Exhibit 10.1(a)

 

CREDIT AGREEMENT

 

 

among

 

 

EVOLVING SYSTEMS, INC.

TELECOM SOFTWARE ENTERPRISES, LLC

EVOLVING SYSTEMS HOLDINGS, INC.

 

 

and

 

 

CAPITALSOURCE FINANCE LLC,

as Agent

 

 

Dated as of

November 14, 2005

 

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

 

TABLE OF CONTENTS

 

I.

DEFINITIONS

 

 

 

 

II.

CREDITS

 

 

 

 

 

 

2.1

Loan

 

 

2.2

Evidence of Loan

 

 

2.3

Interest

 

 

2.4

Voluntary Prepayments

 

 

2.5

Mandatory Payments and Prepayments

 

 

2.6

Promise to Pay; Manner of Payment

 

 

2.7

Payments by Agent

 

 

2.8

Computation of Interest and Fees; Lawful Limits

 

 

2.9

Reallocation of Commitments

 

 

 

 

 

III.

FEES

 

 

 

 

 

 

3.1

Commitment Fee

 

 

3.2

Prepayment Premium

 

 

 

 

 

IV.

CONDITIONS PRECEDENT

 

 

 

 

 

 

4.1

Conditions to Funding of the Loan and the Closing

 

 

 

 

 

V.

REPRESENTATIONS AND WARRANTIES

 

 

 

 

 

 

5.1

Organization and Authority

 

 

5.2

Loan Documents, Revolving Loan Documents and Related Documents

 

 

5.3

Subsidiaries, Capitalization and Ownership Interests

 

 

5.4

Properties

 

 

5.5

Other Agreements

 

 

5.6

Litigation

 

 

5.7

Environmental Matters

 

 

5.8

Tax Returns; Governmental Reports

 

 

5.9

Financial Statements and Reports

 

 

5.10

Compliance with Law; ERISA; Business

 

 

5.11

Intellectual Property

 

 

5.12

Permits; Labor

 

 

5.13

No Default; Solvency

 

 

5.14

Insurance

 

 

5.15

Margin Stock; Regulated Entities; Tax Regulations; OFAC; Patriot Act

 

 

5.16

Broker’s or Finder’s Commissions

 

 

5.17

Disclosure

 

 

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

 

 

5.18

Incorporation of Certain Representations and Warranties

 

 

5.19

Survival

 

 

 

 

 

VI.

AFFIRMATIVE COVENANTS

 

 

 

 

 

 

6.1

Reporting, Collateral and Other Information

 

 

6.2

Conduct of Business; Maintenance of Existence and Assets

 

 

6.3

Compliance with Legal and Other Obligations

 

 

6.4

Insurance

 

 

6.5

Inspection; Management Meetings

 

 

6.6

Use of Proceeds

 

 

6.7

Further Assurances; Post Closing Deliveries

 

 

6.8

Mandatory Dividends

 

 

 

 

 

VII.

NEGATIVE COVENANTS

 

 

 

 

 

 

7.1

Financial Covenants

 

 

7.2

Indebtedness

 

 

7.3 [a05-20328_1ex10d1a.htm#a7_3Liens_105726]

Liens [a05-20328_1ex10d1a.htm#a7_3Liens_105726]

 

 

7.4 [a05-20328_1ex10d1a.htm#a7_4ConsolidationsMergersAndInves_105741]

Consolidations, Mergers and Investments
[a05-20328_1ex10d1a.htm#a7_4ConsolidationsMergersAndInves_105741]

 

 

7.5 [a05-20328_1ex10d1a.htm#a7_5RestrictedPayments_105758]

Restricted Payments [a05-20328_1ex10d1a.htm#a7_5RestrictedPayments_105758]

 

 

7.6 [a05-20328_1ex10d1a.htm#a7_6TransactionsWithAffiliates_105811]

Transactions with Affiliates
[a05-20328_1ex10d1a.htm#a7_6TransactionsWithAffiliates_105811]

 

 

7.7 [a05-20328_1ex10d1a.htm#a7_7TransferOfAssets_105821]

Transfer of Assets [a05-20328_1ex10d1a.htm#a7_7TransferOfAssets_105821]

 

 

7.8 [a05-20328_1ex10d1a.htm#a7_8ContingentObligations_105852]

Contingent Obligations [a05-20328_1ex10d1a.htm#a7_8ContingentObligations_105852]

 

 

7.9 [a05-20328_1ex10d1a.htm#a7_9OrganizationalDocumentsAccoun_105903]

Organizational Documents; Accounting Changes; Use of Proceeds; Insurance;
Business [a05-20328_1ex10d1a.htm#a7_9OrganizationalDocumentsAccoun_105903]

 

 

7.10 [a05-20328_1ex10d1a.htm#a7_10RelatedDocumentsSubordinated_105920]

Related Documents; Subordinated Debt; and TSE Contingent Obligations
[a05-20328_1ex10d1a.htm#a7_10RelatedDocumentsSubordinated_105920]

 

 

7.11 [a05-20328_1ex10d1a.htm#a7_11NegativePledges_105923]

Negative Pledges [a05-20328_1ex10d1a.htm#a7_11NegativePledges_105923]

 

 

7.12 [a05-20328_1ex10d1a.htm#a7_12CertainSpecificAgreements_105939]

Certain Specific Agreements
[a05-20328_1ex10d1a.htm#a7_12CertainSpecificAgreements_105939]

 

 

7.13 [a05-20328_1ex10d1a.htm#a7_13ShareholderBlockingRights_105941]

Shareholder Blocking Rights
[a05-20328_1ex10d1a.htm#a7_13ShareholderBlockingRights_105941]

 

 

 

 

 

VIII. [a05-20328_1ex10d1a.htm#Viii_EventsOfDefault_105946]

EVENTS OF DEFAULT [a05-20328_1ex10d1a.htm#Viii_EventsOfDefault_105946]

 

 

 

 

 

IX. [a05-20328_1ex10d1a.htm#Ix_RightsAndRemediesAfterDefault_110101]

RIGHTS AND REMEDIES AFTER DEFAULT
[a05-20328_1ex10d1a.htm#Ix_RightsAndRemediesAfterDefault_110101]

 

 

 

 

 

 

9.1 [a05-20328_1ex10d1a.htm#a9_1RightsAndRemedies_110104]

Rights and Remedies [a05-20328_1ex10d1a.htm#a9_1RightsAndRemedies_110104]

 

 

9.2 [a05-20328_1ex10d1a.htm#a9_2ApplicationOfProceeds_110130]

Application of Proceeds
[a05-20328_1ex10d1a.htm#a9_2ApplicationOfProceeds_110130]

 

 

9.3 [a05-20328_1ex10d1a.htm#a9_3RightsToAppointReceiver_110151]

Rights to Appoint Receiver
[a05-20328_1ex10d1a.htm#a9_3RightsToAppointReceiver_110151]

 

 

9.4 [a05-20328_1ex10d1a.htm#a9_4AttorneyInFact_110158]

Attorney in Fact [a05-20328_1ex10d1a.htm#a9_4AttorneyInFact_110158]

 

 

9.5 [a05-20328_1ex10d1a.htm#a9_5RightsAndRemediesNotExclusive_110201]

Rights and Remedies not Exclusive
[a05-20328_1ex10d1a.htm#a9_5RightsAndRemediesNotExclusive_110201]

 

 

 

 

 

X. [a05-20328_1ex10d1a.htm#X_WaiversAndJudicialProceedings_110204]

WAIVERS AND JUDICIAL PROCEEDINGS
[a05-20328_1ex10d1a.htm#X_WaiversAndJudicialProceedings_110204]

 

 

 

 

 

 

10.1 [a05-20328_1ex10d1a.htm#a10_1CertainWaivers_110205]

Certain Waivers [a05-20328_1ex10d1a.htm#a10_1CertainWaivers_110205]

 

 

10.2 [a05-20328_1ex10d1a.htm#a10_2DelayNoWaiverOfDefaults_110208]

Delay; No Waiver of Defaults
[a05-20328_1ex10d1a.htm#a10_2DelayNoWaiverOfDefaults_110208]

 

 

10.3 [a05-20328_1ex10d1a.htm#a10_3JuryWaiver_110230]

Jury Waiver [a05-20328_1ex10d1a.htm#a10_3JuryWaiver_110230]

 

 

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

 

 

10.4 [a05-20328_1ex10d1a.htm#a10_4AmendmentAndWaivers_110232]

Amendment and Waivers [a05-20328_1ex10d1a.htm#a10_4AmendmentAndWaivers_110232]

 

 

10.5 [a05-20328_1ex10d1a.htm#a10_5SurvivalAndTermination_110250]

Survival and Termination
[a05-20328_1ex10d1a.htm#a10_5SurvivalAndTermination_110250]

 

 

 

 

 

XI. [a05-20328_1ex10d1a.htm#Xi_AgentProvisionsSettlement_110254]

AGENT PROVISIONS; SETTLEMENT
[a05-20328_1ex10d1a.htm#Xi_AgentProvisionsSettlement_110254]

 

 

 

 

 

 

11.1 [a05-20328_1ex10d1a.htm#a11_1Agent_110256]

Agent [a05-20328_1ex10d1a.htm#a11_1Agent_110256]

 

 

11.2 [a05-20328_1ex10d1a.htm#a11_2SetoffAndSharingOfPayments_110536]

Set-off and Sharing of Payments
[a05-20328_1ex10d1a.htm#a11_2SetoffAndSharingOfPayments_110536]

 

 

11.3 [a05-20328_1ex10d1a.htm#a11_3SettlementsPaymentsAndInform_110546]

Settlements; Payments; and Information
[a05-20328_1ex10d1a.htm#a11_3SettlementsPaymentsAndInform_110546]

 

 

11.4 [a05-20328_1ex10d1a.htm#a11_4DisseminationOfInformation_110600]

Dissemination of Information
[a05-20328_1ex10d1a.htm#a11_4DisseminationOfInformation_110600]

 

 

 

 

 

XII. [a05-20328_1ex10d1a.htm#Xii_Miscellaneous_110618]

MISCELLANEOUS [a05-20328_1ex10d1a.htm#Xii_Miscellaneous_110618]

 

 

 

 

 

 

12.1 [a05-20328_1ex10d1a.htm#a12_1GoverningLawJurisdictionServ_110620]

Governing Law; Jurisdiction; Service of Process; Venue
[a05-20328_1ex10d1a.htm#a12_1GoverningLawJurisdictionServ_110620]

 

 

12.2 [a05-20328_1ex10d1a.htm#a12_2SuccessorsAndAssignsAssignme_110623]

Successors and Assigns; Assignments and Participations
[a05-20328_1ex10d1a.htm#a12_2SuccessorsAndAssignsAssignme_110623]

 

 

12.3 [a05-20328_1ex10d1a.htm#a12_3ReinstatementApplicationOfPa_110908]

Reinstatement; Application of Payments
[a05-20328_1ex10d1a.htm#a12_3ReinstatementApplicationOfPa_110908]

 

 

12.4 [a05-20328_1ex10d1a.htm#a12_4Indemnity_110917]

Indemnity [a05-20328_1ex10d1a.htm#a12_4Indemnity_110917]

 

 

12.5 [a05-20328_1ex10d1a.htm#a12_5Notice_110933]

Notice [a05-20328_1ex10d1a.htm#a12_5Notice_110933]

 

 

12.6 [a05-20328_1ex10d1a.htm#a12_6SeverabilityCaptionsCounterp_110935]

Severability; Captions; Counterparts
[a05-20328_1ex10d1a.htm#a12_6SeverabilityCaptionsCounterp_110935]

 

 

12.7 [a05-20328_1ex10d1a.htm#a12_7Expenses_110959]

Expenses [a05-20328_1ex10d1a.htm#a12_7Expenses_110959]

 

 

12.8 [a05-20328_1ex10d1a.htm#a12_8EntireAgreement_111056]

Entire Agreement [a05-20328_1ex10d1a.htm#a12_8EntireAgreement_111056]

 

 

12.9 [a05-20328_1ex10d1a.htm#a12_9ApprovalsAndDuties_111059]

Approvals and Duties [a05-20328_1ex10d1a.htm#a12_9ApprovalsAndDuties_111059]

 

 

12.10 [a05-20328_1ex10d1a.htm#a12_10ConfidentialityAndPublicity_111103]

Confidentiality and Publicity
[a05-20328_1ex10d1a.htm#a12_10ConfidentialityAndPublicity_111103]

 

 

12.11 [a05-20328_1ex10d1a.htm#a12_11NoConsequentialDamages_111133]

No Consequential Damages
[a05-20328_1ex10d1a.htm#a12_11NoConsequentialDamages_111133]

 

 

12.12 [a05-20328_1ex10d1a.htm#a12_12BorrowerFundsAdministrator_111135]

Borrower Funds Administrator
[a05-20328_1ex10d1a.htm#a12_12BorrowerFundsAdministrator_111135]

 

 

12.13 [a05-20328_1ex10d1a.htm#a12_13JointAndSeveralLiability_111155]

Joint and Several Liability
[a05-20328_1ex10d1a.htm#a12_13JointAndSeveralLiability_111155]

 

 

 

 

 

XIII. [a05-20328_1ex10d1a.htm#Xiii_Taxes_111318]

TAXES [a05-20328_1ex10d1a.htm#Xiii_Taxes_111318]

 

 

 

 

 

 

13.1 [a05-20328_1ex10d1a.htm#a13_1Taxes_111320]

Taxes [a05-20328_1ex10d1a.htm#a13_1Taxes_111320]

 

 

13.2 [a05-20328_1ex10d1a.htm#a13_2CertificatesOfLenders__111414]

Certificates of Lenders
[a05-20328_1ex10d1a.htm#a13_2CertificatesOfLenders__111414]

 

 

13.3 [a05-20328_1ex10d1a.htm#a13_3Survival__111416]

Survival [a05-20328_1ex10d1a.htm#a13_3Survival__111416]

 

 

 

 

 

XIV. [a05-20328_1ex10d1a.htm#Xiv_Guaranty_111422]

GUARANTY [a05-20328_1ex10d1a.htm#Xiv_Guaranty_111422]

 

 

 

 

 

 

14.1 [a05-20328_1ex10d1a.htm#a14_1Guaranty_111425]

Guaranty [a05-20328_1ex10d1a.htm#a14_1Guaranty_111425]

 

 

14.2 [a05-20328_1ex10d1a.htm#a14_2GuarantyAbsolute_111427]

Guaranty Absolute [a05-20328_1ex10d1a.htm#a14_2GuarantyAbsolute_111427]

 

 

14.3 [a05-20328_1ex10d1a.htm#a14_3Waiver_111502]

Waiver [a05-20328_1ex10d1a.htm#a14_3Waiver_111502]

 

 

14.4 [a05-20328_1ex10d1a.htm#a14_4ContinuingGuarantyAssignment_111506]

Continuing Guaranty; Assignments
[a05-20328_1ex10d1a.htm#a14_4ContinuingGuarantyAssignment_111506]

 

 

14.5 [a05-20328_1ex10d1a.htm#a14_5MaximumLiability_111519]

Maximum Liability [a05-20328_1ex10d1a.htm#a14_5MaximumLiability_111519]

 

 

14.6 [a05-20328_1ex10d1a.htm#a14_6Subordination_111521]

Subordination [a05-20328_1ex10d1a.htm#a14_6Subordination_111521]

 

 

14.7 [a05-20328_1ex10d1a.htm#a14_7Subrogation_111524]

Subrogation [a05-20328_1ex10d1a.htm#a14_7Subrogation_111524]

 

 

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

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (this “Agreement”), dated as of November 14, 2005, is
entered into by and among, (i) Evolving Systems, Inc. (“Evolving Systems”), a
Delaware corporation and Telecom Software Enterprises, LLC, a Colorado limited
liability company (together with Evolving Systems each a “Borrower”);
(ii) Evolving Systems Holdings, Inc., a Delaware corporation (“Intermediate
Holdco”), as a Guarantor and additional Credit Party; (iii) CAPITALSOURCE
FINANCE LLC, a Delaware limited liability company (in its individual capacity,
“CapitalSource”), as administrative and payment agent for the Lenders
(CapitalSource, in such capacity, “Agent”); and (iv) the LENDERS from time to
time parties hereto.

 

WHEREAS, the Credit Parties have requested that Lenders make available to
Borrower a term loan in an aggregate original principal amount of Eight Million
Five Hundred Thousand Dollars ($8,500,000), the proceeds of which, in each case,
shall be used by Borrower for purposes permitted under, and otherwise in
accordance with and subject to the terms of, this Agreement.

 

WHEREAS, Lenders are willing to make the loan available to Borrower, upon the
terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt, sufficiency and adequacy of which hereby
are acknowledged, the parties hereto hereby agree as follows:

 

I.              DEFINITIONS

 

For purposes of the Loan Documents and all schedules, exhibits, annexes and
attachments thereto, in addition to the definitions elsewhere in this Agreement
and the other Loan Documents, the terms listed in Appendix A hereto shall have
the respective meanings assigned to such terms in Appendix A hereto, which is
incorporated herein and made a part hereof.  All capitalized terms used which
are not specifically defined herein shall have the respective meanings assigned
to them in Article 9 of the UCC to the extent the same are used or defined
therein.  Unless otherwise specified in any Loan Document, this Agreement, any
other Loan Document and any agreement or contract referred to herein or in
Appendix A hereto shall mean such agreement or contract, as modified, amended,
supplemented or restated and in effect from time to time, subject to any
applicable restrictions set forth in such Loan Document.  Unless otherwise
specified, as used in the Loan Documents or in any certificate, report,
instrument or other document made or delivered pursuant to any of the Loan
Documents, all accounting terms not defined in Appendix A hereto or elsewhere in
this Agreement or any other Loan Document shall have the meanings assigned to
such terms in and shall be interpreted in accordance with GAAP.  If any change
in GAAP results in a change in the calculation of the financial covenants or
interpretation of related provisions of this Agreement or any other Loan
Document, then Borrower, Agent, Lenders and the other Credit Parties agree to
amend such provisions of this Agreement so as to equitably reflect such changes
in GAAP with the desired result that the criteria for evaluating the Credit
Parties’ financial condition shall be the same after such change in GAAP as if
such change had not been made, provided that, notwithstanding any other
provision of this Agreement, the Requisite Lenders’ agreement to any amendment
of such

 

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

 

provisions shall be sufficient to bind all Lenders; and, provided further, until
such time as the financial covenants and the related provisions of this
Agreement have been amended in accordance with the terms of this paragraph, the
calculations of financial covenants and the interpretation of any related
provisions shall be calculated and interpreted in accordance with GAAP as in
effect immediately prior to such change in GAAP.  The term “Borrower” used in
the singular shall mean each of Evolving Systems and Telecom Software
Enterprises, LLC.

 

II.            CREDITS

 

2.1          LOAN

 

Subject to the terms and conditions set forth in this Agreement, each Lender
agrees to loan to Borrower on the Closing Date such Lender’s Pro Rata Share of
the Loan, which, in the aggregate for all Lenders, shall be in the original
principal amount of Eight Million Five Hundred Thousand Dollars ($8,500,000). 
The Loan is not a revolving credit facility and may not be drawn, repaid and
redrawn and any repayments or prepayments of principal on the Loan shall
permanently reduce the Loan.  The obligations of Lenders hereunder are several
and not joint or joint and several.  Borrower irrevocably authorizes Agent and
Lenders to disburse the proceeds of the Loan on the Closing Date.

 

2.2          EVIDENCE OF LOAN

 

(A)           EACH LENDER SHALL MAINTAIN, IN ACCORDANCE WITH ITS USUAL PRACTICE,
ELECTRONIC OR WRITTEN RECORDS EVIDENCING THE INDEBTEDNESS AND OBLIGATIONS TO
SUCH LENDER RESULTING FROM THE LOAN MADE BY SUCH LENDER, INCLUDING, WITHOUT
LIMITATION, THE AMOUNTS OF PRINCIPAL AND INTEREST PAYABLE AND PAID TO SUCH
LENDER FROM TIME TO TIME UNDER THIS AGREEMENT.

 

(B)           AGENT SHALL MAINTAIN ELECTRONIC OR WRITTEN RECORDS IN WHICH IT
WILL RECORD (I) THE AMOUNT OF EACH LOAN MADE HEREUNDER, THE CLASS AND TYPE OF
EACH LOAN MADE AND ANY APPLICABLE INTEREST RATE PERIODS, (II) THE AMOUNT OF ANY
PRINCIPAL AND/OR INTEREST DUE AND PAYABLE AND/OR TO BECOME DUE AND PAYABLE FROM
BORROWER TO EACH LENDER HEREUNDER AND (III) ALL AMOUNTS RECEIVED BY AGENT
HEREUNDER FROM BORROWER AND EACH LENDER’S SHARE THEREOF.

 

(C)           THE ENTRIES IN THE ELECTRONIC OR WRITTEN RECORDS MAINTAINED
PURSUANT TO SECTION 2.2(B) (THE “REGISTER”), WHICH SHALL INCLUDE THE PROMISSORY
NOTES, IF ANY, ISSUED PURSUANT TO SECTION 2.2(D) HEREOF, SHALL, IN THE ABSENCE
OF MANIFEST ERROR, BE PRIMA FACIE EVIDENCE OF THE EXISTENCE AND AMOUNTS OF THE
OBLIGATIONS AND INDEBTEDNESS THEREIN RECORDED; PROVIDED, HOWEVER, THAT THE
FAILURE OF AGENT TO MAINTAIN SUCH RECORDS OR ANY ERROR THEREIN SHALL NOT IN ANY
MANNER AFFECT THE OBLIGATIONS OF BORROWER TO REPAY THE LOANS OR OBLIGATIONS IN
ACCORDANCE WITH THEIR TERMS.  THE REGISTER SHALL BE SUBJECT TO THE TERMS OF
SECTION 12.2(C).

 

(D)           BORROWER AGREES THAT:

 

(I)          UPON WRITTEN NOTICE BY AGENT TO BORROWER THAT A PROMISSORY NOTE OR
OTHER EVIDENCE OF INDEBTEDNESS OR REPLACEMENT OF A LOST NOTE IS REQUESTED BY
AGENT (FOR ITSELF OR ON BEHALF OF ANY LENDER) TO EVIDENCE THE LOAN AND OTHER
OBLIGATIONS OWING OR PAYABLE TO, OR TO BE MADE BY, SUCH LENDER, BORROWER
PROMPTLY SHALL (AND IN ANY EVENT WITHIN FIVE (5) BUSINESS DAYS OF ANY SUCH
REQUEST AND IN THE EVENT OF A LOST NOTE UPON

 

2

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

 

RECEIPT OF CUSTOMARY AFFIDAVITS AND INDEMNITIES) EXECUTE AND DELIVER TO AGENT AN
APPROPRIATE PROMISSORY NOTE OR NOTES IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO AGENT AND BORROWER, PAYABLE TO THE ORDER OF SUCH LENDER IN A
PRINCIPAL AMOUNT EQUAL TO THE AMOUNT OF THE LOAN OWING OR PAYABLE TO SUCH
LENDER;

 

(II)         ALL REFERENCES TO “NOTES” IN THE LOAN DOCUMENTS SHALL MEAN NOTES,
IF ANY, TO THE EXTENT ISSUED (AND NOT RETURNED TO BORROWER FOR CANCELLATION)
HEREUNDER, AS THE SAME MAY BE AMENDED, SUPPLEMENTED, MODIFIED, DIVIDED AND/OR
RESTATED AND IN EFFECT FROM TIME TO TIME WHICH SHALL BE INCLUDED IN THE REGISTER
MAINTAINED BY THE AGENT; AND

 

(III)        UPON AGENT’S WRITTEN REQUEST (FOR ITSELF OR ON BEHALF OF ANY
LENDER), AND IN ANY EVENT WITHIN FIVE (5) BUSINESS DAYS OF ANY SUCH REQUEST,
BORROWER SHALL EXECUTE AND DELIVER TO AGENT NEW NOTES AND/OR SPLIT OR DIVIDE THE
NOTES, OR ANY OF THEM, IN EXCHANGE FOR THE THEN EXISTING SUBJECT NOTES, IN SUCH
SMALLER AMOUNTS OR DENOMINATIONS AS AGENT OR SUCH LENDER SHALL SPECIFY;
PROVIDED, THAT THE AGGREGATE PRINCIPAL AMOUNT OF SUCH NEW, SPLIT OR DIVIDED
NOTES SHALL NOT EXCEED THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES OUTSTANDING
AT THE TIME SUCH REQUEST IS MADE; AND PROVIDED, FURTHER, THAT SUCH NOTES THAT
ARE REPLACED SHALL THEN BE DEEMED NO LONGER OUTSTANDING HEREUNDER AND REPLACED
BY SUCH NEW NOTES, PROMPTLY CANCELLED AND RETURNED TO BORROWER WITHIN A
REASONABLE PERIOD OF TIME AFTER AGENT’S RECEIPT OF THE REPLACEMENT NOTES.

 

2.3          INTEREST

 

(A)           SUBJECT TO SECTION 2.3(C), THE LOAN SHALL BEAR INTEREST ON THE
OUTSTANDING PRINCIPAL AMOUNT THEREOF FROM THE DATE MADE AT A RATE PER ANNUM
EQUAL TO (I) THE GREATER OF (A) LIBOR RATE IN EFFECT FROM TIME TO TIME OR
(B) 3.75%, PLUS (II) THE APPLICABLE MARGIN IN EFFECT FROM TIME TO TIME.

 

(B)           INTEREST ON THE LOAN SHALL BE DUE AND PAYABLE IN CASH IN ARREARS
ON EACH INTEREST PAYMENT DATE AND ON THE DATE OF ANY PREPAYMENT (ACTUAL OR DUE)
OF THE LOAN PURSUANT TO SECTIONS 2.4 AND 2.5.

 

(C)           UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF
DEFAULT, THE OBLIGATIONS SHALL BEAR INTEREST AT THE DEFAULT RATE UPON WRITTEN
NOTICE OF SUCH INCREASE GIVEN BY AGENT TO BORROWER; PROVIDED, THAT, FROM AND
AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT UNDER SECTIONS VIII (A), (G) OR
(H), SUCH INCREASE SHALL BE AUTOMATIC AND WITHOUT ANY NOTICE FROM AGENT,
REQUISITE LENDERS, OR ANY OTHER PERSON.  IN ALL SUCH EVENTS UNLESS OTHERWISE
PROVIDED IN THE APPLICABLE NOTICE BY AGENT TO BORROWER, AND NOTWITHSTANDING THE
DATE ON WHICH APPLICATION OF THE DEFAULT RATE IS COMMUNICATED TO BORROWER, THE
DEFAULT RATE SHALL ACCRUE FROM THE INITIAL DATE OF SUCH EVENT OF DEFAULT UNTIL
THAT EVENT OF DEFAULT IS WAIVED IN WRITING IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT AND SHALL BE PAYABLE IN CASH UPON DEMAND.  NEITHER AGENT NOR LENDERS
SHALL BE REQUIRED TO (I) ACCELERATE THE MATURITY OF THE LOAN, (II) TERMINATE ANY
COMMITMENT OR (III) EXERCISE ANY OTHER RIGHTS OR REMEDIES UNDER THE LOAN
DOCUMENTS OR APPLICABLE LAW IN ORDER TO CHARGE INTEREST HEREUNDER AT THE DEFAULT
RATE.

 

3

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2.4          VOLUNTARY PREPAYMENTS

 

(A)           SUBJECT TO THE TERMS OF THIS SECTION 2.4 AND SECTION 3.2, BORROWER
MAY PREPAY TO AGENT, FOR THE RATABLE BENEFIT OF THE APPLICABLE LENDERS, THE
OUTSTANDING PRINCIPAL AMOUNT OF THE LOAN, IN WHOLE OR IN PART, AT ANY TIME OR
FROM TIME TO TIME.

 

(B)           IF BORROWER ELECTS TO MAKE ANY PREPAYMENT OF THE LOAN PURSUANT TO
THIS SECTION 2.4, BORROWER FUNDS ADMINISTRATOR SHALL GIVE IRREVOCABLE NOTICE OF
SUCH PREPAYMENT TO AGENT NOT LESS THAN THREE (3) BUSINESS DAYS PRIOR TO THE DATE
SUCH PREPAYMENT IS TO BE MADE, SPECIFYING (I) THE DATE ON WHICH SUCH PREPAYMENT
IS TO BE MADE, (II) THE AMOUNT OF SUCH PREPAYMENT AND (III) THE AMOUNT OF THE
PREPAYMENT PREMIUM, IF ANY, AND ACCRUED INTEREST APPLICABLE TO SUCH PREPAYMENT. 
SUCH NOTICE SHALL BE ACCOMPANIED BY A CERTIFICATE OF A RESPONSIBLE OFFICER OF
BORROWER FUNDS ADMINISTRATOR ON BEHALF OF BORROWER FUNDS ADMINISTRATOR STATING
THAT SUCH PAYMENT IS BEING MADE IN COMPLIANCE WITH THIS SECTION 2.4.  NOTICE OF
PREPAYMENT HAVING BEEN SO GIVEN, THE AGGREGATE PRINCIPAL AMOUNT OF THE LOAN SO
SPECIFIED TO BE PREPAID, TOGETHER WITH ACCRUED INTEREST THEREON AND THE
APPLICABLE PREPAYMENT PREMIUM, SHALL BE DUE AND PAYABLE ON THE PREPAYMENT DATE
SET FORTH IN SUCH NOTICE.

 

(C)           ANY VOLUNTARY PARTIAL PREPAYMENT WITH RESPECT TO THE LOAN SHALL BE
APPLIED IN THE FOLLOWING ORDER OF PRIORITY TO THE PAYMENT OF:  (I) FIRST, TO ALL
THEN UNPAID FEES AND EXPENSES OF AGENT UNDER THE LOAN DOCUMENTS, (II) SECOND, TO
ALL THEN UNPAID FEES AND EXPENSES OF LENDERS UNDER THE LOAN DOCUMENTS, INCLUDING
ANY PREPAYMENT PREMIUM, (III) THIRD TO ANY AND ALL OBLIGATIONS THAT ARE DUE AND
OWING PURSUANT TO THE TERMS OF THE LOAN DOCUMENTS, EXCEPT THE PRINCIPAL BALANCE
OF THE LOAN AND ACCRUED AND UNPAID INTEREST THEREON; (IV) FOURTH TO ACCRUED AND
UNPAID INTEREST ON THE PORTION OF THE PRINCIPAL BALANCE OF THE LOAN BEING
PREPAID; AND (V) FIFTH TO THE PRINCIPAL BALANCE OF THE LOAN, WHICH SHALL BE
APPLIED TO THE SCHEDULED INSTALLMENTS THEREOF IN INVERSE ORDER OF MATURITIES.

 

(D)           ALL PREPAYMENTS MADE PURSUANT TO THIS SECTION 2.4 SHALL BE
DESIGNATED AS A PREPAYMENT PURSUANT TO THIS SECTION 2.4 ON THE APPLICABLE WIRE. 
THE AMOUNT OF ANY PARTIAL PREPAYMENT OF THE PRINCIPAL BALANCE OF THE LOAN SHALL
NOT BE LESS THAN $100,000 OR, IF IN EXCESS THEREOF, IN INTEGRAL MULTIPLES OF
$100,000 IN EXCESS THEREOF.

 

2.5          MANDATORY PAYMENTS AND PREPAYMENTS

 

(A)           THE PRINCIPAL AMOUNT OF THE LOAN SHALL BE PAID IN INSTALLMENTS ON
THE DATES AND IN THE RESPECTIVE AMOUNTS SET FORTH BELOW:

 

 

 

Amount of

 

Payment Date

 

Principal Payment

 

 

 

 

 

January 1, 2006

 

$

250,000

 

April 1, 2006

 

$

250,000

 

July 1, 2006

 

$

250,000

 

October 1, 2006

 

$

250,000

 

January 1, 2007

 

$

500,000

 

April 1, 2007

 

$

500,000

 

July 1, 2007

 

$

500,000

 

October 1, 2007

 

$

500,000

 

January 1, 2008

 

$

625,000

 

April 1, 2008

 

$

625,000

 

July 1, 2008

 

$

625,000

 

October 1, 2008

 

$

625,000

 

January 1, 2009

 

$

500,000

 

April 1, 2009

 

$

500,000

 

July 1, 2009

 

$

500,000

 

October 1, 2009

 

$

500,000

 

January 1, 2010

 

$

250,000

 

April 1, 2010

 

$

250,000

 

July 1, 2010

 

$

250,000

 

October 1, 2010

 

$

250,000

 

 

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(B)           THE THEN REMAINING UNPAID PRINCIPAL AMOUNT OF THE LOAN AND ALL
OTHER OBLIGATIONS UNDER OR IN RESPECT OF THE LOAN SHALL BE DUE AND PAYABLE IN
FULL, IF NOT EARLIER IN ACCORDANCE WITH THIS AGREEMENT, ON THE MATURITY DATE.

 

(C)           IF A CHANGE OF CONTROL OCCURS THAT HAS NOT BEEN CONSENTED TO IN
WRITING BY AGENT PRIOR TO CONSUMMATION THEREOF, OR ANY CREDIT PARTY OR ANY
SUBSIDIARY OF ANY CREDIT PARTY (OTHER THAN THE REVOLVING BORROWER AND ITS
SUBSIDIARIES), WHETHER IN A SINGLE TRANSACTION OR A SERIES OF TRANSACTIONS:

 

(I)          SELLS OR TRANSFERS ANY PROPERTY (OTHER THAN ANY QUALIFIED ASSET
SALE);

 

(II)         SELLS OR ISSUES ANY CAPITAL STOCK (EXCLUDING SALES OR ISSUANCES OF
PERMITTED SECURITIES TO THE EXTENT NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING OR WOULD BE CAUSED THEREBY OR RESULT THEREFROM, BUT
SPECIFICALLY INCLUDING ANY SALE OR ISSUANCE OF CAPITAL STOCK PURSUANT TO A
PUBLIC OFFERING);

 

(III)        RECEIVES ANY PROPERTY DAMAGE INSURANCE AWARD OR ANY OTHER INSURANCE
PROCEEDS OF ANY KIND, INCLUDING, WITHOUT LIMITATION, PROCEEDS FROM ANY LIFE
INSURANCE (INCLUDING THE LIFE INSURANCE POLICY) OR BUSINESS INTERRUPTION
INSURANCE IN EXCESS OF $100,000; OR

 

(IV)       INCURS ANY INDEBTEDNESS OTHER THAN PERMITTED INDEBTEDNESS.

 

then Borrower shall prepay the Loan and the other Obligations in an amount equal
to one hundred percent (100%) of the Net Proceeds received by the Credit Parties
and their Subsidiaries in connection therewith (or such lesser amount as is
required to irrevocably pay in cash in full the Obligations)), which prepayment
shall be applied thereto in accordance with Section 2.5(e); provided, that, the
foregoing notwithstanding, if Borrower reasonably expects the Net Proceeds of
any such sale or transfer in respect of the foregoing clause (i) or any such
property damage

 

5

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insurance award under the foregoing clause (iii), or a portion thereof, to be
reinvested in productive assets of a kind then used or usable in the Business,
and, within one hundred eighty (180) days after such occurrence, enters into a
binding commitment to make such reinvestment (which reinvestment shall be made
within two hundred seventy (270) days after such occurrence), then Borrower
shall deliver an amount equal to such Net Proceeds, or applicable portion
thereof, to Agent to be held by Agent in a cash collateral account pending such
reinvestment.

 

(D)           ON THE DAY OF THE DELIVERY TO AGENT OF BORROWER’S ANNUAL AUDITED
FINANCIAL STATEMENTS IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, BUT IN ANY
EVENT NO LATER THAN THE NINETIETH (90TH) DAY AFTER THE END OF EACH FISCAL YEAR
OF BORROWER (COMMENCING WITH THE FISCAL YEAR OF BORROWER ENDING DECEMBER 31,
2006), BORROWER SHALL FURNISH TO AGENT A WRITTEN CALCULATION OF EXCESS CASH FLOW
FOR SUCH FISCAL YEAR AND DELIVER TO AGENT, FOR DISTRIBUTION TO LENDERS, AN
AMOUNT EQUAL TO FIFTY PERCENT (50%) OF SUCH EXCESS CASH FLOW, FOR APPLICATION TO
THE LOAN AND THE OTHER OBLIGATIONS IN ACCORDANCE WITH SECTION 2.5(E).

 

(E)           ALL PREPAYMENTS PURSUANT TO SECTIONS 2.5(C), AND 2.5(D) SHALL BE
APPLIED IN THE FOLLOWING ORDER OF PRIORITY: (I) FIRST, TO ALL THEN UNPAID FEES
AND EXPENSES OF AGENT UNDER THE LOAN DOCUMENTS, (II) SECOND, TO ALL THEN UNPAID
FEES AND EXPENSES OF LENDERS UNDER THE LOAN DOCUMENTS, INCLUDING ANY PREPAYMENT
PREMIUM, (III) THIRD TO ANY AND ALL OBLIGATIONS THAT ARE DUE AND OWING PURSUANT
TO THE TERMS OF THE LOAN DOCUMENTS, EXCEPT THE PRINCIPAL BALANCE OF THE LOAN AND
ACCRUED AND UNPAID INTEREST THEREON; (IV) FOURTH TO ACCRUED AND UNPAID INTEREST
ON THE PORTION OF THE PRINCIPAL BALANCE OF THE LOAN BEING PREPAID OR REQUIRED TO
BE PREPAID; AND (V) FIFTH TO THE PRINCIPAL BALANCE OF THE LOAN, WHICH SHALL BE
APPLIED TO THE SCHEDULED INSTALLMENTS THEREOF IN INVERSE ORDER OF MATURITIES.

 

2.6          PROMISE TO PAY; MANNER OF PAYMENT.

 

Borrower absolutely and unconditionally promises to pay, when due and payable
pursuant hereto, principal, interest and all other amounts and Obligations
payable hereunder and under any other Loan Document, without any right of
rescission and without any deduction whatsoever, including any deduction for
set-off, recoupment or counterclaim, notwithstanding any damage to, defects in
or destruction of the Collateral or any other event, including obsolescence of
any property or improvements.  Any payments made by the Credit Parties shall be
made by wire transfer on the date when due, without offset, deduction or
counterclaim, in Dollars, in immediately available funds to such account as may
be indicated in writing by Agent to Borrower from time to time.  Any such
payment received after 2:00 p.m. (New York City time) on any date shall be
deemed received on the next succeeding Business Day, and any applicable interest
or fees shall continue to accrue in respect thereof.  Whenever any payment under
any Loan Document shall be stated to be due or shall become due and payable on a
day other than a Business Day, the due date thereof shall be extended to, and
such payment shall be made on, the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of payment
of any interest (at the interest rate in effect during such extension) and/or
fees, as the case may be.

 

6

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2.7          PAYMENTS BY AGENT

 

Should any Obligation required to be paid under any Loan Document remain unpaid
beyond any applicable cure period, such Obligation may be paid by Agent, on
behalf of Lenders.  Any sums expended or amounts paid by Agent and/or Lenders as
a result of any Credit Party’s failure to pay, perform or comply with any Loan
Document or any of the Obligations may be charged to Borrower’s account and
added to the Obligations.

 

2.8          COMPUTATION OF INTEREST AND FEES; LAWFUL LIMITS

 

All interest and fees owing from time to time under the Loan Documents shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed in each calculation period, as applicable.  In no contingency or event
whatsoever, whether by reason of acceleration or otherwise, shall the interest
and other charges paid or agreed to be paid to Agent, for the benefit of
Lenders, or Lenders for the use, forbearance or detention of money hereunder
exceed the maximum rate permissible under applicable law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto. 
If, due to any circumstance whatsoever, fulfillment of any provision hereof, at
the time performance of such provision shall be due, shall exceed any such
limit, then, the obligation to be so fulfilled shall be reduced to such lawful
limit, and, if Agent or Lenders shall have received interest or any other
charges of any kind which might be deemed to be interest under applicable law in
excess of the maximum lawful rate, then such excess shall be applied first to
any unpaid fees and charges hereunder, then to the unpaid principal balance owed
by Borrower hereunder, and if the then remaining excess interest is greater than
the previously unpaid principal balance, Agent and Lenders shall promptly refund
such excess amount to Borrower and the provisions hereof shall be deemed amended
to provide for such permissible rate.  The terms and provisions of this
Section 2.8 shall control to the extent any other provision of any Loan Document
is inconsistent herewith.

 

2.9          REALLOCATION OF COMMITMENTS

 

The Credit Parties, Agent and the Lenders agree and acknowledge that, on terms
and conditions satisfactory to each Borrower, Revolving Borrower, Agent, each of
the Lenders, and the Revolving Lender, any Commitment of any Lender hereunder
and the Revolving Lender under the Revolving Loan Agreement for the benefit of
any Borrower or Revolving Borrower may be reallocated and adjusted from time to
time with any other Commitment or Commitments of such Lender under this
Agreement or Revolving Lender for the benefit of the other Borrower or Revolving
Borrower, and the outstanding Loans thereunder and hereunder reclassified or
re-categorized in connection therewith and herewith to evidence or effectuate
any such reallocation and adjustment, without constituting a novation, for any
purpose, including, without limitation, for purposes of accurately reflecting
each Borrower’s or Revolving Borrower’s relative contribution to, or allocable
amount or share of, Evolving System’s Consolidated EBITDA, earnings, revenue,
assets and/or liabilities.  For clarification purposes, any such reallocation
and adjustment shall require the written consent of each Borrower, Revolving
Borrower, Agent, each Lender and Revolving Lender and shall not, in any event,
result in a reduction of the aggregate Commitments contained herein and in the
Revolving Loan Agreement.

 

7

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III.           FEES

 

3.1          COMMITMENT FEE

 

On the Closing Date, Borrower shall pay to Agent, for the ratable benefit of
Lenders, a nonrefundable commitment fee equal to One Hundred Twenty Seven
Thousand Five Hundred Dollars ($127,500), which commitment fee shall be deemed
fully earned and due and payable on the Closing Date and in addition to any
other fee from time to time payable under the Loan Documents.

 

3.2          PREPAYMENT PREMIUM.

 

If the Obligations are accelerated as a result of either (i) an Event of Default
under Article VIII(a), (g)(ii) – (g)(v) or (h) or (ii) an Event of Default
resulting from violation of any of the financial covenants set forth in
Exhibit B-1 hereto or Borrower otherwise prepays, or is required to prepay, the
Loan in full or in part (other than as a result of any mandatory prepayment
under Sections 2.5(c)(iii) or 2.5(d)), then, on the effective date of such
acceleration or prepayment, Borrower shall pay to Agent, for the ratable benefit
of Lenders (in addition to the then outstanding principal, accrued interest and
other Obligations owing pursuant to the terms of this Agreement and any other
Loan Document), as yield maintenance for the loss of bargain and not as a
penalty, an amount equal to the Prepayment Premium (prior to giving effect to
any payment of Obligations as a result thereof).  For purposes of determining
the Prepayment Premium, if any, due upon acceleration of the Obligations, such
acceleration shall be deemed to have occurred on the date the Event of Default
giving rise to such acceleration first occurred.

 

IV.           CONDITIONS PRECEDENT

 

4.1          CONDITIONS TO FUNDING OF THE LOAN AND THE CLOSING

 

The obligations of Agent and Lenders to consummate the transactions contemplated
herein and to fund the Loan in each case are subject to the delivery of all
documents listed on, the taking of all actions set forth on and the satisfaction
of each of the conditions precedent listed on Exhibit D hereto, all in a manner,
form and substance satisfactory to Agent in its sole discretion.

 

V.            REPRESENTATIONS AND WARRANTIES

 

Each Credit Party, jointly and severally, represents and warrants to the Lender
Parties as follows as of the Closing Date and except as set forth in the
disclosure schedule corresponding to such Section:

 

5.1          ORGANIZATION AND AUTHORITY

 

Each Credit Party, and each Subsidiary of each Credit Party, is a corporation,
partnership or limited liability company, or other form of entity, as the case
may be, duly organized or formed, validly existing and in good standing (to the
extent such concept applies) under the laws of its jurisdiction of organization
or formation.  Each Credit Party, and each Subsidiary of each Credit Party,
(a) has all requisite corporate, partnership, limited liability company or other
type

 

8

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of entity, as the case may be, power and authority to own its Properties and
carry on its business as now being conducted and as contemplated in the Loan
Documents, the Revolving Loan Documents and the Related Documents, (b) is duly
qualified and licensed to do business in and in good standing (to the extent
such concept applies) in each jurisdiction where the failure so to qualify or be
licensed or qualified would reasonably be expected to result in a Material
Adverse Effect, and (c) has all requisite corporate, partnership, limited
liability company or other type of entity, as the case may be, power and
authority (i) to execute, deliver and perform the Loan Documents, the Revolving
Loan Documents and the Related Documents to which it is a party, (ii) with
respect to Borrower, to borrow hereunder, (iii) to consummate the transactions
contemplated by the Loan Documents, the Revolving Loan Documents and the Related
Documents and (iv) to grant the Liens pursuant to the Security Documents to
which it is a party.

 

5.2          LOAN DOCUMENTS, REVOLVING LOAN DOCUMENTS AND RELATED DOCUMENTS

 

The execution, delivery and performance by each Credit Party of the Loan
Documents, the Revolving Loan Documents and the Related Documents to which it is
a party, and the consummation by such Credit Party of the transactions
contemplated thereby, (a) have been duly authorized by all requisite corporate,
partnership, limited liability company or other form of entity, as the case may
be, action of such Credit Party, and such Loan Documents, Revolving Loan
Documents and Related Documents to which it is a party have been duly executed
and delivered by or on behalf of such Credit Party; (b) do not violate any
provisions of (i) any applicable law, statute, rule, regulation, ordinance or
tariff, (ii) any order, injunction, writ or decree of any Governmental Authority
binding on such Credit Party or any of their respective Properties, or (iii) the
Organizational Documents of such Credit Party, or any agreement between such
Credit Party and its shareholders, members, partners or equity owners or, to the
knowledge of the Credit Parties, among any such shareholders, members, partners
or equity owners; (c) are not in conflict with, and do not result in a breach or
default of or constitute an event of default, or an event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute or
result in a conflict, breach, default or event of default under, any indenture,
agreement or other instrument to which such Credit Party is a party, or by which
the Properties of such Credit Party are bound, the effect of which would
reasonably be expected to result in, either individually or in the aggregate, a
Material Adverse Effect; (d) except as contemplated or expressly permitted by
the Loan Documents and the Revolving Loan Documents, will not result in the
creation or imposition of any Lien of any nature upon any of the Collateral or
other material Properties of any Credit Party; and (e) except for filings in
connection with the perfection and/or registration of the Liens created by the
Security Documents, filings required to be made by Evolving Systems with the
SEC, as defined herein, under the Securities Exchange Act of 1934, as amended,
and rules and regulations thereunder, and consents, approvals, authorizations,
filings, registrations and qualifications that have been obtained, made or done,
do not require the consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority or any other
Person.  Each of the Loan Documents, the Revolving Loan Documents and the
Related Documents to which each Credit Party, is a party constitutes the legal,
valid and binding obligation of such Credit Party, enforceable against such
Credit Party in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
law affecting the enforceability of creditors’ rights generally and to the
effect of general principles of equity which may limit the availability of
equitable remedies (whether in a proceeding at law or in equity).

 

9

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5.3          SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS

 

As of the Closing Date, no Credit Party has any Subsidiaries other than those
Persons listed as Subsidiaries on Schedule 5.3.  Schedule 5.3 states the
authorized and issued capitalization of each Credit Party, the number and class
of equity securities and/or ownership, voting or partnership interests issued
and outstanding of such Credit Party, the number and class of Capital Stock
authorized and issued pursuant to each employee stock option plan and stock
purchase plan and, except as to the holders of the common stock of Evolving
Systems and Capital Stock issued pursuant to employee stock option plans and
stock purchase plans, the beneficial and record owners thereof (including
options, warrants, convertible notes and other rights to acquire, or
exchangeable or exercisable for, any of the foregoing) as of the Closing Date. 
Except as listed on Schedule 5.3, the outstanding equity securities and/or
ownership, voting or partnership interests of each Credit Party have been duly
authorized and validly issued and are fully paid and nonassessable and each
Credit Party listed on Schedule 5.3 owns beneficially and of record all of the
equity securities it is listed as owning free and clear of any Liens other than
Liens created by the Security Documents and Permitted Liens.  Schedule 5.3 lists
the directors and managers of each Credit Party as of the Closing Date.  Except
as listed on Schedule 5.3, no Credit Party (a) owns any interest or participates
or engages in any joint venture, partnership or similar arrangements with any
Person, (b) is a party to or has knowledge of any agreements restricting the
transfer of its equity securities, excluding the equity securities of Evolving
Systems, (c) has issued any rights which can be convertible into or exchangeable
or exercisable for any of its equity securities, or any rights to subscribe for
or to purchase, or any options for the purchase of or any rights of pre-emption
or conversion of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, or other commitments or claims of any character
relating to, any of its equity securities or any securities convertible into or
exchangeable or exercisable for any of its equity securities and (d) is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire,
repay, redeem or retire any of its equity securities or other convertible rights
or options or debt securities.  No Credit Party has any stock appreciation
rights, phantom stock plan or similar rights or obligations outstanding.

 

5.4          PROPERTIES

 

Each Credit Party is the sole owner and has good, valid and marketable title to,
or a valid leasehold interest in, license of, or right to use, all of its
material Properties, whether personal or real, in each instance, necessary or
used in the Ordinary Course of Business, free and clear of all Liens other than
Permitted Liens.  All material tangible personal Property of each Credit Party
is in good repair, working order and condition (normal wear and tear excepted)
and is suitable and adequate for the uses for which they are being used or are
intended.

 

5.5          OTHER AGREEMENTS

 

Other than as listed in Schedule 5.5, no Credit Party is (a) a party to any
judgment, order or decree or any agreement, document or instrument, or subject
to any restriction, which adversely affects its ability to grant a security
interest in the Collateral, take actions necessary to perfect the Lender’s
Liens, execute and deliver, or perform its payment, guaranty, indemnification,
release, waiver, and any material obligations under, any Loan Document,
Revolving Loan Document or Related Document to which it is a party or to pay the
Obligations,

 

10

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(b) in default in any material respect in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any Related
Document, nor is there any event, fact, condition or circumstance which, with
notice or passage of time or both, would constitute or result in a material
conflict, breach, default or event of default under, any of the Related
Documents, (c) in default in the performance, observance or fulfillment of any
obligation, covenant or condition contained in any other agreement, document or
instrument to which it is a party or to which any of its Properties are subject,
which default would reasonably be expected to result in a Material Adverse
Effect, nor is there any event, fact, condition or circumstance which, with
notice or passage of time or both, would constitute or result in a conflict,
breach, default or event of default under, any of the foregoing which would
reasonably be expected to result in a Material Adverse Effect, or (d) a party or
subject to any agreement, document or instrument with respect to, or obligation
to pay any, service or management fee to an Affiliate with respect to, the
ownership, operation, leasing or performance of any of its Business other than
the Cross-License Agreements and Transfer Pricing Agreements.

 

5.6          LITIGATION

 

Except as set forth on Schedule 5.6, (i) there are no actions, suits, or
proceedings pending against any Credit Party, (ii) to the knowledge of the
Credit Parties, there are no investigations pending against any Credit Party and
(iii) to the knowledge of the Credit Parties, there are no actions, suits,
investigations or proceedings threatened against any Credit Party that, in each
case, (a) questions or would reasonably be expected to prevent the validity of
any of the Loan Documents, Revolving Loan Documents or Related Documents or the
right of such Credit Party to enter into any Loan Document, any Revolving Loan
Document or any Related Document to which it is a Party or to consummate the
transactions contemplated thereby, or (b) would reasonably be expected to result
in, either individually or in the aggregate, a Material Adverse Effect.  Except
as listed on Schedule 5.6, no Credit Party is a party or subject to any order,
writ, injunction, judgment or decree of any Governmental Authority.

 

5.7          ENVIRONMENTAL MATTERS

 

Each Credit Party is, and the operations of each Credit Party are, in compliance
with all applicable Environmental Laws in all material respects.  No Credit
Party has been notified in writing of any action, suit, proceeding or
investigation (a) relating in any way to compliance by or liability of such
Credit Party under any Environmental Laws, (b) which otherwise deals with any
Hazardous Substance or any Environmental Law, or (c) which seeks to suspend,
revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Substance.

 

5.8          TAX RETURNS; GOVERNMENTAL REPORTS

 

Except as set forth in Schedule 5.8, each Credit Party (a) has filed all federal
and all material state, foreign and local tax returns and other material reports
which are required by law to be filed by such Credit Party, and (b) has paid all
taxes, assessments, fees and other governmental charges, including, without
limitation, payroll and other employment related taxes, in each case that are
due and payable, except for items that such Credit Party currently is

 

11

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contesting in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP and no notice of Lien has
been filed or recorded.

 

5.9          FINANCIAL STATEMENTS AND REPORTS

 

All financial statements relating to any Credit Party that have been and
hereafter may be delivered to Agent or any Lender by any Credit Party (a) are
consistent with the books of account and records of such Credit Party, (b) have
been prepared in accordance with GAAP on a consistent basis throughout the
indicated periods, subject to, in the case of interim unaudited financial
statements, the lack of footnote disclosure and normal year-end adjustments, and
(c) present fairly in all material respects the consolidated financial position
and results of operations of such Credit Party and its consolidated Subsidiaries
at the dates and for the relevant periods indicated in accordance with GAAP on a
basis consistently applied.  Except as (a) listed on Schedule 5.9 and
(b) permitted under this Agreement and not required to be disclosed on a Credit
Party’s financial statements under GAAP, the Credit Parties have no material
obligations or liabilities of any kind that are not disclosed in such financial
statements, and since the date of the most recent financial statements submitted
to Agent and Lenders, there has not occurred any Material Adverse Effect or, to
Credit Parties’ knowledge, any event or condition that would reasonably be
expected to result in a Material Adverse Effect.

 

5.10        COMPLIANCE WITH LAW; ERISA; BUSINESS

 

(A)           EXCEPT AS SET FORTH ON SCHEDULE 5.10(C), EACH CREDIT PARTY (A) IS
IN COMPLIANCE WITH ALL LAWS, STATUTES, RULES, REGULATIONS, ORDINANCES AND
TARIFFS OF ANY GOVERNMENTAL AUTHORITY APPLICABLE TO SUCH CREDIT PARTY, THE
BUSINESS AND/OR SUCH CREDIT PARTY’S PROPERTIES OR OPERATIONS, INCLUDING, WITHOUT
LIMITATION, ERISA AND ANY OTHER LAWS OR REGULATIONS PERTAINING TO THE BUSINESS,
AND (B) IS NOT IN VIOLATION OF ANY ORDER OF ANY GOVERNMENTAL AUTHORITY OR OTHER
BOARD OR TRIBUNAL, EXCEPT, IN THE CASE OF BOTH (A) AND (B), WHERE ANY SUCH
NONCOMPLIANCE OR VIOLATION WOULD NOT REASONABLY BE EXPECTED TO RESULT IN, EITHER
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.  THERE IS NO EVENT,
FACT, CONDITION OR CIRCUMSTANCE WHICH, WITH NOTICE OR PASSAGE OF TIME, OR BOTH,
WOULD CONSTITUTE OR RESULT IN ANY NONCOMPLIANCE WITH, OR ANY VIOLATION OF, ANY
OF THE FOREGOING, IN EACH CASE EXCEPT WHERE ANY SUCH NONCOMPLIANCE OR VIOLATION
WOULD NOT REASONABLY BE EXPECTED TO RESULT IN, EITHER INDIVIDUALLY OR IN THE
AGGREGATE, A MATERIAL ADVERSE EFFECT.

 

(B)           EVOLVING SYSTEMS HAS FILED ALL MATERIAL REPORTS, SCHEDULES, FORMS,
STATEMENTS AND OTHER DOCUMENTS (INCLUDING EXHIBITS AND OTHER INFORMATION
INCORPORATED THEREIN) WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”)
REQUIRED TO BE FILED BY EVOLVING SYSTEMS SINCE DECEMBER 31, 2002 (SUCH
DOCUMENTS, THE “SEC DOCUMENTS”). NO SUBSIDIARY OF EVOLVING SYSTEMS IS REQUIRED
TO FILE, OR FILES, ANY FORM, REPORT OR OTHER DOCUMENT WITH THE SEC OR SIMILAR
FOREIGN GOVERNMENTAL AUTHORITY REGULATING PUBLIC ISSUANCE OF SECURITIES. AS OF
THEIR RESPECTIVE DATES, THE SEC DOCUMENTS COMPLIED IN ALL MATERIAL RESPECTS WITH
THE REQUIREMENTS OF THE SECURITIES ACT, OR THE EXCHANGE ACT, AS THE CASE MAY BE,
APPLICABLE TO SUCH SEC DOCUMENTS, AND NONE OF THE SEC DOCUMENTS CONTAINED ANY
UNTRUE STATEMENT OF A MATERIAL FACT OR OMITTED TO STATE A MATERIAL FACT REQUIRED
TO BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MATERIALLY MISLEADING
AS OF THEIR RESPECTIVE DATES; PROVIDED THAT NOTWITHSTANDING ANYTHING ELSE
CONTAINED IN THIS

 

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AGREEMENT OR ANY LOAN DOCUMENT, NONE OF THE CREDIT PARTIES MAKE ANY
REPRESENTATION, WARRANTY OR GUARANTY AS TO ANY PROJECTIONS FURNISHED TO AGENT OR
THE LENDERS (EXCEPT THAT SUCH PROJECTIONS HAVE BEEN PREPARED BY THE APPLICABLE
CREDIT PARTY OR SUBSIDIARY OF A CREDIT PARTY ON THE BASIS OF ASSUMPTIONS WHICH
WERE BELIEVED TO BE REASONABLE AS OF THE DATE OF SUCH PROJECTIONS IN LIGHT OF
CURRENT AND REASONABLY FORESEEABLE BUSINESS CONDITIONS).  THE FINANCIAL
STATEMENTS OF EVOLVING SYSTEMS INCLUDED IN THE SEC DOCUMENTS COMPLY AS TO FORM
IN ALL MATERIAL RESPECTS WITH APPLICABLE ACCOUNTING REQUIREMENTS AND THE
PUBLISHED RULES AND REGULATIONS OF THE SEC WITH RESPECT THERETO, HAVE BEEN
PREPARED IN ACCORDANCE WITH GAAP (EXCEPT, IN THE CASE OF UNAUDITED STATEMENTS,
AS PERMITTED BY FORM 10-Q OF THE SEC) APPLIED ON A CONSISTENT BASIS DURING THE
PERIODS INVOLVED (EXCEPT AS MAY BE INDICATED IN THE NOTES THERETO) AND FAIRLY
PRESENT IN ALL MATERIAL RESPECTS THE CONSOLIDATED FINANCIAL POSITION OF EVOLVING
SYSTEMS AND ITS CONSOLIDATED SUBSIDIARIES AS OF THE DATES THEREOF AND THE
CONSOLIDATED RESULTS OF THEIR OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN
ENDED (SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO THE ABSENCE OF FOOTNOTE
DISCLOSURE AND TO NORMAL AND RECURRING YEAR-END AUDIT ADJUSTMENTS).

 

(C)           EXCEPT AS SET FORTH ON SCHEDULE 5.10(C), NO CREDIT PARTY HAS
(I) ENGAGED IN ANY “PROHIBITED TRANSACTIONS,” AS DEFINED IN SECTION 406 OF ERISA
AND SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER, (II) FAILED TO MEET ANY APPLICABLE
MINIMUM FUNDING REQUIREMENTS UNDER SECTION 302 OF ERISA IN RESPECT OF ITS PLANS
AND NO FUNDING REQUIREMENTS HAVE BEEN POSTPONED OR DELAYED, (III) KNOWLEDGE OF
ANY EVENT OR OCCURRENCE WHICH WOULD CAUSE THE PENSION BENEFIT GUARANTY
CORPORATION TO INSTITUTE PROCEEDINGS UNDER TITLE IV OF ERISA TO TERMINATE ANY OF
ITS EMPLOYEE BENEFIT PLANS, (IV) ANY FIDUCIARY RESPONSIBILITY UNDER ERISA FOR
INVESTMENTS WITH RESPECT TO ANY PLAN EXISTING FOR THE BENEFIT OF PERSONS OTHER
THAN ITS EMPLOYEES OR FORMER EMPLOYEES, OR (V) WITHDRAWN, COMPLETELY OR
PARTIALLY, FROM ANY MULTI-EMPLOYER PENSION PLANS SO AS TO INCUR LIABILITY UNDER
THE MULTIEMPLOYER PENSION PLAN AMENDMENTS OF 1980.  WITH RESPECT TO EACH CREDIT
PARTY, THERE EXISTS NO EVENT DESCRIBED IN SECTION 4043 OF ERISA, EXCLUDING
SUBSECTIONS 4043(B)(2) AND 4043(B)(3) THEREOF, FOR WHICH THE THIRTY (30) DAY
NOTICE PERIOD CONTAINED IN 12 C.F.R. § 2615.3 HAS NOT BEEN WAIVED.  EACH CREDIT
PARTY HAS MAINTAINED ALL MATERIAL RECORDS REQUIRED TO BE MAINTAINED BY ANY
APPLICABLE GOVERNMENTAL AUTHORITY.  INTERMEDIATE HOLDCO HAS NOT ENGAGED, DOES
NOT PRESENTLY ENGAGE AND DOES NOT PROPOSE TO ENGAGE IN ANY BUSINESS OTHER THAN
THE OWNERSHIP OF THE EQUITY SECURITIES OF EVOLVING SYSTEMS HOLDINGS LIMITED, A
COMPANY ORGANIZED UNDER THE LAWS OF ENGLAND AND WALES, AND ACTIVITIES INCIDENTAL
THERETO.

 

5.11        INTELLECTUAL PROPERTY

 

(A)           EXCEPT AS SET FORTH ON SCHEDULE 5.11, AS OF THE CLOSING DATE, OR
AS THEREAFTER OTHERWISE DISCLOSED IN WRITING TO AGENT FROM TIME TO TIME, NO
CREDIT PARTY OR SUBSIDIARY OF A CREDIT PARTY OWNS OR LICENSES ANY MATERIAL
PATENTS, PATENT APPLICATIONS, REGISTERED TRADEMARKS, TRADEMARK APPLICATIONS,
TRADE NAMES, REGISTERED SERVICE MARKS, SERVICE MARK APPLICATIONS, REGISTERED
COPYRIGHTS OR COPYRIGHT APPLICATIONS OTHER THAN OFF-THE-SHELF LICENSES READILY
AVAILABLE IN THE OPEN MARKET.  EACH CREDIT PARTY AND EACH SUBSIDIARY OF A CREDIT
PARTY OWNS DIRECTLY, OR IS ENTITLED TO USE BY LICENSE OR OTHERWISE, ALL
INTELLECTUAL PROPERTY NECESSARY FOR OR MATERIAL TO THE CONDUCT OF SUCH CREDIT
PARTY’S BUSINESS (SUCH INTELLECTUAL PROPERTY, THE “NECESSARY INTELLECTUAL
PROPERTY”).  THE OWNERSHIP OR LICENSE INTERESTS OF ALL OF THE CREDIT PARTIES’
AND EACH OF THEIR SUBSIDIARIES’ INTERESTS IN THE ITEMS LISTED ON SCHEDULE 5.11
AS OF THE CLOSING DATE ARE AND, AT ALL TIMES AFTER THE CLOSING DATE (EXCEPT TO
THE EXTENT NO LONGER DEEMED

 

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NECESSARY FOR OR MATERIAL TO THE CONDUCT OF THE BUSINESS OF THE CREDIT PARTIES
AND THEIR SUBSIDIARIES IN THE GOOD FAITH BUSINESS JUDGMENT OF THE CREDIT
PARTIES) WILL BE: (A) SUBSISTING AND HAVE NOT BEEN ADJUDGED INVALID OR
UNENFORCEABLE, IN WHOLE OR PART; AND (B) VALID, IN FULL FORCE AND EFFECT AND NOT
IN KNOWN CONFLICT WITH THE RIGHTS OF ANY PERSON.  EACH CREDIT PARTY AND
SUBSIDIARY OF A CREDIT PARTY HAS MADE ALL FILINGS AND RECORDATIONS NECESSARY IN
THE EXERCISE OF REASONABLE BUSINESS JUDGMENT TO PROTECT ITS OWNERSHIP OR LICENSE
INTEREST IN THE NECESSARY INTELLECTUAL PROPERTY OF SUCH CREDIT PARTY OR
SUBSIDIARY OF A CREDIT PARTY IN THE UNITED STATES PATENT AND TRADEMARK OFFICE,
AND THE UNITED STATES COPYRIGHT OFFICE AND IN CORRESPONDING OFFICES THROUGHOUT
THE WORLD, AS APPROPRIATE.  EACH CREDIT PARTY AND SUBSIDIARY OF A CREDIT PARTY
HAS PERFORMED ALL ACTS AND HAS PAID AND WILL CONTINUE TO PAY ALL REQUIRED FEES
AND TAXES TO MAINTAIN EACH AND EVERY ITEM OF ITS OWNERSHIP OR LICENSE INTEREST
IN NECESSARY INTELLECTUAL PROPERTY IN FULL FORCE AND EFFECT, EXCEPT SUCH ITEMS
OF ITS NECESSARY INTELLECTUAL PROPERTY AS ARE NO LONGER DEEMED NECESSARY FOR OR
MATERIAL TO THE CONDUCT OF ITS BUSINESSES IN ITS REASONABLE BUSINESS JUDGMENT. 
AS OF THE CLOSING DATE, NO LITIGATION IS PENDING OR, TO THE KNOWLEDGE OF EACH
CREDIT PARTY, THREATENED AGAINST ANY CREDIT PARTY OR SUBSIDIARY THEREOF, WHICH
CONTAINS ALLEGATIONS RESPECTING THE VALIDITY, ENFORCEABILITY, INFRINGEMENT OR
OWNERSHIP OF THE INTEREST OF ANY CREDIT PARTY OR SUBSIDIARY OF A CREDIT PARTY IN
THE NECESSARY INTELLECTUAL PROPERTY.  NO CREDIT PARTY OR SUBSIDIARY OF A CREDIT
PARTY IS IN BREACH OF OR DEFAULT UNDER THE PROVISIONS OF ANY OF THE LICENSES
UNDER WHICH IT HAS OBTAINED RIGHTS TO LICENSE ANY NECESSARY INTELLECTUAL
PROPERTY, NOR IS THERE ANY EVENT, FACT, CONDITION OR CIRCUMSTANCE WHICH, WITH
NOTICE OR PASSAGE OF TIME OR BOTH, WOULD CONSTITUTE OR RESULT IN A CONFLICT,
BREACH, DEFAULT OR EVENT OF DEFAULT UNDER, ANY SUCH LICENSE AGREEMENT WHICH
WOULD REASONABLY BE EXPECTED TO RESULT IN, EITHER INDIVIDUALLY OR IN THE
AGGREGATE, A MATERIAL ADVERSE EFFECT.  ALL PERSONNEL (INCLUDING EMPLOYEES,
AGENTS, CONSULTANTS AND CONTRACTORS) OF THE CREDIT PARTIES AND EACH SUBSIDIARY
THEREOF, WHO HAVE CONTRIBUTED TO OR PARTICIPATED IN THE CONCEPTION OR
DEVELOPMENT OF THE NECESSARY INTELLECTUAL PROPERTY USED IN THE BUSINESS OF THE
CREDIT PARTIES AND THEIR SUBSIDIARIES EITHER (I) HAVE BEEN A PARTY TO A
“WORK-FOR-HIRE” OR OTHER ARRANGEMENTS OR AGREEMENTS WITH THE CREDIT PARTIES OR
THEIR SUBSIDIARIES IN ACCORDANCE WITH APPLICABLE INTERNATIONAL, NATIONAL AND
OTHER APPLICABLE LAWS THAT HAS ACCORDED THE CREDIT PARTIES AND THEIR
SUBSIDIARIES FULL, EFFECTIVE, EXCLUSIVE AND ORIGINAL OWNERSHIP OF ALL TANGIBLE
AND INTANGIBLE PROPERTY AND INTELLECTUAL PROPERTY RIGHTS THEREBY ARISING OR
RELATING THERETO, OR (II) HAVE EXECUTED APPROPRIATE INSTRUMENTS OF ASSIGNMENT IN
FAVOR OF THE CREDIT PARTIES OR THEIR SUBSIDIARIES AS ASSIGNEE THAT HAVE CONVEYED
TO SUCH PERSON EFFECTIVE AND EXCLUSIVE OWNERSHIP OF ALL INTELLECTUAL PROPERTY
RIGHTS THEREBY ARISING AND RELATED THERETO.

 

5.12        PERMITS; LABOR

 

Each Credit Party is in compliance with, and has, all Permits necessary or
required by applicable law or Governmental Authorities for the operation of its
Business as presently conducted and as proposed to be conducted, and for the
execution, delivery and performance by, and enforcement against, such Credit
Party of each Loan Document, Revolving Loan Document and Related Document,
except where noncompliance, violation or lack thereof would not reasonably be
expected to result in, either individually or in the aggregate, a Material
Adverse Effect.  Except as listed in Schedule 5.12, (a) there is not any event,
fact, condition or circumstance which, with notice or passage of time or both,
would constitute or result in a conflict, breach, default or event of default
under, any of the foregoing Permits, in each case which would reasonably be
expected to result in, either individually or in the aggregate, a

 

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Material Adverse Effect, and (b) no Credit Party is nor has been involved in any
group labor dispute, strike, walkout or union organization.

 

5.13        NO DEFAULT; SOLVENCY

 

No Default or Event of Default exists.  Each Credit Party is and, after giving
effect to the transactions and the Indebtedness contemplated by the Loan
Documents and the transactions contemplated by the Revolving Loan Document and
the Related Documents, will be Solvent.

 

5.14        INSURANCE

 

All insurance policies of the Credit Parties or otherwise relating to their
Properties as of the Closing Date are listed and described on Schedule 5.14.

 

5.15        MARGIN STOCK; REGULATED ENTITIES; TAX REGULATIONS; OFAC; PATRIOT ACT

 

(A)           THE CREDIT PARTIES ARE NOT ENGAGED IN THE BUSINESS OF EXTENDING
CREDIT FOR THE PURPOSE OF PURCHASING OR CARRYING ANY “MARGIN STOCK” OR “MARGIN
SECURITY” (WITHIN THE MEANING OF REGULATIONS T, U OR X ISSUED BY THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM), AND NO PROCEEDS OF THE LOAN WILL BE
USED TO PURCHASE OR CARRY ANY MARGIN STOCK OR MARGIN SECURITY OR TO EXTEND
CREDIT TO OTHERS FOR THE PURPOSE OF PURCHASING OR CARRYING ANY MARGIN STOCK OR
MARGIN SECURITY WITHIN THE MEANING OF SUCH REGULATIONS T, U OR X.

 

(B)           NO CREDIT PARTY OR ANY PERSON CONTROLLING ANY CREDIT PARTY IS
(A) AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF
1940; OR (B) SUBJECT TO REGULATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT
OF 1935, THE FEDERAL POWER ACT, THE INTERSTATE COMMERCE ACT, ANY STATE PUBLIC
UTILITIES CODE, OR ANY OTHER FEDERAL OR STATE STATUTE OR REGULATION LIMITING ITS
ABILITY TO INCUR INDEBTEDNESS.

 

(C)           NO CREDIT PARTY INTENDS TO TREAT THE LOAN, THE COMMITMENTS AND/OR
ANY LETTERS OF CREDIT AND RELATED TRANSACTIONS AS BEING A “REPORTABLE
TRANSACTION” (WITHIN THE MEANING OF TREASURY REGULATION SECTION 1.6011-4).

 

(D)           NO CREDIT PARTY (I) IS A PERSON WHOSE PROPERTY OR INTEREST IN
PROPERTY IS BLOCKED OR SUBJECT TO BLOCKING PURSUANT TO SECTION 1 OF EXECUTIVE
ORDER 13224 OF SEPTEMBER 23, 2001 BLOCKING PROPERTY AND PROHIBITING TRANSACTIONS
WITH PERSONS WHO COMMIT, THREATEN TO COMMIT, OR SUPPORT TERRORISM (66 FED. REG.
49079 (2001)), (II) ENGAGES IN ANY DEALINGS OR TRANSACTIONS PROHIBITED BY
SECTION 2 OF SUCH EXECUTIVE ORDER, OR IS OTHERWISE ASSOCIATED WITH ANY SUCH
PERSON IN ANY MANNER VIOLATIVE OF SUCH SECTION 2, OR (III) IS A PERSON ON THE
LIST OF SPECIALLY DESIGNATED NATIONALS AND BLOCKED PERSONS OR SUBJECT TO THE
LIMITATIONS OR PROHIBITIONS UNDER ANY OTHER U.S. DEPARTMENT OF TREASURY’S OFFICE
OF FOREIGN ASSETS CONTROL REGULATION OR EXECUTIVE ORDER (“OFAC”).

 

(E)           EACH CREDIT PARTY IS IN COMPLIANCE, IN ALL MATERIAL RESPECTS, WITH
THE PATRIOT ACT.  NO PART OF THE PROCEEDS OF THE LOAN WILL BE USED, DIRECTLY OR
INDIRECTLY, FOR ANY PAYMENTS TO ANY GOVERNMENTAL OFFICIAL OR EMPLOYEE, POLITICAL
PARTY, OFFICIAL OF A POLITICAL PARTY, CANDIDATE FOR POLITICAL OFFICE, OR ANYONE
ELSE ACTING IN AN OFFICIAL CAPACITY, IN ORDER TO OBTAIN,

 

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RETAIN OR DIRECT BUSINESS OR OBTAIN ANY IMPROPER ADVANTAGE, IN VIOLATION OF THE
UNITED STATES FOREIGN CORRUPT PRACTICES ACT OF 1977, AS AMENDED.

 

5.16        BROKER’S OR FINDER’S COMMISSIONS

 

Except as set forth on Schedule 5.16 no broker’s, finder’s or placement fee or
commission is or will be payable to any broker, investment banker or agent
engaged by any Credit Party or any of its officers, directors or agents with
respect to the transactions contemplated by this Agreement, the other Loan
Documents, the Revolving Loan Documents and the Related Documents, except for
fees payable to Agent and Lenders.

 

5.17        DISCLOSURE

 

No Loan Document or any other agreement, document, written report, certificate
or statement furnished to Agent or any Lender by or on behalf of any Credit
Party in connection with the transactions contemplated by or pursuant to the
Loan Documents, nor any representation or warranty made by any Credit Party in
any Loan Document, contains any untrue statement of a material fact or omits to
state any material fact necessary to make the factual statements therein taken
as a whole not materially misleading as of the time made or delivered in light
of the circumstances under which it was made or furnished; provided that
notwithstanding anything else contained in this Agreement or any Loan Document,
none of the Credit Parties make any representation, warranty or guaranty as to
any projections furnished to Agent or the Lenders (except that such projections
have been prepared by the applicable Credit Party or Subsidiary of a Credit
Party on the basis of assumptions which were believed to be reasonable as of the
date of such projections in light of current and reasonably foreseeable business
conditions).

 

5.18        INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES

 

As of the Closing Date and any other date on which representations and
warranties are otherwise remade or deemed remade hereunder, (i) each of the
representations and warranties contained in the Related Documents made by any
Credit Party is true and correct in all material respects (except to the extent
already qualified by materiality, in which case it shall have been true and
correct in all respects and shall not have been false or misleading in any
respect taken as a whole and in light of the circumstances under which it was
made or furnished) and (ii) to the knowledge of each Credit Party, each of the
representations and warranties contained in the Related Documents made by
Persons other than a Credit Party, Agent or any Lender is true and correct in
all material respects.

 

5.19        SURVIVAL

 

Each Credit Party agrees that the representations and warranties contained in
the Loan Documents are made with the knowledge and intention that Agent and
Lenders are relying and will rely thereon.  All such representations and
warranties will survive the execution and delivery of this Agreement, the
Closing and the funding of the Loan.

 

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VI.           AFFIRMATIVE COVENANTS

 

Each Credit Party, jointly and severally, covenants and agrees that, until the
full performance and satisfaction, and indefeasible payment in full in cash, of
all the Obligations (other than contingent indemnification Obligations to the
extent no claim giving rise thereto has been asserted) and the termination of
the Commitments:

 

6.1          REPORTING, COLLATERAL AND OTHER INFORMATION

 

(A)           REPORTING.  THE CREDIT PARTIES SHALL MAINTAIN, AND SHALL CAUSE
EACH OF THEIR SUBSIDIARIES TO MAINTAIN A SYSTEM OF ACCOUNTING ESTABLISHED AND
ADMINISTERED IN ACCORDANCE WITH SOUND BUSINESS PRACTICES TO PERMIT THE
PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GAAP (PROVIDED THAT
INTERIM FINANCIAL STATEMENTS SHALL NOT BE REQUIRED TO HAVE FOOTNOTE DISCLOSURE
AND MAY BE SUBJECT TO NORMAL YEAR-END ADJUSTMENTS).

 

(B)           THE CREDIT PARTIES SHALL FURNISH TO AGENT AND EACH LENDER, AT THE
TIMES, FOR THE PERIODS AND OTHERWISE IN ACCORDANCE WITH THE TERMS OF EXHIBIT C
ATTACHED HERETO, ALL STATEMENTS (FINANCIAL OR OTHERWISE), BUDGETS, PROJECTIONS,
REPORTS, LISTINGS, CALCULATIONS, CERTIFICATES, NOTICES AND OTHER MATERIALS
DESCRIBED ON SUCH EXHIBIT C-1.

 

(C)           COLLATERAL DELIVERABLES; RELATED ACTIONS.  EACH CREDIT PARTY
SHALL, AND SHALL CAUSE EACH OTHER CREDIT PARTY TO COMPLY WITH EACH OF THE
AGREEMENTS, COVENANTS AND UNDERTAKINGS SET FORTH IN EXHIBIT C-2, APPLICABLE TO
SUCH CREDIT PARTY IN ACCORDANCE WITH THE TERMS THEREOF, AND REPRESENTS AND
WARRANTS TO THE LENDER PARTIES THAT THE REPRESENTATIONS AND WARRANTIES THEREON
CONTAINED ARE TRUE, CORRECT AND COMPLETE IN ALL MATERIAL RESPECTS (EXCEPT TO THE
EXTENT ALREADY QUALIFIED BY MATERIALITY, IN WHICH CASE IT SHALL HAVE BEEN TRUE
AND CORRECT IN ALL RESPECTS) AND SHALL NOT HAVE BEEN FALSE OR MISLEADING IN ANY
RESPECT TAKEN AS A WHOLE AND IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH IT WAS
MADE OR FURNISHED.

 

6.2          CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE AND ASSETS

 

Each Credit Party shall, and shall cause each of its Subsidiaries to:

 

(A)           ENGAGE SOLELY IN THE BUSINESS IN ACCORDANCE WITH GOOD BUSINESS
PRACTICES CUSTOMARY TO ITS INDUSTRY, AND USE COMMERCIALLY REASONABLE EFFORTS TO
PRESERVE THE GOODWILL AND BUSINESS OF THE CUSTOMERS, SUPPLIERS AND OTHERS HAVING
MATERIAL BUSINESS RELATIONS WITH IT;

 

(B)           USE COMMERCIALLY REASONABLE EFFORTS TO COLLECT ITS ACCOUNTS IN THE
ORDINARY COURSE OF BUSINESS;

 

(C)           MAINTAIN AND PRESERVE ALL OF ITS MATERIAL PROPERTIES USED OR
USEFUL IN ITS BUSINESS IN GOOD WORKING ORDER AND CONDITION (NORMAL WEAR AND TEAR
EXCEPTED AND EXCEPT AS MAY BE DISPOSED OF IN ACCORDANCE WITH THE TERMS OF THE
LOAN DOCUMENTS) AND FROM TIME TO TIME MAKE ALL REASONABLY NECESSARY REPAIRS,
RENEWALS AND REPLACEMENTS THEREOF;

 

(D)           EXCEPT AS PERMITTED UNDER SECTION 7.4(H), MAINTAIN AND PRESERVE IN
FULL FORCE AND EFFECT ITS ORGANIZATIONAL EXISTENCE UNDER THE LAWS OF ITS STATE
OR JURISDICTION OF INCORPORATION, ORGANIZATION OR FORMATION, AS APPLICABLE;

 

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(E)           MAINTAIN AND PRESERVE IN FULL FORCE AND EFFECT ALL PERMITS AND
QUALIFICATIONS TO DO BUSINESS AND REMAIN IN GOOD STANDING (TO THE EXTENT SUCH
CONCEPT APPLIES TO SUCH ENTITY) IN EACH JURISDICTION IN WHICH THE OWNERSHIP OR
LEASE OF ITS PROPERTY OR THE NATURE OF ITS BUSINESS MAKES SUCH PERMITS OR
QUALIFICATION NECESSARY, IN EACH CASE EXCEPT AS WOULD NOT REASONABLY BE EXPECTED
TO RESULT IN, EITHER INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE
EFFECT; AND

 

(F)            MAINTAIN, COMPLY WITH AND KEEP IN FULL FORCE AND EFFECT AND RENEW
ITS RIGHTS IN INTELLECTUAL PROPERTY EXCEPT WHERE THE NON-PRESERVATION,
NON-COMPLIANCE OR LOSS OF WHICH OR FAILURE TO MAINTAIN WOULD NOT REASONABLY BE
EXPECTED TO RESULT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL
ADVERSE EFFECT.

 

6.3          COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS

 

Each Credit Party shall, and shall cause each of its Subsidiaries to:

 

(A)           COMPLY WITH ALL LAWS, STATUTES, RULES, REGULATIONS, ORDINANCES AND
TARIFFS OF ALL GOVERNMENTAL AUTHORITIES APPLICABLE TO IT OR ITS BUSINESS,
PROPERTIES OR OPERATIONS, EXCEPT WHERE THE FAILURE TO COMPLY WOULD NOT
REASONABLY BE EXPECTED TO RESULT IN, EITHER INDIVIDUALLY OR IN THE AGGREGATE, A
MATERIAL ADVERSE EFFECT;

 

(B)           COMPLY IN ALL MATERIAL RESPECTS WITH THE SECURITIES ACT AND
EXCHANGE ACT AND THE RULES PROMULGATED UNDER SUCH ACTS IN ALL MATERIAL RESPECTS
AND MAKE ALL MATERIAL FILINGS REQUIRED BY SUCH ACTS WITHIN THE REQUIRED FILING
PERIOD;

 

(C)           PAY ALL TAXES, ASSESSMENTS, GOVERNMENTAL FEES AND CHARGES EXCEPT
TAXES, ASSESSMENTS, GOVERNMENTAL FEES AND CHARGES BEING CONTESTED IN GOOD FAITH
BY APPROPRIATE PROCEEDINGS DILIGENTLY PROSECUTED AND AGAINST WHICH ADEQUATE
RESERVES ARE BEING MAINTAINED IN ACCORDANCE WITH GAAP AND, WITH RESPECT TO SUCH
ITEMS, ALL SUCH ITEMS DO NOT EXCEED $250,000 AGAINST PERSONS ORGANIZED IN THE
UNITED STATES IN THE AGGREGATE AT ANY TIME OR SUCH ITEMS DO NOT EXCEED
$1,500,000 AGAINST PERSONS ORGANIZED OUTSIDE THE UNITED STATES IN THE AGGREGATE
AT ANY TIME;

 

(D)           SUBJECT TO ANY SUBORDINATION PROVISIONS IN FAVOR OF THE LENDER
PARTIES AND/OR OTHER RESTRICTIONS HEREIN SET FORTH, PERFORM IN ACCORDANCE WITH
ITS TERMS EACH CONTRACT, AGREEMENT OR OTHER ARRANGEMENT TO WHICH IT IS A PARTY
OR BY WHICH IT OR ANY OF THE COLLATERAL IS BOUND, EXCEPT WHERE THE FAILURE TO SO
PERFORM WOULD NOT REASONABLY BE EXPECTED TO RESULT IN, EITHER INDIVIDUALLY OR IN
THE AGGREGATE, A MATERIAL ADVERSE EFFECT;

 

(E)           PAY AND PERFORM, BEFORE THE SAME SHALL BECOME DELINQUENT AND AS
THE SAME SHALL BE REQUIRED TO BE PERFORMED, ALL OF ITS OBLIGATIONS, LIABILITIES
AND INDEBTEDNESS, BUT SUBJECT TO ANY SUBORDINATION PROVISIONS CONTAINED HEREIN
AND/OR IN ANY INSTRUMENT OR AGREEMENT EVIDENCING OR PERTAINING TO SUCH
INDEBTEDNESS, EXCEPT WHERE THE FAILURE TO SO PAY OR PERFORM WOULD NOT REASONABLY
BE EXPECTED TO RESULT IN, EITHER INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL
ADVERSE EFFECT;

 

(F)            PAY AND PERFORM, BEFORE THE SAME SHALL BECOME DELINQUENT AND AS
THE SAME SHALL BE REQUIRED TO BE PERFORMED, BUT SUBJECT TO ANY SUBORDINATION
PROVISIONS CONTAINED HEREIN AND IN THE SUBORDINATION AGREEMENT, AND PRESERVE AND
ENFORCE ALL OF ITS MATERIAL RIGHTS, DUTIES

 

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AND OBLIGATIONS UNDER EACH OF THE RELATED DOCUMENTS AND THE TSE PURCHASE
AGREEMENT EXCEPT AS PROVIDED IN SECTION 7.5(F); AND

 

(G)           PROPERLY FILE ALL REPORTS REQUIRED TO BE FILED WITH ANY
GOVERNMENTAL AUTHORITY, EXCEPT WHERE THE FAILURE TO FILE WOULD NOT REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

6.4          INSURANCE

 

Each Credit Party shall or if applicable Evolving Systems shall cause such
Credit Party to (a) ensure that the Life Insurance Policy is fully paid and in
full force and effect at all times; and (b) keep all of its insurable Properties
adequately insured against losses, damages and hazards as are customarily
insured against by businesses engaging in similar activities or the Business or
owning similar Properties and of such types and in such amounts as are
customarily carried under similar circumstances by such other Persons, and at
least the minimum amount required by applicable law and any other agreement to
which such Credit Party is a party or pursuant to which such Credit Party
provides any services, including, without limitation, liability, property and
business interruption insurance, as applicable; provided the amount of business
interruption insurance shall not be less than projected EBITDA for all Credit
Parties and their Subsidiaries on a consolidated basis without duplication for a
period of not less than six (6) months and, in any event, not less than
$1,500,000; and maintain general liability insurance at all times against
liability on account of damage to Persons and Property having such limits,
deductibles, exclusions and co-insurance and other provisions as are customary
for a business engaged in activities similar to those of such Credit Party under
similar circumstances and (c) maintain directors and officers liability
insurance at all times against risks and liabilities customarily insured; all of
the foregoing insurance policies and coverage levels to (i) be satisfactory to
Agent in its Permitted Discretion, (ii) name Agent, for the benefit of the
Lender Parties, as loss payee/mortgagee in respect of property damage and
casualty insurance, additional insured in respect of liability insurance
(excluding errors and omissions insurance and directors and officers liability
insurance) and sole beneficiary of the Life Insurance Policy, and
(iii) expressly provide that they cannot be altered, amended, modified, canceled
or terminated without at least thirty (30) days (ten (10) days in the event of a
termination for nonpayment of premiums) prior written notice to Agent from the
insurer except to add in the Ordinary Course of Business additional customers as
loss payee/mortgagee or additional insured pursuant to this subsection (iii),
and that they inure to the benefit of Agent, for the benefit of the Lender
Parties, notwithstanding any action or omission or negligence of or by such
Credit Party, or any insured thereunder.  Upon request of Agent or any Lender,
Borrower shall furnish to Agent, with sufficient copies for each Lender, at
reasonable intervals (but not more than once per calendar year) a certificate of
a Responsible Officer on behalf of Borrower (and, if requested by Agent, any
insurance broker of Borrower) setting forth the nature and extent of all
insurance maintained by Borrower and its Subsidiaries in accordance with this
Section 6.4.  Unless Borrower provides Agent with evidence of the insurance
coverage required by this Agreement, Agent may purchase insurance at Borrower’s
expense to protect Agent’s and Lenders’ interests in the Credit Parties’
Properties.  This insurance may, but need not, protect the Credit Parties’
interests.  The coverage that Agent purchases may not pay any claim that any
Credit Party makes or any claim that is made against any Credit Party in
connection with said Property.  Borrower may later cancel any insurance
purchased by Agent, but only after providing Agent with satisfactory evidence to
Agent, and

 

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written acknowledgment thereof, that Borrower has obtained insurance as required
by this Agreement.  If Agent purchases insurance, Borrower shall be responsible
for the costs of that insurance, including interest and any other charges Agent
may impose in connection with the placement of insurance, until the effective
date of the cancellation or expiration of the insurance.  The costs of the
insurance shall be added to the Obligations and payable on demand.  The costs
incurred by Agent of the insurance may be more than the costs of insurance
Borrower may be able to obtain on its own.  Any and all proceeds of the Life
Insurance Policy shall be applied to the payment of the Obligations as provided
in this Agreement.

 

6.5          INSPECTION; MANAGEMENT MEETINGS

 

(A)           EACH CREDIT PARTY SHALL PERMIT THE REPRESENTATIVES OF AGENT FROM
TIME TO TIME DURING NORMAL BUSINESS HOURS UPON REASONABLE NOTICE TO (I) VISIT
AND INSPECT ANY OF SUCH CREDIT PARTY’S AND THE SUBSIDIARIES OF SUCH CREDIT
PARTIES’S OFFICES OR PROPERTIES OR ANY OTHER PLACE WHERE COLLATERAL IS LOCATED
TO INSPECT THE COLLATERAL AND/OR TO EXAMINE AND/OR AUDIT ALL OF SUCH CREDIT
PARTY’S BOOKS OF ACCOUNT, RECORDS, REPORTS AND OTHER PAPERS, (II) MAKE COPIES
AND EXTRACTS THEREFROM AND (III) DISCUSS SUCH CREDIT PARTY’S BUSINESS,
OPERATIONS, PROSPECTS, PROPERTIES, ASSETS, LIABILITIES, CONDITION AND/OR
ACCOUNTS WITH ITS OFFICERS AND, SO LONG AS OFFICERS AND EMPLOYEES OF THE CREDIT
PARTY OR SUCH SUBSIDIARY ARE ENTITLED TO BE PRESENT, INDEPENDENT PUBLIC
ACCOUNTANTS (AND BY THIS PROVISION SUCH OFFICERS AND ACCOUNTANTS ARE AUTHORIZED
TO DISCUSS THE FOREGOING); PROVIDED, HOWEVER, THAT (X) THE CREDIT PARTIES SHALL
NOT BE OBLIGATED TO REIMBURSE AGENT FOR MORE THAN AN AGGREGATE OF TWO
(2) VISITS, INSPECTIONS, EXAMINATIONS AND/OR AUDITS UNDER THIS
SECTION 6.5(A) AND PURSUANT TO THE REVOLVING LOAN AGREEMENT (WHETHER ANY SUCH
VISIT, INSPECTION, EXAMINATION OR AUDIT INCLUDES OR COVERS SOME OR ALL OF THE
“CREDIT PARTIES” AND THEIR RESPECTIVE “SUBSIDIARIES” UNDER AND AS DEFINED IN
THIS AGREEMENT AND THE REVOLVING LOAN AGREEMENT) DURING ANY FISCAL YEAR IN WHICH
NO EVENT OF DEFAULT EXISTS, OF WHICH ONE (1) VISIT, INSPECTION, EXAMINATION
AND/OR AUDIT IN WHICH EMPLOYEES AND AGENTS OF AGENT LOCATED WITHIN NORTH AMERICA
TRAVEL OUTSIDE NORTH AMERICA, WHICH VISITS SHALL, TO THE EXTENT PRACTICABLE AND
APPROPRIATE IN THE PERMITTED DISCRETION OF THE AGENT, BE COORDINATED TO OCCUR AT
THE SAME TIME AS THE SEMI-ANNUAL MEETINGS PROVIDED FOR IN CLAUSE (B) BELOW (IT
BEING AGREED AND UNDERSTOOD THAT THE BORROWER SHALL BE OBLIGATED TO REIMBURSE
AGENT FOR ALL SUCH VISITS, INSPECTIONS, EXAMINATIONS AND AUDITS CONDUCTED WHILE
ANY EVENT OF DEFAULT EXISTS), AND (Y) NO NOTICE SHALL BE REQUIRED TO DO ANY OF
THE FOREGOING IF ANY EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING.

 

(B)           THE CREDIT PARTIES SHALL CAUSE THEIR SENIOR MANAGEMENT TO HOLD
MEETINGS WITH AGENT IN PERSON, ON A SEMI-ANNUAL BASIS OR MORE FREQUENTLY IN THE
PERMITTED DISCRETION OF THE AGENT, TO DISCUSS THE FINANCIAL PERFORMANCE AND
PROJECTIONS OF EVOLVING SYSTEMS AND ITS SUBSIDIARIES.  THE FORMAT AND CONTENT OF
THE MEETINGS SHALL BE SUBSTANTIALLY SIMILAR TO THE DISCUSSION OF SUCH MATTERS IN
MEETINGS OF THE BOARD OF DIRECTORS OF EVOLVING SYSTEMS.  CREDIT PARTIES’ SHALL
REIMBURSE AGENT FOR ALL REASONABLE OUT-OF-POCKET EXPENSES INCURRED IN CONNECTION
WITH ATTENDANCE AT SUCH MEETINGS.

 

(C)           AGENT AND SUCH REPRESENTATIVES SHALL MAINTAIN THE CONFIDENTIALITY
OF ALL NON-PUBLIC INFORMATION (WHETHER WRITTEN OR VERBAL AND WHETHER
SPECIFICALLY IDENTIFIED AS “CONFIDENTIAL”) OBTAINED DURING SUCH VISITS,
INSPECTIONS, EXAMINATIONS, AUDITS OR MEETINGS IN ACCORDANCE WITH SECTION 12.10.

 

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6.6          USE OF PROCEEDS

 

Borrower shall use the proceeds from the Loan solely for the following
purposes:  (i) to refinance a portion of the existing indebtedness on the
Closing Date that was used to pay costs incurred in purchasing Tertio Telecoms
Limited, a seller of operational support systems and for payment of other costs
and expenses incurred in connection with the negotiation and consummation of the
transactions provided for in this Agreement and the other Loan Documents; and
(ii) in compliance with applicable law and not in violation of this Agreement.

 

6.7          FURTHER ASSURANCES; POST CLOSING DELIVERIES

 

(A)           EXCEPT AS AUTHORIZED BY AGENT IN ITS PERMITTED DISCRETION, EACH
CREDIT PARTY SHALL, AND SHALL CAUSE EACH CREDIT PARTY TO, WITHIN FIVE
(5) BUSINESS DAYS AFTER DEMAND BY AGENT OR REQUISITE LENDERS, TAKE SUCH FURTHER
ACTIONS, OBTAIN SUCH CONSENTS AND APPROVALS AND DULY EXECUTE AND DELIVER SUCH
FURTHER AGREEMENTS, ASSIGNMENTS, INSTRUCTIONS OR DOCUMENTS AS MAY BE REQUESTED
IN THEIR PERMITTED DISCRETION IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT IN
ITS PERMITTED DISCRETION IN ORDER TO CARRY OUT THE PURPOSES, TERMS AND
CONDITIONS OF THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY,
WHETHER BEFORE, AT OR AFTER THE PERFORMANCE AND/OR CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE OCCURRENCE OF ANY DEFAULT OR EVENT OF
DEFAULT.

 

(B)           WITHOUT LIMITING ANY OTHER PROVISION OF ANY LOAN DOCUMENT, EACH
CREDIT PARTY SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES TO, EXECUTE AND
DELIVER, OR CAUSE TO BE EXECUTED AND DELIVERED, TO AGENT ALL AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER DELIVERIES, AND TAKE OR CAUSE TO BE TAKEN ALL
ACTIONS, AND OTHERWISE PERFORM, OBSERVE AND COMPLY WITH ALL OBLIGATIONS AND
COVENANTS, SET FORTH ON SCHEDULE 6.7 HERETO WITHIN THE APPLICABLE TIME PERIODS
SET FORTH THEREON.

 

(C)           EACH CREDIT PARTY SHALL, AND, EXCEPT AS PROVIDED IN
SUBSECTION (E) SHALL CAUSE ITS SUBSIDIARIES TO, (I) EXECUTE, DELIVER AND/OR
RECORD ANY AND ALL FINANCING STATEMENTS, CONTINUATION STATEMENTS, STOCK POWERS,
INSTRUMENTS AND OTHER DOCUMENTS, OR CAUSE THE EXECUTION, DELIVERY AND RECORDING
OF ANY AND ALL OF THE FOREGOING, THAT ARE NECESSARY OR REQUIRED UNDER LAW OR
OTHERWISE REQUESTED BY AGENT IN ITS PERMITTED DISCRETION TO CREATE, PERFECT OR
PRESERVE THE PLEDGE OF THE COLLATERAL TO AGENT AND THE LIEN ON THE COLLATERAL IN
FAVOR OF AGENT, FOR THE BENEFIT OF THE LENDER PARTIES UNDER THE LOAN DOCUMENTS
(AND EACH CREDIT PARTY IRREVOCABLY GRANTS AGENT THE RIGHT, AT AGENT’S OPTION, TO
FILE ANY OR ALL OF THE FOREGOING), AND (II) DEFEND THE COLLATERAL AND THE LIEN
IN FAVOR OF AGENT, FOR THE BENEFIT OF THE LENDER PARTIES UNDER THE LOAN
DOCUMENTS, AGAINST ALL CLAIMS AND DEMANDS OF ALL PERSONS (OTHER THAN PERMITTED
LIENS).  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING AND EXCEPT AS PROVIDED
IN SUBSECTION (E) OR AS OTHERWISE APPROVED IN WRITING BY REQUISITE LENDERS,
(I) EACH GUARANTOR SHALL, AND EACH CREDIT PARTY SHALL CAUSE ITS SUBSIDIARIES
(OTHER THAN THE BORROWER) TO, GUARANTY THE OBLIGATIONS OF BORROWER AND GRANT TO
AGENT, FOR THE BENEFIT OF THE LENDER PARTIES UNDER THE LOAN DOCUMENTS, A LIEN ON
ALL OF ITS PROPERTY TO SECURE SUCH GUARANTY, AND (II) EVOLVING SYSTEMS AND EACH
CREDIT PARTY SHALL GRANT A FIRST PRIORITY LIEN (OTHER THAN WITH RESPECT TO
PROPERTY SUBJECT TO PRIORITY PERMITTED LIENS) ON ALL OF ITS PROPERTY (OTHER THAN
ACCOUNTS USED EXCLUSIVELY FOR EMPLOYEE PAYROLL AND EMPLOYEE BENEFIT AND ANY
OTHER PROPERTY THAT IS NOT REQUIRED TO CONSTITUTE COLLATERAL PURSUANT TO THE
SECURITY DOCUMENTS) AND, WITHOUT LIMITING THE FOREGOING, PLEDGE THE STOCK AND
OTHER EQUITY INTERESTS AND

 

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SECURITIES OF EACH OF ITS SUBSIDIARIES, IN EACH CASE TO AGENT, FOR THE BENEFIT
OF THE LENDER PARTIES, TO SECURE THE OBLIGATIONS.  IN FURTHERANCE THEREOF, EACH
DOMESTIC SUBSIDIARY OF A CREDIT PARTY SHALL EXECUTE A JOINDER AGREEMENT AND
BECOME A PARTY TO SUCH OF THE LOAN DOCUMENTS, INCLUDING THIS AGREEMENT, AND IN
SUCH CAPACITY (BORROWER OR GUARANTOR) AS AGENT SHALL ELECT.  NOTWITHSTANDING THE
OTHER PROVISIONS OF THIS SUBSECTION (C) AND ANYTHING ELSE IN THIS AGREEMENT TO
THE CONTRARY, THE CREDIT PARTIES SHALL NOT BE REQUIRED TO GRANT A LEASEHOLD
MORTGAGE IN THE LEASES LISTED ON SCHEDULE 6.7(C) AS SUCH LEASES EXIST AS OF THE
DATE OF THIS AGREEMENT.

 

(D)           CONCURRENTLY WITH (I) THE EXECUTION BY ANY CREDIT PARTY, AS
LESSEE, OF ANY LEASE PERTAINING TO REAL PROPERTY, SUCH CREDIT PARTY SHALL
DELIVER TO AGENT (A) AN EXECUTED COPY THEREOF, (B), A LANDLORD WAIVER AND
CONSENT FROM THE LANDLORD UNDER SUCH LEASE IN FORM AND SUBSTANCE ACCEPTABLE TO
AGENT IN ITS PERMITTED DISCRETION AND (C) EXCEPT FOR EXTENSIONS OF LEASES LISTED
ON SCHEDULE 6.7(C) AS OF THE CLOSING DATE AND FOR LEASES OF REAL PROPERTY
REQUIRING NO MORE THAN $200,000 IN ANNUAL RENT PAYMENTS, (I) AT THE OPTION OF
AGENT, EITHER A LEASEHOLD MORTGAGE UPON OR A COLLATERAL ASSIGNMENT OF SUCH LEASE
IN FAVOR OF AGENT FOR THE BENEFIT OF THE LENDER PARTIES UNDER THE LOAN
DOCUMENTS, IN EITHER CASE IN FORM AND SUBSTANCE ACCEPTABLE TO AGENT IN ITS
PERMITTED DISCRETION AND (II) AT THE OPTION OF AGENT, A LENDER’S POLICY OF TITLE
INSURANCE FOR THE BENEFIT OF THE LENDER PARTIES UNDER THE LOAN DOCUMENTS, IN
SUCH FORM AND AMOUNT AND CONTAINING SUCH ENDORSEMENTS AS SHALL BE SATISFACTORY
TO AGENT IN ITS PERMITTED DISCRETION, INSURING THE LIEN OF SUCH LEASEHOLD
MORTGAGE OR COLLATERAL ASSIGNMENT OF LEASE, TOGETHER WITH A SURVEY OF SUCH REAL
PROPERTY, WHICH SURVEY SHALL BE OF A RECENT ENOUGH DATE AND IN SUFFICIENT DETAIL
SO AS TO PERMIT THE TITLE COMPANY ISSUING SUCH POLICY TO ELIMINATE ANY SURVEY
EXCEPTIONS TO SUCH POLICY AND (D) SUCH OTHER DOCUMENTS AND ASSURANCES WITH
RESPECT TO SUCH REAL PROPERTY AS AGENT MAY REQUIRE IN ITS PERMITTED DISCRETION,
AND (II) THE EXECUTION BY ANY CREDIT PARTY OF ANY CONTRACT RELATING TO THE
ACQUISITION BY SUCH CREDIT PARTY OF REAL PROPERTY, AN EXECUTED COPY OF SUCH
CONTRACT AND, CONCURRENTLY WITH THE CLOSING OF THE PURCHASE OF SUCH REAL
PROPERTY, (A) A FIRST MORTGAGE OR DEED OF TRUST IN FAVOR OF AGENT, FOR THE
BENEFIT OF THE LENDER PARTIES UNDER THE LOAN DOCUMENTS, ON SUCH REAL PROPERTY,
IN FORM AND SUBSTANCE ACCEPTABLE TO AGENT IN ITS PERMITTED DISCRETION, (B) A
LENDER’S POLICY OF TITLE INSURANCE FOR THE BENEFIT OF THE LENDER PARTIES UNDER
THE LOAN DOCUMENTS, IN SUCH FORM AND AMOUNT AND CONTAINING SUCH ENDORSEMENTS AS
SHALL BE SATISFACTORY TO AGENT IN ITS PERMITTED DISCRETION, (C) A SURVEY OF SUCH
REAL PROPERTY, WHICH SURVEY SHALL BE OF A RECENT ENOUGH DATE AND IN SUFFICIENT
DETAIL SO AS TO PERMIT THE TITLE COMPANY ISSUING SUCH POLICY TO ELIMINATE ANY
SURVEY EXCEPTIONS TO SUCH POLICY, (D) A RECENT ENVIRONMENTAL ASSESSMENT OF SUCH
REAL PROPERTY BY A THIRD PARTY ACCEPTABLE TO AGENT, AND THE RESULTS THEREOF
SHALL BE SATISFACTORY TO AGENT IN ITS PERMITTED DISCRETION, AND (E) SUCH OTHER
DOCUMENTS AND ASSURANCES WITH RESPECT TO SUCH REAL PROPERTY AS AGENT MAY REQUIRE
IN ITS PERMITTED DISCRETION.

 

(E)           THE FOREGOING PROVISIONS OF THIS SECTION 6.7 TO THE CONTRARY
NOTWITHSTANDING: (A) NO FOREIGN SUBSIDIARY OF EVOLVING SYSTEMS THAT IS A
“CONTROLLED FOREIGN CORPORATION,” AS DEFINED IN SECTION 957 OF THE CODE, SHALL
BE REQUIRED TO DELIVER ANY GUARANTY OR GRANT A SECURITY INTEREST IN ANY OF ITS
PROPERTY TO SECURE ANY SUCH GUARANTY, AND NEITHER BORROWER NOR ANY OF ITS OTHER
DOMESTIC SUBSIDIARIES SHALL BE REQUIRED TO PLEDGE SECURITIES REPRESENTING IN THE
AGGREGATE MORE THAN SIXTY FIVE PERCENT (65%) OF THE VOTING POWER OF THE
OUTSTANDING VOTING EQUITY SECURITIES OF ANY SUCH FOREIGN SUBSIDIARY OF EVOLVING
SYSTEMS, TO THE EXTENT, IN ANY SUCH CASE, SUCH GUARANTY OR GRANTING, OR A PLEDGE
OF ADDITIONAL EQUITY SECURITIES, WOULD REASONABLY BE EXPECTED TO RESULT IN
MATERIAL AND ADVERSE TAX CONSEQUENCES TO ANY CREDIT PARTY UNDER SECTION 956 OF
THE CODE AND (B) NO FOREIGN SUBSIDIARY OF EVOLVING SYSTEMS INCORPORATED IN THE
UNITED

 

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KINGDOM SHALL BE REQUIRED TO DELIVER ANY GUARANTY OR GRANT A SECURITY INTEREST
IN ANY OF ITS PROPERTY TO SECURE ANY SUCH GUARANTY IF SUCH GUARANTY OR SECURITY
WOULD BE IN BREACH OF SECTION 151 OF THE COMPANIES ACT 1985, AS DETERMINED BY
AGENT IN ITS PERMITTED DISCRETION.

 

6.8          MANDATORY DIVIDENDS

 

On the day of delivery of any quarterly financial statements pursuant to
Section 6.1, Borrower shall furnish to Agent a written calculation of U.K.
Excess Cash Flow for the prior quarter.  For each period for which EBITDA of the
Credit Parties and their consolidated Subsidiaries on a consolidated basis
without duplication is less than the aggregate of (a) the “Minimum EBITDA” set
forth in Exhibit B-1 for such period and (b) $250,000, the Credit Parties shall
cause the Revolving Borrowers and their Subsidiaries, directly or indirectly,
to, within the 45-day period following delivery of such financial statements,
either (a) dividend to Evolving Systems 100% of such Excess Cash Flow lawfully
available for dividends and lawfully transfer any remainder to Evolving Systems
in another manner approved by Agent in its Permitted Discretion or (b) with the
prior consent of Agent, lawfully transfer 100% of such Excess Cash Flow to
Evolving Systems in another a manner approved by Agent in its Permitted
Discretion.

 

VII.         NEGATIVE COVENANTS

 

Each Credit Party, jointly and severally, covenants and agrees that, until the
full performance and satisfaction, and indefeasible payment in full in cash, of
all Obligations (other than contingent indemnification Obligations to the extent
no claim giving rise thereto has been asserted) and the termination of all
Commitments:

 

7.1          FINANCIAL COVENANTS

 

No Credit Party shall, and no Credit Party shall cause or permit any of its
Subsidiaries to, violate any of the financial covenants set forth in Exhibit B-1
hereto, calculated and determined as of the respective dates and for the
respective periods set forth thereon.

 

7.2          INDEBTEDNESS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, create, incur, assume, suffer to exist, or otherwise become or
remain directly or indirectly liable with respect to, any Indebtedness, except
the following (collectively, “Permitted Indebtedness”):

 

(A)           INDEBTEDNESS OF THE CREDIT PARTIES EVIDENCED BY THE LOAN DOCUMENTS
OR THE REVOLVING LOAN DOCUMENTS;

 

(B)           ANY INDEBTEDNESS OF BORROWER AND ITS SUBSIDIARIES EXISTING ON THE
CLOSING DATE AND SET FORTH ON SCHEDULE 7.2 HERETO, INCLUDING EXTENSIONS AND
REPLACEMENTS THEREOF PROVIDED THAT THE PRINCIPAL AMOUNT OF SUCH INDEBTEDNESS AS
OF THE DATE OF SUCH EXTENSION OR REPLACEMENT IS NOT INCREASED AND THE MATURITY
AND WEIGHTED AVERAGE LIFE THEREOF ARE NOT SHORTENED;

 

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(C)           INDEBTEDNESS OF BORROWER AND ITS SUBSIDIARIES NOT TO EXCEED
$250,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING CONSTITUTING CAPITAL LEASE
OBLIGATIONS;

 

(D)           INDEBTEDNESS OF BORROWER AND ITS SUBSIDIARIES INCURRED AFTER THE
CLOSING DATE SECURED BY PURCHASE MONEY LIENS PERMITTED UNDER
SECTION 7.3(E)(I) PROVIDED THE AGGREGATE AMOUNT THEREOF OUTSTANDING AT ANY TIME
DOES NOT EXCEED $200,000;

 

(E)           INTER-COMPANY UNSECURED INDEBTEDNESS ARISING FROM LOANS MADE BY
BORROWER TO ITS DOMESTIC WHOLLY-OWNED SUBSIDIARIES THAT ARE CREDIT PARTIES TO
FUND WORKING CAPITAL REQUIREMENTS OF SUCH SUBSIDIARIES IN THE ORDINARY COURSE OF
BUSINESS; PROVIDED, THAT, THAT UPON THE REQUEST OF AGENT, SUCH INDEBTEDNESS
SHALL BE EVIDENCED BY PROMISSORY NOTES HAVING TERMS (INCLUDING SUBORDINATION
TERMS) SATISFACTORY TO THE AGENT, THE SOLE ORIGINALLY EXECUTED COUNTERPARTS OF
WHICH SHALL BE PLEDGED AND DELIVERED TO THE AGENT, FOR THE BENEFIT OF THE LENDER
PARTIES, AS SECURITY FOR THE OBLIGATIONS;

 

(F)            INTER-COMPANY UNSECURED INDEBTEDNESS NOT LISTED IN SCHEDULE 7.2
ON THE CLOSING DATE ARISING FROM LOANS MADE BY BORROWER TO EVOLVING SYSTEMS
NETWORKS INDIA PVT LTD, AN INDIA CORPORATION, AND EVOLVING SYSTEMS GMBH, A
GERMAN CORPORATION, SO LONG AS SUCH PERSONS ARE WHOLLY-OWNED SUBSIDIARIES OF
EVOLVING SYSTEMS, TO FUND WORKING CAPITAL REQUIREMENTS OF SUCH SUBSIDIARIES IN
THE ORDINARY COURSE OF BUSINESS; PROVIDED, THAT, THAT UPON THE REQUEST OF AGENT,
SUCH INDEBTEDNESS SHALL BE EVIDENCED BY PROMISSORY NOTES HAVING TERMS (INCLUDING
SUBORDINATION TERMS) SATISFACTORY TO AGENT, THE SOLE ORIGINALLY EXECUTED
COUNTERPARTS OF WHICH SHALL BE PLEDGED AND DELIVERED TO AGENT, FOR THE BENEFIT
OF THE LENDER PARTIES, AS SECURITY FOR THE OBLIGATIONS; PROVIDED, HOWEVER, THAT
THE AGGREGATE AMOUNT OF INVESTMENTS PERMITTED PURSUANT TO SECTION 7.4(I) AND
OUTSTANDING INDEBTEDNESS PERMITTED PURSUANT TO THIS SUBSECTION 7.2(F) DOES NOT
EXCEED $100,000 AT ANY TIME;

 

(G)           SUBORDINATED DEBT OF BORROWER EVIDENCED BY THE SUBORDINATED NOTES
TO THE EXTENT SUCH INDEBTEDNESS REMAINS SUBJECT TO THE TERMS AND CONDITIONS OF
THE SELLER SUBORDINATION AGREEMENT;

 

(H)           CONTINGENT OBLIGATIONS TO THE EXTENT CONSTITUTING INDEBTEDNESS AND
PERMITTED UNDER SECTION 7.8 HEREOF;

 

(I)            THE INCURRENCE BY ANY CREDIT PARTY OR ANY SUBSIDIARY THEREOF OF
INDEBTEDNESS IN AN AMOUNT UP TO $50,000 ARISING FROM THE HONORING BY A BANK OR
OTHER FINANCIAL INSTITUTION OF A CHECK, DRAFT OR SIMILAR INSTRUMENT DRAWN
AGAINST INSUFFICIENT FUNDS, SO LONG AS SUCH INDEBTEDNESS IS COVERED WITHIN FIVE
BUSINESS DAYS;

 

(J)            REIMBURSEMENT OBLIGATIONS UNDER THE LETTERS OF CREDIT LISTED ON
SCHEDULE 7.2;

 

(K)           UNSECURED INDEBTEDNESS OF A CREDIT PARTY OR ITS SUBSIDIARIES
INCURRED IN CONNECTION WITH THE FINANCING OF INSURANCE PREMIUMS IN THE ORDINARY
COURSE OF BUSINESS WITH RESPECT TO INSURANCE REQUIRED OR PERMITTED UNDER
SECTION 6.4 UP TO $500,000 IN AGGREGATE ANNUAL PREMIUMS; AND

 

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(L)                                     OTHER UNSECURED INDEBTEDNESS OF BORROWER
AND ITS SUBSIDIARIES NOT TO EXCEED $50,000 IN THE AGGREGATE OUTSTANDING AT ANY
TIME.

 

7.3                               LIENS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer
to exist any Lien upon, in, against or with respect to any part of, or any
pledge of, any of the Collateral or any of its other Property or Capital Stock
(other than the Capital Stock of Evolving Systems) whether now owned or
hereafter acquired, except the following (collectively, “Permitted Liens”):

 

(A)                                  LIENS CREATED BY THE LOAN DOCUMENTS OR THE
REVOLVING LOAN DOCUMENTS OR OTHERWISE ARISING IN FAVOR OF AGENT, FOR THE BENEFIT
OF THE LENDER PARTIES;

 

(B)                                 LIENS IMPOSED BY LAW FOR TAXES, ASSESSMENTS,
FEES OR CHARGES OF ANY GOVERNMENTAL AUTHORITY (I) THAT ARE NOT YET DELINQUENT OR
(II) WHICH ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS AND WITH
RESPECT TO WHICH ADEQUATE RESERVES OR OTHER APPROPRIATE PROVISIONS ARE BEING
MAINTAINED BY SUCH CREDIT PARTY OR SUBSIDIARY IN ACCORDANCE WITH GAAP AND, WITH
RESPECT TO THIS CLAUSE (II), ALL SUCH LIENS SECURE CLAIMS NOT EXCEEDING AMOUNTS
SET FORTH IN SECTION 6.3(C);

 

(C)                                  STATUTORY LIENS OF LANDLORDS, CARRIERS,
WAREHOUSEMEN, MECHANICS AND/OR MATERIALMEN AND OTHER SIMILAR LIENS IMPOSED BY
LAW OR THAT ARISE BY OPERATION OF LAW IN THE ORDINARY COURSE OF BUSINESS THAT,
IN ANY SUCH CASE, ARE ONLY FOR AMOUNTS NOT YET DELINQUENT OR WHICH ARE BEING
CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS (WHICH HAVE THE EFFECT OF
PREVENTING OR STAYING THE FORFEITURE OR SALE OF THE PROPERTY SUBJECT THERETO)
AND WITH RESPECT TO WHICH ADEQUATE RESERVES OR OTHER APPROPRIATE PROVISIONS ARE
BEING MAINTAINED BY SUCH PERSON IN ACCORDANCE WITH GAAP;

 

(D)                                 LIENS (OTHER THAN ANY LIEN IMPOSED BY ERISA)
INCURRED OR DEPOSITS OR PLEDGES MADE IN THE ORDINARY COURSE OF BUSINESS
(INCLUDING, WITHOUT LIMITATION, SURETY BONDS AND APPEAL BONDS) IN CONNECTION
WITH WORKERS’ COMPENSATION, UNEMPLOYMENT INSURANCE AND OTHER TYPES OF SOCIAL
SECURITY BENEFITS OR TO SECURE THE PERFORMANCE OF TENDERS, BIDS, LEASES, TRADE
CONTRACTS, STATUTORY OBLIGATIONS AND OTHER SIMILAR OBLIGATIONS (OTHER THAN FOR
THE REPAYMENT OF INDEBTEDNESS);

 

(E)                                  (I) PURCHASE MONEY LIENS SECURING
INDEBTEDNESS PERMITTED UNDER SECTION 7.2(D); PROVIDED, THAT (X) ANY SUCH LIEN
ATTACHES TO THE SUBJECT PROPERTY CONCURRENTLY WITH OR WITHIN TWENTY (20) DAYS
AFTER THE ACQUISITION THEREOF, (Y) SUCH LIEN ATTACHES ONLY TO THE SUBJECT
PROPERTY AND (Z) THE PRINCIPAL AMOUNT OF SUCH INDEBTEDNESS SECURED THEREBY DOES
NOT EXCEED 100% OF THE COST OF SUCH PROPERTY; AND (II) LIENS ARISING UNDER
CAPITAL LEASES PERMITTED UNDER SECTION 7.2(C) TO THE EXTENT SUCH LIENS ATTACH
ONLY TO THE PROPERTY THAT IS THE SUBJECT OF SUCH CAPITAL LEASES;

 

(F)                                    ANY ATTACHMENT OR JUDGMENT LIEN PROVIDED
THAT THE ENFORCEMENT OF SUCH LIENS IS EFFECTIVELY STAYED, SATISFIED, VACATED,
DISMISSED OR DISCHARGED WITHIN 30 DAYS OF ISSUANCE OR EXECUTION AND SUCH LIENS
SECURE CLAIMS NOT OTHERWISE CONSTITUTING AN EVENT OF DEFAULT;

 

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(G)                                 EASEMENTS, RIGHTS OF WAY, RESTRICTIONS,
ZONING ORDINANCES, RESERVATIONS, COVENANTS AND OTHER SIMILAR CHARGES, TITLE
EXCEPTIONS OR ENCUMBRANCES RELATING TO REAL PROPERTY OF THE CREDIT PARTIES
INCURRED IN THE ORDINARY COURSE OF BUSINESS THAT, EITHER INDIVIDUALLY OR IN THE
AGGREGATE, ARE NOT SUBSTANTIAL IN AMOUNT, DO NOT INTERFERE IN ANY MATERIAL
RESPECT WITH THE USE OF THE PROPERTY AFFECTED OR THE ORDINARY CONDUCT OF THE
BUSINESS OF THE CREDIT PARTIES AND DO NOT RESULT IN MATERIAL DIMINUTION IN VALUE
OF THE PROPERTY SUBJECT THERETO;

 

(H)                                 LIENS DISCLOSED ON SCHEDULE 7.3 AS OF THE
CLOSING DATE;

 

(I)                                     LIENS ARISING BY VIRTUE OF ANY STATUTORY
OR COMMON LAW PROVISION RELATING TO BANKER’S LIENS, RIGHTS OF SET-OFF,
RECOUPMENT, COMBINATION OF ACCOUNTS OR SIMILAR RIGHTS AS TO DEPOSIT ACCOUNTS OR
OTHER FUNDS MAINTAINED WITH A CREDITOR DEPOSITORY INSTITUTION;

 

(J)                                     LIENS THAT ARISE UNDER CUSTOMARY
NON-ASSIGNMENT PROVISIONS IN CONTRACTS, LEASES, SUBLEASES, LICENSES AND
SUBLICENSES ENTERED INTO WITH UNAFFILIATED THIRD PARTIES IN THE ORDINARY COURSE
OF BUSINESS;

 

(K)                                  TRANSFER RESTRICTIONS THAT ARISE UNDER ANY
AGREEMENT FOR A SALE, LEASE, TRANSFER, CONVEYANCE, ASSIGNMENT OR OTHER
DISPOSITION OF ANY PROPERTY OR ANY INTEREST THEREIN THAT IS PERMITTED PURSUANT
TO SECTION 7.7 THAT IMPOSES RESTRICTIONS ONLY ON THE PROPERTIES THAT ARE THE
SUBJECT OF SUCH AGREEMENT PENDING THE CONSUMMATION OF SUCH TRANSACTION;

 

(L)                                     RESTRICTIONS UNDER FEDERAL, STATE OR
FOREIGN SECURITIES LAWS OR THE RULES OR REGULATIONS PROMULGATED THEREUNDER;

 

(M)                               LIENS ON CAPITAL STOCK OF EVOLVING SYSTEMS NOT
HELD BY ANY CREDIT PARTY OR SUBSIDIARY OF A CREDIT PARTY; AND

 

(N)                                 LIENS OF LICENSORS AND SUBLICENSORS ON
LICENSES AND SUBLICENSES OF INTELLECTUAL PROPERTY OF A CREDIT PARTY OR
SUBSIDIARY THEREOF ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS.

 

7.4                               CONSOLIDATIONS, MERGERS AND INVESTMENTS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, directly or indirectly, (i) merge, liquidate, amalgamate or
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its Property to or in favor of, any other Person, (ii) purchase, own,
hold, invest in or otherwise acquire any obligations or stock or other
securities of, or any other ownership interest in, any other Person (including
the establishment or creation of any Subsidiary) or any joint venture, or
otherwise consummate or commit to make any Acquisition (including by way of
merger, consolidation or other combination), (iii) purchase, own, hold, invest
in or otherwise acquire any “investment property” (as defined in the UCC) issued
by any other Person, or (iv) except as permitted by Section 7.2 or Section 7.8,
make, permit to exist or commit to make any loans, advances or extensions of
credit to or for the benefit of any Person, or assume, guarantee, indemnify,
endorse, contingently agree to purchase or otherwise become liable for or upon
or incur any obligation of, any Person (the items described in the foregoing
clauses (ii), (iii) and (iv) sometimes are referred to as “Investments”),
except:

 

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(A)                                  INVESTMENTS CREATED BY THE LOAN DOCUMENTS
AND THE REVOLVING LOAN DOCUMENTS;

 

(B)                                 TRADE CREDIT EXTENDED BY BORROWER AND ITS
SUBSIDIARIES IN THE ORDINARY COURSE OF BUSINESS AND INVESTMENTS RECEIVED IN
SATISFACTION OR PARTIAL SATISFACTION THEREOF FROM FINANCIALLY TROUBLED ACCOUNT
DEBTORS TO THE EXTENT REASONABLY NECESSARY IN ORDER TO PREVENT OR LIMIT LOSS;

 

(C)                                  INVESTMENTS CONSTITUTING INTER-COMPANY
INDEBTEDNESS TO THE EXTENT PERMITTED UNDER SECTIONS 7.2(E) AND (F);

 

(D)                                 LOANS TO EMPLOYEES AND ADVANCES FOR BUSINESS
TRAVEL AND SIMILAR TEMPORARY ADVANCES MADE IN THE ORDINARY COURSE OF BUSINESS TO
OFFICERS, DIRECTORS AND EMPLOYEES, NOT TO EXCEED $25,000 IN THE AGGREGATE AT ANY
TIME OUTSTANDING;

 

(E)                                  THE ENDORSEMENT OF NEGOTIABLE INSTRUMENTS
FOR DEPOSIT OR COLLECTION OR SIMILAR TRANSACTIONS IN THE ORDINARY COURSE OF
BUSINESS;

 

(F)                                    (I) INVESTMENTS BY THE CREDIT PARTIES IN
CASH EQUIVALENTS WITH RESPECT TO WHICH AGENT, FOR THE BENEFIT OF THE LENDER
PARTIES, HAS A FIRST PRIORITY AND PERFECTED LIEN, AS SECURITY FOR THE
OBLIGATIONS AND (II) INVESTMENTS IN CASH EQUIVALENTS BY THE REVOLVING BORROWER,
EVOLVING SYSTEMS NETWORKS INDIA PVT LTD AND EVOLVING SYSTEMS GMBH;

 

(G)                                 BORROWER AND ITS SUBSIDIARIES MAY CONSUMMATE
TRANSACTIONS OTHERWISE PERMITTED UNDER SECTIONS 7.2, 7.5, 7.7 AND 7.8;

 

(H)                                 UPON NOT LESS THAN TEN (10) BUSINESS DAYS’
PRIOR WRITTEN NOTICE TO AGENT, ANY SUBSIDIARY OF BORROWER MAY (A) MERGE WITH, OR
DISSOLVE OR LIQUIDATE INTO, OR TRANSFER ITS PROPERTY TO, BORROWER OR A DOMESTIC
WHOLLY-OWNED SUBSIDIARY OF BORROWER THAT IS A CREDIT PARTY, PROVIDED THAT, WITH
RESPECT TO ANY SUCH MERGER, BORROWER OR SUCH DOMESTIC WHOLLY-OWNED SUBSIDIARY
SHALL BE THE CONTINUING OR SURVIVING ENTITY AND (B) MERGE WITH, OR DISSOLVE OR
LIQUIDATE INTO, OR TRANSFER ITS PROPERTY TO A WHOLLY-OWNED SUBSIDIARY OF
BORROWER AS PERMITTED BY THE REVOLVING LOAN DOCUMENTS;

 

(I)                                     INVESTMENTS IN THE CAPITAL STOCK OF
EVOLVING SYSTEMS NETWORKS INDIA PVT LTD AND EVOLVING SYSTEMS GMBH NOT LISTED IN
SCHEDULE 7.4 ON THE CLOSING DATE; PROVIDED THAT THE AGGREGATE AMOUNT OF SUCH
INVESTMENTS AND THE OUTSTANDING INDEBTEDNESS PERMITTED UNDER
SECTION 7.2(F) SHALL NOT EXCEED $100,000 AT ANY TIME;

 

(J)                                     INVESTMENTS IN ANY DOMESTIC WHOLLY-OWNED
SUBSIDIARY OF BORROWER THAT IS OR CONCURRENT WITH SUCH INVESTMENT BECOMES A
CREDIT PARTY;

 

(K)                                  INVESTMENTS EXISTING AS OF THE CLOSING DATE
BY A CREDIT PARTY IN ITS SUBSIDIARIES SET FORTH ON SCHEDULE 7.4;

 

(L)                                     INVESTMENTS RECEIVED IN COMPROMISE OR
RESOLUTION OF LITIGATION OR ARBITRATION PROCEEDINGS WITH PERSONS WHO ARE NOT
AFFILIATES OF A CREDIT PARTY UP TO $50,000 IN THE AGGREGATE;

 

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(M)                               INVESTMENTS REPRESENTED BY PREPAID EXPENSES
MADE IN THE ORDINARY COURSE OF BUSINESS; AND

 

(N)                                 WITHOUT DUPLICATION OF ANY QUANTITATIVE
LIMITS, THE REVOLVING BORROWER AND ITS SUBSIDIARIES MAY MAKE INVESTMENTS
PERMITTED UNDER THE REVOLVING LOAN AGREEMENT.

 

For purposes of covenant compliance, the amount of any Investment shall be the
amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment.

 

7.5                               RESTRICTED PAYMENTS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, (i) declare, pay or make any dividend or distribution of cash,
securities or other Property on any shares of its Capital Stock or other equity
or ownership interests or securities, (ii) apply any of its Property to the
acquisition, redemption or other retirement of any of its Capital Stock or other
equity or ownership interests or securities or of any warrants, options or other
rights to purchase or acquire, exchangeable or exercisable for, or convertible
into, any of the foregoing, (iii) make any payment or prepayment of principal,
premium, if any, interest, or fees on any Subordinated Debt, make any sinking
fund or similar payment with respect to any Subordinated Debt, or redeem,
exchange, purchase, retire, defease or setoff against any Subordinated Debt;
(iv) make any payment or prepayment of any TSE Contingent Obligation, make any
sinking fund or similar payment with respect to any TSE Contingent Obligation,
or redeem, exchange, purchase, retire, defease or setoff against any TSE
Contingent Obligation or (v) pay any management, service, consulting,
non-competition or similar fee or any compensation to any Affiliate of any
Credit Party (the items described in clauses (i), (ii), (iii), (iv) and
(v) above sometimes are referred to herein as “Restricted Payments”). 
Notwithstanding the foregoing:

 

(A)                                  ANY WHOLLY-OWNED SUBSIDIARY OF BORROWER MAY
DECLARE AND PAY DIVIDENDS AND OTHER DISTRIBUTIONS TO BORROWER OR TO ANY OTHER
DOMESTIC WHOLLY-OWNED SUBSIDIARY OF BORROWER THAT IS A CREDIT PARTY AND THE
WHOLLY-OWNED SUBSIDIARIES OF EVOLVING SYSTEMS PARTY TO THE REVOLVING LOAN
AGREEMENT MAY DECLARE AND PAY DIVIDENDS PERMITTED UNDER THE REVOLVING LOAN
AGREEMENT;

 

(B)                                 EVOLVING SYSTEMS MAY, UPON TERMINATION,
RESIGNATION OR RETIREMENT OF AN OFFICER OR EMPLOYEE OF BORROWER, REDEEM FOR CASH
ANY EQUITY SECURITIES OR WARRANTS OR OPTIONS TO ACQUIRE ANY EQUITY SECURITIES OF
EVOLVING SYSTEMS OWNED BY SUCH OFFICER OR EMPLOYEE, PROVIDED, THAT ALL OF THE
FOLLOWING CONDITIONS ARE SATISFIED WITH RESPECT TO EACH SUCH DISTRIBUTION:

 

(I)                             NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND
IS CONTINUING OR WOULD ARISE AS A RESULT OF SUCH DISTRIBUTION;

 

(II)                          AFTER GIVING EFFECT TO SUCH DISTRIBUTION, THE
CREDIT PARTIES ARE IN COMPLIANCE ON A PRO FORMA BASIS WITH THE FINANCIAL
COVENANTS REFERENCED IN SECTION 7.1(A) (RECOMPUTED FOR THE MOST RECENT PERIOD
FOR WHICH FINANCIAL STATEMENTS HAVE BEEN DELIVERED IN ACCORDANCE WITH THE TERMS
HEREOF AFTER GIVING EFFECT THERETO AS OF THE FIRST DAY OF SUCH PERIOD); AND

 

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(III)                       THE AGGREGATE AMOUNT OF SUCH DISTRIBUTIONS SHALL NOT
EXCEED $175,000 IN ANY FISCAL YEAR OF BORROWER OR $350,000 DURING THE TERM;

 

(C)                                  THE REVOLVING BORROWER MAY MAKE
DISTRIBUTIONS TO INTERMEDIATE HOLDCO SOLELY SUFFICIENT TO PERMIT INTERMEDIATE
HOLDCO TO PAY AS AND WHEN DUE AND PAYABLE FRANCHISE TAXES AND OTHER SIMILAR
ORDINARY COURSE LICENSING EXPENSES AND OTHER GENERAL AND CUSTOMARY HOLDING
COMPANY COSTS AND EXPENSES INCURRED IN THE ORDINARY COURSE OF BUSINESS AND
OTHERWISE RELATING TO ACTIVITIES IN WHICH INTERMEDIATE HOLDCO OTHERWISE IS
PERMITTED TO ENGAGE UNDER THE LOAN DOCUMENTS TO THE EXTENT NO DEFAULT OR EVENT
OF DEFAULT HAS OCCURRED AND IS CONTINUING OR WOULD ARISE AS A RESULT OF SUCH
DISTRIBUTIONS;

 

(D)                                 BORROWER MAY MAKE PAYMENTS ON THE
SUBORDINATED DEBT EVIDENCED BY THE SUBORDINATED NOTES ONLY TO THE EXTENT
EXPRESSLY PERMITTED UNDER THE APPLICABLE SELLER SUBORDINATION AGREEMENT;

 

(E)                                  THE CREDIT PARTIES AND THEIR SUBSIDIARIES
MAY PAY (I) REASONABLE COMPENSATION (INCLUDING PERMITTED SECURITIES ISSUED AS
EQUITY COMPENSATION) TO OFFICERS AND EMPLOYEES FOR ACTUAL SERVICES RENDERED TO
BORROWER AND ITS SUBSIDIARIES IN THE ORDINARY COURSE OF BUSINESS, INCLUDING
REASONABLE SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT, AND
(II) REASONABLE DIRECTORS’ FEES, MEETING FEES AND REIMBURSEMENT OF ACTUAL
OUT-OF-POCKET EXPENSES INCURRED IN CONNECTION WITH ATTENDING BOARD OF DIRECTOR
MEETINGS; AND

 

(F)                                    EVOLVING SYSTEMS MAY PAY THE TSE
CONTINGENT OBLIGATION DUE ON NOVEMBER 15, 2005 IN AN AMOUNT UP TO $300,000 AND
TSE CONTINGENT OBLIGATIONS ON OR PROMPTLY THEREAFTER THE DAY OF DELIVERY TO
AGENT OF QUARTERLY FINANCIAL STATEMENTS FOR SUCH FISCAL QUARTER; PROVIDED, THAT
ALL OF THE FOLLOWING CONDITIONS ARE SATISFIED WITH RESPECT TO EACH SUCH PAYMENT:

 

(I)                             NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND
IS CONTINUING OR WOULD ARISE AS A RESULT OF SUCH DISTRIBUTION;

 

(II)                          THE CREDIT PARTIES ARE COMPLIANCE WITH THE
FINANCIAL COVENANTS REFERENCED IN SECTION 7.1(A) AND PROVIDE EVIDENCE TO AGENT
TO SUCH EFFECT; AND

 

(III)                               THE AGGREGATE AMOUNT OF SUCH DISTRIBUTIONS
SHALL NOT EXCEED $2,900,000 DURING THE TERM;

 

(G)                                 EVOLVING SYSTEMS MAY DECLARE AND MAKE
DIVIDEND PAYMENTS OR OTHER DISTRIBUTIONS PAYABLE SOLELY IN PERMITTED SECURITIES;
AND

 

(H)                                 THE CREDIT PARTIES AND THEIR SUBSIDIARIES
MAY MAKE PAYMENTS PURSUANT TO AND IN ACCORDANCE WITH THE CROSS LICENSE AGREEMENT
AND TRANSFER PRICING AGREEMENTS.

 

7.6                               TRANSACTIONS WITH AFFILIATES

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, enter into or consummate any transaction with any Affiliate of
such Person other than:

 

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(A)                                  AS EXPRESSLY PERMITTED BY, AND SUBJECT TO
THE TERMS OF, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE REVOLVING LOAN
DOCUMENTS;

 

(B)                                 COMPENSATION AND EMPLOYMENT ARRANGEMENTS
(INCLUDING PERMITTED SECURITIES ISSUED AS EQUITY COMPENSATION) WITH EMPLOYEE,
OFFICERS AND DIRECTORS IN THE ORDINARY COURSE OF BUSINESS AND TO THE EXTENT
OTHERWISE PERMITTED UNDER SECTION 7.5(E);

 

(C)                                  OTHER TRANSACTIONS PURSUANT TO WRITTEN
AGREEMENTS BETWEEN A CREDIT PARTY OR ITS SUBSIDIARY AND ANY SUCH AFFILIATES THAT
ARE ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS AND PURSUANT TO THE
REASONABLE REQUIREMENTS OF THE BUSINESS OF SUCH CREDIT PARTY; PROVIDED, THAT
SUCH TRANSACTIONS AND AGREEMENTS ARE ON FAIR AND REASONABLE TERMS NOT LESS
FAVORABLE TO SUCH PERSON THAN WOULD BE OBTAINED IN AN ARM’S LENGTH TRANSACTION
BETWEEN UNRELATED PARTIES OF EQUAL BARGAINING POWER;

 

(D)                                 (I) TRANSACTIONS BETWEEN OR AMONG ANY OF THE
CREDIT PARTIES AND/OR THEIR DOMESTIC WHOLLY-OWNED SUBSIDIARIES THAT ARE OR
CONCURRENT WITH SUCH TRANSACTION BECOMES A CREDIT PARTY AND (II) TRANSACTIONS
BETWEEN OR AMONG THE REVOLVING BORROWERS AND ITS SUBSIDIARIES THAT ARE PERMITTED
BY THE REVOLVING LOAN AGREEMENT;

 

(E)                                  THE CROSS LICENSE AGREEMENT AND THE
TRANSFER PRICING AGREEMENTS IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT IN
ITS PERMITTED DISCRETION; AND

 

(F)                                    THE AGREEMENTS IDENTIFIED ON
SCHEDULE 7.6.

 

7.7                               TRANSFER OF ASSETS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, directly or indirectly, sell, lease, transfer, convey, assign
or otherwise dispose of (whether in a single transaction or a series of
transactions) any Property or any interest therein, or agree to do any of the
foregoing, except that:

 

(A)                                  BORROWER AND ITS SUBSIDIARIES MAY SELL
LEASE, TRANSFER, CONVEY, ASSIGN OR OTHERWISE DISPOSE OF (WHETHER IN A SINGLE
TRANSACTION OR A SERIES OF TRANSACTIONS) OBSOLETE, WORN OUT, REPLACED, DAMAGED
OR EXCESS PROPERTY THAT IS NO LONGER NEEDED IN THE ORDINARY COURSE OF BUSINESS
AND HAS A BOOK VALUE NOT EXCEEDING $200,000 IN THE AGGREGATE IN ANY FISCAL YEAR;

 

(B)                                 BORROWER AND ITS SUBSIDIARIES MAY SELL OR
OTHERWISE DISPOSE OF INVENTORY AND USE CASH IN THE ORDINARY COURSE OF BUSINESS
AND LIQUIDATE OR SELL CASH EQUIVALENTS IN THE ORDINARY COURSE OF BUSINESS;

 

(C)                                  BORROWER AND ITS SUBSIDIARIES MAY SELL,
LEASE, TRANSFER, CONVEY, ASSIGN OR OTHERWISE DISPOSE OF OTHER PROPERTIES NOT
SPECIFICALLY PERMITTED OTHERWISE IN THIS SECTION 7.7 (OTHER THAN CAPITAL STOCK
OF A CREDIT PARTY TO THE EXTENT OWNED BY ANOTHER CREDIT PARTY) TO THE EXTENT
(A) BORROWER OR SUCH SUBSIDIARY COMPLIES WITH THE MANDATORY PREPAYMENT
PROVISIONS OF SECTION 2.5(C) IN CONNECTION THEREWITH (TO THE EXTENT THE PROCEEDS
THEREOF ARE NOT REINVESTED IN ACCORDANCE WITH THE TERMS OF SUCH
SECTION 2.5(C)(I)), (B) SUCH SALE IS FOR FAIR MARKET VALUE AND THE AGGREGATE
FAIR MARKET VALUE OF ALL ASSETS SO SOLD DOES NOT EXCEED $250,000 IN ANY FISCAL
YEAR, (C) NO DEFAULT OR EVENT OF DEFAULT EXISTS OR OTHERWISE WOULD RESULT
THEREFROM, (D) AFTER GIVING EFFECT

 

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TO SUCH TRANSACTION, THE CREDIT PARTIES ARE IN COMPLIANCE ON A PRO FORMA BASIS
WITH THE FINANCIAL COVENANTS REFERENCED IN SECTION 7.1(A) (RECOMPUTED FOR THE
MOST RECENT PERIOD FOR WHICH FINANCIAL STATEMENTS HAVE BEEN DELIVERED IN
ACCORDANCE WITH THE TERMS HEREOF AFTER GIVING EFFECT THERETO AS OF THE FIRST DAY
OF SUCH PERIOD), AND (E) THE SOLE CONSIDERATION THEREFOR RECEIVED BY BORROWER OR
SUCH SUBSIDIARY IS CASH;

 

(D)                                 TRANSACTIONS OTHERWISE PERMITTED UNDER
SECTIONS 7.2, 7.3, 7.4, 7.5, 7.6 AND 7.8 TO THE EXTENT PERMITTED THEREUNDER; 

 

(E)                                  ANY CREDIT PARTY MAY SELL, TRANSFER,
CONVEY, ASSIGN OR OTHERWISE DISPOSE OF PROPERTY TO ANY OTHER CREDIT PARTY;

 

(F)                                    BORROWER AND ITS SUBSIDIARIES MAY LICENSE
AND SUBLICENSE THEIR INTELLECTUAL PROPERTY IN THE ORDINARY COURSE OF BUSINESS ON
A NON-EXCLUSIVE BASIS SO LONG AS SUCH LICENSE DOES NOT RESTRICT THE ABILITY OF
AGENT AND LENDERS TO EXERCISE THEIR RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND THE REVOLVING LOAN DOCUMENTS WITH RESPECT TO SUCH INTELLECTUAL PROPERTY
SUBJECT TO SUCH LICENSE.  SUCH LICENSE MAY INCLUDE A RESTRICTION ON THE
ASSIGNABILITY OF THE LICENSE AND ITS CONTINUATION AFTER A CHANGE IN CONTROL;

 

(G)                                 THE REVOLVING BORROWER AND ITS SUBSIDIARIES
MAY DISPOSE OF PROPERTY TO THE EXTENT PERMITTED BY THE REVOLVING LOAN DOCUMENTS.

 

7.8                               CONTINGENT OBLIGATIONS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to, enter into, create, assume, suffer to exist or incur any
Contingent Obligations or assume, guarantee, indemnify, endorse, contingently
agree to purchase or otherwise become liable for or upon or incur any obligation
of any Person, except:

 

(A)                                  BORROWER OR ANY OF ITS DOMESTIC
SUBSIDIARIES MAY ENTER INTO GUARANTEES OF INDEBTEDNESS OF BORROWER OR ANY SUCH
DOMESTIC SUBSIDIARY THAT ARE CREDIT PARTIES OTHERWISE PERMITTED UNDER
SECTION 7.2;

 

(B)                                 BORROWER AND ITS SUBSIDIARIES MAY ENDORSE
CHECKS FOR COLLECTION IN THE ORDINARY COURSE OF BUSINESS;

 

(C)                                  BORROWER AND THE REVOLVING BORROWER MAY
ENTER INTO UNSECURED HEDGING AGREEMENTS IN THE ORDINARY COURSE OF BUSINESS FOR
BONA FIDE HEDGING PURPOSES AND NOT FOR SPECULATION IN AN AGGREGATE NOTIONAL OR
CONTRACT AMOUNT NOT TO EXCEED $250,000 OUTSTANDING AT ANY TIME;

 

(D)                                 CONTINGENT OBLIGATIONS OF BORROWER AND ITS
SUBSIDIARIES INCURRED IN THE ORDINARY COURSE OF BUSINESS WITH RESPECT TO
WORKERS’ COMPENSATION CLAIMS, UNEMPLOYMENT INSURANCE AND OTHER TYPES OF SOCIAL
SECURITY BENEFITS, SELF-INSURANCE OBLIGATIONS, BANKERS’ ACCEPTANCES, PERFORMANCE
BONDS, APPEAL AND SURETY BONDS AND OTHER SIMILAR OBLIGATIONS;

 

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(E)                                  CONTINGENT OBLIGATIONS OF BORROWER AND ITS
SUBSIDIARIES ARISING UNDER INDEMNITY AGREEMENTS TO TITLE INSURERS TO CAUSE SUCH
TITLE INSURERS TO ISSUE TO AGENT TITLE INSURANCE POLICIES;

 

(F)                                    THE TSE CONTINGENT OBLIGATIONS;

 

(G)                                 CONTINGENT OBLIGATIONS OF ANY CREDIT PARTY
OR SUBSIDIARY THEREOF ARISING FROM INDEMNIFICATION OBLIGATIONS TO ITS DIRECTORS,
OFFICERS AND EMPLOYEES IN THE ORDINARY COURSE OF BUSINESS;

 

(H)                                 A GUARANTY OF THE OBLIGATIONS OF THE
REVOLVING BORROWER UNDER THE REVOLVING LOAN DOCUMENTS;

 

(I)                                     INDEMNITIES GIVEN BY ANY CREDIT PARTY OR
ANY SUBSIDIARY THEREOF TO ITS CUSTOMERS, VENDORS, INDEPENDENT CONTRACTORS,
PURCHASERS OR SELLERS OF PROPERTY, OR OTHER THIRD PARTIES IN THE ORDINARY COURSE
OF BUSINESS; AND

 

(J)                                     CONTINGENT OBLIGATIONS IN RESPECT OF
EVOLVING SYSTEMS’ GUARANTEE OF THE EXPENSES INCURRED BY CERTAIN EMPLOYEES IN
CONNECTION WITH THE USE OF CREDIT CARDS SPONSORED BY EVOLVING SYSTEMS IN AN
AGGREGATE AMOUNT NOT TO EXCEED $150,000 AT ANY TIME OUTSTANDING.

 

7.9                               ORGANIZATIONAL DOCUMENTS; ACCOUNTING CHANGES;
USE OF PROCEEDS; INSURANCE; BUSINESS

 

No Credit Party shall, and no Credit Party shall permit or cause any of its
Subsidiaries to:

 

(A)                                  AMEND, MODIFY, RESTATE OR CHANGE ANY OF ITS
ARTICLES OF INCORPORATION, BYLAWS, CERTIFICATE OF FORMATION, OPERATING
AGREEMENT, AND OTHER CHARTER DOCUMENTS, IN ANY RESPECT ADVERSE TO AGENT OR
LENDERS (INCLUDING CHANGING ITS NAME), OR MAKE ANY MATERIAL CHANGE TO ITS EQUITY
CAPITAL STRUCTURE OR, WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT (BUT WITHOUT
LIMITING THE MERGERS OR OTHER TRANSACTIONS INVOLVING ANY CREDIT PARTY OTHERWISE
PERMITTED UNDER SECTION 7.4(H)), REINCORPORATE OR REORGANIZE ITSELF UNDER THE
LAWS OF ANY JURISDICTION OTHER THAN THE JURISDICTION IN WHICH IT IS INCORPORATED
OR ORGANIZED AS OF THE CLOSING DATE;

 

(B)                                 MAKE ANY SIGNIFICANT CHANGE IN ACCOUNTING
TREATMENT OR REPORTING PRACTICES, EXCEPT AS REQUIRED BY GAAP OR TO ACCOMMODATE
FAS 123R, OR CHANGE ITS FISCAL YEAR;

 

(C)                                  USE ANY PROCEEDS OF THE LOAN, DIRECTLY OR
INDIRECTLY, FOR “PURCHASING” OR “CARRYING” “MARGIN STOCK” AS DEFINED IN
REGULATIONS T, U OR X OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM,
OR TO REPAY OR REFINANCE INDEBTEDNESS INCURRED TO SO “PURCHASE” OR “CARRY”
“MARGIN STOCK,” OR OTHERWISE IN VIOLATION OF APPLICABLE LAW OR THIS AGREEMENT;

 

(D)                                 AMEND, MODIFY, RESTATE OR CHANGE ANY
INSURANCE POLICY IN ANY MATERIAL RESPECT INCLUDING, WITHOUT LIMITATION, ANY
MATERIAL INCREASE IN THE AMOUNT OF ANY DEDUCTIBLES PAYABLE BY THE CREDIT PARTIES
UNDER ANY SUCH INSURANCE POLICY OR ANY MATERIAL CHANGE IN THE SCOPE OF COVERAGE,
COVERAGE AMOUNT, BENEFICIARIES, LOSS PAYEES AND/OR ADDITIONAL INSUREDS EXCEPT
ADDITIONAL INSUREDS PERMITTED BY SECTION 6.4(C), BUT EXCLUDING CHANGES IN THE
TERM OF COVERAGE IN CONNECTION WITH RENEWALS THEREOF IN THE ORDINARY COURSE OF
BUSINESS;

 

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(E)                                  ENGAGE, DIRECTLY OR INDIRECTLY, IN ANY
BUSINESS OTHER THAN THE BUSINESS; OR

 

(F)                                    ALLOW INTERMEDIATE HOLDCO TO ENGAGE IN
ANY BUSINESS OTHER THAN THE OWNERSHIP OF THE EQUITY SECURITIES OF EVOLVING
SYSTEMS HOLDINGS LIMITED AND ACTIVITIES INCIDENTAL THERETO.

 

7.10                        RELATED DOCUMENTS; SUBORDINATED DEBT; AND TSE
CONTINGENT OBLIGATIONS

 

(A)                                  NO CREDIT PARTY SHALL, AND NO CREDIT PARTY
SHALL PERMIT OR CAUSE ANY OF ITS SUBSIDIARIES TO, (I) AMEND, SUPPLEMENT, WAIVE
OR OTHERWISE MODIFY ANY OF THE TERMS OR PROVISIONS OF, AND WILL NOT FAIL TO
ENFORCE OR DILIGENTLY PURSUE ITS REMEDIES UNDER, ANY RELATED DOCUMENT, AS IN
EFFECT ON THE CLOSING DATE, IN ANY MANNER ADVERSE TO AGENT OR ANY LENDER OR
WHICH WOULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT, OR
(II) TAKE OR FAIL TO TAKE ANY OTHER ACTION UNDER ANY RELATED DOCUMENT THAT WOULD
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(B)                                 NO CREDIT PARTY SHALL, AND NO CREDIT PARTY
SHALL PERMIT OR CAUSE ANY OF ITS SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY, AMEND,
SUPPLEMENT OR OTHERWISE MODIFY THE TERMS OF ANY SUBORDINATED DEBT EXCEPT AS
EXPRESSLY PERMITTED UNDER THE APPLICABLE SUBORDINATION AGREEMENT.

 

(C)                                  NO CREDIT PARTY SHALL, AND NO CREDIT PARTY
SHALL PERMIT OR CAUSE ANY OF ITS SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY, AMEND,
TERMINATE, SUPPLEMENT OR OTHERWISE, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
AGENT IN ITS PERMITTED DISCRETION, MODIFY THE TERMS OF THE TSE PURCHASE
AGREEMENT, THE CROSS LICENSE AGREEMENT OR TRANSFER PRICING AGREEMENTS OR ANY TSE
CONTINGENT OBLIGATIONS IN ANY MATERIAL RESPECT OR IN ANY MANNER ADVERSE TO AGENT
OR LENDERS; PROVIDED, HOWEVER, THAT THE PARTIES MAY AMEND THE TSE PURCHASE
AGREEMENT SO LONG AS SUCH AMENDMENT IS NOT ADVERSE TO THE INTERESTS OF AGENT OR
LENDERS UNDER THE LOAN DOCUMENTS OR THE REVOLVING LOAN DOCUMENTS AND DOES NOT
EXTEND THE DURATION OF THE AGREEMENT, INCREASE THE AGGREGATE AMOUNTS DUE
THEREUNDER, OR ACCELERATE PAYMENT DATES.  THE CREDIT PARTIES SHALL NOTIFY AND
PROMPTLY PROVIDE AGENT WITH COPIES OF ANY AMENDMENT, MODIFICATION, RESTATEMENT
OR CHANGE TO SUCH AGREEMENTS.

 

7.11                        NEGATIVE PLEDGES

 

EXCEPT AS A RESULT OF THE LOAN DOCUMENTS AND THE REVOLVING LOAN DOCUMENTS, NO
CREDIT PARTY SHALL, AND NO CREDIT PARTY SHALL PERMIT OR CAUSE ANY OF ITS
SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY, CREATE OR OTHERWISE CAUSE OR SUFFER TO
EXIST OR BECOME EFFECTIVE ANY CONSENSUAL RESTRICTION OR ENCUMBRANCE OF ANY KIND
ON THE ABILITY OF ANY SUCH SUBSIDIARY TO PAY DIVIDENDS OR MAKE ANY OTHER
DISTRIBUTION ON ANY OF SUCH SUBSIDIARY’S EQUITY SECURITIES OR TO PAY FEES OR
MAKE OTHER PAYMENTS AND DISTRIBUTIONS TO BORROWER OR ANY OF ITS SUBSIDIARIES
EXCEPT AS PERMITTED UNDER THE TRANSFER PRICING AGREEMENTS.  NO CREDIT PARTY
SHALL, AND NO CREDIT PARTY SHALL PERMIT OR CAUSE ANY OF ITS DOMESTIC
SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY, ENTER INTO, ASSUME OR BECOME SUBJECT TO
ANY CONTRACT OR AGREEMENT THAT PROHIBITS OR OTHERWISE RESTRICTS THE EXISTENCE OF
ANY LIEN UPON ANY OF ITS PROPERTY IN FAVOR OF AGENT, FOR THE BENEFIT OF THE
LENDER PARTIES UNDER THE LOAN DOCUMENTS, WHETHER NOW OWNED OR HEREAFTER ACQUIRED
EXCEPT (A) IN CONNECTION WITH ANY DOCUMENT OR INSTRUMENT GOVERNING LIENS RELATED
TO PURCHASE MONEY INDEBTEDNESS AND CAPITAL LEASES WHICH, IN EACH CASE, OTHERWISE
CONSTITUTE PERMITTED LIENS AND (B) LEASED EQUIPMENT,

 

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INTELLECTUAL PROPERTY AND GENERAL INTANGIBLES OF ANY CREDIT PARTY TO THE EXTENT
EXCLUDED FROM COLLATERAL IN SECTION 2(C) OF THE SECURITY AGREEMENT.

 

7.12                        CERTAIN SPECIFIC AGREEMENTS

 

NEITHER ANY CREDIT PARTY NOR ANY SUBSIDIARY OF ANY CREDIT PARTY (I) WILL BE OR
BECOME A PERSON WHOSE PROPERTY OR INTERESTS IN PROPERTY ARE BLOCKED OR SUBJECT
TO BLOCKING PURSUANT TO SECTION 1 OF EXECUTIVE ORDER 13224 OF SEPTEMBER 23, 2001
BLOCKING PROPERTY AND PROHIBITING TRANSACTIONS WITH PERSONS WHO COMMIT, THREATEN
TO COMMIT OR SUPPORT TERRORISM (66 FED. REG. 49079(2001), (II) WILL ENGAGE IN
ANY IN ANY DEALINGS OR TRANSACTIONS PROHIBITED BY SECTION 2 OF SUCH EXECUTIVE
ORDER, OR OTHERWISE BE ASSOCIATED WITH ANY SUCH PERSON IN ANY MANNER VIOLATIVE
OF SECTION 2 OF SUCH EXECUTIVE ORDER, OR (III) OTHERWISE WILL BECOME A PERSON ON
THE LIST OF SPECIALLY DESIGNATED NATIONALS AND BLOCKED PERSONS OR SUBJECT TO THE
LIMITATIONS OR PROHIBITIONS UNDER ANY OTHER OFAC REGULATION OR EXECUTIVE ORDER.

 

7.13                        SHAREHOLDER BLOCKING RIGHTS

 

No Credit Party shall issue any Capital Stock which grants or provides any
direct or indirect owner or equityholder thereof any Shareholder Blocking
Rights.

 

VIII.                        EVENTS OF DEFAULT

 

The occurrence of any one or more of the following shall constitute an “Event of
Default”:

 

(A)                                  ANY CREDIT PARTY SHALL FAIL TO PAY WHEN DUE
AND PAYABLE (I) ANY PRINCIPAL OR PREPAYMENT PREMIUM PROVIDED FOR OR REQUIRED
UNDER THIS AGREEMENT AND/OR THE NOTES, OR (II) WITHIN TWO (2) BUSINESS DAYS
AFTER THE SAME SHALL BECOME DUE AND PAYABLE, ANY INTEREST, FEES OR OTHER
OBLIGATIONS (OTHER THAN PRINCIPAL OR PREMIUM) PROVIDED FOR OR REQUIRED UNDER
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, IN ANY SUCH CASE DESCRIBED IN THE
FOREGOING CLAUSE (I) OR (II), WHETHER ON ANY PAYMENT DATE, AT MATURITY, BY
REASON OF ACCELERATION, BY NOTICE OF INTENTION TO PREPAY, BY REQUIRED PREPAYMENT
OR OTHERWISE);

 

(B)                                 ANY REPRESENTATION, STATEMENT OR WARRANTY
MADE OR DEEMED MADE BY OR ON BEHALF OF ANY CREDIT PARTY IN ANY LOAN DOCUMENT OR
REVOLVING LOAN DOCUMENT, OR IN ANY OTHER CERTIFICATE, DOCUMENT, REPORT OR
OPINION DELIVERED PURSUANT TO ANY LOAN DOCUMENT OR REVOLVING LOAN DOCUMENT TO
WHICH IT IS A PARTY SHALL NOT BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS OR
SHALL HAVE BEEN FALSE OR MISLEADING IN ANY MATERIAL RESPECT TAKEN AS A WHOLE AND
IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH IT WAS MADE OR FURNISHED ON THE DATE
WHEN MADE OR DEEMED TO HAVE BEEN MADE (EXCEPT TO THE EXTENT ALREADY QUALIFIED BY
MATERIALITY, IN WHICH CASE IT SHALL HAVE BEEN TRUE AND CORRECT IN ALL RESPECTS
AND SHALL NOT HAVE BEEN FALSE OR MISLEADING IN ANY RESPECT TAKEN AS A WHOLE AND
IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH IT WAS MADE OR FURNISHED ON THE DATE
WHEN MADE OR DEEMED TO HAVE BEEN MADE);

 

(C)                                  ANY CREDIT PARTY THERETO SHALL BE IN
VIOLATION, BREACH OR DEFAULT OF, OR SHALL FAIL TO PERFORM, OBSERVE OR COMPLY
WITH, ANY COVENANT, OBLIGATION OR AGREEMENT SET FORTH IN, OR ANY EVENT OF
DEFAULT OCCURS UNDER, ANY LOAN DOCUMENT AND SUCH VIOLATION, BREACH, DEFAULT,
EVENT OF DEFAULT OR FAILURE SHALL NOT BE CURED WITHIN THE APPLICABLE PERIOD, IF
ANY, SET FORTH IN THE

 

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APPLICABLE LOAN DOCUMENT; PROVIDED THAT, WITH RESPECT TO THE AFFIRMATIVE
COVENANTS SET FORTH IN ARTICLE VI (OTHER THAN SECTIONS 6.1, 6.3(C), 6.4, 6.5,
6.7(B) OR 6.8, FOR WHICH NO CURE PERIOD SHALL APPLY), ANY SUCH VIOLATION,
BREACH, DEFAULT, EVENT OF DEFAULT OR FAILURE SHALL RESULT IN ANY EVENT OF
DEFAULT ONLY IF IT REMAINS UNCURED FOR THIRTY (30) CALENDAR DAYS AFTER THE
EARLIER OF (I) RECEIPT (AS DEFINED IN SECTION 12.5) BY SUCH PERSON OF WRITTEN
NOTICE OF SUCH VIOLATION, BREACH, DEFAULT, EVENT OF DEFAULT OR FAILURE AND
(II) THE TIME AT WHICH ANY OFFICER OF A CREDIT PARTY KNEW OR BECAME AWARE, OR
SHOULD REASONABLY HAVE KNOWN OR BEEN AWARE, OF SUCH VIOLATION, BREACH, DEFAULT,
EVENT OF DEFAULT OR FAILURE;

 

(D)                                 (I) ANY OF THE LOAN DOCUMENTS CEASES FOR ANY
REASON TO BE IN FULL FORCE AND EFFECT OR (II) ANY LIEN, EXCEPT LIENS THAT THE
AGENT CHOOSES NOT TO PERFECT, CREATED UNDER ANY LOAN DOCUMENTS CEASES (OTHER
THAN PURSUANT TO THE EXPRESS TERMS OF THE APPLICABLE LOAN DOCUMENT) TO
CONSTITUTE A VALID FIRST PRIORITY PERFECTED LIEN (OTHER THAN WITH RESPECT TO
PROPERTY SUBJECT ONLY TO PRIORITY PERMITTED LIENS) ON THE COLLATERAL IN
ACCORDANCE WITH THE TERMS THEREOF;

 

(E)                                  ONE OR MORE JUDGMENTS OR DECREES IS OR ARE
RENDERED AGAINST THE CREDIT PARTIES, ANY SUBSIDIARY OF ANY CREDIT PARTY OR ANY
OF THEM IN AN OUTSTANDING AMOUNT, AT ANY ONE TIME, IN EXCESS OF $175,000
INDIVIDUALLY OR $350,000 IN THE AGGREGATE (EXCLUDING JUDGMENTS AND DECREES TO
THE EXTENT COVERED BY THIRD PARTY INSURANCE OF SUCH PERSONS WHERE SUCH COVERAGE
HAS BEEN ACKNOWLEDGED BY THE INSURER), WHICH IS/ARE NOT SATISFIED, STAYED,
VACATED OR DISCHARGED OF RECORD WITHIN THIRTY (30) CALENDAR DAYS OF BEING
RENDERED;

 

(F)                                    ANY CREDIT PARTY OR ANY SUBSIDIARY OF ANY
CREDIT PARTY SHALL, OR THERE SHALL OCCUR:

 

(I)                                     DEFAULT IN THE PAYMENT OF ANY PRINCIPAL
OF OR INTEREST WHEN DUE ON ANY INDEBTEDNESS (OTHER THAN THE OBLIGATIONS AND THE
“OBLIGATIONS” AS DEFINED IN THE REVOLVING LOAN AGREEMENT) IN THE OUTSTANDING
PRINCIPAL AMOUNT IN EXCESS OF $250,000 IN THE AGGREGATE, WHICH DEFAULT IS NOT
CURED OR WAIVED WITHIN ANY APPLICABLE GRACE OR CURE PERIOD;

 

(II)                                  DEFAULT OR BREACH THE TERMS OF ANY NOTE,
AGREEMENT, INDENTURE OR OTHER DOCUMENT EVIDENCING OR RELATING TO ANY
INDEBTEDNESS (OTHER THAN THE OBLIGATIONS AND THE “OBLIGATIONS” AS DEFINED IN THE
REVOLVING LOAN AGREEMENT) IN THE OUTSTANDING PRINCIPAL AMOUNT IN EXCESS OF
$750,000 IN THE AGGREGATE, WHICH DEFAULT OR BREACH IS NOT CURED OR WAIVED WITHIN
ANY APPLICABLE GRACE OR CURE PERIOD AND THE EFFECT OF WHICH IS TO CAUSE, OR TO
PERMIT THE HOLDER OR HOLDERS OF ANY SUCH INDEBTEDNESS TO CAUSE, SUCH
INDEBTEDNESS TO BECOME DUE (WHETHER BY ACCELERATION OR OTHERWISE) PRIOR TO THE
STATED MATURITY THEREOF;

 

(III)                               DEFAULT OR BREACH THE TERMS OF ANY
AGREEMENT, CONTRACT, DOCUMENT OR INSTRUMENT THAT IS BETWEEN ANY CREDIT PARTY AND
AGENT OR ANY LENDER OR ANY AFFILIATE OF AGENT OR ANY LENDER (OTHER THAN THE LOAN
DOCUMENTS) BEYOND ALL APPLICABLE GRACE OR CURE PERIODS;

 

(IV)                              UPON WRITTEN NOTICE FROM AGENT, ANY DEFAULT OR
BREACH IN THE PERFORMANCE, OBSERVANCE OR FULFILLMENT OF ANY PROVISION CONTAINED
IN ANY MATERIAL

 

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CONTRACT AND SUCH DEFAULT OR BREACH CONTINUES BEYOND ALL APPLICABLE GRACE OR
CURE PERIOD AND PERMITS THE OTHER PARTY THERETO TO TERMINATE SUCH MATERIAL
CONTRACT OR OTHERWISE REDUCE OR LIMIT ANY MATERIAL AMOUNTS OWED BY SUCH OTHER
PARTY THEREUNDER;

 

(V)                                 AN “EVENT OF DEFAULT” (AS DEFINED IN THE
SUBORDINATED NOTES); OR

 

(VI)                              AN “EVENT OF DEFAULT” (AS DEFINED IN THE
REVOLVING LOAN AGREEMENT).

 

(G)                                 ANY CREDIT PARTY OR ANY SUBSIDIARY OF ANY
CREDIT PARTY SHALL (I) BE UNABLE TO PAY ITS DEBTS GENERALLY AS THEY BECOME DUE,
AS DETERMINED BY AGENT IN ITS PERMITTED DISCRETION, (II) FILE A VOLUNTARY
PETITION UNDER ANY INSOLVENCY STATUTE, (III) MAKE A GENERAL ASSIGNMENT FOR THE
BENEFIT OF ITS CREDITORS, (IV) COMMENCE A PROCEEDING FOR THE APPOINTMENT OF A
RECEIVER, TRUSTEE, LIQUIDATOR OR CONSERVATOR OF ITSELF OR OF THE WHOLE OR ANY
SUBSTANTIAL PART OF ITS PROPERTY OR SHALL OTHERWISE BE DISSOLVED OR LIQUIDATED
(OTHER THAN AS PERMITTED UNDER SECTION 7.4(H)), OR (V) FILE A PETITION SEEKING
REORGANIZATION OR LIQUIDATION OR SIMILAR RELIEF UNDER ANY DEBTOR RELIEF LAW OR
ANY OTHER APPLICABLE LAW OR STATUTE;

 

(H)                                 (I) A COURT OF COMPETENT JURISDICTION SHALL
(A) ENTER AN ORDER, JUDGMENT OR DECREE APPOINTING A CUSTODIAN, RECEIVER,
TRUSTEE, LIQUIDATOR OR CONSERVATOR OF ANY CREDIT PARTY OR ANY SUBSIDIARY OF ANY
CREDIT PARTY OR THE WHOLE OR ANY SUBSTANTIAL PART OF ANY SUCH PERSON’S
PROPERTIES, WHICH SHALL CONTINUE UNDISMISSED AND UNSTAYED AND IN EFFECT FOR A
PERIOD OF SIXTY (60) CALENDAR DAYS, (B) APPROVE A PETITION FILED AGAINST ANY
CREDIT PARTY OR ANY SUBSIDIARY OF ANY CREDIT PARTY SEEKING REORGANIZATION,
LIQUIDATION OR SIMILAR RELIEF UNDER THE ANY DEBTOR RELIEF LAW OR ANY OTHER
APPLICABLE LAW OR STATUTE, WHICH IS NOT DISMISSED OR STAYED WITHIN SIXTY (60)
CALENDAR DAYS, OR (C) UNDER THE PROVISIONS OF ANY DEBTOR RELIEF LAW OR OTHER
APPLICABLE LAW OR STATUTE, ASSUME CUSTODY OR CONTROL OF ANY CREDIT PARTY OR ANY
SUBSIDIARY OF ANY CREDIT PARTY OR OF THE WHOLE OR ANY SUBSTANTIAL PART OF ANY
SUCH PERSON’S PROPERTIES, WHICH IS NOT IRREVOCABLY RELINQUISHED WITHIN SIXTY
(60) CALENDAR DAYS, (II) THERE IS COMMENCED AGAINST ANY CREDIT PARTY OR ANY
SUBSIDIARY OF ANY CREDIT PARTY ANY PROCEEDING OR PETITION SEEKING
REORGANIZATION, LIQUIDATION OR SIMILAR RELIEF UNDER ANY DEBTOR RELIEF LAW OR ANY
OTHER APPLICABLE LAW OR STATUTE (A) WHICH IS NOT UNCONDITIONALLY DISMISSED OR
STAYED WITHIN SIXTY (60) CALENDAR DAYS AFTER THE DATE OF COMMENCEMENT, OR (B) IN
RESPECT OF WHICH SUCH CREDIT PARTY OR ANY SUBSIDIARY OF ANY CREDIT PARTY TAKES
ANY ACTION TO INDICATE ITS APPROVAL OF OR CONSENT TO ANY SUCH PROCEEDING OR
PETITION; OR (III) ANY STAYED ORDER, JUDGMENT, DECREE, PROCEEDING, PETITION OR
OTHER ITEM IS REINSTATED.

 

(I)                                     ANY CHANGE OF CONTROL OR ANY MATERIAL
ADVERSE EFFECT OCCURS;

 

(J)                                     AGENT OR ANY LENDER RECEIVES ANY
EVIDENCE THAT ANY CREDIT PARTY HAS DIRECTLY OR INDIRECTLY BEEN ENGAGED IN ANY
TYPE OF ACTIVITY WHICH, IN AGENT’S PERMITTED DISCRETION, WOULD REASONABLY BE
EXPECTED TO RESULT IN FORFEITURE OF ANY MATERIAL PORTION OF COLLATERAL TO ANY
GOVERNMENTAL AUTHORITY, WHICH SHALL HAVE CONTINUED UNREMEDIED FOR A PERIOD OF
TWENTY (20) CALENDAR DAYS AFTER WRITTEN NOTICE FROM AGENT;

 

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(K)                                  UNINSURED DAMAGE TO, OR UNINSURED LOSS,
THEFT OR DESTRUCTION OF, ANY PORTION OF THE COLLATERAL OCCURS THAT EXCEEDS
$250,000 IN THE AGGREGATE;

 

(L)                                     (I) ANY CREDIT PARTY IS CRIMINALLY
INDICTED OR CONVICTED (A) OF A FELONY OR (B) UNDER ANY LAW THAT WOULD REASONABLY
BE EXPECTED TO LEAD TO FORFEITURE OF ANY MATERIAL PORTION OF COLLATERAL, OR
(II) ANY DIRECTOR OR SENIOR OFFICER OF ANY CREDIT PARTY IS CONVICTED (A) OF A
FELONY FOR FRAUD OR DISHONESTY IN CONNECTION WITH THE BUSINESS OR (B) UNDER ANY
LAW THAT WOULD REASONABLY BE EXPECTED TO LEAD TO FORFEITURE OF ANY MATERIAL
PORTION OF COLLATERAL;

 

(M)                               THE ISSUANCE OF ANY PROCESS FOR LEVY,
ATTACHMENT OR GARNISHMENT OR EXECUTION UPON OR ANY JUDGMENT AGAINST ANY CREDIT
PARTY OR ANY OF ITS MATERIAL PROPERTY OR AGAINST ANY OF THE COLLATERAL, WHICH
HAS AN AGGREGATE FAIR MARKET VALUE IN EXCESS OF $175,000 INDIVIDUALLY OR
$350,000 IN THE AGGREGATE IN ANY CASE WHICH IS NOT SATISFIED, STAYED, VACATED,
DISMISSED OR DISCHARGED WITHIN THIRTY (30) CALENDAR DAYS OF BEING ISSUED OR
EXECUTED;

 

(N)                                 (I) THE SUBORDINATION PROVISIONS OF THE
SELLER SUBORDINATION AGREEMENT AND/OR THE SUBORDINATION PROVISIONS CONTAINED IN
OR OTHERWISE PERTAINING TO ANY AGREEMENT OR INSTRUMENT GOVERNING ANY
SUBORDINATED DEBT SHALL FOR ANY REASON BE REVOKED OR INVALIDATED, OR CEASE TO BE
IN FULL FORCE AND EFFECT, OR (II) ANY PERSON SHALL RAISE A NON-FRIVOLOUS CLAIM
IN COURT CONTESTING IN ANY MANNER THE VALIDITY OR ENFORCEABILITY THEREOF,
(III) ANY PERSON SHALL TAKE ANY ACTION IN VIOLATION THEREOF OR FAIL TO TAKE ANY
ACTION REQUIRED BY THE TERMS THEREOF THAT WOULD REASONABLY BE EXPECTED TO HAVE
AN ADVERSE EFFECT ON THE RIGHTS AND REMEDIES OF AGENT OR LENDERS, OR (IV) THE
OBLIGATIONS, FOR ANY REASON SHALL NOT HAVE THE PRIORITY CONTEMPLATED BY THIS
AGREEMENT, THE SELLER SUBORDINATION AGREEMENT OR SUCH SUBORDINATION PROVISIONS;

 

(O)                                 AN “EVENT OF DEFAULT” UNDER ANY OTHER LOAN
DOCUMENT OCCURS (TO THE EXTENT, WITH RESPECT TO ANY SUCH OTHER LOAN DOCUMENT,
NOT OTHERWISE CONSTITUTING AN EVENT OF DEFAULT HEREUNDER);

 

(P)                                 ANY CREDIT PARTY IS ENJOINED, RESTRAINED OR
IN ANY WAY PREVENTED BY THE ORDER OF ANY COURT OR OTHER GOVERNMENTAL AUTHORITY
FROM CONDUCTING ALL OR ANY MATERIAL PART OF ITS BUSINESS FOR MORE THAN FIFTEEN
(15) CALENDAR DAYS WHICH IS REASONABLY LIKELY TO BE, HAVE OR RESULT IN A
MATERIAL ADVERSE EFFECT;

 

(Q)                                 IF THE “SHELF REGISTRATION STATEMENT” (AS
DEFINED IN THE CERTIFICATE OF DESIGNATION OF EVOLVING SYSTEM’S SERIES B
CONVERTIBLE PREFERRED STOCK (“CERTIFICATE OF DESIGNATION”)) TO BE PREPARED AND
FILED BY THE CORPORATION (AS DEFINED IN THE CERTIFICATE OF DESIGNATION) IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF SECTION 2.3 OF THE INVESTOR RIGHTS
AGREEMENT (AS DEFINED IN THE CERTIFICATE OF DESIGNATION) BY AND AMONG THE
CORPORATION AND THE HOLDERS OF THE SERIES B PREFERRED STOCK DATED AS OF THE
SERIES B ORIGINAL ISSUE DATE (AS DEFINED IN THE CERTIFICATE OF DESIGNATION)
(I) IS NOT DECLARED EFFECTIVE BY THE SEC AS CONTEMPLATED BY SECTION 2.3 OR
(II) IF DECLARED EFFECTIVE, IS NOT KEPT CONTINUOUSLY EFFECTIVE AS CONTEMPLATED
BY SECTION 2.4 OF THE INVESTOR RIGHTS AGREEMENT, OR ANY OTHER EVENT OCCURS WHICH
WITH THE PASSAGE OF TIME AND/OR GIVING OF NOTICE WOULD GRANT A HOLDER OF
EVOLVING SYSTEM’S PREFERRED STOCK THE RIGHTS DESCRIBED IN SECTION 5 OF THE
CERTIFICATE OF DESIGNATION; OR

 

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(R)                                    THE OCCURRENCE OF A “LIQUIDATION” AS
DEFINED IN THE CERTIFICATE OF DESIGNATION OR ANY OTHER EVENT WHICH WITH THE
PASSAGE OF TIME AND/OR GIVING OF NOTICE WOULD GIVE RISE TO A “LIQUIDATION” TO
WHICH AGENT HAS NOT PREVIOUSLY EXPRESSLY CONSENTED IN WRITING;

 

If an Event of Default occurs and is continuing, notwithstanding any other
provision of any Loan Document, (I) Agent may (and at the request of Requisite
Lenders, shall), by notice to Borrower (i) terminate Lenders’ Commitments and
obligations hereunder, whereupon the same shall immediately terminate, and
(ii) declare all or any of the Loan and/or any Notes, all interest thereon and
all other Obligations (including, without limitation, the Prepayment Premium, if
any) to be due and payable immediately including any Prepayment Premium
calculated as if such Obligations were prepaid on the date of the Event of
Default (provided, that in the case of any Event of Default under
Article VIII(g), (h), (q), or (r) all of the foregoing automatically and without
any act by Agent or any Lender shall be due and payable immediately and Lenders’
Commitments and obligations hereunder shall immediately terminate; in each case
without presentment, demand, protest or notice of any kind, all of which hereby
are expressly waived by the Credit Parties), and (II) without limiting any of
the other rights and/or remedies of Agent and Lenders, no action permitted to be
taken under Article VII hereof may be taken to the extent such action is
expressly prohibited during the existence of an Event of Default.

 

IX.                                RIGHTS AND REMEDIES AFTER DEFAULT

 

9.1                               RIGHTS AND REMEDIES

 

(A)                                  IN ADDITION TO THE ACCELERATION AND OTHER
PROVISIONS SET FORTH IN ARTICLE VIII, UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF AN EVENT OF DEFAULT, AGENT SHALL HAVE THE RIGHT TO (AND AT THE
REQUEST OF REQUISITE LENDERS, SHALL) EXERCISE ANY AND ALL RIGHTS AND REMEDIES
PROVIDED FOR IN ANY LOAN DOCUMENT OR ANY REVOLVING LOAN DOCUMENT, UNDER THE UCC
OR AT LAW OR IN EQUITY, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO (I) APPLY ANY PROPERTY OF ANY CREDIT PARTY HELD
BY AGENT, FOR THE BENEFIT OF THE LENDER PARTIES, OR ANY LENDER TO REDUCE THE
OBLIGATIONS, (II) FORECLOSE THE LIENS CREATED UNDER THE LOAN DOCUMENTS OR THE
REVOLVING LOAN DOCUMENTS, (III) ENFORCE, REALIZE UPON, TAKE POSSESSION OF AND/OR
SELL OR OTHERWISE TRANSFER ANY COLLATERAL OR SECURITIES PLEDGED, WITH OR WITHOUT
JUDICIAL PROCESS, (IV) EXERCISE ALL RIGHTS AND POWERS WITH RESPECT TO THE
COLLATERAL AS ANY CREDIT PARTY MIGHT EXERCISE, (V) COLLECT AND SEND NOTICES
REGARDING THE COLLATERAL, WITH OR WITHOUT JUDICIAL PROCESS, (VI) BY ITS OWN
MEANS OR WITH JUDICIAL ASSISTANCE, ENTER ANY PREMISES AT WHICH COLLATERAL AND/OR
PLEDGED SECURITIES ARE LOCATED, OR RENDER ANY OF THE FOREGOING UNUSABLE OR
DISPOSE OF THE COLLATERAL AND/OR PLEDGED SECURITIES ON SUCH PREMISES WITHOUT ANY
LIABILITY FOR RENT, STORAGE, UTILITIES, OR OTHER SUMS, AND NO CREDIT PARTY SHALL
RESIST OR INTERFERE WITH SUCH ACTION, (VII) AT CREDIT PARTIES’ EXPENSE, REQUIRE
THAT ALL OR ANY PART OF THE COLLATERAL BE ASSEMBLED AND MADE AVAILABLE TO AGENT
AT ANY PLACE WHERE THE CREDIT PARTIES REGULARLY MAINTAIN INVENTORY OR PROPERTY
DESIGNATED BY AGENT IN ITS PERMITTED DISCRETION, AND/OR (VIII) RELINQUISH OR
ABANDON ANY COLLATERAL OR SECURITIES PLEDGED OR ANY LIEN THEREON. 
NOTWITHSTANDING ANY PROVISION OF ANY LOAN DOCUMENT, AGENT, IN ITS PERMITTED
DISCRETION, SHALL HAVE THE RIGHT, AT ANY TIME THAT ANY CREDIT PARTY FAILS TO DO
SO, AND FROM TIME TO TIME, WITHOUT PRIOR NOTICE, TO: (I) OBTAIN INSURANCE
COVERING ANY OF THE COLLATERAL TO THE EXTENT REQUIRED HEREUNDER; (II) PAY FOR
THE PERFORMANCE OF ANY OF THE OBLIGATIONS; (III) DISCHARGE TAXES, LEVIES AND/OR
LIENS ON ANY OF THE COLLATERAL THAT ARE IN VIOLATION OF ANY LOAN DOCUMENT; AND
(IV) PAY FOR THE MAINTENANCE, REPAIR AND/OR PRESERVATION OF THE

 

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COLLATERAL.  SUCH EXPENSES AND ADVANCES SHALL BE ADDED TO THE OBLIGATIONS UNTIL
REIMBURSED TO AGENT AND SHALL BE SECURED BY THE COLLATERAL AND PAYABLE ON
DEMAND, AND SUCH PAYMENTS BY AGENT SHALL NOT BE CONSTRUED AS A WAIVER BY AGENT
OR LENDERS OF ANY EVENT OF DEFAULT OR ANY OTHER RIGHTS OR REMEDIES OF AGENT AND
LENDERS.

 

(B)                                 THE CREDIT PARTIES JOINTLY AND SEVERALLY
AGREE THAT NOTICE RECEIVED BY ANY OF THEM AT LEAST TEN (10) CALENDAR DAYS BEFORE
THE TIME OF ANY INTENDED PUBLIC SALE, OR THE TIME AFTER WHICH ANY PRIVATE SALE
OR OTHER DISPOSITION OF COLLATERAL IS TO BE MADE, SHALL BE DEEMED TO BE
REASONABLE NOTICE OF SUCH SALE OR OTHER DISPOSITION.  IF PERMITTED BY APPLICABLE
LAW, ANY PERISHABLE COLLATERAL WHICH THREATENS TO SPEEDILY DECLINE IN VALUE OR
WHICH IS SOLD ON A RECOGNIZED MARKET MAY BE SOLD IMMEDIATELY BY AGENT WITHOUT
PRIOR NOTICE TO ANY CREDIT PARTY.  AT ANY SALE OR DISPOSITION OF COLLATERAL OR
SECURITIES PLEDGED, AGENT MAY (TO THE EXTENT PERMITTED BY APPLICABLE LAW)
PURCHASE ALL OR ANY PART THEREOF FREE FROM ANY RIGHT OF REDEMPTION BY THE CREDIT
PARTIES, WHICH RIGHT HEREBY IS WAIVED AND RELEASED.  THE CREDIT PARTIES JOINTLY
AND SEVERALLY COVENANT AND AGREE NOT TO, AND NOT TO PERMIT OR CAUSE ANY OF THEIR
SUBSIDIARIES TO, INTERFERE WITH OR IMPOSE ANY OBSTACLE TO AGENT’S EXERCISE OF
ITS RIGHTS AND REMEDIES WITH RESPECT TO THE COLLATERAL.  IN DEALING WITH OR
DISPOSING OF THE COLLATERAL OR ANY PART THEREOF, AGENT AND LENDERS SHALL NOT BE
REQUIRED TO GIVE PRIORITY OR PREFERENCE TO ANY ITEM OF COLLATERAL OR OTHERWISE
TO MARSHAL ASSETS OR TO TAKE POSSESSION OR SELL ANY COLLATERAL WITH JUDICIAL
PROCESS.

 

(C)                                  EACH CREDIT PARTY HEREBY GRANTS TO AGENT,
FOR THE BENEFIT OF THE LENDER PARTIES, AFTER THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, AN IRREVOCABLE, NONEXCLUSIVE LICENSE
(EXERCISABLE WITHOUT PAYMENT OF ROYALTY OR OTHER COMPENSATION TO SUCH CREDIT
PARTY) TO USE, ASSIGN, LICENSE OR SUBLICENSE ANY INTELLECTUAL PROPERTY, (UNLESS
SUCH USE, ASSIGNMENT, LICENSE OR SUBLICENSE IS EXPRESSLY PROHIBITED UNDER A
LICENSE AGREEMENT AND WOULD RESULT IN A BREACH UNDER SUCH AGREEMENT FOR WHICH
SUCH AGREEMENT WOULD REASONABLY BE EXPECTED TO BE TERMINATED BY SUCH LICENSOR)
AND NOW OWNED OR HEREAFTER ACQUIRED BY SUCH CREDIT PARTY, AND WHEREVER THE SAME
MAY BE LOCATED, INCLUDING IN SUCH LICENSE REASONABLE ACCESS AS TO ALL MEDIA IN
WHICH ANY OF THE LICENSED ITEMS MAY BE RECORDED OR STORED AND TO ALL COMPUTER
PROGRAMS AND USED FOR THE COMPILATION OR PRINTOUT THEREOF.  ALL PROCEEDS
RECEIVED BY AGENT OR LENDERS IN CONNECTION WITH SUCH LICENSE SHALL BE USED BY
AGENT OR LENDERS TO SATISFY THE OBLIGATIONS.

 

(D)                                 IN ADDITION TO THE ACCELERATION AND OTHER
PROVISIONS SET FORTH IN ARTICLE VIII, UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF AN EVENT OF DEFAULT, EACH CREDIT PARTY SHALL TAKE ANY ACTION
THAT AGENT, FOR THE BENEFIT OF ITSELF AND THE LENDERS, MAY REQUEST IN ORDER TO
ENABLE AGENT TO OBTAIN AND ENJOY THE FULL RIGHTS AND BENEFITS GRANTED TO AGENT
HEREUNDER.

 

9.2                               APPLICATION OF PROCEEDS

 

In addition to any other rights and remedies Agent and Lenders have under the
Loan Documents or the Revolving Loan Documents, the UCC, at law or in equity,
all payments received after the occurrence and during the continuation of any
Event of Default, and all proceeds collected or received from collecting,
holding, managing, renting, selling or otherwise disposing of all or any part of
the Collateral or any proceeds thereof upon exercise of remedies hereunder upon
the occurrence and during the continuation of an Event of Default, shall be
applied in the following order of priority:

 

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(I)                             FIRST, TO THE PAYMENT OF ALL COSTS AND EXPENSES
OF SUCH COLLECTION, HOLDING, MANAGING, RENTING, SELLING OR DISPOSITION, AND OF
CONDUCTING THE CREDIT PARTIES’ BUSINESSES AND OF MAINTENANCE, REPAIRS,
REPLACEMENTS, ALTERATIONS, ADDITIONS AND IMPROVEMENTS OF OR TO THE COLLATERAL,
AND TO THE PAYMENT OF ALL SUMS WHICH AGENT OR LENDERS MAY BE REQUIRED OR MAY
ELECT TO PAY, IF ANY, FOR TAXES, ASSESSMENTS, INSURANCE AND OTHER CHARGES UPON
THE COLLATERAL OR ANY PART THEREOF, AND ALL OTHER PAYMENTS THAT AGENT OR LENDERS
MAY BE REQUIRED OR AUTHORIZED TO MAKE UNDER ANY PROVISION OF THE LOAN DOCUMENTS
(INCLUDING, WITHOUT LIMITATION, IN EACH SUCH CASE, IN-HOUSE DOCUMENTATION AND
DILIGENCE FEES AND LEGAL EXPENSES, SEARCH, AUDIT, RECORDING, PROFESSIONAL AND
FILING FEES AND EXPENSES AND REASONABLE ATTORNEYS’ FEES AND ALL EXPENSES,
LIABILITIES AND ADVANCES MADE OR INCURRED IN CONNECTION THEREWITH);

 

(II)                          SECOND, TO PAYMENT OF ALL ACCRUED UNPAID INTEREST
ON THE OBLIGATIONS AND FEES OWED TO THE AGENT AND LENDERS;

 

(III)                       THIRD, TO PAYMENT OF PRINCIPAL OF THE OBLIGATIONS;

 

(IV)                      FOURTH, TO PAYMENT OF ANY OTHER AMOUNTS OWING
CONSTITUTING OBLIGATIONS; AND

 

(V)                         FIFTH, ANY SURPLUS THEN REMAINING TO THE CREDIT
PARTIES, UNLESS OTHERWISE PROVIDED BY LAW OR DIRECTED BY A COURT OF COMPETENT
JURISDICTION;

 

provided that the Credit Parties shall be liable for any deficiency if such
proceeds are insufficient to satisfy all of the Obligations or any of the other
items referred to in this Section.  In carrying out the foregoing, (x) amounts
received shall be applied in the numerical order provided until exhausted prior
to the application to the next succeeding category; and (y) each of the Lenders
shall receive an amount equal to its pro rata share of amounts available to be
applied pursuant to clauses (i), (ii), (iii) and (iv) above.

 

9.3                               RIGHTS TO APPOINT RECEIVER

 

Without limiting any other rights, options and remedies Agent and Lenders have
under the Loan Documents or the Revolving Loan Documents, the UCC, at law or in
equity, upon the occurrence and during the continuation of an Event of Default,
Agent shall have the right to apply for and have a receiver appointed by a court
of competent jurisdiction in any action taken by Agent to enforce its and
Lenders’ rights and remedies in order to manage, protect and preserve the
Collateral, to sell or dispose of the Collateral and continue the operation of
the Businesses of the Credit Parties and to collect all revenues and profits
thereof and apply the same to the payment of all expenses and other charges of
such receivership including the compensation of the receiver and to the payments
as aforesaid until a sale or other disposition of such Collateral shall be
finally made and consummated.  To the extent not prohibited by applicable law,
each Credit Party hereby irrevocably consents to, and waives any right to object
to or otherwise contest, the appointment of, a receiver as provided above.

 

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9.4                               ATTORNEY IN FACT

 

Each Credit Party hereby irrevocably appoints Agent, for the benefit of the
Lender Parties, as its attorney in fact to take any action Agent or Requisite
Lenders deem necessary or desirable upon the occurrence and during the
continuation of an Event of Default to protect and realize upon the Liens in the
Collateral, including the execution and delivery of any and all documents or
instruments related to the Collateral in such Credit Party’s name, and said
appointment shall create in Agent, for the benefit of the Lender Parties, a
power coupled with an interest.

 

9.5                               RIGHTS AND REMEDIES NOT EXCLUSIVE

 

As among the Lender Parties on one hand and the Credit Parties on the other
hand, Agent and Lenders shall have the right in their sole discretion to
determine which rights, Liens and/or remedies Agent and/or Lenders may at any
time pursue, relinquish, subordinate or modify, and such determination shall not
in any way modify or affect any of Agent’s or Lenders’ rights, Liens or remedies
under any Loan Document, any Revolving Loan Documents, applicable law or
equity.  The enumeration of any rights and remedies in any Loan Document or any
Revolving Loan Document is not intended to be exhaustive, and all rights and
remedies of Agent and the Lenders described in any Loan Document and the
Revolving Loan Documents are cumulative and are not alternative to or exclusive
of any other rights or remedies which Agent and Lenders otherwise may have.  The
partial or complete exercise of any right or remedy shall not preclude any other
further exercise of such or any other right or remedy.

 

X.                                    WAIVERS AND JUDICIAL PROCEEDINGS

 

10.1                        CERTAIN WAIVERS

 

Except as expressly provided for herein or in any other Loan Document, each
Credit Party hereby waives set-off, counterclaim, demand, presentment, protest,
all defenses with respect to any and all instruments and all notices and demands
of any description, and the pleading of any statute of limitations as a defense
to any demand under any Loan Document.  Each Credit Party hereby waives any and
all defenses and counterclaims it may have or could interpose in any action or
procedure brought by Agent or any Lender to obtain an order of court recognizing
the assignment of, or Lien of Agent, for the benefit the Lender Parties, in and
to, any Collateral.

 

10.2                        DELAY; NO WAIVER OF DEFAULTS

 

No course of action or dealing, renewal, release or extension of any provision
of any Loan Document, or single or partial exercise of any such provision, or
delay, failure or omission on Agent’s or any Lender’s part in enforcing any such
provision shall affect the liability of any Credit Party or operate as a waiver
of such provision or affect the liability of any Credit Party or preclude any
other or further exercise of such provision.  No waiver by any party to any Loan
Document of any one or more defaults by any other party in the performance of
any of the provisions of any Loan Document shall operate or be construed as a
waiver of any future default, whether of a like or different nature, and each
such waiver shall be limited solely to the express

 

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terms and provisions of such waiver.  Notwithstanding any other provision of any
Loan Document or any Revolving Loan Documents, by completing the Closing under
this Agreement and funding the Loan, neither Agent nor any Lender waives any
breach of any representation or warranty of any Credit Party under any Loan
Document or any Revolving Loan Documents, and all of Agent’s and Lenders’ claims
and rights resulting from any such breach or misrepresentation hereby
specifically are reserved.

 

10.3                        JURY WAIVER

 

EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY
CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE
LOAN DOCUMENTS, ANY REVOLVING LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE.  EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY,
AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

 

10.4                        AMENDMENT AND WAIVERS

 

Except as otherwise provided herein, no amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, or consent
to any departure by the Credit Parties or any of them therefrom, shall be
effective unless the same shall be in writing and signed by Requisite Lenders
(or Agent at the direction of the Requisite Lenders) and each Credit Party;
provided, that no amendment, modification, termination or waiver shall, unless
in writing and signed by each Credit Party and each Lender directly affected
thereby, do any of the following: (i) increase the Commitment of any individual
Lender (which action shall be deemed to directly affect all Lenders);
(ii) reduce the principal of, rate (or cash rate) of interest on or fees payable
with respect to any Loan or other Obligation; (iii) extend the scheduled due
date, or reduce the amount due on any scheduled due date, of any installment of
principal, interest or fees payable under any Loan Document, or waive, forgive,
extend, defer or postpone the payment thereof; (iv) change the percentage of the
Commitments, of the aggregate unpaid principal amount of the Loan, or of Lenders
which shall be required for Lenders, Agent or any of them to take any action
hereunder (which action shall be deemed to directly affect all Lenders) or alter
as between or among the Lenders, the amount payable to each hereunder;
(v) except as otherwise permitted herein or in the other Loan Documents, release
any Guaranty or release any material portion of the Collateral (which action
shall be deemed to directly affect all Lenders) (provided, that consent to such
release shall not be required if such release is made after the occurrence and
during the continuation of an Event of Default in connection with the sale or
disposition of the Collateral by Agent otherwise permitted hereunder);
(vi) amend, modify or waive this Section 10.4 or the definitions of the terms
used in this Section 10.4 insofar as the definitions affect the substance of
this Section 10.4 (which action shall be deemed to directly affect all Lenders);
and/or (vii) consent to the assignment or other transfer by any Credit Party or
any other party to

 

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any Loan Documents (other than Agent or any Lender) of any of their rights and
obligations under any Loan Document; and provided, further, that no amendment,
modification, termination or waiver affecting the rights or duties of Agent
under any Loan Document shall be effective unless in writing and signed by
Agent, in addition to Lenders required hereinabove to take such action.  Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 10.4 shall be binding upon Agent, each Lender and the Credit
Parties.

 

10.5                        SURVIVAL AND TERMINATION

 

(A)                                  ALL OBLIGATIONS, COVENANTS, AGREEMENTS,
REPRESENTATIONS, WARRANTIES, WAIVERS AND INDEMNITIES MADE BY EACH CREDIT PARTY
IN THE LOAN DOCUMENTS SHALL SURVIVE THE EXECUTION AND DELIVERY OF THE LOAN
DOCUMENTS, THE CLOSING, THE MAKING AND FUNDING OF THE LOAN AND ANY TERMINATION
OF THIS AGREEMENT UNTIL ALL OBLIGATIONS (OTHER THAN CONTINGENT INDEMNIFICATION
OBLIGATIONS TO THE EXTENT NO CLAIM GIVING RISE THERETO HAS BEEN ASSERTED) ARE
FULLY PERFORMED AND INDEFEASIBLY PAID IN FULL IN CASH AND ALL COMMITMENTS HAVE
BEEN TERMINATED; PROVIDED, THAT, THE OBLIGATIONS AND PROVISIONS OF SECTIONS
10.1, 10.3, 10.5, 12.3, 12.4, 12.7, 12.9, 12.10 AND 12.11, ARTICLE XI AND
ARTICLE XIII SHALL SURVIVE THE TERMINATION OF THE LOAN DOCUMENTS AND ANY
PAYMENT, IN FULL OR IN PART, OF THE OBLIGATIONS.

 

(B)                                 THE LOAN AND OTHER OBLIGATIONS SHALL BE DUE
AND PAYABLE IN FULL IN CASH, IF NOT EARLIER IN ACCORDANCE WITH THIS AGREEMENT,
ON THE MATURITY DATE.  ALL OF AGENT’S AND LENDERS’ RIGHTS AND REMEDIES AND THE
LIENS IN THE COLLATERAL SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL, AND THIS
AGREEMENT SHALL TERMINATE WHEN ALL OBLIGATIONS HAVE BEEN FULLY PERFORMED AND
INDEFEASIBLY PAID IN FULL IN CASH AND CREDIT PARTIES SHALL HAVE EXECUTED AND
DELIVERED RELEASES IN FAVOR OF AGENT AND LENDERS IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT, IN ITS PERMITTED DISCRETION (PROVIDED, HOWEVER, THAT THE
RELEASE MAY EXCLUDE CLAIMS FILED BY A CREDIT PARTY AGAINST AGENT OR A LENDER
PRIOR TO THE PAYOFF CONTEMPLATED IN THIS SECTION 10.5(B), ARISING OUT OF THE
GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUD OF AGENT OR SUCH LENDER). 
ACCORDINGLY, EACH CREDIT PARTY WAIVES ANY RIGHT IT MAY HAVE UNDER THE UCC TO
DEMAND THE FILING OF TERMINATION STATEMENTS WITH RESPECT TO THE COLLATERAL OTHER
THAN SUCH RIGHT IN CONNECTION WITH THE RELEASE OF LIENS PURSUANT TO SALES OR
OTHER DISPOSITIONS OF ASSETS EXPRESSLY PERMITTED UNDER THIS TERMS OF THIS
AGREEMENT, AND AGENT SHALL NOT BE REQUIRED TO PROVIDE SUCH TERMINATION
STATEMENTS OR TO FILE THEM WITH ANY FILING OFFICE UNLESS AND UNTIL ALL
CONDITIONS TO THE TERMINATION OF THIS AGREEMENT AND THE PAYMENT AND PERFORMANCE
OF THE OBLIGATIONS ARE SATISFIED IN A MANNER ACCEPTABLE TO AGENT, IN ITS
PERMITTED DISCRETION.

 

XI.                                AGENT PROVISIONS; SETTLEMENT

 

11.1                        AGENT

 

(A)                                  APPOINTMENT.  EACH LENDER HEREBY DESIGNATES
AND APPOINTS CAPITALSOURCE AS THE ADMINISTRATIVE AGENT, PAYMENT AGENT AND
COLLATERAL AGENT UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND EACH
LENDER HEREBY IRREVOCABLY AUTHORIZES CAPITALSOURCE, AS AGENT FOR SUCH LENDER, TO
TAKE SUCH ACTION OR TO REFRAIN FROM TAKING SUCH ACTION ON ITS BEHALF UNDER THE
PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND TO EXERCISE SUCH
POWERS AND PERFORM SUCH DUTIES AS ARE DELEGATED TO AGENT BY THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, TOGETHER WITH SUCH OTHER POWERS AS ARE
REASONABLY

 

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INCIDENTAL THERETO.  AGENT AGREES TO ACT AS SUCH ON THE CONDITIONS CONTAINED IN
THIS ARTICLE XI.  THE PROVISIONS OF THIS ARTICLE XI ARE SOLELY FOR THE BENEFIT
OF AGENT AND LENDERS, AND THE CREDIT PARTIES SHALL HAVE NO RIGHTS AS THIRD-PARTY
BENEFICIARIES OF ANY OF THE PROVISIONS OF THIS ARTICLE XI OTHER THAN
SECTION 11.1(H)(III).  AGENT MAY PERFORM ANY OF ITS DUTIES HEREUNDER, OR UNDER
THE LOAN DOCUMENTS, BY OR THROUGH ITS AGENTS, EMPLOYEES OR SUB-AGENTS.

 

(B)                                 NATURE OF DUTIES.  IN PERFORMING ITS
FUNCTIONS AND DUTIES UNDER THIS AGREEMENT, AGENT IS ACTING SOLELY ON BEHALF OF
LENDERS, AND ITS DUTIES ARE ADMINISTRATIVE IN NATURE, AND DOES NOT ASSUME AND
SHALL NOT BE DEEMED TO HAVE ASSUMED, ANY OBLIGATION TOWARD OR RELATIONSHIP OF
AGENCY OR TRUST WITH OR FOR LENDERS, OTHER THAN AS EXPRESSLY SET FORTH HEREIN
AND IN THE OTHER LOAN DOCUMENTS, OR THE CREDIT PARTIES.  AGENT SHALL HAVE NO
DUTIES, OBLIGATIONS OR RESPONSIBILITIES EXCEPT THOSE EXPRESSLY SET FORTH IN THIS
AGREEMENT OR IN THE OTHER LOAN DOCUMENTS.  AGENT SHALL NOT HAVE BY REASON OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT A FIDUCIARY RELATIONSHIP IN RESPECT OF
ANY LENDER.  EACH LENDER SHALL MAKE ITS OWN INDEPENDENT INVESTIGATION OF THE
FINANCIAL CONDITION AND AFFAIRS OF THE CREDIT PARTIES IN CONNECTION WITH THE
EXTENSION OF CREDIT HEREUNDER AND SHALL MAKE ITS OWN APPRAISAL OF THE
CREDITWORTHINESS OF THE CREDIT PARTIES.  EXCEPT FOR INFORMATION, NOTICES,
REPORTS AND OTHER DOCUMENTS EXPRESSLY REQUIRED TO BE FURNISHED TO LENDERS BY
AGENT HEREUNDER OR GIVEN TO AGENT FOR THE ACCOUNT OF OR WITH COPIES FOR LENDERS,
AGENT SHALL HAVE NO DUTY OR RESPONSIBILITY, EITHER INITIALLY OR ON A CONTINUING
BASIS, TO PROVIDE ANY LENDER WITH ANY CREDIT OR OTHER INFORMATION WITH RESPECT
THERETO, WHETHER COMING INTO ITS POSSESSION BEFORE THE CLOSING DATE OR AT ANY
TIME OR TIMES THEREAFTER.  IF AGENT SEEKS THE CONSENT OR APPROVAL OF ANY LENDERS
TO THE TAKING OR REFRAINING FROM TAKING ANY ACTION HEREUNDER, THEN AGENT SHALL
SEND PRIOR WRITTEN NOTICE THEREOF TO EACH LENDER.  AGENT SHALL PROMPTLY NOTIFY
EACH LENDER IN WRITING ANY TIME THAT THE APPLICABLE PERCENTAGE OF LENDERS HAVE
INSTRUCTED AGENT TO ACT OR REFRAIN FROM ACTING PURSUANT HERETO.

 

(C)                                  RIGHTS, EXCULPATION, ETC.  NEITHER AGENT
NOR ANY OF ITS OFFICERS, DIRECTORS, MANAGERS, MEMBERS, EQUITY OWNERS, EMPLOYEES,
ATTORNEYS OR AGENTS SHALL BE LIABLE TO ANY LENDER FOR ANY ACTION LAWFULLY TAKEN
OR OMITTED BY THEM HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, OR IN
CONNECTION HEREWITH OR THEREWITH; PROVIDED THAT THE FOREGOING SHALL NOT PREVENT
AGENT FROM BEING BE LIABLE TO THE EXTENT OF ITS OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT JURISDICTION ON A FINAL AND
NONAPPEALABLE BASIS.  NOTWITHSTANDING THE FOREGOING, AGENT SHALL BE OBLIGATED ON
THE TERMS SET FORTH HEREIN FOR PERFORMANCE OF ITS EXPRESS DUTIES AND OBLIGATIONS
HEREUNDER.  AGENT SHALL NOT BE LIABLE FOR ANY APPORTIONMENT OR DISTRIBUTION OF
PAYMENTS MADE BY IT IN GOOD FAITH, AND IF ANY SUCH APPORTIONMENT OR DISTRIBUTION
IS SUBSEQUENTLY DETERMINED TO HAVE BEEN MADE IN ERROR, THE SOLE RECOURSE OF ANY
LENDER TO WHOM PAYMENT WAS DUE BUT NOT MADE SHALL BE TO RECOVER FROM THE OTHER
LENDERS ANY PAYMENT IN EXCESS OF THE AMOUNT TO WHICH THEY ARE DETERMINED TO BE
ENTITLED (AND SUCH OTHER LENDERS HEREBY AGREE PROMPTLY TO RETURN TO SUCH LENDER
ANY SUCH ERRONEOUS PAYMENTS RECEIVED BY THEM).  IN PERFORMING ITS FUNCTIONS AND
DUTIES HEREUNDER, AGENT SHALL EXERCISE THE SAME CARE WHICH IT WOULD IN DEALING
WITH LOANS FOR ITS OWN ACCOUNT.  AGENT SHALL NOT BE RESPONSIBLE TO ANY LENDER
FOR ANY RECITALS, STATEMENTS, REPRESENTATIONS OR WARRANTIES MADE BY THE CREDIT
PARTIES HEREIN OR FOR THE EXECUTION, EFFECTIVENESS, GENUINENESS, VALIDITY,
ENFORCEABILITY, COLLECTIBILITY OR SUFFICIENCY OF THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, OR FOR THE
FINANCIAL CONDITION OF THE CREDIT PARTIES.  AGENT SHALL NOT BE REQUIRED TO MAKE
ANY INQUIRY CONCERNING EITHER THE PERFORMANCE OR OBSERVANCE OF ANY OF THE TERMS,
PROVISIONS, OR CONDITIONS OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS, OR

 

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THE FINANCIAL CONDITION OF THE CREDIT PARTIES, OR THE EXISTENCE OR POSSIBLE
EXISTENCE OF ANY DEFAULT OR EVENT OF DEFAULT.  AGENT MAY AT ANY TIME REQUEST
INSTRUCTIONS FROM LENDERS WITH RESPECT TO ANY ACTIONS OR APPROVALS WHICH BY THE
TERMS OF THIS AGREEMENT OR OF ANY OF THE OTHER LOAN DOCUMENTS AGENT IS PERMITTED
OR REQUIRED TO TAKE OR TO GRANT, AND AGENT SHALL BE ABSOLUTELY ENTITLED TO
REFRAIN FROM TAKING ANY ACTION OR TO WITHHOLD ANY APPROVAL AND SHALL NOT BE
UNDER ANY LIABILITY WHATSOEVER TO ANY PERSON FOR REFRAINING FROM TAKING ANY
ACTION OR WITHHOLDING ANY APPROVAL UNDER ANY OF THE LOAN DOCUMENTS UNTIL IT
SHALL HAVE RECEIVED SUCH INSTRUCTIONS FROM THE APPLICABLE PERCENTAGE OF
LENDERS.  WITHOUT LIMITING THE FOREGOING, NO LENDER SHALL HAVE ANY RIGHT OF
ACTION WHATSOEVER AGAINST AGENT AS A RESULT OF AGENT ACTING OR REFRAINING FROM
ACTING UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS IN ACCORDANCE
WITH THE INSTRUCTIONS OF THE APPLICABLE PERCENTAGE OF LENDERS AND,
NOTWITHSTANDING THE INSTRUCTIONS OF LENDERS, AGENT SHALL HAVE NO OBLIGATION TO
TAKE ANY ACTION IF IT, IN GOOD FAITH, BELIEVES THAT SUCH ACTION EXPOSES AGENT OR
ANY OF ITS OFFICERS, DIRECTORS, MANAGERS, MEMBERS, EQUITY OWNERS, EMPLOYEES,
ATTORNEYS OR AGENTS TO ANY PERSONAL LIABILITY UNLESS AGENT RECEIVES AN
INDEMNIFICATION SATISFACTORY TO IT FROM LENDERS WITH RESPECT TO SUCH ACTION.

 

(D)                                 RELIANCE.  AGENT SHALL BE ENTITLED TO RELY
UPON ANY WRITTEN NOTICES, STATEMENTS, CERTIFICATES, ORDERS OR OTHER DOCUMENTS OR
ANY TELEPHONE MESSAGE OR OTHER COMMUNICATION (INCLUDING ANY WRITING, TELEX,
TELECOPY OR TELEGRAM) BELIEVED BY IT IN GOOD FAITH TO BE GENUINE AND CORRECT AND
TO HAVE BEEN SIGNED, SENT OR MADE BY THE PROPER PERSON, AND WITH RESPECT TO ALL
MATTERS PERTAINING TO THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE
REVOLVING LOAN DOCUMENTS AND ITS DUTIES HEREUNDER OR THEREUNDER, UPON ADVICE OF
LEGAL COUNSEL, INDEPENDENT ACCOUNTANTS AND OTHER EXPERTS SELECTED BY AGENT IN
ITS SOLE DISCRETION.

 

(E)                                  INDEMNIFICATION.  EACH LENDER, SEVERALLY
AND NOT (I) JOINTLY OR (II) JOINTLY AND SEVERALLY, AGREES TO REIMBURSE AND
INDEMNIFY AND HOLD HARMLESS AGENT AND ITS OFFICERS, DIRECTORS, MANAGERS,
MEMBERS, EQUITY OWNERS, EMPLOYEES, ATTORNEYS AND AGENTS (TO THE EXTENT NOT
REIMBURSED BY THE CREDIT PARTIES), RATABLY ACCORDING TO THEIR RESPECTIVE PRO
RATA SHARE IN EFFECT ON THE DATE ON WHICH INDEMNIFICATION IS SOUGHT UNDER THIS
SUBSECTION OF THE TOTAL OUTSTANDING OBLIGATIONS (OR, IF INDEMNIFICATION IS
SOUGHT AFTER THE DATE UPON WHICH THE COMMITMENTS SHALL HAVE TERMINATED AND THE
LOAN SHALL HAVE BEEN PAID IN FULL, RATABLY IN ACCORDANCE WITH THEIR PRO RATA
SHARE IMMEDIATELY PRIOR TO SUCH DATE OF THE TOTAL OUTSTANDING OBLIGATIONS), FROM
AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, ADVANCES, OR DISBURSEMENTS OF ANY
KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST AGENT OR ANY OF ITS OFFICERS, DIRECTORS, MANAGERS, MEMBERS, EQUITY
OWNERS, EMPLOYEES, ATTORNEYS OR AGENTS IN ANY WAY RELATING TO OR ARISING OUT OF
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE REVOLVING LOAN
DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY AGENT UNDER THIS AGREEMENT, ANY OF
THE OTHER LOAN DOCUMENTS OR ANY OF THE REVOLVING LOAN DOCUMENTS; PROVIDED,
HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES, ADVANCES OR DISBURSEMENTS TO THE EXTENT RESULTING FROM AGENT’S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION ON A FINAL AND NONAPPEALABLE BASIS.  THE OBLIGATIONS OF LENDERS
UNDER THIS ARTICLE XI SHALL SURVIVE THE PAYMENT IN FULL OF THE OBLIGATIONS AND
THE TERMINATION OF THIS AGREEMENT.

 

(F)                                    CAPITALSOURCE INDIVIDUALLY.  WITH RESPECT
TO THE LOAN MADE BY IT AND THE NOTES, IF ANY, ISSUED TO IT, CAPITALSOURCE SHALL
HAVE, AND MAY EXERCISE, THE SAME RIGHTS AND

 

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POWERS HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS, AND IS SUBJECT TO THE SAME
OBLIGATIONS AND LIABILITIES, AS AND TO THE EXTENT SET FORTH HEREIN AND THE OTHER
LOAN DOCUMENTS AS ANY OTHER LENDER.  THE TERMS “LENDERS” OR “REQUISITE LENDERS”
OR ANY SIMILAR TERMS SHALL, UNLESS THE CONTEXT CLEARLY OTHERWISE INDICATES,
INCLUDE CAPITALSOURCE IN ITS INDIVIDUAL CAPACITY AS A LENDER OR ONE OF THE
REQUISITE LENDERS.  CAPITALSOURCE MAY LEND MONEY TO, AND GENERALLY ENGAGE IN ANY
KIND OF BANKING, TRUST OR OTHER BUSINESS WITH, ANY CREDIT PARTY OR ANY
SUBSIDIARY OR AFFILIATE OF ANY CREDIT PARTY AS IF IT WERE NOT ACTING AS AGENT
PURSUANT HERETO.

 

(G)                                 SUCCESSOR AGENT.

 

(I)                             RESIGNATION.  AGENT MAY RESIGN FROM THE
PERFORMANCE OF ALL OR PART OF ITS FUNCTIONS AND DUTIES HEREUNDER AT ANY TIME BY
GIVING AT LEAST THIRTY (30) CALENDAR DAYS’ PRIOR WRITTEN NOTICE TO BORROWER AND
LENDERS.  SUCH RESIGNATION SHALL TAKE EFFECT UPON THE ACCEPTANCE BY A SUCCESSOR
AGENT OF APPOINTMENT PURSUANT TO CLAUSE (II) BELOW OR AS OTHERWISE PROVIDED
BELOW.

 

(II)                          APPOINTMENT OF SUCCESSOR.  UPON ANY SUCH NOTICE OF
RESIGNATION PURSUANT TO CLAUSE (G)(I) OF THIS SECTION 11.1, REQUISITE LENDERS
SHALL APPOINT A SUCCESSOR AGENT WITH THE CONSENT OF BORROWER, WHICH CONSENT
SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED (OR REQUIRED IF ANY
DEFAULT OR EVENT OF DEFAULT EXISTS).  IF A SUCCESSOR AGENT SHALL NOT HAVE BEEN
SO APPOINTED WITHIN SAID THIRTY (30) CALENDAR DAY PERIOD REFERENCED IN CLAUSE
(G)(I) ABOVE, THE RETIRING AGENT, UPON NOTICE TO BORROWER, MAY, ON BEHALF OF
LENDERS, APPOINT A SUCCESSOR AGENT WITH THE CONSENT OF BORROWER, WHICH CONSENT
SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED (OR REQUIRED IF ANY
DEFAULT OR EVENT OF DEFAULT EXISTS), WHO SHALL SERVE AS AGENT UNTIL SUCH TIME AS
REQUISITE LENDERS APPOINT A SUCCESSOR AGENT AS PROVIDED ABOVE.  IF NO SUCCESSOR
AGENT HAS BEEN APPOINTED PURSUANT TO THE FOREGOING WITHIN SAID THIRTY (30)
CALENDAR DAY PERIOD, THE RESIGNATION SHALL BECOME EFFECTIVE AND REQUISITE
LENDERS THEREAFTER SHALL PERFORM ALL THE DUTIES OF AGENT HEREUNDER, UNTIL SUCH
TIME, IF ANY, AS REQUISITE LENDERS APPOINT A SUCCESSOR AGENT AS PROVIDED ABOVE.

 

(III)                       SUCCESSOR AGENT.  UPON THE ACCEPTANCE OF ANY
APPOINTMENT AS AGENT UNDER THE LOAN DOCUMENTS BY A SUCCESSOR AGENT, SUCH
SUCCESSOR AGENT SHALL THEREUPON SUCCEED TO AND BECOME VESTED WITH ALL THE
RIGHTS, POWERS, PRIVILEGES AND DUTIES OF THE RETIRING AGENT AND, UPON THE
EARLIER OF SUCH ACCEPTANCE OR THE EFFECTIVE DATE OF THE RETIRING AGENT’S
RESIGNATION, THE RETIRING AGENT SHALL BE DISCHARGED FROM ITS DUTIES AND
OBLIGATIONS UNDER THE LOAN DOCUMENTS, PROVIDED THAT ANY INDEMNITY RIGHTS OR
OTHER RIGHTS IN FAVOR OF SUCH RETIRING AGENT SHALL CONTINUE AFTER AND SURVIVE
SUCH RESIGNATION AND SUCCESSION.  AFTER ANY RETIRING AGENT’S RESIGNATION AS
AGENT UNDER THE LOAN DOCUMENTS, THE PROVISIONS OF THIS ARTICLE XI SHALL INURE TO
ITS BENEFIT AS TO ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT WHILE IT WAS
AGENT UNDER THE LOAN DOCUMENTS.

 

(H)                                 COLLATERAL MATTERS.

 

(I)                             COLLATERAL.  EACH LENDER AGREES THAT ANY ACTION
TAKEN BY AGENT OR THE REQUISITE LENDERS (OR, WHERE REQUIRED BY THE EXPRESS TERMS
OF THIS AGREEMENT, A GREATER PROPORTION OF LENDERS) IN ACCORDANCE WITH THE
PROVISIONS OF THIS AGREEMENT OR OF

 

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THE OTHER LOAN DOCUMENTS RELATING TO THE COLLATERAL, AND THE EXERCISE BY AGENT
OR THE REQUISITE LENDERS (OR, WHERE SO REQUIRED, SUCH GREATER PROPORTION OF
LENDERS) OF THE POWERS SET FORTH HEREIN OR THEREIN, TOGETHER WITH SUCH OTHER
POWERS AS ARE REASONABLY INCIDENTAL THERETO, SHALL BE AUTHORIZED AND BINDING
UPON ALL OF THE LENDERS AND AGENT.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, AGENT SHALL HAVE THE SOLE AND EXCLUSIVE RIGHT AND AUTHORITY TO
(I) ACT AS THE DISBURSING AND COLLECTING AGENT FOR LENDERS WITH RESPECT TO ALL
PAYMENTS AND COLLECTIONS ARISING IN CONNECTION HEREWITH AND WITH THE LOAN
DOCUMENTS IN CONNECTION WITH THE COLLATERAL; (II) EXECUTE AND DELIVER EACH LOAN
DOCUMENT RELATING TO THE COLLATERAL AND ANY SUBORDINATION AGREEMENT AND ACCEPT
DELIVERY OF EACH SUCH AGREEMENT DELIVERED BY THE CREDIT PARTIES OR ANY OF THEIR
SUBSIDIARIES; (III) ACT AS COLLATERAL AGENT FOR LENDERS FOR PURPOSES OF THE
PERFECTION OF ALL SECURITY INTERESTS AND LIENS CREATED BY SUCH AGREEMENTS AND
ALL OTHER PURPOSES STATED THEREIN; (IV) MANAGE, SUPERVISE AND OTHERWISE DEAL
WITH THE COLLATERAL; (V) TAKE SUCH ACTION AS IS NECESSARY OR DESIRABLE TO
MAINTAIN THE PERFECTION AND PRIORITY OF THE SECURITY INTERESTS AND LIENS CREATED
OR PURPORTED TO BE CREATED BY THE LOAN DOCUMENTS RELATING TO THE COLLATERAL; AND
(VI) EXCEPT AS MAY BE OTHERWISE SPECIFICALLY RESTRICTED BY THE TERMS HEREOF OR
OF ANY OTHER LOAN DOCUMENT, EXERCISE ALL RIGHT AND REMEDIES GIVEN TO SUCH AGENT
AND LENDERS WITH RESPECT TO THE COLLATERAL UNDER THE LOAN DOCUMENTS RELATING
THERETO, APPLICABLE LAW OR OTHERWISE.

 

(II)                          RELEASE OF COLLATERAL.  LENDERS HEREBY IRREVOCABLY
AUTHORIZE AGENT, AT ITS OPTION AND IN ITS SOLE DISCRETION, TO RELEASE ANY LIEN
GRANTED TO OR HELD BY AGENT, FOR THE BENEFIT THE OF LENDER PARTIES, UPON ANY
PROPERTY COVERED BY THE LOAN DOCUMENTS (A) UPON TERMINATION OF THIS AGREEMENT
AND PAYMENT AND SATISFACTION IN FULL OF ALL OBLIGATIONS (OTHER THAN CONTINGENT
INDEMNIFICATION OBLIGATIONS TO THE EXTENT NO CLAIM GIVING RISE THERETO HAS BEEN
ASSERTED); (B) CONSTITUTING PROPERTY BEING SOLD OR DISPOSED OF IF BORROWER
CERTIFIES TO AGENT THAT THE SALE OR DISPOSITION IS MADE IN COMPLIANCE WITH THE
PROVISIONS OF THE LOAN DOCUMENTS (AND AGENT MAY RELY IN GOOD FAITH CONCLUSIVELY
ON ANY SUCH CERTIFICATE TO SUCH EFFECT, WITHOUT FURTHER INQUIRY); OR
(C) CONSTITUTING PROPERTY LEASED TO ANY CREDIT PARTY UNDER A LEASE WHICH HAS
EXPIRED OR BEEN TERMINATED IN A TRANSACTION PERMITTED UNDER THIS AGREEMENT OR IS
ABOUT TO EXPIRE AND WHICH HAS NOT BEEN, AND IS NOT INTENDED BY SUCH CREDIT PARTY
TO BE, RENEWED OR EXTENDED.

 

(III)                       CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES. 
WITHOUT IN ANY MANNER LIMITING AGENT’S AUTHORITY TO ACT WITHOUT ANY SPECIFIC OR
FURTHER AUTHORIZATION OR CONSENT BY LENDERS (AS SET FORTH IN
SECTION 11.1(H)(I) AND (II)), EACH LENDER AGREES TO CONFIRM IN WRITING, UPON
REQUEST BY BORROWER, THE AUTHORITY TO RELEASE ANY PROPERTY COVERED BY THIS
AGREEMENT OR THE LOAN DOCUMENTS CONFERRED UPON AGENT UNDER SECTION 11.1(H)(II). 
SO LONG AS NO EVENT OF DEFAULT EXISTS, UPON RECEIPT BY AGENT OF CONFIRMATION
FROM THE REQUISITE PERCENTAGE OF LENDERS OF ITS AUTHORITY TO RELEASE ANY
PARTICULAR ITEM OR TYPES OF PROPERTY COVERED BY THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, AND UPON AT LEAST FIVE (5) BUSINESS DAYS’ PRIOR WRITTEN REQUEST BY
BORROWER, AGENT SHALL (AND HEREBY IS IRREVOCABLY AUTHORIZED BY LENDERS TO)
EXECUTE SUCH DOCUMENTS AS MAY BE NECESSARY TO EVIDENCE THE RELEASE OF THE LIENS
GRANTED TO AGENT, FOR THE BENEFIT OF THE LENDER PARTIES, HEREIN OR PURSUANT
HERETO UPON SUCH COLLATERAL; PROVIDED, HOWEVER, THAT (A) AGENT SHALL NOT BE
REQUIRED TO EXECUTE ANY SUCH DOCUMENT

 

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ON TERMS WHICH, IN AGENT’S OPINION, WOULD EXPOSE AGENT TO LIABILITY OR CREATE
ANY OBLIGATION OR ENTAIL ANY CONSEQUENCE OTHER THAN THE RELEASE OF SUCH LIENS
WITHOUT RECOURSE OR WARRANTY (OTHER THAN THAT SUCH COLLATERAL IS FREE AND CLEAR,
ON THE DATE OF SUCH DELIVERY, OF ANY AND ALL LIENS ARISING UNDER THE LOAN
DOCUMENTS FROM SUCH PERSON’S OWN ACTS), AND (B) SUCH RELEASE SHALL NOT IN ANY
MANNER DISCHARGE, AFFECT OR IMPAIR THE OBLIGATIONS OR ANY LIENS UPON OR
OBLIGATIONS OF THE CREDIT PARTIES OR ANY SUBSIDIARY OF ANY CREDIT PARTY IN
RESPECT OF ALL INTERESTS RETAINED BY THE CREDIT PARTIES OR ANY SUBSIDIARY OF A
CREDIT PARTY, INCLUDING, WITHOUT LIMITATION, THE PROCEEDS OF ANY SALE, ALL OF
WHICH SHALL CONTINUE TO CONSTITUTE PART OF THE PROPERTY COVERED BY THIS
AGREEMENT, THE LOAN DOCUMENTS OR THE REVOLVING LOAN DOCUMENTS.

 

(IV)                      ABSENCE OF DUTY.  AGENT SHALL HAVE NO OBLIGATION
WHATSOEVER TO ANY LENDER OR ANY OTHER PERSON TO ASSURE THAT THE PROPERTY COVERED
BY THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS EXISTS OR IS OWNED BY ANY CREDIT
PARTY OR IS CARED FOR, PROTECTED OR INSURED OR HAS BEEN ENCUMBERED OR THAT THE
LIENS GRANTED TO AGENT, ON BEHALF OF THE LENDER PARTIES, HEREIN OR PURSUANT
HERETO HAVE BEEN PROPERLY OR SUFFICIENTLY OR LAWFULLY CREATED, PERFECTED,
PROTECTED, ENFORCED OR MAINTAINED OR ARE ENTITLED TO ANY PARTICULAR PRIORITY, OR
TO EXERCISE AT ALL OR IN ANY PARTICULAR MANNER OR UNDER ANY DUTY OF CARE,
DISCLOSURE, OR FIDELITY, OR TO CONTINUE EXERCISING, ANY OF THE RIGHTS,
AUTHORITIES AND POWERS GRANTED OR AVAILABLE TO AGENT IN THIS SECTION 11.1(H) OR
IN ANY OF THE OTHER LOAN DOCUMENTS; IT BEING UNDERSTOOD AND AGREED THAT IN
RESPECT OF THE PROPERTY COVERED BY THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS,
OR ANY ACT, OMISSION OR EVENT RELATED THERETO, AGENT MAY ACT IN ANY MANNER IT
MAY DEEM APPROPRIATE, IN ITS DISCRETION, GIVEN AGENT’S OWN INTEREST IN PROPERTY
COVERED BY THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS AS ONE OF LENDERS AND
AGENT SHALL HAVE NO DUTY OR LIABILITY WHATSOEVER TO ANY OF THE OTHER LENDERS;
PROVIDED, THAT AGENT SHALL EXERCISE THE SAME CARE WHICH IT WOULD IN DEALING WITH
LOANS FOR ITS OWN ACCOUNT.

 

(I)                                     AGENCY FOR PERFECTION.  EACH LENDER
HEREBY APPOINTS AGENT AS AGENT FOR THE PURPOSE OF PERFECTING LENDERS’ SECURITY
INTEREST IN COLLATERAL WHICH, IN ACCORDANCE WITH ARTICLE 9 OF THE UCC IN ANY
APPLICABLE JURISDICTION, CAN BE PERFECTED ONLY BY POSSESSION OR CONTROL.  SHOULD
ANY LENDER (OTHER THAN AGENT) OBTAIN POSSESSION OF ANY SUCH COLLATERAL, SUCH
LENDER SHALL HOLD SUCH COLLATERAL FOR PURPOSES OF PERFECTING A SECURITY INTEREST
THEREIN FOR THE BENEFIT OF THE LENDER PARTIES, NOTIFY AGENT THEREOF AND,
PROMPTLY UPON AGENT’S REQUEST THEREFOR, DELIVER SUCH COLLATERAL TO AGENT OR
OTHERWISE ACT IN RESPECT THEREOF IN ACCORDANCE WITH AGENT’S INSTRUCTIONS.

 

(J)                                     EXERCISE OF REMEDIES.  EXCEPT AS SET
FORTH IN SECTION 11.2, EACH LENDER AGREES THAT IT WILL NOT HAVE ANY RIGHT
INDIVIDUALLY TO ENFORCE OR SEEK TO ENFORCE THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR TO REALIZE UPON ANY COLLATERAL SECURITY FOR THE LOAN OR OTHER
OBLIGATIONS; IT BEING UNDERSTOOD AND AGREED THAT SUCH RIGHTS AND REMEDIES MAY BE
EXERCISED ONLY BY AGENT IN ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS.

 

(K)                                  CONSENTS.

 

(I)                                     IN THE EVENT AGENT REQUESTS THE WAIVER
OR CONSENT OF A LENDER AND DOES NOT RECEIVE A WRITTEN DENIAL THEREOF WITHIN FIVE
(5) BUSINESS DAYS AFTER SUCH

 

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LENDER’S RECEIPT OF SUCH REQUEST, THEN SUCH LENDER WILL BE DEEMED TO HAVE GIVEN
SUCH WAIVER OR CONSENT SO LONG AS SUCH REQUEST CONTAINED A NOTICE STATING THAT
SUCH FAILURE TO RESPOND WITHIN FIVE (5) BUSINESS DAYS WOULD BE DEEMED TO BE A
WAIVER OR CONSENT BY SUCH LENDER.

 

(ii)                                  In the event Agent requests the waiver or
consent of a Lender in a situation where such Lender’s waiver or consent would
be required and such waiver or consent is denied, then Agent or any of its
Eligible Assignees may, at its option, require such Lender to assign its
interest in the Loan to Agent for a price equal to the then outstanding
principal amount thereof due such Lender plus accrued and unpaid interest and
fees (but not any Prepayment Premium) due such Lender, which interest in the
Loan will be assigned by such Lender when such principal, interest and fees are
paid to such Lender.  In the event that Agent or such Eligible Assignee elects
to require any Lender to assign its interest to Agent pursuant to this
Section 11.1(k)(ii), Agent will so notify such Lender in writing within
forty-five (45) days following such Lender’s denial, and such Lender will assign
its interest to Agent or such Eligible Assignee no later than five (5) calendar
days following receipt of such notice.

 

11.2                        SET-OFF AND SHARING OF PAYMENTS

 

In addition to any rights and remedies now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuation of any Event of Default, each Lender is hereby
authorized by the Credit Parties at any time or from time to time, to the
fullest extent permitted by law, with notice to Agent and without prior notice
to Borrower or any other Person other than Agent (such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
(a) balances (general or special, time or demand, provisional or final) held by
such Lender at any of its offices for the account of any Credit Party
(regardless of whether such balances are then due to any Credit Party), and
(b) other Property at any time held or owing by such Lender to or for the credit
or for the account of any Credit Party, against and on account of any of the
Obligations which are not paid when due; provided, that no Lender or any such
holder shall exercise any such right without prior written notice to Agent.  Any
Lender that has exercised its right to set-off or otherwise has received any
payment on account of the Obligations shall, to the extent the amount of any
such set off or payment exceeds its Pro Rata Share of payments obtained by all
of the Lenders on account of such Obligations, purchase for cash (and the other
Lenders or holders of the Loan shall sell) participations in each such other
Lender’s or holder’s Pro Rata Share of Obligations as would be necessary to
cause such Lender to share such excess with each other Lenders or holders in
accordance with their respective Pro Rata Shares; provided, however, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such purchasing Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery.  Each Credit Party
agrees, to the fullest extent permitted by law, that (a) any Lender or holder
may exercise its right to set-off with respect to amounts in excess of its Pro
Rata Share of the Obligations and may sell participations in such excess to
other Lenders and holders, and (b) any Lender so purchasing a participation in
the Loan made or other Obligations held by other Lenders may exercise all rights
of set-off, bankers’ lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loan and other
Obligations in the amount of such participation.

 

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11.3                        SETTLEMENTS; PAYMENTS; AND INFORMATION

 

(A)                                  PAYMENTS; INTEREST AND FEE PAYMENTS.

 

(I)                             PAYMENTS OF PRINCIPAL ON THE LOAN WILL BE
SETTLED, IN ACCORDANCE WITH EACH LENDER’S PRO RATA SHARE, ON THE FIRST BUSINESS
DAY AFTER SUCH PAYMENTS ARE RECEIVED.  ALL SUCH PAYMENTS WILL BE MADE BY SUCH
LENDER WITHOUT SET-OFF, COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

(II)                          ON THE FIRST BUSINESS DAY OF EACH MONTH (“INTEREST
SETTLEMENT DATE”), AGENT WILL ADVISE EACH LENDER BY TELEPHONE OR FACSIMILE OF
THE AMOUNT OF INTEREST AND FEES CHARGED TO AND COLLECTED FROM BORROWER FOR THE
PRECEDING MONTH IN RESPECT OF THE LOAN.  PROVIDED THAT SUCH LENDER HAS MADE ALL
PAYMENTS REQUIRED TO BE MADE BY IT UNDER THIS AGREEMENT, AGENT WILL PAY TO SUCH
LENDER, BY WIRE TRANSFER TO SUCH LENDER’S ACCOUNT (AS SPECIFIED BY SUCH LENDER
ON SCHEDULE A OF THIS AGREEMENT AS AMENDED BY SUCH LENDER FROM TIME TO TIME
AFTER THE DATE HEREOF PURSUANT TO THE NOTICE PROVISIONS CONTAINED HEREIN OR IN
THE APPLICABLE LENDER ADDITION AGREEMENT) NOT LATER THAN 2:00 P.M. (NEW YORK
CITY TIME) ON THE NEXT BUSINESS DAY FOLLOWING THE INTEREST SETTLEMENT DATE, SUCH
LENDER’S SHARE OF SUCH INTEREST AND FEES.

 

(B)                                 RETURN OF PAYMENTS.

 

(I)                             IF AGENT PAYS AN AMOUNT TO A LENDER UNDER THIS
AGREEMENT IN THE BELIEF OR EXPECTATION THAT A RELATED PAYMENT HAS BEEN OR WILL
BE RECEIVED BY AGENT FROM ANY CREDIT PARTY AND SUCH RELATED PAYMENT IS NOT
RECEIVED BY AGENT, THEN AGENT WILL BE ENTITLED TO RECOVER SUCH AMOUNT FROM SUCH
LENDER WITHOUT SET-OFF, COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

(II)                          IF AGENT DETERMINES AT ANY TIME THAT ANY AMOUNT
RECEIVED BY AGENT UNDER THIS AGREEMENT MUST BE RETURNED TO ANY CREDIT PARTY OR
PAID TO ANY OTHER PERSON PURSUANT TO ANY DEBTOR RELIEF LAW OR OTHERWISE, THEN,
NOTWITHSTANDING ANY OTHER TERM OR CONDITION OF THIS AGREEMENT, AGENT WILL NOT BE
REQUIRED TO DISTRIBUTE ANY PORTION THEREOF TO ANY LENDER.  IN ADDITION, EACH
LENDER WILL REPAY TO AGENT ON DEMAND ANY PORTION OF SUCH AMOUNT THAT AGENT HAS
DISTRIBUTED TO SUCH LENDER, TOGETHER WITH INTEREST AT SUCH RATE, IF ANY, AS
AGENT IS REQUIRED TO PAY TO BORROWER OR SUCH OTHER PERSON, WITHOUT SET-OFF,
COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

11.4                        DISSEMINATION OF INFORMATION

 

Upon request by a Lender, Agent will distribute promptly to such Lender, unless
previously provided by any Credit Party to such Lender, copies of all notices,
schedules, reports, projections, financial statements, agreements and other
material and information, including, without limitation, financial and reporting
information received from the Credit Parties or generated by a third party (and
excluding only internal information generated by CapitalSource for its own use
as a Lender or as Agent), as provided for in this Agreement and the other Loan
Documents as received by Agent.  Agent shall not be liable to any of the Lenders
for any failure to comply with its obligations under this Section 11.4, except
to the extent that such failure is

 

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attributed to Agent’s gross negligence or willful misconduct and results in
demonstrable damages to such Lender as determined, in each case, by a court of
competent jurisdiction on a final and non-appealable basis.

 

XII.                            MISCELLANEOUS

 

12.1                        GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS;
VENUE

 

The Loan Documents shall be governed by and construed in accordance with the
internal laws of the State of New York without giving effect to its choice of
law provisions that would result in the application of the laws of a different
jurisdiction.  Any judicial proceeding against any Credit Party with respect to
the Obligations, any Loan Document or any related agreement may be brought in
any federal or state court of competent jurisdiction located in Montgomery
County in the State of Maryland or the Borough of Manhattan in the State of New
York.  By execution and delivery of each Loan Document to which it is a party,
each Credit Party (i) accepts the non-exclusive jurisdiction of the aforesaid
courts, (ii) waives personal service of process, (iii) agrees that service of
process upon it may be made by certified or registered mail, return receipt
requested, pursuant to Section 12.5, and (iv) waives any objection to
jurisdiction and venue of any action instituted hereunder and agrees not to
assert any defense based on lack of jurisdiction, venue, convenience or forum
nonconveniens.  Nothing shall affect the right of Agent or any Lender to serve
process in any manner permitted by law or shall limit the right of Agent or any
Lender to bring proceedings against any Credit Party in the courts of any other
jurisdiction having jurisdiction.  Any judicial proceedings against Agent or any
Lender involving, directly or indirectly, the Obligations, any Loan Document or
any related agreement shall be brought only in a federal or state court located
in Montgomery County in the State of Maryland or in the Borough of Manhattan in
the State of New York.

 

12.2                        SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND
PARTICIPATIONS

 

(A)                                  SUBJECT TO SECTION 12.2(H), EACH LENDER
MAY, AT ANY TIME AND FROM TIME TO TIME, ASSIGN ALL OR ANY PORTION OF ITS RIGHTS
AND DELEGATE ALL OR A PORTION OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS IN A MINIMUM AMOUNT OF $1,000,000 (OR 100% OF ANY REMAINING
COMMITMENT LESS THAN $1,000,000) (INCLUDING ALL OF ITS RIGHTS AND OBLIGATIONS
WITH RESPECT TO THE LOAN) TO ONE OR MORE ELIGIBLE ASSIGNEES (EACH, A
“TRANSFEREE”) WITH THE PRIOR WRITTEN CONSENT OF AGENT AND, TO THE EXTENT NO
DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, WITH THE
PRIOR WRITTEN CONSENT OF BORROWER (WHICH CONSENT OF BORROWER SHALL NOT BE
UNREASONABLY WITHHELD, DELAYED OR CONDITIONS, OR REQUIRED IF ANY DEFAULT OR
EVENT OF DEFAULT EXISTS); PROVIDED, THAT SUCH TRANSFEREE AND SUCH ASSIGNING
LENDER SHALL EXECUTE AND DELIVER TO AGENT FOR ACCEPTANCE AND RECORDING IN THE
REGISTER, A LENDER ADDITION AGREEMENT, WHICH SHALL BE IN FORM AND SUBSTANCE
ACCEPTABLE TO AGENT IN ITS PERMITTED DISCRETION.  UPON SUCH EXECUTION, DELIVERY,
ACCEPTANCE AND RECORDING, FROM AND AFTER THE EFFECTIVE DATE DETERMINED PURSUANT
TO SUCH LENDER ADDITION AGREEMENT, (I) THE TRANSFEREE THEREUNDER SHALL BE A
PARTY HERETO AND, TO THE EXTENT PROVIDED IN SUCH LENDER ADDITION AGREEMENT, HAVE
THE SAME RIGHTS, BENEFITS AND OBLIGATIONS OF A LENDER HEREUNDER, (II) THE
ASSIGNING LENDER SHALL BE RELIEVED OF ITS OBLIGATIONS HEREUNDER WITH RESPECT TO
ITS COMMITMENT OR ASSIGNED PORTION THEREOF, AS THE CASE MAY BE, TO THE EXTENT
THAT SUCH OBLIGATIONS SHALL HAVE BEEN EXPRESSLY ASSUMED BY THE TRANSFEREE
PURSUANT TO SUCH LENDER ADDITION AGREEMENT (AND, IN THE CASE OF A LENDER
ADDITION AGREEMENT

 

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COVERING ALL OR THE REMAINING PORTION OF AN ASSIGNING LENDER’S RIGHTS AND
OBLIGATIONS UNDER THIS AGREEMENT, SUCH ASSIGNING LENDER SHALL CEASE TO BE A
PARTY HERETO BUT SHALL NEVERTHELESS CONTINUE TO BE ENTITLED TO THE BENEFITS OF
SECTIONS 12.4 AND 12.7).  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT ANY
ASSIGNMENT WILL GIVE RISE TO A DIRECT OBLIGATION OF BORROWER TO THE TRANSFEREE
AND THAT THE TRANSFEREE SHALL BE A “LENDER” HEREUNDER AND UNDER THE OTHER LOAN
DOCUMENTS.  EXCEPT AS PROVIDED IN SECTION 12.2(H), NO LENDER WILL ASSIGN ALL OR
ANY PORTION OF ITS LOANS AND/OR COMMITMENTS UNLESS SUCH LENDER ALSO ASSIGNS ITS
PROPORTIONATE SHARE OF ITS “LOANS” AND/OR “COMMITMENTS” UNDER (AND AS DEFINED
IN) THE REVOLVING LOAN AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS SECTION 12.2, NO TRANSFEREE SHALL BE ENTITLED TO THE BENEFITS
OF SECTION 13.1 UNLESS SUCH TRANSFEREE IS A “UNITED STATES PERSON” (AS DEFINED
IN SECTION 13.1(F)).

 

(B)                                 EACH LENDER AT ANY TIME MAY SELL
PARTICIPATIONS IN ALL OR ANY PART OF ITS RIGHTS AND OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING ALL OF ITS RIGHTS AND
OBLIGATIONS WITH RESPECT TO THE LOAN) TO ONE OR MORE PERSONS (EACH, A
“PARTICIPANT”).  IN THE EVENT OF ANY SUCH SALE BY A LENDER OF A PARTICIPATION TO
A PARTICIPANT, SUCH LENDER’S OBLIGATIONS UNDER THIS AGREEMENT TO THE OTHER
PARTIES TO THIS AGREEMENT SHALL REMAIN UNCHANGED, SUCH LENDER SHALL REMAIN
SOLELY RESPONSIBLE FOR THE PERFORMANCE THEREOF, SUCH LENDER SHALL REMAIN THE
HOLDER OF ANY SUCH LOAN (AND ANY NOTE EVIDENCING SUCH LOAN) FOR ALL PURPOSES
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND BORROWER AND AGENT SHALL
CONTINUE TO DEAL SOLELY AND DIRECTLY WITH SUCH LENDER IN CONNECTION WITH SUCH
LENDER’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.  ANY AGREEMENT PURSUANT TO WHICH ANY LENDER SHALL SELL ANY SUCH
PARTICIPATION SHALL PROVIDE THAT SUCH LENDER SHALL RETAIN THE SOLE RIGHT AND
RESPONSIBILITY TO EXERCISE SUCH LENDER’S RIGHTS AND ENFORCE EACH CREDIT PARTY’S
OBLIGATIONS HEREUNDER, INCLUDING THE RIGHT TO CONSENT TO ANY AMENDMENT,
SUPPLEMENT, MODIFICATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS; PROVIDED, THAT SUCH PARTICIPATION AGREEMENT MAY
PROVIDE THAT SUCH LENDER WILL NOT AGREE, WITHOUT THE CONSENT OF THE PARTICIPANT,
TO ANY AMENDMENT, SUPPLEMENT, MODIFICATION OR WAIVER TO THE EXTENT RESULTING IN:
(I) ANY REDUCTION IN THE PRINCIPAL AMOUNT, INTEREST RATE OR FEES PAYABLE WITH
RESPECT TO ANY LOAN IN WHICH SUCH PARTICIPANT PARTICIPATES; (II) ANY EXTENSION
OF THE DATE FIXED FOR ANY PAYMENT OF PRINCIPAL, INTEREST OR FEES PAYABLE WITH
RESPECT TO ANY LOAN IN WHICH SUCH PARTICIPANT PARTICIPATES; AND (III) ANY
RELEASE OF ALL OR SUBSTANTIALLY ALL OF THE COLLATERAL (OTHER THAN IN ACCORDANCE
WITH THE TERMS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS).  THE CREDIT
PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT THE PARTICIPANT UNDER EACH
PARTICIPATION SHALL, SOLELY FOR THE PURPOSES OF SECTIONS 10.5, 12.4 AND 12.7 OF
THIS AGREEMENT, BE CONSIDERED TO BE A “LENDER” HEREUNDER.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 12.2, NO PARTICIPANT SHALL BE
ENTITLED TO THE BENEFITS OF SECTION 13.1 UNLESS SUCH PARTICIPANT IS A “UNITED
STATES PERSON” (AS DEFINED IN SECTION 13.1(F)).

 

(C)                                  AGENT, ON BEHALF OF BORROWER, SHALL
MAINTAIN AT ITS ADDRESS REFERRED TO IN SECTION 12.5 A COPY OF EACH LENDER
ADDITION AGREEMENT DELIVERED TO IT AND THE REGISTER FOR THE RECORDATION OF THE
NAMES AND ADDRESSES OF THE LENDERS AND THE COMMITMENT OF, AND THE PRINCIPAL
AMOUNT OF THE LOAN OWING TO, AND THE NOTES, IF ANY, EVIDENCING SUCH LOAN OWNED
BY, EACH LENDER FROM TIME TO TIME.  ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY NOTWITHSTANDING, EACH OF THE CREDIT PARTIES, AGENT AND THE LENDERS
SHALL TREAT EACH PERSON WHOSE NAME IS RECORDED IN SUCH REGISTER AS THE OWNER OF
THE LOAN, THE NOTES AND THE COMMITMENTS RECORDED THEREIN FOR ALL PURPOSES OF
THIS AGREEMENT.  THE REGISTER SHALL BE AVAILABLE FOR

 

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INSPECTION BY BORROWER OR ANY LENDER AT ANY REASONABLE TIME AND FROM TIME TO
TIME UPON REASONABLE PRIOR NOTICE.

 

(D)                                 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT
TO THE CONTRARY, NO ASSIGNMENT UNDER SECTION 12.2(A) OF ANY RIGHTS OR
OBLIGATIONS UNDER OR IN RESPECT OF THE LOAN OR THE NOTES EVIDENCING SUCH LOAN
SHALL BE EFFECTIVE UNLESS AND UNTIL (I) AGENT SHALL HAVE RECORDED THE ASSIGNMENT
PURSUANT TO SECTION 12.2(C) AND (II) THE ASSIGNOR LENDER OR THE TRANSFEREE HAS
PAID TO AGENT A PROCESSING FEE (NOT AT THE EXPENSE OF ANY CREDIT PARTY) IN THE
AMOUNT OF $3,500 (PROVIDED NO SUCH PROCESSING FEE SHALL BE REQUIRED TO BE PAID
IN CONNECTION WITH AN ASSIGNMENT BY A LENDER TO ANOTHER LENDER, AN ELIGIBLE
ASSIGNEE THAT IS AN AFFILIATE OF SUCH LENDER OR A RELATED FUND OF SUCH LENDER). 
UPON ITS RECEIPT OF A LENDER ADDITION AGREEMENT EXECUTED BY AN ASSIGNING LENDER
AND AN TRANSFEREE, AGENT SHALL (I) PROMPTLY ACCEPT SUCH LENDER ADDITION
AGREEMENT AND (II) ON THE EFFECTIVE DATE DETERMINED PURSUANT THERETO RECORD THE
INFORMATION CONTAINED THEREIN IN THE REGISTER AND GIVE PROMPT NOTICE OF SUCH
ACCEPTANCE AND RECORDATION TO THE LENDERS AND BORROWER.  ON OR PRIOR TO SUCH
EFFECTIVE DATE, THE ASSIGNING LENDER SHALL SURRENDER ANY OUTSTANDING NOTES HELD
BY IT ALL OR A PORTION OF WHICH ARE BEING ASSIGNED, AND BORROWER, AT ITS OWN
EXPENSE, SHALL, UPON THE REQUEST OF AGENT, THE ASSIGNING LENDER OR THE
TRANSFEREE, AS APPLICABLE, EXECUTE AND DELIVER TO AGENT, WITHIN FIVE
(5) BUSINESS DAYS OF ANY REQUEST, NEW NOTES TO REFLECT THE INTEREST HELD BY THE
ASSIGNING LENDER AND ITS TRANSFEREE.

 

(E)                                  EXCEPT AS OTHERWISE PROVIDED IN THIS
SECTION 12.2, NO LENDER SHALL, AS BETWEEN BORROWER AND THAT LENDER, BE RELIEVED
OF ANY OF ITS OBLIGATIONS HEREUNDER AS A RESULT OF ANY SALE, ASSIGNMENT,
TRANSFER OR NEGOTIATION OF, OR GRANTING OF PARTICIPATIONS IN, ALL OR ANY PART OF
THE LOAN OR OTHER OBLIGATIONS OWED TO SUCH LENDER.  EACH LENDER MAY FURNISH ANY
INFORMATION CONCERNING THE CREDIT PARTIES IN THE POSSESSION OF THAT LENDER FROM
TIME TO TIME TO ASSIGNEES AND PARTICIPANTS (INCLUDING PROSPECTIVE ASSIGNEES AND
PARTICIPANTS), SUBJECT TO CONFIDENTIALITY REQUIREMENTS, IF ANY, HEREUNDER.

 

(F)                                    NOTWITHSTANDING ANY OTHER PROVISION SET
FORTH IN THIS AGREEMENT, ANY LENDER MAY AT ANY TIME CREATE A SECURITY INTEREST
IN ALL OR ANY PORTION OF ITS RIGHTS UNDER THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE LOAN OWING TO IT AND THE NOTES HELD BY IT AND THE OTHER LOAN
DOCUMENTS AND ITS RIGHTS IN THE COLLATERAL.

 

(G)                                 EACH CREDIT PARTY AGREES TO PROVIDE
COMMERCIALLY REASONABLE EFFORTS TO ASSIST ANY LENDER IN ASSIGNING OR SELLING
PARTICIPATIONS IN ALL OR ANY PART OF ANY LOAN MADE BY SUCH LENDER TO A POTENTIAL
TRANSFEREE OR PARTICIPANT IDENTIFIED BY SUCH LENDER.

 

(H)                                 NOTWITHSTANDING ANYTHING IN THE LOAN
DOCUMENTS TO THE CONTRARY, (I) CAPITALSOURCE AND ITS AFFILIATES SHALL NOT BE
REQUIRED TO EXECUTE OR DELIVER A LENDER ADDITION AGREEMENT IN CONNECTION WITH
ANY TRANSACTION INVOLVING CAPITALSOURCE AND ANY OF ITS AFFILIATES, OR THE
LENDERS OR FUNDING OR FINANCING SOURCES OF CAPITALSOURCE OR ANY OF ITS
AFFILIATES, (II) SUBJECT TO THE PROVISIONS AT THE END OF THIS PARAGRAPH, NO
LENDER TO OR AFFILIATE, FUNDING OR FINANCING SOURCE OF CAPITALSOURCE OR ANY OF
ITS AFFILIATES SHALL BE CONSIDERED A TRANSFEREE, AND (III) THERE SHALL BE NO
LIMITATION OR RESTRICTION ON (A) THE ABILITY OF CAPITALSOURCE OR ANY OF ITS
AFFILIATES TO ASSIGN OR OTHERWISE TRANSFER ANY LOAN DOCUMENT, COMMITMENT OR
OBLIGATION TO ANY SUCH AFFILIATE OR LENDER OR FINANCING OR FUNDING SOURCE OR
(B) ANY SUCH LENDER’S OR FUNDING OR FINANCING SOURCE’S ABILITY TO ASSIGN OR
OTHERWISE TRANSFER ANY LOAN DOCUMENT, COMMITMENT OR

 

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OBLIGATION; PROVIDED, HOWEVER, CAPITALSOURCE SHALL CONTINUE TO BE LIABLE AS A
“LENDER” UNDER THE LOAN DOCUMENTS UNLESS SUCH AFFILIATE, LENDER OR FUNDING OR
FINANCING SOURCE EXECUTES AND DELIVERS A LENDER ADDITION AGREEMENT AND THEREBY
BECOMES A “LENDER.”

 

(I)                                     THE LOAN DOCUMENTS SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF EACH LENDER, AGENT, EACH TRANSFEREE, EACH
PARTICIPANT (TO THE EXTENT EXPRESSLY PROVIDED HEREIN ONLY) AND ALL FUTURE
HOLDERS OF THE LOAN, THE NOTES, THE OBLIGATIONS AND/OR ANY OF THE COLLATERAL,
AND EACH OF THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.  EACH LOAN DOCUMENT SHALL
BE BINDING UPON THE PERSONS OTHER THAN LENDERS AND AGENT THAT ARE PARTIES
THERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS; PROVIDED THAT, NO SUCH
PERSON SHALL ASSIGN, DELEGATE OR TRANSFER ANY LOAN DOCUMENT OR ANY OF ITS RIGHTS
OR OBLIGATIONS THEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT AND EACH
LENDER.  NO RIGHTS ARE INTENDED TO BE CREATED UNDER ANY LOAN DOCUMENT FOR THE
BENEFIT OF ANY THIRD PARTY DONEE, CREDITOR OR INCIDENTAL BENEFICIARY OF ANY
CREDIT PARTY.  NOTHING CONTAINED IN ANY LOAN DOCUMENT SHALL BE CONSTRUED AS A
DELEGATION TO AGENT OR ANY LENDER OF ANY OTHER PERSON’S DUTY OF PERFORMANCE.

 

12.3                        REINSTATEMENT; APPLICATION OF PAYMENTS

 

To the extent that any payment made or received with respect to the Obligations
is subsequently invalidated, determined to be fraudulent or preferential, set
aside, defeased or required to be repaid to a trustee, debtor in possession,
receiver, administrator custodian or any other similar Person under any Debtor
Relief Law, common law or equitable cause or any other law, then the Obligations
intended to be satisfied by such payment shall be revived and shall continue as
if such payment had not been received by Agent or any Lender and the Liens
created by the Security Documents shall be revived automatically without any
action on the part of any party hereto and shall continue as if such payment had
not been received by Agent or such Lender.  Except as specifically provided in
this Agreement, any payments with respect to the Obligations received shall be
credited and applied in such manner and order as Agent shall decide in its sole
discretion.

 

12.4                        INDEMNITY

 

The Credit Parties, jointly and severally, hereby indemnify Agent and each
Lender, and their respective Affiliates, managers, members, officers, employees,
agents, representatives, successors, assigns, accountants and attorneys
(collectively, the “Indemnified Persons”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, reasonable fees and disbursements of counsel and in-house
documentation and diligence fees and legal expenses) which may be imposed on,
incurred by or asserted against any Indemnified Person with respect to or
arising out of, or in any litigation, proceeding or investigation instituted or
conducted by any Person with respect to any aspect of, or any transaction
contemplated by, or any matter related to, any Loan Document, any Revolving Loan
Document, any Related Document or any agreement, document or transaction
contemplated thereby, whether or not such Indemnified Person is a party thereto,
except to the extent a final and nonappealable order of judgment binding on such
Indemnified Person of a court of competent jurisdiction determines the same
arose out of the gross negligence or willful misconduct of such Indemnified
Person.  If any Indemnified Person uses in-house counsel for

 

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any purpose for which the Credit Parties are responsible to pay or indemnify,
the Credit Parties expressly agree that their indemnification obligations
include reasonable charges for such work commensurate with the reasonable fees
that would otherwise be charged by outside legal counsel selected by such
Indemnified Person in its sole discretion for the work performed.  Agent agrees
to give Borrower reasonable notice of any event of which Agent becomes aware for
which indemnification may be required under this Section 12.4, and Agent may
elect (but is not obligated) to direct the defense thereof.  Any Indemnified
Person may take such actions as it deems necessary and appropriate to
investigate, defend or settle any event or take other remedial or corrective
actions with respect thereto as may be necessary for the protection of such
Indemnified Person or the Collateral; provided, however, that the Indemnified
Person shall not settle, compromise or admit any liability or wrongdoing without
the prior written consent of the Borrower (which consent shall not be
unreasonably withheld or delayed).  Notwithstanding the foregoing, if any
insurer agrees to undertake the defense of an event (an “Insured Event”), Agent
agrees not to exercise its right to select counsel to defend the event if that
would cause Borrower’s insurer to deny coverage; provided, however, that each
Indemnified Person reserves the right to retain counsel to represent such
Indemnified Person with respect to an Insured Event at its sole cost and
expense.  To the extent that Agent or any Lender obtains recovery from a third
party other than an Indemnified Person of any of the amounts that the Credit
Parties have paid to Agent or any Lender pursuant to the indemnity set forth in
this Section 12.4, then Agent and/or any such Lender shall promptly pay to
Borrower the amount of such recovery.  Without limiting any of the foregoing,
the Credit Parties, jointly and severally, indemnify the Indemnified Parties for
all claims for brokerage fees or commissions by any person claiming by, through
or under any Credit Party or Affiliate thereof which may be made in connection
with respect to any aspect of, or any transaction contemplated by or referred to
in, or any matter related to, any Loan Document, any of the Revolving Loan
Documents, any Related Document or any other agreement, document or transaction
contemplated thereby.

 

12.5                        NOTICE

 

Any notice or request under any Loan Document shall be given to any party to
this Agreement at such party’s address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party
hereafter may specify in a notice given in the manner required under this
Section 12.5.  Any notice or request hereunder shall be given only by, and shall
be deemed to have been received upon (each, a “Receipt”):  (i) registered or
certified mail, return receipt requested, on the date on which such notice or
request is received as indicated in such return receipt, (ii) delivery by a
nationally recognized overnight courier, one (1) Business Day after deposit with
such courier, or (iii) 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.

 

12.6                        SEVERABILITY; CAPTIONS; COUNTERPARTS

 

If any provision of any Loan Document is adjudicated to be invalid under
applicable laws or regulations, such provision shall be inapplicable to the
extent of such invalidity without affecting the validity or enforceability of
the remainder of the Loan Documents which shall be given effect so far as
possible.  The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan

 

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Documents.  The Loan Documents may be executed in one or more counterparts
(which taken together, as applicable, shall constitute one and the same
instrument) and by facsimile transmission, which facsimile signatures shall be
considered original executed counterparts.  Each party to this Agreement agrees
that it will be bound by its own facsimile signature and that it accepts the
facsimile signature of each other party.

 

12.7                        EXPENSES

 

The Credit Parties hereby jointly and severally agree to pay on demand, whether
or not the Closing occurs, all reasonable costs and expenses incurred by Agent,
Lenders and/or their Affiliates, including, without limitation, documentation
and diligence fees and expenses, all search, audit, appraisal, recording,
professional and filing fees and expenses and all other out-of-pocket charges
and expenses (including, without limitation, UCC and judgment and tax lien
searches and UCC filings and fees for post-Closing UCC and judgment and tax lien
searches and wire transfer fees and audit expenses), and reasonable attorneys’
fees and expenses, (i) in any effort to enforce, protect or collect payment of
any Obligation or to enforce any Loan Document, any Related Document or any
related agreement, document or instrument, (ii) in connection with entering
into, negotiating, preparing, reviewing and executing the Loan Documents, the
Revolving Loan Documents, the Related Documents and/or any related agreements,
documents or instruments, (iii) arising in any way out of the administration of
the Obligations or the taking or refraining from taking by Agent or any Lender
of any action requested by any Credit Party, (iv) in connection with
instituting, maintaining, preserving, enforcing and/or foreclosing on the Liens
in any of the Collateral or securities pledged under the Loan Documents, whether
through judicial proceedings or otherwise, (v) in defending or prosecuting any
actions, claims or proceedings arising out of or relating to Agent’s and/or
Lenders’ transactions with the Credit Parties, (vi) in seeking, obtaining or
receiving any advice with respect to its rights and obligations under any Loan
Document, any Revolving Loan Document, any Related Document and any related
agreement, document or instrument, (vii) arising out of or relating to any
Default or Event of Default or as a result thereof, (viii) in connection with
all actions, visits, audits and inspections undertaken by Agent or Lenders or
their Affiliates pursuant to the Loan Documents, the Revolving Loan Documents,
any Related Document, and/or (ix) in connection with any modification,
restatement, supplement, amendment, waiver or extension of any Loan Document,
any Revolving Loan Document, any Related Document and/or any related agreement,
document or instrument.  All of the foregoing shall be charged to Borrower’s
account and shall be part of the Obligations.  If Agent, any Lender or any of
their Affiliates uses in-house counsel for any purpose under any Loan Document
for which the Credit Parties are responsible to pay or indemnify, the Credit
Parties expressly agree that their Obligations include reasonable charges for
such work commensurate with the reasonable fees that would otherwise be charged
by outside legal counsel selected by Agent, such Lender or such Affiliate in its
sole discretion for the work performed.  Without limiting the foregoing,
Borrower shall pay all taxes (other than taxes based upon or measured by a
Lender’s income or revenues or any personal property tax), if any, in connection
with the issuance of any Note and the filing and/or recording of any documents
and/or financing statements.   Notwithstanding anything to the contrary
contained herein or in any other Loan Document, in no event shall the Credit
Parties be liable for any costs or expenses relating to or arising out of the
syndication or participation of the Loan, unless such syndication or
participation is at the request of any Credit Party.

 

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12.8                        ENTIRE AGREEMENT

 

This Agreement and the other Loan Documents to which the Credit Parties are
parties constitute the entire agreement between and among the Credit Parties,
Agent and Lenders with respect to the subject matter hereof and thereof, and
supersede all prior agreements and understandings (including, without
limitation, the letter dated on or about September 8, 2005) relating to the
subject matter hereof or thereof.  Execution of this Agreement by the Credit
Parties constitutes a full, complete and irrevocable release of any and all
claims which any Credit Party may have at law or in equity in respect of all
prior discussions and understandings, oral or written, relating to the subject
matter of this Agreement and the other Loan Documents.  Each party hereto
acknowledges that it has been advised by counsel in connection with the
negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions hereof.

 

12.9                        APPROVALS AND DUTIES

 

Unless expressly provided herein to the contrary, any approval, consent, waiver
or satisfaction of Agent or Lenders with respect to any matter that is the
subject of any Loan Document may be granted or withheld by Agent or Lenders, as
applicable, in their sole and absolute discretion.  Other than Agent’s duty of
reasonable care with respect to Collateral delivered pursuant to the Loan
Documents in accordance with applicable law (to the extent not waivable), Agent
and Lenders 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.

 

12.10                 CONFIDENTIALITY AND PUBLICITY

 

(A)                                  EACH CREDIT PARTIES AGREES, AND AGREES TO
CAUSE EACH OF ITS SUBSIDIARIES, (I) EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE
LAW OR REGULATIONS (IN WHICH CASE, EXCEPT IN CONNECTION WITH THE SECURITIES ACT
AND THE SECURITIES EXCHANGE ACT, AS AMENDED, AND THE RULES THEREUNDER, EACH
CREDIT PARTY SHALL, AND SHALL CAUSE ITS SUBSIDIARIES TO, USE ITS BEST EFFORTS TO
OBTAIN CONFIDENTIAL TREATMENT OF SUCH INFORMATION), NOT TO TRANSMIT OR DISCLOSE
ANY PROVISION OF ANY LOAN DOCUMENT TO ANY PERSON (OTHER THAN TO SUCH CREDIT
PARTY’S DIRECTORS, ADVISORS, COUNSEL, ACCOUNTANTS, OFFICERS AND EMPLOYEES ON A
NEED-TO-KNOW BASIS), IN ANY SUCH CASE WITHOUT AGENT’S PRIOR WRITTEN CONSENT, AND
(II) TO INFORM ALL PERSONS RECEIVING INFORMATION RELATED TO THE LOAN DOCUMENTS,
EXCEPT THROUGH DISCLOSURE PURSUANT TO THE SECURITIES ACT AND THE SECURITIES
EXCHANGE ACT, AS AMENDED, AND THE RULES THEREUNDER, OF THE CONFIDENTIAL NATURE
OF THE LOAN DOCUMENTS AND TO DIRECT THEM NOT TO DISCLOSE THE SAME TO ANY OTHER
PERSON AND TO REQUIRE EACH OF THEM TO BE BOUND BY THESE PROVISIONS.  EXCEPT FOR
FILINGS SUBMITTED PURSUANT TO THE SECURITIES ACT AND THE SECURITIES EXCHANGE
ACT, AND THE RULES THEREUNDER, THE CREDIT PARTIES SHALL PROVIDE IN WRITING ANY
MATERIALS THAT THE CREDIT PARTIES OR ANY OF THEIR SUBSIDIARIES PREPARE THAT
CONTAIN AGENT’S OR ANY LENDER’S NAME OR DESCRIBE OR REFER TO ANY LOAN DOCUMENT,
ANY OF THE TERMS THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY PRIOR
TO ITS USE, DISCLOSURE OR DISTRIBUTION, AND AGENT AND EACH LENDER RESERVES THE
RIGHT TO REVIEW AND APPROVE IN ADVANCE (WHICH APPROVAL SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED) ALL SUCH MATERIALS.  THE CREDIT PARTIES SHALL NOT, AND
SHALL NOT PERMIT ANY OF THEIR SUBSIDIARIES TO, USE EITHER AGENT’S OR ANY
LENDER’S NAME (OR THE NAME OF ANY

 

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OF AGENT’S OR ANY LENDER’S AFFILIATES) IN CONNECTION WITH ANY OF ITS BUSINESS;
PROVIDED, THAT BORROWER MAY DISCLOSE THE LENDERS’ NAMES, THE AGGREGATE PRINCIPAL
AMOUNT OF THE LOAN OUTSTANDING AND OTHER PRINCIPAL TERMS OF SUCH LOAN TO (X) ITS
SHAREHOLDERS AND OTHER EQUITY OWNERS AND PROSPECTIVE PURCHASERS OF DEBT OR
EQUITY SECURITIES OF BORROWER AND (Y) GOVERNMENTAL AUTHORITIES REGULATING THE
BUSINESS IN ACCORDANCE WITH APPLICABLE LEGAL REQUIREMENTS.  NOTHING CONTAINED IN
ANY LOAN DOCUMENT IS INTENDED TO PERMIT OR AUTHORIZE ANY CREDIT PARTY OR ANY OF
ITS SUBSIDIARIES TO CONTRACT ON BEHALF OF AGENT OR ANY LENDER.   NOTWITHSTANDING
THE FOREGOING, COPIES OF THE LOAN DOCUMENTS AND INFORMATION CONCERNING THE
APPLICABLE PROVISIONS OF SUCH LOAN DOCUMENTS MAY BE DELIVERED TO EACH HOLDER OF
THE SUBORDINATED NOTES IN CONNECTION WITH MATTERS RELATING TO THE SELLER
SUBORDINATION AGREEMENT.

 

(B)                                 AGENT AND EACH LENDER AGREE TO EXERCISE
THEIR BEST EFFORTS TO MAINTAIN IN CONFIDENCE, IN ACCORDANCE WITH ITS CUSTOMARY
PROCEDURES FOR HANDLING CONFIDENTIAL INFORMATION, ALL NON-PUBLIC INFORMATION
THAT ANY CREDIT PARTY OR SUBSIDIARY THEREOF FURNISHES TO AGENT OR SUCH LENDER ON
A CONFIDENTIAL BASIS CLEARLY IDENTIFIED AS SUCH (“CONFIDENTIAL INFORMATION”),
OTHER THAN ANY SUCH CONFIDENTIAL INFORMATION THAT BECOMES GENERALLY AVAILABLE TO
THE PUBLIC OTHER THAN AS A RESULT OF A BREACH BY AGENT OR ANY LENDER OF ITS
OBLIGATIONS HEREUNDER OR THAT IS OR BECOMES AVAILABLE TO AGENT OR ANY LENDER
FROM A SOURCE OTHER THAN A CREDIT PARTY AND THAT IS NOT, TO THE ACTUAL KNOWLEDGE
OF THE RECIPIENT THEREOF, SUBJECT TO OBLIGATIONS OF CONFIDENTIALITY WITH RESPECT
THERETO; PROVIDED, HOWEVER, THAT AGENT AND EACH LENDER SHALL, IN ANY EVENT, HAVE
THE RIGHT TO DELIVER COPIES OF ANY SUCH INFORMATION, AND TO DISCLOSE ANY SUCH
INFORMATION, TO:

 

(I)                             ITS AFFILIATES, LENDERS, FUNDING OR FINANCING
SOURCES (OR ITS AFFILIATES’ OR LENDERS’ FUNDING OR FINANCING SOURCES), PORTFOLIO
MANAGEMENT SERVICES AND PARTNERS THAT ARE OBLIGATED TO MAINTAIN THE
CONFIDENTIALITY OF SUCH CONFIDENTIAL INFORMATION;

 

(II)                          DIRECTORS, OFFICERS, TRUSTEES, EMPLOYEES, AGENTS,
ATTORNEYS, PROFESSIONAL CONSULTANTS, AND RATING AGENCIES;

 

(III)                       ANY OTHER LENDER AND ANY SUCCESSOR AGENT;

 

(IV)                      (A) SUBJECT TO PROVISIONS SUBSTANTIALLY SIMILAR TO
THOSE CONTAINED IN THIS SECTION 12.10, ANY POTENTIAL TRANSFEREE OR PARTICIPANT,
OR (B) ANY PERSON IF THE DISCLOSURE CONSISTS OF GENERAL PORTFOLIO INFORMATION
AND DOES NOT IDENTIFY ANY CREDIT PARTY SPECIFICALLY BY NAME;

 

(V)                         ANY REGULATORY AUTHORITY OR EXAMINER, OR ANY
INSURANCE INDUSTRY ASSOCIATION, REGULATING OR HAVING JURISDICTION OVER AGENT OR
ANY LENDER AND REQUIRING OR REQUESTING SUCH DISCLOSURE; AND

 

(VI)                      ANY OTHER PERSON TO WHICH SUCH DELIVERY OR DISCLOSURE
MAY BE NECESSARY (A) IN COMPLIANCE WITH ANY APPLICABLE LAW, RULE, REGULATION OR
ORDER, (B) IN RESPONSE TO ANY SUBPOENA OR OTHER LEGAL PROCESS OR INFORMAL
INVESTIGATIVE DEMAND, (C) IN CONNECTION WITH ANY LITIGATION TO WHICH AGENT OR
SUCH LENDER IS A PARTY, OR (D) IN CONNECTION WITH THE EXERCISE OR ENFORCEMENT,
OR POTENTIAL EXERCISE OR ENFORCEMENT, OF ANY OF THE RIGHTS AND/OR REMEDIES OF
AGENT AND/OR THE LENDERS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AT
ANY TIME DURING THE EXISTENCE OF AN EVENT OF DEFAULT.

 

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Should Agent or any Lender be required to disclose any such information by
virtue of a subpoena or similar process by any court, tribunal, or agency
pursuant to items (v) or (vi) above, then Agent or such Lender shall promptly
notify the applicable Credit Party thereof so as to allow such Credit Party, at
its sole cost and expense, to seek a protective order or to take any other
appropriate action to protect its rights.  Further, the foregoing
notwithstanding, the Credit Parties agree that Agent, any Lender or any
Affiliate of Agent or any Lender may (i) disclose a general description of
transactions arising under the Loan Documents, the Revolving Loan Documents and
the Related Documents for advertising, marketing or other similar purposes, and
(ii) use any Credit Party’s name, logo or other indicia germane to such party in
connection with such advertising, marketing or other similar purposes.

 

(C)                                  THE OBLIGATIONS OF AGENT AND LENDERS UNDER
THIS SECTION 12.10 SHALL SUPERSEDE AND REPLACE THE OBLIGATIONS OF AGENT AND
LENDERS UNDER ANY CONFIDENTIALITY AGREEMENT IN RESPECT OF THE FINANCING
EVIDENCED HEREBY EXECUTED AND DELIVERED BY AGENT OR ANY LENDER PRIOR TO THE DATE
HEREOF.

 

12.11                 NO CONSEQUENTIAL DAMAGES

 

No party to this Agreement or any other Loan Document, nor any agent or attorney
of such party or any Lender, shall be liable to any other party to this
Agreement or any other Person on any theory of liability for any special,
indirect, consequential or punitive damages.

 

12.12                 BORROWER FUNDS ADMINISTRATOR

 

(A)                                  BORROWERS MAINTAIN AN INTEGRATED CASH
MANAGEMENT SYSTEM REFLECTING THEIR INTERDEPENDENCE ON ONE ANOTHER AND THE MUTUAL
BENEFITS SHARED AMONG THEM AS A RESULT OF THEIR RESPECTIVE OPERATIONS.  IN ORDER
TO EFFICIENTLY FUND AND OPERATE THEIR RESPECTIVE BUSINESSES AND MINIMIZE THE
NUMBER OF BORROWINGS WHICH THEY WILL MAKE UNDER THIS AGREEMENT AND THEREBY
REDUCE THE ADMINISTRATIVE COSTS AND RECORD KEEPING REQUIRED IN CONNECTION
THEREWITH, INCLUDING THE NECESSITY TO ENTER INTO AND MAINTAIN SEPARATELY
IDENTIFIED AND MONITORED BORROWING FACILITIES, BORROWERS HAVE REQUESTED, AND
AGENT AND LENDERS HAVE AGREED THAT THE LOAN WILL BE ADVANCED TO AND FOR THE
ACCOUNT OF BORROWERS ON A JOINT AND SEVERAL BASIS IN ACCORDANCE WITH THE OTHER
PROVISIONS HEREOF.  EACH BORROWER HEREBY ACKNOWLEDGES THAT IT WILL BE RECEIVING
DIRECT AND INDIRECT BENEFITS FROM EACH LOAN MADE PURSUANT TO THIS AGREEMENT.

 

(B)                                 EACH BORROWER HEREBY DESIGNATES, APPOINTS,
AUTHORIZES AND EMPOWERS BORROWER FUNDS ADMINISTRATOR AS ITS AGENT TO ACT AS
SPECIFIED IN THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS AND BORROWER
FUNDS ADMINISTRATOR HEREBY ACKNOWLEDGES SUCH DESIGNATION, AUTHORIZATION AND
EMPOWERMENT, AND ACCEPTS SUCH APPOINTMENT.  EACH BORROWER HEREBY IRREVOCABLY
AUTHORIZES AND DIRECTS BORROWER FUNDS ADMINISTRATOR TO TAKE SUCH ACTION ON ITS
BEHALF UNDER THE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND
ANY OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS REFERRED TO HEREIN OR THEREIN,
AND TO EXERCISE SUCH POWERS AND TO PERFORM SUCH DUTIES HEREUNDER AND THEREUNDER
AS ARE SPECIFICALLY DELEGATED TO OR REQUIRED OF BORROWER FUNDS ADMINISTRATOR BY
THE RESPECTIVE TERMS AND PROVISIONS HEREOF AND

 

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THEREOF, AND SUCH OTHER POWERS AS ARE REASONABLY INCIDENTAL THERETO, INCLUDING,
WITHOUT LIMITATION, TO TAKE THE FOLLOWING ACTIONS FOR AND ON SUCH BORROWER’S
BEHALF:

 

(I)                             TO SUBMIT ON BEHALF OF EACH BORROWER OTHER
NOTICES TO AGENT IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT;

 

(II)                          TO RECEIVE ON BEHALF OF EACH BORROWER THE PROCEEDS
OF THE LOAN IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, SUCH PROCEEDS
TO BE DISBURSED TO OR FOR THE ACCOUNT OF THE APPLICABLE BORROWER AS SOON AS
PRACTICABLE AFTER ITS RECEIPT THEREOF; AND

 

(III)                       TO SUBMIT ON BEHALF OF EACH BORROWER, COMPLIANCE
CERTIFICATES AND ALL OTHER CERTIFICATES, NOTICES AND OTHER COMMUNICATIONS GIVEN
OR REQUIRED TO BE GIVEN HEREUNDER.

 

Borrower Funds Administrator hereby further is authorized and directed by each
Borrower to take all such actions on behalf of such Borrower necessary to
exercise the specific power granted in clauses (i) through (iii) above and to
perform such other duties hereunder and under the other Loan Documents, and
deliver such agreements, documents, certificates and instruments as delegated to
or required of Borrower Funds Administrator by the terms hereof or thereof.

 

(C)                                  THE ADMINISTRATION BY AGENT AND LENDERS OF
THE CREDIT FACILITY UNDER THIS AGREEMENT AS A CO-BORROWING FACILITY WITH A FUNDS
ADMINISTRATOR IN THE MANNER SET FORTH HEREIN IS SOLELY AS AN ACCOMMODATION TO
BORROWERS AND AT THEIR REQUEST AND NEITHER AGENT NOR ANY LENDER SHALL INCUR ANY
LIABILITY TO ANY CREDIT PARTY AS A RESULT THEREOF.

 

12.13                 JOINT AND SEVERAL LIABILITY

 

(A)                                  EACH BORROWER ACKNOWLEDGES THAT IT IS
JOINTLY AND SEVERALLY LIABLE FOR ALL OF THE OBLIGATIONS UNDER THE LOAN
DOCUMENTS.  EACH BORROWER EXPRESSLY UNDERSTANDS, AGREES AND ACKNOWLEDGES THAT
(I) BORROWERS ARE ALL AFFILIATED ENTITIES BY COMMON OWNERSHIP, (II) EACH
BORROWER DESIRES TO HAVE THE AVAILABILITY OF ONE COMMON CREDIT FACILITY INSTEAD
OF SEPARATE CREDIT FACILITIES, (III) EACH BORROWER HAS REQUESTED THAT LENDERS
EXTEND SUCH A COMMON CREDIT FACILITY ON THE TERMS HEREIN PROVIDED, (IV) LENDERS
WILL BE LENDING AGAINST, AND RELYING ON A LIEN UPON, ALL OF BORROWERS’ ASSETS
EVEN THOUGH THE PROCEEDS OF ANY PARTICULAR LOAN MADE HEREUNDER MAY NOT BE
ADVANCED DIRECTLY TO A PARTICULAR BORROWER, (V) EACH BORROWER WILL NONETHELESS
BENEFIT BY THE MAKING OF THE LOAN BY EACH LENDER AND THE AVAILABILITY OF A
SINGLE CREDIT FACILITY OF A SIZE GREATER THAN EACH COULD INDEPENDENTLY WARRANT,
(VI) ALL OF THE REPRESENTATIONS, WARRANTIES, COVENANTS, OBLIGATIONS, CONDITIONS,
AGREEMENTS AND OTHER TERMS CONTAINED IN THE LOAN DOCUMENTS SHALL BE APPLICABLE
TO AND SHALL BE BINDING UPON EACH BORROWER AND (VII) BORROWERS HAVE EACH
EXECUTED OR WILL EXECUTE THE NOTES AS CO-MAKERS OF THE NOTES AND THAT IT WOULD
NOT BE ABLE TO OBTAIN THE CREDIT PROVIDED BY LENDERS HEREUNDER WITHOUT THE
FINANCIAL SUPPORT PROVIDED BY THE OTHER BORROWERS.

 

(B)                                 EACH BORROWER HEREBY GUARANTEES THE PROMPT
PAYMENT AND PERFORMANCE IN FULL OF ALL OBLIGATIONS.  SUCH GUARANTEE CONSTITUTES
A GUARANTEE OF PAYMENT AND NOT OF COLLECTION.

 

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EACH BORROWER’S OBLIGATIONS UNDER THIS AGREEMENT SHALL, TO THE FULLEST EXTENT
PERMITTED BY LAW, BE UNCONDITIONAL IRRESPECTIVE OF (I) THE VALIDITY OR
ENFORCEABILITY, AVOIDANCE OR SUBORDINATION OF THE OBLIGATIONS OF ANY OTHER
CREDIT PARTY OR OF ANY PROMISSORY NOTE OR OTHER DOCUMENT EVIDENCING ALL OR ANY
PART OF THE OBLIGATIONS OF ANY OTHER CREDIT PARTY, (II) THE ABSENCE OF ANY
ATTEMPT TO COLLECT THE OBLIGATIONS FROM ANY OTHER CREDIT PARTY, OR ANY OTHER
SECURITY THEREFOR, OR THE ABSENCE OF ANY OTHER ACTION TO ENFORCE THE SAME,
(III) THE WAIVER, CONSENT, EXTENSION, FORBEARANCE OR GRANTING OF ANY INDULGENCE
BY AGENT AND/OR ANY LENDER WITH RESPECT TO ANY PROVISION OF ANY INSTRUMENT
EVIDENCING THE OBLIGATIONS OF ANY OTHER CREDIT PARTY OR ANY PART THEREOF, OR ANY
OTHER AGREEMENT NOW OR HEREAFTER EXECUTED BY ANY OTHER CREDIT PARTY AND
DELIVERED TO AGENT AND/OR ANY LENDER, (IV) THE FAILURE BY AGENT AND/OR ANY
LENDER TO TAKE ANY STEPS TO PERFECT AND MAINTAIN ITS SECURITY INTEREST IN, OR TO
PRESERVE ITS RIGHTS TO, ANY SECURITY OR COLLATERAL FOR THE OBLIGATIONS OF ANY
OTHER CREDIT PARTY, (V) AGENT’S AND/OR ANY LENDER’S ELECTION, IN ANY PROCEEDING
INSTITUTED UNDER THE BANKRUPTCY CODE, OF THE APPLICATION OF
SECTION 1111(B)(2) OF THE BANKRUPTCY CODE, (VI) ANY BORROWING OR GRANT OF A
SECURITY INTEREST BY ANY OTHER CREDIT PARTY, AS DEBTOR-IN-POSSESSION UNDER
SECTION 364 OF THE BANKRUPTCY CODE, (VII) THE DISALLOWANCE OF ALL OR ANY PORTION
OF AGENT’S AND/OR ANY LENDER’S CLAIM(S) FOR THE REPAYMENT OF THE OBLIGATIONS OF
ANY OTHER CREDIT PARTY UNDER SECTION 502 OF THE BANKRUPTCY CODE OR (VIII) ANY
OTHER CIRCUMSTANCES WHICH MIGHT CONSTITUTE A LEGAL OR EQUITABLE DISCHARGE OR
DEFENSE OF A GUARANTOR OR OF ANY OTHER CREDIT PARTY (OTHER THAN ACTUAL
INDEFEASIBLE PAYMENT IN FULL IN CASH).  WITH RESPECT TO ANY BORROWER’S
OBLIGATIONS ARISING AS A RESULT OF THE JOINT AND SEVERAL LIABILITY OF BORROWERS
HEREUNDER WITH RESPECT TO THE LOAN OR OTHER EXTENSIONS OF CREDIT MADE TO ANY OF
THE OTHER BORROWERS HEREUNDER, SUCH BORROWER HEREBY FOREVER WAIVES ANY RIGHT TO
ENFORCE ANY RIGHT OF SUBROGATION OR ANY REMEDY WHICH AGENT AND/OR ANY LENDER NOW
HAS OR MAY HEREAFTER HAVE AGAINST ANY OTHER CREDIT PARTY, OR ANY ENDORSER OF ALL
OR ANY PART OF THE OBLIGATIONS, AND ANY BENEFIT OF, AND ANY RIGHT TO PARTICIPATE
IN, ANY SECURITY OR COLLATERAL GIVEN TO AGENT AND/OR ANY LENDER TO SECURE
PAYMENT OF THE OBLIGATIONS OR ANY OTHER LIABILITY OF ANY BORROWER TO AGENT
AND/OR ANY LENDER.  DURING THE EXISTENCE OF ANY EVENT OF DEFAULT, AGENT MAY
PROCEED DIRECTLY AND AT ONCE, WITHOUT NOTICE, AGAINST ANY BORROWER TO COLLECT
AND RECOVER THE FULL AMOUNT, OR ANY PORTION OF THE OBLIGATIONS, WITHOUT FIRST
PROCEEDING AGAINST ANY OTHER CREDIT PARTY OR ANY OTHER PERSON, OR AGAINST ANY
SECURITY OR COLLATERAL FOR THE OBLIGATIONS.  EACH BORROWER CONSENTS AND AGREES
THAT AGENT SHALL BE UNDER NO OBLIGATION TO MARSHAL ANY ASSETS IN FAVOR OF ANY
CREDIT PARTY OR AGAINST OR IN PAYMENT OF ANY OR ALL OF THE OBLIGATIONS.

 

(C)                                  EACH BORROWER IS OBLIGATED TO REPAY THE
OBLIGATIONS AS A JOINT AND SEVERAL OBLIGOR UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.  TO THE EXTENT THAT ANY BORROWER SHALL, UNDER THIS AGREEMENT AS
A JOINT AND SEVERAL OBLIGOR, REPAY ANY OF THE OBLIGATIONS CONSTITUTING THE LOAN
MADE TO ANOTHER BORROWER HEREUNDER OR OTHER OBLIGATIONS INCURRED DIRECTLY AND
PRIMARILY BY ANY OTHER BORROWER (AN “ACCOMMODATION PAYMENT”), THEN THE BORROWER
MAKING SUCH ACCOMMODATION PAYMENT SHALL BE ENTITLED TO CONTRIBUTION AND
INDEMNIFICATION FROM, AND BE REIMBURSED BY, EACH OF THE OTHER BORROWERS IN AN
AMOUNT, FOR EACH OF SUCH OTHER BORROWERS, EQUAL TO A FRACTION OF SUCH
ACCOMMODATION PAYMENT, THE NUMERATOR OF WHICH FRACTION IS SUCH OTHER BORROWER’S
ALLOCABLE AMOUNT AND THE DENOMINATOR OF WHICH IS THE SUM OF THE ALLOCABLE
AMOUNTS OF ALL OF THE BORROWERS.  AS OF ANY DATE OF DETERMINATION, THE
“ALLOCABLE AMOUNT” OF EACH BORROWER SHALL BE EQUAL TO THE MAXIMUM AMOUNT OF
LIABILITY FOR ACCOMMODATION PAYMENTS WHICH COULD BE ASSERTED AGAINST SUCH
BORROWER HEREUNDER WITHOUT (I) RENDERING SUCH BORROWER “INSOLVENT” WITHIN THE
MEANING OF SECTION 101 (31) OF THE BANKRUPTCY

 

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CODE, SECTION 2 OF THE UNIFORM FRAUDULENT TRANSFER ACT (“UFTA”) OR SECTION 2 OF
THE UNIFORM FRAUDULENT CONVEYANCE ACT (“UFCA”), (II) LEAVING SUCH BORROWER WITH
UNREASONABLY SMALL CAPITAL OR ASSETS, WITHIN THE MEANING OF SECTION 548 OF THE
BANKRUPTCY CODE, SECTION 4 OF THE UFTA OR SECTION 5 OF THE UFCA, OR
(III) LEAVING SUCH BORROWER UNABLE TO PAY ITS DEBTS AS THEY BECOME DUE WITHIN
THE MEANING OF SECTION 548 OF THE BANKRUPTCY CODE, SECTION 4 OF THE UFTA OR
SECTION 5 OF THE UFCA.  ALL RIGHTS AND CLAIMS OF CONTRIBUTION, INDEMNIFICATION,
AND REIMBURSEMENT UNDER THIS SECTION 12.13 SHALL BE SUBORDINATE IN RIGHT OF
PAYMENT TO THE PRIOR INDEFEASIBLE PAYMENT IN FULL IN CASH OF THE OBLIGATIONS. 
THE PROVISIONS OF THIS SECTION 12.13 SHALL, TO THE EXTENT INCONSISTENT WITH ANY
PROVISION IN ANY LOAN DOCUMENT, SUPERSEDE SUCH INCONSISTENT PROVISION.

 

(D)                                 IF (I) ANY COURT HOLDS THAT BORROWERS ARE
GUARANTORS AND NOT JOINTLY AND SEVERALLY LIABLE AS PRINCIPAL OBLIGORS OR
(II) BANKRUPTCY OR REORGANIZATION PROCEEDINGS AT ANY TIME ARE INSTITUTED BY OR
AGAINST ANY BORROWER UNDER ANY DEBTOR RELIEF LAW, THEN EACH BORROWER HEREBY:
(A) EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT POSSIBLE, EXCEPT AS
OTHERWISE PROVIDED IN SECTION 12.13(C), ON BEHALF OF SUCH BORROWER, ANY AND ALL
RIGHTS AT LAW OR IN EQUITY TO SUBROGATION, REIMBURSEMENT, EXONERATION,
CONTRIBUTION, INDEMNIFICATION, SET OFF OR ANY OTHER RIGHTS THAT COULD ACCRUE TO
A SURETY AGAINST A PRINCIPAL, TO A GUARANTOR AGAINST A MAKER OR OBLIGOR, TO AN
ACCOMMODATION PARTY AGAINST THE PARTY ACCOMMODATED, TO A HOLDER OR TRANSFEREE
AGAINST A MAKER, OR TO THE HOLDER OF A CLAIM AGAINST ANY PERSON, AND WHICH SUCH
BORROWER MAY HAVE OR HEREAFTER ACQUIRE AGAINST ANY PERSON IN CONNECTION WITH OR
AS A RESULT OF SUCH BORROWER’S EXECUTION, DELIVERY AND/OR PERFORMANCE OF THIS
AGREEMENT, OR ANY OTHER DOCUMENTS TO WHICH SUCH BORROWER IS A PARTY OR
OTHERWISE; (B) EXPRESSLY AND IRREVOCABLY WAIVES ANY “CLAIM” (AS SUCH TERM IS
DEFINED IN THE BANKRUPTCY CODE) OF ANY KIND AGAINST ANY OTHER BORROWER, AND
FURTHER AGREES THAT IT SHALL NOT HAVE OR ASSERT ANY SUCH RIGHTS AGAINST ANY
PERSON (INCLUDING ANY SURETY), EITHER DIRECTLY OR AS AN ATTEMPTED SET OFF TO ANY
ACTION COMMENCED AGAINST SUCH BORROWER BY AGENT OR A LENDER OR ANY OTHER PERSON;
AND (C) ACKNOWLEDGES AND AGREES (I) THAT THIS WAIVER IS INTENDED TO BENEFIT
AGENT AND LENDERS AND SHALL NOT LIMIT OR OTHERWISE AFFECT SUCH BORROWER’S
LIABILITY HEREUNDER OR THE ENFORCEABILITY OF THIS AGREEMENT, AND (II) THAT AGENT
AND LENDERS AND THEIR SUCCESSORS AND ASSIGNS ARE INTENDED BENEFICIARIES OF THIS
WAIVER, AND THE AGREEMENTS SET FORTH IN THIS SECTION 12.13 AND THEIR RIGHTS
UNDER THIS SECTION 12.13 SHALL SURVIVE PAYMENT IN FULL OF THE OBLIGATIONS.

 

(E)                                  EACH CREDIT PARTY WAIVES THE FILING OF A
CLAIM WITH A COURT IN THE EVENT OF RECEIVERSHIP OR BANKRUPTCY OF ANY CREDIT
PARTY, AND WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH
ANY CREDIT PARTY MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY AGENT OR
ANY LENDER IN ENFORCING THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, EVERY
DEFENSE, COUNTERCLAIM OR SETOFF WHICH SUCH CREDIT PARTY MAY NOW HAVE, OR
HEREAFTER MAY HAVE, AGAINST ANOTHER CREDIT PARTY OR ANY OTHER PARTY LIABLE TO
AGENT OR ANY LENDER IN ANY MANNER.  AS FURTHER SECURITY, ANY AND ALL DEBTS AND
LIABILITIES NOW OR HEREAFTER ARISING AND OWING TO ANY CREDIT PARTY BY ANY OTHER
CREDIT PARTY, OR TO ANY OTHER PARTY LIABLE TO AGENT OR ANY LENDER, ARE HEREBY
SUBORDINATED TO AGENT’S AND ANY SUCH LENDER’S CLAIMS AND UPON THE OCCURRENCE OF
AN EVENT OF DEFAULT ARE ASSIGNED TO AGENT FOR THE BENEFIT OF LENDERS.  EACH

 

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CREDIT PARTY RATIFIES AND CONFIRMS WHATEVER AGENT OR A LENDER MAY DO PURSUANT TO
THE TERMS HEREOF, AND AGREES THAT NEITHER AGENT NOR ANY LENDER SHALL BE LIABLE
FOR ANY ERROR IN JUDGMENT OR MISTAKES OF FACT OR LAW OTHER THAN WITH RESPECT TO
ITS GROSS NEGLIGENCE, FRAUD OR WILLFUL MISCONDUCT.  EACH CREDIT PARTY HEREBY
AGREES THAT IT MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING
(INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY AGENT OR
ANY LENDER AGAINST ANY OTHER CREDIT PARTY.

 

(F)                                    SHOULD A CLAIM BE MADE UPON AGENT OR ANY
LENDER AT ANY TIME FOR REPAYMENT OF ANY AMOUNT RECEIVED BY AGENT OR ANY LENDER
IN PAYMENT OF THE OBLIGATIONS, OR ANY PART THEREOF, WHETHER RECEIVED FROM ANY
CREDIT PARTY OR RECEIVED BY AGENT OR ANY LENDER AS THE PROCEEDS OF COLLATERAL,
BY REASON OF:  (1) ANY JUDGMENT, DECREE OR ORDER OF ANY COURT OR ADMINISTRATIVE
BODY HAVING JURISDICTION OVER AGENT OR ANY LENDER OR ANY OF THEIR PROPERTY, OR
(2) ANY SETTLEMENT OR COMPROMISE OF ANY SUCH CLAIM EFFECTED BY AGENT OR ANY
LENDER, IN ITS SOLE DISCRETION, WITH THE CLAIMANT (INCLUDING A CREDIT PARTY),
EACH CREDIT PARTY SHALL REMAIN LIABLE TO AGENT OR ANY SUCH LENDER FOR THE AMOUNT
SO REPAID TO THE SAME EXTENT AS IF SUCH AMOUNT HAD NEVER ORIGINALLY BEEN
RECEIVED BY AGENT OR ANY SUCH LENDER, NOTWITHSTANDING ANY TERMINATION HEREOF OR
THE CANCELLATION OF ANY NOTE OR OTHER INSTRUMENT EVIDENCING ANY OF THE
OBLIGATIONS.

 

To the extent that any payment to, or realization by, any Lender or Agent on the
Obligations exceeds the limitations of this Section 12.13 and is otherwise
subject to avoidance and recovery in any such proceeding, the amount subject to
avoidance shall in all events be limited to the amount by which such actual
payment or realization exceeds such limitation, and this Agreement as limited
shall in all events remain in full force and effect and be fully enforceable
against such Credit Party.  This Section 12.13 is intended solely to reserve the
rights of Lenders and Agent hereunder against each Credit Party, in such
proceeding to the maximum extent permitted by applicable Debtor Relief Laws and
no Credit Party, guarantor of the Obligations or other Person shall have any
right, claim or defense under this Section 12.13 that would not otherwise be
available under applicable Debtor Relief Laws in such proceeding.

 

XIII.                        TAXES

 

13.1                        TAXES

 

(A)                                  SUBJECT TO THIS SECTION 13.1(G), ANY AND
ALL PAYMENTS BY BORROWER OR ANY OTHER CREDIT PARTY TO EACH LENDER OR AGENT UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE MADE FREE AND CLEAR OF, AND
WITHOUT DEDUCTION OR WITHHOLDING FOR, ANY AND ALL PRESENT OR FUTURE TAXES,
LEVIES, IMPOSTS, DEDUCTIONS, CHARGES OR WITHHOLDINGS, AND ALL LIABILITIES WITH
RESPECT THERETO, EXCLUDING, IN THE CASE OF EACH LENDER AND AGENT, SUCH TAXES
(INCLUDING INCOME TAXES OR FRANCHISE TAXES) AS ARE IMPOSED ON OR MEASURED BY THE
NET INCOME OF SUCH LENDER OR AGENT, RESPECTIVELY, BY THE JURISDICTION UNDER THE
LAWS OF WHICH SUCH LENDER OR AGENT, AS THE CASE MAY BE, IS ORGANIZED OR
MAINTAINS A LENDING OFFICE OR OTHER TAXABLE PRESENCE, OR ANY POLITICAL
SUBDIVISION THEREOF (ALL SUCH NON-EXCLUDED TAXES, LEVIES, IMPOSTS, DEDUCTIONS,
CHARGES, WITHHOLDINGS AND LIABILITIES BEING HEREINAFTER REFERRED TO AS “TAXES”).

 

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(B)                                 IN ADDITION, BORROWER AND THE OTHER CREDIT
PARTIES SHALL PAY ANY PRESENT OR FUTURE STAMP OR DOCUMENTARY TAXES OR ANY OTHER
EXCISE OR PROPERTY TAXES, CHARGES OR SIMILAR LEVIES WHICH ARISE FROM ANY PAYMENT
MADE HEREUNDER OR FROM THE EXECUTION, DELIVERY OR REGISTRATION OF, OR OTHERWISE
WITH RESPECT TO, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (HEREINAFTER REFERRED
TO AS “OTHER TAXES”).

 

(C)                                  SUBJECT TO THIS SECTION 13.1(G), THE CREDIT
PARTIES SHALL INDEMNIFY AND HOLD HARMLESS EACH LENDER AND AGENT FOR THE FULL
AMOUNT OF TAXES OR OTHER TAXES (INCLUDING ANY TAXES OR OTHER TAXES IMPOSED BY
ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 13.1) PAID BY SUCH LENDER
OR AGENT AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST, ADDITIONS TO TAX AND
EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES
OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED, EXCEPT IN THE CASE OF TAXES
OR OTHER TAXES INCURRED DUE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH LENDER OR AGENT.  PAYMENT UNDER THIS INDEMNIFICATION SHALL BE MADE WITHIN
TEN (10) DAYS FROM THE DATE ANY LENDER OR AGENT MAKES WRITTEN DEMAND THEREFOR.

 

(D)                                 IF ANY CREDIT PARTY SHALL BE REQUIRED BY LAW
TO DEDUCT OR WITHHOLD ANY TAXES OR OTHER TAXES FROM OR IN RESPECT OF ANY SUM
PAYABLE HEREUNDER TO ANY LENDER OR AGENT, THEN, SUBJECT TO SECTION 13.1(G):

 

(I)                             THE SUM PAYABLE SHALL BE INCREASED AS NECESSARY
SO THAT AFTER MAKING ALL REQUIRED DEDUCTIONS (INCLUDING DEDUCTIONS APPLICABLE TO
ADDITIONAL SUMS PAYABLE UNDER THIS SECTION 13.1), SUCH LENDER OR AGENT, AS THE
CASE MAY BE, RECEIVES AN AMOUNT EQUAL TO THE SUM IT WOULD HAVE RECEIVED HAD NO
SUCH DEDUCTIONS BEEN MADE;

 

(II)                          SUCH CREDIT PARTY SHALL MAKE SUCH DEDUCTIONS; AND

 

(III)                       SUCH CREDIT PARTY SHALL PAY THE FULL AMOUNT DEDUCTED
TO THE RELEVANT TAXATION AUTHORITY OR OTHER AUTHORITY IN ACCORDANCE WITH
APPLICABLE LAW.

 

(E)                                  WITHIN TEN (10) DAYS AFTER THE DATE OF ANY
PAYMENT BY ANY CREDIT PARTY OF TAXES OR OTHER TAXES, BORROWER SHALL FURNISH TO
AGENT (AND THE APPLICABLE LENDER) THE ORIGINAL OR A CERTIFIED COPY OF A RECEIPT
EVIDENCING PAYMENT THEREOF, OR OTHER EVIDENCE OF PAYMENT SATISFACTORY TO AGENT
(AND THE APPLICABLE LENDER).

 

(F)                                    EACH LENDER THAT IS NOT A “UNITED STATES
PERSON” WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE (A “NON-U.S.
LENDER”) SHALL DELIVER TO BORROWER AND AGENT TWO (2) COPIES OF EACH U.S.
INTERNAL REVENUE SERVICE FORM W-8BEN OR FORM W-8ECI, OR ANY SUBSEQUENT VERSIONS
THEREOF OR SUCCESSORS THERETO, OR, IN THE CASE OF A NON-U.S. LENDER CLAIMING
EXEMPTION FROM U.S. FEDERAL WITHHOLDING TAX UNDER SECTION 871(H) OR 881(C) OF
THE CODE WITH RESPECT TO PAYMENTS OF “PORTFOLIO INTEREST”, A FORM W-8BEN, OR ANY
SUBSEQUENT VERSIONS THEREOF OR SUCCESSORS THERETO (AND A CERTIFICATE
REPRESENTING THAT SUCH NON-U.S. LENDER IS NOT A “BANK” FOR PURPOSES OF
SECTION 881(C) OF THE CODE, IS NOT A TEN (10%) PERCENT SHAREHOLDER (WITHIN THE
MEANING OF SECTION 871(H)(3)(B) OF THE CODE) OF BORROWER AND IS NOT A CONTROLLED
FOREIGN CORPORATION RELATED TO BORROWER (WITHIN THE MEANING OF
SECTION 864(D)(4) OF THE CODE)), PROPERLY COMPLETED AND DULY EXECUTED BY SUCH
NON-U.S. LENDER CLAIMING COMPLETE EXEMPTION FROM, OR A REDUCED RATE OF, U.S.
FEDERAL WITHHOLDING TAX ON ALL PAYMENTS BY BORROWER UNDER THIS AGREEMENT

 

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AND THE OTHER LOAN DOCUMENTS.  SUCH FORMS SHALL BE DELIVERED BY EACH NON-U.S.
LENDER ON OR BEFORE THE DATE IT BECOMES A PARTY TO THIS AGREEMENT.  IN ADDITION,
EACH NON-U.S. LENDER SHALL DELIVER SUCH FORMS (OR OTHER FORMS OR DOCUMENTS TO
THE EXTENT REQUIRED) PROMPTLY UPON THE OBSOLESCENCE OR INVALIDITY OF ANY FORM
PREVIOUSLY DELIVERED BY SUCH NON-U.S. LENDER OR UPON ANY CHANGES IN THE FORMS OR
DOCUMENTS REQUIRED HEREUNDER FOR ESTABLISHING THAT PAYMENTS TO THE NON-U.S.
LENDER ARE EXEMPT FROM WITHHOLDING.  EACH NON-U.S. LENDER SHALL PROMPTLY NOTIFY
BORROWER AT ANY TIME IT DETERMINES THAT IT IS NO LONGER IN A POSITION TO PROVIDE
ANY PREVIOUSLY DELIVERED CERTIFICATE TO BORROWER (OR ANY OTHER FORM OF
CERTIFICATION ADOPTED BY THE U.S. TAXING AUTHORITIES FOR SUCH PURPOSE). 
NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, A NON-U.S. LENDER SHALL NOT
BE REQUIRED TO DELIVER ANY FORM PURSUANT TO THIS SUBSECTION THAT SUCH NON-U.S.
LENDER IS NOT LEGALLY ABLE TO DELIVER.

 

(G)                                 BORROWER SHALL NOT BE REQUIRED TO PAY ANY
ADDITIONAL AMOUNTS IN RESPECT OF UNITED STATES FEDERAL INCOME TAX PURSUANT TO
SECTIONS 13.1(C) OR (D) TO ANY LENDER FOR THE ACCOUNT OF ANY LENDING OFFICE OF
SUCH LENDER:

 

(I)                             IF THE OBLIGATION TO PAY SUCH ADDITIONAL AMOUNTS
WOULD NOT HAVE ARISEN BUT FOR A FAILURE BY SUCH LENDER TO DELIVER THE FORMS OR
OTHER DOCUMENTS UNDER SECTION 13.1(F) IN RESPECT OF SUCH LENDING OFFICE; OR

 

(II)                          IF SUCH LENDER SHALL HAVE DELIVERED TO BORROWER A
FORM W-8BEN AND/OR FORM W-8ECI (OR ANY SUBSEQUENT VERSIONS THEREOF OR SUCCESSORS
THERETO) IN RESPECT OF SUCH LENDING OFFICE PURSUANT TO SECTION 13.1(F), AND SUCH
LENDER SHALL NOT AT ANY TIME BE ENTITLED TO EXEMPTION FROM DEDUCTION OR
WITHHOLDING OF UNITED STATES FEDERAL INCOME TAX IN RESPECT OF PAYMENTS BY
BORROWER HEREUNDER FOR THE ACCOUNT OF SUCH LENDING OFFICE FOR ANY REASON OTHER
THAN A CHANGE IN UNITED STATES LAW, TREATY OR REGULATIONS OR IN THE OFFICIAL
INTERPRETATION OF SUCH LAW OR REGULATIONS BY ANY GOVERNMENTAL AUTHORITY CHARGED
WITH THE INTERPRETATION OR ADMINISTRATION THEREOF (WHETHER OR NOT HAVING THE
FORCE OF LAW) AFTER THE DATE OF DELIVERY OF SUCH FORM W-8BEN AND/OR FORM W-8ECI
(OR ANY SUBSEQUENT VERSIONS THEREOF OR SUCCESSORS THERETO).

 

(H)                                 IF, AT ANY TIME, BORROWER REQUESTS ANY
LENDER TO DELIVER ANY FORMS OR OTHER DOCUMENTATION IN ADDITION TO THOSE FORMS
REQUIRED TO BE DELIVERED BY SUCH LENDER PURSUANT TO SECTION 13.1(F), THEN
BORROWER SHALL, ON DEMAND OF SUCH LENDER THROUGH AGENT, REIMBURSE SUCH LENDER
FOR ANY COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND EXPENSES) REASONABLY
INCURRED BY SUCH LENDER IN THE PREPARATION OR DELIVERY OF SUCH FORMS OR OTHER
DOCUMENTATION.

 

(I)                                     IF BORROWER IS REQUIRED TO PAY
ADDITIONAL AMOUNTS TO ANY LENDER OR AGENT PURSUANT TO SECTIONS 13.1 (C) OR (D),
THEN SUCH LENDER SHALL USE ITS REASONABLE EFFORTS (CONSISTENT WITH LEGAL AND
REGULATORY RESTRICTIONS) TO CHANGE THE JURISDICTION OF ITS LENDING OFFICE SO AS
TO ELIMINATE ANY SUCH ADDITIONAL PAYMENT BY BORROWER WHICH MAY THEREAFTER ACCRUE
IF SUCH CHANGE IN THE JUDGMENT OF SUCH LENDER IS NOT OTHERWISE DISADVANTAGEOUS
TO SUCH LENDER.  IN ADDITION TO THE FOREGOING AND IF SUCH LENDER DEEMS IT
COMMERCIALLY REASONABLE IN ITS SOLE DISCRETION, SUCH LENDER AGREES TO OBTAIN A
REFUND OR CREDIT FOR ANY ADDITIONAL AMOUNTS PAID BY BORROWER TO SUCH LENDER OR
AGENT PURSUANT TO SECTIONS 13.1 (C) OR (D), AND, TO THE EXTENT ANY SUCH REFUND
OR CREDIT IS OBTAINED, APPLY SUCH AMOUNTS TO THE OUTSTANDING OBLIGATIONS OWING
BY ANY CREDIT PARTY UNDER THIS AGREEMENT (WITHOUT ANY PREPAYMENT PREMIUM UNDER
SECTION 3.2).

 

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13.2                        CERTIFICATES OF LENDERS.

 

Any Lender claiming reimbursement or compensation pursuant to this Article XIII
shall deliver to Borrower (with a copy to Agent) a certificate setting forth in
reasonable detail the amount payable to such Lender hereunder and such
certificate shall be conclusive and binding on the Credit Parties in the absence
of manifest error.

 

13.3                        SURVIVAL.

 

The agreements and obligations of the Credit Parties in this Article XIII shall
survive the payment of all other Obligations.

 

XIV.                       GUARANTY

 

14.1                        GUARANTY

 

Each Guarantor jointly and severally hereby unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of each other Credit Party,
including, without limitation, Borrower, now or hereafter existing under any
Loan Document, whether for principal, interest (including, without limitation,
all interest that accrues after the commencement of any proceeding of Borrower
or any other Credit Party under any Debtor Relief Laws), fees, commissions,
expense reimbursements, indemnifications or otherwise (such obligations, to the
extent not paid by Borrower, the “Guaranteed Obligations”), and agrees to pay
any and all costs, fees and expenses (including reasonable counsel fees and
expenses) incurred by Agent and Lenders in enforcing any rights under the
guaranty set forth in this Article XIV.  Without limiting the generality of the
foregoing, each Guarantor’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by Borrower or
any other Credit Party to Agent and Lenders under any Loan Document, but for the
fact that they are unenforceable or not allowable due to the existence of any
proceeding under any Debtor Relief Laws involving Borrower or any other Credit
Party.  This guaranty is a guaranty of payment and not of collection.

 

14.2                        GUARANTY ABSOLUTE

 

The obligations of each Guarantor under this Article XIV are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Credit Party or whether any Credit
Party is joined in any such action or actions.  The liability of each Guarantor
under this Article XIV shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now or hereafter have in any way relating to, any or all of the following:

 

(A)                                  ANY LACK OF VALIDITY OR ENFORCEABILITY OF
ANY LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT RELATING THERETO;

 

(B)                                 ANY CHANGE IN THE TIME, MANNER OR PLACE OF
PAYMENT OF, OR IN ANY OTHER TERM OF, ALL OR ANY OF THE GUARANTEED OBLIGATIONS,
OR ANY OTHER AMENDMENT OR WAIVER OF OR ANY CONSENT TO DEPARTURE FROM ANY LOAN
DOCUMENT, INCLUDING, WITHOUT LIMITATION, ANY INCREASE IN THE

 

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GUARANTEED OBLIGATIONS RESULTING FROM THE EXTENSION OF ADDITIONAL CREDIT TO ANY
CREDIT PARTY OR OTHERWISE;

 

(C)                                  ANY TAKING, EXCHANGE OR RELEASE OF, OR
NON-PERFECTION OF A LIEN ON, ANY COLLATERAL, OR ANY TAKING, RELEASE OR AMENDMENT
OR WAIVER OF OR CONSENT TO DEPARTURE FROM ANY OTHER GUARANTY, FOR ALL OR ANY OF
THE GUARANTEED OBLIGATIONS;

 

(D)                                 ANY CHANGE, RESTRUCTURING OR TERMINATION OF
THE CORPORATE, LIMITED LIABILITY COMPANY OR PARTNERSHIP STRUCTURE OR EXISTENCE
OF ANY CREDIT PARTY; OR

 

(E)                                  ANY OTHER CIRCUMSTANCE (INCLUDING, WITHOUT
LIMITATION, ANY STATUTE OF LIMITATIONS) OR ANY EXISTENCE OF OR RELIANCE ON ANY
REPRESENTATION BY AGENT OR LENDERS THAT MIGHT OTHERWISE CONSTITUTE A DEFENSE
AVAILABLE TO, OR A DISCHARGE OF, ANY CREDIT PARTY OR ANY OTHER GUARANTOR OR
SURETY.

 

This Article XIV shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned to Agent or Lenders or any other Person
upon the insolvency, bankruptcy or reorganization of Borrower or any other
Credit Party or otherwise, all as though such payment had not been made.

 

14.3                        WAIVER

 

Each Guarantor hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and this
Article XIV and any requirement that Agent or Lenders exhaust any right or take
any action against any other Credit Party, any other Person or any Collateral. 
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated herein and that the waiver set
forth in this Section 14.3 is knowingly made in contemplation of such benefits. 
Each Guarantor hereby waives any right to revoke this Article XIV, and
acknowledges that this Article XIV is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.

 

14.4                        CONTINUING GUARANTY; ASSIGNMENTS

 

This Article XIV is a continuing guaranty and shall (a) remain in full force and
effect until the indefeasible payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Article XIV and the
termination of this Agreement, (b) be binding upon each Guarantor, its
successors and assigns and (c) inure to the benefit of, and be enforceable by,
Agent and Lenders and their respective successors, pledgees, Transferees and
Participants.  Without limiting the generality of the foregoing clause (c), any
Lender may pledge, assign or otherwise transfer all or any portion of its rights
and obligations under this Agreement (including, without limitation, all or any
portion of its Commitments and the portion of the Loan owing to it) to any
Transferee, and such Transferee shall thereupon become vested with all the
benefits in respect thereof granted such Lender herein or otherwise, in each
case as provided in this Agreement.

 

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14.5                        MAXIMUM LIABILITY

 

The provisions of this Guaranty are severable, and in any action or proceeding
involving any state corporate law, or any Debtor Relief Law, if the obligations
of any Guarantor under this Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such Guarantor’s
liability under this Guaranty, then, notwithstanding any other provision of this
Guaranty to the contrary, the amount of such liability shall, without any
further action by the Guarantors or the Lenders, be automatically limited and
reduced to the highest amount that is valid and enforceable as determined in
such action or proceeding (such highest amount determined hereunder being the
relevant Guarantor’s “Maximum Liability”).  This Section with respect to the
Maximum Liability of each Guarantor is intended solely to preserve the rights of
the Lenders to the maximum extent not subject to avoidance under applicable law,
and no Guarantor nor any other person or entity shall have any right or claim
under this Section with respect to such Maximum Liability, except to the extent
necessary so that the obligations of any Guarantor hereunder shall not be
rendered voidable under applicable law.  Each Guarantor agrees that the
Guaranteed Obligations may at any time and from time to time exceed the Maximum
Liability of each Guarantor without impairing this Guaranty or affecting the
rights and remedies of the Lender Parties hereunder, provided that, nothing in
this sentence shall be construed to increase any Guarantor’s obligations
hereunder beyond its Maximum Liability.

 

14.6                        SUBORDINATION

 

Each of the Persons composing Guarantors hereby agrees that, after the
occurrence and during the continuance of any Default or Event of Default, the
payment of any amounts due with respect to the indebtedness owing by Borrower to
a Guarantor or by amounts due with respect to the indebtedness owing by Borrower
to a Guarantor or by any Guarantor to any other Guarantor is hereby subordinated
to the prior payment in full in cash of the Obligations.  Each Guarantor hereby
agrees that, after the occurrence and during the continuance of any Default or
Event of Default, such Guarantor shall not demand, sue for or otherwise attempt
to collect any indebtedness of Borrower or any other Guarantor owing to such
Guarantor until the Obligations shall have been paid in full in cash.  If,
notwithstanding the foregoing sentence, such Guarantor shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Guarantor as trustee for the Lender
Parties, and such Guarantor shall deliver any such amounts to Agent for
application to the Obligations.

 

14.7                        SUBROGATION

 

No Guarantor shall exercise any rights that it may now have or hereafter acquire
against any other Credit Party or any other guarantor or that arise from the
existence, payment, performance or enforcement of such Guarantor’s obligations
under this Article XIV, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of Agent and Lenders against any other Credit
Party or any other guarantor or any Collateral, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any other
Credit party or any other guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security

 

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solely on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations and all other amounts payable under this Article XIV
shall have been indefeasibly paid in full in cash and all Commitments to lend
hereunder shall have terminated; provided, however, no Guarantor shall have any
rights hereunder against a Credit Party or any of its Subsidiaries if all or any
portion of the Guaranteed Obligations shall have been satisfied with proceeds
from the exercise of remedies in respect of the equity securities of such Credit
Party pursuant to a Pledge Agreement.  If any amount shall be paid to any
Guarantor in violation of the immediately preceding sentence, such amount shall
be held in trust for the benefit of Agent and Lenders and shall forthwith be
paid to Agent to be credited and applied to the Guaranteed Obligations and all
other amounts payable under this Article XIV, whether matured or unmatured, in
accordance with the terms of this Agreement, or to be held as Collateral for any
Guaranteed Obligations or other amounts payable under this Article XIV
thereafter arising.  If (i) any Guarantor shall make payment to Agent and
Lenders of all or any part of the Guaranteed Obligations, (ii) all of the
Guaranteed Obligations and all other amounts payable under this Article XIV
shall be paid in full in cash and (iii) all Commitments to lend hereunder shall
have been terminated, Agent and Lenders will, at such Guarantor’s request and
expense, execute and deliver to such Guarantor or appropriate documents, without
recourse and without representation or warranty, reasonably necessary to
evidence the transfer by subrogation to such Guarantor of an interest in the
Guaranteed Obligations resulting from such payment by such Guarantor.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGES FOLLOW]

 

69

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

 

IN WITNESS WHEREOF, each of the parties has duly executed this Credit Agreement
as of the date first written above.

 

BORROWER:

EVOLVING SYSTEMS, INC.

 

 

 

By:

/s/Brian R. Ervine

 

Name:

Brian R. Ervine

 

Title:

Executive Vice President and Chief

 

 

Financial and Administrative Officer

 

9777 Pyramid Court, Suite 100

 

Englewood, CO 80112

 

Attention:

Anita T. Moseley, General Counsel

 

Telephone:

303 802-2599

 

FAX:

303 802-1138

 

E-MAIL:

atm@evolving.com

 

 

 

 

 

 

BORROWER:

TELECOM SOFTWARE ENTERPRISES, LLC

 

 

 

By:

/s/Brian R. Ervine

 

Name:

Brian R. Ervine

 

Title:

Executive Vice President and Chief

 

 

Financial and Administrative Officer

 

9777 Pyramid Court, Suite 100

 

Englewood, CO 80112

 

Attention:

Anita T. Moseley, General Counsel

 

Telephone:

303 802-2599

 

FAX:

303 802-1138

 

E-MAIL:

atm@evolving.com

 

 

 

 

 

 

GUARANTOR:

EVOLVING SYSTEMS HOLDINGS, INC.

 

 

 

By:

/s/Brian R. Ervine

 

Name:

Brian R. Ervine

 

Title:

Executive Vice President and Chief

 

 

Financial and Administrative Officer

 

9777 Pyramid Court, Suite 100

 

Englewood, CO 80112

 

Attention:

Anita T. Moseley, General Counsel

 

Telephone:

303 802-2599

 

FAX:

303 802-1138

 

E-MAIL:

atm@evolving.com

 

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

 

AGENT AND A LENDER:

CAPITALSOURCE FINANCE LLC

 

 

 

By:

/s/ Steven A. Museles

 

Name:

Steven A. Museles

 

Title:

Senior Vice President

 

 

 

 

 

 

 

CapitalSource Finance LLC

 

4445 Willard Avenue, 12th Floor

 

Chevy Chase, Maryland 20815

 

Attention:

Corporate Finance Group, Portfolio Manager

 

Telephone:

(301) 841-2700

 

FAX:

(301) 841-2313

 

E-MAIL:

sladd@capitalsource.com

 

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

 

Appendix A [a05-20328_1ex10d1a.htm#AppendixA_115051]

 

 

 

 

 

Definitions [a05-20328_1ex10d1a.htm#Definitions_121800]

 

 

 

 

 

EXHIBITS

 

 

 

 

 

Exhibit B-1

Financial Covenants

 

Exhibit B-2

Form of Compliance Certificate

 

Exhibit C [a05-20328_1ex10d1a.htm#Exhibitc1_114853]

Reporting Requirements [a05-20328_1ex10d1a.htm#Exhibitc1_114853]

 

Exhibit D [a05-20328_1ex10d1a.htm#Exhibitd_115003]

Closing Conditions [a05-20328_1ex10d1a.htm#Exhibitd_115003]

 

 

 

 

SCHEDULES

 

 

 

Schedule A [a05-20328_1ex10d1a.htm#Schedulea_121854]

Lenders/Commitments [a05-20328_1ex10d1a.htm#Schedulea_121854]

 

 

Schedule 5.3

Subsidiaries, Capitalization and Ownership Interests

 

 

Schedule 5.5

Other Agreements

 

 

Schedule 5.6

Litigation

 

 

Schedule 5.8

Tax Returns; Governmental Reports

 

 

Schedule 5.9

Financial Statements and Reports

 

 

Schedule 5.10(c)

Compliance with Law

 

 

Schedule 5.11

Intellectual Property

 

 

Schedule 5.12

Permits

 

 

Schedule 5.14

Insurance

 

 

Schedule 5.16

Broker’s or Finder’s Commissions

 

 

Schedule 6.7

Post-Closing Deliverables

 

 

Schedule 6.7(c)

Leases

 

 

Schedule 7.2

Permitted Indebtedness

 

 

Schedule 7.3

Permitted Liens

 

 

Schedule 7.4

Investments

 

 

Schedule 7.6

Affiliates

 

 

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

 

Schedule 6.7

 

Post Closing Deliverables

 

In accordance with Section 6.7 of the Agreement, the following actions, items
and deliverables, which were not completed on or before the Closing Date as
otherwise required by the Agreement, shall be completed, taken and/or delivered
to Required Lenders’ satisfaction on or before the respective dates specified
below.  The Credit Parties acknowledge that the Lenders are accommodating them
by permitting the Credit Parties to complete the following actions, items and
deliverables on a post-Closing basis.  As such, the failure to take, comply with
or provide any of the actions or items referred to below on or before the
respective due date set forth below shall constitute an immediate Event of
Default under the Agreement, without further notice or action by or on behalf of
Agent, any Lender or any other Person.  Nothing in this Schedule 6.7 shall limit
the effect of any provision of the Agreement or the Credit Parties’ obligations
thereunder.  Capitalized terms used but not otherwise defined in this
Schedule 6.7 shall have the meanings assigned to it in the Agreement.

 

1.                                       On or before January 31, 2006, Evolving
Systems and its Subsidiaries shall execute the Transfer Pricing Agreements in
form and substance approved by Agent in its Permitted Discretion and deliver
copies thereof to Agent.

 

2.                                       On or before December 31, 2005, the
Credit Parties shall procure the Life Insurance Policy.

 

3. The Credit Parties shall cooperate with Agent to cause Lenders to provide a
back-to-back letter of credit in support of Letter of Guarantee No. 040/700115-0
mentioned on Schedule 7.2 and shall then cause the issuer to release any charge
over the Property of the Credit Parties.

 

4.                                       On or before the fifteenth Business Day
after the Closing Date Evolving Systems shall amend the Certificate of
Designations of the Series B Convertible Preferred Stock in form and substance
acceptable to Agent. 

 

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

 

Exhibit B-1

 

Financial Covenants

 

1.                                       Leverage Ratio.  No Credit Party shall
permit the Leverage Ratio for the twelve (12) month period ending on any date
set forth in the table below to exceed the maximum ratio set forth in the table
below opposite such date:

 

Date

 

Maximum Ratio

 

 

 

December 31, 2005, March 31, 2006, June 30, 2006 and September 30, 2006

 

2.50:1

 

 

 

December 31, 2006, March 31, 2007, June 30, 2007, and September 30, 2007

 

2.25:1

 

 

 

December 31, 2007, March 31, 2008, June 30, 2008 and September 30, 2008

 

2:00 to 1

 

 

 

December 31, 2008, March 31, 2009 and the end of each quarter thereafter

 

1.75:1

 

2.                                       Minimum EBITDA.  No Credit Party shall
permit EBITDA of the Credit Parties and their consolidated Subsidiaries on a
consolidated basis, without duplication, for the twelve (12) month period ending
on any date set forth in the table below to be less than the minimum amount set
forth in the table below opposite such date: 

 

Date

 

Minimum EBITDA

 

 

 

December 31, 2005, March 31, 2006 and June 30, 2006

 

 

$

5,500,000

 

 

 

 

 

 

September 30, 2006 and December 31, 2006

 

 

$

6,000,000

 

 

 

 

 

 

March 31, 2007 and June 30, 2007

 

 

$

6,500,000

 

 

 

 

 

 

September 30, 2007 and December 31, 2007

 

 

$

7,000,000

 

 

 

 

 

 

March 31, 2008 and the end of each quarter thereafter

 

 

$

7,250,000

 

 

3.                                       Fixed Charge Coverage Ratio.  No Credit
Party shall permit the Fixed Charge Coverage Ratio for the twelve (12) month
period ending on any date set forth in the table below to be less than the
minimum ratio set forth in the table below opposite such date:

 

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

 

Date

 

Minimum Ratio

 

 

 

December 31, 2005, March 31, 2006 and June 30, 2006

 

1.15:1

 

 

 

September 30, 2006 and the end of each quarter thereafter

 

1.20:1

 

4.                                       Capital Expenditures.  No Credit Party
shall make or commit to make Capital Expenditures for any fiscal year (or
shorter period) set forth in the table below in an aggregate amount for all
Credit Parties and their consolidated Subsidiaries, without duplication,
exceeding the dollar limitation set forth in the table below (the “Capital
Expenditure Limitation”) with respect to such fiscal year (or shorter period):

 

Fiscal Year/Period:

 

Limitation

 

 

 

 

 

Fiscal year ending December 31, 2005;

 

$

1,400,000

 

 

 

 

 

Fiscal year ending December 31, 2006 and each fiscal year thereafter until the
Maturity Date

 

$

1,400,000

 

 

provided, however, in the event the Credit Parties do not expend the entire
respective Capital Expenditure Limitation in any fiscal year, the Credit Parties
may carry forward to the immediately succeeding fiscal year (but not to
subsequent fiscal years) fifty percent (50%) of such unutilized portion.  All
Capital Expenditures during any fiscal year shall be applied first to reduce the
applicable Capital Expenditure Limitation of such fiscal year and then to reduce
the carry-forward from the previous fiscal year (or shorter period), if any.

 

5.                                       Definitions.  As used in this
Agreement, the following terms shall have the following meanings:

 

“Capital Expenditures” shall mean for any period, the sum (without duplication)
of all expenditures (whether paid in cash or accrued as liabilities) made by the
Credit Parties and their consolidated Subsidiaries during such period that are
or are required to be treated as capital expenditures under GAAP.

 

“EBITDA” shall mean, with respect to Credit Parties and their consolidated
Subsidiaries on a consolidated basis and without duplication for any period, the
sum of the following for such period, all determined in accordance with GAAP:

 

(a)                                  Net Income;

 

(b)                                 plus the sum of the following, to the extent
deducted in determining such Net Income and without duplication:

 

(i)                                     Interest Expense;

 

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

 

(ii)                                  franchise and income taxes;

 

(iii)                               depreciation, amortization and impairment
expense;

 

(iv)                              all other non-cash and/or non-recurring
charges (including non-cash charges related to accounting for employee stock
option plans as required by FAS 123R) and expenses approved by Agent in its
Permitted Discretion, excluding (A) accruals for cash expenses made in the
Ordinary Course of Business and (B) write-offs of accounts receivable;

 

(v)                                 loss from any sale of assets, other than
sales in the Ordinary Course of Business;

 

(vi)                              extraordinary losses from the sale of
securities or the extinguishment of debt; and

 

(c)                                  minus the sum of the following, to the
extent included in determining such Net Income and without duplication:

 

(i)                                     gain from any sale of assets, other than
sales in the Ordinary Course of Business;

 

(ii)                                  extraordinary gains from the sale of
securities or the extinguishment of debt;

 

(iii)                               all other non-cash and/or non-recurring
income that is in each case not operating income;

 

(v)                                 proceeds of insurance (other than business
interruption insurance); and

 

(vi)                              the amounts that would be accrued in
connection with TSE Contingent Obligations if the Credit Parties accrued for
such amounts.

 

For purposes of computing EBITDA, the EBITDA of any person accrued prior to the
date it becomes a Credit Party or is merged into or consolidated with a Credit
Party or a Subsidiary thereof that Person’s assets and acquired by a Credit
Party or a Subsidiary thereof shall be excluded.

 

“Fixed Charge Coverage Ratio” shall mean, for the Credit Parties and their
consolidated Subsidiaries on a consolidated basis and without duplication, on
any date of determination, the ratio of (a) EBITDA minus Unfinanced Capital
Expenditures minus income and franchise taxes paid in cash, to (b) Fixed
Charges, in each case for the twelve (12) months then ending.

 

“Fixed Charges” shall mean, for any period, the sum of the following for the
Credit Parties and their consolidated Subsidiaries, on a consolidated basis and
without duplication:  (a) Total Debt Service and (b) dividends, repurchases or
redemptions of equity and/or distributions paid in cash.

 

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

 

“Interest Expense” shall mean total interest expense generated during the period
in question (including attributable to conditional sales contracts, Capital
Leases and other title retention agreements in accordance with GAAP and all
unused line and commitment fees and administrative and similar fees) of the
Credit Parties and their consolidated Subsidiaries on a consolidated basis and
without duplication with respect to all outstanding Indebtedness, including
accrued interest and interest paid in kind and capitalized interest, but
excluding commissions, discounts and other fees owed with respect to letters of
credit and bankers’ acceptance financing, net costs under Hedging Agreements and
fees payable to Agent or Lenders on the Closing Date under Section 3.1.

 

“Leverage Ratio” shall mean, on any date of determination, the ratio of
(a) Senior Debt calculated on such date, to (b)  EBITDA for the twelve (12)
months then ending.

 

“Net Income” shall mean, for any period, the net income (or loss) of the Credit
Parties and their consolidated Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP;
provided, that there shall be excluded (a) the income (or loss) of any Person in
which any other Person (other than a Credit Party or a “Credit Party” under and
as defined in the Revolving Loan Agreement) has a joint ownership interest,
except to the extent of the amount of dividends or other distributions actually
paid to any Credit Party by such Person during such period, (b) the income (or
loss) of any Person accrued prior to the date it becomes a or is merged into or
consolidated with a Credit Party or a “Credit Party” under and as defined in the
Revolving Loan Agreement or that Person’s assets are acquired by a Credit Party
or a “Credit Party” under and as defined in the Revolving Loan Agreement,
(c) the income of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions of that income by
that Subsidiary is not at the time permitted by operation of the terms of the
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary and (d) the income (loss)
associated with any Hedging Agreements.

 

“Senior Debt” shall mean, on any date of determination, the Obligations
hereunder and all Indebtedness under the Revolving Loan Agreement (provided
that, for purposes of determining the Indebtedness outstanding under the
Revolving Loan Agreement as of the end of each fiscal quarter, “Senior Debt”
shall mean the average daily amount of outstanding principal and accrued
interest on the Revolving Facility for such fiscal quarter), on a consolidated
basis and without duplication.  For all purposes of this Agreement, the term
“Senior Debt” shall be calculated to include (i.e., not net of) discounts,
deductions or allocations relating or applicable to or arising from any equity
or equity participation or fees, whether under GAAP or otherwise.

 

“Total Debt” shall mean, on any date of determination, the total Indebtedness of
the Credit Parties and their consolidated Subsidiaries on a consolidated basis
and without duplication, including, without limitation, all Indebtedness under
the Loan Documents, Revolving Loan Documents and all accrued interest on the
foregoing (including, without limitation, all interest paid in kind) and all
Capital Lease Obligations and including, without duplication, Contingent
Obligations consisting of guarantees of Indebtedness that otherwise would
constitute Total Debt of other Persons (provided that, for purposes of
determining the Indebtedness outstanding under any other revolving credit
facility (including the Revolving Loan Agreement) as of the end of each fiscal
quarter, “Total Debt” shall mean the average daily

 

70

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

 

amount of outstanding principal and accrued interest on such revolving credit
facility for such fiscal quarter).  For all purposes of this Agreement, the term
“Total Debt” shall be calculated to include (i.e., not net of) discounts,
deductions or allocations relating or applicable to or arising from any equity
or equity participation or fees, whether under GAAP or otherwise.

 

“Total Debt Service” shall mean, for any period, the sum for Credit Parties and
their consolidated Subsidiaries on a consolidated basis amounts of (a) scheduled
payments of principal on any and all Total Debt during such period, (b) other
required payments of principal on Total Debt other than the Obligations, (c) any
other cash amounts due or payable with respect to, in connection with or on
Total Debt during such period (excluding any mandatory prepayments of the
Obligations), and (d) Interest Expense paid in cash or required to be paid in
cash during such period.

 

“Unfinanced Capital Expenditures” shall mean, for any period, all Capital
Expenditures made during such period other than any Capital Expenditures
financed within 30 days of such expenditure with the proceeds of Permitted
Indebtedness (Permitted Indebtedness, for this purpose, does not include
advances under a revolving line of credit, including, without limitation,
Advances under the Revolving Facility).

 

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

 

Exhibit B-2

 

Form of Compliance Certificate

 

COMPLIANCE CERTIFICATE

EVOLVING SYSTEMS, INC.

TELECOM SOFTWARE ENTERPRISES, LLC

 

Date:                 , 20   .

 

This Compliance Certificate (this “Certificate”) is given by Evolving
Systems, Inc. (“ESI”) and Telecom Software Enterprises, LLC (“TSE,” and together
with ESI, collectively, the “Borrower”), pursuant to Section 6.1(a) of that
certain Credit Agreement dated as of                          , 2005 among
Borrower, the other Credit Parties named therein, CapitalSource Finance LLC, a
Delaware limited liability company, in its capacity as agent for the Lenders (in
such capacity, “Agent”), and the Lenders thereunder (as amended, modified,
supplemented or restated from time to time, the “Credit Agreement”). 
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.

 

The officer executing this Certificate is the
                                     of ESI and the
                                     of TSE, and as such is duly authorized to
execute and deliver this Certificate on behalf of Borrower.  By so executing
this Certificate, the Borrower hereby certifies to the Lender Parties that:

 

(a)                                  the financial statements delivered with
this Certificate in accordance with subsection 6.1(a) of the Credit Agreement
fairly present in all material respects the consolidated results of operations
and financial position of the Credit Parties and their consolidated Subsidiaries
as of, and for the respective periods ending on, the dates of such financial
statements;

 

(b)                                 Borrower has reviewed the relevant terms of
the Loan Documents and the financial condition of Borrower and the other Credit
Parties;

 

(c)                                  no Default or Event of Default has occurred
and is continuing, except as set forth in Schedule 1 hereto, which includes a
description of the nature and status and period of existence of such Default or
Event of Default, if any, and what action Borrower has taken, and is undertaking
and proposes to take with respect thereto; and

 

(d)                                 Borrower and the other Credit Parties are in
compliance with all financial covenants set forth on Exhibit B-1 to the Credit
Agreement, as demonstrated by the calculations of such covenants below, except
as set forth in Schedule 1 hereto.

 

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

 

IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed by the
                                                 of ESI and the
                              of TSE as of this           day of
                      , 20    .

 

 

[EVOLVING SYSTEMS, INC.]

 

[TELECOM SOFTWARE ENTERPRISES, LLC]

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

 

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

 

LEVERAGE RATIO

 

a.

 

Senior Debt

 

$

 

 

 

 

 

 

 

b.

 

EBITDA for the twelve (12) months then ending

 

$

 

 

 

 

 

 

 

c.

 

Ratio of Line (a) to (b)

 

 

 

 

MINIMUM EBITDA

 

a.

 

EBITDA for the twelve (12) months then ending

 

$

 

 

FIXED CHARGE COVERAGE RATIO

 

a.

 

EBITDA for the twelve (12) months then ending

 

$

 

 

 

 

 

 

 

b.

 

Less the aggregate amount of all Unfinanced Capital Expenditures during the
twelve (12) months then ending

 

$

 

 

 

 

 

 

 

c.

 

Less income and franchise taxes paid in cash for the twelve (12) months then
ending

 

$

 

 

 

 

 

 

 

d.

 

Total ((a) less (b) less (c))

 

$

 

 

 

 

 

 

 

e.

 

Fixed Charges during the twelve (12) months then ending

 

$

 

 

 

 

 

 

 

f.

 

Ratio of Line (d) to (e)

 

 

 

 

CAPITAL EXPENDITURES

 

Maximum Permitted Capital Expenditures

 

$

 

 

 

 

 

In Compliance

 

Yes / No

 

 

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

 

SCHEDULE 1 TO EXHIBIT B-2

CONDITIONS OR EVENTS WHICH CONSTITUTE A DEFAULT OR

EVENT OF DEFAULT

 

If any condition or event exists that constitutes a Default or Event of Default,
specify nature and period of existence and what action Borrower or one or more
other Credit Parties has taken, is taking or proposes to take with respect
thereto; if no such condition or event exists, state “None.”

 

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

 

Exhibit C-1

 

Reporting Requirements

 

(A)                                  FINANCIAL REPORTS.  THE CREDIT PARTIES
SHALL FURNISH TO AGENT AND EACH LENDER:

 

(I)                                     AS SOON AS AVAILABLE AND IN ANY EVENT
WITHIN NINETY (90) CALENDAR DAYS AFTER THE END OF EACH FISCAL YEAR OF EVOLVING
SYSTEMS, (A) AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF EVOLVING SYSTEMS AND
ITS CONSOLIDATED SUBSIDIARIES, INCLUDING THE NOTES THERETO, CONSISTING OF A
CONSOLIDATED BALANCE SHEET AT THE END OF SUCH FISCAL YEAR AND THE RELATED
CONSOLIDATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS AND OWNERS’
EQUITY FOR SUCH FISCAL YEAR, WHICH FINANCIAL STATEMENTS SHALL BE PREPARED BY AND
ACCOMPANIED BY AN OPINION OF ANY “BIG FOUR” OR ANY OTHER NATIONALLY RECOGNIZED
INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM SATISFACTORY TO AGENT IN ITS
PERMITTED DISCRETION (WHICH OPINION SHALL BE WITHOUT (1) A “GOING CONCERN”
QUALIFICATION, (2) ANY QUALIFICATION OR EXCEPTION AS TO THE SCOPE OF SUCH AUDIT
AND (3) ANY QUALIFICATION WHICH RELATES TO THE TREATMENT OR CLASSIFICATION OF
ANY ITEM AND WHICH, AS A CONDITION TO THE REMOVAL OF SUCH QUALIFICATION, WOULD
REQUIRE AN ADJUSTMENT TO SUCH ITEM, THE EFFECT OF WHICH WOULD BE TO CAUSE ANY
NONCOMPLIANCE WITH THE PROVISIONS OF SECTION 7.1(A)), AND WHICH OPINION SHALL
STATE THAT SUCH FINANCIAL STATEMENTS PRESENT FAIRLY IN ALL MATERIAL RESPECTS THE
FINANCIAL POSITION FOR THE PERIODS INDICATED IN CONFORMITY WITH GAAP APPLIED ON
A BASIS CONSISTENT WITH PRIOR YEARS AND (B) CONSOLIDATING BALANCE SHEETS AND
INCOME STATEMENTS FOR (1) EVOLVING SYSTEMS AND ITS CONSOLIDATED DOMESTIC
SUBSIDIARIES, (2) THE REVOLVING BORROWER AND ITS CONSOLIDATED SUBSIDIARIES
(EXCLUDING EVOLVING SYSTEMS GMBH) AND (3) EVOLVING SYSTEMS NETWORKS INDIA PVT
LTD;

 

(II)                                  AS SOON AS AVAILABLE AND IN ANY EVENT
WITHIN FORTY-FIVE (45) CALENDAR DAYS AFTER THE END OF EACH FISCAL QUARTER OF
EVOLVING SYSTEMS, UNAUDITED FINANCIAL STATEMENTS OF EVOLVING SYSTEMS AND ITS
CONSOLIDATED SUBSIDIARIES CONSISTING OF (A) A CONSOLIDATED BALANCE SHEET AND
RELATED CONSOLIDATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS AND
OWNERS’ EQUITY AS OF THE END OF SUCH FISCAL QUARTER, ALL CERTIFIED ON BEHALF OF
BORROWER BY A RESPONSIBLE OFFICER AS FAIRLY PRESENTING IN ALL MATERIAL RESPECTS
THE FINANCIAL POSITION AND THE RESULTS OF OPERATIONS OF BORROWER IN ACCORDANCE
WITH GAAP, SUBJECT TO NORMAL YEAR-END ADJUSTMENTS AND THE ABSENCE OF FOOTNOTE
DISCLOSURE AND (B) CONSOLIDATING BALANCE SHEETS AND INCOME STATEMENTS FOR
(1) EVOLVING SYSTEMS AND ITS CONSOLIDATED DOMESTIC SUBSIDIARIES, (2) THE
REVOLVING BORROWER AND ITS CONSOLIDATED SUBSIDIARIES, EXCLUDING EVOLVING SYSTEMS
GMBH AND (3) EVOLVING SYSTEMS NETWORKS INDIA PVT LTD; AND

 

(III)                               AS SOON AS AVAILABLE AND IN ANY EVENT WITHIN
THIRTY (30) CALENDAR DAYS AFTER THE END OF EACH CALENDAR MONTH, UNAUDITED
FINANCIAL STATEMENTS OF EVOLVING SYSTEMS AND ITS CONSOLIDATED SUBSIDIARIES
CONSISTING OF (A) A CONSOLIDATED BALANCE SHEET AND THE RELATED CONSOLIDATED
STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS AND OWNERS’ EQUITY AS OF
THE END OF SUCH CALENDAR MONTH, ALL CERTIFIED ON BEHALF OF BORROWER BY A
RESPONSIBLE OFFICER AS FAIRLY PRESENTING IN ALL MATERIAL RESPECTS THE FINANCIAL
POSITION AND THE RESULTS OF OPERATIONS OF BORROWER IN ACCORDANCE WITH GAAP,
SUBJECT TO NORMAL

 

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

 

YEAR-END ADJUSTMENTS AND THE ABSENCE OF FOOTNOTE DISCLOSURE AND
(B) CONSOLIDATING BALANCE SHEETS AND INCOME STATEMENTS FOR (1) EVOLVING SYSTEMS
AND ITS CONSOLIDATED DOMESTIC SUBSIDIARIES, (2) THE REVOLVING BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES (EXCLUDING EVOLVING SYSTEMS GMBH) AND (3) EVOLVING
SYSTEMS NETWORKS INDIA PVT LTD.

 

All such financial statements shall be prepared in accordance with GAAP
consistently applied with prior periods (subject, as to interim statements, to
normal year-end adjustments and the absence of footnote disclosure).  With each
delivery of monthly and annual financial statements, Borrower also shall deliver
to Agent and each Lender a completed Compliance Certificate certified on behalf
of Borrower by a Responsible Officer.

 

(B)                                 OTHER MATERIALS.  THE CREDIT PARTIES SHALL
FURNISH TO AGENT AND LENDERS:

 

(I)                                     CONCURRENTLY WITH THE DELIVERY OF ANNUAL
AND QUARTERLY FINANCIAL STATEMENTS PURSUANT TO CLAUSES (A)(I) AND (A)(II) ABOVE:

 

(1) A REPORT LISTING ANY AND ALL NEW CONTRACTS ENTERED INTO BY ANY CREDIT PARTY
DURING THE PRECEDING FISCAL YEAR OR QUARTER THAT ARE MATERIAL TO ITS BUSINESS. 
IF THE BOARD OF DIRECTORS OF EVOLVING SYSTEMS RECEIVES SUCH A REPORT THEN THE
REPORT DELIVERED UNDER THIS SUBSECTION MAY TAKE THE SAME FORM AND SUBSTANCE;

 

(2) AN OPERATING REPORT FOR EVOLVING SYSTEMS AND ITS CONSOLIDATED SUBSIDIARIES,
WHICH INCLUDES A DETAILED COMPARISON OF THE ACTUAL YEAR-TO-DATE OPERATING
RESULTS AGAINST (A) THE PROJECTED OPERATING BUDGET DELIVERED HEREUNDER FOR THE
CURRENT OR PRIOR FISCAL YEAR AND (B) THE ACTUAL OPERATING RESULTS FOR THE SAME
PERIOD DURING THE PRIOR FISCAL YEAR, IN EACH CASE INCLUSIVE OF PROFIT AND LOSS
STATEMENTS;

 

(3) A REPORT SPECIFYING ALL UNPAID AMOUNTS, FEES, PAYABLES AND BALANCES OWING TO
ANY GOVERNMENTAL AUTHORITY (OTHER THAN FOR TAXES) AS OF THE LAST DAY OF SUCH
ENDED FISCAL YEAR OR QUARTER, IF ANY, AND

 

(4) A MANAGEMENT REPORT, IN REASONABLE DETAIL, SIGNED BY A RESPONSIBLE OFFICER
OF BORROWER, DESCRIBING THE OPERATIONS AND FINANCIAL CONDITION OF THE CREDIT
PARTIES FOR THE QUARTER AND PORTION OF THE FISCAL YEAR THEN ENDED (OR FOR THE
FISCAL YEAR THEN ENDED IN THE CASE OF ANNUAL FINANCIAL STATEMENTS), WHICH MAY BE
SATISFIED BY DELIVERY OF QUARTERLY AND ANNUAL REPORTS FILED WITH THE SEC; AND

 

(II)                                  AS SOON AS AVAILABLE AND IN ANY EVENT
WITHIN TEN (10) CALENDAR DAYS AFTER THE PREPARATION, RECEIPT OR ISSUANCE THEREOF
OR REQUEST BY AGENT OR ANY LENDER THEREFOR, AS APPLICABLE:

 

(1) COPIES OF ANY FINAL REPORTS SUBMITTED TO THE CREDIT PARTIES BY THEIR
INDEPENDENT ACCOUNTANTS IN CONNECTION WITH ANY INTERIM AUDIT OF THE BOOKS OF

 

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THE CREDIT PARTIES OR THEIR SUBSIDIARIES AND COPIES OF EACH MANAGEMENT CONTROL
LETTER PROVIDED BY SUCH INDEPENDENT ACCOUNTANTS; AND

 

(2) SUCH ADDITIONAL INFORMATION, DOCUMENTS, STATEMENTS, REPORTS AND OTHER
MATERIALS AS AGENT OR ANY LENDER MAY REQUEST FROM TIME TO TIME IN ITS PERMITTED
DISCRETION.

 

(C)                                  NOTICES.  THE CREDIT PARTIES SHALL
PROMPTLY, AND IN ANY EVENT WITHIN FIVE (5) BUSINESS DAYS AFTER ANY OFFICER OF
ANY CREDIT PARTY OBTAINS KNOWLEDGE THEREOF, NOTIFY AGENT AND EACH LENDER IN
WRITING OF:

 

(I)                                     ANY PENDING OR THREATENED LITIGATION,
SUIT, INVESTIGATION, ARBITRATION, ENFORCEMENT ACTION, DISPUTE RESOLUTION
PROCEEDING OR ADMINISTRATIVE OR REGULATORY PROCEEDING BROUGHT OR INITIATED BY OR
AGAINST ANY CREDIT PARTY OR SUBSIDIARY OF A CREDIT PARTY OR OTHERWISE AFFECTING
OR INVOLVING OR RELATING TO ANY CREDIT PARTY OR SUBSIDIARY OF A CREDIT PARTY OR
ANY CREDIT PARTY’S OR A SUBSIDIARY OF A CREDIT PARTY’S PROPERTY TO THE EXTENT
(A) THE AMOUNT IN CONTROVERSY EXCEEDS $100,000 INDIVIDUALLY OR $150,000 IN THE
AGGREGATE FOR ALL SUCH EVENTS OR (B) TO THE EXTENT ANY OF THE FOREGOING SEEKS
INJUNCTIVE RELIEF AGAINST A CREDIT PARTY;

 

(II)                                  THE OCCURRENCE OR EXISTENCE OF ANY DEFAULT
OR EVENT OF DEFAULT, WHICH NOTICE SHALL SPECIFY THE NATURE, STATUS AND PERIOD OF
EXISTENCE THEREOF AND THE ACTIONS PROPOSED TO BE TAKEN WITH RESPECT THERETO;

 

(III)                               ANY OTHER DEVELOPMENT, EVENT, FACT,
CIRCUMSTANCE OR CONDITION THAT WOULD REASONABLY BE EXPECTED TO RESULT IN A
MATERIAL ADVERSE EFFECT, IN EACH CASE DESCRIBING THE NATURE AND STATUS THEREOF
AND THE ACTIONS PROPOSED TO BE TAKEN WITH RESPECT THERETO;

 

(IV)                              ANY MATTER(S) IN THE AMOUNT OF $250,000
INDIVIDUALLY OR $500,000 IN THE AGGREGATE, IN EXISTENCE AT ANY TIME ADVERSELY
AFFECTING THE VALUE, ENFORCEABILITY OR COLLECTIBILITY OF ANY OF THE COLLATERAL;

 

(V)                                 TO THE EXTENT NOT DUPLICATIVE OF DELIVERIES
MADE HEREUNDER, ANY MATERIAL WRITTEN NOTICE (INCLUDING ANY NOTICE OF DEFAULT OR
ACCELERATION) AND ANY MATERIAL WRITTEN INFORMATION OR OTHER MATERIAL WRITTEN
DELIVERY GIVEN OR MADE BY OR DELIVERED TO OR RECEIVED BY ANY CREDIT PARTY TO OR
FROM ANY LENDER OF ANY SUCH CREDIT PARTY (AS A LENDER AND NOT IN ANY OTHER
CAPACITY), TOGETHER WITH COPIES THEREOF, AS APPLICABLE INCLUDING IN CONNECTION
WITH THE SUBORDINATED LOAN DOCUMENT.

 

(VI)                              (A) THE RECEIPT OF ANY NOTICE OR REQUEST FROM
ANY GOVERNMENTAL AUTHORITY REGARDING ANY LIABILITY OR CLAIM OF LIABILITY IN THE
AMOUNT EQUAL TO OR EXCEEDING $100,000 INDIVIDUALLY OR $150,000 IN THE AGGREGATE
OR (B) ANY ACTION TAKEN OR THREATENED TO BE TAKEN BY ANY GOVERNMENTAL AUTHORITY
(OR ANY NOTICE OF ANY OF THE FOREGOING) WITH RESPECT TO ANY CREDIT PARTY WHICH
WOULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT;

 

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(VII)                           RECEIPT OR GIVING OF ANY NOTICE BY ANY CREDIT
PARTY REGARDING TERMINATION OF ANY LEASE OF REAL PROPERTY (OTHER THAN BY
EXPIRATION OF THE TERM) OR ANY SENIOR OFFICER OR EXECUTIVE, OR THE LOSS,
TERMINATION OR NOTICE OF NON-RENEWAL (OTHER THAN BY EXPIRATION OF THE TERM) OF
ANY MATERIAL CONTRACT TO WHICH ANY CREDIT PARTY IS A PARTY OR BY WHICH ITS
PROPERTIES OR ASSETS ARE SUBJECT OR BOUND;

 

(VIII)                        THE FILING, RECORDING OR ASSESSMENT OF ANY
FEDERAL, STATE, LOCAL OR FOREIGN TAX LIEN AGAINST ANY COLLATERAL OR ANY CREDIT
PARTY;

 

(IX)                                THE CREATION, ESTABLISHMENT OR ACQUISITION
OF ANY SUBSIDIARY OR THE ISSUANCE BY BORROWER OF ANY CAPITAL STOCK OR OTHER
EQUITY SECURITY OR WARRANT, OPTION OR SIMILAR AGREEMENT IN RESPECT THEREOF OTHER
THAN PERMITTED SECURITIES OF EVOLVING SYSTEMS; OR

 

(X)                                   ANY DEFAULT OR BREACH IN THE PERFORMANCE,
OBSERVANCE OR FULFILLMENT OF ANY PROVISION CONTAINED IN ANY MATERIAL CONTRACT
THAT WITH THE GIVING OF NOTICE AND PASSAGE OF TIME PERMITS THE OTHER PARTY
THERETO TO TERMINATE SUCH MATERIAL CONTRACT OR OTHERWISE REDUCE OR LIMIT ANY
MATERIAL AMOUNTS OWED BY SUCH OTHER PARTY THEREUNDER.

 

Each notice in accordance with the foregoing shall be accompanied by a written
statement by a Responsible Officer on behalf of Borrower setting forth details
of the occurrence referred to therein, and describing with particularity any and
all clauses or provisions of this Agreement and the other Loan Documents that
have been breached or violated.

 

(D)                                 OPERATING BUDGET AND PROJECTIONS.  BORROWER
SHALL FURNISH TO AGENT AND EACH LENDER ON OR PRIOR TO THE CLOSING DATE AND FOR
EACH FISCAL YEAR OF BORROWER THEREAFTER PRIOR TO THE COMMENCEMENT OF SUCH FISCAL
YEAR, CONSOLIDATED MONTH BY MONTH PROJECTED OPERATING BUDGETS, PROJECTIONS,
PROFIT AND LOSS STATEMENTS, INCOME STATEMENTS, BALANCE SHEETS AND CASH FLOW
REPORTS OF AND FOR THE CREDIT PARTIES FOR SUCH UPCOMING FISCAL YEAR (INCLUDING
AN INCOME STATEMENT FOR AND A BALANCE SHEET AS AT THE END OF EACH SUCH MONTH),
AND ANNUAL PROJECTIONS FOR THE FISCAL YEARS THEN REMAINING IN THE TERM, IN EACH
CASE PREPARED IN ACCORDANCE WITH GAAP CONSISTENTLY APPLIED WITH PRIOR PERIODS
(SUBJECT TO NORMAL YEAR-END ADJUSTMENTS AND THE ABSENCE OF FOOTNOTE DISCLOSURE).

 

(E)                                  SHAREHOLDER/EQUITY HOLDER REPORTS AND
GOVERNMENT FILINGS.  THE CREDIT PARTIES SHALL FURNISH TO AGENT, WITHIN FIVE
(5) BUSINESS DAYS AFTER THE SENDING OR FILING THEREOF, COPIES, WHICH MAY BE IN
ELECTRONIC FORM, OF ALL PROXY STATEMENTS, FINANCIAL STATEMENTS AND REPORTS WHICH
ANY CREDIT PARTY HAS MADE AVAILABLE TO ITS SHAREHOLDERS OR OTHER EQUITY OWNERS
AS A CLASS OR ANY CLASS OR SERIES OF SHAREHOLDERS OR OTHER EQUITY OWNERS AS A
CLASS OR SERIES, AND COPIES OF ALL REGULAR, PERIODIC AND SPECIAL REPORTS,
FINANCIAL STATEMENTS OR REGISTRATION STATEMENTS WHICH ANY CREDIT PARTY FILES
WITH THE SECURITIES AND EXCHANGE COMMISSION, ANY STOCK EXCHANGE OR ANY
GOVERNMENTAL AUTHORITY.

 

(F)                                    GOVERNMENT FILINGS REFERENCING AGENT OR
LENDERS.  A REASONABLE TIME PRIOR TO ITS USE, DISCLOSURE OR DISTRIBUTION
THEREOF, THE CREDIT PARTIES SHALL AND SHALL CAUSE THEIR SUBSIDIARIES TO PROVIDE
IN WRITING EVERY DOCUMENT TO BE FILED PURSUANT TO STATE OR FEDERAL

 

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securities laws that contain Agent’s or any Lender’s name or describe or refer
to any Loan Document, any of the terms thereof or any of the transactions
contemplated thereby.

 

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Exhibit C-2

 

Collateral Reporting and Other Requirements

 

(A)                                  COLLATERAL REPORTING.  EACH CREDIT PARTY
SHALL:

 

(I)                                     PROVIDE AGENT WITH NOT LESS THAN THIRTY
(30) DAYS’ PRIOR WRITTEN NOTICE OF ANY CHANGE IN SUCH CREDIT PARTY’S LEGAL NAME,
ORGANIZATIONAL IDENTIFICATION NUMBER, IF ANY, FEDERAL EMPLOYER IDENTIFICATION
NUMBER, MAILING ADDRESS, CORPORATE OR ORGANIZATIONAL FORM OR JURISDICTION OF
ORGANIZATION, OR OF ANY NEW LOCATION FOR ANY OF ITS PROPERTY VALUED AT MORE THAN
$100,000;

 

(II)                          NOTIFY AGENT PROMPTLY IN WRITING (A) PRIOR TO ANY
CHANGE IN THE PROPOSED USE BY SUCH CREDIT PARTY OR SUBSIDIARY OF ANY TRADE NAME
OR FICTITIOUS BUSINESS NAME AND (B) UPON OBTAINING KNOWLEDGE THAT ANY
APPLICATION OR REGISTRATION RELATING TO ANY NECESSARY INTELLECTUAL PROPERTY
(WHETHER NOW OR HEREAFTER EXISTING) MAY BECOME ABANDONED, OR OF ANY ADVERSE
DETERMINATION OR DEVELOPMENT (INCLUDING THE INSTITUTION OF, OR ANY SUCH
DETERMINATION OR MATERIAL DEVELOPMENT IN, ANY PROCEEDING IN THE UNITED STATES
PATENT AND TRADEMARK OFFICE, THE UNITED STATES COPYRIGHT OFFICE OR ANY COURT)
REGARDING SUCH CREDIT PARTY’S OR SUBSIDIARY’S OWNERSHIP OF ANY NECESSARY
INTELLECTUAL PROPERTY, ITS RIGHT TO REGISTER THE SAME, OR TO KEEP AND MAINTAIN
THE SAME;

 

(III)                       PROMPTLY NOTIFY AGENT OF ANY COMMERCIAL TORT CLAIM
IN EXCESS OF $50,000 AND ANY CLAIMS IN EXCESS OF $100,000 IN THE AGGREGATE,
ACQUIRED BY IT AND, UNLESS OTHERWISE CONSENTED TO BY AGENT, AND PROMPTLY ENTER
INTO A SUPPLEMENT TO THE SECURITY AGREEMENT TO WHICH IT IS A PARTY GRANTING TO
AGENT, FOR THE BENEFIT OF THE LENDER PARTIES, A LIEN ON AND SECURITY INTEREST IN
SUCH COMMERCIAL TORT CLAIM;

 

(IV)                      UPON ACQUIRING OR RECEIVING ANY OF THE SAME, DELIVER
AND PLEDGE TO AGENT ANY AND ALL INSTRUMENTS (EXCLUDING CHECKS, DRAFTS AND
SIMILAR INSTRUMENTS THAT ARE CUSTOMARILY ENDORSED OR PRESENTED FOR COLLECTION OR
DEPOSIT IN THE ORDINARY COURSE OF BUSINESS), NEGOTIABLE DOCUMENTS, CHATTEL PAPER
AND, SUBJECT TO THE LIMITATIONS IN SECTION 6.7(E) OF THIS AGREEMENT,
CERTIFICATED SECURITIES (OR CAPITAL STOCK) (ACCOMPANIED BY STOCK POWERS EXECUTED
IN BLANK) DULY ENDORSED AND/OR ACCOMPANIED BY SUCH INSTRUMENTS OF ASSIGNMENT AND
TRANSFER EXECUTED BY SUCH PERSON IN SUCH FORM AND SUBSTANCE AS AGENT MAY REQUEST
IN ITS PERMITTED DISCRETION; PROVIDED, THAT SO LONG AS NO EVENT OF DEFAULT SHALL
HAVE OCCURRED AND BE CONTINUING, EACH CREDIT PARTY OR SUBSIDIARY MAY RETAIN FOR
COLLECTION IN THE ORDINARY COURSE OF BUSINESS ANY INSTRUMENTS, NEGOTIABLE
DOCUMENTS AND CHATTEL PAPER RECEIVED BY SUCH PERSON IN THE ORDINARY COURSE OF
BUSINESS; PROVIDED, FURTHER, THAT IF ANY SUCH CREDIT PARTY OR SUBSIDIARY RETAINS
POSSESSION OF ANY INSTRUMENTS (EXCLUDING CHECKS, DRAFTS AND SIMILAR INSTRUMENTS
THAT ARE CUSTOMARILY ENDORSED OR PRESENTED FOR COLLECTION OR DEPOSIT IN THE
ORDINARY COURSE OF BUSINESS), NEGOTIABLE DOCUMENTS OR CHATTEL PAPER PURSUANT TO
THE TERMS HEREOF, EACH SUCH INSTRUMENT, NEGOTIABLE DOCUMENTS AND CHATTEL PAPER
SHALL BE MARKED WITH THE FOLLOWING LEGEND: “THIS WRITING AND THE OBLIGATIONS
EVIDENCED OR SECURED HEREBY ARE SUBJECT TO THE SECURITY INTEREST OF
CAPITALSOURCE FINANCE LLC, AS AGENT, AS SECURED

 

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PARTY, FOR THE BENEFIT OF CERTAIN LENDER PARTIES” IN EACH CASE IN ACCORDANCE
WITH THE TERMS OF ANY APPLICABLE SECURITY AGREEMENT;

 

(V)                         DELIVER TO AGENT AN UPDATED SCHEDULE I (FILING
JURISDICTIONS), SCHEDULE II (CAPITAL STOCK, INSTRUMENTS, DOCUMENTS, LETTER OF
CREDIT RIGHTS AND CHATTEL PAPER), AND/OR SCHEDULE III (LEGAL NAMES, PRIOR NAMES,
TYPE OF ENTITY, ORGANIZATIONAL IDENTIFICATION NUMBER, STATE OF ORGANIZATION,
CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS, OFFICES, WAREHOUSES,
CONSIGNEES, PROCESSORS, BOOKS AND RECORDS) OF THE SECURITY AGREEMENT TO WHICH IT
IS A PARTY WITHIN FIVE (5) BUSINESS DAYS OF ANY CHANGE THERETO;

 

(VI)                      PRIOR TO ANY CREDIT PARTY OPENING ANY NEW DEPOSIT OR
SECURITIES ACCOUNTS (EXCEPT ACCOUNTS USED EXCLUSIVELY FOR PAYROLL AND EMPLOYEE
BENEFITS), SUCH CREDIT PARTY SHALL GIVE AGENT NOT LESS THAN TEN (10) BUSINESS
DAYS’ PRIOR WRITTEN NOTICE OF ITS INTENTION TO DO SO AND SHALL DELIVER TO AGENT
A REVISED VERSION OF SCHEDULE V (DEPOSIT ACCOUNTS) OF THE SECURITY AGREEMENT TO
WHICH IT IS A PARTY SHOWING ANY CHANGES THERETO WITHIN FIVE (5) BUSINESS DAYS OF
ANY SUCH CHANGE (AND SHALL OTHERWISE OBTAIN AND DELIVER TO AGENT AN ACCOUNT
CONTROL AGREEMENT IN RESPECT THEREOF IN ACCORDANCE WITH THE TERMS OF SUCH
SECURITY AGREEMENT);

 

(VII)                   ADVISE AGENT PROMPTLY, IN REASONABLE DETAIL, (A) OF ANY
LIEN (OTHER THAN A PERMITTED LIEN) OR MATERIAL CLAIM MADE OR ASSERTED AGAINST
ANY OF THE COLLATERAL, AND (B) OF THE OCCURRENCE OF ANY OTHER EVENT WHICH WOULD
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE VALUE OF THE
COLLATERAL OR ON THE LIENS CREATED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT;

 

(VIII)                PROMPTLY, AND IN ANY EVENT WITHIN FIVE (5) BUSINESS DAYS
AFTER BECOMING A BENEFICIARY, NOTIFY AGENT OF THE ISSUANCE OF ANY LETTER OF
CREDIT OF WHICH SUCH CREDIT PARTY OR SUBSIDIARY IS A BENEFICIARY;

 

(IX)                        PROMPTLY NOTIFY AGENT OF ANY COLLATERAL WHICH
CONSTITUTES A CLAIM AGAINST THE UNITED STATES GOVERNMENT OR ANY INSTRUMENTALITY
OR AGENT THEREOF, IN AN AMOUNT EQUAL TO OR GREATER THAN $50,000 INDIVIDUALLY OR
$100,000 IN THE AGGREGATE, THE ASSIGNMENT OF WHICH CLAIM IS RESTRICTED BY
FEDERAL LAW AND, UPON THE REQUEST OF AGENT, SUCH CREDIT PARTY OR SUBSIDIARY
SHALL TAKE SUCH STEPS AS MAY BE NECESSARY TO COMPLY WITH ANY APPLICABLE FEDERAL
ASSIGNMENT OF CLAIMS LAWS OR OTHER COMPARABLE LAWS; AND

 

(X)                           PROMPTLY COMPLY WITH ALL OF THE TERMS AND
CONDITIONS OF EACH SECURITY AGREEMENT TO WHICH SUCH CREDIT PARTY OR SUBSIDIARY
IS A PARTY AS IS NECESSARY OR DESIRABLE TO ENSURE THE ATTACHMENT, GRANTING,
CREATION, PERFECTION, CONTINUATION AND/OR ENFORCEABILITY OF A LIEN, IN FAVOR OF
AGENT, FOR THE BENEFIT OF THE LENDER PARTIES, AS A RESULT OF ANY OF THE EVENTS
OR CIRCUMSTANCES DESCRIBED IN THE OTHER CLAUSES OF THIS PARAGRAPH (B) IN EACH
CASE SUBJECT TO ANY GRACE OR CURE PERIODS SET FORTH THEREIN.

 

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Exhibit D

 

Closing Conditions

 

(A)                                  AGENT SHALL HAVE RECEIVED (I) THE LOAN
DOCUMENTS EXECUTED BY EACH CREDIT PARTY AND THE OTHER PARTIES THERETO AND
(II) EXECUTED COPIES OF THE REVOLVING LOAN DOCUMENTS;

 

(B)                                 AGENT SHALL HAVE RECEIVED (I) A REPORT OF
UNIFORM COMMERCIAL CODE FINANCING STATEMENT, TAX, PENDING SUIT AND JUDGMENT LIEN
SEARCHES AS REQUESTED BY AGENT, AND SUCH REPORT SHALL SHOW NO LIENS ON THE
COLLATERAL (OTHER THAN PERMITTED LIENS AND LIENS TO BE TERMINATED AT CLOSING),
(II) EACH DOCUMENT (INCLUDING, WITHOUT LIMITATION, ANY UNIFORM COMMERCIAL CODE
FINANCING STATEMENTS) REQUIRED BY ANY LOAN DOCUMENT OR UNDER LAW OR REQUESTED BY
AGENT IN ITS PERMITTED DISCRETION TO BE FILED, REGISTERED OR RECORDED TO CREATE
AND PERFECT, IN FAVOR OF AGENT, FOR THE BENEFIT OF THE LENDERS PARTIES, A FIRST
PRIORITY LIEN UPON THE COLLATERAL, SUBJECT ONLY TO PRIORITY PERMITTED LIENS, AND
(III) EVIDENCE OF EACH SUCH FILING, REGISTRATION AND RECORDATION AND OF THE
PAYMENT BY BORROWER OF ANY NECESSARY FEE, TAX OR EXPENSE RELATING THERETO;

 

(C)                                  AGENT SHALL HAVE RECEIVED: (I) A PAYOFF
LETTER AND LIEN TERMINATION AGREEMENT FROM THE HOLDERS OF THE SUBORDINATED NOTES
IN FORM AND SUBSTANCE SATISFACTORY TO AGENT IN ITS PERMITTED DISCRETION
PROVIDING FOR (A) PARTIAL REPAYMENT OF THE LIABILITIES AND OBLIGATIONS OF THE
CREDIT PARTIES TO THE HOLDERS OF THE SUBORDINATED NOTES AND (B) TERMINATION OF
ALL SECURITY AGREEMENTS AND RELATED DOCUMENTS WITH RESPECT TO ALL LIENS AND
UNIFORM COMMERCIAL CODE FINANCING STATEMENTS RELATING THERETO, (II) RELEASE AND
TERMINATION OF, OR AGENT’S AUTHORITY TO RELEASE AND TERMINATE, ANY AND ALL OTHER
LIENS AND/OR UNIFORM COMMERCIAL CODE FINANCING STATEMENTS IN, ON, AGAINST OR
WITH RESPECT TO ANY OF THE COLLATERAL, OTHER THAN PERMITTED LIENS, AND
(III) EVIDENCE THAT ALL PRIOR LOCKBOX AND BLOCKED ACCOUNT ARRANGEMENTS, IF ANY,
ARE TERMINATED;

 

(D)                                 [RESERVED];

 

(E)                                  AGENT SHALL HAVE RECEIVED (I) THE CHARTER
AND GOOD STANDING DOCUMENTS, (II) A CERTIFICATE OF THE SECRETARY OR ASSISTANT
SECRETARY OF EACH CREDIT PARTY, DATED THE CLOSING DATE, AS TO THE INCUMBENCY AND
SIGNATURE OF THE PERSONS EXECUTING THE LOAN DOCUMENTS AND THE RELATED DOCUMENTS
ON BEHALF OF SUCH CREDIT PARTY, (III) THE WRITTEN LEGAL OPINIONS OF COUNSEL
AND/OR SPECIAL COUNSEL FOR THE CREDIT PARTIES WITH RESPECT TO THE LOAN DOCUMENTS
AND THE REVOLVING LOAN DOCUMENTS, AND (IV) A CERTIFICATE EXECUTED BY AN
RESPONSIBLE OFFICER OF BORROWER FUNDS ADMINISTRATOR, WHICH CONTAINS A
REPRESENTATION AND WARRANTY BY BORROWER AS OF THE CLOSING DATE THAT THE
CONDITIONS CONTAINED IN THIS AGREEMENT HAVE BEEN SATISFIED;

 

(F)                                    AGENT SHALL BE SATISFIED WITH ALL
CORPORATE AND OTHER PROCEEDINGS, DOCUMENTS, INSTRUMENTS AND OTHER LEGAL MATTERS
IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, THE
REVOLVING LOAN DOCUMENTS AND THE RELATED DOCUMENTS (INCLUDING, BUT NOT LIMITED
TO, THOSE RELATING TO CORPORATE AND CAPITAL STRUCTURES OF EACH CREDIT PARTY);

 

(G)                                 THE RELATED TRANSACTIONS (OTHER THAN THE
TRANSFER PRICING AGREEMENT) SHALL HAVE CLOSED IN THE MANNER CONTEMPLATED BY THE
RELATED DOCUMENTS, AND AGENT SHALL HAVE RECEIVED CERTIFIED COPIES OF SUCH
RELATED DOCUMENTS;

 

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(H)                                 AGENT SHALL HAVE RECEIVED ORIGINAL
CERTIFICATES OF ALL SUCH REQUIRED INSURANCE POLICIES, AND CONFIRMATION THAT SUCH
CERTIFICATES ARE IN EFFECT AND THAT THE PREMIUMS THEN DUE AND OWING WITH RESPECT
THERETO HAVE BEEN PAID IN FULL, WHICH CERTIFICATES SHALL NAME THE AGENT, FOR THE
BENEFIT OF THE LENDER PARTIES, AS SOLE BENEFICIARY, LOSS PAYEE OR ADDITIONAL
INSUREDS (EXCEPT IN THE CASE OF ADDITIONAL INSUREDS AS PERMITTED BY
SECTION 6.4(C)), AS APPLICABLE;

 

(I)                                     AGENT SHALL HAVE RECEIVED (OR SHALL
RECEIVE SIMULTANEOUSLY WITH THE FUNDING OF THE LOAN) ALL FEES, CHARGES AND
EXPENSES DUE AND PAYABLE TO AGENT AND LENDERS ON OR PRIOR TO THE CLOSING DATE
PURSUANT TO THE LOAN DOCUMENTS;

 

(J)                                     ALL IN FORM AND SUBSTANCE SATISFACTORY
TO AGENT IN ITS PERMITTED DISCRETION, AGENT SHALL HAVE RECEIVED SUCH CONSENTS,
APPROVALS AND AGREEMENTS FROM SUCH THIRD PARTIES AS AGENT AND ITS COUNSEL SHALL
DETERMINE IN THEIR PERMITTED DISCRETION ARE NECESSARY OR DESIRABLE WITH RESPECT
TO (I) THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED THEREBY,
(II) CLAIMS AGAINST ANY CREDIT PARTY OR ANY OF THE COLLATERAL, AND/OR
(III) AGREEMENTS, DOCUMENTS OR INSTRUMENTS TO WHICH ANY CREDIT PARTY IS A PARTY
OR BY WHICH ANY OF ITS PROPERTIES OR ASSETS ARE BOUND OR SUBJECT, INCLUDING
WITHOUT LIMITATION LANDLORD WAIVERS AND CONSENTS FOR EACH PROPERTY LEASE;

 

(K)                                  AGENT SHALL HAVE COMPLETED ITS DUE
DILIGENCE EXAMINATIONS OF EACH CREDIT PARTY AND THEIR SUBSIDIARIES, INCLUDING,
WITHOUT LIMITATION, (I) EXAMINATION OF THE COLLATERAL AND ITS FINANCIAL DUE
DILIGENCE, (II) AN EXAMINATION OF THE TERMS AND CONDITIONS OF ALL OBLIGATIONS
OWED BY SUCH PERSON DEEMED MATERIAL BY AGENT, THE RESULTS OF WHICH SHALL BE
SATISFACTORY TO AGENT, AND (III) CUSTOMER REFERENCE CHECKS AND CALLS, CREDIT
CHECKS AND BACKGROUND CHECKS WITH RESPECT TO THE RELEVANT KEY MANAGEMENT AND
PRINCIPALS OF EACH CREDIT PARTY AND THEIR SUBSIDIARIES;

 

(L)                                     THERE SHALL BE NO EVENT OF DEFAULT UNDER
A MATERIAL CONTRACT AS OF THE CLOSING DATE;

 

(M)                               NO MATERIAL ADVERSE EFFECT SHALL HAVE OCCURRED
SINCE JUNE 30, 2005 AND AGENT SHALL HAVE RECEIVED THE AUDITED FINANCIAL
STATEMENTS OF THE CREDIT PARTIES FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 AND
THE UNAUDITED FINANCIAL STATEMENTS OF THE CREDIT PARTIES ON A CONSOLIDATED,
CONSOLIDATING AND PRO-FORMA BASIS FOR THE EIGHT (8) MONTH PERIOD ENDING AND AS
OF AUGUST 31, 2005;

 

(N)                                 AGENT SHALL HAVE RECEIVED EVIDENCE THAT
CONSOLIDATED EBITDA OF BORROWER (CALCULATED, FOR PURPOSES OF THIS SUBSECTION (N)
WITHOUT REGARD FOR THE AMOUNTS THAT WOULD BE ACCRUED IN CONNECTION WITH TSE
CONTINGENT OBLIGATIONS IF THE CREDIT PARTIES ACCRUED FOR SUCH AMOUNTS) FOR THE
SIX (6)-MONTH PERIOD ENDED ON JUNE 30, 2005 WAS AT LEAST TWO MILLION SEVEN
HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000);

 

(O)                                 AGENT SHALL HAVE RECEIVED SUCH OTHER
APPROVALS, OPINIONS, DOCUMENTS, AGREEMENTS, INSTRUMENTS, CERTIFICATES AND
MATERIALS AS AGENT OR ANY LENDER MAY REQUEST IN THEIR PERMITTED DISCRETION;

 

(P)                                 THE CREDIT PARTIES AND THEIR CONSOLIDATED
SUBSIDIARIES, ON A CONSOLIDATED BASIS WITHOUT DUPLICATION SHALL HAVE AN
AGGREGATE OF AT LEAST $4,000,000 OF UNRESTRICTED CASH,

 

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MARKETABLE SECURITIES AND AVAILABILITY UNDER THE REVOLVING FACILITY, AS DEFINED
IN THE REVOLVING LOAN AGREEMENT; AND

 

(Q)                                 NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING OR WILL OCCUR AFTER GIVING EFFECT TO THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS.

 

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APPENDIX A

 

DEFINITIONS

 

The following terms are defined in the Sections or subsections referenced
opposite such terms:

 

“Accommodation Payment”

12.13(c)

“Affected Lender”

13.4

“Agent”

Preamble

“Agreement”

Preamble

“Borrower”

Preamble

“Capital Expenditures”

Exhibit D

“CapitalSource”

Preamble

“Confidential Information”

13.10

“EBITDA”

Exhibit D

“Event of Default”

VIII

“Fixed Charge Coverage Ratio”

Exhibit D

“Guaranteed Obligations”

14.1

“Indemnified Persons”

12.4

“Insured Event”

12.4

“Interest Coverage Ratio”

Exhibit D

“Interest Settlement Date”

11.5(a)(iii)

“Investments”

7.4

“Leverage Ratio”

Exhibit D

“Maximum Liability”

14.5

“Necessary Intellectual Property”

5.11

“Non-U.S. Lender”

13.1(f)

“Other Taxes”

13.1(b)

“Participant”

12.2(b)

“Permitted Indebtedness”

7.2

“Permitted Liens”

7.3

“Premium Financing Agreement”

7.8(k)

“Receipt”

12.5

“Register”

2.4

“Replacement Lender”

13.4

“Restricted Payments”

7.5

“SEC”

5.10

SEC Documents

5.10

“Taxes”

13.1(a)

“Transferee”

12.2(a)

“UK Subsidiaries”

Annex A

“UFCA”

12.13(c)

“UFTA”

12.13(c)

 

In addition to the terms defined elsewhere in the Agreement, the following terms
have the following meanings:

 

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“Account Control Agreement” shall mean, with respect to each deposit account,
securities account or other account of any Credit Party, excluding each
exclusively payroll account opened in the Ordinary Course of Business, an
agreement, in form and substance satisfactory to Agent in its Permitted
Discretion, among Agent, such Credit Party and the financial institution at
which such account is maintained, pursuant to which, among other things, Agent,
for the benefit of the Lender Parties, has “control” under the UCC over, and
otherwise has a first priority and perfected Lien on, such account and all
Property from time to time on deposit or otherwise credited to such account.

 

“Acquisition” shall mean any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of more than fifty percent (50%) of
the Capital Stock of any Person or otherwise causing any Person to become a
Subsidiary of a Credit Party, or (c) a merger, amalgamation, consolidation or
other combination with another Person.

 

“Affiliate” or “affiliate” shall mean, as to any initial Person, any other
Person (a) that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such initial
Person, (b) who is or within the preceding ten years was a director or officer
(i) of such initial Person, (ii) of any Subsidiary of such initial Person, or
(iii) of any other Person described in clause (a) above with respect to such
initial Person, or (c) which, directly or indirectly through one or more
intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of twenty percent (20%) or more
of any class of the outstanding voting Capital Stock of such initial Person. 
For purposes of this definition, the term “control” (and the correlative terms,
“controlled by” and “under common control with”) shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and/or policies of a Person, whether through ownership of securities
or other interests, by contract or otherwise.

 

“Applicable Default Margin” shall mean four percent (4.0%).

 

“Applicable Margin” shall mean six and one quarter percent (6.25%); provided,
however, that the Applicable Margin shall, from time to time, be five and one
quarter percent (5.25%) for the quarter following each fiscal quarter in which
quarterly financial statements are delivered pursuant to this Agreement in which
the Leverage Ratio calculated as of the last day of such prior quarter was less
than 1.50 to 1.

 

“Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. §101, et seq.), as amended and in effect from time to time and the
regulations issued from time to time thereunder.

 

“Borrower Funds Administrator” shall mean Evolving Systems, Inc. or such
successor Person approved by Agent.

 

“Business” shall mean the development, distribution and implementation of
software primarily for the communications industry and the provision of related
services, and other activities that are reasonably incidental or ancillary
thereto.

 

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“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which the Federal Reserve or Agent is authorized or required by law to be
closed.

 

“Capital Lease” shall mean, as to any Person, any lease of any interest in any
kind of Property by that Person as lessee that is, should be or should have been
recorded as a “capital lease” in accordance with GAAP.

 

“Capital Lease Obligations” shall mean all obligations of any Person under
Capital Leases, in each case taken at the amount thereof accounted for as a
liability in accordance with GAAP.

 

“Capital Stock” shall mean, as to any Person that is a corporation, the
authorized shares of such Person’s capital stock or shares, including all
classes of common, preferred, voting and nonvoting capital stock or shares, and,
as to any Person that is not a corporation or an individual, the partnership,
membership or other ownership interests in such Person, including, without
limitation, the right to share in profits and losses, the right to receive
distributions of cash and other Property, and the right to receive allocations
of items of income, gain, loss, deduction and credit and similar items from such
Person, whether or not such interests include voting or similar rights entitling
the holder thereof to exercise control over such Person, collectively with, in
any such case, all warrants, options and other rights to purchase or otherwise
acquire, and all other instruments convertible into or exchangeable for, any of
the foregoing.

 

“Cash Equivalents” shall mean (a) securities issued, or directly and fully
guaranteed or insured, by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than six (6) months from the
date of acquisition, (b) time deposits, certificates of deposit and bankers’
acceptances of items denominated in the currency of the holder’s jurisdiction of
formation (i) any domestic commercial bank of recognized standing having capital
and surplus in excess of $500,000,000, or (ii) any bank (or the parent company
of such bank) whose short-term commercial paper rating from Standard & Poor’s
Ratings Services (“S&P”) is at least A-2 or the equivalent thereof or from
Moody’s Investors Service, Inc. (“Moody’s”) is at least P-2 or the equivalent
thereof in each case with maturities of not more than six (6) months from the
date of acquisition (any bank meeting the qualifications specified in clauses
(b)(i) or (ii), an “Approved Bank”), (c) repurchase obligations with a term of
not more than seven (7) days for underlying securities of the types described in
clause (a) above entered into with any Approved Bank, (d) commercial paper
issued by any Approved Bank or by the parent company of any Approved Bank and
commercial paper issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating of at least A-2 or the
equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody’s,
or guaranteed by any industrial company with a long term unsecured debt rating
of at least A or A2, or the equivalent of each thereof, from S&P or Moody’s, as
the case may be, and in each case maturing within six (6) months after the date
of acquisition, and (e) investments in money market funds substantially all of
whose assets are comprised of securities of the type described in clauses
(a) through (d) above.

 

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“Change of Control” shall mean the occurrence of any of the following:

 

(I)                             ANY “CHANGE IN/OF CONTROL” OR “SALE” OR
“DISPOSITION” OR SIMILAR EVENT AS DEFINED IN ANY ORGANIZATIONAL DOCUMENT OF ANY
CREDIT PARTY OR THE SUBORDINATED NOTES;

 

(II)                          THE CONSUMMATION OF ANY INITIAL PUBLIC OFFERING BY
ANY CREDIT PARTY AFTER THE CLOSING DATE;

 

(III)                       ANY PERSON AND ITS AFFILIATES, INDIVIDUALLY OR AS
PART OF A GROUP (AS THAT TERM IS DESCRIBED IN RULE 13D-5(B)(1) UNDER THE
EXCHANGE ACT), EITHER (A) OWNING OR CONTROLLING IN THE AGGREGATE IN EXCESS OF
20% OF THE THEN OUTSTANDING VOTING CAPITAL STOCK OF EVOLVING SYSTEMS OR
(B) BEING ABLE TO ELECT A MAJORITY OF THE BOARD OF DIRECTORS OF EVOLVING
SYSTEMS;

 

(IV)                              ANY CREDIT PARTY CEASES TO OWN AND CONTROL,
BENEFICIALLY AND OF RECORD, ONE HUNDRED PERCENT (100%) OF THE ISSUED AND
OUTSTANDING CAPITAL STOCK (OTHER THAN DIRECTORS’ QUALIFYING SHARES REQUIRED BY
LAW), FREE AND CLEAR OF ALL LIENS, RIGHTS, OPTIONS, WARRANTS OR OTHER SIMILAR
AGREEMENTS OR UNDERSTANDINGS, OTHER THAN LIENS IN FAVOR OF AGENT, FOR THE
BENEFIT OF THE LENDER PARTIES OF ANY SUBSIDIARY OF WHICH IT OWN, OR CONTROLS
SUCH CAPITAL STOCK AS OF THE CLOSING DATE;

 

(V)                                 STEPHEN K. GARTSIDE, JR. CEASES TO BE
EMPLOYED AS CHIEF EXECUTIVE OFFICER OF BORROWER OR OTHERWISE DIES OR BECOMES
DISABLED AND, IN ANY CASE, SHALL NOT HAVE BEEN REPLACED WITHIN FORTY-FIVE (45)
CALENDAR DAYS BY AN INTERIM CHIEF EXECUTIVE OFFICER, AND WITHIN TWO HUNDRED
SEVENTY (270) DAYS BY A PERMANENT CHIEF EXECUTIVE OFFICER WITH SUCH PERMANENT
REPLACEMENT HAVING SIMILAR EXPERIENCE AND QUALIFICATIONS AS THE CHIEF EXECUTIVE
OFFICER BEING REPLACED; OR

 

(VI)                              ANY CREDIT PARTY IS SUBJECT TO SHAREHOLDER
BLOCKING RIGHTS WHICH HAVE NOT BEEN WAIVED PURSUANT TO AN AGREEMENT IN FORM AND
SUBSTANCE SATISFACTORY TO AGENT IN ITS PERMITTED DISCRETION; PROVIDED THAT ANY
VOTING RIGHTS OF THE HOLDERS OF EVOLVING SYSTEM’S SERIES B CONVERTIBLE PREFERRED
STOCK UNDER SECTION 3(C) OF THE CERTIFICATE OF DESIGNATION HAVE ONLY BEEN
WAIVED, IF AT ALL, WITH RESPECT TO THE RIGHTS OF THE AGENT AND LENDERS UNDER THE
LOAN DOCUMENTS.

 

“Charter and Good Standing Documents” shall mean, for each Credit Party, (i) a
copy of the certificate of incorporation or formation (or other applicable
charter document) certified as of a date not more than twenty one (21) Business
Days prior to the Closing Date by the applicable Governmental Authority of the
jurisdiction of incorporation or organization of such Credit Party, (ii) a copy
of the bylaws or similar Organizational Documents of such Credit Party certified
as of a date not more than twenty one (21) Business Days prior to the Closing
Date by the corporate secretary or assistant secretary of such Credit Party (or
its general partner or managing member, as the case may be), (iii) an original
certificate of good standing as of a date acceptable to Agent issued by the
applicable Governmental Authority of the jurisdiction of incorporation or
organization of such Credit Party and of every other jurisdiction in which such
Credit Party has an office or conducts business or is otherwise required to be
in good standing, and (iv) copies of

 

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the resolutions of the Board of Directors or Managers (or other applicable
governing body of such Credit Party) of such Credit Party and, if required,
stockholders, members, partners or other equity owners, authorizing the
execution, delivery and performance of the Loan Documents and the Related
Documents to which such Credit Party is a party, certified by the corporate
secretary or assistant secretary of such Credit Party (or its general partner or
managing member, as the case may be) as of the Closing Date.

 

“Closing” shall mean the satisfaction, or written waiver by Agent and Requisite
Lenders, of all of the conditions precedent set forth in this Agreement required
to be satisfied prior to the disbursement of the Loan and consummation of the
other transactions contemplated hereby.

 

“Closing Date” shall mean the date of this Agreement.

 

“Code” shall mean the Internal Revenue Code of 1986, and regulations promulgated
thereunder.

 

“Collateral” shall mean, collectively, all Property, interests in Property,
collateral and/or security granted and/or securities pledged to Agent, for the
benefit of the Lender Parties, or any Lender by the Credit Parties and any other
Person to secure the Obligations or any part thereof pursuant to the Loan
Documents, including, without limitation, all Property in which a Lien is
granted pursuant to the Security Documents to secure the Obligations or any part
thereof.

 

“Commitment” or “Commitments” shall mean as to all Lenders, the aggregate
commitments of all Lenders to fund the Loan as the same may be reduced, modified
or terminated from time to time pursuant to this Agreement.

 

“Compliance Certificate” shall mean a compliance certificate executed by a
Responsible Officer of Borrower in the form of Exhibit B-2 hereto.

 

“Contingent Obligations” shall mean, as to any Person, any agreement,
undertaking or arrangement by which such Person assures, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, any Indebtedness, leases,
dividends or other obligations (“primary obligations”) of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, including, without limitation, any
so-called “keepwell” or “makewell” agreement, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, (d) otherwise to assure or to hold harmless the owner
of such primary obligation against loss in respect thereof, (e) with respect to
any letter of credit of such Person or as to which that Person is otherwise
liable for reimbursement of drawings, or (f) with respect to any Hedging
Agreement; provided, however, that the term “Contingent Obligation” shall not
include endorsements of instruments for deposit or collection in the Ordinary
Course of Business.  The amount of any Contingent Obligation shall be deemed

 

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to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.

 

“Credit Party” shall mean each of Evolving Systems, Inc., Telecom Software
Enterprises, LLC, Intermediate Holdco, and all Domestic Subsidiaries of such
persons.

 

“Credit Parties” shall mean Evolving Systems, Telecom Software Enterprises, LLC,
Intermediate Holdco, and all Domestic Subsidiaries of such persons.

 

“Cross License Agreement” shall mean, collectively, (i) the Intercompany License
Agreement, dated as of October 17, 2005, between Evolving Systems, as licensor,
and Revolving Borrower, as licensee, and (ii) the Intercompany License
Agreement, dated as of October 17, 2005 between Revolving Borrower, as licensor,
and Evolving Systems, as licensee.

 

“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.

 

“Default” shall mean any event, fact, circumstance or condition that, with the
giving of applicable notice or passage of time or both, would constitute, be or
result in an Event of Default.

 

“Default Rate” shall mean a per annum rate equal to the Libor Rate in effect
from time to time, plus six and one quarter percent (6.25%), plus the Applicable
Default Margin; provided, that if any Obligation otherwise does not bear
interest, the Default Rate with respect thereto shall equal the Libor Rate in
effect from time to time, plus six and one quarter percent (6.25%), plus the
Applicable Default Margin.

 

“Dollars” and “$” shall mean lawful money of the United States of America.

 

“Domestic Subsidiary” shall mean any Subsidiary of 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.

 

“Eligible Assignee” shall mean any of the following:  (a) a commercial bank
organized under the laws of the United States, or any state thereof; (b) a
commercial bank organized under the laws of any other country; (c) a finance
company, insurance company or other financial institution or fund which is
engaged in making, purchasing or otherwise investing in commercial loans or
other debt obligations for its own account in its ordinary course of business;
or (d) a Related Fund.

 

“Environmental Laws” shall mean, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendment and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, any other
“Superfund” or

 

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“Superlien” law and all other federal, state and local and foreign
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances, in each case, as amended, and the legally-binding rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of Governmental Authorities with respect thereto.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.

 

“Eurocurrency Reserve Requirement” for any day shall mean the aggregate (without
duplication) of the rates (expressed as a decimal rounded upward to the nearest
1/100th of 1%) as determined by Agent of reserve requirements in effect on such
day (including, without limitation, basis, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System of the United Stated or other Governmental Authority, or any successor
thereto, having jurisdiction with respect thereto) prescribed for Eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
such Board) maintained by a member bank of the Federal Reserve System.

 

“Excess Cash Flow” shall mean, for Evolving Systems and its consolidated
Subsidiaries, for each fiscal year commencing with the year ending December 31,
2006, on a consolidated basis without duplication, an amount equal to the sum of
(i) EBITDA (as defined in Annex I hereof) for such fiscal year, minus
(ii) actual cash franchise and income tax paid in cash during such fiscal year,
minus (iii) cash Interest Expense on the Loan and the Revolving Facility and the
Subordinated Notes actually paid during such fiscal year, if any, minus
(iv) Unfinanced Capital Expenditures (as defined in Exhibit B-1 hereto) of the
Credit Parties and their Subsidiaries for such fiscal year minus (v) an amount
equal to the aggregate amount of all scheduled repayments of principal and all
prepayments of the Loan for such fiscal year, if any, minus (vi) an amount equal
to the sum of payments of principal on the Subordinated Notes and Revolving
Facility, if any, (to the extent such payments on the Revolving Facility
resulting in permanent reductions of the Revolving Facility) actually made
during such period to the extent permitted hereunder.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Fair Valuation” shall mean the determination of the value of the consolidated
assets of a Person on the basis of the amount which may be realized by a willing
seller within a reasonable time through collection or sale of such assets at
market value on a going concern basis to an interested buyer who is willing to
purchase under ordinary selling conditions in an arm’s length transaction.

 

“Foreign Subsidiary” shall mean any Subsidiary of a Person that is not a
Domestic Subsidiary.

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time as applied by nationally recognized
accounting firms.

 

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“Governmental Authority” shall mean any federal, state, foreign, municipal,
national, provincial, local or other governmental department, court, commission,
board, bureau, agency or instrumentality or political subdivision thereof, or
any entity or officer exercising executive, legislative or judicial, regulatory
or administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.

 

“Guarantor” shall mean any Credit Party other than Borrower, and “Guarantors”
shall mean all such other Credit Parties.

 

“Guaranty” shall mean any guaranty executed by a Guarantor, including, without
limitation, the guaranty effectuated by Article XIV of this Agreement or any
guaranty set forth in a Pledge Agreement executed by a Person relating to the
Capital Stock of Borrower or any of its Subsidiaries.

 

“Hazardous Substances” shall mean any flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products, methane, hazardous materials,
hazardous wastes, hazardous or toxic substances or related materials as defined
in or other substances or materials regulated by or subject to, or which may
form the basis of liability under, any applicable Environmental Law.

 

“Hedging Agreement” shall mean any swap agreements (as defined in Section 101 of
the Bankruptcy Code) and any other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange rates
and entered into for bona fide hedging purposes and not for speculation.

 

“Indebtedness” of any Person shall mean, without duplication: (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables incurred and payable in the Ordinary Course of Business of such
Person); (c) the face amount of all letters of credit issued for the account of
such Person and, without duplication, all drafts drawn thereunder and all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments issued by such Person; (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by such Person (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property); (f) all
Capital Lease Obligations; (g) the principal balance outstanding under any
synthetic lease, off-balance sheet loan or similar off balance sheet financing
products; (h) all indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in Property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness;
and (i) all Contingent Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (h) above.

 

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“Intellectual Property” shall mean all present and future:  trade secrets,
know-how and other proprietary information; trademarks, trademark applications,
internet domain names, service marks, trade dress, trade names, business names,
designs, logos, slogans (and all translations, adaptations, derivations and
combinations of the foregoing) indicia and other source and/or business
identifiers, and the goodwill of the business relating thereto and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights and copyright
applications; (including copyrights for computer programs) and all tangible and
intangible property embodying the copyrights, unpatented inventions (whether or
not patentable); patents and patent applications; industrial design applications
and registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to sue for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.

 

“Intellectual Property Security Agreement” shall mean an Acknowledgment of
Intellectual Property Collateral Lien executed by a Credit Party in favor of
Agent, for the benefit of the Lender Parties, as the same may be modified,
amended, restated or supplemented from time to time.

 

“Interest Payment Date” shall mean the first day of each calendar month.

 

 “Joinder Agreement” shall mean an agreement, in form and substance satisfactory
to Agent in its Permitted Discretion, pursuant to which, among other things, a
Person becomes a party to, and bound by the terms of, this Agreement and/or the
other Loan Documents in the same capacity and to the same extent as either
Borrower or a Guarantor, as Agent may determine.

 

“Landlord Waiver and Consent” shall mean a waiver or consent, in form and
substance satisfactory to Agent in its Permitted Discretion, pursuant to which a
mortgagee, owner or lessor of real property on which any Collateral is stored or
otherwise located, or a warehouseman, processor or other bailee of any Property
of any Credit Party, (i) acknowledges and consents to the Liens of Agent, for
the benefit of the Lender Parties under the Loan Documents, (ii) waives any
Liens held by such Person on such Property, and (iii) in the case of any such
agreement with a mortgagee or lessor, permits Agent access to and use of such
real Property for a reasonable amount of time following the occurrence and
during the continuance of an Event of Default to assemble, complete and sell any
Collateral stored or otherwise located thereon.

 

“Lender” shall mean any of the Persons from time to time named on Schedule A
under the headings “Lenders,” and their respective successors and permitted
assigns (but not, except as expressly set forth herein, any Participant that
otherwise is not a party to this Agreement), and “Lenders” shall mean all of
them collectively.

 

“Lender Addition Agreement” shall mean an agreement among Agent, a Lender and
such Lender’s assignee regarding their respective rights and obligations with
respect to assignments of

 

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the Commitments, the Loan and other interests under this Agreement and the other
Loan Documents, in form and substance acceptable to Agent in its Permitted
Discretion; it being agreed and understood that the consent or approval of
Borrower shall be required thereto only in accordance with the terms of
Section 13.1.

 

“Lender Parties” shall mean, collectively, Agent and Lenders, and “Lender Party”
shall mean any of them.

 

“Lending Office” shall mean, with respect to any Lender, the office or offices
of such Lender specified as its “Lending Office” opposite its name on the
applicable signature page hereto, or such other office or offices of such Lender
as it may from time to time notify Borrower and Agent.

 

“Libor Rate” shall mean a fluctuating per annum rate of interest equal to
(i) the rate per annum (rounded upwards to the nearest 1/100th of 1%) equal to
the offered rate for deposits of Dollars for a 30-day period which appears on
Telerate page 3750 as of 11:00 A.M. (London time) Rate divided by (ii) 1.00
minus the Eurocurrency Reserve Requirements in effect.  “Telerate page 3750”
means the display designated as “page 3750” on the Telerate Service (or such
other page as may replace Page 3750 on that service or such other service as may
be nominated by the British Bankers’ Association as the information vendor for
the purpose of displaying British Bankers’ Association Interest Settlement Rates
for deposits in Dollars).

 

“Lien” shall mean any mortgage, pledge, security interest, encumbrance,
transfer, charge or other restriction, lien or charge of any kind or any other
priority arrangement (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement or any lease in the nature
thereof), or any other arrangement pursuant to which title to the Property is
retained by or vested in some other Person for security purposes.

 

“Life Insurance Policy” shall mean a current, valid and fully paid key man life
insurance policy insuring the life of Stephen K. Gartside, Jr. in the amount of
$1,000,000 that (i) lists Agent, for the benefit of the Lender Parties, as the
sole beneficiary thereunder, (ii) is issued by a carrier and otherwise is in
form and substance acceptable to Agent in its Permitted Discretion, (iii) cannot
be altered, amended or modified in any respect (including, without limitation,
with respect to amounts of coverage and beneficiaries without the consent of
Agent), and (iv) cannot be canceled without at least thirty (30) Business Days’
prior written notice to Agent.

 

“Loan” shall mean the term loan in aggregate principal balance of $8,500,000
made by the Lenders to the Borrowers pursuant to this Agreement.

 

“Loan Documents” shall mean, collectively, this Agreement, the Notes, if any,
the Security Documents, all Compliance Certificates, the Subordination
Agreements and all other agreements, documents, instruments and certificates
heretofore or hereafter executed and/or delivered to Agent or any Lender by or
on behalf of any Credit Party in connection with any of the foregoing or the
Loan, in each case as the same may be amended, modified or supplemented from
time to time.

 

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“Material Adverse Effect” shall mean any event, condition, obligation, liability
or circumstance or set of events, conditions, obligations, liabilities or
circumstances or any change(s) which:

 

(I)                                     HAS, HAD OR WOULD REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT UPON OR CHANGE IN (A) THE LEGALITY, VALIDITY
OR ENFORCEABILITY OF ANY LOAN DOCUMENT TO WHICH A CREDIT PARTY IS A PARTY OR
(B) THE AGGREGATE RIGHTS AND REMEDIES OF THE AGENT UNDER THE LOAN DOCUMENTS
TAKEN AS A WHOLE;

 

(II)                                  HAS BEEN OR WOULD REASONABLY BE EXPECTED
TO BE MATERIAL AND ADVERSE TO THE VALUE OF ANY OF THE COLLATERAL, TAKEN AS A
WHOLE, OR TO THE BUSINESS, OPERATIONS, LIABILITIES OR CONDITION (FINANCIAL OR
OTHERWISE) OF EVOLVING SYSTEMS OR REVOLVING BORROWER, INDIVIDUALLY, OR OF THE
CREDIT PARTIES TAKEN AS A WHOLE; OR

 

(III)                               HAS MATERIALLY IMPAIRED OR WOULD REASONABLY
BE EXPECTED TO MATERIALLY IMPAIR THE ABILITY OF EVOLVING SYSTEMS OR REVOLVING
BORROWER, INDIVIDUALLY, OR OF THE CREDIT PARTIES TAKEN AS A WHOLE TO PERFORM ANY
OF ITS OR THEIR OBLIGATIONS, OR TO CONSUMMATE THE TRANSACTIONS, UNDER THE LOAN
DOCUMENTS.

 

“Material Contracts” means (i) the Related Documents and (ii) any other one or
series of related contracts, agreements or arrangements to which Credit Parties
or any of their Subsidiaries are a party that involve aggregate consideration
payable to or by such Credit Party or such Subsidiary of more than $1,000,000
annually.

 

“Maturity Date”  shall mean the earliest to occur of (i) the acceleration
(whether automatic or by written notice) of any Obligations in accordance with
the terms of this Agreement and (ii) the last day of the Term.

 

“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt, leasehold
mortgage, leasehold deed of trust, leasehold deed to secure debt or similar
instrument creating a Lien on real Property or on any interest in real Property
to secure any of the Obligations.

 

“Net Proceeds” shall mean:

 

(I)                                     IN RESPECT OF ANY ISSUANCE OF DEBT OR
EQUITY, CASH PROCEEDS AND NON-CASH PROCEEDS RECEIVED OR RECEIVABLE IN CONNECTION
THEREWITH, NET OF UNDERWRITING DISCOUNTS AND REASONABLE OUT-OF-POCKET COSTS AND
EXPENSES PAID OR INCURRED IN CONNECTION THEREWITH IN FAVOR OF ANY PERSON THAT IS
NOT AN AFFILIATE OF ANY CREDIT PARTY; AND

 

(II)                                  IN RESPECT OF ANY DISPOSITION, CASUALTY,
CONDEMNATION, TAKING OR OTHER EVENT OF LOSS, PROCEEDS IN CASH, CHECKS OR OTHER
CASH EQUIVALENT FINANCIAL INSTRUMENTS (INCLUDING CASH EQUIVALENTS) AS AND WHEN
RECEIVED BY THE PERSON MAKING SUCH DISPOSITION OR ALL INSURANCE PROCEEDS
RECEIVED ON ACCOUNT OF SUCH CASUALTY, CONDEMNATION, TAKING OR OTHER EVENT OF
LOSS, IN ANY SUCH CASE NET OF: (I) IN THE EVENT OF A DISPOSITION, (X) THE DIRECT
COSTS AND EXPENSES RELATING TO SUCH DISPOSITION EXCLUDING AMOUNTS PAYABLE TO
BORROWER OR ANY AFFILIATE OF ANY CREDIT PARTY, (Y) SALE, USE OR OTHER
TRANSACTION TAXES PAID OR PAYABLE AS A RESULT THEREOF, AND (Z) AMOUNTS REQUIRED
TO BE

 

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APPLIED TO REPAY PRINCIPAL, INTEREST AND PREPAYMENT PREMIUMS AND PENALTIES ON
INDEBTEDNESS (OTHER THAN THE OBLIGATIONS) SECURED BY A LIEN ON THE ASSET THAT IS
THE SUBJECT OF SUCH DISPOSITION; AND (II) IN THE EVENT OF A CASUALTY,
CONDEMNATION, TAKING OR OTHER EVENT OF LOSS, (X) ALL MONEY ACTUALLY APPLIED TO
REPAIR OR RECONSTRUCT THE DAMAGED PROPERTY OR PROPERTY AFFECTED BY THE
CONDEMNATION OR TAKING IN ACCORDANCE WITH THE TERMS HEREOF, (Y) ALL OF THE COSTS
AND EXPENSES REASONABLY INCURRED IN CONNECTION WITH THE COLLECTION OF SUCH
PROCEEDS, AWARD OR OTHER PAYMENTS, AND (Z) ANY AMOUNTS RETAINED BY OR PAID TO
PARTIES HAVING SUPERIOR RIGHTS TO SUCH PROCEEDS, AWARDS OR OTHER PAYMENTS.

 

“Notes” shall mean, collectively, if any, any notes issued pursuant to this
Agreement, together with any promissory notes or other instruments issued in
substitution therefor or replacement thereof, in each case as the same may be
amended, modified, divided, split, supplemented and/or restated from time to
time.

 

“Obligations” shall mean, without duplication, all present and future
obligations, Indebtedness and liabilities of Borrower and/or any other Credit
Party to Agent and/or the other Lender Parties at any time and from time to time
of every kind, nature and description arising under any Loan Document, whether
direct or indirect, secured or unsecured, joint and/or several, absolute or
contingent, due or to become due, matured or unmatured, now existing or
hereafter arising, contractual or tortious or liquidated or unliquidated,
including, without limitation, all interest, fees, charges, expenses and/or
amounts paid or advanced by Agent or any other Lender Party to, on behalf of or
for the benefit of any such Person for any reason under any Loan Document at any
time, obligations of performance as well as obligations of payment, and all
interest, fees and other amounts that accrue after the commencement of any
proceeding under any Debtor Relief Law by or against any such Person or its
Properties related to any of the Obligations.

 

“Ordinary Course of Business” shall mean, in respect of any transaction
involving any Credit Party, the ordinary course of such Credit Party’s business,
as conducted by such Credit Party in accordance with past practices and
undertaken by such Credit Party in good faith and not for purposes of evading
any covenant or restriction in any Loan Document.

 

“Organizational Documents” shall mean (a) for any corporation, the memorandum
and/or certificate or articles of incorporation, the bylaws, any certificate of
designation, or other instrument relating to the rights of preferred
shareholders or stockholders of such corporation and any shareholder rights
agreement, (b) for any partnership, the partnership agreement and, if
applicable, the certificate of limited partnership, and (c) for any limited
liability company, the operating agreement and articles or certificate of
formation or organization.

 

“Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L.
107-56, as amended.

 

“Permit” shall mean any license, lease, power, permit, franchise, certificate,
authorization or approval issued by a Governmental Authority.

 

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“Permitted Discretion” shall mean, with respect to any Person, a determination
or judgment made by such Person in good faith in the exercise of reasonable
(from the perspective of a secured lender) credit or business judgment.

 

“Permitted Securities” shall mean any Capital Stock of Evolving Systems that by
their terms (or by the terms of any security into which they are convertible or
for which they are exchangeable) or upon the happening of any event or otherwise
(A) are not convertible or exchangeable for Indebtedness or any securities that
are not Permitted Securities, (B) (i) do not mature and (ii) are not putable or
redeemable at the option of the holder thereof, in each case under clause (i) or
(ii) in whole or in part on or prior to the date that is six (6) months after
the earlier of the scheduled end of the Term or the actual payment in full in
cash of the Obligations, (C) do not require or mandate payments of dividends or
distributions in cash on or prior to the date that is six (6) months after the
earlier of the scheduled end of the Term or the actual payment in full in cash
of the Obligations, (D) are unsecured and by operation of law or by legally
binding agreement are subordinated in right of repayment, liens, security and
remedies to all of the Obligations and to all of Agent’s and the other Lender
Parties’ rights, Liens and remedies, (E) are not sold, issued or otherwise
transferred in connection with or as a part of a Public Offering; and (F) to the
extent the same are subject to or provide for any Shareholder Blocking Rights,
all such Shareholder Blocking Rights have been waived in form and substance
satisfactory to Agent in its Permitted Discretion.

 

“Person” shall mean an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature.

 

“Pledge Agreement” shall mean any pledge agreement between Agent and any Credit
Party, as the same be amended, modified, supplemented or restated from time to
time.

 

“Prepayment Premium” shall mean: (a) for the period from the Closing Date
through and including November 14, 2006, an amount equal to two and one half
percent (2.5%) of the Loan so prepaid or required to be prepaid; (b) for the
period after November 14, 2006 through and including November 14, 2007, an
amount equal to one and one half percent (1.5%) of the Loan so prepaid or
required to be prepaid.

 

“Priority Permitted Liens” shall mean Permitted Liens contemplated by and
permitted under Sections 7.3(b), (c), (d), (e) and/or (i).

 

“Property” shall mean all types of real, personal or mixed property and all
types of tangible or intangible property.

 

“Pro Rata Share” shall mean:

 

(a)                                  with respect to any Lender as to all
Lenders, the percentage obtained by dividing (i) the aggregate amount of such
Lender’s share of the Loan outstanding and such Lender’s Commitments by (ii) the
aggregate amount of all Lenders’ share of the Loan outstanding and all Lenders’
Commitments; in any case as such percentage may be adjusted by assignments
permitted pursuant to Section 12.2 and 2.9.

 

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

 

“Public Offering” shall mean any offer or sale of its Capital Stock by Evolving
Systems or any of its Subsidiaries pursuant to any registration statement filed
and effective with the Securities and Exchange Commission or any other
applicable Governmental Authority except offers and sales pursuant to (a) any
Special Registration Statement or (b) any registration statements on Form S-3
that are effective as of the Closing Date.

 

“Qualified Asset Sale” shall mean any sale, transfer or other disposition by
Borrower or any of its Subsidiaries permitted under Section 7.7(a), (b), (d),
(e), (f) and (g).

 

“Real Estate” shall mean each parcel of real Property owned by any Credit Party.

 

“Related Documents” shall mean, collectively, the Subordinated Loan Documents,
the Transfer Pricing Agreements to be prepared pursuant to Section 6.7, and the
Cross License Agreement.

 

“Related Fund” shall mean (a) any fund, trust or similar entity that invests in
commercial loans in the ordinary course of its business and is advised or
managed by (i) a Lender, (ii) an Affiliate of a Lender, (iii) the same
investment advisor that manages a Lender or (iv) an Affiliate of an investment
advisor that manages a Lender or (b) any finance company, insurance company or
other financial institution which temporarily warehouses the Loan for any Lender
or any Person described in clause (a) above.

 

“Related Transactions” shall mean the transactions anticipated by the Related
Documents.

 

“Requisite Lenders” shall mean at any time Lenders then holding more than fifty
percent (50%) of the sum of the aggregate unpaid principal amount of the Loan
then outstanding.  For purposes of this definition, all Lenders that are
Affiliates and each Lender and its Related Funds shall be deemed to constitute
one, single Lender.

 

“Responsible Officer” shall mean the chief executive officer or the president of
Borrower Funds Administrator, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants or delivery of financial information, the chief financial officer or
the treasurer of Borrower Funds Administrator, or any other officer having
substantially the same authority and responsibility.

 

“Revolving Borrower” shall mean Evolving Systems Ltd., a company incorporated
under the laws of England and Wales, as the “Borrower” under the Revolving Loan
Agreement

 

“Revolving Facility” shall mean the revolving loan facility established pursuant
to the Revolving Loan Documents.

 

“Revolving Lender” shall mean the “Lender” under the Revolving Loan Agreement.

 

“Revolving Loan Agreement” shall mean the Revolving Loan Agreement dated the
date hereof by and among Revolving Borrower, Evolving Systems Ltd, Agent and CSE
Finance, Inc., as the same be amended, modified, supplemented or restated from
time to time.

 

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

 

“Revolving Loan Documents” shall mean the Revolving Loan Agreement and all other
agreements, documents, instruments and certificates heretofore or hereafter
executed in connection with the Revolving Loan Agreement.

 

“Revolving Obligations” shall mean the “Obligations” as defined in the Revolving
Loan Agreement.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

 

“Security Agreements” shall mean any security or pledge agreement executed by a
Person in favor of Agent, for the benefit of the Lender Parties, to secure the
Obligations.

 

“Security Documents” shall mean, collectively, the Security Agreements, the
Guarantees, any Mortgages, the Intellectual Property Security Agreements, all
Account Control Agreements, all Landlord Waivers and Consents, all UCC financing
statements and all other agreements, documents and instruments that create or
perfect the Liens in the Collateral, as the same may be modified, amended or
supplemented from time to time.

 

“Seller Subordination Agreement” shall mean the Subordination Agreement dated
the date hereof by and among Agent, the Credit Parties named therein, the
holders of the Subordinated Notes and any other parties thereto as the same may
be modified, amended, restated or supplemented from time to time and in form and
substance satisfactory to Agent.

 

“Shareholder Blocking Rights” shall mean any rights of any owner (direct or
indirect) of any Capital Stock of any Credit Party which, pursuant to the terms
of any agreement or Organizational Document, has the right to consent, or the
effect of requiring such consent, to any foreclosure by the Agent under any
Pledge Agreement or otherwise to the exercise of any of Agent’s rights and
remedies thereunder or otherwise has the right to restrain, delay, impair or
otherwise interfere with the Agent in the event of Agent’s exercise of its
rights under a Pledge Agreement or other Security Documents.

 

“Solvent” shall mean, as to any Person at any time, that (a) the fair value of
the Property of such Person is greater than the amount of such Person’s
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of
Section 101(32)(A) of the Bankruptcy Code and, in the alternative, for purposes
of the Uniform Fraudulent Transfer Act; (b) the present fair saleable value of
the Property of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured; and (c) such Person is able to realize upon its Property and pay
its debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business.

 

“Special Registration Statement” shall mean (i) a registration statement
relating to any employee benefit plan, (ii) any registration statement with
respect to any corporate reorganization or transaction under Rule 145 of the
Securities Act, including any registration statements related to the issuance or
resale of securities issued in such a transaction or (iii) any

 

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

 

registration statement for the purpose of effecting a business combination;
provided that, in the case of any registration statement described in clauses
(ii) and (iii), the underlying transaction is permitted under the Loan Documents
or is otherwise consented to in writing by Agent prior to the consummation
thereof.

 

“Subordinated Debt” shall mean any Indebtedness, contingent equity, earnout or
other obligations of Borrower or any of its Subsidiaries that is unsecured and
subordinated by written contract in right of payment, liens, security and
remedies to all of the Obligations and all of the Lender Parties’ rights, Liens
and remedies in form and substance satisfactory to Requisite Lenders, including,
without limitation, the unsecured Indebtedness of Borrower evidenced by the
Subordinated Loan Documents.

 

“Subordinated Loan Documents” shall mean, collectively, the Subordinated Notes
and all other agreements, documents and instruments executed and delivered in
connection therewith.

 

“Subordinated Notes” shall mean the Subordinated Notes of Evolving Systems dated
November 14, 2005 in the aggregate principal amount of $4,869,700.47.

 

“Subordination Agreement” shall mean, collectively, any of (i) the Seller
Subordination Agreement and (ii) any other agreement between Agent and the
holders of Subordinated Debt to which Evolving Systems is either a party or
executes an acknowledgment to such agreement, in each case as the same may be
modified, amended, restated or supplemented from time to time and in form and
substance satisfactory to Requisite Lenders.

 

“Subsidiary” shall mean, as to any initial Person, any other Person in which
more than fifty percent (50%) of all equity, membership, partnership or other
ownership interests is owned directly or indirectly by such initial Person or
one or more of its Subsidiaries.  For purposes of the Loan Documents, any
reference to “Subsidiary” shall be deemed to refer to a Subsidiary of Borrower
unless the context provides otherwise.

 

“Term” shall mean the period commencing on the Closing Date and ending on
November 14, 2010.

 

“Transfer Pricing Agreements” shall mean agreements on transfer pricing in form
and substance satisfactory to Agent in its Permitted Discretion.

 

“TSE Contingent Obligations” shall mean the Deferred Payment obligations to the
Sellers (as defined in the TSE Purchase Agreement).

 

“TSE Purchase Agreement” shall mean the Acquisition Agreement of Telecom
Software Enterprises, LLC, dated as of October 15, 2004 among Evolving Systems,
as Buyer, and Lisa Marie Maxson and Peter McGuire, as Sellers.

 

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New
York from time to time; provided, that to the extent the UCC is used to define
any term herein or in any other Loan Document and such term is defined
differently in different Articles or Divisions of the UCC the definition of such
term contained in Article or Division 9 shall govern.

 

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“UK Excess Cash Flow” shall mean, for Revolving Borrower and its consolidated
Subsidiaries (the “UK Subsidiaries”), for each fiscal quarter commencing with
the fiscal quarter ending December 31, 2006, on a consolidated basis without
duplication, an amount equal to the sum of (i) EBITDA (as defined in Annex I
hereof) of the UK Subsidiaries for such fiscal quarter, minus (ii) actual cash
franchise and income tax paid in cash by the UK Subsidiaries during such fiscal
quarter, minus (iii) cash Interest Expense on the Revolving Facility actually
paid during such fiscal quarter, if any, minus (iv) Unfinanced Capital
Expenditures (as defined in Exhibit B-1 hereto) of the UK Subsidiaries for such
fiscal quarter minus (v) an amount equal to the sum of payments of principal on
the Revolving Facility, if any, (to the extent such payments on the Revolving
Facility resulting in permanent reductions of the Revolving Facility) actually
made during such period to the extent permitted hereunder, minus (vi) the amount
of any dividends made by Revolving Borrower under Section 7.5(c) during such
period for Intermediate Holdco to pay taxes, costs and expenses.

 

“Wholly-Owned Subsidiary” shall mean any Subsidiary in which (other than
directors’ qualifying shares required by law) one hundred percent (100%) of the
equity, at the time as of which any determination is being made, is owned,
beneficially and of record, by Borrower or by one or more of the other
Wholly-Owned Subsidiaries of Borrower, or both.

 

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SCHEDULE A

Lenders/Commitments

 

Lenders

 

Commitment

 

 

 

 

 

CapitalSource Finance LLC

 

$

8,500,000

 

4445 Willard Avenue, 12th Floor

 

 

 

Chevy Chase, Maryland 20815

 

 

 

Attention: Corporate Finance Group, Portfolio Manager

 

 

 

Telephone: (301) 841-2700

 

 

 

FAX: (301) 841-2360

 

 

 

E-Mail: sladd@capitalsource.com

 

 

 

 

 

 

 

Wire Instructions:

 

 

 

 

Bank:

Bank of America, Baltimore, MD

 

 

 

Account:

003939396662

 

 

 

ABA:

026009593

 

 

 

Account Name:

CapitalSource Funding LLC - CFG

 

 

 

Reference:

Evolving Systems

 

 

 

 

 

 

 

Total:

 

$

8,500,000

 

 

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