SC TO-I

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE TO

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934

Evolving Systems, Inc.
(Name of Subject Company (Issuer) and Filing Person (Offeror))

Options to Purchase Common Stock, Par Value $0.001 Per Share Granted under Evolving Systems, Inc.
Amended and Restated Stock Option Plan
(Title of Class of Securities)

30049 R100
(CUSIP Number of Class of Securities of Underlying Common Stock)

Copies to:

Brian R. Ervine Senior Vice President & CFO Evolving Systems, Inc. 9777 Mt. Pyramid Ct. Englewood, CO 80112 (303) 802-1000	Anita T. Moseley Senior Vice President & General Counsel Evolving Systems, Inc. 9777 Mt. Pyramid Ct. Englewood, CO 80112 (303) 802-1000
(Name, address and telephone number of person authorized to receive notices and communications on behalf of filing person)

copies to:
Charles D. Maguire, Jr.
Holme Roberts & Owen LLP
1700 Lincoln Street, Suite 4100
Denver, CO 80203
303-861-7000

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee
$724,771.35	$66.68

*

Calculated solely for purposes of determining the filing fee. This amount is calculated on the basis of $.2755, the average of the high and low sales price of Evolving Systems' Common Stock on August 29, 2002, as reported on the Nasdaq SmallCap Market, and assumes that options to purchase 2,630,749 shares of Evolving Systems' Common Stock will be exchanged and/or cancelled pursuant to this Offer. The amount of the filing fee, calculated in accordance with Rule 0-11(b) of the Securities Exchange Act of 1934, as amended, equals $92 per each $1.0 million of the value of the transaction.

o Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: Not applicable	Filing party: Not applicable
Form or Registration No.: Not applicable	Date filed: September 4, 2002

o Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

o

third party tender offer subject to Rule 14d-1.



ý

issuer tender offer subject to Rule 13e-4.



o

going-private transaction subject to Rule 13e-3.



o

amendment to Schedule 13D under Rule 13d-2.

Check the Following box if the filing is a final amendment reporting the results of the tender offer. o

Item 1.    Summary of Terms.

        The information set forth under "Summary Term Sheet" in the Offer to Exchange Outstanding Options to Purchase Common Stock, dated September 4, 2002 (the "Offer to Exchange"), a copy of which is attached hereto as Exhibit (a)(1)(A), is incorporated herein by reference.

Item 2.    Subject Company Information.

        (a)    Name and Address.

        The name of the issuer is Evolving Systems, Inc., a Delaware Corporation ("Evolving Systems" or the "Company"). The address of its principal executive offices are 9777 Mt. Pyramid Ct., Englewood, Colorado 80112. The telephone number at that address is (303) 802-1000.

        (b)    Securities.

        This Tender Offer Statement on Schedule TO relates to an offer by the Company (the "Replacement Grant Plan") to exchange options to purchase shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), outstanding under the Company's Amended & Restated Stock Option Plan (the "Eligible Option Grants"), for replacement options (the "Replacement Options") to purchase shares of the Common Stock to be granted under the Replacement Grant Plan, on the terms and subject to the conditions set forth in the Offer to Exchange. The number of shares of Common Stock subject to the Replacement Options will be equal to the number of shares of Common Stock subject to the Eligible Option Grants that are accepted for exchange and cancelled. The information set forth in the Summary Term Sheet and in Section 1 ("Number of Options; Expiration Date"), Section 5 ("Acceptance of Eligible Option Grants for Exchange and Cancellation and Issuance of Replacement Options") and Section 8 ("Source and Amount of Consideration; Terms of Replacement Options") of the Offer to Exchange is incorporated herein by reference.

        (c)    Trading Market and Price.

        The information set forth in the Offer to Exchange under Section 7 ("Price Range of Common Stock") is incorporated herein by reference.

Item 3.    Identity and Background of Filing Person.

        (a)    Name and Address.

        The filing person is the issuer. The information set forth in Item 2(a) above is incorporated herein by reference. The information set forth in Schedule A to the Offer to Exchange is hereby incorporated by reference.

Item 4.    Terms of the Transaction.

        (a)    Material Terms.

        The information set forth under the "Summary Term Sheet," Section 1 ("Number of Options; Expiration Date"), Section 3 ("Procedures for Tendering Options"), Section 4 ("Withdrawal Rights and Change in Election"), Section 5 ("Acceptance of Eligible Option Grants for Exchange and Cancellation and Issuance of Replacement Options"), Section 6 ("Conditions of the Offer"), Section 8 ("Source and Amount of Consideration; Terms of Replacement Options"), Section 10 ("Status of Eligible Option Grants Acquired by us in the Offer"), Section 11 ("Legal Matters; Regulatory Approvals"), Section 12 ("Material U.S. Federal Income Tax Consequences") and Section 13 ("Extension of the Offer; Termination; Amendment") of the Offer to Exchange is incorporated herein by reference.

        (b)    Purchases.

        The information set forth in the Offer to Exchange under Section 9 ("Interests of Directors and Officers; Transactions and Arrangements Involving the Eligible Option Grants") is incorporated herein by reference.

Item 5.    Past Contacts, Transactions, Negotiations and Arrangements.

        (a)    Agreements Involving the Subject Company's Securities.

        The information set forth in the Offer to Exchange under Section 8 ("Source and Amount of Consideration; Terms of Replacement Options") and Section 9 ("Interests of Directors and Officers; Transactions and Arrangements Involving the Eligible Option Grants") is incorporated herein by reference. The eligible option plans, option agreements and plan prospectuses attached hereto as Exhibits d(1) and d(2) contain information regarding the subject securities.

Item 6.    Purposes of the Transaction and Plans or Proposals.

        (a)  Purposes. The information set forth in the Offer to Exchange under the Summary Term Sheet in Section 2 ("Purpose of the Offer") is incorporated herein by reference.

        (b)  Use of Securities Acquired. The information set forth in Section 5 ("Acceptance of Eligible Option Grants for Exchange and Cancellation and Issuance of Replacement Options") and Section 10 ("Status of Eligible Option Grants Acquired by us in the Offer") of the Offer to Exchange is incorporated herein by reference.

        (c)  Plans. The information set forth under the Offer to Exchange in Section 2 ("Purpose of the Offer") and Section 15 ("Information About Us") is incorporated herein by reference.

Item 7.    Source and Amount of Funds or Other Consideration.

        (a)    Source of Funds.

        The information set forth in the Offer to Exchange under Section 8 ("Source and Amount of Consideration; Terms of Replacement Options") is incorporated herein by reference.

        (b)    Conditions.

        The information set forth in the Offer to Exchange under Section 6 ("Conditions of the Offer") is incorporated herein by reference.

        (c)    Borrowed Funds.

        Not applicable.

Item 8.    Interest in Securities of the Subject Company.

        (a)    Securities Ownership.

        The information set forth in the Offer to Exchange under Section 9 ("Interests of Directors and Officers; Transactions and Arrangements Involving the Eligible Option Grants") [and Schedule B ("Beneficial Ownership Table")] is incorporated herein by reference.

        (b)    Securities Transactions.

        The information set forth in the Offer to Exchange under Section 9 ("Interests of Directors and Officers; Transactions and Arrangements Involving the Eligible Option Grants") is incorporated herein by reference.

Item 9.    Person/Assets, Retained, Employed, Compensated or Used.

        (a)    Solicitation or Recommendations.

        The information set forth in the Offer to Exchange under Section 14 ("Fees and Expenses") is incorporated herein by reference.

Item 10.    Financial Statements.

        (a)  Financial Information. The information set forth (i) in the Offer to Exchange under Section 15 ("Information About Us"), Section 17 ("Additional Information") and Section 16 ("Financial Information"), (ii) on pages F-2 through F-19 of Evolving Systems' Annual Report on Form 10-K for its fiscal year ended December 30, 2001, is incorporated herein by reference and (iii) on pages 3 through 10 of Evolving Systems' Quarterly Report on Form 10-Q for its second fiscal quarter ended June 30, 2002, is incorporated herein by reference, and is available over the Internet at the World Wide Web site of the Securities and Exchange Commission at http://www.sec.gov. is incorporated herein by reference.

        (b)    Pro Forma Financial Information.

        Not applicable.

Item 11.    Additional Information.

        (a)    Agreements, Regulatory Requirements and Legal Proceedings.

        The information set forth in the Offer to Exchange under Section 11 ("Legal Matters; Regulatory Approvals") is incorporated herein by reference.

        (b)    Other Material Information.

        Not applicable.

Item 12.    Exhibits.

(a)(1)(A)	Offer to Exchange Outstanding Options to Purchase Common Stock, dated September 4, 2002.
(a)(1)(B)	Election Form.
(a)(1)(C)	Notice of Withdrawal.
(a)(1)(D)	Form of Email Confirmation of Receipt of Election Form.
(a)(1)(E)	Form of Email Confirmation of Receipt of Notice of Withdrawal.
(a)(1)(F)	Form of Email Reminder of Expiration Date.
(a)(1)(G)	Cover Letter dated September 4, 2002, from the Legal Department to holders of Eligible Option Grants.
(a)(1)(H)	Evolving Systems, Inc. Annual Report on Form 10-K for its fiscal year ended December 31, 2001, previously filed with the Securities and Exchange Corporation on April 1, 2002 and incorporated herein by reference.
(a)(1)(I)	Evolving Systems, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, previously filed with the Securities and Exchange Commission on August 15, 2002 and incorporated herein by reference.
(b)	Not applicable.
(d)(1)	Evolving Systems, Inc. Amended and Restated Stock Option Plan [Filed as an exhibit to the Company's Registration Statement on Form S-8 (Registration No. 333-60779), originally filed on August 6, 1998, and incorporated herein by reference] and form of agreement thereunder.
(d)(2)	Evolving Systems, Inc. Amended and Restated Stock Option Plan Prospectus.
(g)	Not applicable.
(h)	Not applicable.

Item 13.    Information Required by Schedule 13E-3.

        (a)    Not applicable.

SIGNATURE

        After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

	Evolving Systems, Inc.
	/s/ ANITA T. MOSELEY Anita T. Moseley Senior Vice President & General Counsel
Date: September 3, 2002

INDEX TO EXHIBITS

Exhibit Number	Description
(a)(1)(A)	Offer to Exchange Outstanding Options to Purchase Common Stock, dated September 4, 2002.
(a)(1)(B)	Election Form.
(a)(1)(C)	Notice of Withdrawal.
(a)(1)(D)	Form of Email Confirmation of Receipt of Election Form.
(a)(1)(E)	Form of Email Confirmation of Receipt of Notice of Withdrawal.
(a)(1)(F)	Form of Email Reminder of Expiration Date.
(a)(1)(G)	Cover Letter dated September 4, 2002 from the Legal Department to holders of Eligible Option Grants.
(a)(1)(H)	Evolving Systems, Inc. Annual Report on Form 10-K for its fiscal year ended December 31, 2001, previously filed with the Securities and Exchange Corporation on April 1, 2002 and incorporated herein by reference.
(a)(1)(I)	Evolving Systems, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, previously filed with the Securities and Exchange Commission on August 15, 2002 and incorporated herein by reference.
(b)	Not applicable.
(d)(1)	Evolving Systems, Inc. Amended and Restated Stock Option Plan. [Filed as an exhibit to the Company's Registration Statement on Form S-8 (Registration No. 333-60779), originally filed on August 6, 1998 and incorporated herein by reference] and form of agreement thereunder.
(d)(2)	Evolving Systems, Inc. Amended and Restated Stock Option Plan Prospectus.
(g)	Not applicable.
(h)	Not applicable.

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CALCULATION OF FILING FEE

Item 1. Summary of Terms.
Item 2. Subject Company Information.
Item 3. Identity and Background of Filing Person.
Item 4. Terms of the Transaction.
Item 5. Past Contacts, Transactions, Negotiations and Arrangements.
Item 6. Purposes of the Transaction and Plans or Proposals.
Item 7. Source and Amount of Funds or Other Consideration.
Item 8. Interest in Securities of the Subject Company.
Item 9. Person/Assets, Retained, Employed, Compensated or Used.
Item 10. Financial Statements.
Item 11. Additional Information.
Item 12. Exhibits.
Item 13. Information Required by Schedule 13E-3.

SIGNATURE
INDEX TO EXHIBITS

EX-99.(A)(1)(A)

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Exhibit (a)(1)(A)

Evolving Systems, Inc.
9777 Mt. Pyramid Ct.
Englewood, Colorado 80112
(303) 802-1000

OFFER TO EXCHANGE
OUTSTANDING OPTIONS
TO PURCHASE COMMON STOCK
September 4, 2002

EVOLVING SYSTEMS, INC.

OFFER TO EXCHANGE OUTSTANDING OPTIONS

THE OFFER TO EXCHANGE (the "Offer") EXPIRES AT 12:00 MIDNIGHT, U.S. MOUNTAIN DAYLIGHT TIME,
ON OCTOBER 2, 2002, UNLESS WE EXTEND THE OFFER

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS RELATING TO EVOLVING SYSTEMS' AMENDED AND RESTATED STOCK OPTION PLAN COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933

        We are offering our employees, including our executive officers, the opportunity to exchange all outstanding options to purchase shares of our common stock (Eligible Option Grants) for replacement options to purchase shares of our common stock (Replacement Options) (Offer). If you wish to accept this Offer, you must complete an Election Form agreeing to exchange your Eligible Option Grants for Replacement Options. In addition, if you wish to accept this Offer, you must exchange all of your options that were granted in the six-month period prior to the date on which this Offer is first provided to you (the Commencement Date). This Offer is currently expected to expire at 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, unless we extend the Offer to a later date (the Expiration Date). In other words:

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You may exchange one or more of your outstanding options. Your election to exchange one or more of your outstanding options is entirely voluntary and may not be withdrawn or changed after October 2, 2002 (or any later Expiration Date).



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If you elect to exchange any of your outstanding options, then you must also exchange all of your options that have been granted since March 4, 2002.

        Any options granted in the six-month period prior to the Commencement Date that are cancelled due to your participation in the Offer will be replaced by the same number of Replacement Options, subject to the conditions set forth below in this Offer.

        Subject to the terms and conditions of this Offer, we will grant the Replacement Options no earlier than the date that is six months and one day after the date we cancel the options accepted for exchange, provided that if our common stock is publicly traded on the Nasdaq or any Subsequent Market (as defined in the Glossary) and there are no reported sales of our common stock on such date, then the Replacement Option Grant Date will be the next day on which there is a reported sale (Replacement Option Grant Date). The Offer is currently scheduled to expire at 12:00 Midnight on October 2, 2002 (the "Expiration Date") and we expect to cancel options on October 2, 2002, or as soon as possible thereafter (the "Cancellation Date"). The Offer commenced on September 4, 2002 (the "Commencement Date"). Each Replacement Option will have an exercise price equal to the greater of (a) the Fair Market Value of our common stock on the Replacement Option Grant Date or (b) One Dollar ($1.00). The Fair Market Value will be (i) the closing price of our common stock as reported on Nasdaq or any other securities market that reports daily the closing selling price per share of our common stock or (ii) if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date. The number of shares subject to each Replacement Option will equal the number of shares subject to each Eligible Option Grant you exchange, subject to adjustment.

        We are making this Offer upon the terms, and subject to the conditions, described in this Offer to Exchange (and the attachments hereto) and in the related cover letter and attached Summary Term Sheet and Questions and Answers (which together, as they may be amended from time to time, constitute the Offer). Without limiting the preceding sentence, this Offer is subject to the conditions that we describe in Section 6 of the Offer to Exchange.

        ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD TENDER OR NOT TENDER YOUR ELIGIBLE OPTION GRANTS FOR EXCHANGE. YOU MUST EVALUATE THE RISKS ASSOCIATED WITH THE OFFER AND MAKE YOUR OWN DECISION WHETHER TO TENDER YOUR ELIGIBLE OPTION GRANTS.

        Shares of our common stock are quoted on the Nasdaq SmallCap Market under the symbol "EVOL." On August 29, 2002 the closing price of our common stock as reported on the Nasdaq SmallCap Market was $0.30 per share. We recommend that you obtain current market quotations for our common stock, as well as evaluate other factors, before deciding whether to elect to exchange your Eligible Option Grants.

        If you have any questions regarding the Offer, please consult the Summary Term Sheet and Questions and Answers. If the Summary Term Sheet or the Questions and Answers do not answer your questions, or if you need assistance completing the related documentation, please contact Anita T. Moseley at atm@evolving.com or at (303) 802-2599 or Karen Heath at kheath@evolving.com or at (303) 802-2594.

        We are not making this Offer to, and we will not accept any tender of options from or on behalf of, option holders in any jurisdiction in which the Offer or the acceptance of any tender of options would not be in compliance with the laws, rules, regulations or policies of that jurisdiction. However, we may, at our discretion, take any actions necessary for us to make this Offer to option holders in any of these jurisdictions.

        THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC), OR ANY STATE SECURITIES COMMISSION, OR OTHER SIMILAR FOREIGN SECURITIES REGULATORY AUTHORITY, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION, OR OTHER SIMILAR FOREIGN SECURITIES REGULATORY AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

IMPORTANT

        This Offer is not conditioned on a minimum number of options being tendered. Your election to exchange one or more of your Eligible Option Grants is voluntary. If you decide to participate in this Offer, you must complete the Election Form contained in the packet sent to you and deliver it in accordance with its instructions before 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, or if we extend the Offer such later Expiration Date. If you do not deliver the Election Form by the stated time on the Expiration Date, we will consider that as your rejection of the Offer. We must actually receive the Election Form by the stated time. No late deliveries will be accepted. Please also note that, even if you deliver your Election Form on time, in order to preserve the status of options that are not exchanged pursuant to the Offer as incentive stock options, we retain the right to choose whether to accept your Eligible Option Grants for exchange. Accordingly, your Eligible Option Grants (and the related stock option agreements) will be automatically cancelled if, and only if, we accept your Eligible Option Grants for exchange. Nevertheless, we intend to accept promptly after the Expiration Date all Eligible Option Grants that are properly submitted to be exchanged and have not been validly withdrawn.

We cannot guarantee that the Replacement Options will have a lower exercise price than the Eligible Option Grants. However, our Board of Directors believes that the Offer may create a better chance for some participants to obtain value from their options and our stock option program in the short term. The Board of Directors recognizes that the decision to accept or reject the Offer is an individual one that should be based on a variety of factors. You should consult your personal advisors if you have questions about your financial and/or tax situation. The information about this Offer is limited to this document, the attached Summary Term Sheet and Questions and Answers and the Tender Offer Statement on Schedule T/O.

        WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR ELIGIBLE OPTION GRANTS OTHER THAN AS SET FORTH IN THIS OFFER TO EXCHANGE. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT, THE ATTACHED SUMMARY TERM SHEET AND QUESTIONS AND ANSWERS AND THE TENDER OFFER STATEMENT ON SCHEDULE T/O. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

GLOSSARY

Commencement Date means September 4, 2002, or such later date that we first provide our employees the opportunity to participate in this Offer and the means to exchange Eligible Option Grants.

Company Option Plan means our Amended and Restated Stock Option Plan.

Eligible Option Grants means all outstanding options to purchase shares of our common stock. If you do exchange outstanding options, then the options granted in the six-month period prior to the Commencement Date must also be exchanged, even if those shares were granted at an exercise price below $1.00 per share, the minimum exercise price for the Replacement Options. These options are also included in the definition of Eligible Option Grants.

Employed and employment includes services to us as an employee.

Expiration Date means the time that this Offer will expire, which is currently set to be at 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, unless we extend the Offer to a later date.

Fair Market Value means (i) the closing price of our common stock as reported on the Nasdaq SmallCap Market or any Subsequent Market or (ii) if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date.

Minimum Exercise Price for Replacement Options shall be $1.00 per share.

Nasdaq means The Nasdaq Stock Market, Inc.'s National Market or, if the Company trades on The Nasdaq Small Cap Market, then the Small Cap Market.

Offer means the offer to exchange Eligible Option Grants for Replacement Options.

Replacement Grant Plan means our Amended and Restated Stock Option Plan. All Replacement Options will be issued under the Replacement Grant Plan.

Replacement Options means options to purchase shares of our common stock that will be issued in exchange for the Eligible Option Grants.

Replacement Option Grant Date means the date that is six months and one day after the Expiration Date. For example, assuming that October 2, 2002 is the Expiration Date, the Replacement Option Grant Date will be April 3, 2003. If our common stock is publicly traded on the Nasdaq or a Subsequent Market and no sales of our common stock are reported on the date that is six months and one day after the Expiration Date, then the Replacement Option Grant Date shall be the next day on which there is a reported sale.

SEC means the United States Securities and Exchange Commission.

Schedule T/O means the Tender Offer Statement filed by us with the SEC in connection with this Offer to Exchange, including any amendments thereto.

Subject to adjustment means that the number of shares to be granted under your Replacement Options will be changed to give effect to any stock splits, stock dividends, recapitalizations or similar transaction that may occur between the Expiration Date and the Replacement Option Grant Date.

Subsequent Market means the OTC Bulletin Board, or any other securities market that reports daily the closing selling price per share of our common stock.

SUMMARY TERM SHEET

        The following is a summary of the material terms of this Offer. We urge you to read carefully the remainder of this Offer to Exchange, the Questions and Answers and the Schedule TO-I, because the information in this summary is not complete and additional important information is contained in the remainder of this Offer to Exchange and the Schedule TO-I and the accompanying documents. We have included cross-references to the relevant sections of this Offer to Exchange where you can find a more complete description of the topics discussed in this summary.

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Offer. We are offering our employees, including our executive officers, the opportunity to exchange Eligible Option Grants for Replacement Options. Eligible Option Grants are all outstanding options. (See Section 1)



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Voluntary Participation; Exchange. Your participation in this Offer is voluntary. You may exchange one or more of your Eligible Option Grants, but if you elect to exchange any Eligible Option Grant, you also must exchange all other options granted to you during the six-month period prior to the Commencement Date, even if the exercise price of those options is less than the Minimum Exercise Price ($1.00 per share). These options are also referred to as Eligible Option Grants. (See Section 1)



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Replacement Options.

Number of Shares. The number of shares subject to the Replacement Options will equal the number of shares subject to the Eligible Option Grants exchanged, subject to adjustment. (See Section 8)

Term. Each Replacement Option will have the same term as, and expire no later than, the cancelled Eligible Option Grant that it replaced. For example, if you elect to cancel an Eligible Option Grant which, by its terms, would have expired no later than January 1, 2008, then your Replacement Option will also expire no later than January 1, 2008. (See Section 8)

Vesting and Exercisability. Six (6) months will be added to the vesting schedule of the Eligible Option Grants for the relevant Replacement Options; that is, you will receive vesting credit under each Replacement Option equal to the vesting under the corresponding Eligible Option Grant that is exchanged, but vesting will be delayed by six months. For example, if you elect to cancel an Eligible Option Grant that will be vested on the Replacement Option Grant Date (April 3, 2003), then the Replacement Options for that option grant will vest 6 months after the Replacement Option Grant Date (October 3, 2003). If you elect to cancel an Eligible Option Grant that will not be vested until after the Replacement Option Grant date (for example, a grant that will be vested on July 1, 2003), then six (6) months will be added to the vesting schedule for that option grant (for example, the options that would have vested on July 1, 2003, will now vest on January 1, 2004).

Exercise Price. The Replacement Options will have an exercise price equal to the greater of One Dollar ($1.00) or the Fair Market Value of our common stock on the Replacement Option Grant Date. (See Sections 5 and 8)

Incentive Stock Options. For employees residing in the United States, the Replacement Options will be treated as incentive stock options to the maximum extent permitted by U.S. tax law. (See Section 12)

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Timing. We commenced this Offer on September 4, 2002. The Expiration Date of this Offer is currently October 2, 2002, but we may extend this Offer to a later date. The Replacement Option Grant Date will be April 3, 2003, or a later date if this Offer is extended, provided that if our common stock is publicly traded on the Nasdaq or any Subsequent Market and there are no reported sales of our common stock on such date, then the Replacement Option Grant Date will be the next day following such date on which there is a reported sale. (See Section 1)

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Eligibility. If for any reason you are not employed by us on October 2, 2002, you will not be eligible to participate in this Offer. If you are employed by us on October 2, 2002, but you do not continue to be employed by us through the Replacement Option Grant Date (April 3, 2003), you will not be eligible to receive Replacement Options and your cancelled options will not be reinstated.

        Eligible Option Grants held by our executive officers may be exchanged in this Offer. (See Sections 8 and 9)

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Election. To make your election to accept this Offer, you must deliver an Election Form to us before 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002 in accordance with the procedures described in this Offer to Exchange. We must actually have your Election Form on October 2, 2002. No late deliveries will be accepted. You may change or withdraw your election at any time prior to 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002 by following similar procedures. You may not withdraw or change your election after the stated time on the Expiration Date. This is a one-time offer, and we will not accept late tenders of options under any circumstances. We reserve the right to reject any or all tenders that we determine are not in appropriate form or that we determine are unlawful to accept. Subject to our rights to extend, terminate and amend the offer, we presently expect that promptly after the expiration of the Offer, we will accept all properly tendered options. (See Sections 3 and 4)



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Conditions to this Offer. This Offer is subject to a number of conditions. If any of the conditions to which this Offer is subject occur, we may terminate or amend this Offer, or we may postpone or forego our acceptance of any Eligible Option Grants for exchange. (See Section 6)



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Trading Price for Our Common Stock. Shares of our common stock are currently traded on Nasdaq SmallCap Market under the symbol "EVOL." We recommend that you obtain current market quotations for our common stock before deciding whether to elect to exchange your Eligible Option Grants. We cannot guarantee that the Replacement Options will have a lower exercise price than the Eligible Option Grants. (See Section 7)



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U.S. Federal Tax Consequences. If you are an employee residing in the United States, you will not be subject to any current U.S. income tax if you elect to exchange your Eligible Option Grants for Replacement Options. The grant of Replacement Options will not result in the recognition of taxable income, and the Replacement Options will qualify as incentive stock options to the maximum extent permitted by U.S. tax law. (See Section 12) If you are an employee residing outside the United States, please see Schedule B for more details on the tax consequences of the exchange of your Eligible Option Grants for Replacement Options.



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Extended Vesting. This is intended to balance the interests of the eligible persons and our stockholders. Eligible persons are being offered an opportunity to exchange old options with high exercise prices for new options with exercise prices equal to the greater of One Dollar ($1.00) or the fair market value of our common stock at the time of grant. The extended vesting provides the company and stockholders with an additional employee retention incentive.



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No Board Recommendation. The Board of Directors makes no recommendation regarding your decision to tender. Although our Board of Directors has approved the Offer, neither we nor our Board of Directors makes any recommendation as to whether you should tender or not tender your options. You must make an independent decision on whether or not to tender options. We strongly urge you to read "Certain Risks of Participating in the Offer" beginning on page 7 of this Offer. For questions regarding tax implications or other investment-related questions, you should talk to your own legal counsel, and financial and tax advisors.



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Amendment and Termination. As long as we comply with applicable laws, we may amend or terminate this Offer in any way. We will notify you if we amend or terminate this Offer. We may be required to extend this Offer in the event we materially change the terms of this Offer. (See Section 13)

CERTAIN RISKS OF PARTICIPATING IN THE OFFER

        Participation in the Offer involves a number of potential risks, including those described below. This list and the risk factors under the heading entitled "Factors that might affect operating results" in Evolving Systems' quarterly report on Form 10-Q for the quarter ended June 30, 2002, as well as the "Risk Factors" section of the Evolving Systems' Annual Report on Form 10-K for the year ended December 31, 2001, highlight the material risks of participating in this Offer. In addition, we strongly urge you to read the sections in this Offer discussing tax consequences in the United States and outside the United States, as well as the rest of this Offer. Eligible participants should carefully consider these risks and are encouraged to speak with their financial and tax advisors before deciding to participate in the Offer.

ECONOMIC RISKS

        If our stock price increases after the date your tendered options are cancelled, including if Evolving Systems is acquired by or merges with another company, your cancelled options might have been worth more than the new options that you receive in exchange for them.

        We cannot predict the exercise price of new options. Because we will not grant the new options for at least six months and one day after the Cancellation Date, at the earliest, the new options may have a higher exercise price than some or all of your current options. The minimum exercise price is $1 per share.

        We may engage in transactions in the future with business partners or other companies which could significantly change our structure, ownership, organization or management or the make-up of our Board of Directors, and which could significantly affect the price of our shares. If we engage in such a transaction or transactions before the date we grant the new options, our shares could increase (or decrease) in value, and the exercise price of the new options could be higher (or lower) than the exercise price of options you elect to tender and that are cancelled by us in connection with this Offer.

        Evolving Systems' merger with or sale to another company could have substantial effects on our stock price, including potentially substantial appreciation in the price of our stock. Depending on the structure and terms of such a transaction, tendering option holders might be deprived of any further price appreciation in the stock associated with the new options. For example, if our common stock is acquired in a cash merger before the new options are granted, the fair market value of our common stock, and hence the price at which new options would be granted, could be at a price at or near the cash price being paid for our common stock in the transaction, yielding limited or no financial benefit to a recipient of the new options for that transaction.

        In addition, if Evolving Systems is acquired by another company for stock before the new options are granted, then any new stock options you receive would be for the purchase of the acquiring company's stock (as opposed to Evolving Systems') based on the exchange ratio in the acquisition, with an exercise price equal to the fair market value of the acquiring company's stock on the grant date of the new options, subject to you meeting the conditions for receiving the new options. If Evolving Systems is acquired by another company solely for cash, the treatment of the options would be similar to a stock acquisition, however the number of shares subject to the new options that you would receive would be based on the number of shares of the acquiring company's stock that you would have been able to purchase if you had received the cash paid to Evolving Systems' stockholders for all of the shares subject to your cancelled options. If Evolving Systems is acquired by another company whose stock is not publicly traded, then any new stock options granted by the private company would likely be exercisable for stock that is not publicly traded which would be difficult to sell. Option holders who do not tender their options in the Offer will have their outstanding options treated in accordance with the terms of the plan they are granted under, and if their options are assumed by a successor to our company, those options would be priced in accordance with the terms of that transaction. This could potentially result in a greater financial benefit for those option holders who decided not to participate in this Offer and who instead retain their original options.

        As outlined in Section 1 of this Offer, the exercise price of any new options granted to you in return for your tendered options will be the greater of One Dollar ($1.00) or the fair market value of the underlying shares on the date of grant. You will be at risk of any such increase in our share price before the grant date of the new options for these or any other reasons. There is also a risk that our shares will be trading below One Dollar ($1.00) on the date the new options are granted.

Participation in the Offer will make you ineligible to receive any new option grants until April 3, 2003, at the earliest.

        You are generally eligible to receive option grants at any time that the Board of Directors or a Committee appointed by the board chooses to make them. However, if you participate in the Offer, you will not be eligible to receive any additional option grants until April 3, 2003 at the earliest.

        If you are not employed by Evolving Systems for any reason on the date of grant of the new options, including as the result of a reduction-in-force or another company's acquisition of us, you will neither receive a new option nor have any of your cancelled options returned to you.

        Once your option is cancelled, it is gone forever. Accordingly, if you do not have an employment relationship with Evolving Systems (or one of our subsidiaries or a successor entity, as applicable) for any reason on the date of grant of the new options, you will not receive any new options or other consideration in exchange for your tendered options that have been accepted by us for exchange. This means that if you quit for any reason, die, or we terminate your employment, with or without cause or notice, and you are not an employee on the date we grant the new options, you will not receive anything for the options you tendered and we cancelled. This Offer is not a guarantee of employment for any period. Your employment with Evolving Systems (or one of our subsidiaries or a successor entity, as applicable) may be terminated at any time by either you or us, with or without cause or notice, subject to the laws of the country where you work and any employment you may have with Evolving Systems (or one of our subsidiaries or a successor entity, as applicable).

        If the economic conditions in our end-markets remain stagnant or worsen, the Company may undertake various additional measures to reduce its expenses including, but not limited to, a further reduction-in-force of its employees. Should your employment be terminated as part of any such reduction-in-force, you will not have the benefit of the cancelled option or any new option.

        If Evolving Systems is acquired by another company, that company may, as part of the transaction or otherwise, decide to terminate some or all of our employees prior to the grant of new options under this option exchange program. If you do not have an employment relationship with Evolving Systems (or one of our subsidiaries, or a successor entity, as applicable) due to our being acquired, or for any other reason on the date of grant of the new options, you will neither receive the new option, nor will you receive any other consideration for the options that were cancelled.

We will not grant new options to you if we are prohibited by applicable laws or regulations.

        Even if we accept your tendered options, we will not grant new options to you if we are prohibited by applicable laws, rules, regulations or policies from doing so. Such a prohibition could result from, among other things, changes in U.S. laws, foreign laws, SEC or other similar foreign regulatory authority's rules, regulations or policies or Nasdaq listing requirements or if you move to a jurisdiction in which we are prohibited or prevented from granting options.

BUSINESS-RELATED RISKS

Our Common Stock May Be Delisted From The Nasdaq SmallCap Market, Resulting In A Limited Public Market For Our Common Stock.

        On May 29, 2002 we received a notice from Nasdaq stating that our stock would be delisted from the Nasdaq National Market on August 27, 2002 as a result of our failure to meet the minimum bid price requirements for the Nasdaq National Market ($1.00). On July 30, 2002, we received a second notice from Nasdaq that our stock would be delisted from the Nasdaq National Market on October 28, 2002 because the Company's stock had not maintained a minimum market value of publicly held shares required by the Nasdaq National Market ($5,000,000). On August 28, 2002, trading in our common stock was transferred to the Nasdaq SmallCap Market. If we fail to maintain the qualification for our common stock to trade on the Nasdaq SmallCap Market, including the requirement that our common stock maintain a $1.00 minimum per share bid price or a minimum market value of publicly held shares of at least $5,000,000, our common stock will likely be delisted.

        We currently do not comply with the Nasdaq SmallCap Market's continued listing requirements because our common stock has failed to maintain a $1.00 minimum per share bid price and we do not have minimum market value of publicly held shares of at least $5,000,000. There can be no assurance that we will be able to achieve the continued listing requirements and maintain them for the necessary period for continued listing on the Nasdaq SmallCap Market.

        If our common stock is delisted from the Nasdaq SmallCap Market, trading, if any, would be conducted in the over-the-counter market in the OTC Bulletin Board, or in the so-called "pink sheets". Consequently, selling our common stock would be more difficult because smaller quantities of shares could be bought and sold, transactions could be delayed and security analysts' and news media's coverage of us may be reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock.

        In addition, if our common stock is delisted from the Nasdaq National Market, our common stock may become subject to the 'penny stock' regulations, including Rule 15g-9 under the Securities Exchange Act of 1934. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell our common stock and affect the ability of holders to sell their shares of our common stock in the secondary market. In the event that our common stock becomes subject to the penny stock rules, the market liquidity for the shares would be adversely affected.

        For a description of other risks related to Evolving Systems' business, please see the discussion of risks associated with our business under the heading entitled "Factors that might affect operating results" in Evolving Systems' quarterly report on Form 10-Q for the quarter ended June 30, 2002, as well as the "Risk Factors" section of the Evolving Systems' Annual Report on Form 10-K for the year ended December 31, 2001.

TAX-RELATED RISKS FOR U.S. RESIDENTS

Your new option may be a nonstatutory stock option, whereas your cancelled option may have been an incentive stock option.

        If you are an eligible person residing in the United States who meets the conditions for receiving new options, your new option will be an incentive stock option, to the extent it qualifies under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). For options to qualify as incentive stock options, the value of shares subject to options that first become exercisable by the option holder in any calendar year cannot exceed $100,000, as determined using the option exercise price. By participating in this exchange, a portion of any new options you receive may exceed this limit and be treated as nonstatutory stock options. In general, nonstatutory stock options are less favorable to you from a tax perspective. All other eligible persons who meet the conditions for receiving new options will receive nonstatutory stock options.

Even if you elect not to participate in the option exchange program, your incentive stock options may be affected.

        You should note, if you are subject to the tax laws of the United States, that there is a risk that any of your incentive stock options that are eligible for exchange may be affected, even if you do not participate in the exchange. We believe that eligible options that you choose not to tender for exchange will not be subject to current U.S. federal income tax if you do not elect to participate in the option exchange program. We also believe that the option exchange program will not change the U.S. federal income tax treatment of subsequent grants and exercises of your incentive stock options (and sales of shares acquired upon exercises of such options) if you do not participate in this Offer.

        However, the IRS may characterize this Offer as a "modification" of those incentive stock options, even if you decline to participate. A successful assertion by the IRS of this position could extend the options' holding period to qualify for favorable tax treatment. In such case, if you dispose of your incentive stock option shares before the end of this longer holding period (which would be two years from the date the new options are granted and one year from exercise), your incentive stock option could be taxed as a nonstatutory stock option.

        In 1991, the IRS issued a private letter ruling in which another company's option exchange program was characterized as a "modification" of all of the incentive stock options that could be exchanged. This does not necessarily mean that our Offer will be viewed the same way. Private letter rulings given by the IRS contain the IRS opinion regarding only the specific facts presented by a specific person or company. The person or company receiving the letter may rely on it, but no other person or company may rely on the letter ruling, nor may they assume the same opinion would apply to their situation, even if the facts at issue are similar. While such letters do not provide certainty, they may indicate how the IRS will view a similar situation. We therefore do not know if the IRS will assert the position that our Offer constitutes a "modification" of incentive stock options eligible for tender.

        We recommend that you consult with your personal tax advisor before deciding whether or not to participate in the Offer with respect to the tax consequences relating to your specific circumstances.

THE OFFER

1.    ELIGIBILITY; NUMBER OF OPTIONS; EXPIRATION DATE.

        We are offering to exchange Replacement Options for Eligible Option Grants held by our employees, including our executive officers. Eligible Option Grants are all outstanding options that were granted under our Amended and Restated Stock Option Plan (Company Option Plan). As of September 4, 2002, an aggregate of 4,024,025 shares of our common stock were covered by options outstanding under our Amended and Restated Stock Option Plan, 2,630,749 of which shares were covered by Eligible Option Grants.

        Your participation in this Offer is voluntary. You may elect to exchange one or more of your Eligible Option Grants; but you may not exchange less than all shares subject to a particular Eligible Option Grant. However, if you elect to exchange any Eligible Option Grant, you must exchange all options granted to you in the six-month period prior to the Commencement Date, even if the exercise price of such options is less than the Minimum Exercise Price for the Replacement Options ($1.00 per share). For example, based on a Commencement Date of September 4, 2002, to participate in this Offer, you must exchange all of your options that were granted on or after March 4, 2002, even if the exercise price of some of those options is less than One Dollar ($1.00) per share. These options are also included in the definition of Eligible Option Grants. Our Offer is subject to the terms and conditions described in this Offer and the attached Summary Term Sheet and Questions and Answers. We will only accept Eligible Option Grants that are properly exchanged and not validly withdrawn in accordance with Section 5 of this Offer before the Offer expires on October 2, 2002.

        The Replacement Options will be granted on April 3, 2003 (or a later date if the Offer is extended) and will have an exercise price equal to the greater of One Dollar ($1.00) or the Fair Market Value of our common stock on the Replacement Option Grant Date. If, however, on the Replacement Option Grant Date you are on a leave of absence that is not protected by statute, then the Replacement Options will be granted on the date, if any, that you return to regular employment with us. The Fair Market Value will be the closing price of our common stock as reported on Nasdaq or any Subsequent Market, or, if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date. The number of shares subject to your Replacement Options will equal the number of shares subject to each Eligible Option Grant that you exchange and any options granted in the six-month period prior to the Commencement Date that are cancelled because of your election to exchange Eligible Option Grants. The number of shares subject to the Replacement Options will be adjusted for any stock splits, stock dividends, recapitalizations or similar transactions that may occur between the Expiration Date and the Replacement Option Grant Date.

        IF, FOR ANY REASON (INCLUDING DEATH), YOU ARE NOT EMPLOYED BY US FROM THE EXPIRATION DATE THROUGH THE REPLACEMENT OPTION GRANT DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT HAVE BEEN EXCHANGED. IF YOUR EMPLOYMENT WITH US TERMINATES AFTER YOU TENDERED YOUR OPTIONS BUT PRIOR TO THE EXPIRATION DATE, YOU ARE NOT ELIGIBLE TO PARTICIPATE IN THE OFFER. PARTICIPATION IN THIS OFFER DOES NOT CONFER UPON YOU THE RIGHT TO REMAIN EMPLOYED BY US.

        IF YOU ARE AN EMPLOYEE RESIDING IN THE UNITED STATES, THEN YOUR EMPLOYMENT WITH US IS "AT WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME, INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH OR WITHOUT CAUSE.

        All Replacement Options will be issued under our Amended and Restated Stock Option Plan (the Replacement Grant Plan), pursuant to replacement option agreements between you and us. For employees residing in the United States, all Replacement Options will be treated as incentive stock options under U.S. tax law to the maximum extent permitted by U.S. tax law.

        The Expiration Date of this Offer means 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, unless we, in our discretion, extend the Offer. If we extend the Offer, the term Expiration Date will refer to the latest time and date at which the Offer expires. See Section 13 for a description of our rights to extend, delay, terminate and amend the Offer.

        We will publish a notice if we decide to amend this Offer and take any of the following actions:

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increase or decrease what we will give you in exchange for your Eligible Option Grants;



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increase or decrease the number of Eligible Option Grants to be exchanged in the Offer; or



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extend or terminate the Offer.

        If the Offer is scheduled to expire within ten business days from the date we notify you of such an increase or decrease, we intend to extend the Offer for a period of ten business days after the date the notice is published.

        We will also notify you of any other material change in the information contained in this Offer in the manner required by applicable law.

        A business day means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight.

2.    PURPOSE OF THE OFFER.

        Many of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our common stock. For this reason, we believe these options are not attractive as an incentive to retain and motivate employees, and are unlikely to be exercised in the foreseeable future. By making this Offer, we intend to provide our employees with the benefit of holding options that over time may have a greater potential to increase in value, and thereby create better incentives for our employees to remain with us and contribute to the attainment of our business and financial objectives and the creation of value for all of our stockholders.

        The Board of Directors has approved this Offer. We cannot guarantee that the Replacement Options will (i) have a lower exercise price than the Eligible Option Grants, or (ii) will have an exercise price equal to or lower than the Fair Market Value, and we make no representations as to our future stock price. However, the Board of Directors believes that the Offer may create a better chance for participating employees to obtain value from their options and our stock option program. The Board of Directors recognizes that the decision to accept or reject the Offer is an individual one that should be based on a variety of factors, and you should consult with your personal advisors if you have questions about your financial and/or tax situation.

        We regularly evaluate various strategic and business development opportunities, including licensing agreements, marketing arrangements, joint ventures, acquisitions and dispositions, including transactions that could result in a sale of the Company. We intend to continue to selectively pursue alliances and acquisitions that would allow us to gain access to new customers and technologies, penetrate new geographic markets and enter new product markets. We also intend to pursue opportunities to fill the two (2) vacant seats on our Board of Directors with individuals who can assist with these goals. Subject to the foregoing, and except as otherwise disclosed in this Offer (including in Section 15) or in our filings with the SEC, we presently have no plans or proposals that relate to or would result in:

(a)  any extraordinary corporate transaction, such as a merger, reorganization or liquidation;

(b)  any purchase, sale or transfer of a material amount of our assets;

(c)  any material change in our present dividend rate or policy, or our indebtedness or capitalization;

(d)  any change in our management, including a change to the material terms of employment of any executive officer;

(e)  any change in our present Board of Directors, including a change in the number or term of directors, except that we may fill the vacancies on the Board of Directors;

(f)    any other material change in our corporate structure or business;

(g)  our common stock not being authorized for quotation in an automated quotation system operated by a national securities association. We currently do not satisfy all of the Nasdaq SmallCap Market listing requirements and have been given until November 25, 2002 to satisfy these requirements. Nasdaq may grant us an additional 180 days to satisfy all of the listing requirements, but we cannot assure you that we will be able to do so in time, or that we will be able to continue meeting Nasdaq's requirements even if we are able to do so in the short-term;

(h)  our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act;

(i)    the suspension of our obligation to file reports pursuant to Section 15(d) of the Securities Exchange Act;

(j)    the acquisition by any person of any material amount of our securities or the disposition of any material amount of securities; or

(k)  any change in our Certificate of Incorporation or Bylaws, or any actions which may impede the acquisition of control of us by any person.

        Neither we nor our Board of Directors makes any recommendation as to whether you should exchange your Eligible Option Grants, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this Offer and to consult your own legal, investment and/or tax advisors. You must make your own decision whether to exchange your Eligible Option Grants.

3.    PROCEDURES FOR TENDERING OPTIONS.

        Making Your Election.    To make your election to accept or reject this Offer, you must make your election and deliver the Election Form in accordance with its instructions before 12:00 midnight, U.S. Mountain Daylight Time, on the October 2, 2002. The Election Form is provided in the packet regarding the Offer. If you have misplaced your Election Form, please contact Karen Heath at kheath@evolving.com or at (303) 802-2594. You do not need to return your stock option agreements for your Eligible Option Grants to effectively elect to accept the Offer as they will be automatically cancelled if we accept your Eligible Option Grants for exchange. You will be required to return your stock option agreements only upon our request.

        The delivery of Election Forms, Notices of Withdrawal and any other required documents are at the sole risk of the option holder. Delivery will be accomplished only when documents are actually received by us. No late deliveries will be accepted.

        You may withdraw your tendered options at any time prior to the Expiration Date, in accordance with Section 4 of this Offer. The delivery of all documents, including Election Forms, any Notices to Withdraw from the Offer and any other required documents, is at your risk. In all cases, you should allow sufficient time to ensure timely delivery. If you provide us with an e-mail address, we intend to confirm receipt of your Election Form and any Notice to Withdraw from the Offer via e-mail within two business days of receipt. If you do not receive confirmation of receipt, it is your responsibility to ensure that we have received your Election Form and any Notice to Withdraw from the Offer.

        Determination of Validity; Rejection of Eligible Option Grants; Waiver of Defects; No Obligation to Give Notice of Defects.    We will determine, in our discretion, all questions as to the number of shares subject to Eligible Option Grants and the validity, form, eligibility (including time of receipt) and acceptance of Election Forms. Neither we nor any other person is obligated to give notice of any defects or irregularities in any Election Form or otherwise in the exchange of any Eligible Option Grants, and no one will be liable for failing to give such notice. Our determination of these matters will be final and binding on all parties. We may reject any or all Election Forms or Eligible Option Grants that are exchanged to the extent that we determine they were not properly executed or delivered or to the extent that we determine it is unlawful to accept the Eligible Option Grants that are exchanged. Additionally, in order to preserve the status of options that are not exchanged pursuant to the Offer as incentive stock options, we retain the right to choose whether or not to accept your Eligible Option Grants for exchange. Accordingly, your Eligible Option Grants (and the related stock option agreements) will be automatically cancelled if, and only if, we accept your Eligible Option Grants for exchange, provided that such Eligible Option Grants are properly and timely exchanged and are not validly withdrawn. Nevertheless, we intend to accept promptly after October 2, 2002 all Eligible Option Grants that are properly submitted to be exchanged and have not been validly withdrawn. We may waive any of the conditions of the Offer or any defect or irregularity in any Election Form with respect to any particular Eligible Option Grants or any particular option holder. No Eligible Option Grants will be accepted for exchange until all defects or irregularities have been cured to our satisfaction by the option holder exchanging the Eligible Option Grants, or waived by us, prior to October 2, 2002.

        Our Acceptance Constitutes an Agreement.    If you elect to exchange your Eligible Option Grants and you exchange your Eligible Option Grants according to the procedures described above, you will have accepted the Offer. Our acceptance of Eligible Option Grants that are properly exchanged will form a binding agreement between us and you on the terms and subject to the conditions of this Offer.

        Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will accept on the Expiration Date of the Offer all Eligible Option Grants for which an Election Form has properly been delivered and which has not thereafter been validly withdrawn.

4.    CHANGE IN ELECTION.

        You may only change your election by following the procedures described in this Section 4. You may change your election at any time before 12:00 midnight, U.S. Mountain Daylight Time, on the Expiration Date.

        To change your election, you must either deliver a Notice of Withdrawal or re-deliver an Election Form, each in accordance with its instructions, before 12:00 midnight, U.S. Mountain Daylight Time, on the Expiration Date. Each of these documents is provided in the packet regarding the Offer. If you have misplaced any of the items provided in the packet, please contact Karen Heath at kheath@evolving.com or at (303) 802-2594. The last Notice of Withdrawal or Election Form delivered by you prior to 12:00 midnight, U.S. Mountain Daylight Time, on the Expiration Date will be treated by us as your final election with respect to the Offer.

        The delivery of Election Forms, Notices of Withdrawal and any other required documents are at the sole risk of the option holder. Delivery will be made only when we actually receive the documents. No late deliveries will be accepted.

5.    ACCEPTANCE OF ELIGIBLE OPTION GRANTS FOR EXCHANGE AND CANCELLATION AND ISSUANCE OF REPLACEMENT OPTIONS.

        We have the right to accept or reject any Eligible Option Grant for exchange in our sole discretion. However, on the terms and subject to the conditions of this Offer, we currently expect that on October 2, 2002 we will accept Eligible Option Grants for exchange and cancel all Eligible Option Grants properly exchanged and not validly withdrawn before October 2, 2002 in accordance with this Offer. The Replacement Options will be granted on April 3, 2003, or at a later date if the Offer is extended, with vesting of the Replacement Options carrying over from each respective Eligible Option Grant that is exchanged. If, however, on the Replacement Option Grant Date you are on a leave of absence that is not protected by statute, then the Replacement Options will be granted on the date, if any, that you return to regular employment with us.

        The number of shares subject to your Replacement Option will equal the number of shares subject to each Eligible Option Grant that you exchange plus any options granted in the six-month period prior to the Commencement Date that are cancelled because of your election to exchange Eligible Option Grants. The number of shares subject to the Replacement Options will be adjusted for any stock splits, stock dividends, recapitalizations or similar transactions that may occur between the Expiration Date and the Replacement Option Grant Date. A listing of all of your Eligible Option Grants and the options granted in the six-month period prior to the Commencement Date will be distributed to you via interoffice mail or facsimile. If you have misplaced or have any questions regarding this document, please contact Karen Heath at kheath@evolving.com or at (303) 802-2594. If you are not employed by us on the Expiration Date, then you are not eligible to participate in this Offer. If you are an employee of ours as of the Expiration Date but are not employed continuously by us through the Replacement Option Grant Date, you will not be eligible to receive Replacement Options.

        We will notify you as promptly as practicable if we reject your election to exchange your Eligible Option Grants. If you are not notified of a rejection, you may assume that on the Expiration Date your properly executed and delivered Election Form has been accepted. Our acceptance of Eligible Option Grants that are properly exchanged will form a binding agreement between us and you on the terms and subject to the conditions of this Offer. In your Election Form you may elect to provide us with your email address, in which case you will be sent an email confirming your election. The confirmation will confirm your election and will state the number of Replacement Options that we will grant to you on the Replacement Option Grant Date. If you do not provide us with your email address, you will not receive confirmation of your election.

6.    CONDITIONS OF THE OFFER.

        We will have the right not to accept any Eligible Option Grants that you elect to exchange, and we may terminate or amend the Offer, or postpone our acceptance and cancellation of any Eligible Option Grants that you elect to exchange, in each case subject to Rule 13e-4(f)(5) under the Exchange Act, at any time on or before the Expiration Date, if we determine that any of the following events has occurred and, in our reasonable judgment, such event makes it inadvisable for us to proceed with the Offer or to accept and cancel Eligible Option Grants that you elect to exchange:

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any change or changes occur in the applicable accounting rules that cause the Offer to subject us to adverse accounting treatment;



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any action or proceeding by any government agency, authority or tribunal or any other person, domestic or foreign, is threatened or pending before any court, authority, agency or tribunal that directly or indirectly challenges the making of the Offer, the acquisition of some or all of the Eligible Option Grants, the issuance of Replacement Options, or otherwise relates to the Offer or that, in our reasonable judgment, could materially and adversely affect our business, condition (financial or otherwise), income, operations or prospects or materially impair the benefits we believe we will receive from the Offer;



•

any action is threatened, pending or taken, or any approval is withheld, by any court or any authority, agency, tribunal or any person that, in our reasonable judgment, would or might directly or indirectly:

(a)  make it illegal for us to accept some or all of the Eligible Option Grants or to issue some or all of the Replacement Options or otherwise restrict or prohibit consummation of the Offer or otherwise relates to the Offer;

(b)  delay or restrict our ability, or render us unable, to accept the Eligible Option Grants for exchange and cancellation or to issue Replacement Options for some or all of the exchanged Eligible Option Grants;

(c)  materially impair the benefits we believe we will receive from the Offer; or

(d)  materially and adversely affect our business, condition (financial or otherwise), income, operations or prospects.

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there is:

(a)  any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; or

(b)  the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory;

(c)  any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that, in our reasonable judgment, might affect the extension of credit to us by banks or other lending institutions in the United States;

(d)  in our reasonable judgment, any extraordinary or material adverse change in U.S. financial markets generally, including, without limitation, a decline of at least 10% in either the Dow Jones Industrial Average, the Nasdaq Market Index or the Standard & Poor's 500 Index from the date of commencement of the Offer;

(e)  the commencement of a war or other national or international calamity directly or indirectly involving the United States, which would reasonably be expected to affect materially or adversely, or to delay materially, the completion of the Offer; or

(f)    if any of the situations described above existed at the time of commencement of the Offer and that situation, in our reasonable judgment, deteriorates materially after commencement of the Offer;

•

another person publicly makes or proposes a tender or exchange offer for some or all of our common stock, or an offer to merge with or acquire us, or we learn that:

(a)  any person, entity or group, within the meaning of Section 13(d)(3) of the Securities Exchange Act, has acquired or proposes to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before the Expiration Date;

(b)  any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before the Expiration Date has acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our Common Stock; or

(c)  any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or made a public announcement that it intends to acquire us or any of our assets or securities.

•

any change or changes occur in our business, condition (financial or otherwise), assets, income, operations, prospects or stock ownership that, in our reasonable judgment, is or may be material to us.

        The conditions to the Offer are for Evolving Systems' benefit. As stated in Section 2, the benefits that we believe we will receive from the Offer include providing our employees with the benefit of holding options that over time may have a greater potential to increase in value, and thereby create better incentives for our employees to remain with us and contribute to the attainment of our business and financial objectives and the creation of value for all of our stockholders. We may assert the conditions to the Offer in our discretion before the Expiration Date and we may waive them at any time and from time to time before the Expiration Date, whether or not we waive any other condition to the Offer.

        Our failure to exercise any of these rights is not a waiver of any of these rights. The waiver of any of these rights with respect to particular facts and circumstances is not a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 6 will be final and binding upon everyone.

        Additionally, the U.S. Internal Revenue Service may characterize our Offer to you as a modification of those Eligible Option Grants that are incentive stock options, even if you decline the Offer. In order to reduce this risk, we retain the right to choose whether or not to accept your Eligible Option Grants for exchange for any reason (including reasons other than those described above) in our sole discretion. Accordingly, your Eligible Option Grants (and the related stock option agreements) will be automatically cancelled if, and only if, we accept your Eligible Option Grants for exchange, provided that such Eligible Option Grants are properly and timely exchanged and are not validly withdrawn. Nevertheless, we intend to accept promptly after the Expiration Date all Eligible Option Grants that are properly submitted to be exchanged and have not been validly withdrawn.

        Also, if your employment with us terminates, whether voluntarily, involuntarily or for any other reason (including death), before your Replacement Options are granted, you will not receive any Replacement Options or have a right to any Eligible Option Grants that were previously cancelled. THEREFORE, IF YOU ARE NOT EMPLOYED BY US FROM THE EXPIRATION DATE THROUGH THE REPLACEMENT OPTION GRANT DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT HAVE BEEN ACCEPTED FOR EXCHANGE AND CANCELLED.

        IF YOU ARE AN EMPLOYEE RESIDING IN THE UNITED STATES, THEN YOUR EMPLOYMENT WITH US IS "AT WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME, INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH OR WITHOUT CAUSE.

7.    PRICE RANGE OF COMMON STOCK.

        The Eligible Option Grants to be exchanged pursuant to this Offer are not publicly traded. However, upon exercise of a Replacement Option that we grant, the option holder will become an owner of our common stock. On May 11, 1998, our common stock began trading on the Nasdaq National Market under the symbol "EVOL." On May 29, 2002 we received a notice from Nasdaq stating that our stock would be delisted from the Nasdaq National Market on August 27, 2002 as a result of our failure to meet the minimum bid price requirements for the Nasdaq National Market ($1.00). On July 30, 2002, we received a second notice from Nasdaq that our stock would be delisted from the Nasdaq National Market on October 28, 2002 because the Company's stock had not maintained a minimum market value of publicly held shares required by the Nasdaq National Market ($5,000,000). On August 28, 2002 our stock was transferred to the Nasdaq Small Cap Market. We will have until November 25, 2002 to demonstrate compliance with the Nasdaq SmallCap Market standards or to transfer back to the Nasdaq National Market. Nasdaq may grant us additional time to meet the SmallCap Market standards. We cannot guarantee that we will be able to meet the requirements of the Nasdaq Small Cap Market or that we will qualify to transfer back to the Nasdaq National Market. As a result, our stock may be delisted from Nasdaq and trading in our stock may be transferred to the OTC Bulletin Board or the Pink Sheets. The following table shows, for the periods indicated, the high and low closing sales prices per share of our common stock as reported on the Nasdaq National Market and, beginning on August 28, 2002, the Nasdaq SmallCap Market.

Quarter ended		High		Low
Fiscal Year 2000
	March 31, 2000	$	10.188	$	9.125
	June 30, 2000	$	6.375	$	5.875
	September 30, 2000	$	7.00	$	6.50
	December 31, 2000	$	2.375	$	2.063
Fiscal Year 2001
	March 31, 2001	$	3.313	$	2.781
	June 30, 2001	$	5.75	$	5.33
	September 30, 2001	$	1.04	$	.99
	December 31, 2001	$	.88	$	.76
Fiscal Year 2002
	March 31, 2002	$	1.34	$	1.041
	June 30, 2002	$	.31	$	.27
	September 30, 2002 (through August 29, 2002)	$	.30	$	.251

        As of August 29, 2002, the last reported sale price of our common stock, as reported by the Nasdaq SmallCap Market, was $0.30 per share.

        We cannot guarantee that the Replacement Options will have a lower exercise price than the Eligible Option Grants.    We recommend that you obtain current market quotations for our common stock before deciding whether to elect to exchange your Eligible Option Grants.

8.    SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF REPLACEMENT OPTIONS.

        Consideration.    The number of shares subject to your Replacement Options will equal the number of shares subject to each Eligible Option Grant that you exchange. The number of shares subject to the Replacement Options will be adjusted for any stock splits, stock dividends, recapitalizations or similar transactions that may occur between the Expiration Date and the Replacement Option Grant Date. Each Replacement Option generally will have the same terms as the cancelled Eligible Option Grant that it replaced, except that six months shall be added to the vesting schedules. See below for a summary of the terms of the Replacement Options, including special rules concerning the exercise of Replacement Options granted to Non-exempt Employees.

        If we receive and accept the exchange of all Eligible Option Grants, we will grant Replacement Options to purchase a total of approximately 2,630,749 shares of our common stock. As of August 29, 2002 there were approximately 13,296,835 shares of our common stock outstanding. The common stock issuable upon exercise of the Replacement Options would equal approximately 20% of the total shares of our common stock outstanding as of August 29, 2002.

        Merger or Acquisition.    If we merge with or are acquired by another entity between the Expiration Date and the Replacement Option Grant Date, there is a risk that the Replacement Options will not be granted.

        Terms of Replacement Options.    All Replacement Options will be issued under our Amended and Restated Stock Option Plan.

        For employees residing in the United States, the Replacement Options will be treated as incentive stock options to the maximum extent permitted by U.S. law. (See Section 12) If you are an employee residing outside the United States, your stock option agreement may contain different and/or additional terms to comply with local laws.

        The issuance of Replacement Options under this Offer will not create any contractual or other right of the recipients to receive any future grants of options or benefits in lieu of options. Declining to participate in this Offer will not impact your ability to receive options or other stock awards in the future.

        The following description of the Replacement Grant Plan and the replacement option agreements is a summary intended to highlight major attributes of these documents and is not complete. A Replacement Option will be subject to the terms and conditions of the Amended and Restated Stock Option Plan, and the replacement option agreement. Additional information about the Replacement Grant Plan may be found in the S-8 Registration Statement and related Prospectus prepared in connection with the Replacement Grant Plan. Please contact Karen Heath at kheath@evolving.com or at (303)  802-2594 to request a copy of the Replacement Grant Plan, related prospectus and current form of stock option agreement. Copies will be provided promptly and at our expense. The form of stock option agreement may be changed with the approval of our Board of Directors or our Compensation Committee prior to the Replacement Option Grant Date.

        General.    The Amended and Restated Stock Option Plan, was adopted on January 19, 1996, and was subsequently amended in 1997, 1999, 2000 and 2001 to increase the number of shares available under the Plan. As of August 29, 2002, there was an aggregate of 6,850,000 shares of common stock reserved for issuance under the Replacement Grant Plan. The Amended and Restated Stock Option Plan permits us to grant options intended to qualify as incentive stock options under the Internal Revenue Code.

        Administration.    Our Board of Directors has delegated administration of the Replacement Grant Plan to the Compensation Committee of the Board of Directors. Nonetheless, our Board of Directors has the authority to construe, interpret and amend the Replacement Grant Plan.

        Term.    The term of each option granted under the Replacement Grant Plan is fixed by our Compensation Committee at the time of grant. Each Replacement Option will have the same term as, and expire no later than, the cancelled Eligible Option Grant that it replaced.

        Exercise Price.    The Replacement Options will have an exercise price equal to the greater of One Dollar ($1.00) or the Fair Market Value of our common stock on the Replacement Option Grant Date, which is expected to be April 3, 2003, or a later date if we extend the Offer. The Fair Market Value will be the closing price of our common stock as reported on Nasdaq or any Subsequent Market, or, if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date. We cannot guarantee that the Replacement Options will have a lower exercise price than the Eligible Option Grants. We recommend that you obtain current market quotations for our common stock before deciding whether to elect to exchange your options.

        Vesting and Exercise.    The Compensation Committee of the Board of Directors (or any appropriately delegated committee of the Board of Directors) has the authority to determine the time or times at which options granted under the Replacement Grant Plan may be exercised. If you receive a Replacement Option and are continuously employed by us, your Replacement Option will vest according to the same vesting schedule and vesting commencement date as the Eligible Option Grant for which it was exchanged, except that each Replacement Option will have an additional six (6) months added to its vesting schedule commencing on the Replacement Option Grant Date (even if your Eligible Option Grant is fully vested). For example, if your options under your Eligible Option Grant would be vested on April 3, 2003, your Replacement Options will be vested on October 3, 2003.

        Time of Exercise.    Generally, you may exercise the vested portion of a Replacement Option at any time. If your employment or service with us terminates for any reason (except due to death or permanent disability), you can only exercise the vested portion of your Replacement Option within three months following your termination date, unless you would have had a longer period of time under your Eligible Option Grant. If your employment or service with us terminates as a result of your death, your estate or beneficiaries may exercise some or all of your Replacement Options within twelve months following your termination date. However, under no circumstances may you exercise the Replacement Options after the expiration of the term of such option. Note that an exercise under these circumstances of Replacement Options intended to qualify as incentive stock options may disqualify such Replacement Options for incentive stock option treatment. See Section 12—"Material U.S. Federal Income Tax Consequences—U.S. Federal Income Tax Consequences of Incentive Stock Options".

        Tax Consequences.    If you are an employee residing in the United States, you should refer to Section 12 for a discussion of the material U.S. federal income tax consequences of the Replacement Options and the Eligible Option Grants, as well as the consequences of accepting or rejecting this Offer. If you are an employee residing outside the United States, please see Schedule B for more details on the tax and social insurance consequences of this transaction under the laws of the country in which you live and work.

        Termination of Employment Prior to Replacement Option Grant Date.    IF, FOR ANY REASON (INCLUDING DEATH), YOU ARE NOT EMPLOYED BY US FROM THE EXPIRATION DATE THROUGH THE REPLACEMENT OPTION GRANT DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT HAVE BEEN EXCHANGED. IF YOUR EMPLOYMENT WITH US TERMINATES AFTER YOU TENDERED YOUR OPTIONS BUT PRIOR TO THE EXPIRATION DATE, YOU WILL NOT BE ELIGIBLE TO PARTICIPATE IN THE OFFER. PARTICIPATION IN THIS OFFER DOES NOT CONFER UPON YOU THE RIGHT TO REMAIN EMPLOYED BY US. This means that if you die or quit, with or without good reason, or we terminate your employment, with or without cause, prior to the Replacement Option Grant Date and after the Expiration Date, you will not receive anything for the Eligible Option Grants that you exchanged and we cancelled.

        Registration of Option Shares.    All shares of common stock issuable upon exercise of options under the Replacement Grant Plan, including shares that will be issuable upon exercise of all Replacement Options, have been registered under the Securities Act of 1933 on a Registration Statement on Form S-8 filed with the SEC. Unless you are considered an affiliate of ours, you will be able to sell shares you obtain upon the exercise of vested Replacement Options free of any transfer restrictions under applicable securities laws.

        Our statements in this Offer concerning the Replacement Grant Plan and the Replacement Options are merely summaries and do not purport to be complete. These statements are subject to, and are qualified in their entirety by reference to, all provisions of the Replacement Grant Plan and the corresponding form of option agreement under the Replacement Grant Plan, which is filed as an exhibit to the Tender Offer Statement on Schedule T/O, of which this Offer to Exchange is a part. See Section 16—Additional Information—for a discussion on how to obtain a copy of the Replacement Grant Plan and the corresponding form of option agreement.

9.    INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS INVOLVING THE ELIGIBLE OPTION GRANTS.

        A list of our directors and executive officers is attached to this Offer to Exchange as Schedule A. As of August 29, 2002, our executive officers and directors (11 persons) as a group held options outstanding under the Company Option Plan to purchase a total of 2,895,100 shares of our common stock. This covered approximately 72% of the shares subject to all options outstanding under the Company Option Plan. As of August 29, 2002, our executive officers as a group held Eligible Option Grants to purchase a total of 1,882,129 shares of our common stock. This covered approximately 47% of the shares subject to all Eligible Option Grants. All of the Eligible Option Grants held by executive officers are eligible to be exchanged in this Offer. Options held by non-employee directors are not eligible for this Offer to Exchange.

        Attached to this Offer as Schedule B is a table indicating the number and percentage of options to purchase common stock owned by our executive officers as of August 29, 2002 which are eligible to be tendered.

        During the past 60 days, we have not granted options to purchase any shares of our common stock. During the past 60 days, no individuals have exercised options to acquire shares of our common stock.

        Neither we, nor, to the best of our knowledge, any member of our Board of Directors or any of our executive officers, nor any affiliates of ours, engaged in transactions involving Eligible Option Grants during the past 60 days. In addition, except as otherwise described above, neither we, nor, to our knowledge, any of our executive officers or members of our Board of Directors are a party to any agreement, arrangement or understanding with respect to any of our securities (including but not limited to, any agreement, arrangement or understanding concerning the transfer or the voting of any of our securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations).

10.  STATUS OF ELIGIBLE OPTION GRANTS ACQUIRED BY US IN THE OFFER.

        Many of our option holders hold options with exercise prices significantly higher than the current market price of our common stock. We believe it is in our best interest to offer these option holders an opportunity to more effectively participate in the potential growth in our stock price. We could accomplish this goal by repricing some existing options, which would enable option holders to immediately receive replacement options with a lower exercise price. However, the repriced options would be subject to variable accounting, which could require us to record additional compensation expense each quarter until the repriced options were exercised, cancelled or expired.

        We believe that we can accomplish our goals of providing option holders with the benefit of choosing whether they want to receive options that over time may have greater potential to increase in value than the Eligible Option Grants held by the option holders, without incurring additional current or future compensation expense. Applicable financial accounting rules provide that if each of the following conditions is met, we will not recognize any compensation expense as a result of the Offer:

•

we do not grant any Replacement Options until a day that is at least six months and one day after the date that we accept and cancel Eligible Option Grants (including option grants issued in the six-month period prior to the Commencement Date that will be exchanged because of your election to exchange Eligible Option Grants) tendered for exchange;



•

the exercise price of Replacement Options is the greater of One Dollar ($1.00) or the Fair Market Value of our common stock on the Replacement Option Grant Date, which is expected to be April 3, 2003, or a later date if we extend the Offer. The Fair Market Value will be the closing price of our common stock as reported on Nasdaq SmallCap Market or any Subsequent Market, or, if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date;



•

we require any option holder who tenders any Eligible Option Grants in the Offer to tender all options that he or she received during the six-month period prior to the Commencement Date which, based on a Commencement Date of September 4, 2002, includes all options granted on or after March 4, 2002 (even if the exercise price of such options is less than $1.00 per share); and



•

we do not grant any options to an option holder who tendered Eligible Option Grants in the Offer until the Replacement Option Grant Date.

        Eligible Option Grants (including option grants issued in the six-month period prior to the Commencement Date that will be exchanged because of your election to cancel Eligible Option Grants) that have been granted under the Company Option Plan and that we acquire in connection with the Offer will be cancelled and the shares of common stock that may be purchased under those Eligible Option Grants will be returned to the pool of shares available for grants of new awards or options under such plans without further stockholder action, except as required by applicable law or Nasdaq rules or any other securities quotation system or any stock exchange on which our common stock is then quoted or listed.

11.  LEGAL MATTERS; REGULATORY APPROVALS.

        We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by the Offer, or of any approval or other action by any government or regulatory authority or agency that is required for the acquisition or ownership of the Eligible Option Grants as described in the Offer. If any other approval or action should be required, we presently intend to seek such approval or take such action. This could require us to delay the acceptance of any Eligible Option Grants that you elect to exchange. We cannot assure you that we would be able to obtain any required approval or take any other required action. Our failure to obtain any required approval or take any required action might result in harm to our business. Our obligation under the Offer to accept exchanged Eligible Option Grants and to issue Replacement Options is subject to conditions, including the conditions described in Section 6.

12.  MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.

        The following is a general summary of the material U.S. federal income tax consequences of the exchange of Eligible Option Grants under the Offer. This discussion is based on the U.S. Internal Revenue Code, its legislative history, U.S. Treasury Regulations and administrative and judicial interpretations as of the date of the Offer, all of which may change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to apply in all respects to all categories of option holders. In addition, this discussion does not address any aspect of foreign, state or local income taxation or any other form of taxation that may be applicable to an option holder. If you are an employee residing outside the United States, the discussion in this Section 12 generally will not apply to you. Please see Schedule C for more details regarding the tax treatment of the exchange in your country.

        We believe that the exchange will be treated as a non-taxable exchange. If you exchange outstanding incentive or nonqualified stock options for Replacement Options, you will not be required to recognize income for U.S. federal income tax purposes at the time of the exchange.

        At the Replacement Option Grant Date, you will not be required to recognize additional income for U.S. federal income tax purposes. The grant of Replacement Options is not recognized as taxable income in the United States.

        U.S. Federal Income Tax Consequences of Incentive Stock Options.    You will not be subject to any current U.S. federal income tax if you elect to exchange your incentive stock options in exchange for Replacement Options.

        If you exchange your incentive stock options and we accept your incentive stock options, any Replacement Options you are granted will qualify as incentive stock options to the maximum extent permitted by U.S. federal tax law. See "U.S. Federal Income Tax Consequences of Nonqualified Stock Options" below.

        In order to qualify for long-term capital gain treatment of gain on the sale of shares subject to an incentive stock option, such shares must be held by the optionee for the longer of one year from the date of the option exercise and two years from the date of the option grant. For purposes of these required incentive stock option holding periods, Replacement Options qualifying as incentive stock options will be treated as newly granted on the Replacement Option Grant Date. Thus, if you elect to exchange existing incentive stock options, no credit can be given for the period of time you held such options.

        We do not believe that our Offer to you will change any of the terms of your Eligible Option Grants if you do not accept the Offer. However, if you choose not to accept this Offer, it is possible that the U.S. Internal Revenue Service would decide that the right to exchange your incentive stock options under this Offer is a modification of your incentive stock options. A successful assertion by the U.S. Internal Revenue Service that your incentive stock options are modified could extend the holding period of the incentive stock options required to qualify for favorable tax treatment and cause a portion of your incentive stock options to be treated as nonqualified stock options.

        Under current U.S. federal income tax law, you should not have realized taxable income when incentive stock options were granted to you under the Company Option Plan. In addition, you generally will not realize taxable income when you exercise an incentive stock option. However, your alternative minimum taxable income will be increased by the amount that the aggregate fair market value of the shares you may purchase under the incentive stock option (which is generally determined as of the date you exercise the option) exceeds the aggregate exercise price of the incentive stock option. Except in certain circumstances that are described in the Company Option Plan and in your option agreement, such as your death or disability, if an option is exercised more than three months after your employment is terminated, the option will not be treated as an incentive stock option and is subject to taxation under the rules applicable to nonqualified stock options that are discussed below.

        If you sell common stock that you acquired by exercising an incentive stock option, the tax consequences of the sale depend on whether the disposition is qualifying or disqualifying. The disposition of the common stock is qualifying if it is made after the later of: (a) more than two years from the date the incentive stock option was granted or (b) more than one year after the date the incentive stock option was exercised.

        If the disposition of the common stock you received when you exercised incentive stock options is qualifying, any excess of the sale price over the exercise price of the option will be treated as long-term capital gain taxable to you at the time of the sale. If the disposition is not qualifying, which we refer to as a disqualifying disposition, the excess of the fair market value of the common stock on the date the option was exercised over the exercise price will be taxable ordinary income to you at the time of the sale. However, if the difference between the sale price and the option exercise price is less than the amount in the preceding sentence, this lesser amount is ordinary income to you. Any amount in excess of the ordinary income amount will be long term capital gain or short-term capital gain, depending on whether or not the common stock was sold more than one year after the option was exercised.

        If you sell common stock you received when you exercised an incentive stock option in a qualifying disposition, we will not be entitled to a tax deduction. However, if you sell, in a disqualifying disposition, common stock you received when you exercised an incentive stock option, we will be entitled to a deduction equal to the amount of compensation income taxable to you.

        U.S. Federal Income Tax Consequences of Nonqualified Stock Options.    Under current U.S. law, you will not recognize income for federal income tax purposes upon the grant of a nonqualified stock option. However, when you exercise the option, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will be treated as taxable compensation income to you and, if you are an employee, then you will be subject to withholding of U.S. income and employment taxes at that time. We will be entitled to a deduction equal to the amount of compensation income taxable to you if we comply with applicable withholding requirements.

        The subsequent sale of the shares acquired pursuant to the exercise of a nonqualified stock option generally will give rise to capital gain or loss equal to the difference between the sale price and the sum of the exercise price paid for the shares plus the ordinary income recognized with respect to the shares, and these capital gains or losses will be treated as long term capital gains or losses if you held the shares for more than one year following exercise of the option.

        We recommend that you consult your own tax advisor with respect to the federal, state, local and foreign tax consequences of participating in the Offer.

13.  EXTENSION OF THE OFFER; TERMINATION; AMENDMENT.

        We may at any time, and from time to time, extend the period of time during which the Offer is open and delay accepting any Eligible Option Grants tendered for exchange by announcing the extension and/or giving oral or written notice of the extension to the option holders.

        Prior to the Expiration Date, we may postpone accepting and canceling any Eligible Option Grants or terminate or amend the Offer if any of the conditions specified in Section 6 occur. In order to postpone accepting or canceling, we must announce the postponement and give oral or written notice of the postponement to the option holders. Our right to delay accepting and canceling Eligible Option Grants may be limited by Rule 13e-4(f)(5) under the Securities Exchange Act, which requires that we pay the consideration offered or return the surrendered options promptly after we terminate or withdraw the Offer.

        As long as we comply with any applicable laws, we may amend the Offer in any way, including decreasing or increasing the consideration offered in the Offer to option holders or by decreasing or increasing the number of Eligible Option Grants to be exchanged or surrendered in the Offer.

        We may amend the Offer at any time by announcing an amendment. If we extend the length of time during which the Offer is open, notice of the amendment must be issued no later than 6:00 a.m., U.S. Mountain Daylight Time, on the next business day after the last previously scheduled or announced Expiration Date. Any announcement relating to the Offer will be sent promptly to option holders in a manner reasonably designed to inform option holders of the change.

        If we materially change the terms of the Offer or the information about the Offer, or if we waive a material condition of the Offer, we may extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Securities Exchange Act. Under these rules, the minimum period an Offer must remain open following material changes in the terms of the Offer or information about the Offer, other than a change in price or a change in percentage of securities sought, will depend on the facts and circumstances. We will publish a notice if we decide to take any of the following actions:

•

increase or decrease what we will give you in exchange for your Eligible Option Grants; or



•

increase or decrease the number of Eligible Option Grants to be exchanged in the Offer.

        If the Offer is scheduled to expire within ten business days from the date we notify you of such an increase or decrease, we intend to extend the Offer for a period of ten business days after the date the notice is published.

        For purposes of this Offer, a "business day" means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Mountain Time.

14.  FEES AND EXPENSES.

        We will not pay any fees or commissions to any broker, dealer or other person asking holders of Eligible Option Grants to exchange such Eligible Option Grants pursuant to this Offer.

15.  INFORMATION ABOUT US.

OVERVIEW

        Our principal offices are located at 9777 Mt. Pyramid Ct., Englewood, Colorado 80112, and our telephone number is (303) 802-1000. We were incorporated in Colorado in 1985 and were reincorporated in Delaware in January 1996.

        Evolving Systems is a leading provider of innovative operational and enhanced services software solutions to blue chip clients in the communications industry. We are a leading provider of local number portability solutions. We offer software products that enable carriers to comply with the Federal Communication Commission's ("FCC") number conservation mandates intended to extend the life of the North American Numbering Plan. Our competency as a supplier of operations support systems ("OSS") and enhanced services products positions us to more completely implement our products across a carrier's infrastructure, resulting in a more rapid realization of benefits such as reduced costs or increased revenues.

        From our inception in 1985, we have provided custom software development services to a limited number of telecommunications companies. Beginning in 1996, we made a decision to expand our focus to include development of Local Number Portability ("LNP") software products. Our LNP software products enable carriers to meet the FCC requirement that customers be permitted to retain their local phone numbers when changing service providers. Our LNP software products are used in the wireline industry to support the ordering and provisioning process for over 60% of the telephone numbers ported each month in North America. Over time, we have expanded our LNP product features and developed other LNP related OSS software products for the wireline market. We also offer a suite of products that satisfy the same number portability requirement for the wireless industry. The wireless industry in the United States is currently under a mandate from the FCC to implement number portability on November 24, 2003.

        We developed the software currently in use by all regional Number Portability Administration Centers ("NPACs") in the United States and Canada. The software receives ported telephone number information from carriers as changes occur and distributes the data to all subscribing carriers in the region. This software was provided under contract to NeuStar, Inc., formerly a division of Lockheed Martin IMS. This software has been expanded and enhanced to support the FCC's wireless number portability mandate which is effective on November 24, 2003.

        In 2001, we began expanding our product portfolio for the recently mandated number conservation market. The FCC's decision to alter the method of allocating telephone numbers to wireline and wireless carriers and to impose revised administration and reporting requirements on those carriers presented a unique opportunity. Our NumeriTrack^TM product has been sold to four major carriers and facilitates compliance with the FCC mandates for both wireline and wireless carriers, supports integration with carriers' existing back-office systems and contains features for future adaptability.

        During 2002 we have continued our objective of reducing expenses in order to address the decline in our revenues from the downturn in the telecommunications industry. We reduced our work force during the first and second quarters by 119 people, renegotiated our Englewood, Colorado headquarters lease, reduced our number of sub-contractors, eliminated certain employee benefits, closed all of our remaining satellite offices, and are carefully monitoring fixed asset purchases and general expenditures throughout all levels of the organization.

        In addition, we plan to continue to leverage the success we have had over the past two years developing software with a combined staff of our employees and sub-contractors from India. We believe this approach will allow us to deliver high quality products and services at a lower cost.

SELECTED FINANCIAL DATA

        Please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, both of which are being delivered to eligible persons with this Offer for important financial and other information about us. The financial data as of March 31, 2002 and June 30, 2002 are derived from our unaudited consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002, respectively. This financial data should be read together with the Management's Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the years ended December 31, 2001 and December 31, 2000 and our Quarterly Report on Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002.

16.  ADDITIONAL INFORMATION.

        With respect to the Offer, we have filed a Tender Offer Statement on Schedule T/O with the SEC, of which this Offer to Exchange is a part. This Offer to Exchange does not contain all of the information contained in the Schedule T/O and the exhibits to the Schedule T/O. We recommend that you review the Schedule T/O, including its exhibits, before making a decision on whether to tender your options.

        We recommend that you review the following materials that we have filed with the SEC before making a decision on whether to exchange your options:

(a)

our Annual Report on Form 10-K for the fiscal years ended December 31, 2001 and December 31, 2000;



(b)

our Quarterly Report on Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002;



(c)

the description of our common stock contained in our Registration Statement on Form S-1, filed May 11, 1998, including any amendments or reports filed for the purpose of updating such description; and



(d)

any document that we filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Offer and before the expiration of this Offer. Information in these filings will be deemed to be incorporated by reference as of the date we make the filing.

        The SEC file number for these filings is 0-24081. These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the following SEC public reference rooms:

450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549 500 West Madison Street
Suite 1400
Chicago, Illinois 60661

        You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.

        Our SEC filings are also available to the public on the SEC's Internet site at http://www.sec.gov.

        Our common stock is quoted on the Nasdaq SmallCap Market under the symbol "EVOL," and our SEC filings can be read at the following Nasdaq address:

Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006

        We will also provide without charge to each holder of Eligible Option Grants, upon their written or oral request, a copy of this Offer to Exchange or any or all of the documents to which we have referred you, other than exhibits to these documents (unless the exhibits are specifically incorporated by reference into the documents). Requests should be directed to:

Evolving Systems, Inc.
Anita T. Moseley
9777 Mt. Pyramid Ct.
Englewood, CO 80112

or by telephoning us at (303) 802-2599 between the hours of 9:00 a.m. and 5:00 p.m., Englewood, Colorado, local time.

        As you read the documents listed in this Section 16, you may find some inconsistencies in information from one document to another. Should you find inconsistencies between the documents, or between a document and this Offer, you should rely on the statements made in the most recent document.

        The information about us contained in this Offer to Exchange should be read together with the information contained in the documents to which we have referred you in making your decision about whether or not to participate in this Offer.

17.  MISCELLANEOUS.

        This Offer and our SEC reports referred to above include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. However, the safe harbors of Section 27A of the Securities Act and 21E of the Securities Exchange Act do not apply to statements made in connection with this Offer. These forward-looking statements involve risks and uncertainties, including those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001. We encourage you to review the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 before you decide whether to participate in the Offer.

        If at any time we become aware of any jurisdiction where the making of this Offer violates the law, we will make a good faith effort to comply with the law. If, we cannot comply with the law, the Offer will not be made to, nor will exchanges be accepted from or on behalf of, the option holders residing in that jurisdiction.

        Our Board of Directors recognizes that the decision to accept or reject this Offer is an individual one that should be based on a variety of factors and you should consult your personal advisors if you have questions about your financial or tax situation. The information about this Offer from us is limited to this document, the attached Summary Term Sheet and Questions and Answers and the Tender Offer Statement on Schedule T/O.

        WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THE OFFER. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT, THE ATTACHED SUMMARY TERM SHEET AND QUESTIONS AND ANSWERS AND THE TENDER OFFER STATEMENT ON SCHEDULE T/O. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

SCHEDULE A

INFORMATION ABOUT OUR DIRECTORS AND
EXECUTIVE OFFICERS

        Our directors and executive officers and their positions and offices as of August 29, 2002, are set forth in the following table:

Name	Age	Position and Offices Held
Donald R. Dixon	55	Director
Robert J. Loarie	59	Director
Michael R. Perusse	43	Director
James M. Ross	60	Director
George A. Hallenbeck	60	President, Chief Executive Officer & Chairman of the Board
Brian R. Ervine	40	Sr. Vice President, Chief Financial Officer,Treasurer & Assistant Secretary
Anita T. Moseley	50	Sr. Vice President, General Counsel & Secretary
Stephen K. Gartside, Jr.	37	Vice President of Business Development
Marc D. Abbott	52	Vice President, Principal—Consulting Services
Patrick Shane Furlong	37	Vice President, Principal—Consulting Services
Joseph P. Murray	37	Vice President of Software Development

        The address of each executive officer and director is: c/o Evolving Systems, Inc. 9777 Mt. Pyramid Ct. Englewood, Colorado 80112.

        Biographies for each of our executive officers and directors are set forth in our Proxy Statement filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and incorporated by reference herein.

SCHEDULE B

        The following table sets forth certain information regarding ownership of eligible options as of August 29, 2002 by each of our executive officers.

Name	Total Eligible Options	% of Eligible Options Outstanding
George A. Hallenbeck	800,000	20%
Brian R. Ervine	175,000	4%
Anita T. Moseley	290,784	7%
Stephen K. Gartside, Jr.	185,000	5%
Marc D. Abbott	155,000	4%
Patrick Shane Furlong	126,345	3%
Joseph P. Murray	150,000	4%

SCHEDULE C
ADDENDA FOR EMPLOYEES RESIDING OUTSIDE THE U.S.

        We believe that you will not be subject to additional tax solely by virtue of your participation in the Offer and your tender of Eligible Option Grants for Replacement Options. However, the tax legislation in most of the countries outside of the United States does not specifically address the tax consequences of the tender of Eligible Option Grants for Replacement Options. Consequently, although it appears that you will not be subject to any additional tax liability if you participate in the Offer, we cannot be certain of this result. It is possible that you may be subject to tax on the value of the Replacement Options upon grant or on some other basis or that you may lose the ability to claim preferential tax treatment in connection with your Replacement Options. We therefore strongly recommend that you consult with your tax advisor as to the tax consequences of participating in the Offer.

        If you are eligible for this Offer because you are an employee of Evolving Systems living or working in the United States, but are also subject to the tax laws in another country, you should be aware that there may be other tax and social insurance consequences which may apply to you. You should be certain to consult your own tax advisors to discuss these consequences.

QUESTIONS AND ANSWERS

        These Questions and Answers relate to our offer to exchange all outstanding options to purchase shares of our common stock. They are to be read in conjunction with the Offer to Exchange of which they are a part.

Q1

What is the Stock Option Exchange Program?

A1

Our Stock Option Exchange Program (also referred to in these materials as the Offer) is a voluntary program permitting eligible employees to cancel stock options and exchange them for replacement options covering the same number of shares, subject to adjustment in the strike price and the vesting schedule. The Replacement Options will be granted on April 3, 2003 or, if we extend the Expiration Date of the Offer, at a later date. If our common stock is publicly traded on the Nasdaq or any Subsequent Market and there are no reported sales of our common stock on such date, then the Replacement Option Grant Date will be the next day on which there is a reported sale. Each Replacement Option will have an exercise price equal to the greater of One Dollar ($1.00) or the Fair Market Value of our common stock on the Replacement Option Grant Date. The Fair Market Value will be the closing price of our common stock as reported on the Nasdaq or any Subsequent Market, or, if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date.

Your participation is voluntary. You may either keep all of your current Eligible Option Grants at their current exercise price or exchange some or all of your Eligible Option Grants for Replacement Options covering the same number of shares as the Eligible Option Grants you exchanged, subject to adjustment. However, if you have been granted options since March 4, 2002 and you elect to exchange any of your Eligible Option Grants, you must exchange ALL of your options granted since March 4, 2002 for Replacement Options as well—even if the exercise price of some of those options is less than $1.00 per share.

Q2

Why is the Stock Option Exchange Program being offered?

A2

In light of the decline in the price of our common stock, we recognize that the exercise prices of the majority of our outstanding options, whether or not they are currently exercisable, are higher than the price of our common stock as reported on Nasdaq. We have determined that these options are not attractive or effective as an incentive to retain and motivate employees, and are unlikely to be exercised in the foreseeable future. By making this Offer we intend to provide our employees with the benefit of holding options that over time may have a greater potential to increase in value, and thereby create better incentives for our employees to remain with us and

contribute to the attainment of our business and financial objectives and the creation of value for all of our stockholders.

Q3

Why don't you just reprice my options, as I have seen done at other companies?

A3

In 1998, the Financial Accounting Standards Board adopted unfavorable accounting treatment for companies that reprice options. If we were to simply reprice options, we would be required to take a charge against future operating results based on any appreciation in value of the repriced options in each accounting period. The amount of that charge would be uncertain until the end of each accounting period. That uncertainty would affect our operating results and would likely create additional volatility in our stock price.

Q4

Why can't I just receive additional options?

A4

We strive to balance the need for a competitive compensation package for our employees with the interests of our stockholders. Because of the large number of options that we currently have outstanding, a large grant of new options would be dilutive to our stockholders and could have a dilutive effect on our earnings per share if we become profitable.

Q5

What options may I exchange as part of the Offer?

A5

As described more fully below, we are offering to exchange any stock option:

•

that is currently outstanding under our Amended and Restated Stock Option Plan; and

•

that is still outstanding on October 2, 2002, or such later Expiration Date if we extend the Offer.

If you elect to exchange any Eligible Option Grant, then you must also exchange all of your options that were granted in the six-month period prior to the Commencement Date—even if the exercise price of some of those options is less than $1.00 per share. For example, based on a Commencement Date of September 4, 2002 to participate in this Offer, you must exchange ALL of your options that were granted on or after March 4, 2002. The options granted in the six-month period prior to the Commencement Date that are cancelled due to your participation in the Offer will be replaced by the same number of Replacement Options.

Q6

What options must I exchange as part of the Offer?

A6

You do not have to exchange any options. However, as explained in Q&A 5, if you decide to participate in the Offer and exchange any Eligible Option Grants, you must exchange ALL options granted to you within the six-month period preceding the Commencement Date, even if the exercise price of those options is less than One Dollar ($1.00) per share.

Q7

If I elect to exchange my Eligible Option Grants, do I have to exchange all of my Eligible Option Grants or can I just exchange some of them?

A7

Subject to the requirement that you exchange all options granted since March 4, 2002 if you elect to participate in the Offer (See Q&A 5 and Q&A 6), if you have more than one Eligible Option Grant, then you may exchange any or all of them. You cannot exchange a portion of any particular Eligible Option Grant and keep the balance. You must exchange all unexercised shares that are subject to each particular Eligible Option Grant that you exchange in the Offer.

Q8

Can I exchange a portion of an unexercised Eligible Option Grant?

A8

No. If you elect to exchange an Eligible Option Grant, you must exchange all shares covered by that Eligible Option Grant that have not been exercised.

Q9

Can I exchange the remaining portion of an Eligible Option Grant that I have partially exercised?

A9

Yes. If you have exercised an Eligible Option Grant in part, and the remaining unexercised portion of that option is still outstanding, you may exchange the remaining portion pursuant to the Offer. Options for which you have properly submitted an exercise notice prior to the Expiration Date will

be considered exercised to that extent, whether or not you have received confirmation of exercise for the shares purchased.

Q10

May I exchange options that I have already exercised?

A10

The Offer only pertains to options and does not apply in any way to outstanding shares that you have purchased, whether upon the exercise of options or otherwise. If you have exercised an Eligible Option Grant in its entirety, that option is no longer outstanding and is therefore not subject to the Offer.

Q11

Are purchase rights granted under our Employee Stock Purchase Plan eligible for exchange under the Stock Option Exchange Program?

A11

No. Neither purchase rights granted under our Employee Stock Purchase Plan nor shares of our common stock acquired under our Employee Stock Purchase Plan or other employee plans are eligible to participate in the Offer.

Q12

Are there conditions to the Offer?

A12

Yes. In addition to the requirement that you exchange all options granted since March 4, 2002, if you elect to participate in the Offer (see Q&A 5 and Q&A 6), the Offer is subject to a number of other conditions, which are described in Section 6 of the Offer to Exchange. Please read that section carefully. The Offer is not conditioned on a minimum number of option holders accepting the Offer or a minimum number of options being exchanged.

Q13

Are there any eligibility requirements that I must satisfy to receive my Replacement Options?

A13

You must be employed by us on October 2, 2002, or, if the Offer is extended, such later Expiration Date. You also must remain continuously employed through April 3, 2003, the Replacement Option Grant Date. If you go on a leave of absence protected by statute, you will be considered "continuously employed" during that leave. If you go on a leave that is not protected by statute, then you will be considered "continuously employed" only so long as we approve your leave.

If you are not an employee on the Expiration Date, you will not be eligible to exchange any Eligible Option Grants, and any election you may have made will not be accepted by us. Also, if you do not remain an employee through the Replacement Option Grant Date and your Eligible Option Grants were cancelled under this Offer, you will not be granted Replacement Options and your cancelled options will not be reinstated.

YOUR EMPLOYMENT WITH US IS "AT WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME, INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH OR WITHOUT CAUSE.

Q14

Are employees who are on a leave of absence on the Replacement Option Grant Date eligible to participate?

A14

If you exchange Eligible Option Grants in the Offer and, on the Replacement Option Grant Date, you are on a leave of absence that is protected by statute, then you will be entitled to Replacement Options on the Replacement Option Grant Date. If, however, on the Replacement Option Grant Date you are on an approved leave of absence that is not protected by statute, then the Replacement Options will be granted only if you return to regular employment with us. For those employees, the "Replacement Option Grant Date" will be the date of return.

Q15

Can employees residing outside the United States participate?

A15

All current employees, including employees residing outside the United States, holding Eligible Option Grants may participate in the Offer provided they meet the eligibility criteria set forth in Q&A 13.

Special considerations or conditions may apply to employees residing outside the United States. In some countries, the application of local rules may have important consequences to those employees. Included in the Offer to Exchange are short summaries of some of the consequences with respect to the countries other than the United States where our employees reside (see Schedule B to the Offer to Exchange). If you are an employee residing outside the United States, you should review these summaries. We also recommend that you consult your individual tax, legal and investment advisors.

Q16

What if my employment is terminated between the Expiration Date and the Replacement Option Grant Date?

A16

If you elect to exchange Eligible Option Grants, your election will be irrevocable as of 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, or if the Offer is extended, such later Expiration Date. If your employment with us terminates, whether voluntarily, involuntarily (including, without limitation, redundancy), or for any other reason (including death), before your Replacement Options are granted, you will not receive any Replacement Options. You will not have a right to any Eligible Option Grants that have been cancelled under any circumstances. IF YOU ARE NOT CONTINUOUSLY EMPLOYED BY US FROM THE EXPIRATION DATE THROUGH THE REPLACEMENT OPTION GRANT DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT HAVE BEEN ACCEPTED FOR EXCHANGE AND CANCELLED.

YOUR EMPLOYMENT WITH US IS "AT WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME, INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH OR WITHOUT CAUSE.

Q17

Are the terms and conditions of the Offer the same for everyone?

A17

No. The terms and conditions differ as follows:

•

Replacement Options granted to our employees residing in the United States will be treated as incentive stock options to the maximum extent permitted by U.S. tax laws.

•

Replacement Options granted to employees in jurisdictions outside the United States may be subject to different terms and conditions than those granted to our employees residing in the United States. If you are an employee residing outside the United States, please see Schedule B for more details.

Q18

How should I decide whether to participate?

A18

We understand that this will be a challenging decision for everyone. The Offer does carry considerable risk, and there is considerable uncertainty regarding our future stock performance. As a result, the decision to participate must be your personal decision, and it will depend largely on the exercise prices of your Eligible Option Grants and your assumptions about our business, our financial performance, our stock price, investors' demand for equity securities of similar companies, the performance of the Nasdaq, the future overall economic and political environment, and numerous other factors as well as your desire and ability to remain an employee of Evolving Systems until the Replacement Option Grant Date. For these reasons, we cannot advise you on the decision to participate in the Offer, and we have not authorized anyone to make any recommendation on our behalf as to your choices.

Q19

How does the Offer work?

A19

On or before October 2, 2002, or if the Offer is extended, such later Expiration Date, you may decide to exchange any of your Eligible Option Grants for Replacement Options. The Replacement Options will be granted on the Replacement Option Grant Date, which we currently anticipate will be April 3, 2003. The number of shares subject to your Replacement Options will equal the number of shares subject to the Eligible Option Grants that you exchanged. The number of shares to be granted under your Replacement Options will be adjusted for any stock splits, stock dividends, recapitalizations or similar transactions that may occur between the Expiration Date and the Replacement Option Grant Date.

If you elect to exchange any of your Eligible Option Grants, you must exchange all options granted to you during the six-month period prior to the Commencement Date, even if the exercise price of such options is less than One Dollate ($1.00) per share. For example, assuming a Commencement Date of September 4, 2002, to participate in the Offer, you must exchange ALL of your options that were granted on or after March 4, 2002. The options granted in the six-month period prior to the Commencement Date that are cancelled due to your participation in the Offer will be replaced by the same number of Replacement Options.

Q20

What if my Eligible Option Grants are not currently vested? Can I exchange them?

A20

Yes. Your Eligible Option Grants do not need to be vested for you to participate in the Offer.

Q21

My options are separated between incentive stock options and nonqualified stock options because my original grant exceeded the $100,000 limit on incentive stock options imposed by U.S. tax laws. Can I cancel one part but not the other? (This question is relevant only for employees who are residing in the United States.)

A21

No. An option that has been separated into a partial incentive stock option and a partial nonqualified stock option is still considered to be a single option and cannot be separated for purposes of the Offer. You should note that all Replacement Options for employees residing in the United States will be incentive stock options to the maximum extent permitted by U.S. tax law.

Q22

When will I receive my Replacement Options?

A22

You will be granted your Replacement Options on the Replacement Option Grant Date, which is expected to be April 3, 2003. If we extend the Offer, the Replacement Option Grant Date will be later. See Q&A 1. We expect to distribute stock option agreements relating to the Replacement Options within approximately six weeks following the Replacement Option Grant Date.

Q23

Why won't I receive my Replacement Options immediately after the Expiration Date of the Offer?

A23

To avoid adverse accounting consequences that can result from stock option exchanges, we cannot grant Replacement Options or any other options to participants in the Offer for at least six months and one day after the Expiration Date. Assuming you remain continuously employed by us, you will not receive your Replacement Options until the Replacement Option Grant Date. If you participate in the Offer, any other options that otherwise might have been granted to you prior to the Replacement Option Grant Date will be deferred until the Replacement Option Grant Date at the earliest.

Q24

How will my Replacement Options vest?

A24

Each Replacement Option will have six months added to the vesting schedule of the Eligible Option Grant it replaces. For example, if your Eligible Option Grant is fully vested on the Replacement Option Grant Date, the Replacement Option will vest six months after the Replacement Option Grant Date. Options that are not fully vested on the Replacement Option Grant Date will have their vesting schedules extended by six months.

Q25

Will I be entitled to vesting "credit" during the period beginning on the Expiration Date and ending on the Replacement Option Grant Date?

A25

Yes. If you receive a Replacement Option, you will receive vesting credit under the Replacement Option equal to the vesting under the corresponding Eligible Option Grant that is exchanged, including during the period beginning on the Expiration Date and ending on the Replacement Option Grant Date.

Q26

What is the exercise price for the Replacement Options?

A26

The exercise price of your Replacement Options will be the greater of One Dollar ($1.00) or the Fair Market Value of our common stock on the Replacement Option Grant Date, which is expected to be April 3, 2003, unless we extend the Offer. The Fair Market Value will be the closing price of our common stock as reported on Nasdaq or any Subsequent Market, or, if our common stock is not publicly traded, the value of our common stock as determined in good faith by our Board of Directors on the Replacement Option Grant Date. We cannot guarantee that the Replacement Options will have a lower exercise price than the Eligible Option Grants you exchanged, and we make no representations as to our future stock price. We recommend that you obtain current market quotations for our common stock before deciding whether to elect to participate in the Offer and exchange your Eligible Option Grants.

Q27

How long is the option term of the Replacement Options?

A27

The Replacement Options granted to you will retain the original option term of the Eligible Option Grants being exchanged.

Q28

If I exchange my Eligible Option Grants, how many shares will I receive under my Replacement Options?

A28

This is a share-for-share Stock Option Exchange Program, so for each share subject to the Eligible Option Grants that you exchange (and for all options granted in the six-month period before the Commencement Date that are exchanged as a result of your participation in this Offer), you will receive an option for one share under the Replacement Options. However, the number of shares subject to your Replacement Options will be adjusted for any stock splits, stock dividends, recapitalizations or similar transaction that may occur between the Expiration Date and the Replacement Option Grant Date.

Q29

Will I have to wait longer to sell common stock under my Replacement Options than I would under the Eligible Option Grants that I exchange?

A29

Yes. Because you will have six months added to the vesting schedule, you will have to wait an additional six months more than is in your Eligible Option Grant because you cannot exercise and sell your options until they are vested.

Q30

Am I eligible to receive future grants if I participate in this exchange?

A30

Because of the accounting consequences, if you elect to exchange Eligible Option Grants, you will not receive any additional stock option grants until after the Replacement Option Grant Date.

Q31

Can you provide me with examples of how an exchange will operate?

A31

Yes. Please note, however, that these examples may not apply if you are an employee residing outside the United States.

Example #1: For purposes of illustration only, assume that (1) the grant date of your Eligible Option Grant was July 28, 2000; (2) your Eligible Option Grant was for 1,000 shares; (3) the exercise price of your Eligible Option Grant was $5.25 per share; (4) the vesting schedule of your Eligible Option Grant was quarterly vesting over a 4 year period; (5) the Fair Market Value of our common stock on the Replacement Option Grant Date (assume April 3, 2003) is $1.20 per share; and (6) you timely file an election.

Using the assumptions listed above, upon our acceptance of your election, we would cancel your Eligible Option Grant on October 2, 2002. On the Replacement Option Grant Date, we would grant you a new option for 1,000 shares with an exercise price of $1.20 per share. Six months would be added to the vesting schedule for this Replacement Option. Shares which would have been vested on April 3, 2003, under the Eligible Option Grant, will now vest on October 3, 2003 under the Replacement Option Grant, and the vesting schedule for unvested shares will be extended by six months.

Example #2. For purposes of illustration only, assume that (1) the grant date of your Eligible Option Grant was November 6, 1998; (2) your Eligible Option Grant was for 3,600 shares; (3) the exercise price of your Eligible Option Grant was $2.75 per share; (4) the vesting schedule of your Eligible Option Grant was quarterly vesting over a 4 year period; (5) the Fair Market Value of our common stock on the Replacement Option Grant Date (assume April 3, 2003) is $.80 per share; and (6) you timely file an election.

Using the assumptions listed above, upon our acceptance of your valid election, we would cancel your Eligible Option Grant on October 2, 2002. On the Replacement Option Grant Date, we would grant you a new option for 3,600 shares with an exercise price of $1.00 per share, the Minimum Exercise Price. Because all of the shares would have been vested on April 3, 2003, the vesting schedule for this Replacement Option would result in all of the Replacement Option shares becoming vested on October 3, 2003.

Q32

How long will the Offer remain open?

A32

The Offer is scheduled to remain open until 12:00 midnight, U.S. Mountain Daylight Time, October 2, 2002 or, if the Offer is extended, such later Expiration Date. We currently have no plans to extend the Offer beyond October 2, 2002. If we do extend the Offer, we will announce the extension no later than 6:00 a.m., U.S. Mountain Daylight Time, on the next business day following the previously announced Expiration Date.

Q33

If the Offer is extended, how does the extension impact the date on which my Replacement Options will be granted?

A33

If we extend the Offer, the Replacement Option Grant Date will be extended to a day that is at least six months and one day after the extended Expiration Date.

        Questions & Answers 34-37 relate only to persons subject to U.S. federal income taxes and do not cover any state, local or non-U.S. tax consequences. If you are an employee residing outside the United States, please review the summaries in Schedule C to the Offer and/or consult your personal tax advisor to determine the tax and social insurance consequences of this exchange transaction.

Q34

Will my Replacement Options be incentive stock options or nonqualified stock options?

A34

The Replacement Options will be incentive stock options to the maximum extent permitted by U.S. tax law.

Q35

In the U.S., what is the difference in tax treatment between nonqualified stock options and incentive stock options?

A35

When you exercise a nonqualified stock option, you will pay U.S. federal, state and local income taxes and FICA taxes on the difference between the exercise price of the nonqualified stock option and the fair market value of the common stock on the day of exercise. For employees, this amount will be reported as income on your W-2 for the year in which the exercise occurs. Also for employees, withholding amounts must be collected when the exercise takes place. When you sell shares that you have acquired by exercising a nonqualified stock option, any excess of the sale price over the exercise price of the option will be treated as long term capital gain or short term capital gain taxable to you at the time of sale, depending on whether you held the shares for more than one year.

You generally will not realize taxable income when you exercise an incentive stock option. However, your alternative minimum taxable income will be increased by the amount that the aggregate fair market value of your shares, which is generally determined as of the date you exercise the option, exceeds the aggregate exercise price of the option. When you sell your shares that you have acquired by exercising an incentive stock option, the tax consequences of the sale depend on whether the disposition is "qualifying" or "disqualifying." The disposition of your shares is a qualifying disposition if it is made after the later of: (a) more than two years from the date the incentive stock option was granted or (b) more than one year after the date the incentive stock option was exercised.

If the disposition of your shares you received when you exercised incentive stock options is a qualifying disposition, any excess of the sale price over the exercise price of the option will be treated as long term capital gain taxable to you at the time of the sale. If the disposition is a disqualifying disposition, the excess of the fair market value of your shares on the date the option was exercised over the exercise price will be taxable ordinary income to you at the time of the sale. However, if the difference between the sale price and the option exercise price is less than the amount in the preceding sentence, this lesser amount is ordinary income to you. Any amount you realize in excess of the ordinary income amount will be long-term capital gain or short-term capital gain, depending on whether or not you sold your shares more than one year after the option was exercised.

Q36

Will I have to pay U.S. taxes if I exchange my Eligible Option Grants in the Offer?

A36

We do not believe that any U.S. federal income tax consequences will be imposed as a result of your participation in the Offer. However, for personalized tax advice you should contact your own tax advisor.

Q37

What are the U.S. tax implications for not participating in this Offer?

A37

We do not believe that our Offer to you will change any of the terms of your Eligible Option Grants if you do not accept the Offer. However, the U.S. Internal Revenue Service may characterize our Offer to you as a modification of those Eligible Option Grants that are incentive stock options, even if you decline the Offer. A successful assertion by the U.S. Internal Revenue Service that your Eligible Option Grants have been modified could extend the Eligible Option Grants' holding period to qualify for favorable tax treatment and cause a portion of your Eligible Option Grants to be treated as nonqualified stock options. In order to minimize the risk that our Offer to you could be characterized as a modification of those Eligible Option Grants that are incentive stock options, we have structured the Offer so that we retain the right to choose whether or not to accept your Eligible Option Grants for Exchange. Accordingly, your Eligible Option Grants (and the related stock option agreements) will be automatically cancelled if, and only if, we accept your Eligible Option Grants for exchange. If you choose not to exchange your Eligible Option Grants and you have been granted incentive stock options, we recommend that you consult with your own tax advisor to determine the U.S. tax consequences of the exercise of those Eligible Option Grants and the sale of the common stock that you will receive upon exercise. Nevertheless, we intend to accept promptly after the Expiration Date all Eligible Option Grants that are properly submitted to be exchanged and have not been validly withdrawn.

Q38

What do I need to do to exchange my Eligible Option Grants?

A38

To exchange your Eligible Option Grants, you must complete and deliver the Election Form contained in the Option Exchange Program Packet in accordance with its instructions before 12:00 midnight, U.S. Mountain Daylight Time, on the Expiration Date, which is expected to be October 2, 2002. Delivery will be deemed made only when the Election Form is actually received by us. No late deliveries will be accepted. We may reject any Eligible Option Grant if we determine the Election Form is not properly completed or to the extent that we determine it would be unlawful to accept the Eligible Option Grant. Also, please note that, even if you timely deliver your Election Form, in order to preserve the status of options that are not exchanged pursuant to the

Offer as incentive stock options, we retain the right to choose whether or not to accept your Eligible Option Grants for exchange. Accordingly, your Eligible Option Grants (and the related stock option agreements) will be automatically cancelled if, and only if, we accept your Eligible Option Grants for exchange. Nevertheless, we intend to accept promptly after the Expiration Date all Eligible Option Grants that are properly submitted to be exchanged and have not been validly withdrawn.

Q39

What is the deadline to elect to participate in the Offer?

A39

You must deliver your Election Form in accordance with its instructions by 12:00 midnight, U.S. Mountain Daylight Time, on the Expiration Date, which is expected to be October 2, 2002. Although we do not currently intend to do so, we may, in our discretion, extend the Offer at any time. If we extend the Offer, we will announce the extension no later than 6:00 a.m., U.S. Mountain Daylight Time, on the next business day following the scheduled or announced Expiration Date.

Q40

Can I change my election? How often?

A40

Yes. You can change your election at any time by either delivering a Notice of Withdrawal or revising and re-delivering your Election Form, each in accordance with its instructions, prior to the Expiration Date. There is no limit to the number of times you can change your election prior to the Expiration Date. However, the last Notice of Withdrawal or Election Form you deliver prior to the Expiration Date will determine your election with respect to the Offer.

Q41

What will happen if I do not turn in my Election Form by the Expiration Date?

A41

If you do not turn in your Election Form by the Expiration Date, you cannot participate in the Offer. Delivery will be deemed made only when your Election Form is actually received by us. No late deliveries will be accepted.

Q42

Will I receive a confirmation of my election or change of election?

A42

Yes. In your Election Form you may elect to provide us with your email address, in which case you will be sent an email confirming your election. The confirmation will confirm your election and will state the number of Replacement Options that we will grant to you on the Replacement Option Grant Date. If you would like to receive a confirmation, it is important that you provide us with your email address. If you do not provide us with your email address, you will not receive confirmation of your election.

Q43

What happens to my Replacement Option if Evolving Systems, Inc. merges or is acquired prior to the Replacement Option Grant Date?

A43

It is possible that, prior to the grant of the new options, Evolving Systems might be acquired by another company. If Evolving Systems is acquired by another company for stock before the new options are granted, any new stock options you receive would be for the purchase of the acquiring company's stock (as opposed to Evolving Systems') based on the exchange ratio in the acquisition, with an exercise price equal to the fair market value of the acquiring company's stock on the grant date of the new options, subject to you meeting the conditions for receiving the new options. If Evolving Systems is acquired by another company solely for cash, the treatment of the options would be similar to a stock acquisition, however the number of shares subject to the new options that you would receive would be based on the number of shares of the acquiring company's stock that you would have been able to purchase if you had received the cash paid to Evolving Systems' stockholders for all of the shares subject to your cancelled options. If Evolving Systems is acquired by another company whose stock is not publicly traded, then any new stock options granted by the private company would likely be exercisable for stock that is not publicly traded which would be difficult to sell. Depending on the structure of the transaction, an acquisition of Evolving Systems could potentially result in a greater financial benefit for those option holders who opted not to participate in this Offer and who instead retained their options. If we were acquired by another company, that company may decide to terminate some or all of our eligible persons before

granting new options, which would mean that you would not receive the new option or any other consideration for the options that were cancelled.

Q44

What if I do not accept this Offer?

A44

This Offer is completely voluntary. You do not have to participate, and there are no penalties for electing not to participate in this Offer. However, if you are an employee residing in the United States, you choose not to participate in this Offer and your Eligible Option Grants are incentive stock options, the Offer may modify the status of your incentive stock options. Please consult with your personal tax advisor.

Q45

Where do I go if I have additional questions about this Offer?

A45

Please direct your questions to Anita T. Moseley at atm@evolving.com or at (303) 802-2599 or to Karen Heath at kheath@evolving.com or at (303) 802-2594.

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Exhibit (a)(1)(A)

EX-99.(A)(1)(B)

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Exhibit (a)(1)(B)

ELECTION FORM

Evolving Systems, Inc.
9777 Mt. Pyramid Ct.
Englewood, CO 80112
Attn: Karen Heath

        I have received Evolving Systems, Inc.'s Offer to Exchange and Summary Term Sheet dated September 4, 2002 sent to employees holding options to purchase Common Stock of Evolving Systems, Inc. (the "Company" or "Evolving Systems"), granted under its Equity Compensation Plan. Defined terms not explicitly defined herein, but defined in the Offer to Exchange, shall have the same definitions as in the Offer to Exchange.

        Pursuant to the terms of the Offer, I elect to have one or more Eligible Option Grants held by me, as specified below, cancelled in exchange for a right to receive Replacement Options. I hereby agree that, unless I revoke my election before 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002 (or a later expiration date if Evolving Systems extends the Offer), my election will be irrevocable, and if accepted by Evolving Systems, such surrendered Eligible Options will be cancelled in their entirety on October 2, 2002 (or a later expiration date if Evolving Systems extends the Offer). I understand that, subject to my continuous employment through the Replacement Option Grant Date, I will have the right to receive a Replacement Option to be granted on or after April 3, 2003.

o

I hereby elect to cancel, upon the terms and conditions stated in the Offer, the following Eligible Option Grants:

Option Grant Date
Number of Shares to be Exchanged

        I understand that any options granted to me on or after March 4, 2002 will automatically be surrendered for cancellation under the Offer even if such options are not listed above. I acknowledge that I will have no right to exercise all or any part of the cancelled option(s) after the date of this election (unless I properly revoke this election), and that such options will be cancelled as of October 2, 2002 (or a later expiration date if Evolving Systems extends the Offer).

        I further acknowledge and agree that neither the ability to participate in the Offer nor actual participation in the Offer shall be construed as a right to continued employment with Evolving Systems (except on an at will basis). I agree that Evolving Systems has made no representations or warranties to me regarding this Offer or the future pricing of Evolving Systems' stock, and that my participation in this Offer is at my own discretion.

        This Election Form may be delivered to Karen Heath at Evolving Systems' corporate headquarters in Englewood, Colorado, by hand delivery, interoffice mail, or by facsimile to (303) 802-1138. If you have questions regarding the process for returning this Election Form, please contact Karen Heath at kheath@evolving.com or at (303) 802-2594.

        WAIVER OF LIABILITY: I agree to release the Company, its employees, officers, directors and agents from all claims and liabilities for any costs, taxes, losses or damages that I may incur resulting from my election to participate in this Offer. I understand that the release I am making only applies to claims related to events or occurrences existing on or before my execution of this form, and I further understand that this release expressly excludes all claims based upon allegations of fraud, gross negligence, intentional wrongful acts, willful violations of the law and violations of federal or state securities laws by the Company. I understand that the term costs, as used in this waiver, includes any costs arising out of, or relating to, participation in the Offer, including such costs as attorney's fees and other expenses incurred in litigating claims related to participation in the Offer and that the term damages, as used in this waiver, includes any damages related to claims or causes of action arising out of, or relating to, participation in the Offer, including personal economic losses or other liabilities related to, or resulting from, my decision to participate in the Offer, as such terms relate to claims otherwise within the scope of this release.

o

I DO NOT accept the offer to exchange options

o

This Election Form is being submitted to replace a previously submitted Election Form or Notice of Withdrawal.

		Date:
Optionee Signature
Name:		Email Address:
	(Please print)

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Exhibit (a)(1)(B)

EX-99.(A)(1)(C)

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Exhibit (a)(1)(C)

NOTICE OF WITHDRAWAL

        If you previously elected to accept Evolving Systems, Inc.'s Offer to Exchange, and you would like to change your election and reject the Offer, you must deliver this Notice to Karen Heath of Evolving Systems, Inc. ("Evolving Systems") before 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, unless the Offer is extended. This Notice of Withdrawal may be delivered to Karen Heath at Evolving Systems' corporate offices in Englewood, Colorado by personal delivery, interoffice mail, or by facsimile at (303) 802-1138. If you have questions regarding the process for returning this Notice, please contact Karen Heath at kheath@evolving.com or at (303) 802-2594.

To Evolving Systems:

        I previously received a copy of the Offer to Exchange (dated September 4, 2002), the cover letter, the Summary Term Sheet and an Election Form. I properly submitted the Election Form, in which I elected to accept Evolving Systems' Offer to Exchange. I now wish to change that election, and reject Evolving Systems' Offer to Exchange. I understand that by submitting this Notice to Karen Heath, I will be able to withdraw my acceptance of the Offer, and reject the Offer to Exchange instead. By completing this form, I acknowledge that I have received the Offer to Exchange.

        I understand that in order to reject the Offer, I must properly submit this Notice to Karen Heath before 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, or if Evolving Systems extends the deadline to exchange options, before the extended expiration of the Offer.

        By rejecting the Offer to Exchange, I understand that I will not receive any Replacement Options, and I will keep my Eligible Options as listed on my personal Option Report. These options will continue to be governed by the stock option plan under which these options were granted and the existing option agreements between Evolving Systems and me.

        By submitting this form, I hereby bind my successors, assigns and legal representatives.

        I do not accept the offer to exchange options.

		Date:
Optionee Signature
Name:		Email Address:
	(Please print)

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Exhibit (a)(1)(C)

EX-99.(A)(1)(D)

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Exhibit (a)(1)(D)

        This email confirms our receipt of your Election Form, which sets forth your election to exchange one or more of your Eligible Option Grants in the Evolving Systems Stock Option Exchange Program. This email does not serve as a formal acceptance by Evolving Systems of the options designated on your Election Form for exchange. However, delivery of your Election Form does serve as a confirmation to Evolving Systems that you agree to cancel any options granted to you on or after March 4, 2002, regardless of the price and regardless of whether you have included this grant information in the Election Form. The procedure for acceptance of Eligible Option Grants for exchange is described in the Offer to Exchange previously made available to you.

        You may contact Karen Heath at kheath@evolving.com or at (303) 802-2594 to request a copy of your stock option account. The exchanged Eligible Option Grants will be reflected on your stock option account as cancelled, and represent your right to receive Replacement Options in accordance with the terms of the Offer to Exchange.

        Please note that you will not have the right to exercise all or any part of the cancelled options after the date of your Election Form.

        Your election to exchange your Eligible Option Grants may be withdrawn or changed at any time prior to 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002, the Expiration Date of the Offer to Exchange.

        Please do not respond to this email. You may email questions about the Offer to Exchange to kheath@evolving.com or call Karen Heath at (303) 802-2594.

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Exhibit (a)(1)(D)

EX-99.(A)(1)(E)

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Exhibit (a)(1)(E)

        This email confirms our receipt of your Notice of Withdrawal rejecting Evolving Systems' Offer to Exchange and nullifying your previously submitted Election Form. Please note that the Notice of Withdrawal completely withdraws you from the Offer to Exchange and cannot be used to make changes to your previously submitted Election Form. If you would like to change your election with respect to particular options only, you should submit a new Election Form instead.

        In addition, you may change your mind and re-accept the Offer by completing and delivering a new Election Form at any time prior to 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002. Election Forms can be found in your Option Exchange Program Packet and must be delivered to Karen Heath according to their instructions.

        Please do not respond to this email. You may email questions about the Offer to Exchange to kheath@evolving.com or call Karen Heath at (303) 802-2594.

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Exhibit (a)(1)(E)

EX-99.(A)(1)(F)

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Exhibit (a)(1)(F)

To All Evolving Systems Optionholders Eligible to Participate in the Offer to Exchange:

        REMINDER—If you are electing to exchange any of your Eligible Option Grants under the Stock Option Exchange Program, the deadline to deliver your Election Form to Karen Heath is October 2, 2002 at 12:00 midnight, U.S. Mountain Daylight Time.

        A copy of the Election Form can be found in your Option Exchange Program Packet. We cannot accept late submissions, and therefore we urge you to respond early to avoid any last minute problems.

        If you are not electing to tender any of your outstanding Eligible Option Grants for exchange, then no action is required on your part.

        If you have any questions regarding the Stock Option Exchange Program, contact Karen Heath at kheath@evolving.com or at (303) 802-2594.

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Exhibit (a)(1)(F)

EX-99.(A)(1)(G)

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Exhibit (a)(1)(G)

[Evolving Systems Letterhead]

September 4, 2002

To Evolving Systems Optionholder:

        Today Evolving Systems formally commenced its Stock Option Exchange Program (the "Program"). In connection with the commencement of the Program, the Legal Department would like to provide you with the following additional information relating to the Program.

        The Program is a voluntary program permitting eligible employees to exchange stock options for replacement options covering the same number of shares. The replacement options will be granted on or after April 3, 2003 and will have an exercise price equal to greater of One Dollar ($1.00) or the fair market value of our common stock on the date of grant. Please carefully review the materials referenced below as they will provide you with details on how the Program operates.

        If you decide to participate in the Program, you will need to complete and deliver an Election Form (item #1 below) by October 2, 2002 at 12:00 midnight, U.S. Mountain Daylight Time, to Evolving Systems, Inc., Attention: Karen Heath, 9777 Mt. Pyramid Ct., Englwood, Colorado 80112. The Election Form may be delivered via personal delivery, interoffice mail or facsimile at (303) 802-1138. Please note the following documents in your Option Exchange Program Packet:

1.

Election Form



2.

Notice of Withdrawal



3.

Offer to Exchange Outstanding Options to Purchase Common Stock including Summary Term Sheet



4.

Stock Option Exchange Program Questions and Answers



5.

Personnel Option Status Report (reflecting your historical options grants)

        If you have any questions about your historical stock option grant information, please contact Karen Heath at kheath@evolving.com or at (303) 802-2594.

        If you decide to participate in the Program, you must complete and deliver the Election Form by 12:00 midnight, U.S. Mountain Daylight Time, on October 2, 2002 unless we extend the Program. We will not accept late submissions, and therefore urge you to respond early to avoid any last minute problems.

        Karen Heath will provide you with an email confirmation of receipt of your Election Form within three (3) business days after receipt by us.

        Please feel free to contact Karen Heath at kheath@evolving.com or at (303) 802-2594 for further assistance.

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Exhibit (a)(1)(G)

EX-99.(D)(2)

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Exhibit (d)(2)

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933.

[LOGO]

September 2002

1996 AMENDED AND RESTATED STOCK OPTION PLAN

QUESTIONS AND ANSWERS REGARDING
YOUR INCENTIVE STOCK OPTION

To our Optionees holding Incentive Stock Options:

        We are pleased with this opportunity to provide you with information regarding our 1996 Amended and Restated Stock Option Plan (the "Plan"). We believe that the Plan is an important part of the benefits provided to you and hope you will take the time to review this information carefully.

        Evolving Systems, Inc. (sometimes referred to as the "Company") adopted the Plan in order to provide you with an opportunity to share in the Company's growth and to purchase common stock upon terms which are favorable from a tax standpoint. The Company believes that the Plan assists it in obtaining qualified employees and in building a satisfying long-term relationship with existing employees through recognition of their contributions.

        The terms of the Plan provide for the grant of incentive stock options, nonstatutory stock options, stock bonuses and rights to purchase restricted stock. Presently, the Company intends to grant only incentive stock options and nonstatutory stock options under the Plan. In the event that other types of awards are made available to you in the future, you will receive supplemental information describing those awards.

        The following information may not answer all the questions you have about the Plan and is not intended to go into every detail of the Plan. A copy of the Plan is available from the Legal Department. To obtain a copy of the Plan and/or additional information about your option, the Plan and its administrators, please contact Karen Heath (303) 802-2594 or Anita Moseley (303) 802-2599 of the Legal Department at the Company's offices at 9777 Mt. Pyramid Ct., Englewood, Colorado 80112.

Information about Evolving Systems

        An important part of your participation in the Plan is understanding the Company, its operations and financial condition. You can keep yourself informed about the Company by reviewing reports and other documents that the Company prepares for stockholders and the general public and which will be provided to you. If you become an Evolving Systems stockholder, you will be entitled to attend stockholder meetings and to vote in the election of directors and on other matters brought before the stockholders.

        If you do not receive the current annual report as a stockholder of Evolving Systems, this information should be delivered to you with these materials. Whether or not you have already received this information, you may always request a copy from the Legal Department.

        In addition, Evolving Systems must provide or make available to you, as an optionee, the following information and documents: The United States federal securities laws require Evolving Systems to provide information about its business and financial status in annual reports commonly known as "10-Ks" and quarterly reports commonly known as "10-Qs." These reports are filed with the Securities and Exchange Commission (the "Commission"). In addition, if certain important corporate events occur during the year, the Company may file reports commonly known as "8-Ks." The Company also prepares and files with the Commission a proxy statement in connection with its annual meeting of stockholders. The proxy statement provides further information about Evolving Systems and its officers, directors and major stockholders. From time to time the Company may also file other documents with the Commission as required by Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act").

        All of these documents constitute part of the information required by the securities laws to be provided or made available to you, and these documents are incorporated by reference into these materials, which constitute the prospectus for the Plan. For a copy of these documents, all of which are available without charge and upon written or oral request, please contact the Legal Department.

Question Index

Question		Page
1.	Who determines whether I receive an option and the terms of my option? How many shares of common stock will my option cover?	4
2.	Why is my option an incentive stock option rather than a nonstatutory stock option?	4
3.	How was the exercise price of my option determined?	4
4.	When can I exercise my option?	4
5.	How do I exercise my option?	5
6.	Do I have to pay the exercise price with cash?	5
7.	I have heard about cashless exercise programs through brokers. How do these work?	5
8.	Will I continue to receive options as long as I continue providing services to Evolving Systems?	5
9.	Can the terms of the Plan be changed and, if so, do those changes affect my option? Can vesting of my option be accelerated?	6
10.	What happens if I leave Evolving Systems?	6
11.	Will my incentive stock option always remain an incentive stock option?	6
12.	What are the rights of my heirs upon my death?	7
13.	Can a relative or friend exercise my option?	7
14.	Can I sell the stock I receive from exercising my option right away?	7
15.	If I am aware of important non-public information, can I sell my stock before this news is disclosed to the public? For example, if I know that Evolving Systems is having significant problems or is about to acquire a competitor, can I sell my stock before Evolving Systems puts out a press release?	7
16.	Does the Plan have any of the same benefits as a qualified retirement plan (including a 401(k) plan) and will my participation in the Plan affect my participation in a 401(k) plan?	7
17.	What is the difference between ordinary income and capital gains and losses for United States Federal income tax purposes?	8
18.	Do I have to pay tax when I receive or exercise my option?	8
19.	How is my profit taxed when I do dispose of the stock received on exercise of my option? What if I lose money?	8
20.	Is there any withholding on the exercise of my Option or the sale of the stock acquired on exercise?	9
21.	Do I have to notify Evolving Systems after I sell my stock?	9
22.	How am I affected by the alternative minimum tax?	9
23.	What are the tax consequences of an incentive stock option "stock swap" (using shares I already own to pay the exercise price of my incentive stock option)?	10
24.	Are there any special tax rules which apply to me if the Company has the right to repurchase my stock after I exercise my option ?	10

Part I

Terms of the Plan

1.    Who determines whether I receive an option and the terms of my option? How many shares of common stock will my option cover?

        In general, the decision to grant an option is made according to position guidelines established by the Compensation Committee of the Evolving Systems Board of Directors (the "Board"). The Plan currently provides for the grant of options to employees, directors and consultants covering an aggregate of 6,850,000 shares of Evolving Systems' common stock. When the Board, or the President with authorization of the Board, grants an option, it has the discretion to determine the terms of the option, including the number of shares the option will cover, although tax restrictions apply on the number of incentive stock options that can be granted under certain circumstances. (If the aggregate value of the shares under all incentive stock options you hold and that become exercisable for the first time during any calendar year is greater than $100,000, then that number of those shares with a value over $100,000 will be treated as nonstatutory stock options not having the tax advantages of incentive stock options.)

        The Board administers the Plan and has the power to interpret the Plan. Members of the Board are elected for three-year terms. All directors will hold office until the expiration of the term for which elected and until their successors are elected and qualified or until their earlier death, resignation or removal from office. The entire Board or any individual director may be removed from office, prior to the expiration of a Board member's term of office, only in the manner and within the limitations provided by the Company's Bylaws and the law of Delaware. Information about the current members of the Board or Committee is provided in the Evolving Systems proxy statement for its last annual meeting. You may obtain additional information about the administration of the Plan by contacting the Legal Department.

        When administration of the Plan is delegated to a Committee, the Board retains the right to revert authority to construe and interpret the Plan back to itself. References to the Board in this document should be construed as references to the Committee, as applicable.

2.    Why is my option an incentive stock option rather than a nonstatutory stock option?

        Since you are an employee, the Board of Directors could have granted you either an incentive stock option or a nonstatutory stock option. The decision to grant you an incentive stock option was based on the Board's understanding of the relative tax benefits to you and the Company in granting incentive stock options versus nonstatutory stock options. In general, potentially favorable tax treatment is provided to the holders of stock options that qualify as incentive stock options under the Internal Revenue Code of 1986, as amended (the "IRS Code"). The rules governing the tax effects of incentive stock options and nonstatutory stock options are complex, and you should carefully read the tax information provided in Part II of this document.

3.    How was the exercise price of my option determined?

        The IRS Code requires that the exercise price of an incentive stock option be at least 100% of the fair market value of Evolving Systems' common stock on the date the option is granted (the "grant date"). However, if you own 10% of more of the voting power of the Company or its affiliates, then your exercise price must be 110% of fair market value.

4.    When can I exercise my option?

        The Board of Directors also determines certain terms of the option, including the date or dates after which the option may be exercised. In some instances, option grants may have allowed you to exercise your stock options prior to vesting, with the Company reserving the right to buy-back the unvested portion if you leave the Company. You should check your option agreement to determine exercise rights and vesting schedules. In most instances, vesting schedules will cover a four year period. Generally, new employees will be granted options that vest 25% on the one year anniversary of the date of the grant, and the balance in equal quarterly installments over a three year period thereafter. Employees who have been with the Company for more than one year, will generally receive options that vest quarterly over a four-year period.

        Incentive stock options never can have more than a 10-year term, so you must exercise your option before it expires at the end of the 10-year period. For example, if your option was granted on May 1, 1998, it cannot be exercised after April 30, 2008. (Note, if you own 10% or more of the voting power of Evolving Systems or its affiliates, then your option term must be five years or less.)

5.    How do I exercise my option?

        Once your option becomes exercisable, you may exercise your option by completing an option exercise form and delivering the form, together with payment of the exercise price to the Legal Department. You can obtain option exercise forms from the Human Resources form bank or from the Legal Department.

6.    Do I have to pay the exercise price with cash?

        You may always pay the exercise price with cash. You also may pay the exercise price under a "cashless exercise" program through your brokerage firm.

7.    I have heard about "cashless exercise" programs through brokers. How do these work?

        "Cashless exercise" programs involve the delivery to a broker of a copy of your signed and completed option exercise form and your irrevocable instructions to the Company's transfer agent to deliver stock to be received upon exercise of the option to the broker rather than to you. Under U.S. Treasury Regulation T, the broker can then deliver cash to Evolving Systems in payment of the exercise price and, in some cases, withholding taxes. Evolving Systems will then instruct its transfer agent to deliver the stock certificate to the broker. After the stock is delivered to the broker, the stock can be maintained as margin stock in an account designated by you or sold pursuant to your instructions. However, Evolving Systems will not participate in any Regulation T program, which would cause stock certificates to be delivered to the broker before payment for the exercise price or an irrevocable guarantee of payment from the sales proceeds, has been provided to the Company. You should contact Karen Heath for information regarding the cashless exercise program. Note that a cashless exercise of an incentive stock option is a disqualifying event.

8.    Will I continue to receive options as long as I continue providing services to Evolving Systems?

        Whether or not you receive options will depend on many factors, such as your performance, the Company's overall performance, the Compensation Committee's then current policy and the number of shares remaining in the Plan. The Compensation Committee has the authority to stop granting options and to terminate the Plan at any time. Any such termination of the Plan would not impair your rights under your option without your consent. The Plan by its terms and, therefore, the Board's authority to grant options under the Plan both terminate in January 2006 unless the Board terminates the Plan earlier. You should note that your receipt of an option does not alter any right to terminate your employment at any time and for any reason, with or without cause, your service as a consultant according to the terms of your agreement and/or your service as a member of a Board in accordance with the terms of the applicable bylaws and state law.

9.    Can the terms of the Plan be changed and, if so, do those changes affect my option? Can vesting of my option be accelerated?

        Generally, the Board decides whether to change the terms of the Plan. Usually the Plan is amended to increase the number of shares available under the Plan or to take into account changes in the tax or securities laws. These changes may be presented to the stockholders of the Company for approval at an annual meeting if tax, securities or other laws require approval of the changes. Any changes to the Plan would not impair your rights under your option without your consent.

        If certain changes occur to Evolving Systems' capitalization (e.g., a stock split or stock dividend of its common stock), the Compensation Committee will appropriately adjust the exercise price and number of shares subject to your option. In addition, if the Company merges with another company or undergoes certain other types of capital reorganizations (a "change in control"), then either the surviving corporation will assume your option (or substitute a similar option for your option) or the time during which your option may be exercised will be accelerated if you are still performing services for Evolving Systems or an affiliate. However, your option will terminate if not exercised within fifteen (15) days of notice from the Company that vesting of your options has been accelerated.

10.  What happens if I leave Evolving Systems?

        Your option continues to vest as long as you continue to provide service to Evolving Systems or an affiliate, even if your service capacity changes to that of a nonemployee director or a consultant. However, when your service does terminate (whether voluntarily or involuntarily), vesting of your option stops but your right to exercise any vested shares generally continues for three (3) months after your last day of service (twelve (12) months if termination is due to disability, eighteen (18) months if termination is due to death). If you do not exercise the vested options during the applicable time period, these options will lapse, and you will no longer have the right to exercise these options.

11.  Will my incentive stock option always remain an incentive stock option?

        Generally yes. Under the IRS Code, if termination of your employment is due to your death or if you die within three (3) months after your employment terminates, your option will remain an incentive stock option even though your heirs have up to eighteen (18) months to exercise. Otherwise, to remain an incentive stock option, your option must be exercised either within three (3) months of termination of your employment generally or twelve (12) months of termination of your employment if termination is due to your total and permanent disability, or eighteen (18) months from the date of your death.

        As noted in Question 10 above, your option provides that it must be exercised within three (3) months after your service terminates (alternatively, twelve (12) months if your service terminates due to your total and permanent disability or eighteen (18) months if your service terminates due to your death). However, in a few very limited circumstances it is possible for you to exercise your option more than three months after your employment terminates. In that case, as required by the IRS Code, your "incentive stock option" will become a "nonstatutory stock option" and will lose its potentially favorable tax treatment.

        For example, if your status changes from "employee" to "consultant," then your option will not terminate since you are still serving the Company as a consultant. However, even though your service to Evolving Systems continues, since your employment has terminated, you must exercise your option within three (3) months after your employment terminates or your incentive stock option will automatically become a nonstatutory stock option. Likewise, if your service terminates because of disability and the Company believes that your disability is permanent and total within the meaning of the IRS Code, the Company will allow you up to twelve (12) months to exercise your option. However, if the IRS later disagrees that your disability actually was "permanent and total," then it is possible that the IRS will disallow the favorable tax treatment for your option.

12.  What are the rights of my heirs upon my death?

        Your estate, persons having rights to your option by will or by the laws of descent and distribution or your designated beneficiary will have the right to exercise your option as to any vested portion of your option if you were still in service at the time of death or, if so provided in your option, you died within three months after your service was terminated for any reason.

13.  Can a relative or friend exercise my option?

        No, only you may exercise your option during your lifetime. While you may not transfer your option during your lifetime, you can provide for the transfer of the option upon your death, either in your will or by submitting a third-party designation in a form approved by Evolving Systems to become effective upon your death.

14.  Can I sell the stock I receive from exercising my option right away?

        Generally, yes. The stock you receive upon exercise of your option is freely tradable in most cases and will not bear any restrictive legends. However, an immediate sale will have certain tax consequences. See the discussion in Part II.

        Rule 10b-5 under the Exchange Act prohibits you from engaging in fraudulent practices in connection with the sale of the shares. Finally, note that certain Evolving Systems' employees and directors are subject to "blackout" periods for trading its securities. You will be notified by the Legal Department if you are subject to these blackout periods. Please see the Compliance Officer for further information on Rule 144, Rule 701 and the "blackout" period.

15.  If I am aware of important non-public information, can I sell my stock before this news is disclosed to the public? For example, if I know that Evolving Systems is having significant problems or is about to acquire a competitor, can I sell my stock before Systems puts out a press release?

        No. If you are aware of important inside information, you must not sell shares of Evolving Systems stock, whether received upon exercise of an option or otherwise, before dissemination of the information to the public. Basically, "inside information" is information that is both very important (material) and non-public (not disclosed through press releases, newspaper articles or otherwise to the public that buys and sells securities). Whether information is material will depend on the specific circumstances. A general test is whether dissemination of the information to the public would be likely to affect the market price of Evolving Systems stock or would be likely to be considered important by people who are considering whether to buy or sell Evolving Systems stock. Certainly if the information makes you want to buy or sell, it would probably have the same effect on others. Material information may include projections, estimates or proposals.

16.  Does the Plan have any of the same benefits as a qualified retirement plan, including a 401(k) plan, and will my participation in the Plan affect my participation in a 410(k) plan?

        The Plan is not a qualified retirement plan and, therefore, does not have the same tax deferral benefits, nor is the Plan subject to any provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Your participation in the Plan does not affect your ability to participate in any 401(k) plan of Evolving Systems.

Part II

Tax issues relating to your participation in the plan

        The information in this Part II responds to questions you may have about the United States federal tax consequences of participating in the Plan with respect to stock options. You should understand, however, that this tax information is not complete. For example, it does not address state or local tax laws or the application of laws if you are subject to tax laws in other countries. Furthermore, because tax laws and regulations may change, and interpretations of these laws and regulations can change the way the laws and regulations apply to you, this information may need to be updated after the issuance of this prospectus. Therefore, you should consult with a tax advisor if you have questions relating to the tax consequences of participation in, and the sale of shares received under, the Plan.

17.  What is the difference between ordinary income and capital gains and losses for United States Federal income tax purposes?

        The maximum marginal tax rate applicable to mid-term and long-term capital gains currently is 28% for stock held more than one year but not more than 18 months (20% for stock held more than 18 months) while the maximum marginal rate applicable to ordinary income and short-term capital gains is higher—generally, 39.6%. Additionally, capital gains and losses are subject to certain other provisions of the IRS Code not applicable to ordinary income.

18.  Do I have to pay tax when I receive or exercise my option?

        No. One tax advantage of an incentive stock option is that, no matter how long you hold the stock, tax generally is deferred until you dispose of the stock. Therefore, you did not pay a tax (and Evolving Systems did not receive a deduction) when you were granted your Option. Except for the possible application of the alternative minimum tax (please review this carefully with your tax advisor before exercising your option), you pay no tax upon exercise of an incentive stock option until you dispose of the stock you acquire.

19.  How is my profit taxed when I do dispose of the stock received on exercise of my option? What if I lose money?

        How your profit or loss is characterized will depend on how much time passed after both the date that the Option was granted and the date that you exercised the option.

•

If you dispose of the stock at least two years after the grant date AND at least one year after the exercise date, your entire gain or loss is characterized as mid-term or long-term capital gain or loss with a maximum capitals gains rate of 28% or 20%.



•

If you dispose of the stock less than two years after the grant date OR less than one year after the exercise date, a portion of your profit (either the original "spread" or your subsequent "profit," whichever is less) will be characterized as ordinary income with a maximum tax rate of 39.6%, and the transfer will be a "disqualifying disposition."

        You should be aware that transfer of legal title to the stock received upon exercise of an incentive stock option in a transaction that is not a sale may still be taxable as a disposition of the stock. Such transfers include most gifts, but do not include a transfer into joint ownership with right of survivorship if you remain one of the joint owners, a pledge or a transfer by bequest or inheritance, certain tax-free exchanges or certain transfers to a spouse or former spouse incident to a divorce.

        The portion of your profit which is characterized as ordinary income upon a disqualifying disposition is equal to the lesser of:

•

the difference between the fair market value of the stock on the date you exercised the option and your exercise price (the "spread"), or



•

the difference between the sales price and the original exercise price of the option (your "profit").

        Any profit you make over the amount characterized as ordinary income is characterized as capital gain, which will be long-term, mid-term or short-term depending on how long the stock was held from the exercise date. If you lose money on the sale of the stock, you may be able to report the loss as a capital loss, which will be long-term, mid-term or short-term depending on how long the stock was held from the exercise date.

        Different rules will apply if, under the IRS Code, you would not be entitled to report a loss on the sale of your stock if you were to lose money on the sale. For example, if you sell your stock to your spouse at a loss, you are not entitled to report the sale as a loss, and any subsequent tax consequences on the further disposition of the stock are determined under special rules that govern such situations. If you sell your stock to your spouse, whether or not at a loss, you will be taxed on the difference between the fair market value of the stock on the exercise date and the exercise price. Other dispositions of stock, described in the IRS Code, may have similar consequences.

20.  Is there any withholding on the exercise of my Option or the sale of the stock acquired on exercise?

        No. Currently, there is no withholding required either upon the exercise of an incentive stock option or on the sale of stock acquired on exercise (even if part of your profit is ordinary income). Evolving Systems is generally required to report to the IRS any ordinary income recognized by you as a result of a sale, which is a disqualifying disposition. (However, Evolving Systems may be required in the future to withhold taxes at the time you exercise an incentive stock option or dispose of stock acquired on exercise of the option.)

21.  Do I have to Notify Evolving Systems after I sell my stock?

        Yes. If you dispose of the stock within two years after the date the option was granted to you or within one year after you exercise your option, you should immediately notify Evolving Systems and provide certain details of such transaction to the Company.

22.  How am I affected by the alternative minimum tax?

        The alternative minimum tax is a separately computed tax equal to up to 26% of so much of your "alternative minimum taxable income" up to $175,000 ($87,500 in the case of a married taxpayer filing a separate return) as exceeds a specified exemption amount plus up to 28% on any additional alternative minimum taxable income. The alternative minimum tax is imposed only if and to the extent you would pay more tax if your taxes are computed pursuant to the alternative minimum tax rules than the tax you would pay if computed in the regular manner. The alternative minimum tax takes into account what are called tax preference items and other adjustments that are not taken into account when calculating taxes in the regular manner. One of the adjustments is the inclusion in alternative minimum taxable income of the difference between the exercise price of an incentive stock option and the fair market value of the stock on the exercise date, if that amount constitutes a profit. If you pay alternative minimum tax upon exercise of an incentive stock option, you are entitled to a credit against regular tax (but not alternative minimum tax) in later years. When you sell the stock, you are allowed, for purposes of calculating your alternative minimum tax in the year of sale, to decrease the profit by the adjustment amount previously included in your alternative minimum taxable income in the year of exercise.

23.  What are the tax consequences of an incentive stock option "stock swap" (using shares I already own to pay the exercise price of my incentive stock option)?

        Under proposed IRS regulations, if you pay the exercise price of your incentive stock option, in whole or in part, with shares you already own, you are deemed to have made a tax-free like-kind exchange of the previously-held shares for an equivalent number of shares received under the option. Note, however, that you could recognize ordinary income if you acquired your already owned shares upon exercise of an incentive stock option or under an employee stock purchase plan as defined in Section 423 of the Code and the exchange is treated as a disposition.(1)

(1)

The "stock swap" exchange will be treated as a disposition if you exchange your already owned shares within two years of the grant date of the prior option relating to the already owned shares or within one year after the exercise date of that prior option.

        The tax basis, holding periods and consequences of a subsequent disposition of the shares will depend on whether the shares disposed of are such "equivalent shares" or are "additional shares" received at the time of exercise. For purposes of calculating any capital gain or loss upon a subsequent taxable disposition, your basis in the equivalent shares will be equal to your basis in the shares surrendered plus any ordinary income recognized by reason of the exchange, and the holding period of the surrendered shares will carry over to the equivalent shares. However, for purposes of calculating any ordinary income on a subsequent disqualifying disposition, the amount treated as having been paid for the equivalent shares will be equal to their fair market value on the exercise date, and the holding period for such shares will begin on the exercise date.

        It appears that your basis in any additional shares, for purposes of calculating any capital gain upon a later disposition, will be the amount of cash, if any, used to pay any part of the exercise price. For purposes of calculating any ordinary income upon a disqualifying disposition of the additional shares, the amount treated as having been paid for the additional shares will be the amount of cash, if any, used to pay any part of the exercise price. The holding period for the additional shares will begin on the exercise date for all purposes.

        If there is a disqualifying disposition of the shares you acquired upon exercise of your incentive stock option under a stock swap, the shares with the lowest basis will be treated as having been disposed of first.

24.  Are there any special tax rules which apply to me if Evolving Systems has the right to repurchase my stock after I exercise my option?

        Yes. If you were allowed to exercise all of your option, even the unvested portion, Evolving Systems retains a right to repurchase any unvested shares until they vest, and your stock is subject to what is called a "risk of forfeiture." If stock you receive pursuant to the exercise of your option is subject to a risk of forfeiture and you dispose of the stock after the risk of forfeiture lapses in a disqualifying disposition, the amount of ordinary income you must report is calculated differently. In this case, the amount of ordinary income generally is equal to the lesser of:

•

the excess, if any, of the value of the stock on the date(s) the risk of forfeiture disappears over the exercise price paid for such stock, or



•

the profit, if any, on the sale of the stock.

        If your profit is more than the amount that must be reported as ordinary income, then the remainder of the profit is characterized as capital gain, which will be long-term, mid-term or short-term depending on how long you held your stock. If you wish to avoid this result, you may be able to make a Section 83(b) election within 30 days after the exercise of the option. Please contact the Compliance Officer for further information and the form of election if you think you should be filing a Section 83(b) election. Remember that this must be done within 30 days after you exercise your option. Filing a Section 83(b) election also may affect your alternative minimum tax liability, if any.

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