Exhibit 10.1(c)

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (the “Agreement”) is entered into as of this 14th day of
November, 2005, by and between CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company, as administrative agent and collateral agent for the Lenders
defined below (in such capacities, “Agent” or “Secured Party”) under the Loan
Agreement (as defined below), and EVOLVING SYSTEMS, INC., a Delaware corporation
(“Pledgor”).

 

RECITALS

 

A.            Reference is made to (i) that certain Credit Agreement (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, from time to time, the “US Loan Agreement”),
dated as of the date hereof, among Pledgor, the other Credit Parties named
therein, Secured Party and the Lenders from time to time a party thereto (the
“US Lenders”), and to the other Loan Documents referred to therein, and
(ii) that certain Revolving Facility Agreement (the “UK Loan Agreement,” and
together with the US Loan Agreement, collectively, the “Loan Agreement”), dated
as of the date hereof, among the Credit Parties named therein, Secured Party, as
agent, CSE Finance, Inc. and the other Lenders from time to time a party thereto
(the “UK Lenders,” and together with the US Lenders, collectively, the
“Lenders”), and to the other Loan Documents referred to therein.

 

B.            Pledgor is a Borrower under the US Loan Agreement and a Guarantor
under that certain Guaranty, dated as of the date hereof, among Pledgor and the
other Guarantors named therein in favor of Agent for the benefit of the UK
Lenders (the “Guaranty”), and is the record and beneficial owner of certain
securities of each of the entities listed on Schedule 1.1 attached hereto and as
described herein and the holder of the notes listed on Schedule 1.2 attached
hereto and as described herein.  The obligations of Secured Party and Lenders to
execute and deliver the Loan Documents under each Loan Agreement and to make the
loans provided for thereunder are conditioned on, among other things, the
execution of this Agreement and the pledge by Pledgor to Secured Party, for its
benefit and the benefit of the Lenders, of the Collateral (as defined herein) as
security for, among other things, Pledgor’s obligations under the Loan Documents
to which it is a party and the Guaranty, and Pledgor has agreed to enter into
this Agreement in order to induce Secured Party and Lenders to enter into the
Loan Documents and to make the Loan.

 

Accordingly, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and as an inducement for Secured Party and
Lenders to enter into the Loan Documents, the parties hereto, intending to be
legally bound, do hereby agree as follows:

 

SECTION 1

DEFINITIONS

 

1.1.          Defined Terms.  Capital terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Loan Agreement or,
to the extent the same are used or defined therein, the meanings provided in
Article 9 of the UCC in effect on the date hereof.  Whenever the context so
requires, each reference to gender includes the masculine and feminine, the
singular number includes the plural and vice versa.  This Agreement shall mean
such agreement as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, from time

 

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

 

to time.  Unless otherwise specified, all accounting terms not defined in the US
Loan Agreement shall have the meanings given to such terms in and shall be
interpreted in accordance with GAAP.  References in this Agreement to any Person
shall include such Person and its successors and permitted assigns.  In this
Agreement, the following terms shall mean as follows:

 

“Collateral” shall mean, collectively and each individually, (i) (a) 100% of the
issued and outstanding capital stock, equity securities, limited liability
company interests, membership interests and ownership interests of Telecom
Software Enterprises, LLC, a Colorado limited liability company and Evolving
Systems Holdings, Inc., a Delaware corporation, and (b) securities representing
65% of the aggregate voting power of the issued and outstanding capital stock
and ownership interests of Evolving Systems Networks India PVT Ltd., an India
corporation, in each case under the foregoing (a) or (b) owned or held of record
or beneficially by Pledgor on the date hereof as listed on Schedule 1.1 hereto
(and the certificates, copies of which are attached hereto, representing such
shares, securities and/or interests, if any); (ii) all other capital stock,
equity securities, limited liability company interests, membership interests and
ownership interests of Telecom Software Enterprises, LLC, Evolving Systems
Holdings, Inc. or any current or future direct Subsidiary of Pledgor organized
under the laws of the United States or any state thereof, in each case owned or
held of record or beneficially by Pledgor at any time (and the certificates
representing such shares, securities and/or interests, if any); (iii) securities
representing 65% of the aggregate voting power of the capital stock, equity
securities, limited liability company interests, membership interests and
ownership interests of Evolving Systems Networks India PVT Ltd. or any current
or future direct Subsidiary of Pledgor organized outside of the laws of the
United States, in each case owned or held of record or beneficially by Pledgor
at any time (and the certificates representing such shares, securities and/or
interests, if any); (iv) all other Investment Property of Pledgor; (v) the
Pledged Notes; (vi) any and all replacements, products and proceeds of, and
dividends, distributions in property, securities, returns of capital or other
distributions made on or with respect to, any of the foregoing; and (vii) all
rights and privileges of Pledgor with respect to the foregoing.  Notwithstanding
the foregoing, the term “Collateral” shall not include securities representing
at any time more than 65% of the aggregate voting power of the Capital Stock of
a “controlled foreign corporation,” as defined in Section 957 of the Code.

 

“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.

 

“Event of Default” shall mean the occurrence of any event set forth in
Section 4.

 

“Initial Pledged Notes” means the notes set forth on Schedule 1.2 attached
hereto.

 

“Investment Property” shall have the meaning given that term in the UCC.

 

“Loan Documents” shall mean, collectively, the Loan Documents as defined in each
Loan Agreement.

 

“Obligations” shall mean, collectively, all “Obligations” as defined in each
Loan Agreement and all “Guaranteed Obligations” as defined in the Guaranty.

 

“Pledged Notes” means all Initial Pledged Notes and all notes, instruments or
chattel paper pledged pursuant to this Agreement.

 

2

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

 

SECTION 2

COLLATERAL

 

2.1.          Pledge of Collateral.

 

(a)           As security for the due and punctual payment and performance of
(i) the Obligations and (ii) Pledgor obligations under this Agreement
(collectively, the “Secured Obligations”), Pledgor pledges and assigns to
Secured Party, for its benefit and the ratable benefit of the Lenders, and
grants to Secured Party, for its benefit and the ratable benefit of the Lenders,
a continuing first priority security interest in and Lien on, all of Pledgor’s
right, title and interest in the Collateral and all proceeds thereof.

 

(b)           As of the Closing Date, Pledgor has delivered to Secured Party,
for its benefit and the benefit of the Lenders, the Initial Pledged Notes and
all certificates, if any, representing that portion of the Collateral described
in clause (i) of the definition of Collateral.  Pledgor will deliver to Secured
Party, for its benefit and the benefit of the Lenders, within ten (10) Business
Days after Pledgor’s acquisition of such Collateral, all certificates, if any,
representing that portion of the Collateral described in clauses (ii), (iii) and
(iv) of the definition of Collateral (and agrees that to the extent any such
Collateral is uncertificated, Pledgor will not certificate such Collateral
without delivering such certificates to Secured Party), in each case registered
in the name of Pledgor and accompanied by a stock power duly executed by Pledgor
in blank in form and substance satisfactory to Secured Party, with any and all
documentary tax stamps and other documents necessary to cause Secured Party, for
its benefit and the benefit of the Lenders, to have a good, valid and perfected
continuing first priority pledge of and Lien on such Collateral (free and clear
of any other Liens other than Permitted Liens (as defined in each Loan
Agreement)).  Any Pledged Notes acquired by Pledgor (excluding checks, drafts
and similar instruments that are customarily endorsed or presented for
collection or deposit in the Ordinary Course of Business), shall be accompanied
by proper instruments of assignment or endorsement for security purposes, duly
executed by Pledgor, and such other instruments or documents as the Secured
Party may request in writing in its Permitted Discretion, in form and substance
satisfactory to Secured Party, to cause Secured Party, for its benefit and the
benefit of the Lenders, to have a good, valid and perfected continuing first
priority pledge of and Lien on such Collateral (free and clear of any Liens
other than Permitted Liens (as defined in each Loan Agreement)); provided, that
so long as no Event of Default shall have occurred and be continuing, Pledgor
may retain for collection in the Ordinary Course of Business any such Pledged
Notes but shall mark all Pledged Notes (excluding checks, drafts and similar
instruments that are customarily endorsed or presented for collection or deposit
in the ordinary course of business) 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 party, for the benefit of
certain Lender Parties.” With respect to all other Collateral consisting of
Investment Property in which a security interest may be perfected by control
under the UCC, Pledgor shall, within ten (10) Business Days after Pledgor’s
acquisition of such Collateral, take such action as may be required to perfect
Secured Party’s security interest in such Collateral by control under the UCC as
a first priority security interest in such Collateral (free and clear of any
other Liens other than Permitted Liens (as defined in each Loan Agreement).  At
any time following the occurrence and continuation of an Event of Default, at
the option of Secured Party, the Collateral or any part thereof may be
registered in the name of Secured Party, for its benefit and the benefit of the
Lenders, or of its or their nominees, and Pledgor covenants that, upon written
demand by Secured Party, Pledgor shall, and shall cause the Person in which such
Collateral evidences an ownership stake to, effect such registration.

 

(c)           Pledgor irrevocably and unconditionally authorizes Agent (or its
agent) to file at any time and from time to time such financing statements with
respect to the Collateral naming the Agent or its designee as the secured party
and Pledgor as the debtor as Agent may require and including any other
information with respect to Pledgor or otherwise as may be required by the UCC
of such jurisdiction as Agent may determine together with amendments and
continuations with respect thereto.

 

3

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

 

(d)           In the event that Pledgor fails to do so, Secured Party shall have
the right, but not the obligation, to pay any taxes or levies on or relating to
the Collateral and any costs to preserve the Collateral, which payments shall be
part of the Obligations.  No injury to, or loss or destruction of any of, the
Collateral or any Material Adverse Effect or Material Adverse Change shall
relieve Pledgor of any of the Secured Obligations.

 

(e)           Secured Party acknowledges that notwithstanding Pledgor’s delivery
of a stock certificate representing 72.99% of the outstanding capital stock of
Evolving Systems Networks India PVT, Ltd., and notwithstanding anything to the
contrary contained in this Agreement or any Loan Document, Secured Party’s
security interest and Lien extends only to securities representing 65% of the
aggregate voting power of the outstanding capital stock of Evolving Systems
Networks India PVT, Ltd., and Secured Party has no security interest in or Lien
on the remaining securities representing 35% of the aggregate voting power of
the shares of capital stock of Evolving Systems Networks India PVT, Ltd. (a
portion of which unencumbered shares are evidenced by the certificate delivered
to Secured Party).   The Secured Party agrees to return to Pledgor the stock
certificate(s) representing the ownership interests in Evolving Systems Networks
India PVT, Ltd. as reasonably requested by Pledgor so long as Pledgor has
delivered the new stock certificate(s) of Evolving Systems Networks India PVT,
Ltd. representing 65% of Pledgor’s aggregate voting power of the ownership
interests in therein.

 

2.2.          Voting Rights, Dividends and Distributions.

 

(a)           So long as no Event of Default has occurred and is continuing,
subject to the terms of this Agreement (i) Pledgor shall be entitled to exercise
all voting and/or consensual rights and powers relating to the Collateral;
provided, however, that Pledgor will not be entitled to exercise any such right
if the result thereof could materially and adversely affect the rights inuring
to a holder of the Collateral or the rights and remedies of the Agent or any of
the Lenders under this Agreement, the Loan Agreement or any other Loan Document
or the ability of the Agent or any of the Lenders to exercise the same and
(ii) Pledgor shall be entitled to receive and retain and to utilize in
accordance with the Loan Agreement cash dividends payable on the Collateral to
the extent, and only to the extent, that such cash dividends are permitted by,
and otherwise paid in accordance with, the terms and conditions of this
Agreement, the Loan Agreement, the other Loan Documents and applicable law.  All
noncash dividends, and all dividends paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions (other
than dividends and distributions referred to in the preceding sentence) made on
or in respect of the Collateral, whether paid or payable in cash or otherwise,
whether resulting from a subdivision, combination or reclassification of the
outstanding capital stock or partnership interests of the issuer of any
Collateral or received in exchange for the Collateral or any part thereof, or in
redemption thereof, or as a result of any merger, amalgamation, arrangement,
consolidation, acquisition or other exchange of assets to which such issuer may
be a party or otherwise, shall be and become part of the Pledged Collateral,
and, if received by Pledgor, to the extent required to be paid to the Agent
pursuant to the terms of the Loan Agreement or the other Loan Documents, shall
not be commingled by Pledgor with any of its other funds or property but shall
be held separate and apart therefrom, shall be held in trust for the benefit of
the Agent and shall be forthwith delivered to the Agent in the same form as so
received (with any necessary endorsement).

 

(b)           Each party hereto shall execute and deliver (or cause to be
executed and delivered) to the other party such proxies, powers of attorney,
dividend orders and other instruments as such other party may request in writing
for the purpose of enabling it to exercise the voting and/or consensual rights
and powers that it is entitled to exercise pursuant to this Agreement and/or to
receive the dividends that it is authorized to receive and retain pursuant to
this Agreement.

 

4

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

 

(c)           Upon the occurrence and continuation of an Event of Default, all
rights of Pledgor to exercise voting and/or consensual rights and powers and/or
to receive dividends that Pledgor is entitled to exercise and/or receive
pursuant to this Section 2.2 shall cease immediately upon notice by or on behalf
of Secured Party to Pledgor, and all such rights thereupon shall become vested
solely and exclusively in Secured Party, for its benefit and the benefit of the
Lenders, automatically without any action by any Person.  Pledgor hereby
appoints Secured Party, for its benefit and the benefit of the Lenders, its
attorney-in-fact, with full power of substitution, which appointment as
attorney-in-fact is irrevocable and coupled with an interest, to take all such
actions upon or after the occurrence and continuation of an Event of Default,
whether in the name of Secured Party, any Lender or Pledgor, as Secured Party
may consider necessary or desirable for the purpose of exercising such rights
and receiving such dividends.  Any dividends, distributions in property, returns
of capital and other distributions made on or in respect of the Collateral, and
any and all cash and other property received in exchange therefor and/or
redemption of any Collateral delivered to Pledgor in violation of this Agreement
shall be held in trust for the benefit of the Secured Party, for its benefit and
the benefit of the Lenders, and forthwith shall be delivered to Secured Party,
for its benefit and the benefit of the Lenders.  Any and all money and other
property received by Secured Party pursuant to the provisions of this
Section 2.2(c) shall be retained by Secured Party, for its benefit and the
benefit of the Lenders, as part of the Collateral.

 

SECTION 3

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

3.1           Collateral.  Pledgor hereby represents and warrants to Secured
Party and Lenders as of the date hereof and as of the date of each Advance under
the UK Loan Agreement (which representations and warranties shall survive the
execution and delivery of this Agreement and the making of the Loans under each
Loan Agreement) as follows:  (a) Pledgor is, or, with respect to the Collateral
described in clauses (ii), (iii) and (iv) of the definition of Collateral, will
be, the direct record and beneficial owner of each share, security and other
interest that comprises the Collateral, and Pledgor has and will have good,
valid and marketable title thereto, free and clear of all Liens other than those
created by this Agreement or except as permitted under the Loan Documents;
(b) all of the Collateral under clause (i) of the definition of Collateral has
been, or, with respect to the Collateral described in clauses (ii) and (iii) of
the definition of Collateral, will be, duly and validly issued, fully paid and
nonassessable; (c) the Collateral constitutes that percentage of the issued and
outstanding capital stock, equity securities and ownership interests of each
Person in which such Collateral represents an ownership interest (calculated on
a fully diluted, as converted basis) as set forth on Schedule 1.1; (d) the
Collateral is and will be duly and validly pledged to Secured Party, for its
benefit and the benefit of the Lenders, in accordance with applicable law, and
Secured Party, for its benefit and the benefit of the Lenders, has and will have
a good, valid and perfected first priority Lien on and security interest in the
Collateral and the proceeds thereof subject to no other Liens (except as
permitted under the Loan Documents), and no filing or other action will be
necessary to perfect or protect such Lien in any Collateral constituting
certificated securities other than delivery to Secured Party of certificates
representing such Collateral accompanied by a stock power duly executed by
Pledgor in blank; (e) except to the extent required by applicable law, the
obligations of Pledgor hereunder are not subordinated in any way to any other
obligation of Pledgor or to the rights of any other Person; and (f) except as
expressly permitted under the Loan Agreement, Pledgor will not consent to or
approve the issuance of (i) any additional shares of any class of capital stock
or other equity securities of any issuer of the Collateral described in clauses
(i), (ii) or (iii) of the definition of Collateral, (ii) any securities
convertible voluntarily by the holder thereof or automatically upon the
occurrence or nonoccurrence of any event or condition into, or exchangeable for,
any such shares or interests, or (iii) any warrants, options, rights, or other
commitments entitling any person to purchase or otherwise acquire any such
shares or interests.  Pledgor has full legal authority and power to own the
Collateral and to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereunder, and

 

5

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

 

Pledgor is under no legal restriction, limitation or disability that would
prevent any of the foregoing.  No effective financing statement relating to any
of the Collateral is on file in any public office except those on behalf of
Secured Party for the benefit of itself and the Lenders.

 

3.2.          Authorization.  The execution, delivery and performance by Pledgor
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate actions on the
part of Pledgor and pursuant to all necessary consents required thereof.  This
Agreement has been duly executed and delivered by Pledgor and constitutes the
legal, valid and binding obligation of Pledgor, enforceable against Pledgor 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).  No approval, consent,
authorization of, filing registration or qualification with, or other action by,
Pledgor or any other Person (including, without limitation, any Person whose
securities constitute part of the Collateral) or Governmental Authority that has
not been obtained is or will be necessary to permit the valid execution,
delivery and performance of this Agreement by Pledgor or the consummation of the
transactions or creation of the Liens and security interests contemplated hereby
other than delivery of certificates representing the Collateral (if any) to
Secured Party and the filing of appropriate UCC financing statements.

 

3.3.          No Conflicts.  The execution, delivery and performance by Pledgor
of this Agreement and the consummation of the transactions contemplated hereby
and the creation and granting of the security interests and Liens contemplated
hereby do not and will not (1) conflict with or violate any provision of any
applicable law, statute, rule, regulation, ordinance or tariff or any order,
injunction, writ or decree of any Governmental Authority binding on or
applicable to Pledgor or any of its properties or assets; (2) conflict with,
result in a breach of, constitute a default of or an event of default under, 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, require any consent not obtained under, or result in or require
the acceleration of any indebtedness pursuant to, any indenture, agreement or
other instrument to which Pledgor is a party or by which it, or any of its
properties or assets are bound or subject in each case the effect of which would
be or have a Material Adverse Effect; (3) if applicable, conflict with or
violate any provision of the certificate of incorporation or formation or
by-laws or operating agreement of Pledgor or any Person whose securities
constitute part of the Collateral under clause (i), (ii) or (iii) of the
definition of Collateral or any agreement by and between Pledgor or any such
Person and its shareholders or equity owners or among any such shareholders or
equity owners (other than any such agreements among the equity owners or
shareholders of Pledgor with respect to the Capital Stock of Pledgor); or
(4) result in the creation or imposition of any Lien of any nature whatsoever
upon any of the properties or assets of Pledgor (except as contemplated herein).

 

3.4.          Non-Subordination.  Except to the extent required by applicable
law, the obligations of Pledgor under this Agreement are not subordinated in any
way to any other obligation of Pledgor or to the rights of any other Person, and
Pledgor is not a party to or bound by any other agreement, document or
instrument that otherwise relates to the Secured Obligations or any of the
Collateral (other than the Loan Documents or as permitted by the Loan
Documents).

 

3.5.          Litigation and Compliance; Other Agreements.

 

(a)           There is no action, suit, proceeding or investigation pending or,
to Pledgor’s knowledge, threatened (1) against the Collateral that would
reasonably be expected to have a Material Adverse Effect, or (2) that questions
or could reasonably be expected to prevent the validity of this Agreement or the
right or ability of Pledgor to enter into this Agreement or to consummate the

 

6

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

 

transactions contemplated hereby.

 

3.6           [Intentionally Omitted].

 

3.7           Covenants.

 

(a)           Pledgor shall take all necessary and appropriate actions to ensure
that this Agreement and the Liens and pledges created hereby are and remain
enforceable against Pledgor in accordance with their terms and that Pledgor
complies with each of its obligations hereunder.  Pledgor shall not (i) cause or
permit to be done, or enter into or make or become a party to any agreement,
arrangement or commitment to do or cause to be done, any of the things
prohibited by this Agreement or that would breach this Agreement, or (ii) enter
into or make or become a party to any agreement, document or instrument or
arrangement that would prevent Pledgor from complying herewith and/or performing
hereunder.

 

(b)           Pledgor hereby agrees to take or cause to be taken promptly such
further actions, obtain such consents and approvals and duly execute and deliver
or cause to be executed and delivered such further agreements, assignments,
instructions or documents Secured Party may request in its Permitted Discretion
with respect to or in order to fully effectuate the purposes, terms and
conditions of this Agreement and the consummation of the transactions
contemplated hereby, whether before, at or after the performance and/or
consummation of such transactions or the occurrence of a Default or Event of
Default, including, without limitation, any of the foregoing necessary or
required or requested by Secured Party in its Permitted Discretion to create,
perfect, maintain, preserve, continue, validate or otherwise protect, and from
time to time renew, Secured Party’s, for its benefit and the benefit of the
Lenders, perfected first priority Lien on and pledge of the Collateral.  Without
limiting the foregoing, upon the exercise by Secured Party or any Lender or any
of its or their Affiliates or agents of any right or remedy hereunder which
requires any consent, approval or registration with, consent, qualification or
authorization by, any Person, Pledgor shall execute and deliver, or cause (to
the extent that it has the legal right, power or authority to cause) the
execution and delivery of, all applications, certificates, instruments and other
documents that Secured Party or any Lender or its or their Affiliate or agents
may be required to obtain for such consent, approval, registration,
qualification or authorization.  Pledgor hereby appoints Secured Party, for its
benefit and the benefit of the Lenders, its attorney-in-fact (without requiring
Secured Part to act as such), with full power of substitution, which appointment
as attorney-in-fact is irrevocable and coupled with an interest, to take all
such actions, whether in the name of Secured Party, for its benefit and the
benefit of the Lenders, or Pledgor, as Secured Party in its Permitted Discretion
may consider necessary with respect to the foregoing (but only to the extent
Pledgor fails to so execute and/or file any of the foregoing within two
(2) Business Days of Secured Party’s request or the time when Pledgor is
otherwise obligated to do so).  Pledgor will pay all reasonable costs associated
with respect to the foregoing, including without limitation, the cost of filing
any of the foregoing in all public offices or other locations wherever Secured
Party in its Permitted Discretion deems filing to be necessary or desirable.

 

(c)           Pledgor (i) shall (A) maintain at all times the pledge of the
Collateral to Secured Party, for its benefit and the benefit of the Lenders, and
Secured Party’s, for its benefit and the benefit of the Lenders, perfected first
priority Lien on the Collateral; and (B) defend the Collateral and Secured
Party’s, for its benefit and the benefit of the Lenders, perfected first
priority Lien thereon and pledge thereof against all claims and demands of all
Persons at any time (except for Liens permitted under the Loan Documents) and
pay all reasonable costs and expenses (including, without limitation, in-house

 

7

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

 

documentation and diligence fees and legal expenses and reasonable attorneys’
fees and expenses) in connection with such defense, which, at Secured Party’s
discretion, may be added to the Obligations, and (ii) shall not sell, lease,
transfer, pledge, encumber, restrict, assign or otherwise dispose of any of the
Collateral or any interest therein or create, incur, assume or suffer to exist
any Lien on the Collateral or any interest therein (except pursuant hereto or
allowed pursuant to the Loan Documents).

 

(d)           Pledgor shall, and shall cause each Person whose securities
constitute the Collateral to, (i) keep true, complete and accurate records with
respect to the Collateral, (ii) except as permitted by the Loan Documents, not
take or permit to be taken any action in connection with the Collateral or
otherwise which would impair in any material respect (as determined by Secured
Party in its Permitted Discretion) the value of the Collateral, taken as a
whole, or any material portion thereof or the value of the interests or rights
of Pledgor or Secured Party, for its benefit and the benefit of the Lenders,
therein, including, without limitation, any amendment to or modification of the
certificate of incorporation (or similar charter documents) or bylaws (or
similar documents) of Pledgor or such Person that is not permitted by the Loan
Documents.

 

(e)           Pledgor shall notify Agent at least thirty (30) Days before any
change of its state of incorporation, corporate name, federal tax identification
number or address.

 

3.8           No Third Party Beneficiary.  No rights are intended to be created
under this Agreement for the benefit of any third party donee, creditor or
incidental beneficiary of Pledgor.

 

SECTION 4

EVENTS OF DEFAULT

 

The occurrence of any one or more of the following shall constitute an “Event of
Default” under this Agreement: (a) Pledgor 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, this Agreement and such failure shall not
be cured within the applicable period, if any; provided that, with respect to
the covenants set forth herein (other than Sections 3.7(c)(i)(A) and
3.7(c)(ii) for which there shall be no cure periods), there shall be a 30
calendar day cure period commencing from the earlier of (i) Receipt (as defined
herein) by Pledgor of written notice of such breach, default, violation or
failure, and (ii) the time at which any authorized officer of Pledgor knew or
became aware of such failure, violation, breach or default; (b) any
representation, statement or warranty made or deemed made by Pledgor in this
Agreement shall not be true and correct in all material respects or shall have
been false or misleading in any material respect on the date when made or deemed
to have been made (except to the extent already qualified by materiality, in
which case it shall be true and correct in all respects and shall not be false
or misleading in any respect) except those made as of a specific date; (c) any
Event of Default (as defined in the Loan Agreement) shall occur and be
continuing past any cure period and shall not have been waived in writing or
cured within the applicable cure period; or (d) if prior to termination of this
Agreement pursuant to Section 6.11 hereof, this Agreement shall cease to be in
full force and effect or any Lien created hereunder shall cease to constitute a
valid perfected first priority Lien on the Collateral or Secured Party, for its
benefit and the benefit of the Lenders, otherwise ceases to have a valid
perfected first priority Lien on and security interest in any of the Collateral,
except as otherwise permitted by the terms of this Agreement or the other Loan
Documents.

 

8

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

 

SECTION 5

RIGHTS AND REMEDIES

 

5.1           Rights and Remedies in Loan Documents.

 

(a)           In addition to the provisions set forth in this Agreement, upon
the occurrence and continuation of an Event of Default, Secured Party, for its
benefit and the benefit of the Lenders, shall have the right to exercise any and
all rights, powers, options and remedies provided for in any Loan Document
and/or herein, under the UCC or at law or in equity, including, without
limitation, to the fullest extent permitted by applicable law, the right (in its
sole and absolute discretion) to, which Pledgor agrees to be commercially
reasonable, (i) apply the Collateral to reduce the Secured Obligations,
(ii) foreclose the Liens created hereunder and under the Loan Documents,
(iii) realize upon, take possession of and/or sell any Collateral, with or
without judicial process, at public or private sales or at any broker’s board or
on any securities exchange or otherwise, (iv) exercise all rights and powers
with respect to the Collateral as Pledgor might exercise in its absolute
discretion, including, without limitation, to (1) relinquish or abandon any
Collateral or any Lien thereon, (2) to vote all or any part of the Collateral
and otherwise act with respect thereto as though it were the outright owner
thereof, (3) to settle, adjust, compromise and arrange all claims and demands
whatsoever in relation to all or any part of the Collateral, (4) to execute all
such contracts, agreements, deeds, documents and instruments, to bring, defend
and abandon all such actions, suits and proceedings, and to take all actions in
relation to all or any party of the Collateral, and/or (5) to appoint managers,
sub-agents, and officers for any of the purposes mentioned in the foregoing
provisions of this Section and to dismiss the same, (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 is
located, or render any of the foregoing unusable or dispose of the Collateral on
such premises without any liability for rent, storage, utilities, or other sums,
and Pledgor shall not resist or interfere with such action, (vii) at any Credit
Party’s or Pledgor’s expense, require that all or any part of the Collateral be
assembled and made available to Secured Party at any place designated by Secured
Party in its Permitted Discretion, and/or (viii) relinquish or abandon any
Collateral or any Lien thereon.   Agent shall have the right in its sole
discretion to determine which rights and/or remedies Agent or any other Lender
may at any time pursue, relinquish, subordinate or modify, and such
determination will not in any way modify or affect any of Agent’s or any
Lender’s rights and remedies under this Agreement, at law or in equity.

 

(b)           Secured Party, in its sole discretion, shall have the right, but
not the obligation, at any time that any Credit Party or Pledgor fails to do so,
and from time to time, without prior notice, as applicable, to discharge taxes,
levies or Liens on any of the Collateral that are in violation of any Loan
Document unless Credit Party or Pledgor, as applicable, is in good faith with
due diligence by appropriate proceedings contesting those items.  Such expenses
and advances shall be added to the Obligations until reimbursed to Secured Party
and shall be secured by the Collateral, and such payments by Secured Party shall
not be construed as a waiver by Secured Party or Lenders of any Event of Default
or any other rights or remedies of Secured Party and Lenders.

 

(c)           Pledgor agrees that notice received by it 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 Secured Party without prior notice to Pledgor.  At any sale or
disposition of Collateral, Secured Party may (to the extent permitted by
applicable law) (i) purchase all or any part thereof free from any right of
redemption by Pledgor or any Credit Party or other Person guaranteeing the
Obligations, which right is hereby waived and released, (ii) restrict the number
of prospective bidders or purchasers and/or further restrict such prospective
bidders or purchasers to Persons who will represent and agree that they are
purchasing for their own account, for investment and not with a view to the
distribution or resale of the Collateral, and (iii) otherwise require that such
sale be conducted subject to restrictions as to such other matters as Secured
Party may deem necessary in order that such sale may be effected in such manner
as to comply with all applicable state and federal securities and other laws. 
The Agent shall not be obligated to make any sale or other disposition of any
Collateral if it shall

 

9

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

 

determine not to do so, regardless of the fact that notice of sale or other
disposition of such Collateral shall have been given. The Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.  For purposes hereof, a written agreement to
purchase the Collateral or any portion thereof shall be treated as a sale
thereof.  The Agent shall be free to carry out such sale pursuant to such
agreement and Pledgor shall not be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that after the
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full.

 

(d)           Pledgor hereby acknowledges that (i) notwithstanding that a higher
price might be obtained for the Collateral at a public sale than at a private
sale or sales, the making of a public sale of the Collateral may be subject to
registration requirements under applicable securities laws and other legal
restrictions, compliance with which would require such actions on the part of
Pledgor, would entail such expenses and would subject Secured Party, any Lender,
any underwriter through whom the Collateral may be sold or any controlling
person of any of the foregoing to such liabilities, as would make a public sale
of the Collateral impractical, and accordingly, Pledgor hereby agrees that
private sales made by Secured Party or any Lender in good faith in accordance
with the provisions of this Agreement may be at prices and on other terms less
favorable to the seller than if the Collateral were sold at a public sale, and
that Secured Party and Lenders shall not have any obligation to take any steps
in order to permit the Collateral to be sold at a public sale, such a private
sale being considered or deemed to be a sale in a commercially reasonable
manner; (ii) any private sale of the Collateral may be subject to compliance
with federal and state securities and/or other laws, and (iii) Secured Party is
hereby authorized to comply with any limitation or restriction in connection
with such sale that may be necessary in order to avoid any violation of
applicable law or in order to obtain any required approval of the purchaser(s)
by any Governmental Authority or officer or court.

 

5.2           Application of Proceeds.  In addition to any other rights, options
and remedies Secured Party and Lenders have under the Loan Documents, the UCC,
at law or in equity, the proceeds of any collection, recovery, receipt,
appropriation, realization, transfer, exchange, disposition or sale of the
Collateral as aforesaid shall be applied in accordance with the terms of each
Loan Agreement.

 

5.3           Rights of Lender to Appoint Receiver.  Without limiting and in
addition to any other rights, options and remedies Secured Party and Lenders
have hereunder or under the Loan Documents, the UCC, at law or in equity, upon
the occurrence and continuation of an Event of Default, Secured Party shall have
the right to apply for and have a receiver appointed by a court of competent
jurisdiction in any action taken by Secured Party to enforce its rights and
remedies in order to manage, protect and preserve the Collateral and continue
the operation of the business of Borrower and/or Pledgor 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.

 

5.4           Attorney in Fact.  Pledgor hereby irrevocably appoints Secured
Party, for its benefit and the benefit of the Lenders, as its attorney in fact
to take any action Lender deems necessary upon the occurrence and continuation
of an Event of Default to perfect, protect and realize upon its Lien and first
priority security interest in the Collateral, for its benefit and the benefit of
the Lenders, including the execution and delivery of any and all documents or
instruments related to the Collateral in Pledgor’s name, or otherwise to effect
fully the purpose, terms and conditions of this Agreement and the other Loan
Documents, and said appointment shall create in Secured Party, for its benefit
and the benefit of the Lenders, a power coupled with an interest.

 

10

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

 

SECTION 6

MISCELLANEOUS

 

6.1           No Waiver of Defaults; Waiver.  No course of action or dealing,
renewal, waiver, release or extension of any provision of any Loan Document or
this Agreement, or single or partial exercise of any such provision, or delay,
failure or omission on Secured Party’s or Lenders’ part in enforcing any such
provision shall affect the liability of Pledgor or operate as a waiver of such
provision or preclude any other or further exercise of such provision.  No
waiver by Secured Party or any Lender of any one or more defaults by any other
party in the performance of any of the provisions of any Loan Document or this
Agreement 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 terms and provisions of such waiver.  Notwithstanding any
other provision of any Loan Document or this Agreement, by completing the
Closing and/or by making Advances and/or funding the Loan, neither Secured Party
nor any Lender waives any breach of any representation or warranty under any
Loan Document or this Agreement, and all of Secured Party’s and Lenders’ claims
and rights resulting therefrom are specifically reserved.  Except as expressly
provided for herein, Pledgor hereby waives setoff, counterclaim, demand,
presentment, protest, all defenses with respect to any and all instruments and
all notices and demands of any description (including, without limitation,
notice of acceptance hereof, notice of any Loan made, credit extended,
collateral received or delivered) and the pleading of any statute of limitations
as a defense to any demand under any Loan Document, it being the intention that
Pledgor shall remain liable under this Agreement and the Loan Documents until
the full amount of all Secured Obligations shall have been indefeasibly paid in
cash (other than indemnity obligations under the Loan Documents not then due and
payable for any events of claims that would give rise thereto that are not then
pending) and performed and satisfied in full and any commitments to extend
credit under the Loan Agreement are terminated, notwithstanding any act,
omission or anything else which might otherwise operate as a legal or equitable
discharge of Pledgor.  Pledgor hereby waives any and all defenses and
counterclaims it may have or could interpose in any action or procedure brought
by Secured Party or any Lender to obtain an order of court recognizing the
assignment of, or Lien of Secured Party, for its benefit and the benefit of the
Lenders, in and to, any Collateral.

 

6.2           Entire Agreement.  This Agreement and the other Loan Documents to
which Pledgor is a party constitute the entire agreement between Pledgor and
Secured Party and Lenders with respect to the subject matter hereof and thereof,
and supersede all prior agreements and understandings, if any, relating to the
subject matter hereof or thereof.  Any promises, representations, warranties or
guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing signed by the parties hereto.  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.

 

6.3           Amendment.  No provision of this Agreement may be changed,
modified, amended, restated, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing or in any other manner other than
by a written agreement signed by Secured Party and Pledgor.  Pledgor
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.

 

6.4           Notices.  Any notice or request under this Agreement shall be
given to any party hereto at

 

11

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

 

such party’s address set forth beneath its signature on the signature
page hereto, or at such other address as such party may hereafter specify in a
notice given in the manner required under this Section 6.4.  Any such notice or
request shall be given only by, and shall be deemed to have been received upon
(each, a “Receipt”):  (a) registered or certified mail, return receipt
requested, on the date on which such received as indicated in such return
receipt, (b) delivery by a nationally recognized overnight courier, one
(1) Business Day after deposit with such courier, or (c) facsimile or electronic
transmission, in each case upon telephone or further electronic communication
from the recipient acknowledging receipt (whether automatic or manual from
recipient), as applicable.

 

6.5           Governing Law; Jurisdiction; Construction.  This Agreement 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.  Any judicial
proceeding against Pledgor with respect to any of the Secured Obligations, any
of the Collateral or this 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 this Agreement, Pledgor (a) accepts the non-exclusive jurisdiction of the
aforesaid courts and irrevocably agrees to be bound by any judgment rendered
thereby, (b) waives personal service of process, (c) agrees that service of
process upon it may be made by certified or registered mail, return receipt
requested, pursuant to Section 6.4 hereof, and (d) 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
non conveniens.  Nothing shall affect the right of Secured Party or any Lender
to serve process in any manner permitted by law or shall limit the right of
Secured Party or any Lender to bring proceedings against Pledgor in the courts
of any other jurisdiction having jurisdiction.  Any judicial proceedings against
Secured Party or any Lender, involving, directly or indirectly, the Secured
Obligations, Collateral or this Agreement shall be brought only in a federal or
state court located in Montgomery County in the State of Maryland or the Borough
of Manhattan in the State of New York.  Pledgor acknowledges that it
participated in the negotiation and drafting of this Agreement and that,
accordingly, it shall not move or petition a court construing this Agreement to
construe it more stringently against one party than against any other.

 

6.6           Severability; Captions; Counterparts; Facsimile Signature.  If any
provision of this Agreement 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
this Agreement which shall be given effect so far as possible.  The captions in
this Agreement are intended for convenience and reference only and shall not
affect the meaning or interpretation of this Agreement.  This Agreement 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.

 

6.7           Successors and Assigns.  This Agreement (a) shall inure to the
benefit of, and, except as provided in the Loan Agreement, may be enforced by,
Secured Party and Lenders, Transferees, Participants (to the extent expressly
provided in the Loan Agreement) and all future holders of the Notes, if any, any
of the Secured Obligations or any of the Collateral and each of their respective
successors and permitted assigns, and (b) shall be binding upon and enforceable
against Pledgor and Pledgor’s permitted assigns and successors.  Pledgor shall
not assign, delegate or transfer this Agreement or any of its rights or
obligations thereunder without the prior written consent of Secured Party.  This
Agreement shall be

 

12

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

 

binding upon Pledgor and its respective heirs, administrators, executors,
successors and assigns.  Nothing contained in this Agreement or any other Loan
Document shall be construed as a delegation to Secured Party or any Lender of
Pledgor’s duty of performance.  PLEDGOR ACKNOWLEDGES AND AGREES THAT SECURED
PARTY AND LENDERS AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND REISSUE
(WITHOUT ANY SUBSTANTIVE CHANGES OTHER THAN THOSE RESULTING FROM SUCH DIVISION)
THE NOTES, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR
TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT, ANY
NOTE, THE OBLIGATIONS, THE COLLATERAL AND/OR THE LOAN DOCUMENTS TO ONE OR MORE
TRANSFEREES IN EACH CASE ON THE TERMS AND CONDITIONS PROVIDED IN THE LOAN
AGREEMENT.  The terms “Secured Party” and “Lenders” in this Agreement includes
Transferees and Participants and Secured Party’s successors and assigns, each of
which shall, except as provided in the Loan Agreement, have all rights and
benefits of Secured Party or Lender hereunder.  Except as provided in the Loan
Agreement, each Transferee and Participant shall have all of the rights and
benefits with respect to the Secured Obligations, Notes, Collateral, this
Agreement and/or Loan Documents held by it as fully as if the original holder
thereof.  Notwithstanding any other provision of this Agreement or any Loan
Document, Secured Party and Lenders may disclose to any Transferee or
Participant all information, reports, financial statements, certificates and
documents obtained under any provision of this Agreement, provided, that
Transferees and Participants shall be subject to the confidentiality provisions
contained in each Loan Agreement that are applicable to Secured Party and
Lenders.

 

6.8           Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
ARISING HEREUNDER OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES WITH RESPECT HERETO OR THE TRANSACTIONS CONTEMPLATED HEREBY, 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.

 

6.9           Expenses.  Pledgor shall pay to Secured Party and Lenders all
reasonable costs and expenses incurred by Secured Party, Lenders and/or their
Affiliates and reasonable attorneys’ fees and expenses (a) in any effort to
enforce this Agreement against Pledgor, (b) in defending or prosecuting any
actions, claims or proceedings by or against Pledgor arising out of or relating
to this Agreement and/or the Collateral (except to the extent such action, claim
or proceeding is determined in a final, nonappealable judgment by a court of
competent jurisdiction binding on such Secured Party, Lender or Affiliate to
have arisen as a result of the gross negligence or willful misconduct of such
party), (c) arising in any way out of the taking or refraining from taking by
Secured Party or any Lender of any action requested by Pledgor, and/or (d) in
connection with any modification, restatement, supplement, amendment, waiver or
extension of this Agreement and/or any related agreement, document or instrument
requested by Pledgor.  If Secured Party or any Lender or any of its Affiliates
uses in-house counsel for any of the foregoing, Pledgor expressly agrees that
its obligations hereunder include reasonable cost of time spent by such in-house
counsel.

 

13

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

 

6.10         Rights and Remedies.  Secured Party, for its benefit and the
benefit of the Lenders, shall have the right in its sole discretion to determine
which rights and/or remedies Secured Party or Lenders may at any time pursue,
relinquish, subordinate or modify, and such determination will not in any way
modify or affect any of Secured Party’s or Lenders’ rights, Liens or remedies
under any Loan Document or this Agreement, applicable law or equity.  The
enumeration of any rights and remedies in this Agreement or any Loan Document is
not intended to be exhaustive, and all rights and remedies of Secured Party
described in this Agreement and the Loan Documents are cumulative and are not
alternative to or exclusive of any other rights or remedies which Secured Party
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.

 

6.11         Termination; Release of Collateral.  This Agreement shall continue
in full force and effect until full performance and indefeasible payment in full
in cash of all Secured Obligations (other than indemnity obligations under the
Loan Documents not then due and payable for any events of claims that would give
rise thereto that are not then pending) and termination of any commitments to
extend credit under any of the Loan Documents.  Notwithstanding any other
provision of this Agreement or any Loan Document, no termination of this
Agreement shall affect Secured Party’s or Lenders’ rights or any of the Secured
Obligations existing as of the effective date of such termination until the
Secured Obligations have been fully performed and indefeasibly paid in cash in
full (other than indemnity obligations under the Loan Documents not then due and
payable for any events of claims that would give rise thereto that are not then
pending) and Pledgor 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 such release may exclude claims filed by
Pledgor against Secured Party or any Lender prior to the payoff contemplated in
this Section 6.11 to the extent arising out of the gross negligence, willful
misconduct or fraud of Secured Party or any Lender).  The Liens granted to
Secured Party, for its benefit and the benefit of the Lenders, hereunder and any
financing statements filed pursuant hereto and the rights and powers of Secured
Party and Lenders hereunder shall continue in full force and effect until all of
the Secured Obligations have been fully performed and indefeasibly paid in full
in cash (other than indemnity obligations under the Loan Documents not then due
and payable for any events of claims that would give rise thereto that are not
then pending) and Pledgor shall have executed and delivered releases in favor of
Agent and Lenders in form and substance satisfactory to Agent, in its Permitted
Discretion.  Subject to Section 12.3 of the Loan Agreement, promptly following
full performance and satisfaction and indefeasible payment in full in cash of
all Secured Obligations (other than indemnity obligations under the Loan
Documents not then due and payable for any events of claims that would give rise
thereto that are not then pending) and the termination of any commitments to
extend credit under any Loan Documents, the Liens created hereby shall terminate
and Secured Party and Lenders shall execute and deliver such documents, at
Pledgor’s expense, as are necessary to release their Liens in the Collateral and
shall return the Collateral to Pledgor; provided, however, that the parties
agree that, notwithstanding any such termination or release or the execution,
delivery or filing of any such documents or the return of any Collateral, if and
to the extent that any such payment made or received with respect to the
Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other 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
hereby 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 any Lender.   Secured Party and each Lender shall not be deemed to have
made any representation or warranty with

 

14

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

 

respect to any Collateral so delivered except that such Collateral is free and
clear, on the date of such delivery, of any and all Liens arising from its own
acts.

 

6.12         Approvals and Duties.  Secured Party and Lenders shall have no
responsibility for or obligation or duty with respect to any of the Collateral
(other than the duty of reasonable care with respect to the safekeeping of such
Collateral in their custody) 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.

 

6.13         Survival.  It is the express intention and agreement of the parties
hereto that all covenants, representations, warranties and waivers and
indemnities made by Pledgor herein shall survive the execution, delivery and
termination of this Agreement until all Obligations are performed in full and
indefeasibly paid in full in cash and any commitments to extend credit under any
of the Loan Documents are terminated.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

15

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

 

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

 

 

CAPITALSOURCE FINANCE LLC

 

 

 

 

 

By:

/s/ Steven A. Museles

 

 

Name:

Steven A. Museles

 

Its: Senior Vice President

 

 

 

4445 Willard Avenue, 12th Floor

 

Chevy Chase, MD 20815

 

Attention: Corporate Finance Group, Portfolio Manager

 

Telephone:

(301) 841-2700

 

FAX:

(301) 841-2313

 

E-Mail:

sladd@capitalsource.com

 

 

 

 

 

EVOLVING SYSTEMS, INC.

 

 

 

 

 

By:

/s/Brian R. Ervine

 

 

Name:

Brian R. Ervine

 

Its: Executive Vice President, Chief Financial &
Administrative Officer

 

9777 Pyramid Court, Suite 100

 

Englewood, Colorado 80112

 

Attention:

Anita T. Moseley, General Counsel

 

Telephone:

(303) 802-2599

 

FAX:

(303) 802-1138

 

E-Mail:

atm@evolving.com

 

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

 

Pledge Agreement

 

Schedule 1.1

 

Name of Entity

 

Class or Series
of Units

 

Number of
Units

 

Percentage of
Ownership

 

Certificate
Representing
Such Units

 

 

 

 

 

 

 

 

 

Telecom Software Enterprises, LLC

 

Membership Interests

 

The Membership Interest is uncertificated

 

100%

 

The Membership Interest is uncertificated

 

 

 

 

 

 

 

 

 

Evolving Systems Holdings, Inc.

 

Common Stock

 

100 shares

 

100%

 

1

 

 

 

 

 

 

 

 

 

Evolving Systems Networks India PVT Ltd.

 

Equity Shares

 

370,184 shares

 

100%
(only 65% pledged pursuant to this Agreement)

 

001 (9,998 shares),
002 (1 share)*,
003 (1 share)*,
004 (90,000
shares) and 006
(270,184 shares)**

 

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

* Certificates Numbers 002 and 003 are held by N. Madhusudan Reddy, a director
of Evolving Systems Networks India PVT Ltd, as the nominee of Evolving
Systems, Inc.

 

** Only 65% of the outstanding shares of Evolving Systems Networks India PVT,
Ltd. are pledged to Secured Party pursuant to this Agreement.  Notwithstanding
the fact that certificate no. 006 represents more than 65% of the outstanding
shares of Evolving Systems Networks India PVT, Ltd., Secured Party’s security
interest and Lien shall extend only to 65% of such outstanding shares.

 

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

 

Pledge Agreement

 

Schedule 1.2

 

Initial Pledged Notes

 

None.

 

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