's proportionate share of space in the Project) and
any government approvals. Such signage may be of a size comparable to the
artist renderings of the Building in the Project brochure furnished to Tenant.
Tenant shall be responsible for the cost of any exterior signage.

4.05. Tenant Extra Improvements. All Tenant Extra Improvements (if any)
shall be installed at Tenant's cost, such installation to be made and paid for
pursuant to the provisions of Exhibit B. For purposes hereof, "costs" shall
---------
include, without limitation, all building permit fees for Tenant Extra
Improvements (not already included in the permit fees paid with respect to the
Landlord's or Tenant Improvements); payments to architects, engineers and other
design consultants for services and disbursements; and such reasonable
inspection fees as Landlord may incur. Landlord shall not seek the benefits of
depreciation deductions or income tax credit allowances for federal or state
income tax reporting purposes with respect to any Tenant Extra Improvements for
which Tenant has fully reimbursed Landlord under this Section 4.05.

4.06. Repair Obligation. Subject to Tenant's obligations under Section
3.04 to pay Tenant's Proportionate Share of Basic Operating Cost, Landlord shall
maintain and repair, in a manner consistent with the Comparable Buildings (as
defined in Section 8.01(a)(2)), all elements of the Project that are not the
express obligation of Tenant or other tenants of the Project, including without
limitation: (i) the structural portions of the Building; (ii) the exterior walls
of the Building, including exterior glass and glazing; (iii) the roof (including
both membrane and structure); (iv) all mechanical (including the HVAC system),
electrical, plumbing and life safety systems; (v) the Common Areas; (vi) the
Project parking area; and (vii) landscaped areas (if any). However, Landlord
shall not have any obligation to repair damage caused by Tenant, its agents,
employees, contractors, invitees or licensees. Landlord shall have the right,
but not the obligation, to undertake work of repair which Tenant is required to
perform under this Lease and which Tenant defaults in

16
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its obligation to perform. Tenant shall reimburse Landlord upon demand, as
Additional Rent, for all costs reasonably incurred by Landlord in performing any
such repair for the account of Tenant, together with an amount equal to five
percent (5%) of such costs to reimburse Landlord for its administration and
managerial effort. Except as specifically set forth in this Lease, Landlord
shall have no obligation whatsoever to maintain or repair the Leased Premises.
The parties intend that the terms of this Lease govern their respective
maintenance and repair obligations. Tenant expressly waives the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to such obligations or which affords Tenant the
right to make repairs at the expense of Landlord or terminate this Lease by
reason of the condition of the Leased Premises or any needed repairs. Landlord
shall perform and construct, and Tenant shall have no responsibility to perform
or construct, any repair, maintenance or improvements (a) necessitated by the
acts or omissions of Landlord or any other occupant of the Building, or their
respective agents, employees or contractors, (b) for which Landlord has a right
of reimbursement from others, and (c) which could be treated as a "capital
expenditure" under generally accepted accounting principles. Notwithstanding the
foregoing, Tenant shall pay for its share of the repairs described in subsection
(c) to the extent such costs are properly included in Basic Operating Costs.

4.07. Peaceful Enjoyment. Landlord covenants with Tenant that upon
Tenant paying the Rent and all other charges required under this Lease and
performing all of Tenant's covenants and agreements herein contained within
applicable notice and cure periods, Tenant shall peacefully have, hold and enjoy
the Leased Premises subject to all of the terms of this Lease and to any deed of
trust, mortgage or other agreement to which this Lease may be subordinate. This
covenant and the other covenants of Landlord contained in this Lease shall be
binding upon Landlord and its successors only with respect to breaches occurring
during its or their respective ownerships of Landlord's interest hereunder.

Article 5.
Tenant's Covenants

5.01. Payments by Tenant. Tenant shall pay Rent at the times and in
the manner provided in this Lease. All obligations of Tenant hereunder to make
payments to Landlord shall constitute Rent and failure to pay the same when due
shall give rise to the rights and remedies provided for in Section 7.08. If
there is more than one Tenant, the obligations imposed under this Lease upon
Tenant shall be joint and several.

5.02. Tenant Improvements. The Tenant Improvements shall be installed
and constructed by Landlord pursuant to Exhibit B. All Landlord's Work shall
---------
become the property of Landlord upon installation and shall be surrendered to
Landlord without compensation to Tenant upon termination of this Lease by lapse
of time or otherwise. All Tenant Extra Improvements permanently installed
pursuant to Section 4.05 (if any) shall become the property of Landlord upon
installation and shall be surrendered to Landlord without compensation to Tenant
upon termination of this Lease by lapse of time or otherwise.

5.03. Taxes on Personal Property and Tenant Extra Improvements. In
addition to, and wholly apart from its obligation to pay Tenant's Proportionate
Share of Basic Operating Costs, Tenant shall be responsible for, and shall pay
prior to delinquency, all taxes or governmental service

17
<PAGE>

fees, possessory interest taxes, fees or charges in lieu of any such taxes,
capital levies, and any other charges imposed upon, levied with respect to, or
assessed against Tenant's personal property, on the value of its Tenant Extra
Improvements (if any) and on its interest pursuant to this Lease. To the extent
that any such taxes are not separately assessed or billed to Tenant, Tenant
shall pay the amount thereof as invoiced to Tenant by Landlord. In no event
shall Tenant have to pay any portion of taxes, capital levies, and any other
charges imposed upon, levied with respect to, or assessed against the personal
property or the improvements of other tenants in the Project.

5.04. Repairs by Tenant. Subject to Section 4.06, Tenant shall be
obligated to maintain and repair the Leased Premises, to keep the same at all
times in good order, condition and repair, and, upon expiration of the Term, to
surrender the same to Landlord in the same condition as on the Term Commencement
Date, reasonable wear and tear, taking by condemnation, and damage that is
Landlord's responsibility under Section 7.07. Tenant's obligations shall
include, without limitation, the obligation to maintain and repair all walls,
floors, ceilings and fixtures and to repair all damage caused by Tenant, its
agents, employees, contractors, invitees and others using the Leased Premises
with Tenant's expressed or implied permission. At the request of Tenant,
Landlord shall perform the work of maintenance and repair constituting Tenant's
obligation under this Section 5.04 at Tenant's sole cost and expense and as an
extra service to be rendered pursuant to Section 4.02(e). Any work of repair and
maintenance performed by or for the account of Tenant by persons other than
Landlord shall be performed by contractors approved by Landlord, which approval
shall not be unreasonably withheld, and in accordance with procedures Landlord
shall from time to time establish. Tenant shall give Landlord prompt notice of
any damage to or defective condition in any part of the Building's mechanical,
electrical, plumbing, life safety or other system servicing, located in or
passing through the Leased Premises of which Tenant has actual notice.

5.05. Waste. Tenant shall not commit or allow its agents, employees,
contractors, invitees or licensees to commit any waste or damage in any portion
of the Leased Premises or the Project.

5.06. Assignment or Sublease.

(a) Tenant shall not voluntarily or by operation of law assign,
transfer or encumber (collectively "Assign") or sublet all or any part of
Tenant's interest in this Lease or in the Leased Premises without Landlord's
prior written consent given under and subject to the terms of this Section 5.06.
Notwithstanding anything to the contrary contained in this Lease, Landlord and
Tenant agree as follows, Tenant may assign this Lease or sublet the Leased
Premises, or any portion thereof, without Landlord's consent and without being
subjected to Section 5.06(c) or (e) below (but with prior written notice to
Landlord as discussed below): (i) an entity controlling, controlled by or under
common control with Tenant, (ii) a successor entity related to Tenant by merger,
consolidation, reorganization or government action, or (iii) a purchaser of
substantially all of Tenant's assets located in the Leased Premises.

(b) If Tenant desires to Assign this Lease or any interest herein
or sublet the Leased Premises or any part thereof, Tenant shall give Landlord
written notice of such intent. Tenant's notice shall specify the date the
proposed assignment or sublease would be effective and be accompanied by
information pertinent to Landlord's determination as to the financial and
operational responsibility and appropriateness of the proposed assignee or
subtenant, including,

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<PAGE>

without limitation, its name, business and financial condition, financial
details of the proposed transfer, the intended use (including any modification)
of the Leased Premises, and exact copies of all of the proposed agreement(s)
between Tenant and the proposed assignee or subtenant. Tenant shall promptly
provide Landlord with (i) such other or additional information or documents
reasonably requested (within ten (10) days after receiving Tenant's notice) by
Landlord, and (ii) an opportunity to meet and interview the proposed assignee or
subtenant, if requested by Landlord.

(c) Landlord shall have a period of ten (10) business days
following such interview and receipt of such additional information (or fifteen
(15) business days from the date of Tenant's original notice if Landlord does
not request additional information or an interview) within which to notify
Tenant in writing that Landlord elects either (i) to terminate this Lease as to
the space so affected as of the effective date specified by Tenant, in which
event Tenant will be relieved of all further obligations hereunder as to such
space, or (ii) to permit Tenant to Assign this Lease or sublet such space,
subject, however, to prior written approval of the proposed assignee or
sublessee by Landlord, such consent not to be unreasonably withheld so long as
the use of the Leased Premises by such proposed assignee or sublessee would be a
Permitted Use (unless otherwise approved by Landlord), the proposed assignee or
sublessee is of sound financial condition as determined by Landlord in its
reasonable discretion, the proposed assignee executes such reasonable assumption
documentation as Landlord shall require, and the proposed assignee or sublessee
is not already a tenant in the Building. Notwithstanding the foregoing, if
Landlord elects option (i) above, Tenant may elect to withdraw Tenant's request
to sublet or assign such portion of the Leased Premises by written notice to
Landlord given on or before the date which is five (5) business days following
Landlord's notice to Tenant of its intent to recapture such space. Upon such
notice by Tenant, Landlord's election to recapture the subject space in that
instance shall be null and void and Tenant shall retain possession of such
subject space. If Landlord fails to notify Tenant in writing of such election
within said period, Landlord shall be deemed to have waived option (i) above,
but written approval by Landlord of the proposed assignee or sublessee shall
still be required. Failure by Landlord to approve a proposed subtenant or
assignee shall not cause a termination of this Lease.

(d) In the event Tenant shall request the consent of Landlord to
any assignment or subletting hereunder, Tenant shall pay Landlord a processing
fee of $250.00 and shall reimburse Landlord for Landlord's reasonable attorneys'
fees incurred in connection therewith not to exceed $1,000. All such fees shall
be deemed Additional Rent under this Lease.

(e) Any rent or other consideration realized by Tenant under any
such sublease or assignment in excess of the Rent payable hereunder, after
recovery of the reasonable cost of Tenant Extra Improvements for which Tenant
has paid and reasonable subletting and assignment costs, including without
limitation any broker's commissions, attorneys' fees and remodeling fees shall
be divided and paid as follows: forty percent (40%) to Tenant and sixty percent
(60%) to Landlord.

(f) In any event in which Landlord has no right to recapture,
Tenant shall diligently seek to obtain not less than fair market rent for the
space to sublet. In any assignment of this Lease in whole or in part, Tenant
shall seek to obtain from the assignee consideration reflecting a value of not
less than fair market rent for the space subject to such assignment.

19
<PAGE>

(g) The consent of Landlord to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Tenant or to
any subsequent or successive assignment or subletting by the assignee or
subtenant. However, Landlord may consent to subsequent assignments and
sublettings of the Lease or sublease or amendments or modifications thereto,
without notifying Tenant or any other party liable on the Lease or sublease and
without obtaining their consent. Such action shall not relieve Tenant or any
such other party from liability under this Lease or a sublease.

(h) No assignment or subletting by Tenant shall relieve Tenant of any
obligation under this Lease. In the event of default by an assignee or
subtenant of Tenant or any successor of Tenant in the performance of any of the
terms hereof, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against such assignee, subtenant or successor. Any
assignment or subletting which conflicts with the provisions hereof shall be
void and, at Landlord's option, shall constitute a default under this Lease.

(i) Notwithstanding any other provision of this Section 5.06 (other
than Subsection 5.06(i)), Tenant shall have the right to sublease up to 15,896
square feet of space within the Leased Premises for a sublease term that does
not exceed the first twenty-four (24) months following the Term Commencement
Date, and Tenant shall be allowed to keep any excess rent derived from such
sublease and Landlord shall not have the right to recapture the subleased
premises during such initial twenty-four (24) month period.

5.07. Alterations, Additions and Improvements.

(a) Tenant shall not make or allow to be made any alterations or
additions in or to the Leased Premises without first obtaining the written
consent of Landlord; provided, however, Tenant may, without Landlord's consent,
perform interior non-structural alterations or additions not involving material
modifications to the Building and its mechanical, electrical, HVAC and life
safety systems so long as (i) for alterations or additions requiring government
permits, the cost thereof during any calendar year does not exceed Ten Thousand
Dollars ($10,000.00) during any calendar year, or (ii) for alterations or
additions not requiring government permits, the cost thereof during any calendar
year does not exceed Forty Thousand Dollars ($40,000.00). Landlord's consent
will not be unreasonably withheld with respect to proposed alterations and
additions which (i) comply with all applicable laws, ordinances, rules and
regulations; (ii) are compatible with and does not adversely affect the Building
and its mechanical, electrical, HVAC and life safety systems; (iii) will not
affect the structural portions of the Building; (iv) will not interfere with the
use and occupancy of any other portion of the Building by any other tenant, its
employees or invitees; and (v) will not trigger any additional costs to
Landlord. Specifically, but without limiting the generality of the foregoing,
Landlord's right of consent shall encompass plans and specifications for the
proposed alterations or additions, construction means and methods, the identity
of any contractor or subcontractor to be employed on the work of alterations or
additions, and the time for performance of such work. Tenant shall supply to
Landlord any additional documents and information requested by Landlord in
connection with Tenant's request for consent hereunder. Notwithstanding
anything to the contrary contained in the paragraph, in connection with any
request for consent hereunder, Tenant may request that Landlord advise Tenant
whether or not Landlord will require Tenant to remove the alteration at the
expiration of the Lease. Unless Landlord advises Tenant in writing that
Landlord

20
<PAGE>

will not require Tenant to remove such alteration at the expiration of the
Lease, the parties agree that Tenant shall be obligated to remove such
alteration at the expiration of the Lease. Further, Landlord acknowledges that
Tenant will not be required to remove any Tenant Improvements to the Leased
Premises.

(b) Any consent given by Landlord under this Section 5.07 shall be
deemed conditioned upon: (i) Tenant's acquiring all applicable permits required
by governmental authorities; (ii) Tenant's furnishing to Landlord copies of such
permits, together with copies of the approved plans and specifications, prior to
commencement of the work thereon; and (iii) the compliance by Tenant with the
conditions of all applicable permits and approvals in a prompt and expeditious
manner.

(c) Tenant shall provide Landlord with not less than fifteen (15) days
prior written notice of commencement of the work so as to enable Landlord to
post and record appropriate notices of non-responsibility. All alterations and
additions permitted hereunder shall be made and performed by Tenant without cost
or expense to Landlord. Tenant shall pay the contractors and suppliers all
amounts due to them when due and keep the Leased Premises and the Project free
from any and all mechanics', materialmen's and other liens and claims arising
out of any work performed, materials furnished or obligations incurred by or for
Tenant. For work costing in excess of Two Hundred Fifty Thousand Dollars
($250,000.00), Landlord may require, at its sole option, that Tenant provide to
Landlord, at Tenant's expense, a lien and completion bond in an amount equal to
at least one and one half (1 1/2) times the total estimated cost of any
alterations, additions or improvements to be made in or to the Leased Premises,
to protect Landlord against any liability for mechanics', materialmen's and
other liens and claims, and to ensure timely completion of the work. In the
event any alterations or additions to the Leased Premises are performed by
Landlord hereunder, whether by prearrangement or otherwise, Landlord shall be
entitled to charge Tenant a five percent (5%) administration fee in addition to
the actual costs of labor and materials provided. Such costs and fees shall be
deemed Additional Rent under this Lease, and may be charged and payable prior to
commencement of the work.

(d) Any and all alterations, additions or improvements made to the
Leased Premises by Tenant shall become the property of Landlord upon
installation and shall be surrendered to Landlord without compensation to Tenant
upon the termination of this Lease by lapse of time or otherwise unless (i)
Landlord conditioned its approval of such alterations, additions or improvements
on Tenant's agreement to remove them, or (ii) Landlord notifies Tenant prior to
(or promptly after) the Term Expiration Date that the alterations, additions
and/or improvements must be removed, in which case Tenant shall, by the Term
Expiration Date (or promptly thereafter), remove such alterations, additions and
improvements, repair any damage resulting from such removal and restore the
Leased Premises to their condition existing prior to the date of installation of
such alterations, additions and improvements. Notwithstanding anything to the
contrary set forth above, this clause shall not apply to equipment, trade
fixtures or furniture owned by Tenant. Tenant's trade fixtures, furniture,
equipment and other personal property shall at all times be and remain Tenant's
Property ("Tenant's Property"). Except for alterations that cannot be removed
without structural injury to the Leased Premises, at any time Tenant may remove
Tenant's Property from the Leased Premises.

21
<PAGE>

Tenant shall repair at its sole cost and expense all damage caused to the Leased
Premises and the Project by removal of Tenant's movable equipment or furniture
and such other alterations, additions and improvements as Tenant shall be
required or allowed by Landlord to remove from the Leased Premises.

(e) All alterations, additions and improvements permitted under this
Section 5.07 shall be constructed diligently, in a good and workmanlike manner
with new, good and sufficient materials and in compliance with all applicable
laws, ordinances, rules and regulations (including, without limitation, building
codes and those related to accessibility and use by individuals with
disabilities). Tenant shall, promptly upon completion of the work, furnish
Landlord with "as built" drawings for any alterations, additions or improvements
performed under this Section 5.07.

5.08. Compliance With Laws and Insurance Standards. Landlord
represents and warrants that, at the Term Commencement Date, all elements of the
Building encompassed within a "warm shell" (as defined in Exhibit B) are in
compliance with all applicable laws, ordinances and other legal requirements.
Tenant shall not occupy or use, or permit any portion of the Leased Premises to
be occupied or used in a manner that violates any applicable law, ordinance,
rule, regulation, order, permit, covenant, easement or restriction of record, or
the recommendations of Landlord's engineers or consultants, relating in any
manner to the Project, or for any business or purpose which is disreputable,
objectionable or productive of fire hazard. Tenant shall not do or permit
anything to be done which would result in the cancellation of the all risk
property insurance coverage on the Project and/or its contents. If Tenant does
or permits anything to be done which increases the cost of any insurance
covering or affecting the Project, then Tenant shall reimburse Landlord, upon
demand, as Additional Rent, for such additional costs. Landlord shall deliver
to Tenant a written statement setting forth the amount of any such insurance
cost increase and showing in reasonable detail the manner in which it has been
computed. Tenant shall, at Tenant's sole cost and expense, comply with all
laws, ordinances, rules, regulations and orders (state, federal, municipal or
promulgated by other agencies or bodies having or claiming jurisdiction) related
to the use, condition or occupancy of the Leased Premises now in effect or which
may hereafter come into effect including, but not limited to, (a) accessibility
and use by individuals with disabilities, but only insofar as the same require
work within the Leased Premises or work outside the Leased Premises that Tenant
is responsible for pursuant to other provisions of this Lease, and (b)
environmental conditions in, on or about the Leased Premises caused by Tenant or
its agents, employees or contractors. If anything done by Tenant in its use or
occupancy of the Leased Premises shall create, require or cause imposition of
any requirement by any public authority for structural or other upgrading of or
alteration or improvement to the Project, Tenant shall, at Landlord's option,
either perform the upgrade, alteration or improvement at Tenant's sole cost and
expense or reimburse Landlord upon demand, as Additional Rent, for the cost to
Landlord of performing such work. The judgment of any court of competent
jurisdiction or the admission by Tenant in any action against Tenant, whether
Landlord is a party thereto or not, that Tenant has violated any law, ordinance,
rule, regulation, order, permit, covenant, easement or restriction shall be
conclusive of that fact as between Landlord and Tenant. Notwithstanding the
foregoing, Tenant shall not be obligated to make any structural repairs or
alterations to the Leased Premises or any modifications to the mechanical,
electrical, plumbing and life safety systems of the Building to comply with such
laws, ordinances, rules, regulations or orders

22
<PAGE>

unless the need for such compliance arises exclusively by virtue of Tenant's
particular use of the Leased Premises or Tenant's alterations, additions or
improvements made subsequent to the Term Commencement Date.

5.09. No Nuisance; No Overloading. Tenant shall use and occupy the Leased
Premises, and control its agents, employees, contractors, invitees and visitors
in such manner so as not to create any nuisance, or unreasonably interfere with,
annoy or disturb (whether by noise, odor, vibration or otherwise) any other
tenant or occupant of the Project or Landlord in its operation of the Project.
Tenant shall not place or permit to be placed any loads upon the floors, walls
or ceilings in excess of the maximum designed load specified by Landlord or
which might damage the Leased Premises, the Building, or any portion thereof.

5.10. Furnishing of Financial Statements; Tenant's Representations. In
order to induce Landlord to enter into this Lease, Tenant agrees that it shall
promptly furnish Landlord, from time to time, within ten (10) business days of
receipt of Landlord's written request therefor, with Tenant's most recent
financial statements in Tenant's customary form reflecting Tenant's financial
condition as of the date of such statements. Tenant represents and warrants
that all financial statements, records and information furnished by Tenant to
Landlord in connection with this Lease are true, correct and complete in all
respects. Prior to Tenant's providing Landlord with any financial information,
Landlord agrees that it will execute a Nondisclosure Agreement in the form of
Exhibit D hereto which is made a part hereof. If Tenant or its parent is a
- ---------
public company, Tenant's obligation under this Section 5.10 shall be satisfied
by delivery to Landlord of Tenant's most recent publicly disclosed financial
information.

5.11. Entry by Landlord. Landlord, its employees, agents and consultants,
shall have the right to enter the Leased Premises at any time, in cases of an
emergency, and otherwise at reasonable times upon twenty-four (24) hours' prior
written notice to inspect the same, to clean, to perform such work as may be
permitted or required under this Lease, to make repairs to or alterations of the
Leased Premises or other portions of the Project, to deal with emergencies, to
post such notices as may be permitted or required by law to prevent the
perfection of liens against Landlord's interest in the Project or to show the
Leased Premises to prospective tenants (but only during the last six (6) months
of the Term), purchasers, encumbrancers or others, or for any other purpose as
Landlord may reasonably deem necessary or desirable; provided, however, that
Tenant may require that an employee of Tenant accompany Landlord during any non-
emergency entry and Landlord shall use its best efforts to minimize interference
with Tenant's business operations in the Leased Premises. Tenant shall not be
entitled to any abatement of Rent or damages by reason of the exercise of any
such right of entry. Any such entry shall comply with the Tenant's reasonable
security measures.

5.12. Nondisturbance and Attornment.

(a) This Lease and the rights of Tenant hereunder shall be subject
and subordinate to the lien of any deed of trust, mortgage or other
hypothecation or security instrument (collectively, "Security Device") now or
hereafter placed upon, affecting or encumbering the Project or any part thereof
or interest therein, and to any and all advances made thereunder, interest
thereon or costs incurred and any modifications, renewals, supplements,
consolidations, replacements and

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<PAGE>

extensions thereof. With respect to any Security Device entered into by Landlord
after execution of this Lease, such subordination is conditioned on Landlord's
obtaining assurance in a commercially reasonable form (a "nondisturbance
agreement") from the holder of or beneficiary under such encumbrance that
Tenant's possession of the Leased Premises will not be disturbed, and Tenant's
rights under this Lease will be recognized, so long as Tenant is not in default
under this Lease (after expiration of applicable notice and cure periods) and
attorns to the record owner of the Leased Premises and any subordination of this
Lease shall be conditioned on Tenant's receipt of such an agreement. Without the
consent of Tenant, the holder of any such Security Device or the beneficiary
thereunder shall have the right to elect to be subject and subordinate to this
Lease, such subordination to be effective upon such terms and conditions as such
holder or beneficiary may direct which are not inconsistent with the provisions
hereof. Tenant agrees to attorn to and recognize as the Landlord under this
Lease the holder or beneficiary under a Security Device or any other party that
acquires ownership of the Leased Premises by reason of a foreclosure or sale
under any Security Device (or deed in lieu thereof), provided such holder,
beneficiary or other party has become bound by a nondisturbance agreement as of
the date the Security Device gained priority over this Lease. The new owner
following such foreclosure, sale or deed shall be responsible for the completion
of the Tenant Improvements and shall be responsible for the Security Deposit but
shall not be (i) liable for any act or omission of any prior landlord or with
respect to events occurring prior to acquisition of ownership except relating to
a continuing default; (ii) subject to any offsets or defenses which Tenant might
have against any prior landlord; or (iii) bound by prepayment of more than one
(1) month's Rent unless actually received. Landlord shall, in good faith, use
its best efforts to cause the current holder of a Security Device on the Project
to execute and deliver a nondisturbance agreement to Tenant within thirty (30)
days of execution of this Lease. Landlord shall, however, obtain such
nondisturbance agreement from the holders of all existing Security Devices prior
to the Term Commencement Date.

(b) Tenant shall not unreasonably withhold its consent to changes or
amendments to this Lease requested by the holder of a Security Device so long as
these changes do not alter the basic business terms of this Lease or otherwise
materially diminish any rights or materially increase any obligations of Tenant
hereunder. In connection with any amendment to this Lease required under this
paragraph, Landlord shall reimburse Tenant's reasonable attorneys' fees and
costs, not to exceed $1,000.00 in any single instance. If, within ten (10)
business days after notice from Landlord, Tenant fails or refuses to execute
with Landlord the amendment(s) to this Lease accomplishing the change(s) or
amendment(s) which are requested by such holder, Landlord, at its sole option,
shall have the right to do either or both of the following: (i) to execute any
instrument for or on behalf of Tenant as its attorney-in-fact (in acknowledgment
thereof, Tenant hereby appoints Landlord as its irrevocable attorney-in-fact
solely to execute any instruments required to carry out the intent of this
Section 5.12(b) on behalf of Tenant); and/or (ii) to provide Tenant with a
further notice and if Tenant fails or refuses to execute the amendment(s) within
five (5) business days of such additional notice, Landlord shall have the right
to terminate this Lease.

5.13. Estoppel Certificate. Within ten (10) days following Landlord's
request, Tenant shall execute, acknowledge and deliver written estoppel
certificates addressed to (i) any mortgagee or prospective mortgagee of
Landlord, or (ii) any purchaser or prospective purchaser of all or any portion
of, or interest in, the Project, on a form specified by Landlord, certifying as
to such facts (if true) and agreeing to such notice provisions and other matters
(provided, however that such notice

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<PAGE>

provisions and other matters shall not alter the basic business terms of this
Lease or otherwise materially diminish any rights or materially increase any
obligations of Tenant hereunder, and if such estoppel certificate includes any
matters not strictly of a factual nature, Tenant shall have a right to
reimbursement of reasonable attorney's fees in connection with the review
thereof, in accordance with Section 5.12 above) as such mortgagee(s) or
purchaser(s) may reasonably require, including, without limitation, the
following: (a) that this Lease is unmodified and in full force and effect (or in
full force and effect as modified, and stating the modifications); (b) the
amount of, and date to which Rent and other charges have been paid in advance;
(c) the amount of any Security Deposit; and (d) acknowledging that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating the nature of the alleged default). However, in no event shall any such
estoppel certificate require an amendment of the provisions of this Lease or
otherwise affect or abridge Tenant's rights hereunder. Any such estoppel
certificate may be relied upon by any such mortgagee or purchaser. Failure by
Tenant to execute and deliver any such estoppel certificate within the time
requested shall be conclusive upon Tenant that (1) this Lease is in full force
and effect and has not been modified except as represented by Landlord; (2) not
more than one month's Rent has been paid in advance; and (3) Landlord is not in
default under this Lease. Failure by Tenant to execute and deliver any such
estoppel certificate within five days of Landlord's further notice to Tenant
that Tenant has failed to execute and deliver any such estoppel certificate
within the initial ten (10) day notice period, shall constitute a default under
this Lease. If requested by Tenant upon reasonable written notice, Landlord
shall execute and deliver an estoppel certificate covering the factual matters
outlined in clauses (a) through (d) above (except in case of (d) certifying as
to the absence of any default by Tenant or identifying any such claimed
default), which may be relied upon solely for purposes of Tenant's obtaining
financial accommodations.

5.14. Security Deposit.

(a) By no later than November 24, 1999, Tenant shall pay to Landlord
the agreed upon Security Deposit as security for the full and faithful
performance of Tenant's obligations under this Lease. If at any time during the
Term, Tenant shall be in default in the payment of Rent or in default for any
other reason after expiration of applicable notice and cure periods, Landlord
may use, apply or retain all or part of the Security Deposit for payment of any
amount due Landlord or to cure such default or to reimburse or compensate
Landlord for any liability, loss, cost, expense or damage (including attorneys'
fees) which Landlord may suffer or incur by reason of Tenant's defaults. If
Landlord uses or applies all or any part of the Security Deposit, Tenant shall,
on demand, pay to Landlord a sum sufficient to restore the Security Deposit to
the full amount required by this Lease. Upon expiration of the Term or earlier
termination of this Lease and after Tenant has vacated the Leased Premises,
Landlord shall return the Security Deposit to Tenant, reduced by such amounts as
may be required by Landlord to remedy defaults on the part of Tenant in the
payment of Rent, to repair damages to the Leased Premises caused by Tenant and
to clean the Leased Premises. The portion of the deposit not so required shall
be paid over to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest in this Lease) within thirty (30) days after expiration of the
Term or earlier termination hereof. Landlord shall hold the Security Deposit for
the foregoing purposes; provided, however, that Landlord shall have no
obligation to segregate the Security Deposit from its general funds or to pay
interest in respect thereof. No part of the Security Deposit shall be considered
to be held in trust, or to be prepayment of any monies to be paid by Tenant
under this Lease.

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(b) The Security Deposit shall increase proportionally with
any increase in Base Rent resulting from Landlord's funding of additional Tenant
Improvements in accordance with paragraph 5(c) of Exhibit B to this Lease, and
such funding being repaid through amortization payments made to Landlord along
with Base Rent in accordance with paragraph 5(c) of Exhibit B to this Lease. The
amount of the Security Deposit shall decrease twenty percent (20%) per year
beginning on the second (2/nd/) anniversary of the Term Commencement Date.

(c) In lieu of a cash deposit, Tenant may deliver the Security
Deposit to Landlord in the form of a clean and irrevocable letter of credit (the
"Letter of Credit") issued by and drawable upon (said issuer being referred to
as the "Issuing Bank") a financial institution which is approved by Landlord in
its sole discretion, provided that Landlord shall not unreasonably withhold its
consent to an Issuing Bank which has outstanding unsecured, uninsured and
unguaranteed indebtedness, or shall have issued a letter of credit or other
credit facility that constitutes the primary security for any outstanding
indebtedness (which is otherwise uninsured and unguaranteed), that is then
rated, without regard to qualification of such rating by symbols such as "+" or
"-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA"
or better by Standard & Poor's Rating Service, and has combined capital, surplus
and undivided profits of not less than $100,000,000. Landlord hereby approves of
Merrill Lynch International Bank Limited, London as an issuing bank. Such Letter
of Credit shall (a) name Landlord as beneficiary, (b) be in the amount of the
Security Deposit, (c) have a term of not less than one year, (d) permit multiple
drawings, (e) be fully transferable by Landlord, and (f) otherwise be in form
and content reasonably satisfactory to Landlord. If upon any transfer of the
Letter of Credit, any fees or charges shall be so imposed, then such fees or
charges shall be payable solely by Tenant and the Letter of Credit shall so
specify. The Letter of Credit shall provide that it shall be deemed
automatically renewed, without amendment, for consecutive periods of one year
each thereafter during the Term unless the Issuing Bank sends a notice (the
"Non-Renewal Notice") to Landlord by certified mail, return receipt requested,
not less than 45 days next preceding the then expiration date of the Letter of
Credit stating that the Issuing Bank has elected not to renew the Letter of
Credit. Landlord shall have the right, upon receipt of the Non-Renewal Notice,
to draw the full amount of the Letter of Credit, by sight draft on the Issuing
Bank, and shall thereafter hold or apply the cash proceeds of the Letter of
Credit pursuant to the terms of this Article. Notwithstanding the foregoing,
Tenant shall thereafter have the right to provide Landlord with a replacement
Letter of Credit in compliance with this Section, in which case Landlord shall
provide Tenant such cash sums drawn on the Letter of Credit. The Issuing Bank
shall agree with all drawers, endorsers and bona fide holders that drafts drawn
under and in compliance with the terms of the Letter of Credit will be duly
honored upon presentation to the Issuing Bank at an office location in San
Francisco. The Letter of Credit shall be subject in all respects to the Uniform
Customs and Practice for Documentary Credits (1993 revision), International
Chamber of Commerce Publication No. 500. Tenant shall have the right at any time
to replace the Letter of Credit with a (i) cash security deposit, (ii) a
replacement Letter of Credit that meets all of the conditions of this Section
5.14, or (iii) a combination of items (i) and (ii).

5.15. Surrender. Subject to the provisions of Section 5.07 hereof, on the
Term Expiration Date (or earlier termination of this Lease), Tenant shall quit
and surrender possession of the Leased Premises to Landlord in as good order and
condition as they were in on the Term Commencement Date, reasonable wear and
tear, casualties, taking by condemnation and repairs which are Landlord's
responsibility excepted. Reasonable wear and tear shall not include any

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<PAGE>

damage or deterioration that would have been prevented by good maintenance
practice or by Tenant performing all of its obligations under this Lease. Tenant
shall, without cost to Landlord, remove all furniture, equipment, trade
fixtures, debris and articles of personal property owned by Tenant in the Leased
Premises, and shall repair any damage to the Project resulting from such
removal. Any such property not removed by Tenant by the Term Expiration Date (or
earlier termination of this Lease) shall be considered abandoned, and Landlord
may remove any or all of such items and dispose of same in any lawful manner or
store same in a public warehouse or elsewhere for the account and at the expense
and risk of Tenant. If Tenant shall fail to pay the cost of storing any such
property after storage for thirty (30) days or more, Landlord may sell any or
all of such property at public or private sale, in such manner and at such times
and places as Landlord may deem proper in accordance with applicable law,
without notice to or demand upon Tenant. Landlord shall apply the proceeds of
any such sale as follows: first, to the costs of such sale; second, to the costs
of storing any such property; third, to the payment of any other sums of money
which may then or thereafter be due to Landlord from Tenant under any of the
terms of this Lease; and fourth, the balance, if any, to Tenant.

5.16. Tenant's Remedies. Landlord shall not be deemed in breach of this
Lease unless Landlord fails within a reasonable time to perform an obligation
required to be performed by Landlord. For purposes of this Section 5.16, a
reasonable time shall in no event, be less than thirty (30) days after receipt
by Landlord, and by the holders of any ground lease, deed of trust or mortgage
covering the Leased Premises whose name and address shall have been furnished
Tenant in writing for such purpose, of written notice specifying wherein such
obligation of Landlord has not been performed; provided, however, that if the
nature of Landlord's obligation is such that more than thirty (30) days after
such notice are reasonably required for its performance, then Landlord shall not
be in breach of this Lease if performance is commenced within said thirty (30)-
day period and thereafter diligently pursued to completion. If Landlord fails to
cure such default within the time provided for in this Lease, the holder of any
such ground lease, deed of trust or mortgage shall have an additional thirty
(30) days to cure such default; provided that if such default cannot reasonably
be cured within that thirty (30) day period, then such holder shall have such
additional time to cure the default as is reasonably necessary under the
circumstances. Tenant shall look solely to Landlord's interest in the Project,
insurance proceeds, condemnation awards and the proceeds thereof for recovery of
any judgment from Landlord. Neither Landlord nor any of its trustees, directors,
officers, agents, employees or representatives (or, if Landlord is a
partnership, its partners, whether general or limited) shall ever be personally
liable for any such judgment. Any lien obtained to enforce any such judgment and
any levy of execution thereon shall be subject and subordinate to any lien, deed
of trust or mortgage to which Section 5.12 applies or may apply. Except as
otherwise specifically provided for in this Lease, Tenant shall not have the
right to terminate this Lease or withhold, reduce or offset any amount against
any payments of Rent due and payable under this Lease by reason of a breach of
this Lease by Landlord.

5.17. CC&Rs/Rules and Regulations. Tenant shall comply with (i) the rules
and regulations for the Project attached as Exhibit E and such reasonable
---------
amendments thereto as Landlord may adopt from time to time with prior notice to
Tenant, and (ii) such reasonable covenants, conditions and restrictions for the
Project ("CC&Rs") as Landlord may adopt from time to time with prior notice to
Tenant. Tenant shall not be required to comply with any new rule or regulation
or CC&Rs unless the same applies non-discriminatorily to all occupants of the
Project,

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<PAGE>

does not unreasonably interfere with Tenant's use of the Leased Premises and
does not materially increase the obligations or decrease the rights of Tenant
under the Lease. In case of any conflict between (i) the rules and regulations
and/or CC&Rs and (ii) the provisions of this Lease, this Lease shall control.

Article 6.
Environmental Matters

6.01. Hazardous Materials Prohibited.

(a) Except with Landlord's prior written consent, Tenant shall not
cause or permit any Hazardous Materials (as defined in Section 6.01(c) below) to
be brought, kept, used, generated, released or disposed in, on, under or about
the Leased Premises or the Project by Tenant, its agents, employees, contractors
or invitees; provided, however, that Tenant may use, store and dispose of, in
accordance with applicable Laws, limited quantities of standard office and
janitorial supplies, but only to the extent reasonably necessary for Tenant's
operations in the Leased Premises. Tenant hereby indemnifies Landlord from and
against (i) any breach by Tenant of the obligations stated in the preceding
sentence, (ii) any breach of the obligations stated in Section 6.01(b) below, or
(iii) any claims or liability resulting from Tenant's use of Hazardous Materials
in violation of applicable laws or provisions hereof. Tenant hereby agrees to
defend and hold Landlord harmless from and against any and all claims,
liability, losses, damages, costs and/or expenses (including, without
limitation, diminution in value of the Project, or any portion thereof, damages
for the loss or restriction on use of rentable or usable space or of any amenity
of the Project, damages arising from any adverse impact on marketing of space in
the Project, and sums paid in settlement of claims, fines, penalties, attorneys'
fees, consultants' fees and experts' fees) which are caused by any breach of the
obligations stated in Sections 6.01(a) or 6.01(b) or otherwise resulting from
Tenant's use of Hazardous Materials in the Project in violation of applicable
laws or provisions hereof. This indemnification of Landlord by Tenant includes,
without limitation, death of or injury to person, damage to any property or the
environment and costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state or local governmental agency or political subdivision because
of any Hazardous Material present in, on, under or about the Leased Premises or
the Project (including soil and ground water contamination) which results from
such a breach. Without limiting the foregoing, if the presence of any Hazardous
Material in, on, under or about the Leased Premises or the Project caused or
permitted by Tenant results in any contamination of the Leased Premises or the
Project, Tenant shall promptly take all actions at its sole expense as are
necessary to return the same to the condition existing prior to the introduction
of such Hazardous Material as required under applicable laws; provided that
Landlord's approval of such actions, and the contractors to be used by Tenant in
connection therewith, shall first be obtained. This indemnification of Landlord
by Tenant shall survive the expiration or sooner termination of this Lease.

(b) Tenant covenants and agrees that Tenant shall at all times be
responsible and liable for, and be in compliance with, all federal, state, local
and regional laws, ordinances, rules, codes and regulations, as amended from
time to time ("Governmental Requirements"), relating to health and safety and
environmental matters, arising, directly or indirectly, out of Tenant's use of
Hazardous Materials (as defined in Section 6.01(c) below) in the Project. Health
and safety and

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<PAGE>

environmental matters for which Tenant is responsible under this paragraph
include, without limitation (i) notification and reporting to governmental
agencies, (ii) the provision of warnings of potential exposure to Hazardous
Materials to Landlord and Tenant's agents, employees, licensees, contractors and
others, (iii) the payment of taxes and fees, (iv) the proper off-site
transportation and disposal of Hazardous Materials, and (v) all requirements,
including training, relating to the use of equipment. Immediately upon discovery
of a release of Hazardous Materials associated with Tenant's activities, Tenant
shall give written notice to Landlord, whether or not such release is subject to
reporting under Governmental Requirements. The notice shall include information
on the nature and conditions of the release and Tenant's planned response.
Tenant shall be liable for the cost of any clean-up of the release of any
Hazardous Materials by Tenant on the Project.

(c) As used in this Lease, the term "Hazardous Material" means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government. The term "Hazardous Material" includes, without limitation, any
substance, material or waste which is (i) defined as a "hazardous waste" or
similar term under the laws of the jurisdiction where the Project is located;
(ii) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. (S) 1317); (iii) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource, Conservation
and Recovery Act, 42 U.S.C. (S) 6901 et seq. (42 U.S.C. (S) 6903); (iv) defined
-- ---
as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. (42 U.S.C. (S) 9601); (v) hydrocarbons, petroleum, gasoline, crude oil or
- ---
any products, by-products or fractions thereof; or (vi) asbestos in any form or
condition.

(d) As used in this Article 6, the term "Laws" means any applicable
federal, state or local laws, ordinances, rules or regulations relating to any
Hazardous Material affecting the Project, including, without limitation, the
specific laws, ordinances and regulations referred to in Section 6.01(c) above.
References to specific Laws shall also be references to any amendments thereto
and to any applicable successor Laws.

(e) To the best of Landlord's knowledge, except as disclosed in the
environmental reports (the "Environmental Reports") provided to Tenant (i) there
are no Hazardous Materials, PCB transformers or underground storage tanks on the
Project, and (ii) the Project is in compliance with all Laws relating to any
Hazardous Material. Tenant acknowledges its receipt and review of the
Environmental Reports prior to entering into this Lease. Landlord represents
and warrants that (i) during the period of its ownership of the Project prior to
entering into this Lease, neither it nor its agents, employees, contractors, or
invitees have released or authorized the release of any Hazardous Materials on
the Project, and (ii) after entering into this Lease, Landlord will not release
any Hazardous Materials on the Project. Landlord hereby agrees to indemnify,
protect, defend and hold the Tenant harmless of and from any and all claims,
liability, costs, penalties, fines, damages, injury, judgments, forfeiture,
losses or expenses (including without limitation reasonable attorneys' fees)
arising out of or in any way related to or resulting from any Hazardous
Materials discovered in the Leased Premises or on the Project which were not
brought, kept, used, generated, released or disposed in, on, under or about the
Leased Premises or the Project by Tenant, its agents, employees, contractors or
invitees. This Section 6.01 of the Lease constitutes the entire agreement of
Landlord and Tenant regarding Hazardous Materials.

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<PAGE>

6.02. Limitations on Assignment and Subletting. It shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting of the Leased Premises if the proposed assignee's or sublessee's
anticipated use of the Leased Premises involves the generation, storage, use,
treatment, or disposal of Hazardous Material (excluding standard office and
janitorial supplies; in limited quantities as hereinabove provided).

6.03. Right of Entry. Landlord, its employees, agents and consultants,
shall have the right to enter the Leased Premises at any time, in case of an
emergency, and otherwise during reasonable hours and upon reasonable notice to
Tenant, in order to conduct periodic environmental inspections and tests to
determine whether any Hazardous Materials are present. The costs and expenses
of such inspections shall be paid by Landlord unless a default or breach of this
Lease, violation of Laws or contamination caused or permitted by Tenant is found
to exist. In such event, Tenant shall reimburse Landlord upon demand, as
Additional Rent, for the reasonable costs and expenses of such inspections if it
is determined that Tenant has failed to perform its obligations under this Lease
with regard to Hazardous Materials.

6.04. Notice to Landlord. Tenant shall promptly notify Landlord in
writing of: (i) any enforcement, clean-up, removal or other governmental or
regulatory action instituted or threatened regarding the Leased Premises or the
Project pursuant to any Laws caused by Tenant's use or storage of Hazardous
Materials; (ii) any claim made or threatened by any person against Tenant or the
Leased Premises relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from or claimed to result from Tenant's use or storage
of any Hazardous Material; and (iii) any reports made to or received from any
governmental agency arising out of or in connection with any Hazardous Material
in or removed from the Leased Premises or the Project, including any complaints,
notices, warnings or asserted violations in connection therewith. Tenant shall
also supply to Landlord as promptly as possible, and in any event within three
(3) business days after Tenant first receives or sends the same, copies of all
claims, reports, complaints, notices, warnings, asserted violations or other
communications relating in any way to the Leased Premises or Tenant's use
thereof.

Article 7.
Insurance, Indemnity, Condemnation, Damage and Default

7.01. Landlord's Insurance. Landlord shall secure and maintain policies
of insurance for the Project (including the Leased Premises) covering loss of or
damage to the Project, including the Tenant Improvements (as shown on the "as-
built" plans provided to Landlord after completion of construction of the Tenant
Improvements) and all subsequent alterations, additions and improvements to the
Leased Premises approved by Landlord in writing, with loss payable to Landlord
and to the holders of any deeds of trust, mortgages or ground leases on the
Project. Landlord shall not be obligated to obtain insurance for Tenant's trade
fixtures, equipment, furnishings, machinery or other property. Such policies
shall provide protection against fire and extended coverage perils and such
additional perils as Landlord deems suitable, in the amount of the estimated
replacement cost thereof and with such deductible(s) as Landlord shall deem
reasonably appropriate. Landlord shall further secure and maintain commercial
general liability insurance with respect to the Project in such amount as
Landlord shall determine, such insurance to be in addition to, and not in lieu
of, the liability insurance required to be maintained by Tenant. In addition,

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<PAGE>

Landlord may secure and maintain rental income insurance. If the annual cost to
Landlord for any such insurance exceeds the standard rates because of the nature
of Tenant's operations, Tenant shall, upon receipt of appropriate invoices,
reimburse Landlord for such increases in cost, which amounts shall be deemed
Additional Rent hereunder. Tenant shall not be named as an additional insured
on any policy of insurance maintained by Landlord.

7.02. Tenant's Liability Insurance.

(a) Tenant (with respect to both the Leased Premises and the Common
Areas) shall secure and maintain, at its own expense, at all times during the
Term, a policy or policies of commercial general liability insurance with the
premiums thereon fully paid in advance, protecting Tenant and naming Landlord,
the holders of any deeds of trust, mortgages or ground leases on the Project,
and Landlord's representatives (which term, whenever used in this Article 7,
shall be deemed to include Landlord's partners, trustees, ancillary trustees,
officers, directors, shareholders, beneficiaries, agents, employees and
independent contractors) as additional insureds against claims for bodily
injury, personal injury, advertising injury and property damage (including
attorneys' fees) based upon, involving or arising out of Tenant's operations,
assumed liabilities or Tenant's use, occupancy or maintenance of the Leased
Premises and the Common Areas of the Project. Such insurance shall provide for
a minimum amount of Two Million Dollars ($2,000,000.00) for property damage or
injury to or death of one or more than one person in any one accident or
occurrence, with an annual aggregate limit of at least Four Million Dollars
($4,000,000.00). The coverage required to be carried shall include fire legal
liability, blanket contractual liability, personal injury liability (libel,
slander, false arrest and wrongful eviction), broad form property damage
liability, products liability and completed operations coverage (as well as
owned, non-owned and hired automobile liability if an exposure exists) and the
policy shall contain an exception to any pollution exclusion which insures
damage or injury arising out of heat, smoke or fumes from a hostile fire. Such
insurance shall be written on an occurrence basis and contain a separation of
insureds provision or cross-liability endorsement acceptable to Landlord.
Tenant shall provide Landlord with a certificate evidencing such insurance
coverage. The certificate shall indicate that the insurance provided
specifically recognizes the liability assumed by Tenant under this Lease
(including without limitation performance by Tenant under Section 7.04) and that
Tenant's insurance is primary to and not contributory with any other insurance
maintained by Landlord, whose insurance shall be considered excess insurance
only. Following the initial Term of the Lease, not more frequently that every
two (2) years, if, in the opinion of any mortgagee of Landlord or of the
insurance broker retained by Landlord, the amount of liability insurance
coverage at that time is not adequate, then Tenant shall increase its liability
insurance coverage as reasonably required by either any mortgagee of Landlord or
Landlord's insurance broker.

(b) Subject to Section 5.08 of this Lease, Tenant shall, at Tenant's
expense, comply with (i) all insurance company requirements pertaining to the
use of the Leased Premises and (ii) all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body.

7.03. Tenant's Additional Insurance Requirements.

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<PAGE>

(a) Tenant shall secure and maintain, at Tenant's expense, at all
times during the Term, a policy of physical damage insurance on all of Tenant's
fixtures, furnishings, equipment, machinery, merchandise and personal property
in the Leased Premises and alterations, additions or improvements made by or for
Tenant upon the Leased Premises, all for the full replacement cost thereof
without deduction for depreciation of the covered items and in amounts that meet
any co-insurance clauses of the policies of insurance. Such insurance shall
insure against those risks customarily covered in an "all risk" policy of
insurance covering physical loss or damage. Tenant may use the proceeds from
such insurance for the replacement of fixtures, furnishings, equipment and
personal property and for restoration of alterations, additions or improvements
to the Leased Premises after the Term Commencement Date. Landlord shall be
named as loss payee to the extent of the value of any such improvements after
the Term Commencement Date. In addition, Tenant shall secure and maintain, at
all times during the Term, loss of income, business interruption and extra
expense insurance in such amounts as will reimburse Tenant for direct or
indirect loss of earnings and incurred costs attributable to all perils commonly
insured against by prudent tenants or attributable to prevention of access to
the Leased Premises or to the Building as a result of such perils; such
insurance shall be maintained with Tenant's property insurance carrier.
Further, Tenant shall secure and maintain at all times during the Term workers'
compensation insurance in such amounts as are required by law, employer's
liability insurance in the amount of One Million Dollars ($1,000,000.00) per
occurrence, and all such other insurance as may be required by applicable law or
as may be reasonably required by Landlord. In the event Tenant makes any
alterations, additions or improvements to the Leased Premises, prior to
commencing any work in the Leased Premises, Tenant shall secure "builder's all
risk" insurance which shall be maintained throughout the course of construction,
such policy being an all risk builder's risk completed value form, in an amount
approved by Landlord, but not less than the total contract price for the
construction of such alterations, additions or improvements and covering the
construction of such alterations, additions or improvements, and such other
insurance as Landlord may require, it being understood and agreed that all of
such alterations, additions or improvements shall be insured by Tenant pursuant
to this Section 7.03 immediately upon completion thereof. Tenant shall provide
Landlord with certificates of all such insurance. The property insurance
certificate shall confirm that the waiver of subrogation required to be obtained
pursuant to Section 7.05 is permitted by the insurer. Tenant shall, at least
thirty (30) days prior to the expiration of any policy of insurance required to
be maintained by Tenant under this Lease, furnish Landlord with an "insurance
binder" or other satisfactory evidence of renewal thereof.

(b) All policies required to be carried by Tenant under this Lease
shall be issued by and binding upon a reputable insurance company of good
financial standing licensed to do business in the State of California with a
rating of at least A-VII, or such other rating as may be required by a lender
having a lien on the Project, as set forth in the most current issue of "Best's
Insurance Reports." Tenant shall not do or permit anything to be done that
would invalidate the insurance policies referred to in this Article 7. Evidence
of insurance provided to Landlord shall include an endorsement showing that
Landlord, its representatives and the holders of any deeds of trust, mortgages
or ground leases on the Project are included as additional insureds on general
liability insurance, and as loss payees for property insurance, to the extent
required hereunder, and an endorsement whereby the insurer agrees not to cancel,
non-renew or materially alter the policy without at least thirty (30) days prior
written notice to Landlord, its representatives and any mortgagee of Landlord.

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<PAGE>

(c) In the event that Tenant fails to provide evidence of insurance
required to be provided by Tenant under this Lease, prior to commencement of the
Term, and thereafter during the Term, within ten (10) days following Landlord's
request therefor, and thirty (30) days prior to the expiration date of any such
coverage, Landlord shall be authorized (but not required), after giving Tenant
two (2) business days advance written notice of Landlord's intention to do so
(which notice may be included in the ten (10) day notice referenced above in
this subparagraph (c)) to procure such coverage in the amounts stated with all
costs thereof (plus a five percent (5%) administrative fee) to be chargeable to
Tenant and payable upon written invoice therefor, which amounts shall be deemed
Additional Rent hereunder.

(d) The minimum limits of insurance required by this Lease, or as
carried by Tenant, shall not limit the liability of Tenant nor relieve Tenant of
any obligation hereunder.

7.04. Indemnity and Exoneration.

(a) To the extent not prohibited by law, except to the extent due to
the gross negligence or willful misconduct of Landlord, its employees, agents,
contractors or invitees, or Landlord's breach of this Lease, Landlord and
Landlord's representatives shall not be liable for any loss, injury or damage to
person or property of Tenant, Tenant's agents, employees, contractors, invitees
or any other person, whether caused by theft, fire, act of God, acts of the
public enemy, riot, strike, insurrection, war, court order, requisition or order
of governmental body or authority or which may arise through repair, alteration
or maintenance of any part of the Project or failure to make any such repair or
from any other cause whatsoever, except as expressly otherwise provided in
Sections 7.06 and 7.07. Landlord shall not be liable for any loss, injury or
damage arising from any act or omission of any other tenant or occupant of the
Project, nor shall Landlord be liable under any circumstances for damage or
inconvenience to Tenant's business or for any loss of income or profit
therefrom..

(b) Tenant shall indemnify, protect, defend and hold the Project,
Landlord and its representatives, harmless of and from any and all claims,
liability, costs, penalties, fines, damages, injury, judgments, forfeiture,
losses (including without limitation diminution in the value of the Leased
Premises) or expenses (including without limitation attorneys' fees, consultant
fees, testing and investigation fees, expert fees and court costs) arising out
of or in any way related to or resulting directly or indirectly from (i) the use
or occupancy of the Leased Premises, (ii) the activities of Tenant, its agents,
employees, contractors or invitees in or about the Leased Premises or the
Project (where not covered by Landlord's insurance), (iii) any failure to comply
with any applicable law to the extent required hereunder, and (iv) any default
or breach by Tenant in the performance of any obligation of Tenant under this
Lease; provided, however, that the foregoing indemnity shall not be applicable
to claims to the extent due to the gross negligence or willful misconduct of
Landlord, its employees, agents, contractors or invitees, or Landlord's breach
of this Lease.

(c) Tenant shall indemnify, protect, defend and hold the Project,
Landlord and its representatives, harmless of and from any and all claims,
liability, costs, penalties, fines, damages, injury, judgments, forfeiture,
losses (including without limitation diminution in the value of the Leased
Premises) or expenses (including without limitation attorneys' fees, consultant
fees, testing and investigation fees, expert fees and court costs) arising out
of or in any way related to or

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resulting directly or indirectly from work or labor performed, materials or
supplies furnished to or at the request of Tenant or in connection with
obligations incurred by or performance of any work done for the account of
Tenant in the Leased Premises or the Project, excluding, however, any work to be
performed by or under the direction of Landlord.

(d) The provisions of this Section 7.04 shall survive the expiration
or sooner termination of this Lease. BY SIGNING ITS INITIALS BELOW, TENANT
ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF
THE PROVISIONS SET FORTH IN THIS SECTION 7.04 AND FURTHER ACKNOWLEDGES THAT SUCH
PROVISIONS WERE SPECIFICALLY NEGOTIATED.

________________________
Tenant's Initials

(e) To the extent not prohibited by law, Tenant shall not be liable
for any loss, injury or damage in or about the Project, nor shall Tenant be
liable for any damage or inconvenience to Landlord or Landlord's business or for
any loss of income or profit therefrom to the extent such loss, injury or damage
arises from any gross negligence or willful misconduct of Landlord or its
employees, agents, contractors or invitees, or Landlord's breach of this Lease.

(f) To the extent not prohibited by law, Landlord shall indemnify,
protect, defend and hold Tenant and its representatives, harmless of and from
any and all claims, liability, costs, penalties, fines, damages, injury,
judgments, forfeiture, losses or expenses (including without limitation
reasonable attorneys' fees, consultant fees, testing and investigation fees,
expert fees and court costs) by reason of (i) any damage or injury occurring on
the Project to the extent that such damage or injury shall be caused by or arise
from any gross negligence or willful misconduct by Landlord, its employees,
agents, contractors or invitees, or Landlord's breach of this Lease, (ii)
Landlord's failure to comply with any governmental laws, ordinances and
regulations applicable to the Project, or (iii) any default or breach beyond the
expiration of the applicable cure period on the part of Landlord in the
performance of any obligation of Landlord to be performed pursuant to this
Lease; provided however, that the foregoing indemnity shall not be applicable to
claims to the extent arising by reason of any negligence or willful misconduct
of Tenant.

7.05. Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each waives all rights of recovery, claim,
action or cause of action against the other, its agents (including partners,
both general and limited), trustees, officers, directors, and employees, for any
loss or damage that may occur to the Leased Premises, or any improvements
thereto, or the Project or any personal property of such party therein, by
reason of any cause required to be insured against under this Lease, regardless
of cause or origin, including negligence of the other party hereto, and each
party covenants that, to the fullest extent permitted by law, no insurer shall
hold any right of subrogation against such other party. Tenant shall advise its
insurers of the foregoing and such waiver shall be a part of each policy
maintained by Tenant which applies to the Leased Premises, any part of the
Project or Tenant's use and occupancy of any part thereof.

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7.06. Condemnation.

(a) If the Leased Premises are taken under the power of eminent
domain or sold under the threat of the exercise of such power (all of which are
referred to herein as "condemnation"), this Lease shall terminate as to the part
so taken as of the date the condemning authority takes title or possession,
whichever first occurs (the "date of taking"). If the Leased Premises or any
portion of the Project is taken by condemnation to such an extent as to render
the Leased Premises untenantable as reasonably determined by Tenant and
Landlord, this Lease shall, at the option of either party to be exercised in
writing within thirty (30) days after receipt of written notice of such taking,
forthwith cease and terminate as of the date of taking. All proceeds from any
condemnation of the Leased Premises shall belong and be paid to Landlord,
subject to the rights of any mortgagee of Landlord's interest in the Project or
the beneficiary of any deed of trust which constitutes an encumbrance thereon;
provided that Tenant shall be entitled to any compensation separately awarded to
Tenant for Tenant's relocation expenses, loss of business goodwill and loss of
Tenant's trade fixtures and the unamortized value of improvements made to the
Leased Premises at Tenant's expense. If this Lease continues in effect after the
date of taking pursuant to the provisions of this Section 7.06(a), Landlord
---------------
shall proceed with reasonable diligence to repair, at its expense, the remaining
parts of the Project and the Leased Premises to substantially their former
condition to the extent that the same is feasible (subject to reasonable changes
which Landlord shall deem desirable) and so as to constitute a complete and
tenantable Project and Leased Premises. Net Rent shall abate to the extent
appropriate during the period of restoration, and Net Rent shall thereafter be
equitably adjusted according to the remaining Rentable Area of the Leased
Premises and the Building.

(b) In the event of a temporary taking of all or a portion of the
Leased Premises for the period of ninety (90) days or less, there shall be no
abatement of Rent and Tenant shall remain fully obligated for performance of all
of the covenants and obligations on its part to be performed pursuant to the
terms of this Lease. All proceeds awarded or paid with respect thereto shall
belong to Tenant.

7.07. Damage or Destruction. In the event of a fire or other casualty in
the Leased Premises, Tenant shall immediately give notice thereof to Landlord.
The following provisions shall then apply:

(a) If the damage is limited solely to the Leased Premises and the
Leased Premises can, in Landlord's reasonable opinion, be made tenantable with
all damage repaired within twelve (12) months from the date of damage, then
Landlord shall be obligated to rebuild the same to substantially their former
condition to the extent that the same is feasible (subject to reasonable changes
which Landlord shall deem desirable and such changes as may be required by
applicable law) and shall proceed with reasonable diligence to do so and this
Lease shall remain in full force and effect.

(b) If portions of the Project outside the boundaries of the Leased
Premises are damaged or destroyed (whether or not the Leased Premises are also
damaged or destroyed) and the Leased Premises and the Project can, in Landlord's
opinion, both be made tenantable with all damage repaired within six (6) months
from the date of damage or destruction, and provided that Landlord

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determines that it is economically feasible, then Landlord shall be obligated to
rebuild the same to substantially their former condition to the extent that the
same is feasible (subject to reasonable changes which Landlord shall deem
desirable and such changes as may be required by applicable law) and shall
proceed with reasonable diligence to do so and this Lease shall remain in full
force and effect; provided, however, that Landlord shall not terminate this
Lease if it rebuilds the Project and/or the Leased Premises.

(c) Notwithstanding anything to the contrary contained in Sections
--------
7.07(a) or 7.07(b) above, Landlord shall not have any obligation whatsoever to
- ------- -------
repair, reconstruct or restore the Leased Premises and Tenant shall have the
right to terminate this Lease, when any substantial damage thereto or to the
Project occurs during the last nine (9) months of the Term and Tenant has not
effectively exercised any option granted to Tenant to extend the Term. Under
such circumstances, Landlord shall promptly notify Tenant of its decision not to
rebuild, whereupon the Lease shall terminate as of the date of such notice.

(d) If neither Section 7.07(a) nor 7.07(b) above applies, Landlord
shall so notify Tenant within sixty (60) days after the date of the damage or
destruction and either Tenant or Landlord may terminate this Lease within thirty
(30) days after the date of such notice, such termination notice to be
immediately effective; provided, however, that Landlord shall have the right to
elect to reconstruct the Project and the Leased Premises, in which event (i)
Landlord shall notify Tenant of such election within said sixty (60) day period
and Tenant shall thereupon have no right to terminate this Lease, and (ii)
Landlord shall proceed with reasonable diligence to rebuild the Project and the
Leased Premises to substantially their former condition to the extent that the
same is feasible (subject to reasonable changes which Landlord shall reasonably
deem desirable and such changes as may be required by applicable law).

(e) During any period when Tenant's use of the Leased Premises is
significantly impaired by damage or destruction, Net Rent shall abate in
proportion to the degree to which Tenant's use of the Leased Premises is
impaired until such time as the Leased Premises are made tenantable as
reasonably determined by Landlord. If the Leased Premises are damaged by any
peril and Landlord does not terminate the Lease, then Tenant shall have the
option to terminate the Lease if the Leased Premises cannot be, or are not in
fact, substantially restored by Landlord to their prior condition within 180
days after the condemnation or damage, with such 180 day period extended (up to
60 additional days) for periods of delay as provided under Section 9.12 and
periods of delays beyond the reasonable control of Landlord (including any
delays in obtaining permits).

(f) The proceeds from any insurance paid by reason of damage to or
destruction of the Project or any part thereof insured by Landlord shall belong
to and be paid to Landlord, subject to the rights of any mortgagee of Landlord's
interest in the Project or the beneficiary of any deed of trust which
constitutes an encumbrance thereon. Tenant shall be responsible at its sole
cost and expense for the repair, restoration and replacement of (i) its
fixtures, furnishings, equipment, machinery, merchandise and personal property
in the Leased Premises, and (ii) its alteration, additions and improvements.

(g) Landlord's repair and restoration obligations under this Section
7.07 shall not impair or otherwise affect the rights and obligations of the
parties set forth elsewhere in this Lease.

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Subject to Section 7.07(e), Landlord shall not be liable for any inconvenience
or annoyance to Tenant, its employees, agents, contractors or invitees, or
injury to Tenant's business resulting in any way from such damage or the repair
thereof. Landlord and Tenant agree that the terms of this Lease shall govern the
effect of any damage to or destruction of the Leased Premises or the Project
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute or law to the extent inconsistent therewith.

7.08. Default by Tenant.

(a) Events Of Default. The occurrence of any of the following shall
constitute an event of default on the part of Tenant:

(1) Abandonment. Abandonment of the Leased Premises for a
continuous period of sixty (60) days;

(2) Nonpayment Of Rent. Failure to pay any installment of Rent
due and payable hereunder on the date when payment is due, such failure
continuing for a period of three (3) business days after written notice of such
failure; provided, however, that Landlord shall not be required to provide such
notice more than two (2) times in a calendar year with respect to non-payment of
Net Rent or Additional Rent, the third such non-payment in a calendar year
constituting default without requirement of notice; furthermore, if Tenant shall
be served with a demand for the payment of past due Rent, any payment(s)
tendered thereafter to cure any default by Tenant shall be made only by
cashier's check, wire-transfer or direct deposit of immediately available funds;

(3) Other Obligations. Failure to perform any obligation,
agreement or covenant under this Lease other than those matters specified in
Sections 7.08(a)(1) and 7.08(a)(2), such failure continuing for a period of
thirty (30) days after written notice of such failure (or such longer period as
is reasonably necessary to remedy such default, provided that Tenant commences
the remedy within such thirty (30)-day period and continuously and diligently
pursues such remedy at all times until such default is cured);

(4) General Assignment. Any general arrangement or assignment by
Tenant for the benefit of creditors;

(5) Bankruptcy. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary petition against Tenant,
which involuntary petition remains undischarged for a period of sixty (60) days.
In the event that under applicable law the trustee in bankruptcy or Tenant has
the right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, within such time period as may be
permitted by the bankruptcy court having jurisdiction, cure all defaults of
Tenant hereunder outstanding as of the date of the affirmance of this Lease and
provide to Landlord such adequate assurances as may be necessary to ensure
Landlord of the continued performance of Tenant's obligations under this Lease;

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(6) Receivership. The appointment of a trustee or receiver to
take possession of all or substantially all of Tenant's assets or the Leased
Premises, where possession is not restored to Tenant within ten (10) business
days;

(7) Attachment. The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets or the Leased Premises,
if such attachment or other seizure remains undismissed or undischarged for a
period of ten (10) business days after the levy thereof;

(8) Insolvency. The admission by Tenant in writing of its
inability to pay its debts as they become due; the filing by Tenant of a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation; the filing by Tenant of an answer admitting or failing timely
to contest a material allegation of a petition filed against Tenant in any such
proceeding; or, if within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been
dismissed;

(9) [Intentionally Deleted.]

(10) Partner. If Tenant is a partnership or consists of more
than one (1) person or entity, if any partner of the partnership or any person
or entity constituting Tenant is involved in any of the events or acts described
in subsections 7.08(a)(4) through (8); or

(11) Misrepresentation. The discovery by Landlord that any
representation, warranty or financial statement intentionally given to Landlord
by Tenant or any guarantor of Tenant's obligations under this Lease was
materially false or misleading.

(b) Remedies Upon Default:

(1) Termination. If an event of default occurs, Landlord shall
have the right, with or without notice or demand, immediately (after expiration
of any applicable grace period specified herein) to terminate this Lease, and at
any time thereafter recover possession of the Leased Premises or any part
thereof and expel and remove therefrom Tenant and any other person occupying the
same, by any lawful means, and again repossess and enjoy the Leased Premises
without prejudice to any of the remedies that Landlord may have under this
Lease, or at law or in equity by reason of Tenant's default or of such
termination.

(2) Continuation After Default. Even though Tenant has breached
this Lease and/or abandoned the Leased Premises, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession
under subsection 7.08(b)(1) hereof in writing, and Landlord may enforce all of
its rights and remedies under this Lease, including (but without limitation) the
right to recover Rent as it becomes due, and Landlord, without terminating this
Lease, may exercise all of the rights and remedies of a landlord under Section
1951.4 of the Civil Code of the State of California or any amended or successor
code section. Acts of maintenance or preservation, efforts to relet the Leased
Premises or the appointment of a receiver upon application

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of Landlord to protect Landlord's interest under this Lease shall not constitute
an election to terminate Tenant's right to possession.

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(3) Damages Upon Termination. Should Landlord terminate this
Lease pursuant to the provisions of subsection 7.08(b)(1) hereof, Landlord shall
have all the rights and remedies of a landlord provided by Section 1951.2 of the
Civil Code of the State of California. Upon such termination, in addition to any
other rights and remedies to which Landlord may be entitled under applicable
law, Landlord shall be entitled to recover from Tenant: (i) the worth at the
time of award of the unpaid Rent and other amounts which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award exceeds the
amount of such Rent loss that Tenant proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be likely to result
therefrom. The "worth at the time of award" of the amounts referred to in
clauses (i) and (ii) shall be computed with interest at the lesser of twelve
percent (12%) per annum or the maximum rate then allowed by law. The "worth at
the time of award" of the amount referred to in clause (iii) shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the award plus one percent (1%).

(4) Computation of Rent for Purposes of Default. For purposes of
computing unpaid Rent which would have accrued and become payable under this
Lease pursuant to the provisions of Section 7.08(c), unpaid Rent shall consist
of the sum of:

(i) the total Base Rent for the balance of the Term, plus

(ii) a computation of Tenant's Proportionate Share of Basic
Operating Cost for the balance of the Term, the assumed amount for the
Computation Year of the default and each future Computation Year in the Term to
be equal to Tenant's Proportionate Share of Basic Operating Cost for the
Computation Year immediately prior to the year in which default occurs,
compounded at a per annum rate equal to the mean average rate of inflation for
the preceding five (5) calendar years as determined by the United States
Department of Labor, Bureau of Labor Statistics Consumer Price Index (All Urban
Consumers, all items (1982-84=100)) for the Metropolitan Area or Region in which
the Project is located. If such Index is discontinued or revised, the average
rate of inflation shall be determined by reference to the index designated as
the successor or substitute index by the government of the United States.

(5) Late Charge. If any payment required to be made by Tenant
under this Lease is not received by Landlord within five (5) days after the same
is due (or following written notice if required hereunder), Tenant shall pay to
Landlord an amount equal to five percent (5%) of the delinquency. The parties
agree that Landlord would incur costs not contemplated by this Lease by virtue
of such delinquencies, including without limitation administrative, collection,
processing and accounting expenses, the amount of which would be extremely
difficult to compute, and the amount stated herein represents a reasonable
estimate thereof. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's breach or default with respect to such
delinquency, or prevent Landlord from exercising any of Landlord's other rights
and remedies.

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(6) Interest on Past-Due Obligations. Except as expressly
otherwise provided in this Lease, any Rent due Landlord hereunder, other than
late charges, which is not received by Landlord on the date on which it was due,
shall bear interest from the day after it was due at the lesser of maximum rate
then allowed by law, or twelve percent (12%) per annum, in addition to the late
charge provided for in Section 7.08(e).

(7) Landlord's Right to Perform. Notwithstanding anything to the
contrary set forth elsewhere in this Lease, in the event Tenant fails to perform
any affirmative duty or obligation of Tenant under this Lease, then within the
periods set forth in Section 7.08(a) hereof (and without notice in case of an
emergency) Landlord may (but shall not be obligated to) perform such duty or
obligation on Tenant's behalf, including, without limitation, the obtaining of
insurance policies or governmental licenses, permits or approvals. Tenant shall
reimburse Landlord upon demand for the costs and expenses of any such
performance (including penalties, interest and attorneys' fees incurred in
connection therewith). Such reasonable costs and expenses incurred by Landlord
shall be deemed Additional Rent hereunder.

(8) Remedies Cumulative. All rights, privileges and elections or
remedies of Landlord are cumulative and not alternative with all other rights
and remedies at law or in equity to the fullest extent permitted by law.

Article 8.

Option to Renew, Option to Expand

8.01. Option to Renew.

(a) Landlord hereby grants to Tenant one (1) option (the "Option") to
extend the term of this Lease for an additional period of five (5) years (the
"Option Term"), all on the following terms and conditions:

(1) The Option must be exercised, if at all, by written notice
irrevocably exercising the Option ("Option Notice") delivered by Tenant to
Landlord not later than nine (9) months prior to the Term Expiration Date.
Further, the Option shall not be deemed to be properly exercised if, as of the
date of the Option Notice or at the Term Expiration Date, (i) Tenant is in
default under this Lease after the delivery of any notice required hereunder and
passage of any applicable cure period, (ii) Tenant has assigned this Lease or
its interest therein (other than an assignment for which Landlord's consent is
not required), or (iii) Tenant, or Tenant's affiliate or subsidiary, is in
possession of less than fifty percent (50%) of the square footage of the Leased
Premises. Provided Tenant has properly and timely exercised the Option, the
term of this Lease shall be extended for the period of the Option Term, and all
terms, covenants and conditions of this Lease shall remain unmodified and in
full force and effect, except that the Base Rent shall be modified as set forth
in subsection 8.01(a)(2) below.

(2) The Base Rent payable for the Option Term shall be the then-
current rental rate per rentable square foot (as further defined below, "FMRR")
being agreed to in new leases by the Landlord and other landlords of buildings
in the Emeryville, California area which are comparable in quality, location and
prestige to the Building ("Comparable Buildings") and tenants leasing space

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in the Building or Comparable Buildings. As used herein, "FMRR" shall mean the
rental rate per rentable square foot for which Landlord and other landlords are
entering into new leases (excluding the value of improvements made at Tenant's
expense) within the time period of nine (9) to six (6) months prior to the Term
Expiration Date ("Market Determination Period"), with new tenants leasing from
Landlord and/or other landlords office space in the Building and/or Comparable
Buildings ("Comparative Transactions"). Landlord shall provide its determination
of the FMRR to Tenant within twenty (20) days after Landlord receives the Option
Notice. Tenant shall have fifteen (15) days ("Tenant's Review Period") after
receipt of Landlord's notice of the FMRR within which to accept such FMRR or to
reasonably object thereto in writing. In the event Tenant objects to the FMRR
submitted by Landlord, Landlord and Tenant shall attempt to agree upon such
FMRR. If Landlord and Tenant fail to reach agreement on such FMRR within fifteen
(15) days following Tenant's Review Period (the "Outside Agreement Date"), then
each party shall place in a separate sealed envelope its final proposal as to
FMRR and such determination shall be submitted to arbitration in accordance with
subparagraph 8.01(b) below.

(b) Landlord and Tenant shall meet with each other within five (5) business
days of the Outside Agreement Date and exchange the sealed envelopes and then
open such envelopes in each other's presence. If Landlord and Tenant do not
mutually agree upon the FMRR within one (1) business day of the exchange and
opening of envelopes, then, within ten (10) business days of the exchange and
opening of envelopes, Landlord and Tenant shall agree upon and jointly appoint
one arbitrator who shall be by profession be a real estate appraiser or broker
who shall have been active over the five (5) year period ending on the date of
such appointment in the leasing of comparable commercial properties in the
vicinity of the Building. Neither Landlord nor Tenant shall consult with such
broker or appraiser as to his or her opinion as to FMRR prior to the
appointment. The determination of the arbitrator shall be limited solely to the
issue of whether Landlord's or Tenant's submitted FMRR for the Premises is the
closer to the FMRR for the Leased Premises. Such arbitrator may hold such
hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary. In addition, Landlord or Tenant may submit
to the arbitrator with a copy to the other party within five (5) business days
after the appointment of the arbitrator any data and additional information that
such party deems relevant to the determination by the arbitrator ("Data") and
the other party may submit a reply in writing within five (5) business days
after receipt of such Data.

(1) The arbitrator shall, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties shall use Landlord's or
Tenant's submitted FMRR, and shall notify Landlord and Tenant of such
determination.

(2) The decision of the arbitrator shall be binding upon Landlord and
Tenant.

(3) If Landlord and Tenant fail to agree upon and appoint such
arbitrator, then the appointment of the arbitrator shall be made by the American
Arbitration Association.

(4) The cost of arbitration shall be paid by the party whose
submitted FMRR is not selected by the arbitrator.

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(5) The arbitration proceeding and all evidence given or discovered
pursuant thereto shall be maintained in confidence by all parties.

Notwithstanding anything to the contrary contained in this Section, if the
rent during any extended term is determined by arbitration and if Tenant does
not, in its sole discretion, approve the rental amount established by such
appraisal, Tenant may rescind its exercise of the Option by giving Landlord
written notice of such election to rescind within ten (10) days after receipt of
the arbitrator's decision. If Tenant rescinds its exercise of the Option, then
(i) the Lease shall terminate, at Landlord's election, either on the date that
is two hundred seventy (270) days after Tenant's notice of rescission or on the
date the Lease would have otherwise terminated absent Tenant's exercise of the
Option; and (ii) Tenant shall pay all costs and expenses of the arbitration.

Article 9.

Miscellaneous Matters

9.01. Parking.

(a) Landlord agrees to provide Tenant for use by the employees,
agents, customers and invitees of Tenant the number of parking spaces designated
on the Basic Lease Information sheet on an unreserved and unassigned basis on
those portions of the Project designated by Landlord for parking. Such parking
spaces shall be free of charge during the Term and any extension thereof. At
any time during the first year of following the Term Commencement Date, Tenant
may elect to lease, for a period from the date of such election to the end of
the initial Term, up to an additional forty-six (46) parking stalls at the rate
$55.00 per stall per month during the first year of the initial Term. Tenant
may make multiple elections provided that all elections must occur during the
first year of the initial Term. During subsequent years of the initial Term,
the parking rate for the Additional Spaces shall increase at the lesser of
market increases or three percent (3%) over the prior year. The parking spaces
will not be separately identified and Landlord shall have no obligation to
monitor the use of the parking area; provided, however, the entrance to the
Building garage shall be through a card-key system implemented by Landlord. If
a parking density problem occurs during the Term, Landlord shall address the
problem, in its reasonable discretion, which solution may include initiating a
parking permit system or a reserved parking system and any costs associated
therewith (including, without limitation, costs of patrolling the Building
garage and/or parking area outside of the Building for compliance with the
parking system) shall constitute a Basic Operating Cost. All parking shall be
subject to any and all rules and regulations adopted by Landlord in its
reasonable discretion from time to time. Only automobiles no larger than full
size passenger automobiles or pick-up trucks or standard business use vehicles
(which do not require parking spaces larger than full size passenger
automobiles) may be parked in the Project parking area. Tenant shall not permit
or allow any vehicles that belong to or are controlled by Tenant or Tenant's
employees, agents, customers or invitees to be loaded, unloaded or parked in
areas other then those designated by Landlord for such activities. A failure by
Tenant or any of its employees, agents, customers or invitees to comply with the
foregoing provisions shall afford Landlord the right, but not the obligation,
without notice, in addition to any other rights and remedies available under
this Lease, to remove and to tow away the vehicles involved and to charge the
cost to Tenant, which cost shall be immediately due and payable upon demand by
Landlord.

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(b) Landlord reserves the right to charge a per-car parking fee
during the Term (in additional to any fees otherwise provided under this Lease)
if such parking fees are mandated or otherwise imposed by applicable law. Rates
to be charged by Landlord or its operator for such parking shall be the then-
prevailing market rate for parking in such area as established by Landlord or
its operator from time to time. If a parking fee is charged, Tenant's right to
use of the Building garage and/or a parking area shall be subject to timely
payment of the established parking fees.

9.02. Brokers. Landlord has been represented in this transaction by
Landlord's Broker. Tenant has been represented in this transaction by Tenant's
Broker. Upon full execution of this Lease by both parties, Landlord shall pay
to (i) Landlord's Broker a fee for brokerage services rendered by it in this
transaction if provided for in a separate written agreement between Landlord and
Landlord's Broker, and (ii) Tenant's broker pursuant to Landlord's published
commission schedule or, in the event no such schedule exists, pursuant to a
separate agreement by and between Landlord and Tenant's broker. Tenant
represents and warrants to Landlord that the brokers named in the Basic Lease
Information sheet are the only agents, brokers, finders or other similar parties
with whom Tenant has had any dealings in connection with the negotiation of this
Lease and the consummation of the transaction contemplated hereby. Tenant
hereby agrees to indemnify, defend and hold Landlord free and harmless from and
against liability for compensation or charges which may be claimed by any other
agent, broker, finder or other similar party by reason of any dealings with or
actions of Tenant in connection with the negotiation of this Lease and the
consummation of this transaction, including any costs, expenses and attorneys'
fees incurred with respect thereto.

9.03. No Waiver. No waiver by either party of the default or breach of any
term, covenant or condition of this Lease by the other shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent default or
breach by the other of the same or of any other term, covenant or condition
hereof. Landlord's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Landlord's consent to, or approval of, any
subsequent or similar act by Tenant, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such consent.
Regardless of Landlord's knowledge of a default or breach at the time of
accepting Rent, the acceptance of Rent by Landlord shall not be a waiver of any
preceding default or breach by Tenant of any provision hereof, other than the
failure of Tenant to pay the particular Rent so accepted. Any payment given
Landlord by Tenant may be accepted by Landlord on account of monies or damages
due Landlord, notwithstanding any qualifying statements or conditions made by
Tenant in connection therewith, which statements and/or conditions shall be of
no force or effect whatsoever unless specifically agreed to in writing by
Landlord at or before the time of deposit of such payment.

9.04. Recording. Neither this Lease nor a memorandum thereof shall be
recorded without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion.

9.05. Holding Over. If Tenant holds over after expiration or
termination of this Lease, Tenant shall pay for each month of hold-over tenancy
one hundred fifty percent (150%) times the Base Rent which Tenant was obligated
to pay for the month immediately preceding the end of the Term for each month or
any part thereof of any such hold-over period, together with such other amounts
as may become due hereunder. No holding over by Tenant after the Term shall
operate to extend the Term. In the event of any unauthorized holding over,
Tenant shall indemnify, defend and

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<PAGE>

hold Landlord harmless from and against all claims, demands, liabilities,
losses, costs, expenses (including attorneys' fees), injury and damages incurred
by Landlord as a result of Tenant's delay in vacating the Leased Premises.

9.06. Transfers by Landlord. The term "Landlord" as used in this Lease
shall mean the owner(s) at the time in question of the fee title to the Leased
Premises or, if this is a sublease, of the Tenant's interest in the master
lease. If Landlord transfers, in whole or in part, its rights and obligations
under this Lease or in the Project, upon its transferee's assumption of
Landlord's obligations hereunder and delivery to such transferee of any unused
Security Deposit then held by Landlord, no further liability or obligations
shall thereafter accrue against the transferring or assigning person as Landlord
hereunder. Subject to the foregoing, the obligations and/or covenants in this
Lease to be performed by the Landlord shall be binding only upon the Landlord as
defined in this Section 9.06.

9.07. Attorneys' Fees. In the event either party places the enforcement of
this Lease, or any part of it, or the collection of any Rent due, or to become
due, hereunder, or recovery of the possession of the Leased Premises, in the
hands of an attorney, or files suit upon the same, the prevailing party shall
recover its reasonable attorneys' fees, costs and expenses, including those
which may be incurred on appeal. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not suit is filed or any suit that may
be filed is pursued to decision or judgment. The term "prevailing party" shall
include, without limitation, a party who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other party of its claim or defense. The attorneys'
fee award shall not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys' fees reasonably incurred.

9.08. Termination; Merger. No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Leased Premises, shall
constitute an acceptance of the surrender of the Leased Premises by Tenant
before the scheduled Term Expiration Date. Only a written notice from Landlord
to Tenant shall constitute acceptance of the surrender of the Leased Premises
and accomplish a termination of this Lease. Unless specifically stated
otherwise in writing by Landlord, the voluntary or other surrender of this Lease
by Tenant, the mutual termination or cancellation hereof, or a termination
hereof by Landlord for default by Tenant, shall automatically terminate any
sublease or lesser estate in the Leased Premises; provided, however, Landlord
shall, in the event of any such surrender, termination or cancellation, have the
option to continue any one or all of any existing subtenancies. Landlord's
failure within thirty (30) days following any such event to make any written
election to the contrary by written notice to the holder of any such lesser
interest, shall constitute Landlord's election to have such event constitute the
termination of such interest.

9.09. Amendments; Interpretation. This Lease may not be altered,
changed or amended, except by an instrument in writing signed by the parties in
interest at the time of the modification. The captions of this Lease are for
convenience only and shall not be used to define or limit any of its provisions.

9.10. Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease,

45
<PAGE>

or the application of such provision to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each provision of this Lease shall be valid and shall be enforceable to the
fullest extent permitted by law.

9.11. Notices. All notices, demands, consents and approvals which are
required or permitted by this Lease to be given by either party to the other
shall be in writing and shall be deemed to have been fully given by personal
delivery or by recognized overnight courier service or when deposited in the
United States mail, certified or registered, with postage prepaid, and addressed
to the party to be notified at the address for such party specified on the Basic
Lease Information sheet, or to such other place as the party to be notified may
from time to time designate by at least fifteen (15) days' notice to the
notifying party given in accordance with this Section 9.11, except that upon
Tenant's taking possession of the Leased Premises, the Leased Premises shall
constitute Tenant's address for notice purposes. A copy of all notices given
to Landlord under this Lease shall be concurrently transmitted to such party or
parties at such addresses as Landlord may from time to time hereafter designate
by notice to Tenant.

Any notice sent by registered or certified mail, return receipt requested,
shall be deemed given on the date of delivery shown on the receipt card, or if
no delivery date is shown, the postmark thereon. Notices delivered by
recognized overnight courier shall be deemed given twenty-four (24) hours after
delivery of the same to the courier. If notice is received on a Saturday,
Sunday or legal holiday, it shall be deemed received on the next business day.

9.12. Force Majeure. Any prevention, delay or stoppage of work to be
performed by Landlord or Tenant which is due to strikes, labor disputes,
inability to obtain labor, materials, equipment or reasonable substitutes
therefor, acts of God, governmental restrictions or regulations or controls,
judicial orders, enemy or hostile government actions, civil commotion, or other
causes beyond the reasonable control of the party obligated to perform
hereunder, shall excuse performance of the work by that party for a period equal
to the duration of that prevention, delay or stoppage. Nothing in this Section
9.12 shall excuse or delay Tenant's obligation to pay Rent or other charges due
under this Lease.

9.13. Guarantor. None.

9.14. Successors and Assigns. This Lease shall be binding upon and inure to
the benefit of Landlord, its successors and assigns (subject to the provisions
hereof, including, without limitation, Section 5.15), and shall be binding upon
and inure to the benefit of Tenant, its successors, and to the extent assignment
or subletting, may be approved by Landlord hereunder, Tenant's assigns or
subtenants.

9.15. Further Assurances. Landlord and Tenant each agree to promptly sign
all documents reasonably requested to give effect to the provisions of this
Lease.

9.16. Incorporation of Prior Agreements. This Lease, including the exhibits
and addenda attached to it, contains all agreements of Landlord and Tenant with
respect to any matter referred to herein. No prior agreement or understanding
pertaining to such matters shall be effective.

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<PAGE>

9.17. Applicable Law. This Lease shall be governed by, construed and
enforced in accordance with the laws of the State of California.

9.18. Time of the Essence. Time is of the essence of each and every
covenant of this Lease. Each and every covenant, agreement or other provision
of this Lease on Tenant's part to be performed shall be deemed and construed as
a separate and independent covenant of Tenant, not dependent on any other
provision of this Lease or on any other covenant or agreement set forth herein.

9.19. No Joint Venture. This Lease shall not be deemed or construed to
create or establish any relationship of partnership or joint venture or similar
relationship or arrangement between Landlord and Tenant hereunder.

9.20. Authority. If Tenant is a corporation, trust or general or limited
partnership, each individual executing this Lease on behalf of Tenant represents
and warrants that he or she is duly authorized to execute and deliver this Lease
on Tenant's behalf and that this Lease is binding upon Tenant in accordance with
its terms. If Tenant is a corporation, trust or partnership, Tenant shall,
within ten (10) business days after request by Landlord, deliver to Landlord
evidence satisfactory to Landlord of such authority.

9.21. Declaration of Covenants, Conditions and Restrictions. Tenant
acknowledges that it has received and read any CC&Rs for the Project that have
been recorded as of the date hereof, and agrees to comply with and be bound by
all terms, conditions and provisions thereof. Tenant further acknowledges and
agrees that a default by Tenant under the CC&Rs shall constitute a default
hereunder. All obligations of Landlord hereunder shall be limited to the extent
performance of same is prohibited, restricted or limited under the CC&Rs.

9.22. Offer. Preparation of this Lease by Landlord or Landlord's agent
and submission of same to Tenant shall not be deemed an offer to lease to
Tenant. This Lease is not intended to be binding and shall not be effective
until fully executed by both Landlord and Tenant.

9.23. Building Access. Tenant shall have access to the Leased Premises
twenty-four (24) hours per day, seven (7) days per week. The Building shall be
open from 7:00 a.m. to 6:00 p.m. Monday through Friday, and from 8:00 a.m. to
1:00 p.m. Saturday. Landlord shall provide a cardkey system for access to the
Building and the adjacent garage after such hours. Landlord shall provide
security measures in and around the Building that will include, but may not be
limited to, security cameras and roving security patrols.

9.24. Exhibits; Addenda. The following Exhibits and addenda are attached
to, incorporated in and made a part of this Lease: Exhibit A-1 Site Plan of
-----------
the Building; Exhibit A-2 Floor Plan of the Leased Premises; Exhibit B
----------- ---------
Initial Improvement of the Leased Premises; Exhibit B-1 Preliminary Plans;
-----------
Exhibit B-2 Warm Shell Specifications; Exhibit C Confirmation of Term of Lease;
- ----------- ---------
Exhibit D Confidentiality Agreement; Exhibit E Building Rules and Regulations;
- --------- ---------
and Exhibit F Estimated Budget.
---------

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<PAGE>

9.25. Approvals. Unless otherwise specified in this Lease, whenever the
Lease requires an approval, consent, determination, selection or judgment by
either Landlord or Tenant, such approval, consent, determination, selection or
judgment and any conditions imposed thereby shall be reasonable and shall not be
unreasonably withheld or delayed and, in exercising any regret or remedy
hereunder, each party shall at all times act reasonably and in good faith.

9.26. Depreciation. For all tax purposes, Landlord shall have the right to
depreciate the cost of Landlord's Work and the Tenant Improvements (except for
the cost of Tenant Improvements in excess of Landlord's Contribution (which
Landlord's Contribution shall include the amount referenced in Paragraph 5(c) of
Exhibit B); and Tenant shall have the right to depreciate all Tenant Extra
Improvements and all alterations to the Leased Premises paid for by Tenant.

9.27. Sublease to Reel.com. Landlord shall have the option (the "Option")
to require that Tenant sublease to Reel.com up to 5,000 rentable square feet of
the Leased Premises on the West-Hi-Bay of the first (1/st/) floor (the "Sublease
Space") for a period commencing on the Term Commencement Date and expiring one
year thereafter. The terms of such sublease (including, without limitation, the
exact location of the Sublease Space) shall be as reasonably acceptable to
Tenant except that (i) rent shall not exceed the Rent under the Lease with
respect to the Sublease Space after subtracting Tenant's actual costs to
sublease the Sublease Space (which shall not include any brokerage commissions
and costs associated with the Tenant Improvements), (ii) Reel.com shall
reimburse Tenant for Tenant's reasonable attorneys' fees in connection with the
Sublease, and (iii) Reel.com shall be responsible, at its sole cost, to demise
the Sublease Space from the Leased Premises as may be reasonably required by
Tenant. Landlord's right to exercise its right under this Section 9.27 shall
expire fifteen (15) days from the date of full execution of this Lease and shall
be exercised by Landlord's giving written notice to Tenant prior to the end of
such period. Notwithstanding the foregoing, Tenant shall not be required to
sublease the Sublease Space to Reel.com in the event the rent payable under such
sublease by Reel.com is less than the Rent hereunder or Tenant is required to
incur costs in subleasing the Sublease Space which will not be reimbursed by
Reel.com or Landlord.

[Balance of page has been intentionally left blank.]

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first written above.

"LANDLORD":

BEP-EMERYVILLE, L.P.,
a Delaware limited partnership

By: EPI Investors 103 LLC.,
a California limited liability company
Its: General Partner

By: Ellis Partners, Inc.,
a California corporation
Its: Managing Member

By: ___________________________________
Name: ___________________________________
Title:
_______________________________________

"TENANT":

EVOLVE SOFTWARE, INC.,
a Delaware corporation

By: _____________________________________
Name: _____________________________________
Title:______________________________________

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<PAGE>

EXHIBIT A-1

SITE PLAN
OF THE
BUILDING

1
<PAGE>

EXHIBIT A-2

FLOOR PLAN
OF THE
LEASED PREMISES

2
<PAGE>

EXHIBIT B

INITIAL IMPROVEMENT OF THE LEASED PREMISES

1. Tenant Improvements. Landlord shall construct and install the Tenant
-------------------
Improvements in the Leased Premises, substantially in accordance with plans,
working drawings and specifications ("Tenant's Plans") prepared by Landlord's
architect, Kava Massih Architects, Inc., in consultation with Tenant. Tenant's
Plans shall include design build mechanical, electrical and plumbing plans and
specifications. The costs of preparing Tenant's Plans and performing the Tenant
Improvements shall be allocated between, and paid by, Landlord and Tenant as set
forth in this Exhibit B. Landlord shall use its best efforts to minimize the
---------
cost of preparing the Tenant's Plans and performing the Tenant Improvements.

2. Tenant's Plans.
--------------

As soon as reasonably possible Tenant and Landlord shall approve
Tenant's Plans. Landlord shall cause Landlord's architect to cause Tenant's
Plan's (i) to comply with all applicable codes, laws, ordinances, rules and
regulations, (ii) not adversely affect the Building shell or core or any
systems, components or elements of the Building, (iii) be in a form sufficient
to secure the approval of all government authorities with jurisdiction over the
Building, and (iv) be otherwise satisfactory to Landlord in Landlord's
reasonable discretion. Tenant's Plans shall be complete plans, working drawings
and specifications for the layout, improvement and finish of the Leased Premises
consistent with the design and construction of the Building, including
mechanical and electrical drawings and decorating plans, showing as many of the
following as possible:

(a) Location and type of all partitions;

(b) Location and type of all doors, with hardware and keying
schedule;

(d) Location of telephone equipment room, with all special electrical
and cooling requirements;

(e) Location and type of all electrical outlets, switches, telephone
outlets, and lights;

(f) Location of all sprinklers;

(g) Location and type of all equipment requiring special electrical
requirements;

1
<PAGE>

(h) Location, weight per square foot and description of any heavy
equipment or filing system exceeding fifty (50) pounds per square foot live
and dead load;

(i) Requirements for special air conditioning or ventilation;

(j) Type and color of floor covering;

(k) Location, type and color of wall covering;

(l) Location, type and color of paint or finishes;

(m) Location and type of plumbing;

(n) Location and type of kitchen equipment;

(o) Indicate critical dimensions necessary for construction;

(p) Details showing all millwork with verified dimensions and
dimensions of all equipment to be built in, corridor entrances, bracing or
support of special walls or glass partitions, and any other items or
information requested by Landlord; and

(q) Location of all cabling.

3. Landlord shall cause to be prepared, as quickly as possible, the
Tenant's Plans, as well as an estimate of the total cost of the Tenant
Improvements ("Cost Estimate"), all of which shall conform to or represent
logical evolutions of or developments from the preliminary plans attached hereto
as Exhibit B-1 (the "Initial Preliminary Plans"). The parties intend to replace
-----------
the Initial Preliminary Plans with a final space plan within sixty (60) days of
execution of this Lease (the "Final Preliminary Plans"); provided, however, that
the failure of the parties to replace the Initial Preliminary Plans with the
Final Preliminary Plans shall not affect the enforceability of this Lease. The
Tenant's Plans and Cost Estimate shall be delivered to Tenant immediately upon
completion. Within three (3) business days after receipt thereof, at its
election (a) Tenant may approve the Tenant's Plans and Cost Estimate, or (b)
Tenant may deliver to Landlord the specific written changes to such plans that
are necessary, in Tenant's opinion, to conform such plans to the Final
Preliminary Plans or to reduce costs. If Tenant desires changes, Landlord shall
not unreasonably withhold its approval of such changes and the parties shall
confer and negotiate in good faith to reach agreement on modifications to the
Tenant's Plans and the Cost Estimate as a consequence of such change. As soon
as approved by Landlord and Tenant, Landlord shall submit the Tenant's Plans to
all appropriate governmental agencies and thereafter the Landlord shall use its
best efforts to obtain required governmental approvals as soon as practicable.

4. Construction.
------------

(a) Landlord, at its sole cost and expense and with no deduction from
Landlord's Contribution (as defined below), shall provide the "warm shell" of
the Leased Premises as further shown on Exhibit B-2 (the "Landlord's Work"),
-----------
which shall include the following: (i) windows, side

2
<PAGE>

walls and an entry door; (ii) the restroom core; (iii) HVAC on the roof, but not
distributed; (iv) insulation; (v) line for plumbing, but not distributed; (vi)
main sprinkler lines, but not distributed; and (vii) Common Areas servicing the
Leased Premises.

(b) Landlord shall complete the Landlord's Work and the Tenant
Improvements in the Leased Premises (including all Tenant Improvements relating
to the Sublease Space (as such term is defined in Section 9.27 of the Lease))
substantially in accordance with Tenant's Plans and in a good and workmanlike
manner and in compliance with all applicable codes, laws, ordinances, rules and
regulations. Landlord shall be entitled to charge a construction supervision
fee equal to the lesser of (i) three and one-half percent (3.5%) of the total
costs of the Tenant Improvements, or (ii) $1.00 per square foot of the Rentable
Area of the Leased Premises. Such administration fee shall be deducted from
Landlord's Contribution. Landlord shall pay Landlord's Contribution directly to
the Contractor in installments as the Tenant Improvements are constructed, upon
Landlord' receipt of a written request for payment accompanied by written
invoices and other written evidence reasonably satisfactory to Landlord showing
the costs incurred, until Landlord's Contribution is exhausted. Notwithstanding
the foregoing, Landlord's payment with respect to any invoice submitted by the
Contractor shall not exceed a fixed percentage of the amount of such invoice,
such fixed percentage to be equal to the ratio of Landlord's Contribution to the
contract price for the Tenant Improvements. Within ten (10) days of Tenant's
receipt from Landlord of a copy of a written invoice showing Tenant's share of
such invoice (i.e. the total amount of such invoice less Landlord's share as
determined by the preceding sentence), Tenant shall pay to Landlord the balance
of such invoice and Landlord shall pay to the Contractor the full amount of such
invoice. Landlord shall have no liability to Tenant if the Leased Premises are
not suitable for Tenant's occupancy so long as the Leased Premises are
constructed in accordance with Tenant's Plans. Landlord represents and warrants
that the entire Landlord Contribution shall be available to Tenant for its
intended use and that no portion of the Landlord Contribution has been
previously committed by Landlord for items already constructed or currently
being constructed except for the following: (i) sprinkler distribution laterals
and heads that have been installed, and (ii) telecom conduit and cable that has
been extended from the north electrical distribution room to the south
electrical distribution room.

(c) Landlord shall enter into a construction contract (the
"Construction Contract") for the Tenant's Improvements with a general contractor
(the "Contractor") selected on a competitive bid basis from the following group
of general contractors: (i) Hillhouse Construction, (ii) DPR, (iii) Pankow
Construction, and (iv) at Tenant's option, a general contractor proposed by
Tenant subject to Landlord's reasonable approval. The Construction Contract
shall be written on a "guaranteed maximum price" basis (the "Guaranteed Maximum
Price") and will be subject to Tenant's prior written approval, which will not
be unreasonably withheld. The Construction Contract shall require Contractor to
seek competitive bids from subcontractors in each of the major trades, with a
minimum of three bids where possible. Pricing below the guaranteed maximum
amount shall be based upon the actual hard costs of construction (calculated on
an open book basis) with a mark-up for the Contractor's general conditions,
overhead and profit not to exceed the lesser of the mark-up charged for other
tenant improvements at the Project or a commercially reasonable mark-up.

(d) Notwithstanding anything to the contrary in the Lease, Landlord
shall solely be responsible for, the cost of the Tenant Improvements shall not
include and the Landlord's Contribution shall not be used for the following: (i)
costs for improvements which are not shown on

3
<PAGE>

or described in the final Tenant's Plans or the general construction contract
documents relating to the Construction Contract unless otherwise approved by
Tenant; (ii) costs incurred to remove Hazardous Materials from the Leased
Premises or the surrounding area; (iii) attorneys' fees incurred in connection
with negotiation of construction contracts including the Construction Contract;
(iv) interest and other costs of financing construction costs not caused by
Tenant's failure to make any payments required under Paragraphs 4 or 5 of this
Exhibit B; (v) costs incurred as a consequence of construction defects during
the course of construction of the Tenant Improvements (provided, however, that
this clause (v) shall not expand the scope of any warranty set forth in this
Lease); (vi) costs recovered by Landlord on account of warranties and insurance
(and Landlord hereby agrees to act in a commercially reasonable manner to
exercise all rights it has to recover costs under such warranties and
insurance); (vii) restoration costs as a consequence of casualties where the
restoration costs are in excess of the sum of insurance proceeds plus any
applicable deductibles (with such deductibles not to exceed $10,000.00) under
the applicable insurance policies; (viii) penalties and late charges
attributable to Landlord's failure to pay construction costs unless caused by
Tenant's failure to make any payments required under Paragraphs 4 or 5 of this
Exhibit B; (ix) costs to bring any item which is part of the "warm shell" set
forth on Exhibit B-2 into compliance with applicable laws and restrictions,
including, without limitation, the Americans with Disabilities Act and
environmental laws; (x) wages, labor and overhead for overtime and premium time
unless otherwise agreed by the parties; (xi) offsite management, supervision
fees or other general overhead costs incurred by Landlord other than the fee set
forth in Paragraph 4(b) of this Exhibit B; and (xii) costs exceeding those
authorized pursuant to the terms of the Construction Contract.

5. Landlord's and Tenant's Contributions.
-------------------------------------

(a) Landlord shall pay for Landlord's Work.

(b) As Landlord's contribution for the costs of Tenant Improvements,
Landlord shall give Tenant an allowance in the maximum amount of $25.00 per
square foot of Rentable Area, which equals $1,281,525.00 based upon 51,261
rentable square feet ("Landlord's Contribution"). Landlord's Contribution may be
used only for direct hard and soft costs, including construction costs,
architect fees, and consultant fees; provided, however, that, in the event that
a portion of Landlord's Contribution remains after payment in full for the
Tenant Improvements, such portion shall be a credit against Base Rent. Any
costs of preparing Tenant's Plans and constructing the Tenant Improvements in
excess of Landlord's Contribution shall be paid by Tenant and shall constitute
Tenant's Extra Improvements.

(c) In the event that the actual cost of the Tenant Improvements
exceeds $1,281,525.00, Landlord shall make available up to an additional
$256,305.00 for the Tenant Improvements. Tenant may pay such actual costs in
cash or may elect to have any portion of such amount amortized over the initial
lease Term and paid monthly with Base Rent along with interest calculated at the
lesser of the maximum rate allowed by law or 11.5%.

6. Changes. Except for minor and immaterial changes, if Tenant requests
-------
any change in Tenant's Plans after final approval thereof by Landlord and
Tenant, Tenant shall request such change in a written notice to Landlord. Each
such request shall be accompanied by proper plans and specifications prepared by
Tenant, at Tenant's expense, necessary to show and explain such change

4
<PAGE>

from the previously approved Tenant's Plans. All changes in Tenant's Plans
(except for minor and immaterial changes) shall be subject to the prior written
approval of Landlord which shall be given within five (5) business days (which
shall not be unreasonably withheld).

7. Other Work by Tenant. All work not within the scope of the normal
--------------------
construction trades employed on the Building, such as the furnishing and
installing of furniture, telephone equipment, office equipment and wiring, shall
be furnished and installed by Tenant at Tenant's expense.

8. Requirements for Work Performed by Tenant. All work performed at the
-----------------------------------------
Building or in the Project by Tenant or Tenant's contractor or subcontractors
shall be subject to the following additional requirements:

a. Such work shall not proceed until Landlord has approved in
writing: (i) Tenant's contractor, (ii) the amount and coverage of public
liability and property damage insurance, with Landlord named as an
additional insured, carried by Tenant's contractor, (iii) complete and
detailed plans and specifications for such work, and (iv) a schedule for
the work.

b. All work shall be done in conformity with a valid permit when
required, a copy of which shall be furnished to Landlord before such work
is commenced. In any case, all such work shall be performed in accordance
with all applicable laws. Notwithstanding any failure by Landlord to
object to any such work, Landlord shall have no responsibility for Tenant's
failure to comply with applicable laws.

c. Tenant or Tenant's contractor shall arrange for necessary utility,
hoisting and elevator service, on a nonexclusive basis, with Landlord.
Landlord shall have the right to require any necessary movement of
materials by the elevator to be done after regular working hours.

d. Tenant shall be responsible for cleaning the Leased Premises, the
Building and the Project and removing all debris in connection with the
Tenant Improvements and its other work. All completed work shall be
subject to inspection and acceptance by Landlord. Tenant shall reimburse
Landlord for the cost of third party supervision of construction of the
Tenant Improvements (which may be deducted by Landlord from Landlord's
Contribution) upon demand and for all extra expense incurred by Landlord by
reason of faulty work done by Tenant or Tenant's contractor or by reason of
inadequate cleanup by Tenant or Tenant's contractor. Landlord will provide
Tenant with copies of third party consultant invoices within five (5)
business days of Tenant's request for such invoices.

e. Tenant shall be responsible for the cost of separately metering
electrical utilities to the Leased Premises (or such cost may be paid and
deducted from Landlord's Contribution.

9. Tenant Delay. If the completion of the Tenant Improvements is delayed
------------
(i) at the request of Tenant, (ii) by Tenant's failure to comply with the
foregoing provisions (including failure to pay any sums payable by Tenant within
the time periods specified herein), (iii) by changes in the Tenant's Plans
ordered by Tenant after such Tenant's Plans were already approved by Landlord
and

5
<PAGE>

Tenant or by extra work ordered by Tenant, (iv) because Tenant chooses to have
additional work performed by Landlord, or (v) because of any other act or
omission of Tenant not within Tenant's specific rights under this Lease
(collectively, "Tenant Delay"), then Tenant shall be responsible for all costs
and any expenses occasioned by such Tenant Delay including, without limitation,
any costs and expenses attributable to increases in labor or materials (but only
where such increased costs exceed Landlord's Contribution under paragraph 5(b));
and, if such delay actually delays the Term Commencement Date, then Tenant shall
pay Lessor the Base Rent for the entire period of such delay.

10. Binding Arbitration. Any dispute ("Dispute") between the parties with
-------------------
respect to the Tenant's Plans and/or the Construction Contract shall be resolved
in accordance with the following procedures. Either party may commence
arbitration with respect to a Dispute by giving notice to the other party
("Arbitration Notice"). Within ten (10) days of the Arbitration Notice,
Landlord and Tenant shall jointly select an arbitrator, or if they are unable to
reach agreement on the arbitrator, in accordance with the then current
arbitration rules and procedures (the "Rules") of JAMS-Endispute ("JAMS") from a
list of qualified people maintained by JAMS. Neither Landlord nor Tenant shall
consult with such arbitrator as to his or her opinion as to the Dispute prior to
the appointment. The determination of the arbitrator shall be limited solely to
the Dispute. The arbitration shall take place in San Francisco, California and
all expedited procedures prescribed by the Rules shall apply. Such arbitrator
may hold hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary. In addition, Landlord or Tenant may submit
to the arbitrator, with a copy to the other party, within five (5) business days
after the appointment of the arbitrator any data and additional information that
such party deems relevant to the determination by the arbitrator and the other
party may submit a reply in writing within five (5) business days after receipt
of such data and additional information. The arbitrator shall conduct such
evidentiary hearings as the arbitrator deems necessary or appropriate.

(a) The arbitrator shall, within twenty-one (21) days of his or her
appointment, reach a decision as to the Dispute, and shall notify Landlord and
Tenant of such determination.

(b) The decision of the arbitrator shall be binding upon Landlord and
Tenant.

(c) If Landlord and Tenant fail to agree upon other matters relating
to the arbitration, then the Rules shall govern such arbitration.

(d) The cost of the arbitration shall be paid by the substantially
unsuccessful party.

(e) The arbitration proceeding and all evidence given or discovered
pursuant thereto shall be maintained in confidence by all parties.

(f) Judgment upon the award rendered by the arbitrator may be entered
by either party in any court having jurisdiction, or application may be made to
such court for a judicial recognition of the award or an order of enforcement
thereof, as the case may be.

6
<PAGE>

EXHIBIT C

CONFIRMATION OF TERM OF LEASE

This Confirmation of Term of Lease is made by and between BEP-EMERYVILLE,
L.P., a Delaware limited partnership, as Landlord, and
___________________________________________________________________________, a
_____________________________________________________________, as Tenant, who
agree as follows:

1. Landlord and Tenant entered into a Lease dated ____________________,
19_____ (the "Lease"), in which Landlord leased to Tenant and Tenant leased from
Landlord the Leased Premises described in the Basic Lease Information sheet of
the Lease (the "Leased Premises").

2. Pursuant to Section 3.01 of the Lease, Landlord and Tenant agree to
confirm the commencement date and expiration date of the Term of the Lease as
follows:

a. _________________________, 19_____, is the Term Commencement
Date;

b. _________________________, 19_____, is the Term Expiration Date;

c. _________________________, 19_____, is the commencement date of
Rent under the Lease.

3. Tenant hereby confirms that the Lease is in full force and effect and:

a. It has accepted possession of the Leased Premises as provided in
the Lease;

b. The improvements and space required to be furnished by Landlord
under the Lease have been furnished;

c. Landlord has fulfilled all its duties of an inducement nature;

d. The Lease has not been modified, altered or amended, except as
follows: ________________________________________________________
_____________; and

e. There are no setoffs or credits against Rent and no security
deposit has been paid except as expressly provided by the Lease.

1
<PAGE>

4. The provisions of this Confirmation of Term of Lease shall inure to
the benefit of, or bind, as the case may require, the parties and their
respective successors, subject to the restrictions on assignment and subleasing
contained in the Lease.

DATED: _________________________, 19_____

<TABLE>
<CAPTION>
"LANDLORD": "TENANT":
<S> <C>
BEP-EMERYVILLE, L.P., EVOLVE SOFTWARE, INC.,
a Delaware limited partnership a Delaware corporation

By: EPI Investors 103 LLC, By: ___________________________________________
a California limited liability company Name: ______________________________________
Its: General Partner Title: ______________________________________

By: Ellis Partners, Inc.,
a California corporation
Its: Managing Member

By: __________________________________________
Name: _____________________________________
Title: _____________________________________

By: __________________________________________
Name: _____________________________________
Title: _____________________________________
</TABLE>

2
<PAGE>

EXHIBIT D

CONFIDENTIALITY AGREEMENT

2
<PAGE>

EXHIBIT E

BUILDING RULES AND REGULATIONS

1. The sidewalks, doorways, halls, stairways, vestibules and other
similar areas shall not be obstructed by Tenant or used by it for any purpose
other than ingress to and egress from the Leased Premises, and for going from
one part of the Building to another part. Corridor doors, when not in use,
shall be kept closed. Before leaving the Building, Tenant shall make
commercially reasonable efforts to ensure that all doors to the Leased Premises
are securely locked and all water faucets and electricity are shut off.

2. Plumbing fixtures shall be used only for their designated purpose, and
no foreign substances of any kind shall be deposited therein. Damage to any
such fixtures resulting from misuse by Tenant or any employee or invitee of
Tenant shall be repaired at the expense of Tenant.

3. Nails, screws and other attachments to the Building require prior
written consent from Landlord, except for the routine hanging of pictures and
diplomas or certifications. Tenant shall not mar or deface the Leased Premises
in any way. Tenant shall not place anything on or near the glass of any window,
door or wall which may appear unsightly from outside the Leased Premises.

4. All contractors and technicians rendering any installation service to
Tenant shall be subject to Landlord's approval and supervision prior to
performing services. This applies to all work performed in the Building,
including, but not limited to, installation of telephones, telegraph equipment,
wiring of any kind, and electrical devices, as well as all installations
affecting floors, walls, woodwork, windows, ceilings and any other physical
portion of the Building.

5. Movement in or out of the Building of furniture, office equipment,
safes or other bulky material which requires the use of elevators, stairways, or
the Building entrance and lobby shall be restricted to hours established by
Landlord. All such movement shall be under Landlord's supervision, and the use
of an elevator for such movements shall be restricted to the Building's freight
elevator. Arrangements shall be made at least 24 hours in advance with Landlord
regarding the time, method, and routing of such movements. Tenant shall pay for
the services of the employees of the elevator service company employed when
safes and other heavy articles are moved into or from the Building, and Tenant
shall assume all risks of damage and pay the cost of repairing or providing
compensation for damage to the Building, to articles moved and injury to persons
or property resulting from such moves. Landlord shall not be liable for any
acts or damages resulting from any such activity.

6. Landlord shall have the right to limit the weight and size of, and to
designate the location of, all safes and other heavy property brought into the
Building.

7. Tenant shall cooperate with Landlord in maintaining the Leased
Premises. Tenant shall not employ any person for the purpose of cleaning the
Leased Premises other than the Building's cleaning and maintenance personnel.
Window, carpet and wall cleaning shall be done only by

1
<PAGE>

Landlord's agents at such times and during such hours as Landlord shall elect
but in no event less than once per year. Janitorial services will not be
furnished on nights when rooms are locked and occupied after 7:00 P.M.

8. Deliveries of water, soft drinks, newspapers or other such items to
the Leased Premises shall be restricted to hours established by Landlord and
made by use of the freight elevator if Landlord so directs.

9. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds, fish or animals of any kind shall be brought into
or kept in, on or about the Leased Premises, with the exception of guide dogs
where necessary.

10. No cooking shall be done in the Leased Premises except in connection
with a convenience lunch room for the sole use of employees and guests (on a
non-commercial basis) in a manner which complies with all of the provisions of
the Lease and which does not produce fumes or odors.

11. Food, soft drink or other vending machines shall not be placed within
the Leased Premises without Landlord's prior written consent.

12. Tenant shall not install or operate on the Leased Premises any
electric heater, stove or similar equipment without Landlord's prior written
consent. Tenant shall not use or keep on the Leased Premises any kerosene,
gasoline, or inflammable or combustible fluid or material other than limited
quantities reasonably necessary for the operation and maintenance of office
equipment utilized at the Leased Premises. No explosives shall be brought onto
the Project at any time.

13. Tenant shall not waste electricity, water or air conditioning and
agrees to reasonably cooperate with Landlord to assure the effective operation
of the Building's heating and air conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the Leased Premises; Landlord shall make reasonable adjustments
in thermostats upon request from Tenant.

14. The Building air conditioning system is designed for operation only
with all outside Building windows closed; accordingly, Tenant shall not open or
allow any outside window to be opened at any time.

15. Tenant, its employees, agents and invitees shall each comply with all
requirements necessary for the security of the Leased Premises, including, if
implemented by Landlord, the use of service passes issued by Landlord for after-
hours movement of office equipment/packages, and the signing of a security
register in the Building lobby after hours. Landlord reserves the right to
refuse entry to the Building after normal business hours to Tenant, its
employees, agents or invitees, or any other person without satisfactory
identification showing his or her right of access to the Building at such time.
Landlord shall not be liable for any damages resulting from any error in regard
to any such identification or from such admission to or exclusion from the
Building. Landlord shall not be liable to Tenant for losses due to theft or
burglary, or for damage by

2
<PAGE>

unauthorized persons in, on or about the Project, and Tenant assumes full
responsibility for protecting the Leased Premises from theft, robbery and
pilferage, which includes keeping doors locked and other means of entry closed.

16. Landlord will furnish Tenant with one hundred (100) initial keys for
entrance doors into the Leased Premises, and may charge Tenant for additional
keys thereafter. All such keys shall remain the property of Landlord. No
additional locks are allowed on any door of the Leased Premises without
Landlord's prior written consent and Tenant shall not make any duplicate keys.
Upon termination of this Lease, Tenant shall surrender to Landlord all keys to
the Leased Premises, and give to Landlord the combination of all locks for safes
and vault doors, if any, in the Leased Premises.

17. Tenant shall not bring into (or permit to be brought into) the
Building any bicycle or other type of vehicle.

18. Landlord retains the right at any time, without liability to Tenant,
to change the name and street address of the Building, except as otherwise
expressly provided in the Lease with respect to signage; provided, however, that
after an initial such change, Landlord shall reimburse Tenant its actual
reasonable costs thereof.

19. Canvassing, peddling, soliciting, and distribution of handbills in or
at the Project are prohibited and Tenant will cooperate to prevent these
activities.

20. The Building hours of operation are 7:00 A.M. to 6:00 P.M., Monday
through Friday, excluding holidays. Landlord reserves the right to close and
keep locked all entrance and exit doors of the Building on Saturdays, Sundays
and legal holidays, and between the hours of 6:00 P.M. of any day and 7:00 A.M.
of the following day, and during such other hours as Landlord may deem advisable
for the protection of the Building and the tenants thereof. Card key access to
the Building will be provided to Tenant during such closed hours.

21. The requirements of Tenant will be attended to only upon application
to the Project manager. Employees will not perform any work or do anything
outside of their regular duties unless under specific instruction from the
Project manager.

22. Tenant shall cooperate fully with the life safety program of the
Building as established and administered by Landlord. This shall include
participation by Tenant and its employees in exit drills, fire inspections, life
safety orientations and other programs relating to fire and life safety that may
be established by Landlord.

23. No smoking shall be permitted in the Building.

24. Subject to the provisions of this Lease, Landlord reserves the right
to rescind any of these rules and regulations and to make future reasonable
rules and regulations required for the safety, protection and maintenance of the
Project, the operation and preservation of the good order thereof, and the
protection and comfort of the tenants and their employees and visitors. Such
rules and regulations, when made and written notice thereof given to Tenant,
shall be binding as if

3
<PAGE>

originally included herein. Landlord shall not be responsible to Tenant for the
non-observance or violation of these rules and regulations by any other tenant
of the Building. Landlord reserves the right to exclude or expel from the
Project any person who, in Landlord's judgment, is under the influence of liquor
or drugs, or who shall in any manner do any act in violation of any of these
rules and regulations.

4
<PAGE>

EXHIBIT F

ESTIMATED BUDGET

<PAGE>

EXHIBIT 10.5

EVOLVE SOFTWARE, INC.

1995 STOCK OPTION PLAN

(as adopted March 2, 1995
and as amended July 16, 1996,
January 15, 1999 and November 18, 1999)

1. Purposes of the Plan. The purposes of this Stock Option Plan are
--------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

2. Definitions. As used herein, the following definitions shall apply:
-----------

(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.

(b) "Board" means the Board of Directors of the Company.
-----

(d) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.

(e) "Common Stock" means the Common Stock of the Company.
------------

(f) "Company" means Evolve Software, Inc., a Delaware corporation.
-------

(g) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.

(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any
<PAGE>

Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract, including Company policies.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.

(i) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.

(k) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;

(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.

(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.

(n) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

2
<PAGE>

(o) "Option" means a stock option granted pursuant to the Plan.
------

(p) "Optioned Stock" means the Common Stock subject to an Option.
--------------

(q) "Optionee" means an Employee or Consultant who receives an Option.
--------

(r) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.

(s) "Plan" means this 1995 Stock Option Plan.
----

(t) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.

(u) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 20,000,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.

4. Administration of the Plan.
--------------------------

(a) Administrator. The Plan shall be administered by the Board or a
-------------
Committee appointed by the Board, which Committee shall be constituted to comply
with applicable laws.

(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

3
<PAGE>

(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;

(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;

(iii) to determine whether and to what extent Options are
granted hereunder;

(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions of any award granted
hereunder;

(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;

(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and

(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.

5. Eligibility.
-----------

(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:

(i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which become exercisable for
the first time during any

4
<PAGE>

calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

(c) Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.

8. Option Exercise Price and Consideration.
---------------------------------------

(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option

5
<PAGE>

(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.

(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.

(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

9. Exercise of Option.
------------------

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan, but in no case at a rate of less than 20% per year over five (5) years
from the date the Option is granted.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be

6
<PAGE>

made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.

Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the ninety-
first (91st) day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the

7
<PAGE>

Option by bequest or inheritance does not exercise the Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
----------------------------------------------------------------

(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.

8
<PAGE>

(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
may be substituted by the successor corporation or a parent or subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option for each Share of Optioned Stock
subject to the Option to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

13. Amendment and Termination of the Plan.
-------------------------------------

(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.

(b) Shareholder Approval. The Board shall obtain shareholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
applicable laws.

(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing

9
<PAGE>

and signed by the Optionee and the Company. Termination of the Plan shall not
affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the date of
such termination.

14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares shall comply with applicable laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.

As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Board shall approve from time to time.

17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.

18. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually during the period such Optionee
has one or more Options outstanding, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Amendment to Registration Statement on
Form S-1 of our report dated March 7, 2000 relating to the financial statements
of Evolve Software, Inc. which appear in such Registration Statement. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Registration Statement.

PricewaterhouseCoopers LLP

San Jose, Ca
March 21, 2000

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment to Registration Statement of Evolve
Software, Inc. on Form S-1 of our report dated March 10, 2000 which report
expresses an unqualified opinion and includes an explanatory paragraph
concerning InfoWide, Inc.'s being a development stage company and certain
factors which raise substantial doubt about the ability of InfoWide Inc. to
continue as a going concern, relating to the financial statements of InfoWide,
Inc. (a development stage company) which appear in such Registration Statement.
We also consent to the references to us under the heading "Experts" in such
Registration Statement.

DELOITTE & TOUCHE LLP

San Jose, California
March 21, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-2000
<PERIOD-START> JUL-01-1998 JUL-01-1999
<PERIOD-END> JUN-30-1999 DEC-31-1999
<CASH> 2,840 17,505
<SECURITIES> 0 4,264
<RECEIVABLES> 78 2,599
<ALLOWANCES> (0) (78)
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,258 24,463
<PP&E> 1,665 2,260
<DEPRECIATION> (1,144) (1,330)
<TOTAL-ASSETS> 4,087 25,792
<CURRENT-LIABILITIES> 3,343 8,861
<BONDS> 3,899 3,954
0 0
548 905
<COMMON> 84 149
<OTHER-SE> (3,787) 11,923
<TOTAL-LIABILITY-AND-EQUITY> 4,087 25,792
<SALES> 0 0
<TOTAL-REVENUES> 517 2,087
<CGS> 635 1,366
<TOTAL-COSTS> 10,656 13,394
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 697 189
<INCOME-PRETAX> (11,471) (12,862)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,471) (12,862)
<EPS-BASIC> (3.60) (2.89)
<EPS-DILUTED> (3.60) (2.89)

<PAGE>

[ARTICLE] 5

<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-START] JUL-01-1999
[PERIOD-END] DEC-31-1999
[CASH] 17,505
[SECURITIES] 2,264
[RECEIVABLES] 2,599
[ALLOWANCES] (78)
[INVENTORY] 0
[CURRENT-ASSETS] 24,463
[PP&E] 2,260
[DEPRECIATION] (1,330)
[TOTAL-ASSETS] 25,792
[CURRENT-LIABILITIES] 8,861
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 905
[COMMON] 445
[OTHER-SE] 91,522
[TOTAL-LIABILITY-AND-EQUITY] 25,792
[SALES] 2,087
[TOTAL-REVENUES] 2,087
[CGS] 1,366
[TOTAL-COSTS] 13,801
[OTHER-EXPENSES] 3
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 189
[INCOME-PRETAX] (12,862)
[INCOME-TAX] 0
[INCOME-CONTINUING] (12,862)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (12,862)
[EPS-BASIC] (0.96)
[EPS-DILUTED] (0.96)

</TABLE>