Exhibit 10.1 (h)

 

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION AGREEMENT (this “Agreement”) is made as of February 22, 2008
by and among (i) each of the parties a signatory hereto as junior creditors
(each individually and all collectively, together with their successors and
assigns and all other holders of Junior Debt, the “Junior Creditors”);
(ii) EVOLVING SYSTEMS, INC., a Delaware corporation, (“ESI”), and the other US
Obligors on the signature page hereto (if any); and (iii) BRIDGE BANK, N.A., the
“Senior Creditor”).

 

INTRODUCTION

 

A.            ESI, as borrower, Evolving Systems Holdings, Inc., as a guarantor,
CapitalSource Finance LLC, a Delaware limited liability company, as agent (in
such capacity, the “Existing Agent”), and the lenders from time to time parties
thereto are party to that certain Credit Agreement dated as of November 14, 2005
(the “Existing US Credit Agreement”), pursuant to which, among other things, the
lenders thereunder have made certain term loans and financial accommodations to
ESI, as the borrower thereunder.

 

B.            Evolving Systems Limited, certain other obligors, CSE Finance Inc.
and the other lenders from time to time parties thereto have entered into a
Revolving Facility Agreement dated as of November 14, 2005 (the “Existing
Revolving Loan Credit Agreement” and together with the Existing US Credit
Agreement, the “Existing Credit Agreements”), pursuant to which, among other
things, the lenders thereunder have made certain revolving loans and financial
accommodations to certain of the obligors thereunder.

 

C.            ESI previously entered into certain unsecured subordinated notes
each dated November 14, 2005 evidencing indebtedness in the aggregate original
principal amount of $4,869,700.47 (as the same may be amended, supplemented or
otherwise modified from time to time as permitted hereunder, together with all
notes and other instruments issued in replacement thereof or substitution
therefor, the “Junior Notes”).

 

D.            In connection with and as a condition precedent to the execution
of the Existing Credit Agreements, the Existing Agent, the lenders party to the
Existing Credit Agreements, the Junior Creditors, ESI and the other US Obligors
party thereto entered into that certain Subordination Agreement dated as of
November 14, 2005 (the “Existing Subordination Agreement”).

 

E.             ESI and the Senior Creditor are entering into a Loan and Security
Agreement dated the date hereof (as the same may be amended, supplemented,
replaced, substituted, refinanced or otherwise modified from time to time, as
permitted hereunder, the “US Loan Agreement”), pursuant to which, among other
things, the Senior Creditor is agreeing, subject to the terms and conditions set
forth therein, to make certain loans and financial accommodations to ESI, as
borrower thereunder to, among other things, refinance ESI’s indebtedness under
the Existing US Credit Agreement.

 

F.             Evolving Systems Limited and the Senior Creditor are entering
into a Loan Agreement dated the date hereof (as the same may be amended,
supplemented, replaced,

 

 

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substituted, refinanced or otherwise modified from time to time, as permitted
hereunder, the “UK Loan Agreement” and together with the US Loan Agreement, the
“Credit Agreements”), pursuant to which, among other things, the Senior Creditor
is agreeing, subject to the terms and conditions set forth therein, to make
certain revolving loans and financial accommodations to Evolving Systems Limited
to, among other things refinance the indebtedness under the Existing Revolving
Loan Credit Agreement.

 

G.            As an inducement to and as one of the conditions precedent to the
agreement of the Senior Creditor under the Credit Agreements to consummate the
transactions contemplated thereby, the Senior Creditor has required the
execution and delivery of this Agreement by the Junior Creditors and ESI.

 

NOW THEREFORE, in order to induce the Senior Creditor to consummate the
transactions contemplated by the Credit Agreements, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:

 

1.             Definitions.  Capitalized terms used but not otherwise defined in
this Agreement shall have the meanings assigned to such terms in the applicable
Credit Agreement.  As used in this Agreement, the following terms have the
following meanings:

 

Bankruptcy Code shall mean, collectively, (i) with respect to ESI and any other
US Obligor, Chapter 11 of Title 11 of the United States Code, as amended from
time to time and any successor statutes and all rules and regulations
promulgated thereunder and (ii) with respect to any other Obligor organized or
otherwise formed under the laws of England, the Insolvency Act of 1986, as
amended from time to time and any successor acts and all rules and regulations
promulgated thereunder.

 

Collection Action shall mean, with respect to the Junior Debt, any action (a) to
sue for, take or receive from or on behalf of any US Obligor, by set-off or in
any other manner, the whole or any part of any moneys which may now or hereafter
be owing by any US Obligor with respect to the Junior Debt, (b) to initiate or
participate with others in any suit, action or Proceeding against any US Obligor
or its property to (i) enforce payment of or to collect the whole or any part of
the Junior Debt or (ii) commence judicial enforcement of any of the rights and
remedies under the Junior Debt Documents or applicable law with respect to the
Junior Debt, (c) to accelerate any Junior Debt, (d) to cause any US Obligor to
honor any redemption, put or mandatory payment obligation with respect to the
Junior Debt or any other equity interests of any US Obligor or (e) to take any
action under the provisions of any state, local, federal or foreign law,
including, without limitation, the UCC, or under any contract or agreement, to
enforce against, foreclose upon, take possession of or sell any property or
assets of any US Obligor.

 

Debtor Relief Law shall mean, collectively, the Bankruptcy Code and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization or similar debtor relief laws from time
to time in effect affecting the rights of creditors generally, in each case as
amended from time to time.

 

 

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Junior Debt shall mean, collectively, all of the obligations, liabilities and
indebtedness of ESI (and, if applicable, any other US Obligors) to the Junior
Creditors evidenced by the Junior Notes and all other amounts now or hereafter
owed by ESI or such other US Obligor to the Junior Creditors under or in respect
of any of the Junior Debt Documents.

 

Junior Debt Documents shall mean, collectively, the Junior Notes, any guaranty
with respect to the Junior Debt and all other documents, agreements and
instruments evidencing the foregoing and/or executed and delivered in connection
therewith.

 

Junior Default shall mean (i) a default in the payment of the Junior Debt or in
the performance of any term, covenant or condition contained in any of the
Junior Debt Documents, or (ii) any other occurrence permitting the Junior
Creditors to accelerate the payment of, or put or cause the redemption of, all
or any portion of the Junior Debt or any of the Junior Debt Documents.

 

Missed Secondary Default Payments shall have the meaning set forth in
Section 2.3(b).

 

Obligor or Obligors shall mean, each individually and all collectively, each US
Obligor, Evolving Systems Limited, Evolving Systems Holdings Limited and all
guarantors of the Senior Debt or, if applicable, the Junior Debt (it being
understood that there is no requirement under the Junior Debt Documents that any
Person guarantee the Junior Debt).

 

Paid in Full or Payment in Full shall mean the irrevocable and indefeasible
payment in full in cash of all of the Senior Debt and the termination of the
lending commitments under the Senior Debt Documents.

 

Permitted Junior Debt Payments shall mean payments of principal and interest on
the Junior Debt on a non-accelerated basis (whether such payments are regularly
scheduled payments or optional prepayments) in accordance with the terms of the
Junior Debt Documents as in effect on the date hereof or as modified in
accordance with the terms of this Agreement.

 

Person shall mean any natural person, corporation, general or limited
partnership, limited liability company, firm, trust, association, government,
governmental agency or other entity, whether acting in an individual, fiduciary
or other capacity.

 

Proceeding shall mean any voluntary or involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization,
assignment for the benefit of creditors, appointment of a custodian, receiver,
trustee or other officer with similar powers or any other proceeding for the
liquidation, dissolution or other winding up of a Person, including, without
limitation, any of the foregoing under Debtor Relief Laws.

 

Reorganization Subordinated Securities shall mean any debt or equity securities
issued in a Proceeding in substitution of all or any portion of the Junior Debt,
in each case that (a) are subordinated in right of payment, performance and
otherwise to the Senior Debt (or any debt and/or equity securities issued in
substitution of all or any portion of the Senior Debt) to at least the same
extent that the Junior Debt is subordinated to the Senior Debt pursuant to the
terms of this Agreement, (b) do not have the benefit of any obligation of any
Person (whether as issuer, guarantor or otherwise) unless the Senior Debt has at
least the same benefit of the obligation of

 

 

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such Person, and (c) do not have any terms, and are not subject to or entitled
to the benefit of any agreement or instrument that has terms, that are more
burdensome to the issuer of or other obligor on such debt or equity securities
than are the terms of (x) any such debt or equity securities issued to the
Senior Creditor in connection with such Proceeding or (y) the Junior Debt
immediately prior to such issuance; provided in each case that the Junior
Creditors shall have entered into such supplements to or modifications of this
Agreement as the Senior Creditor reasonably may request to reflect the continued
subordination of the Reorganization Subordinated Securities to the Senior Debt
(or debt and equity securities issued in substitution of all or a portion
thereof).

 

Senior Covenant Default shall mean any “Event of Default” (or other term of
similar import or meaning) under the Senior Debt Documents (other than a Senior
Payment Default).

 

Senior Debt shall mean the “Obligations,” as such term is defined in each Credit
Agreement, including, without limitation, the principal amount of all debts,
claims and indebtedness, accrued and unpaid interest and all fees, costs and
expenses, whether primary, secondary, direct, contingent, fixed or otherwise,
heretofore, now and from time to time hereafter owing, due or payable, whether
before or after the filing of a Proceeding, together with (a) any amendments,
modifications, refinancings, replacements, renewals or extensions thereof and
(b) any interest accruing thereon after the commencement of a Proceeding,
without regard to whether or not such interest is an allowed claim; provided,
however, that in no event shall the aggregate outstanding principal amount of
the Senior Debt exceed $10,000,000, reduced by the aggregate amount of all
principal payments made thereon (whether scheduled or unscheduled, optional or
mandatory or otherwise made) at any time and from time to time under the
$4,000,000 term loan facility under the US Loan Agreement.  Senior Debt shall be
considered to be outstanding whenever any loan commitment under any Senior Debt
Document is outstanding.

 

Senior Debt Documents shall mean, collectively, the Credit Agreements, the other
Loan Documents and all other documents, agreements and instruments evidencing,
securing or otherwise pertaining to all or any portion of the Senior Debt.

 

Senior Default shall mean any Senior Payment Default or Senior Covenant Default.

 

Senior Payment Default shall mean any failure by any Obligor to make any
required payment of interest or principal, or any fee (including, without
limitation, any letter of credit fees) or other monetary payment, under the
Senior Debt Documents, including, without limitation, any default in payment of
Senior Debt after acceleration thereof and/or the filing of a Proceeding, or any
failure to pay the amounts described in this definition regardless of any
requirement of notice or lapse of time or both before such failure to pay
becomes an Event of Default under the Senior Debt Documents.

 

Senior Secondary Default shall mean the Senior Covenant Defaults under
Section 8.2(b) of the Credit Agreements which, in the Senior Creditor’s
reasonable discretion, are capable of being remedied or cured.

 

US Obligor or US Obligors shall mean, each individually and all collectively,
ESI and all US Persons who are guarantors of the Senior Debt or, if applicable,
the Junior Debt (it being

 

 

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understood that there is no requirement under the Junior Debt Documents that any
Person guarantee the Junior Debt).

 

US Persons shall mean a Person incorporated or otherwise organized under the
laws of the United States of America or a state of the United States of America
or the District of Columbia.

 

2.             Subordination.

 

2.1          Subordination of Junior Debt to Senior Debt.  Each of the US
Obligors covenants and agrees, and each of the Junior Creditors by its
acceptance of the Junior Notes (whether upon original issue or transfer or
assignment) covenants and agrees, that (a) the payment of any and all of the
Junior Debt is subordinate and subject in right of payment, to the extent and in
the manner hereinafter set forth, to the prior Payment in Full of the Senior
Debt and (b) the existing and hereafter acquired liens and security interests of
the Senior Creditor in any Collateral is senior, regardless of the time, order,
lack or method of perfection, to all existing and hereafter acquired liens and
security interests, if any, of the Junior Creditors (or any agent therefor) in
the Collateral, if any, securing all or any portion of the Junior Debt.  Senior
Creditor, whether now outstanding or hereafter created, incurred, assumed or
guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the
provisions contained in this Agreement.  The parties hereto intend this
Agreement to be deemed enforceable by any applicable court under any Bankruptcy
Code and other Debtor Relief Laws.

 

2.2          Proceedings.

 

(a)           Payments and Distributions.  In the event of any Proceeding
involving any Obligor or any Property of any Obligor, (i) all Senior Debt first
shall be Paid in Full before any payment of, or payment or distribution with
respect to, the Junior Debt shall be made (other than a distribution of
Reorganization Subordinated Securities); (ii) any payment or distribution,
whether in cash, property or securities which, but for the terms hereof,
otherwise would be payable or deliverable in respect of the Junior Debt (other
than a distribution of Reorganization Subordinated Securities), shall be paid or
delivered directly to the Senior Creditor (to be held and/or applied by the
Senior Creditor  in accordance with the terms of the applicable Credit
Agreement) until all Senior Debt is Paid in Full, and each of the Junior
Creditors irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, custodians, conservators and others having authority in the
premises to effect all such payments and distributions, and each of the Junior
Creditors also irrevocably authorizes, empowers and directs the Senior Creditor
to demand, sue for, collect and receive every such payment or distribution; and
(iii) each of the Junior Creditors agrees to execute and deliver to the Senior
Creditor or its representative all such further instruments confirming the
authorization referred to in the foregoing clause (ii).

 

(b)           Proofs of Claim; Claims; Voting; and Other Matters.  The Junior
Creditors shall not initiate, prosecute or participate in any claim or action in
any Proceeding or otherwise challenging the enforceability, validity, perfection
or priority of the Senior Debt, this Agreement, or any liens and security
interests securing the Senior

 

 

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Debt.  In the event the Junior Creditors (i) fail to execute, verify, deliver
and file any proofs of claim in respect of the Junior Debt in connection with
any Proceeding prior to the date that is 30 days before the expiration of the
time to file any such proof or (ii) fail to vote any such claim in any
Proceeding prior to the date that is 15 days before the expiration of the time
to vote any such claim, the Junior Creditors hereby irrevocably authorize,
empower and appoint the Senior Creditor as their agent and attorney-in-fact to
execute, verify, deliver and file such proofs of claim and to vote such claim
(including the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, or extension); provided
the Senior Creditor shall have no obligation to exercise any such authority with
respect to the Junior Creditors’ claim.  In the event that the Senior Creditor
votes any claim in accordance with the authority granted hereby, the Junior
Creditors shall not be entitled to change or withdraw such vote.

 

(c)           Reinstatement.  The Senior Debt shall continue to be treated as
Senior Debt and the provisions of this Agreement shall continue to govern the
relative rights and priorities of the Senior Creditor and the Junior Creditors
even if all or part of the Senior Debt or the security interests securing the
Senior Debt are subordinated, set aside, avoided or disallowed in connection
with any such Proceeding.  This Agreement shall be reinstated if at any time any
payment of any of the Senior Debt is rescinded or must otherwise be returned by
Senior Creditor or any representative of Senior Creditor.

 

(d)           Collateral.  To the extent that the Junior Creditors have or
acquire any liens or other rights with respect to any Collateral, the Junior
Creditors shall not assert such rights in any Proceeding without the prior
written consent of the Senior Creditor unless requested to do so by the Senior
Creditor, in which case the Junior Creditors shall seek to exercise such rights
in the manner requested by the Senior Creditor.

 

2.3          Junior Debt Payments.

 

(a)           Restrictions on Payments; Commencement of Payment Blockage.  The
terms of the Junior Debt Documents to the contrary notwithstanding, ESI and the
other US Obligors each hereby agrees that it may not make, and each Junior
Creditor hereby agrees that it will not accept, any payment or distribution on
account of, or any redemption, purchase or acquisition of, the Junior Debt (by
set off or otherwise) until the Senior Debt is Paid in Full; provided that
Permitted Junior Debt Payments may be made by ESI (and, if applicable, the other
US Obligors) and accepted by the Junior Creditors so long as, at the time of
such payment or immediately after giving effect thereto:

 

(i)            no Senior Default exists or would be created by the making of
such payment;

 

(ii)           such Permitted Junior Debt Payment is not made from proceeds of
the Senior Debt under the UK Loan Agreement; and

 

 

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(iii)         the Obligors have delivered compliance certificates pursuant to
the Credit Agreements certifying that the Obligors would have been in compliance
on a pro forma basis (recomputed for the most recent period for which financial
statements have been delivered to the Senior Creditor after giving effect
thereto as of the first day of such period) with the financial covenants set
forth in the Credit Agreements assuming the financial covenant levels for the
then current period shall apply, and the Obligors shall have provided to Senior
Creditor such other evidence thereof as requested by Senior Creditor to the
satisfaction of Senior Creditor.

 

With each payment on the Junior Debt, ESI shall certify in writing to the Junior
Creditors that such payment is a Permitted Junior Debt Payment and that no
Senior Default exists.  ESI shall provide a copy of such written certification
to the Senior Creditor.  If a Senior Default has occurred at the time such
payment is made by ESI (or, if applicable, any other US Obligor), the Senior
Creditor shall have 120 days from the date the Senior Creditor receives such
written certification to notify the Junior Creditors that a Senior Default did
exist at the time such payment was made and that such payment was received by
the Junior Creditors in violation of this Agreement.  In the event that the
Junior Creditors are notified by the Senior Creditor within such 120 day period
that the Junior Creditors received such payment in violation of this Agreement,
the Junior Creditors shall promptly return such payment to the Senior Creditor. 
If the Senior Creditor fails to notify the Junior Creditors within such 120 day
period, the Junior Creditors shall have no further obligation or liability to
return such payment.

 

No Senior Default shall be deemed to have been cured or waived for purposes of
this Section 2.3(a) unless and until ESI and the Junior Creditors shall have
received a written waiver or notice of cure of any such Senior Default from
Senior Creditor.  To the extent such Senior Default is cured or waived, the
Senior Creditor agrees to provide the Junior Creditors with notice thereof
within a reasonable period of time.

 

(b)           Limited Exception to Payment Blockage.  In the event that the
Junior Creditors would be permitted to received a Permitted Junior Debt Payment
under Section 2.3(a) above in respect of the Junior Debt solely but for the
occurrence of a Senior Secondary Default (a “Missed Secondary Default Payment”),
and provided no other Senior Default that is not a Senior Secondary Default
exists and the Junior Creditors are otherwise permitted to receive such
Permitted Junior Debt Payments pursuant to Sections 2.3(a)(ii), (iii) and
(iv) above, the Junior Creditors shall be permitted to receive any such Missed
Secondary Default Payment upon the earlier to occur of (i) the cure or waiver of
such Senior Secondary Default as provided in Section 2.3(a) or (ii) 180 days
from the date written notice is provided by any Junior Creditor to Senior
Creditor notifying Senior Creditor of such Missed Secondary Default Payment.

 

(c)           Non-Applicability to Proceeding.  The provisions of this
Section 2.3 shall not apply to any payment with respect to which Section 2.2
would be applicable.

 

 

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2.4          Restriction on Action by the Junior Creditors.

 

(a)           Notwithstanding any of the Junior Creditors’ rights under
applicable law or any provision of the Junior Debt Documents to the contrary and
except as otherwise expressly permitted under clauses (b) and (c) below, the
Junior Creditors hereby acknowledge and agree that the Junior Creditors shall
not take any Collection Action, until the Senior Debt is Paid in Full.

 

(b)           In the event that ESI (or, if applicable, any other US Obligor) is
permitted under this Agreement to make a Permitted Junior Debt Payment in
respect of the Junior Debt and is required to make such payment pursuant to the
Junior Debt Documents but fails to make such payment, the Junior Creditors may,
after one (1) year from the date written notice is provided by any Junior
Creditor to the Senior Creditor notifying the Senior Creditor of such failure to
pay, sue for such missed payment; provided, however, that (i) such action to sue
shall not include any right on the part of Junior Creditors to take any other
Collection Action, including accelerating any Junior Debt or foreclosing upon or
otherwise exercising any rights to any property or assets of ESI or any other US
Obligors, and (ii) any moneys obtained by the Junior Creditors with respect to
any such Collection Action permitted under this Section 2.4(b) during any Senior
Default shall in any event be held in trust for the benefit of the Senior
Creditor and the Senior Creditor and promptly paid or delivered to the Senior
Creditor for the benefit of Senior Creditor in the form received until all
Senior Debt is Paid in Full.

 

(c)           In the event that the Senior Creditor accelerates all of the
Senior Debt, a Junior Creditor may, upon ten days prior written notice to the
Senior Creditor, accelerate its Junior Debt and obtain a judgment; provided,
however, that if following such acceleration of all of the Senior Debt, such
acceleration is rescinded, then each such Junior Creditor shall likewise rescind
such acceleration of the Junior Debt and shall not be permitted to take any
further action with respect to such judgment, and provided, further that
(i) such acceleration right shall not include any right on the part of Junior
Creditors to take any other Collection Action or to enforce such judgment,
including foreclosing upon or otherwise exercising any rights to any property or
assets of ESI or any other US Obligors until all Senior Debt is Paid in Full,
(ii) any moneys obtained by the Junior Creditors with respect to any such
Collection Action permitted under this Section 2.4(c) shall in any event be held
in trust for the benefit of the Senior Creditor and promptly paid or delivered
to the Senior Creditor in the form received until all Senior Debt is Paid in
Full and (iii) in the case of acceleration by all Junior Creditors in accordance
with this Section 2.4(c), any one Junior Creditor may provide such notice on
behalf of all Junior Creditors in a notice specifying it is being given on
behalf of all Junior Creditors.

 

(d)           Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Change of Control (as such term is defined in the
Junior Notes as in effect on the date of this Agreement), the Junior Creditors
may take the following action:

 

 

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(i)            With respect to an event under (i) or (ii) of such Change of
Control definition, a Junior Creditor may, from the earlier to occur of
(A) receipt by Senior Creditor of Payment in Full of the Senior Debt as a result
of any of the transactions completed under (i) or (ii) of such Change of Control
definition, or (B) if there has not been an acceleration of the Senior Debt (if
there has been an acceleration of the Senior Debt, the provisions of
Section 2.4(c) shall apply), within 180 days from the date such transactions
under (i) or (ii) of such Change of Control definition are consummated,
accelerate its Junior Debt and accept and receive payment in satisfaction of its
Junior Debt in accordance with the terms of the Junior Debt Documents; provided
in the case of acceleration by all Junior Creditors in accordance with this
Section 2.4(d)(i), any one Junior Creditor may provide such notice on behalf of
all Junior Creditors in a notice specifying it is being given on behalf of all
Junior Creditors; or

 

(ii)           With respect to an event under (iii) or (iv) of such Change of
Control definition, upon ten days prior written notice from a Junior Creditor to
the Senior Creditor, such Junior Creditor may accelerate its Junior Debt and
accept and receive payment in satisfaction of its Junior Debt; provided, in the
case of acceleration by all Junior Creditors in accordance with this
Section 2.4(d)(ii), any one Junior Creditor may provide such notice on behalf of
all Junior Creditors in a notice specifying it is being given on behalf of all
Junior Creditors.

 

(e)           The Junior Creditors hereby waive any right they may have to
require that the Senior Creditor to marshal any assets of the Obligors in favor
of the Junior Creditors, and the Junior Creditors agree that they shall not
acquire, by subrogation or otherwise, any lien, estate, right or other interest
in any collateral of the Obligors or the proceeds therefrom.  Until the Senior
Debt is Paid in Full, the Junior Creditors shall not (i) institute any judicial
or administrative proceeding against any Obligor, the Senior Creditor, (ii) take
any other action, including without limitation, any Collection Action (except as
expressly permitted under Sections 2.4(b), (c) or (d) above), or (iii) fail to
take any actions or give or fail to give any consent, in each case which
directly or indirectly would interfere with or delay the exercise by the Senior
Creditor of its rights and remedies under the Senior Debt Documents.

 

(f)            The US Obligors agree that any applicable statute of limitations
shall be tolled during any standstill period and waive any right to assert any
defense based upon any such statute of limitations without giving effect to such
tolling.

 

2.5          No Liens.

 

(a)           The Junior Creditors shall not seek to obtain, and shall not take,
accept, obtain or have, any lien or security interest in any Collateral as
security for all or any part of the Junior Debt other than judgment liens
obtained in connection with a Collection Action permitted hereby and, in the
event that the Junior Creditors obtain any liens or security interests in any
Collateral not otherwise permitted hereby, the Junior Creditors shall (or shall
cause its agent to) promptly execute and deliver to the Senior

 

 

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Creditor such documents, agreements and instruments, and take such other
actions, as the Senior Creditor shall request to release such liens and security
interests in such Collateral.

 

(b)           The Senior Creditor shall have the exclusive right as to the
exercise and enforcement of all privileges and rights with respect to the
Collateral in its sole discretion, including, without limitation, the exclusive
right to take or retake control or possession of such Collateral and to hold,
prepare for sale, process, sell, lease, dispose of, or liquidate such Collateral
or settle or adjust insurance claims with respect thereto.  Without in anyway
limiting the foregoing, if in connection with any sale or other disposition of
Collateral the Senior Creditor requests that the Junior Creditors release their
liens upon such Collateral, then the Junior Creditors shall execute and deliver
such documents, agreements and instruments, and take such other actions as are
necessary to release the Junior Creditors’ liens in such Collateral, subject to
the Junior Creditors’ right to retain a lien subordinated hereunder on any
proceeds from the disposition of such Collateral in excess of the amount of the
Senior Debt outstanding.

 

(c)           In furtherance of this Section 2.5, each of the Junior Creditors
hereby irrevocably appoints the Senior Creditor its attorney-in-fact, with full
authority in the place and stead of such Junior Creditor and in the name of such
Junior Creditor or otherwise, to execute and deliver any document, agreement or
instrument which the Junior Creditors may be required to deliver pursuant to
this Section 2.5.  The Senior Creditor shall have no responsibility for or
obligation or duty with respect to any of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights pertaining thereto.

 

2.6          Amendment of Junior Debt Documents.  Until the Senior Debt is Paid
in Full, and anything contained in the Junior Debt Documents or any of the
Senior Debt Documents to the contrary notwithstanding, the Junior Creditors
shall not, without the prior written consent of the Senior Creditor, agree to
any amendment or supplement to, or other modification of, the Junior Debt
Documents or the Junior Debt the effect of which is to (a) increase the maximum
principal amount of the Junior Debt, (b) increase the rate of interest (cash or
otherwise) on any of the Junior Debt (except for regularly scheduled interest at
the non-default rate of interest to the extent expressly provided in the Junior
Debt Documents as in effect on the date of this Agreement), (c) change the date
upon which regularly scheduled payments of principal or interest on the Junior
Debt are due, (d) add or make more restrictive any event of default or any
covenant with respect to the Junior Debt or make any change to any event of
default or any covenant which would have the effect of making such event of
default or covenant more restrictive than those in effect in the Credit
Agreements on the date of this Agreement, (e) change the final maturity date of
any Junior Debt to a date that is earlier than the date which is 180 days after
the scheduled maturity date of the Senior Debt, (f) take any liens or security
interests in assets of the Obligors or any other property or assets securing the
Senior Debt, (g) change any redemption, put or prepayment provisions of the
Junior Debt, (h) alter the subordination provisions with respect to the Junior
Debt, including, without limitation, subordinating the Junior Debt to any other
indebtedness, or (i) change or amend any other term of the Junior Debt Documents
if such change or amendment would result in a Senior Default, increase the
obligations of any Obligor or confer additional material rights on the Junior

 

 

10

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Creditors or any holder of the Junior Debt in a manner adverse to any Obligor or
the Senior Creditor.

 

2.7          Incorrect Payments.  If any payment or distribution on account of
the Junior Debt not permitted to be made by the Obligors or received by the
Junior Creditors under this Agreement is received by the Junior Creditors in
violation of this Agreement before all Senior Debt is Paid in Full, such payment
or distribution shall not be commingled with any asset of the Junior Creditor,
shall be held in trust by the Junior Creditors for the benefit of the Senior
Creditor and shall be promptly paid over to the Senior Creditor, or its
designated representative, for application (in accordance with the Credit
Agreements) to the payment of the Senior Debt then remaining unpaid, until all
of the Senior Debt is Paid in Full.

 

2.8          Transfer.  No Junior Creditor shall sell, assign, pledge, dispose
of or otherwise transfer all or any portion of the Junior Debt or any Junior
Debt Document (a) without giving written notice within fifteen (15) days of such
action to the Senior Creditor, (b) unless prior to the consummation of any such
action, the transferee thereof shall execute and deliver to the Senior Creditor
a joinder to this Agreement providing for the continued subordination of the
Junior Debt to the Senior Debt as provided herein and for the continued
effectiveness of all of the rights of the Senior Creditor arising under this
Agreement, and (c) unless, following the consummation of any such action, there
shall be either (i) no more than five (5) holders of the Junior Debt, or
(ii) one Person acting as agent for all of the Junior Creditors pursuant to
documentation reasonably satisfactory to the Senior Creditor and the Junior
Creditors such that any notice of a Senior Default and other notices and
communications to be delivered to or by the Junior Creditors hereunder shall be
made to or obtained from such agent and shall be binding on the Junior Creditors
as if directly received by or obtained from the Junior Creditors. 
Notwithstanding the failure to execute or deliver any joinder to this Agreement
in form and substance satisfactory to the Senior Creditor, the subordination
effected hereby shall survive any sale, assignment, pledge, disposition or other
transfer of all or any portion of the Junior Debt, and the terms of this
Agreement shall be binding upon the successors and assigns of the Junior
Creditors.

 

2.9          Legends.  Until the Senior Debt is Paid in Full, the Junior Notes
and all other Junior Debt Documents at all times shall contain in a conspicuous
manner the following legend:

 

“This instrument and the rights and obligations evidenced hereby are subordinate
in the manner and to the extent set forth in that certain Subordination
Agreement (as the same may be amended, supplemented, replaced, substituted,
refinanced or otherwise modified from time to time, the “Subordination
Agreement”) dated as of February 22, 2008 among Evolving Systems, Inc., a
Delaware corporation, the other US Obligors (as defined therein), the Junior
Creditors (as defined therein) and the Senior Creditor (as defined therein), all
as more particularly described in the Subordination Agreement, and each holder
of this instrument, by its acceptance hereof, shall be bound by the provisions
of the Subordination Agreement.”

 

 

11

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3.                                      Modifications to Senior Debt.  The
Senior Creditor may at any time without the consent of or notice to the Junior
Creditors, without incurring liability to the Junior Creditors and without
impairing or releasing the obligations of the Junior Creditors under this
Agreement, change the manner or place of payment or extend the time of payment
of, increase the interest rates and fees applicable to or renew or alter any of
the other terms of the Senior Debt (including increases to the principal amount
of outstanding Senior Debt subject to the proviso under the definition of Senior
Debt in this Agreement) or the Senior Debt Documents, or amend, modify,
supplement, restate, substitute, replace or refinance in any manner any Senior
Debt Document or any other any agreement, note, guaranty or other instrument
evidencing or securing or otherwise relating to the Senior Debt.

 

4.                                      Continued Effectiveness of this
Agreement.  The terms of this Agreement, the subordination effected hereby, and
the rights and the obligations of the Junior Creditors, the US Obligors, the
Senior Creditor arising hereunder shall not be affected, modified or impaired in
any manner or to any extent by the validity or enforceability of any of the
Senior Debt Documents or the Junior Debt Documents, or any exercise or
non-exercise of any right, power or remedy under or in respect of the Senior
Debt, the Senior Debt Documents, the Junior Debt or the Junior Debt Documents. 
The Junior Creditors hereby acknowledge that the provisions of this Agreement
are intended to be enforceable at all times, whether before the commencement of,
after the commencement of, in connection with or premised on the occurrence of a
Proceeding.

 

5.                                      No Contest.  Each of the Junior
Creditors agrees that it will not at any time contest the validity, perfection,
priority or enforceability of the Senior Debt, the Senior Debt Documents, or the
liens and security interests of the Senior Creditor in any Collateral.

 

6.                                      Representations and Warranties.  Each
Junior Creditor hereby represents and warrants as follows:

 

6.1                               Existence and Power.  Such Junior Creditor is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.

 

6.2                               Authority.  Such Junior Creditor has the power
and authority to enter into, execute, deliver and carry out the terms of this
Agreement, all of which have been duly authorized by all proper and necessary
action and are not prohibited by such party’s organizational documents.

 

6.3                               Binding Agreements.  This Agreement, when
executed and delivered, will constitute the valid and legally binding obligation
of such Junior Creditor, enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by equitable principles.

 

6.4                               Conflicting Agreements; Litigation.  No
provisions of any mortgage, indenture, contract, agreement, statute, rule,
regulation, judgment, decree or order binding on the Junior Creditors conflicts
with, or requires any consent which has not already been obtained under, or
would in any way prevent the execution, delivery or performance by such Junior
Creditor of the terms of this Agreement or the other Junior

 

12

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Debt Documents to which such Junior Creditor is a party.  No pending or, to the
best of such Junior Creditor’s knowledge, threatened, litigation, arbitration or
other proceedings if adversely determined would prevent the performance by such
Junior Creditor of the terms of this Agreement or the other Junior Debt
Documents to which such Junior Creditor is a party.

 

6.5                               Ownership.  Such Junior Creditor is the sole
owner, beneficially and of record, of the Junior Notes held by it, the other
Junior Debt Documents to which such Junior Creditor is a party and the Junior
Debt owing to such Junior Creditor.

 

6.6                               Defaults.  No Junior Default exists under or
with respect to the Junior Note(s) held by such Junior Creditor or any of the
other Junior Debt Documents to which such Junior Creditor is a party.

 

7.                                      Senior Creditor.  The Senior Creditor
hereby represents and warrants to the Junior Creditors as follows:

 

7.1                               Existence and Power.  The Senior Creditor is a
national association.

 

7.2                               Authority.  The Senior Creditor has the power
and authority to enter into, execute, deliver and carry out the terms of this
Agreement, all of which have been duly authorized by all proper and necessary
action and are not prohibited by its organizational documents.

 

7.3                               Binding Agreements.  This Agreement, when
executed and delivered, will constitute the valid and legally binding obligation
of the Senior Creditor enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by equitable principles.

 

7.4                               Conflicting Agreements; Litigation.  No
provisions of any mortgage, indenture, contract, agreement, statute, rule,
regulation, judgment, decree or order binding on the Senior Creditor conflicts
with, or requires any consent which has not already been obtained under, or
would in any way prevent the execution, delivery or performance of the terms of
this Agreement by the Senior Creditor.  No pending or, to the best of the Senior
Creditor’s knowledge, threatened, litigation, arbitration or other proceedings
if adversely determined would prevent the performance of the terms of this
Agreement by the Senior Creditor.

 

8.                                      Notice of Junior Default.  Each of the
Junior Creditors shall provide the Senior Creditor with written notice of the
occurrence of a Junior Default under its Junior Note and ESI shall provide the
Senior Creditor with a written notice of the occurrence of each Junior Default,
and each Junior Creditor who has provided such notice and ESI shall notify the
Senior Creditor in writing in the event such Junior Default is waived; provided
that (i) any failure to deliver any such notices shall not otherwise affect the
subordination provisions or other obligations of the Junior Creditors or the US
Obligors hereunder, (ii) no such notice shall be effective for purposes of
Section 2.4(b) unless specifically stating so therein and (iii) any one Junior
Creditor may

 

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provide such notices on behalf of all Junior Creditors in a notice specifying it
is being given on behalf of all Junior Creditors.

 

9.                                      Cumulative Rights, No Waivers.  Each and
every right, remedy and power granted to the Senior Creditor or the Junior
Creditors hereunder shall be cumulative and in addition to any other rights,
remedy or power specifically granted herein or in the Senior Debt Documents or
the Junior Debt Documents, as applicable, or now or hereafter existing in
equity, at law, by virtue of statute or otherwise, and may be exercised by the
Senior Creditor or any Junior Creditor, as applicable, from time to time,
concurrently or independently and as often and in such order as the Senior
Creditor or the Junior Creditors, as applicable, may deem expedient.  Any
failure or delay on the part of Senior Creditor or any of the Junior Creditors,
as applicable, in exercising any such right, remedy or power, or abandonment or
discontinuance of steps to enforce the same, shall not operate as a waiver
thereof or affect the rights of the Senior Creditor or Junior Creditors, as
applicable, thereafter to exercise the same, and any single or partial exercise
of any such right, remedy or power shall not preclude any other or further
exercise thereof or the exercise of any other right, remedy or power, and no
such failure, delay, abandonment or single or partial exercise of the rights of
the Senior Creditor or the Junior Creditors, as applicable, hereunder shall be
deemed to establish a custom or course of dealing or performance among the
parties hereto.

 

10.                               Modification.  This Agreement may be amended
or modified only by a writing signed by the US Obligors, the Senior Creditor and
the holders of at least 50.1% of the then outstanding principal balance of the
Junior Notes.  The Junior Creditors may waive any right under this Agreement or
grant a consent by action of the holders of at least 50.1% of the then
outstanding principal balance of the Junior Notes.  Any notice or demand given
to the Junior Creditor by the Senior Creditor in any circumstances not
specifically required by the Senior Creditor shall not entitle the Junior
Creditors to any other or further notice or demand in the same, similar or other
circumstances unless specifically required hereunder.  Any notice or demand
given to the Senior Creditor by any Junior Creditor in any circumstances not
specifically required by the Junior Creditors shall not entitle the Senior
Creditor to any other or further notice or demand in the same, similar or other
circumstances unless specifically required hereunder.

 

11.                               Additional Documents and Actions.  The Junior
Creditors at any time, and from time to time, after the execution and delivery
of this Agreement, promptly will execute and deliver such further documents and
do such further acts and things as the Senior Creditor reasonably may request in
order to effect fully the purposes of this Agreement.

 

12.                               Notices.  Unless otherwise specifically
provided herein, any notice or other communication required or permitted to be
given shall be in writing addressed to the respective party as set forth below
and shall be given only by, and shall be deemed to have been received upon: 
(a) registered or certified mail, return receipt requested, on the date on which
such notice was received as indicated in such return receipt; (b) delivery by a
nationally recognized overnight courier, one Business Day after deposit with
such courier, or (c) facsimile or electronic transmission, in each case upon
telephone or further electronic communication from the recipient acknowledging
receipt (whether automatic or manual from recipient), as applicable.

 

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Notices shall be addressed as follows:

 

(a)

If to the Junior Creditors:

 

 

 

Karen Singer

 

 

 

c/o Romulus Holdings

 

2200 Fletcher Avenue, Fifth Floor

 

Fort Lee, NJ 07024

 

 

 

with copies to:

 

 

 

Andrews Kurth LLP

 

450 Lexington Avenue

 

New York, NY 10017

 

Attention:

Paul Silverstein, Esq.

 

Fax No:

212-850-2929

 

 

 

Milfam II Limited Partnership

 

4550 Gordon Drive

 

Naples, FL 34102

 

Attention:

Lloyd I. Miller, Managing Partner

 

 

 

with copies to:

 

 

 

Andrews Kurth LLP

 

450 Lexington Avenue

 

New York, NY 10017

 

Attention:

Paul Silverstein, Esq.

 

Fax No:

212-850-2929

 

 

(b)

If to the US Obligors:

 

 

 

Evolving Systems, Inc.

 

9777 Pyramid Court

 

Suite 100

 

Englewood, Colorado 80112

 

Attention:

Anita T. Moseley, General Counsel

 

Facsimile:

(303) 802-1138

 

 

(c)

If to the Senior Creditor:

 

 

 

Bridge Bank, N.A.

 

55 Almaden Blvd.

 

San Jose, CA 95113

 

Attn: Dan Pistone

 

FAX: (408) 423-8520

 

15

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or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11.  A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.

 

13.                               Severability.  In the event that any provision
of this Agreement is deemed to be invalid, illegal or unenforceable by reason of
the operation of any law or by reason of the interpretation placed thereon by
any court or governmental authority, the validity, legality and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.

 

14.                               Successors and Assigns.  This Agreement shall
inure to the benefit of the successors and assigns of the Senior Creditor and
the Junior Creditors and shall be binding upon their respective successors and
assigns and the US Obligors.  Upon any lender (a “Refinancing Lender”)
refinancing all or any portion of the Senior Debt, such Refinancing Lender shall
automatically be entitled to all the rights and powers of the Senior Creditor
hereunder without the need for any further action on the part of any party
hereto.  The Senior Creditor, without notice to or consent of the Junior
Creditors, may assign or transfer any or all of the Senior Debt or any interest
therein to any Person and, notwithstanding any such assignment or transfer, or
any subsequent assignment or transfer, the Senior Debt shall, subject to the
terms hereof, be and remain Senior Debt for purposes of this Agreement, and
every permitted assignee or transferee of any of the Senior Debt or of any
interest therein shall, to the extent of the interest of such permitted assignee
or transferee in the Senior Debt, be entitled to rely upon and be the third
party beneficiary of the subordination provided under this Agreement and shall
be entitled to enforce the terms and provisions hereof to the same extent as if
such assignee or transferee were initially a party hereto.  EACH OF THE JUNIOR
CREDITORS AND THE US OBLIGORS ACKNOWLEDGES AND AGREES THAT THE SENIOR CREDITOR
AT ANY TIME AND FROM TIME TO TIME MAY DIVIDE AND REISSUE (WITHOUT SUBSTANTIVE
CHANGES OTHER THAN THOSE RESULTING FROM SUCH DIVISION) THE NOTES EVIDENCING THE
SENIOR DEBT, THE OBLIGATIONS UNDER THE CREDIT AGREEMENTS, THE COLLATERAL AND THE
SENIOR DEBT DOCUMENTS TO ONE OR MORE OTHER PERSONS, IN EACH CASE ON THE TERMS
AND CONDITIONS IN THE SENIOR DEBT DOCUMENTS.  The term “Senior Creditor” in this
Agreement include transferees and participants of the Senior Debt, Refinancing
Lenders and any of their respective successors and assigns, each of which shall
have all rights and benefits of Senior Creditor hereunder.  Each transferee and
participant of the Senior Debt (to the extent provided in the applicable Credit
Agreement) shall have all of the rights and benefits with respect to the
Obligations under the applicable Credit Agreement, the notes evidencing Senior
Debt, the Collateral, this Agreement and the Senior Debt Documents held by it as
fully as the original holder thereof.

 

15.                               Counterparts.  This Agreement may be executed
in one or more counterpart originals, which, taken together, shall constitute
one fully-executed instrument.  Any signature delivered by facsimile shall be
deemed to be a counterpart original hereto.

 

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16.                               Defines Rights of Creditors; Obligors’
Obligations Unconditional.  The provisions of this Agreement are solely for the
purpose of defining the relative rights of the Junior Creditors, the Senior
Creditor and shall not be deemed to create any rights or priorities in favor of
any other Person, including, without limitation, any Obligor.  As between the
Obligors and the Senior Creditor, nothing contained herein shall impair the
unconditional and absolute obligation of the Obligors to the Senior Creditor to
pay the Senior Debt as such Senior Debt shall become due and payable in
accordance with the Senior Debt Documents.  As between ESI and the other US
Obligors and the Junior Creditors, nothing contained herein shall impair the
unconditional and absolute obligation of ESI or, if applicable, the other US
Obligors to the Junior Creditors to pay the Junior Debt as such Junior Debt
shall become due and payable in accordance with the Junior Debt Documents,
subject to the terms of this Agreement.

 

17.                               Subrogation.  After and subject to the
indefeasible Payment in Full of the Senior Debt, and prior to the irrevocable
and indefeasible repayment in full in cash of the Junior Debt, the Junior
Creditors shall be subrogated to the rights of the Senior Creditor to the extent
that payments and distributions otherwise payable to the Junior Creditors have
been applied to the Senior Debt in accordance with the provisions of this
Agreement.  For purposes of such subrogation, no payments or distributions to
the Senior Creditor of any cash, property or securities to which the Junior
Creditors would be entitled except for the provisions of this Agreement, and no
payments pursuant to the provisions of this Agreement to the Senior Creditor by
the Junior Creditors, shall, as among the Obligors, their creditors (other than
the Senior Creditor) and the Junior Creditors be deemed to be a payment or
distribution by such Obligor to or on account of the Senior Debt; it being
understood that the provisions of this Agreement are and are intended solely for
the purpose of defining the relative rights of the Junior Creditors, on the one
hand, and the Senior Creditor, on the other hand.  The Senior Creditor shall
have no obligation or duty to protect the Junior Creditors’ rights of
subrogation arising pursuant to this Agreement or under any applicable law, nor
shall the Senior Creditor be liable for any loss to, or impairment of, any
subrogation rights held by the Junior Creditors.

 

18.                               Conflict.  In the event of any conflict
between any term, covenant or condition of this Agreement and any term, covenant
or condition of any of the Junior Debt Documents or the Senior Debt Documents,
the provisions of this Agreement shall control and govern.

 

19.                               Headings.  The paragraph headings used in this
Agreement are for convenience only and shall not affect the interpretation of
any of the provisions hereof.

 

20.                               Termination.  This Agreement shall terminate
upon the indefeasible Payment in Full of the Senior Debt.

 

21.                               Choice of Law and Venue; Jury Trial Waiver. 
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law.  Each of Senior Creditor, the Junior Creditors and the
Obligors, hereby submits to the non-exclusive jurisdiction of the state and
Federal courts located in the County of Santa Clara, State of California.  EACH
OF SENIOR CREDITOR, THE JUNIOR CREDITORS AND THE OBLIGORS HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS

 

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CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT.  EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.

 

If the jury waiver set forth in Section is not enforceable, then any dispute,
controversy or claim arising out of or relating to this Agreement, or any of the
transactions contemplated therein shall be settled by judicial reference
pursuant to Code of Civil Procedure Section 638 et seq. before a referee sitting
without a jury, such referee to be mutually acceptable to the parties or, if no
agreement is reached, by a referee appointed by the Presiding Judge of the
California Superior Court for Santa Clara County.  This Section shall not
restrict a party from exercising remedies under the Code or from exercising
pre-judgment remedies under applicable law.

 

22.                               Waiver of Consolidation.  Each of the Junior
Creditors acknowledges and agrees that (i) the Obligors are each separate and
distinct entities; and (ii) it will not at any time insist upon, plead or seek
advantage of any substantive consolidation, piercing of the corporate veil or
any other order or judgment that causes an effective combination of the assets
and liabilities of the Obligors in any Proceeding under Debtor Relief Laws or
other similar proceeding.

 

23.                               Defense to Enforcement Provision.  If any of
the Junior Creditors, in contravention of the terms of this Agreement, shall
commence, prosecute or participate in any Proceeding or Collection Action with
respect to the Junior Debt against any Obligor, then Senior Creditor may
(i) intervene and interpose such defense or pleas in its name, and/or (ii) by
virtue of this Agreement, restrain the enforcement thereof in the name of Senior
Creditor.  If any of the Junior Creditors, in contravention of the terms of this
Agreement, obtains any cash or other assets of any Obligor as a result of any
Proceeding or Collection Action with respect to the Junior Debt, such Junior
Creditor agrees forthwith to pay, deliver and assign to the Senior Creditor,
with appropriate endorsements, any such cash or other assets for application to
the Senior Debt owing to Senior Creditor until the Senior Debt has been Paid in
Full.

 

(Signatures appear on the following page.)

 

18

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IN WITNESS WHEREOF, the Junior Creditors, ESI and the Senior Creditor have
caused this Subordination Agreement to be executed as of the date first above
written.

 

 

JUNIOR CREDITORS:

 

 

 

 

 

 

 

KAREN SINGER

 

 

 

[Counterpart Signature Page to Subordination Agreement]

 

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JUNIOR CREDITORS:

 

 

 

 

 

MILFAM II LIMITED PARTNERSHIP

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

[Counterpart Signature Page to Subordination Agreement]

 

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US OBLIGORS:

 

 

 

 

 

EVOLVING SYSTEMS, INC.

 

 

 

 

 

 

 

By:

 

 

Name:

Brian R. Ervine

 

Title:

Executive Vice President and Chief

 

 

Financial Officer

 

 

 

[Counterpart Signature Page to Subordination Agreement]

 

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SENIOR CREDITOR:

 

 

 

 

 

BRIDGE BANK, N.A.

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

[Counterpart Signature Page to Subordination Agreement]

 

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