Exhibit 10.1(e)


 


 


REVOLVING
FACILITY AGREEMENT


 


 


among


 


 


EVOLVING SYSTEMS, LTD.


as Borrower and a Credit
Party


 


EVOLVING SYSTEMS
HOLDINGS, LTD.


EVOLVING SYSTEMS, INC.


TELECOM SOFTWARE
ENTERPRISES, LLC


EVOLVING SYSTEMS
HOLDINGS, INC


as a Credit Party


 


 


and


 


 


CSE FINANCE, INC


as Lender


 


CAPITALSOURCE
FINANCE LLC,


as Agent


 


 


Dated as of


November 14,
2005


 





















 


	
  I.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  II.

  	
  CREDITS

  	
   

  
	
   

  	
  2.1

  	
  Revolving
  Facility

  	
   

  
	
   

  	
  2.2

  	
  Evidence of Loans

  	
   

  
	
   

  	
  2.3

  	
  Interest

  	
   

  
	
   

  	
  2.4

  	
  Procedures for
  Advances under the Revolving Facility

  	
   

  
	
   

  	
  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

  	
  Collections

  	
   

  
	
   

  	
  2.10

  	
  Reallocation of
  Commitments

  	
   

  
	
   

  	
  2.11

  	
  Market
  disruption

  	
   

  
	
   

  	
  2.12

  	
  Increased Costs

  	
   

  
	
   

  	
  2.13

  	
  Letter of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  III.

  	
  FEES

  	
   

  
	
   

  	
  3.1

  	
  Commitment Fee

  	
   

  
	
   

  	
  3.2

  	
  Management Fee

  	
   

  
	
   

  	
  3.3

  	
  Letter of Credit
  Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  IV.

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
  4.1

  	
  Conditions to
  Initial Advance and the Closing

  	
   

  
	
   

  	
  4.2

  	
  Conditions to
  each Advance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  V.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  5.1

  	
  Organization and
  Authority

  	
   

  
	
   

  	
  5.2

  	
  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, Pensions; Business

  	
   

  
	
   

  	
  5.11

  	
  Intellectual
  Property

  	
   

  
	
   

  	
  5.12

  	
  Permits; Labour

  	
   

  
	
   

  	
  5.13

  	
  No Default;
  Solvency

  	
   

  
	
   

  	
  5.14

  	
  Insurance

  	
   

  



 


i





















 


	
   

  	
  5.15

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

  	
   

  
	
   

  	
  5.16

  	
  Broker’s or
  Finder’s Commissions

  	
   

  
	
   

  	
  5.17

  	
  Disclosure

  	
   

  
	
   

  	
  5.18

  	
  Governing Law
  and Enforcement

  	
   

  
	
   

  	
  5.19

  	
  Centre of main
  interests and establishments

  	
   

  
	
   

  	
  5.20

  	
  Incorporation of
  Certain Representations and Warranties

  	
   

  
	
   

  	
  5.21

  	
  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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  VII.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
  7.1

  	
  Financial
  Covenants

  	
   

  
	
   

  	
  7.2

  	
  Indebtedness

  	
   

  
	
   

  	
  7.3

  	
  Liens

  	
   

  
	
   

  	
  7.4

  	
  Consolidations,
  Mergers and Investments

  	
   

  
	
   

  	
  7.5

  	
  Restricted
  Payments

  	
   

  
	
   

  	
  7.6

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
  7.7

  	
  Transfer
  of Assets

  	
   

  
	
   

  	
  7.8

  	
  Contingent
  Obligations

  	
   

  
	
   

  	
  7.9

  	
  Organizational
  Documents; Accounting Changes; Use of Proceeds; Insurance; Business

  	
   

  
	
   

  	
  7.10

  	
  Related
  Documents, Subordinated Debt and TSE Contingent Obligations

  	
   

  
	
   

  	
  7.11

  	
  Negative
  Pledges

  	
   

  
	
   

  	
  7.12

  	
  Certain
  Specific Agreements

  	
   

  
	
   

  	
  7.13

  	
  Shareholder
  Blocking Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  VIII.

  	
  EVENTS
  OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  IX.

  	
  RIGHTS
  AND REMEDIES AFTER DEFAULT

  	
   

  
	
   

  	
  9.1

  	
  Rights
  and Remedies

  	
   

  
	
   

  	
  9.2

  	
  Application
  of Proceeds

  	
   

  
	
   

  	
  9.3

  	
  Rights
  to Appoint Receiver

  	
   

  
	
   

  	
  9.4

  	
  Rights
  and Remedies not Exclusive

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  X.

  	
  WAIVERS

  	
   

  
	
   

  	
  10.1

  	
  Certain
  Waivers

  	
   

  



 


ii





















 


	
   

  	
  10.2

  	
  Delay;
  No Waiver of Defaults

  	
   

  
	
   

  	
  10.3

  	
  Amendment
  and Waivers

  	
   

  
	
   

  	
  10.4

  	
  Survival
  and Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  XI.

  	
  AGENT
  PROVISIONS; SETTLEMENT

  	
   

  
	
   

  	
  11.1

  	
  Agent

  	
   

  
	
   

  	
  11.2

  	
  Set-off
  and Sharing of Payments

  	
   

  
	
   

  	
  11.3

  	
  Disbursement
  of Funds under Revolving Facility

  	
   

  
	
   

  	
  11.4

  	
  Settlements;
  Payments; and Information

  	
   

  
	
   

  	
  11.5

  	
  Dissemination
  of Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  XII.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
  12.1

  	
  Governing
  Law and Enforcement

  	
   

  
	
   

  	
  12.2

  	
  Jurisdiction
  of English courts

  	
   

  
	
   

  	
  12.3

  	
  Service
  of process

  	
   

  
	
   

  	
  12.4

  	
  Successors
  and Assigns; Assignments and Participations

  	
   

  
	
   

  	
  12.5

  	
  Reinstatement;
  Application of Payments

  	
   

  
	
   

  	
  12.6

  	
  Indemnity

  	
   

  
	
   

  	
  12.7

  	
  Notice

  	
   

  
	
   

  	
  12.8

  	
  Severability;
  Headings; Counterparts

  	
   

  
	
   

  	
  12.9

  	
  Expenses

  	
   

  
	
   

  	
  12.10

  	
  Entire
  Agreement

  	
   

  
	
   

  	
  12.11

  	
  Approvals
  and Duties

  	
   

  
	
   

  	
  12.12

  	
  Confidentiality
  and Publicity

  	
   

  
	
   

  	
  12.13

  	
  No
  Consequential Damages

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  XIII.

  	
  TAXES

  	
   

  
	
   

  	
  13.1

  	
  Taxes

  	
   

  
	
   

  	
  13.2

  	
  Certificates
  of Lenders

  	
   

  
	
   

  	
  13.3

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  XIV.

  	
  GUARANTEE
  AND INDEMNITY

  	
   

  
	
   

  	
  14.1

  	
  Guarantee
  and indemnity

  	
   

  
	
   

  	
  14.2

  	
  Continuing
  guarantee

  	
   

  
	
   

  	
  14.3

  	
  Reinstatement

  	
   

  
	
   

  	
  14.4

  	
  Waiver
  of defenses

  	
   

  
	
   

  	
  14.5

  	
  Immediate
  recourse

  	
   

  
	
   

  	
  14.6

  	
  Appropriations

  	
   

  
	
   

  	
  14.7

  	
  Deferral
  of Guarantors’ rights

  	
   

  
	
   

  	
  14.8

  	
  Release
  of UK Guarantors’ right of contribution

  	
   

  
	
   

  	
  14.9

  	
  Additional
  security

  	
   

  
	
   

  	
  14.10

  	
  Guarantee
  limitations

  	
   

  



 


iii





















 


REVOLVING FACILITY AGREEMENT


 


This REVOLVING FACILITY AGREEMENT
(this “Agreement”), dated as of November 14, 2005, is entered into by and
among EVOLVING SYSTEMS LTD., a company incorporated under the laws of England &
Wales with registration number 2325854 (“Borrower”); EVOLVING SYSTEMS HOLDINGS
LTD., a company incorporated under the laws of England & Wales with
registration number 5272751 (a “UK Guarantor”), EVOLVING SYSTEMS, INC., a
Delaware Corporation, TELECOM SOFTWARE ENTERPRISES, LLC, a Colorado limited
liability company and EVOLVING SYSTEMS HOLDINGS, Inc., a Delaware Corporation
as Credit Parties; CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company (in its individual capacity, “CapitalSource”), as administrative,
payment and collateral agent for the Lenders (CapitalSource, in such
capacities, “Agent”); CSE FINANCE INC as a Lender, a Delaware corporation (“CSE
Finance”); and the Lenders from time to time parties hereto.


 


WHEREAS, the Credit
Parties have requested that Lenders make available to Borrower (i) a
revolving credit facility (including a letter of credit sub-facility ) (the “Revolving
Facility”) in a maximum aggregate amount not to exceed the Facility Cap in
effect from time to time (the amount of which, initially, shall be $4,500,000),
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 Revolving Facility 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


 


(a)           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


 


1





















 


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.


 


II.            CREDITS


 


2.1          Revolving
Facility


 


(a)           Subject to the terms and conditions set
forth in this Agreement, each Lender agrees to make available to Borrower its
Pro Rata Share of Advances under the Revolving Facility from time to time
during the Term; provided, that (i) the Pro Rata Share of Advances of any
Lender shall not at any time exceed such Lender’s Commitment under the
Revolving Facility and (ii) the aggregate amount of all Advances at any
time outstanding under the Revolving Facility shall not exceed the lesser of (x) the Facility Cap
in effect at such time less the Letter of Credit Usage then in effect and (y) the Aggregate Borrowing
Availability then in effect.  The
obligations of the Lenders under the Revolving Facility shall be several, and
not joint or joint and several.  The
Revolving Facility is a revolving credit facility that may be drawn, repaid and
redrawn from time to time as permitted under this Agreement.  Borrower may not at any time increase, reduce
or otherwise adjust the Facility Cap. 
Agent shall have the right to establish and readjust from time to time,
in its Permitted Discretion, reserves under the Revolving Facility, which
reserves shall have the effect of reducing the amounts otherwise available to
be disbursed to Borrower under the Revolving Facility.


 


(b)           Subject to Section 2.1(a) Borrower
shall maintain a minimum outstanding balance at all times of Advances in the
amount of at least $2,000,000 from the Closing Date until delivery of the
Compliance Certificate for the quarter ending December 31, 2005 and at a
variable amount, to be adjusted thereafter following delivery of the Compliance
Certificate after the end of each fiscal quarter, as follows:


 


	
  Leverage Ratio calculated pursuant to Exhibit B-1 as

  reported on the Compliance Certificate for the 12-month

  period ending at the end of any fiscal quarter

  	
   

  	
  Minimum Balance of Advances

  Until the Next Reported

  Measurement of the Leverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater than 1.00 to 1

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than 1.00 to 1 and equal to or greater than .75 to 1

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than .75 to 1 and equal to or greater than .50 to 1

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than .50 to 1 and equal to or greater than .25 to 1

  	
   

  	
  $

  	
  700,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than .25 to 1

  	
   

  	
  $

  	
  300,000

  	
   

  



 


2





















 


2.2          Evidence
of Loans


 


(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 each Loan made by
such Lender from time to time, 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(e) 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 12.4(c).


 


(d)           Agent will account to Borrower monthly with
a statement of Advances under the Revolving Facility and any charges and
payments made pursuant to this Agreement, and in the absence of demonstrable
error, such accounting rendered by Agent shall be deemed final, binding and
conclusive unless Agent is notified by Borrower in writing to the contrary
within fifteen (15) calendar days of Receipt of such accounting, which notice
shall be deemed an objection only to items specifically objected to therein.


 


(e)           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 Loans 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 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 Loans owing or
payable to such Lender;


 


3





















 


(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), each Loan
shall bear interest on a daily basis on the outstanding principal amount
thereof from the date made (each a “Borrowing Date”) at a rate per annum equal
to (i) the greater of (A) the daily 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 each 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 Loans pursuant to Sections 2.5 and 2.6.


 


(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 the Agent to the
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 notice from the 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 Loans, (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.


 


2.4          Procedures
for Advances under the Revolving Facility


 


Each Advance under the Revolving Facility shall be made upon Borrower’s
irrevocable written notice to Agent requesting an Advance under the Revolving
Facility in the form of a completed Borrowing Certificate, which Borrowing
Certificate shall be delivered to Agent not later than 12:00p.m. (New York City
time) at least one (1) but not more than four (4) Business


 


4





















 


Days prior to the proposed Business Day on
the Borrowing Date.  Each such completed
Borrowing Certificate requesting an Advance under the Revolving Facility shall:


 


(a)           specify the proposed Borrowing Date of the
requested Advance, which shall be a Business Day;


 


(b)           specify the principal amount of the
requested Advance (which shall be in an aggregate minimum principal amount of
$50,000 and integral multiples of $25,000 in excess thereof); and


 


(c)           certify the matters contained in Section 4.2.


 


On each Borrowing Date, Borrower irrevocably authorizes Agent and the
Lenders to disburse the proceeds of the requested Advance to the Borrower’s
account at:


 


	
  Bank:

  	
  Royal Bank of Scotland

  
	
   

  	
   

  
	
  Account Name:

  	
  Evolving Systems Ltd

  
	
   

  	
   

  
	
  IBAN:

  	
  GB55 RBOS 1663 0000 3666 61

  
	
   

  	
   

  
	
  Swift:

  	
  RBOSGB2L

  
	
   

  	
   

  
	
  Branch:

  	
  151000

  
	
   

  	
   

  
	
  Account No:

  	
  00366661

  



 


or such other account to which Agent agrees (and which shall be subject
to the Security Documents) (or to such other account, if approved by Agent, as
to which Borrower shall instruct Agent in writing), for credit to Borrower via
Federal funds wire transfer no later than 3:00p.m. (New York City time).  Anything herein contained to the contrary
notwithstanding, Agent and Lenders shall be entitled to rely upon the authority
of any officer of Borrower for communications with and instructions from
Borrower, including, without limitation, for purposes of this Section 2.4,
until Agent has received written notice from Borrower that such officer no
longer has such authority.


 


2.5          Mandatory
Payments and Prepayments


 


(a)           The principal amount of the Advances under
the Revolving Facility, and all other Obligations under or in respect of the
Revolving Facility shall be due and payable in full, if not earlier in
accordance with this Agreement, on the Maturity Date.


 


(b)           If it becomes unlawful in any applicable
jurisdiction for a Lender to perform any of its obligations as contemplated by
this Agreement or to fund, issue or maintain its participation in any Advance
or other Obligation:


 


5





















 


(i)            that
Lender shall promptly notify the Agent upon becoming aware of that event;


 


(ii)           upon
the Agent notifying the Borrower, the Commitment of that Lender will be
cancelled on the earlier of immediately or on the date (if applicable) required
by law; and


 


(iii)          the
Borrower shall repay that Lender’s participation in any Advances or Obligations
to that Borrower promptly after the Agent has notified the Borrower or, if
earlier, the date specified by the Lender in the notice delivered to the Agent
(being no earlier than the last day of any applicable grace period permitted by
law).


 


(c)           If a Change of Control occurs that has not
been consented to in writing by the Agent prior to consummation thereof, or any
Credit Party or any Subsidiary of any Credit Party (other than to the extent
any Credit Party is obliged to apply such proceeds in accordance with the terms
of the Term Loan Agreement), 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 an amount equal to $100,000; or


 


(iv)          incurs
any Indebtedness other than Permitted Indebtedness,


 


then Borrower shall prepay the Loans 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 this Section 2.5(c);
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 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, at Agent’s
election, (x) applied to the Revolving Loans (without resulting in a permanent
reduction in the Revolving Loan Commitment) or (y) held by Agent in a cash
collateral account pending such reinvestment.


 


6





















 


(d)           All
prepayments pursuant to this Section 2.5(b) and 2.5(c) shall be
applied in the following order of priority: 
first, to all then unpaid fees and expenses of Agent under the
Loan Documents, second, to all then unpaid fees and expenses of Lenders under the Loan Documents, 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; fourth, to all accrued and unpaid interest on the Revolving
Loan; fifth, to the principal amount of Revolving Loans (with a corresponding
permanent reduction in the Facility Cap).


 


(e)           Any balance of Advances under the Revolving
Facility outstanding at any time in excess of the lesser of (a) the
Facility Cap in effect at such time less the Letter of Credit Usage then in
effect and (b) the Aggregate Borrowing Availability in effect at such time
(determined by reference to the Borrowing Base Certificate then most recently
delivered to Agent in accordance with the terms hereof), shall be immediately
due and payable by Borrower without the necessity of any notice or demand
unless remedied within three (3) Business Days of the date of
determination by the Borrower or notification by the Agent to the Borrower.


 


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 (other than payments
automatically paid through Advances under the Revolving Facility as provided
herein) shall be made by wire transfer on the date when due, without offset,
deduction or counterclaim 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 2:00p.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.  All payments of principal, interest, fees,
expenses and all other amounts hereunder shall be payable in Dollars.


 


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, which non-payment shall be deemed an automatic
request for an Advance under the Revolving Facility as of the date such payment
is or was due, and Borrower hereby irrevocably authorizes disbursement of any such
funds to Agent, for the benefit of Lenders, by way of direct payment of the
relevant amount, interest or other Obligation without necessity of any
demand.  Any sums expended or amounts
paid by Agent and/or Lenders as a result of any Credit Party’s failure to


 


7





















 


pay, perform or comply with any Loan Document
or any of the Obligations may be charged to Borrower’s account as an Advance
under the Revolving Facility 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,
fulfilment 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          Collections


 


In accordance with the Debenture, the Borrower and the UK Guarantor
shall cause all cash payments received by them for their benefit to be promptly
deposited into a Security Account for which a first priority perfected Lien has
been created thereon in favour of the Lender Parties.


 


2.10        Reallocation
of Commitments


 


The Credit Parties, Agent and the Lenders agree and acknowledge that,
on terms and conditions satisfactory to the Borrower, each Term Borrower,
Agent, each of the Lenders, and the Term Lender, any Commitment of any Lender
hereunder and the Term Lender under the Term Loan Agreement for the benefit of
the Borrower or Term Borrower may be reallocated and adjusted from time to time
with any other Commitment or Commitments of such Lender under this Agreement or
Lender for the benefit of the other Borrower or Term Borrowers, 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 Term 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 the Borrower, each Term Borrower, Agent, each Lender and Term Lender
and shall not, in any event, result in (a) a reduction of the aggregate
Commitments contained herein and in the Term Loan Agreement or (b) any
breach of Sections 151 to 158 of the Act.


 


8





















 


2.11        Market
disruption


 


(a)           If a Market Disruption Event occurs in
relation to a Loan, then the rate of interest on each Lender’s share of that
Loan shall be the rate per annum which is the sum of:


 


(i)            the
Applicable Margin;


 


(ii)           the
greater of (A) rate notified to the Agent by that Lender as soon as
practicable and in any event before interest is due to be paid in respect of
that Loan, to be that which expresses as a percentage rate per annum the cost to
that Lender of funding its participation in that Loan from whatever source it
may reasonably select or (B) 3.75%; and


 


(iii)          any
Eurocurrency Reserve Requirement of the Lenders if applicable.


 


(b)           In this Agreement “Market Disruption Event”
means:


 


(i)            at
or about noon on the Borrowing Date the Screen Rate is not available to
determine the LIBOR Rate; or


 


(ii)           before
close of business in London on the Borrowing Date, the Agent receives
notifications from a Lender or Lenders (whose participations in a Loan exceed
25 per cent of that Loan) that the cost to it of obtaining matching deposits in
the Relevant Interbank Market would be in excess of LIBOR.


 


(c)           Alternative basis of interest or funding


 


(i)            If
a Market Disruption Event occurs and the Agent or the Borrower so requires, the
Agent and the Borrower shall enter into negotiations (for a period of not more
than 30 days) with a view to agreeing a substitute basis for determining the
rate of interest.


 


(ii)           Any
alternative basis agreed pursuant to clause 2.11(c) shall, with the
prior consent of all the Lenders and the Borrower, be binding on all Parties.


 


2.12        Increased
Costs


 


(a)


 


(i)            Subject
to clause 2.11(c) and 2.12(d) the Borrower shall, within three
Business Days of a demand by the Agent, pay for the account of a Lender the
amount of any Increased Costs incurred by that Lender as a result of (i) the
introduction of or any change in (or in the interpretation, administration or
application of) any law or regulation or (ii) compliance with any law or
regulation made after the date of this Agreement.


 


(ii)           In
this Agreement “Increased Costs” means:


 


9





















 


(1) a reduction
in the rate of return from the Revolving Facility or on a Lender Party’s (or
its Affiliate’s) overall capital;


 


(2) an
additional or increased cost; or


 


(3) a reduction
of any amount due and payable under any Loan Document,


 


which is
incurred or suffered by a Lender to the extent that it is attributable to that
Lender having entered into its Commitment or funding or performing its
obligations under the Loan Document or Letter of Credit provided, however that
any amounts that such Lender is already receiving by adjusting the Eurocurrency
Reserve Requirements pursuant to the definition of Libor Rate shall not be
included in the Increased Costs.


 


(b)


 


(i)            A
Lender intending to make a claim pursuant to clause 2.12(a) shall
notify the Agent of the event giving rise to the claim, following which the
Agent shall promptly notify the Borrower.


 


(ii)           Each
Lender shall, as soon as practicable after a demand by the Agent, provide a
certificate confirming the amount of its Increased Costs.


 


(c)


 


(i)            Clause 2.12(a) does
not apply to the extent any Increased Cost is:


 


(1) attributable
to a Tax deduction required by law to be made by a Credit Party;


 


(2) compensated
for by clause 13.1 but was not so compensated solely because any of the
exclusions in clause 13.1 applied or is attributable to Taxes for which no
compensation is required in clause 13.1; and


 


(3) attributable
to the wilful breach by the relevant Lender Party or its Affiliates of any law
or regulation.


 


(d)           Each Lender agrees to designate a different
lending office if such designation will avoid the need for, or reduce the
amount of, any compensation pursuant to this Section and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender.


 


2.13        Letter
of Credit.


 


Subject to the terms and conditions set forth
in this Agreement and on Appendix B hereto, Borrower shall have the right to
request, and the Lenders agree to incur, or purchase participations in, Letters
of Credit in respect of Borrower and the other Credit Parties so long as


 


10





















 


none of the Letters of Credit are used directly or indirectly to
benefit the Subordinated Note Holders or otherwise violate Sections 151 to 158
of the Act.


 


III.           FEES


 


3.1          Commitment
Fee


 


On the Closing Date, Borrower shall pay to Agent, for the rateable
benefit of Lenders, a nonrefundable commitment fee equal to Sixty Seven
Thousand Five Hundred Dollars ($67,500.00), 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          Management
Fee


 


Borrower shall pay to Agent a management fee (the “Management Fee”) in an amount equal to one-half of one percent (0.5%) per
annum of the daily average of the aggregate of (i) the Facility Cap for
each day of each month and (ii) any additional amounts advanced under the
Revolving Facility in excess of the Facility Cap for each day outstanding.  The Management Fee shall be payable monthly
in arrears on the first day of each calendar month, commencing with the month
immediately succeeding the month in which the Closing Date occurs, provided
that the amount payable for the first and last month shall be proportional to
the number of days in such month in which the Commitment is outstanding.


 


3.3          Letter
of Credit Fees


 


Borrower shall pay to Agent, for the rateable
benefit of Lenders, a Letter of Credit fee equal to (i) two or three
quarters percent (2.75%) per annum of the aggregate undrawn face amount of all
outstanding Standby Letters of Credit issued for the account of Borrower (the “Standby
Letter of Credit Fee”), which fee shall be payable in arrears on each Interest
Payment Date and (ii) one quarter of one percent (.25%) of the aggregate
undrawn face amount of any such Documentary Letter of Credit issued for the
account of Borrower and payable upon issuance (together with the Standby Letter
of Credit Fees plus normal and customary issuance, presentation, amendment,
processing and other administrative costs and expenses incurred by L/C Issuer,
the “Letter of Credit Fees”).  Upon the
occurrence and during the continuance of any Event of Default, all Letter of
Credit Fees shall be payable on demand at a rate equal to the Letter of Credit
Fee, plus four percent (4.00%) per annum, in each case on the aggregate
undrawn face amount of all outstanding Letters of Credit issued for the account
of Borrower.  Borrower shall also pay on
demand the normal and customary administrative charges for issuance, amendment,
negotiation, renewal or extension of any Standby Letter of Credit or
Documentary Letter of Credit imposed by the L/C Issuer.


 


On demand by Agent at any time after the
occurrence and during the continuance of any Event of Default, Borrower will
cause cash to be deposited and maintained in an account with Agent, as cash
collateral, in an amount equal to one hundred and five percent (105%) of the
Letter of Credit Usage, and Borrower hereby irrevocably authorizes Agent, in
its discretion, on Borrower’s behalf and in Borrower’s name, to open such an
account and to make and maintain


 


11





















 


deposits therein, or in an account opened by Borrower, in the amounts
required to be made by Borrower, out of the proceeds of Accounts or other
Collateral or out of any other funds of any Credit Party coming into any Lender’s
possession at any time.  Agent will
invest such cash collateral (less applicable reserves) in such short-term
money-market items as to which Agent in its Permitted Discretion may determine
and the net return on such investments shall be credited to such account and
constitute additional cash collateral. 
Borrower may not withdraw amounts credited to any such account except
upon the earlier of (i) payment and performance in full of all Obligations
(other than contingent indemnification obligations under the Loan Documents for
which no claim giving rise thereto has been asserted) and termination of this
Agreement and (ii) at such time as such Event of Default no longer exists
unless Agent determines in its Permitted Discretion not to release such amounts
but in any event, Agent shall apply any amounts in such account to the
repayment of any Letter of Credit disbursements.


 


IV.           CONDITIONS PRECEDENT


 


4.1          Conditions
to Initial Advance and the Closing


 


The obligations of Agent and Lenders to consummate the transactions
contemplated herein, to make the initial Advance under the Revolving Facility
(the “Initial Advance”) are, in addition to the conditions precedent specified
in Section 4.2,  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.


 


4.2          Conditions
to each Advance


 


The obligations of Lenders to make any Advance under the Revolving
Facility (including, without limitation, the Initial Advance) are subject, in
each case, to the satisfaction of each of the following:


 


(a)           the Borrower shall have delivered to Agent a
Borrowing Certificate for such Advance
and a Borrowing Base Certificate setting forth the Borrowing Base and the
Aggregate Borrowing Availability as of the most recent month;


 


(b)           each of the representations and warranties
made by each Credit Party in the Loan Documents, except sections 5.4, 5.5(d), 5.7,
5.8, 5.10(c) and (d), 5.11(a), 5.14, 5.16 and 5.20 of the this Agreement,
shall be true and correct in all respects before and after giving effect the
making of such Advance (except to the extent such representations and
warranties expressly relate to an earlier date, in which case they shall have
been true and correct in all respects as of such earlier date);


 


(c)           no Default or Event of Default is continuing
or would result from the requested Advance on the relevant Borrowing Date; and


 


(d)           immediately after giving effect to the
requested Advance, the aggregate outstanding principal amount of Advances under
the Revolving Facility shall not exceed the


 


12





















 


lesser of (i) the
Facility Cap then in effect less the Letter of Credit Usage then in effect; and
(ii) the Aggregate Borrowing Availability then in effect


 


Each Borrowing Certificate submitted shall constitute a representation
and warranty by each Credit Party, as of the date of each such notice and as of
the relevant Borrowing Date, that the conditions in this Section 4.2 are
satisfied.


 


V.            REPRESENTATIONS AND WARRANTIES


 


Each Credit Party, jointly and severally, represents and warrants to
the Lender Parties as follows except as set forth in the disclosure schedule corresponding
to such Section as of the Closing Date, and each time such representation
is to be made pursuant to Section 4.2(b):


 


5.1          Organization
and Authority


 


As of the Closing Date each Credit Party, and each Subsidiary of each
Credit Party, is duly incorporated, organized or formed, validly existing and
in good standing (to the extent such concept applies) under the laws of its
jurisdiction of incorporation, organization or formation.  Each Credit Party, and each Subsidiary of
each Credit Party, (a) has all requisite corporate, partnership, limited
liability company or other company, 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 Term Loan Documents and the Related
Documents to the extent a party thereto, (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 company, as the case may be, power and authority (i) to
execute, deliver and perform the Loan Documents, the Term 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 Term Loan Documents and the Related Documents
to which it is a party and (iv) to grant the Liens pursuant to the
Security Documents to which it is a party.


 


5.2          Loan
Documents and Related Documents


 


The execution, delivery and performance by each Credit Party of the
Loan Documents, the Term 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 company, as the case
may be, action of such Credit Party, and such Loan Documents, Term 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


 


13





















 


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 Term 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 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
Term 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).


 


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, as of the
Closing Date, 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).  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 non-assessable (as applicable) and each Credit Party listed
on Schedule 5.3 as of the Closing Date 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 the Permitted
Liens.  Schedule 5.3 lists
the directors and secretaries 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


 


14





















 


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 Lenders Liens, execute and deliver, or perform its payment,
guarantee, indemnification, release, waiver, and any material obligations
under, any Loan Document, Term Loan Documents or Related Document to which it is a party or to pay the
Obligations, (b) in default in any material respect in the performance,
observance or fulfilment 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
fulfilment 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, Term Loan
Documents or Related Documents or the right of such Credit Party to enter into
any Loan Document, Term Loan Documents or any Related Document to which it is a
party or to consummate the transactions contemplated thereby, or (b) would
reasonably be


 


15





















 


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 as of the Closing Date, and after the Closing Date that, in the case
of any order, writ, injuction, judgment or decree to which any Credit Party
becomes a party would reasonably be expected to have a Material Adverse Effect.


 


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 on Schedule 5.8, each Credit Party (a) has
filed all federal (if applicable) and all other material 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 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 for items
arising after the Closing Date, disclosed to Agent in accordance with Section 6.1
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, Pensions; 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


 


16





















 


Authority
applicable to such Credit Party, the Business and/or such Credit Party’s
Properties or operations, including, without limitation and where applicable,
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
known to a Credit Party 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)           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.


 


(c)           No Credit Party or any of its Subsidiaries
has at any time operated or had maintained for the benefit of it and/or any of
its employees a defined benefit occupation pension scheme other than as listed
in Schedule 5.10.


 


(d)           Except as set forth on Schedule 5.10(c),
no Credit Party subject to ERISA 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, except in
each case under clauses (i) through (v) with respect to any matters
arising after the Closing Date, as would not reasonably be expected to have a
Material Adverse Effect.  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 except, with respect to events occurring after the Closing
Date, for events that would not reasonably be expected to have a Material
Adverse Effect.  Each Credit Party has
maintained all material records required to be maintained by any applicable Governmental
Authority except, after the Closing Date, where the failure to do so would not
reasonably be expected to have a Material Adverse Effect.  UK Guarantor 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 Borrower and activities incidental
thereto.


 


5.11        Intellectual
Property


 


(a)           Except as set forth on Schedule 5.11,
no Credit Party or Subsidiary of a Credit Party owns or licenses any material
patents, patent applications, registered trademarks, trademark applications,
trade names, trade name applications, registered service marks, service


 


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mark
applications, registered copyrights or copyright applications other than
off-the-shelf licenses readily available in the open market.


 


(b)           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’ 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
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 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;
Labour


 


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


 


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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, Term 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 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


 


(a)           No Default or Event of Default exists.


 


(b)           Evolving Systems and each U.S. Subsidiary is
and, after giving effect to the transactions and the Indebtedness contemplated
by the Loan Documents and the transactions contemplated by the Term Loan
Document and the Related Documents, will be Solvent.


 


(c)           Borrower and UK Guarantor are not and, after
giving effect to the transactions and the Indebtedness contemplated by the Loan
Documents and the transactions contemplated by the Term Loan Documents and the
Related Documents (to the extent a party thereto), will not be unable to pay
their respective debts within the meaning of the Insolvency Act 1986.


 


(d)           No corporate action, legal proceeding, or
other procedure or step described in Article VIII(g) or process
described in Article VIII(h) has been taken or threatened, to such
Credit Party’s knowledge, in relation to any Credit Party.


 


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 Loans 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.


 


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(c)           No Credit Party intends
to treat the Loans, 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 Loans 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, 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, Term 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 (including without limitation the Security Agreement
Questionnaire submitted by letter dated October 3, 2005 (as supplemented
prior to the date hereof as described in such letter) to the security
questionnaire for the Borrower and the UK Guarantor) 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).


 


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5.18        Governing
Law and Enforcement


 


(a)           The choice of English Law as the governing
law of this Agreement and the Security Documents governed by English law will
be recognized and enforced in the Relevant Jurisdictions.


 


(b)           Any final judgement obtained in England in
relation to this Agreement and the Security Documents governed by English law
will be recognized and enforced in the Relevant Jurisdictions.


 


5.19        Centre
of main interests and establishments


 


For the purposes of The Council of the European Union Regulation No. 1346/2000
on Insolvency Proceedings (the “Regulation”),
the centre of main interest (as that term is used in Article 3(1) of
the Regulation) for the Borrower and UK Guarantor is situated in England and
Wales and other than in relation to Evolving Systems Ltd’s branch office in
Malaysia, has no “establishment”
(as that term is used in Article 2(h) of the Regulations) in any
other jurisdiction.


 


5.20        Incorporation
of Certain Representations and Warranties


 


Each of the representations and warranties contained in the Related
Documents and, at the Closing Date, the Term Loan 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 to the knowledge of each Credit Party as of the Closing
Date, 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.


 


5.21        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
making of any and all Advances and/or the funding of the Term Loan.


 


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:


 


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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;


 


(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


 


22





















 


(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 an amount equal to $250,000 against Persons
organized in the United States in the aggregate at any time or such items do
not exceed an amount equal to $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)            with respect to the Credit Parties other
than Borrower and any of its Subsidiaries, 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 and obligations under each of the Related Documents and the TSE Purchase
Agreement except as provided in Section 7.5(f); and


 


23





















 


(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 an amount equal to $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 such 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 prior to the repayment in full of the
Obligations as defined in and under the Term Loan Agreement sole beneficiary of
the Life Insurance Policy (after indefeasible repayment of such Obligations,
the Agent need not be the sole beneficiary of the Life Insurance Policy),
and (iii) expressly provide that they cannot be altered, amended,
modified, cancelled or terminated without at least thirty (30) days
(10 days in the event of a termination for non-payment 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, Evolving Systems 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 Evolving Systems (and, if
requested by Agent, any insurance broker of Evolving Systems) setting forth the
nature and extent of all insurance maintained by Evolving Systems and its
Subsidiaries in accordance with this Section 6.4.  Unless Evolving Systems 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.  Evolving Systems may later cancel any
insurance purchased by Agent, but only after providing Agent with satisfactory
evidence to


 


24





















 


Agent, and written acknowledgment thereof,
that Evolving Systems 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 Evolving Systems may be able to obtain on its own.


 


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’ 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 Term 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 Term 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 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 12.12.


 


25





















 


6.6          Use
of Proceeds


 


The Borrower shall use the proceeds from the Advances under the
Revolving Facility solely for the following purposes at the election of
Borrower: (i) for the purchase or generation from time to time of
receivables and inventory and for payments of amounts owing from time to time
to Agent and Lenders under the Loan Documents, and (ii) for permitted
corporate purposes in compliance with applicable law and not in violation of
this Agreement .  The Borrower shall not
use the proceeds from the Advances under the Revolving Facility for the
acquisitions of companies, businesses or undertakings or for repayment or
prepayment of the Term Loan or the obligations under the Subordinated Loan
Documents or to make any loans or payments to any Credit Party organized in the
United States other than (x) any dividend payment as permitted by section 7.5
or for the avoidance of doubt not for any purpose which would result in a
breach of Sections 151 to 158 of the Act.


 


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 shall cause its
Subsidiaries to, (i) execute, deliver and/or record any and all financing
statements, continuation statements, stock powers, transfers, instruments and
other documents, or cause the execution, delivery and/or 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 otherwise approved in writing by Requisite
Lenders, (i) each Guarantor shall, and each Credit Party shall cause its
Subsidiaries (other than 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, (ii) each
Credit Party shall


 


26





















 


pledge the
equity interests in their Subsidiaries to Agent, for the benefit of the Lender
Parties, to secure the Obligations, and (iii) 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 benefits 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 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 Subsidiary of a
Credit Party other than Borrower shall execute a Joinder Agreement and become a
Guarantor.  Nothing in this Section 6.7(c) shall
require a Credit Party to grant any Lien in favor of the Agent, for the benefit
of the Lender Parties under the Loan Documents, in relation to the Capital
Stock of Evolving Systems GmbH, nor shall Evolving Systems GmbH and Evolving
Systems Networks India PVT Ltd be required to execute a Joinder Agreement or
grant any Lien in favor of the Agent, for the benefit of the Lender Parties
under the Loan Documents unless such Subsidiary has EBITDA representing five (5) per
cent or more, or net turnover representing five (5) per cent or more, of
the EBITDA or net turnover respectively of the Credit Parties and their
consolidated Subsidiaries as a whole without duplication.


 


(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 an amount
equal to $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.


 


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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 Term Loan Documents;


 


(b)           any Indebtedness of Evolving Systems 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;


 


(c)           Indebtedness of Evolving Systems and its
Subsidiaries not to exceed an amount equal to $250,000 in the aggregate at any time outstanding constituting
Capital Lease Obligations;


 


(d)           Indebtedness of Evolving Systems and its
Subsidiaries incurred after the Closing Date secured by Liens permitted under Section 7.3(e)(i) provided
the aggregate amount thereof outstanding at any time does not exceed an amount
equal to $200,000;


 


(e)           inter-company unsecured Indebtedness arising
from loans made by Evolving Systems to its Wholly-Owned Subsidiaries that are
Credit Parties to and as defined in the Term Loan Agreement 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 Evolving Systems 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


 


28





















 


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 an
amount equal to $100,000 at any time.


 


(g)           Subordinated
Debt of Evolving Systems 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 an amount equal to $50,000 arising from the honouring 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 an
amount equal to $500,000 in aggregate annual premiums; and;


 


(l)            other
unsecured Indebtedness of Evolving Systems and its Subsidiaries not to exceed
an amount equal to $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
Term 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);


 


29





















 


(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;


 


(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;


 


30





















 


(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 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:


 


(a)           Investments created by the Loan Documents
and the Term Loan Documents;


 


(b)           trade credit extended by Evolving Systems
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 7.2(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 an amount equal to $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


 


31





















 


security for
the Obligations and (ii) Investments in Cash Equivalents by Evolving
Systems Networks India PVT LTD and Evolving Systems GmbH;


 


(g)           Evolving Systems 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, (i) any Subsidiary of Borrower may
merge with, or dissolve or liquidate into, or transfer its Property to,
Borrower or a Wholly-Owned
Subsidiary of Borrower that is a Credit Party, provided that, with respect to
any such merger, Borrower or
such Wholly-Owned Subsidiary shall be the continuing or surviving entity and (ii) a
Subsidiary of Evolving Systems may merge with or dissolve or liquidate into or
transfer its Property to a Wholly-Owned Subsidiary of Evolving Systems as
permitted by the Term 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 an amount equal to $100,000 at any time;


 


(j)            Investments
by any Credit Party other than Borrower or its Subsidiaries in any Wholly-Owned
Subsidiary of Evolving Systems that is a U.S. Subsidiary and that is or
concurrent with such Investment becomes a Credit Party and Investments by Evolving
Systems and its Subsidiaries in a Subsidiary of Evolving Systems that is or
concurrent with such Investment becomes a Credit Party as defined in and under
the Term Loan Agreement;


 


(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 an amount equal to $50,000 in the aggregate;


 


(m)          Investments
represented by prepaid expenses made in the Ordinary Course of Business; and


 


(n)           without duplication of
any quantitative limits, Evolving Systems and its US Subsidiaries which are
Credit Parties may make Investments permitted under the Term 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


 


32





















 


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 Evolving
Systems may declare and pay dividends and other distributions to Evolving
Systems or to any other Wholly-Owned Subsidiary of Evolving Systems that is a
Credit Party and the Wholly-Owned Subsidiaries of Evolving Systems party to the
Term Loan Agreement may declare and pay dividends permitted under the Term Loan
Agreement;


 


(b)           Evolving Systems may, upon termination,
resignation or retirement of an officer or employee of a Credit Party, redeem
for cash any equity securities or warrants or options to acquire any equity
securities of Evolving Systems owned by such officer or employee so long as the
restrictions and limitations in the Term Loan Agreement are complied with;


 


(c)           Borrower may pay dividends 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)           Evolving
Systems 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 Evolving Systems 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;


 


(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


 


33





















 


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:


 


(a)           as expressly permitted by, and subject to
the terms of, this Agreement, the other Loan Documents and the Term 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)           transactions between or among (i) Evolving
Systems and any of its Wholly Owned Subsidiaries that are U.S. Subsidiaries and
Credit Parties under and as defined in the Term Loan Agreement and (ii) between
or among UK Guarantor and its Wholly Owned Subsidiaries that are, or concurrent
with such transaction becomes, a Credit Party;


 


(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.


 


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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)           Evolving Systems 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 an amount equal to $200,000 in the
aggregate in any fiscal year;


 


(b)           Evolving Systems 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)           Evolving Systems 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) Evolving Systems 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 an amount equal to $250,000 in any fiscal year, (c) no Default or
Event of Default exists or otherwise would result therefrom (d) after
giving effect 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
Evolving Systems 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)            Evolving
Systems 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 Term Loan Documents
with respect to such Intellectual Property subject to such license.  Such licence may include a restriction on the
assignability of the license and its continuation after a Change of Control;


 


(g)           Evolving
Systems and its Subsidiaries (other than Borrower and its Subsidiaries) may
dispose of Property to the extent permitted by the Term Loan Documents.


 


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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)           Evolving Systems or any of its Subsidiaries
which are Credit Parties may enter into guarantees of Indebtedness of any other
Credit Party permitted under Section 7.2;


 


(b)           Evolving Systems and its Subsidiaries may
endorse cheques for collection in the Ordinary Course of Business;


 


(c)           Evolving Systems and 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 an amount equal to $250,000 outstanding at any
time;


 


(d)           Contingent Obligations of Evolving Systems
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;


 


(e)           Contingent Obligations of Evolving Systems
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)           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


 


(i)            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 an amount equal to $150,000 at any time
outstanding.


 


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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 or memorandum 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 any Loans, 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;


 


(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 UK Guarantor 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.


 


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(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 Term 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 Term 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 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, Intellectual Property and General Intangibles of
any Credit Party to the extent excluded from Collateral in the Security
Documents.


 


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.


 


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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 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
Term Loan Document or in any other certificate, document, report or opinion
delivered pursuant to any Loan Document or Term 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 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 or 6.7(b), 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 12.7) 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 any
Liens 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 time in excess of an amount equal to
$175,000 individually or an amount equal to $350,000 in the aggregate
(excluding judgments and decrees to the extent covered by third party insurance
of


 


39





















 


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 Term Loan
Agreement) in the outstanding principal amount in excess of an amount equal to
$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 Term Loan Agreement) in the outstanding principal amount in
excess of an amount equal to $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 fulfilment of any provision contained in any Material 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 Term Loan Agreement).


 


(g)           any of the following shall occur:


 


(i)            A
Credit Party or any Subsidiary of a Credit Party is unable to or admits
inability to pay its debts as they fall due or is deemed to or declared to be
unable to pay its debts under applicable law, suspends or threatens to suspend
making payments on any of its debts other than as a result of a bona fide
dispute being contested in good faith or, by reason of actual or anticipated
financial difficulties, commences negotiations with one or more of its
creditors with a view to rescheduling any of its indebtedness.


 


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(ii)           The
value of the assets of any Credit Party or any Subsidiary of a Credit Party is
less than its liabilities (taking into account contingent and prospective
liabilities).


 


(iii)          A
moratorium is declared in respect of any indebtedness of any Credit Party or
any Subsidiary of a Credit Party.  If a
moratorium occurs, the ending of the moratorium will not remedy any Event of
Default caused by that moratorium.


 


(h)           Any corporate action, legal proceedings or
other procedure or step is taken in relation to:


 


(i)            the
suspension of payments, a moratorium of any indebtedness, winding-up,
dissolution, administration or reorganization (by way of voluntary arrangement,
scheme of arrangement or otherwise) of any Credit Party or Subsidiary of a
Credit Party other than a solvent liquidation or reorganization of any
Subsidiary of a Credit Party which is not a Credit Party;


 


(ii)           a
composition, compromise, assignment or arrangement with any creditor of any
Credit Party or any Subsidiary of a Credit Party;


 


(iii)          the
appointment of a liquidator (other than in respect of a solvent liquidation of
a Subsidiary of a Credit Party which is not a Credit Party), receiver,
administrator, administrative receiver, compulsory manager or other similar
officer in respect of any Credit Party or any Subsidiary of a Credit Party or
any of its assets,


 


or any analogous procedure or step is taken
in any jurisdiction.


 


This clause shall not apply to any winding-up
petition which is frivolous or vexatious and is discharged, stayed or dismissed
within 14 days of commencement or, if earlier, the date on which it is
advertised;


 


(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;


 


(k)           uninsured damage to, or uninsured loss,
theft or destruction of, any portion of the Collateral occurs that exceeds an
amount equal to $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;


 


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(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 an amount equal to $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 otherwise
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;


 


(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 Loans and/or any Notes, all
interest thereon and all other Obligations to be due and payable immediately
(provided, that in the case


 


42





















 


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 Term Loan Document, 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 Term 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, (viii) reduce or otherwise change the Facility Cap,
Availability, Aggregate Borrowing Availability and/or any component of the
foregoing and/or (ix) 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 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.  Notwithstanding anything to the contrary in
this Agreement, neither the Agent nor any Lender shall have any right or
authority to take possession of and/or sell or otherwise transfer any
Collateral pledged by the Borrower and UK Guarantor under the Revolving Loan
Documents for the benefit of any Lender under the Term Loan Documents or the
payment of any amounts under the Subordinated Notes, or in repayment or


 


43





















 


satisfaction
of any amount owing by any of the Credit Parties under and as defined in the
Term Loan Documents.


 


(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 Term 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:


 


44





















 


(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 Term 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.


 


45





















 


9.4          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, Term Loan Documents applicable law or
equity.  The enumeration of any rights
and remedies in any Loan Document, or any Term 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 Term Loan Documents are cumulative and
are not alternative to or exclusive of any other rights or remedies which Agent
and Lenders otherwise may have, subject to the limitation contained in the last
sentence of Section 9.1(a). 
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


 


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


 


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10.3        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 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 Loans, 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 10.3
or the definitions of the terms used in this Section 10.3 insofar as the
definitions affect the substance of this Section 10.3 (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 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.  Notwithstanding anything contained in this
Agreement to the contrary, no waiver or consent with respect to any Default (if
in connection therewith Lenders have exercised their right to suspend the
making or incurrence of Advances) or any Event of Default shall be effective
for purposes of the conditions precedent to the making of Advances unless the
same shall be in writing and signed by Lenders holding at least a majority of
the Commitments in respect of the Revolving Facility.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 10.3 shall be
binding upon Agent, each Lender and the Credit Parties.


 


10.4        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 Loans 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, 10.4, 12.5, 12.6, 12.9,


 


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12.11, 12.12
and 12.13, 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)           All
Loans 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 10.4(b),
arising out of the gross negligence, wilful misconduct or fraud of Agent or
such Lender).  Accordingly, each Credit
Party waives any right it may have under the UCC (to the extent the UCC
applies) 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 the
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.  In addition to any appointments in the Term
Loan Documents, each Lender hereby designates and appoints CapitalSource (i) as
the administrative agent, payment agent and collateral agent under this Agreement and the other Loan
Documents and (ii) to hold all of the rights and interests created by the
Security Documents on trust and as agent for the Lenders in respect of the
Obligations 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 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


 


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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 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


 


49





















 


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 Term 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 Loans 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 Term Loan Documents or any action
taken or omitted by Agent under this Agreement, any of the other Loan Documents
or any of the Term 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 wilful
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 Loans made by it or CSE
Finance and the Notes, if any, issued to it or CSE Finance, CapitalSource and
CSE Finance shall have, and may exercise, the same rights and 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 CSE Finance in its individual capacity as a Lender
or one of the Requisite Lenders. 
CapitalSource (and its Affiliates) 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)


 


50





















 


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 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


 


51





















 


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 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 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 certificate of the
Borrower 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 is hereby 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 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 or 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 subject to the last sentence of Section 9.1(a),the Term Loan
Documents.


 


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(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.  Notwithstanding the foregoing,
Agent shall be liable with respect to its own gross negligence or wilful misconduct.


 


(i)            Agency for Perfection.  Each Lender hereby appoints Agent as agent
for the purpose of perfecting Lenders’ security interest in Collateral which 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 Loans 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 Lender’s
receipt of such request, then such Lender will be deemed to have given such
waiver of 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 Loans to Agent for a price equal to
the then outstanding principal amount thereof due such Lender plus
accrued and unpaid interest and fees due such Lender, which interest in the
Loans 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


 


53





















 


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 Loans
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 Loans 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 Loans and other Obligations in the amount of such participation.


 


11.3        Disbursement
of Funds under Revolving Facility


 


Agent may, on behalf of Lenders, disburse funds to Borrower for
Advances requested.  Each Lender shall
reimburse Agent on demand for its Pro Rata Share of all funds disbursed on its
behalf by Agent, or if Agent so requests, each Lender shall remit to Agent its
Pro Rata Share of any Advance before Agent disburses such Advance to
Borrower.  If Agent so elects to require
that funds be made available prior to disbursement to Borrower, Agent shall
advise each Lender by telephone, telex or telecopy of the amount of such Lender’s
Pro Rata Share of such requested Advance no later than one (1) Business
Day prior to the funding date applicable thereto, and each such Lender shall
pay Agent such Lender’s Pro Rata Share of such requested Loan, in same day
funds, by wire transfer to Agent’s account not later than 2:00p.m. (New York
City time).  If Agent shall have
disbursed funds to Borrower on behalf of any such Lender fails to pay the


 


54





















 


amount of its Pro Rata Share forthwith upon
Agent’s demand, Agent shall promptly notify Borrower, and Borrower shall
immediately repay such amount to Agent. 
Any repayment by Borrower required pursuant to this Section 11.3
shall be without premium or penalty. 
Nothing in this Section 11.3 or elsewhere in this Agreement or the
other Loan Documents, including, without limitation, the provisions of Section 11.4,
shall be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights that Agent or Borrower may have against any Lender as a
result of any default by such Lender hereunder.


 


11.4        Settlements;
Payments; and Information


 


(a)           Advances; Payments; Interest and Fee
Payments.


 


(i)            The
amount of outstanding Loans pursuant to Advances may fluctuate from day to day
through Agent’s disbursement of funds to, and receipt of funds from,
Borrower.  In order to minimize the
frequency of transfers of funds between Agent and each Lender, notwithstanding
terms to the contrary set forth in Section 11.3, Advances and repayments
thereof may be settled according to the procedures described in Sections
11.4(a)(ii) and 11.4(a)(iii). 
Notwithstanding these procedures, each Lender’s obligation to fund its
Pro Rata Share of any Advances made by Agent to Borrower will commence on the
date such Advances are made by Agent. 
Nothing contained in this Agreement shall obligate a Lender to make an
Advance at any time any Default or Event of Default exists.  All such payments will be made by such Lender
without set-off, counterclaim or deduction of any kind.


 


(ii)           Once
each week, or more frequently (including daily), if Agent so elects (each such
day being a “Settlement Date”), Agent will advise each Lender by 1:00p.m. (New
York City time) on a Business Day by telephone, telex or telecopy of the amount
of each such Lender’s Pro Rata Share of the outstanding Advances.  In the event payments are necessary to adjust
the amount of such Lender’s share of the Advances to such Lender’s Pro Rata
Share of the Advances, the party from which such payment is due will pay the
other party, in same day funds, by wire transfer to the other’s account not
later than 2:00p.m. (New York City time) on the Business Day following the
Settlement Date.


 


(iii)          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 applicable Loans.  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 2:00p.m. (New York City time) on the next Business Day following the
Interest Settlement Date, such Lender’s share of such interest and fees.


 


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(b)           Availability of Lenders’
Pro Rata Share.


 


(i)            Unless
Agent has been notified by a Lender prior to any proposed funding date of such
Lender’s intention not to fund its Pro Rata Share of an Advance requested by
Borrower, Agent may assume that such Lender will make such amount available to
Agent on the proposed funding date or the Business Day following the next
Settlement Date, as applicable; provided, however, nothing contained in this
Agreement shall obligate a Lender to make an Advance at any time any Default or
Event of Default exists.  If such amount
is not, in fact, made available to Agent by such Lender when due, Agent will be
entitled to recover such amount on demand from such Lender without set-off,
counterclaim or deduction of any kind.


 


(ii)           Nothing
contained in this Section 11.4(b) will be deemed to relieve a Lender
of its obligation to fulfil its commitments or to prejudice any rights Agent or
Borrower may have against such Lender as a result of any default by such Lender
under this Agreement.


 


(c)           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.


 


11.5        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 11.5,
except to the extent that such failure is attributed to Agent’s gross
negligence or wilful 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.


 


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XII.         MISCELLANEOUS


 


12.1        Governing
Law and Enforcement


 


This Agreement
is governed by English law.


 


12.2        Jurisdiction
of English courts


 


(a)                                  The courts of England have
exclusive jurisdiction to settle any dispute arising out of or in connection
with this Agreement (including a dispute regarding the existence, validity or
termination of this Agreement) (a “Dispute”).


 


(b)                                 The Parties agree that the
courts of England are the most appropriate and convenient courts to settle
Disputes and accordingly no Party will argue to the contrary.


 


(c)                                  This Section 12.2 is for
the benefit of the Lender Parties only. 
As a result, no Lender Party shall be prevented from taking proceedings
relating to a Dispute in any other courts with jurisdiction.  To the extent allowed by law, the Lender
Parties may take concurrent proceedings in any number of jurisdictions.


 


12.3        Service
of process


 


Without
prejudice to any other mode of service allowed under any relevant law, each
Credit Party (other than a Credit Party incorporated in England and Wales):


 


(a)                                  irrevocably appoints Borrower
at its registered office, FAO Legal Department as its agent for service of
process in relation to any proceedings before the English courts in connection
with any Loan Document and the Borrower by its execution of this Agreement,
accepts that appointment); and


 


(b)                                 agrees that failure by a
process agent to notify the relevant Credit Party of the process will not
invalidate the proceedings concerned.


 


(c)                                  If any person appointed as
process agent is unable for any reason to act as agent for service of process,
the Borrower (on behalf of all the Credit Parties) must immediately (and in any
event within 5 days of such event taking place) appoint another agent on terms
acceptable to the Agent.  Failing this,
the Agent may appoint another agent for this purpose.


 


Evolving
Systems, Inc., Telecom Software Enterprises, LLC and Evolving Systems Holdings, Inc.
each expressly agrees and consents to the provisions of Section 12.2 and
12.3.


 


12.4        Successors
and Assigns; Assignments and Participations


 


(a)           Subject to Section 12.4(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


 


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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 Loans) 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 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 12.6 and
12.9).  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 12.4(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 Term
Loan Agreement.  Notwithstanding anything
to the contrary contained in this Section 12.4, 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)) or is a resident of the
United Kingdom for UK Tax purposes.


 


(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 Loans) 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;


 


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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, 12.6 and 12.9 of this Agreement, be considered to be
a “Lender” hereunder.  Notwithstanding
anything to the contrary contained in this Section 12.4, 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)) or is a
resident of the United Kingdom for UK Tax purposes.


 


(c)           Agent, on behalf of Borrower, shall maintain
at its address referred to in Section 12.7 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
Loans owing to, and the Notes, if any, evidencing such Loans 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 Loans, the Notes and the Commitments
recorded therein for all purposes of this Agreement.  The Register shall be available for
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 12.4(a) of any rights or
obligations under or in respect of the Loans or the Notes evidencing such Loans
shall be effective unless and until (i) Agent shall have recorded the
assignment pursuant to Section 12.4(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 12.4,
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 Loans
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


 


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Agreement,
including, without limitation, the Loans 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 Loans 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 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 Loans, 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.


 


12.5        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.


 


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12.6        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
Term 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 wilful misconduct of
such Indemnified Person.  If any
Indemnified Person uses in-house counsel for 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 12.6,
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 Term
Loan Documents, any Related Document or any other agreement, document or
transaction contemplated thereby.


 


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12.7        Notice


 


Subject to Section 12.3, 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 12.7.  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.


 


12.8        Severability;
Headings; 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 headings in the Loan
Documents are intended for convenience and reference only and shall not affect
the meaning or interpretation of the Loan 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.


 


12.9        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, 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 Term
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 Term 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


 


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inspections undertaken by Agent or Lenders or
their Affiliates pursuant to the Loan Documents, the Term Loan Documents, any
Related Document, and/or (ix) in connection with any modification,
restatement, supplement, amendment, waiver or extension of any Loan Document,
any Term 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.


 


12.10      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.  The obligations of the Credit Parties and the
rights of the Lenders and the Agent under this Agreement and the Loan Documents
shall be in addition to any obligation and rights under the Term Loan
Documents.


 


12.11      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.


 


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12.12      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 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 Loans outstanding and other principal
terms of such Loans 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;


 


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(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.


 


Should Agent or any Lender be required to disclose any such information
by virtue of a subpoena or similar process by any court or any 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 Term 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.


 


12.13      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.


 


65





















 


XIII.        TAXES


 


13.1        Taxes


 


(a)           Subject to this Section 13.1, 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”).


 


(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, 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 wilful 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 this Section 13.1:


 


(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


 


66





















 


or a certified
copy of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to Agent (and the applicable Lender).


 


(f)            No Lender shall be entitled to any
additional amounts solely in respect of a deduction or withhold for or on
account of United Kingdom Taxes (a “UK Withholding Tax Deduction”) in respect
of interest payable by the Borrower hereunder, if on the date on which the
payment falls due, the payment could have been made to such Lender without a UK
Withholding Tax Deduction if such Lender was entitled under a Treaty to a full
exemption from UK Withholding Tax Deductions in respect of interest payable
hereunder, but on such date such Lender is not or has ceased to be entitled to
a full exemption from UK Withholding Tax Deductions other than as a result of
any change after the Closing Date (or, if later, the date it became a Lender
hereunder) in any existing law, regulation, treaty or directive or in the
interpretation or application thereof.


 


(g)           Notwithstanding any other provision of any
Loan Document but subject to the next following sentence, if at any time after
the Closing or the making of any Advance or funding of the Term Loan
(x) any change in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (y) any new law, regulation,
treaty or directive enacted or any interpretation or application thereof, or
(z) compliance by Agent or any Lender with new request or directive
(whether or not having the force of law) from any Governmental Authority: (i) subjects
Agent or such Lender to any tax, levy, impost, deduction, assessment, charge or
withholding imposed by any taxing authority with respect to any Loan Document,
or changes the basis of taxation of payments to Agent, for its own account
and/or for the benefit of Lenders, of any amount payable thereunder (except in
each case, for net income taxes imposed generally by any taxing authority under
the law of the jurisdiction where a Lender or the Agent is organized or where
it has a Lending Office or its principal place of business (or, if different,
in which, other than by reason of its execution and performance of the Loan
Documents, it is treated as resident for tax purposes) or, in the case of any
Lender, in which its applicable lending office is located, with respect to
interest or commitment fees or other fees payable hereunder or changes in the
rate of tax on the overall net income of Agent and/or such Lender), or (ii) imposes
on Agent or Lenders any other condition or increased cost (not related to
taxation) in connection with the transactions contemplated thereby or
participations therein; and the result of any of the foregoing is to increase
the cost to Agent or Lenders of making or continuing or maintaining any Loan
hereunder or to reduce any amount receivable hereunder, then, in any such case,
the Credit Parties shall promptly pay to the Agent, for its own account and/or
for the benefit of Lenders, any additional amounts necessary to compensate
Agent and each Lender, on an after-tax basis, for such additional cost or
reduced amount as determined by Agent and/or such Lender (acting reasonably and
in good faith).  The Credit Parties shall
not be required to pay any amounts as provided in the preceding sentence, (i) to
the extent Agent or such Lender shall have already been compensated for such
increased cost or reduced amount under Section 2.11 or 2.12 of this
Agreement, (ii) to the extent such increased cost or reduced amount is
attributable to the wilful breach by Agent or such Lender (or an Affiliate of
Agent or such Lender), as applicable, of any law or regulation, (iii) to
the extent such increased cost or reduced amount is attributable to a
withholding for or on account of Tax or (iv) to the extent Agent or such
Lender shall have already been compensated, or is not entitled to compensation,
for such increased cost or reduced amount under Section 13.1(c).  If Agent or any Lender becomes entitled to
claim any additional amounts pursuant to this Section 13.1 it shall
reasonably promptly after obtaining knowledge


 


67





















 


thereof notify
Borrower of the event by reason of which Agent or such Lender has become so
entitled, and each such notice of additional amounts payable pursuant to this Section 13.1
submitted by Agent or such Lender to the Credit Parties shall, absent manifest
error, be final, conclusive and binding for all purposes.


 


(h)           If at any time the Borrower or any other
Credit Party is required by law to make any deduction or withholding from any
sum payable by it under this Agreement or any other Loan Document (or if
subsequently there is any change in the rates at which or the manner in which
such deductions or withholdings are calculated), it shall promptly notify Agent
upon becoming aware of the same.  In addition,
each Lender shall promptly notify Agent upon becoming aware of any
circumstances as a result of which Borrower or any other Credit Party is or
would be required to make any deduction or withholding from any sum payable by
it under this Agreement or under any other Loan Document (or if subsequently
there is or would be any change in the rates at which or the manner in which
such deductions or withholdings are calculated), whether as a result of such
Lender ceasing to beneficially own interest payable hereunder or
otherwise.  If Agent receives such a
notification from a Lender it shall promptly notify the Borrower.  Any Lender which ceases to be a Treaty Lender
by reason of an action taken by such Lender or by reason of a failure by such
Lender to take any action as required by this Agreement shall, upon becoming
aware of such action or failure, also promptly notify Agent and the Borrower of
its change in status, the date of such change and the reason for its change in
status.  The Borrower or any Credit Party,
as appropriate, shall pay the full amount deducted to the relevant taxing or
other authority in accordance with the applicable law and promptly provide an
original tax certificate of withholding to the Agent or relevant Lender (which,
in the case of a withholding under United Kingdom tax legislation, is in the
form of a duly completed Form R185), as appropriate (or other evidence
reasonably satisfactory to such Person).


 


(i)            Upon written request by Borrower, 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 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-US 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).


 


68





















 


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.


 


(j)            No Credit Party shall be required to pay
any additional amounts in respect of United States Federal income tax pursuant
to this Section 13.1 to Agent or to any Lender for the account of any
Lending Office of such Lender 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(i) in respect of such Lending
Office.


 


(k)           To the extent that the Borrower or another
Credit Party reasonably determines that (i) Agent and/or any Lender may
recover Taxes deduction from payments made by Borrower or such Credit Party
under any Loan Document to the extent Borrower or such Credit Party shall have
paid additional amounts in respect of such Taxes under Section 13.1(d) or
(ii) a withholding or deduction for or on account of taxes may be avoided
or reduced if, in either case, Agent or a Lender completes certain procedural
formalities and/or provides properly completed and executed documentation
prescribed by applicable law, Agent or such Lender shall within a reasonable
timeframe cooperate with Borrower to complete such procedural formalities
and/or provide such documentation to the Borrower (in each case, upon the
Borrower’s reasonable request and at the Borrower’s sole cost and expense); provided
that Agent or such Lender, as the case may be, determines in its sole, good
faith reasonable judgment that completing such procedural formalities and/or
providing such documentation will not disadvantage or prejudice such Agent or
Lender in any manner.


 


(l)            If the United Stated Internal Revenue
Service or any other Governmental Authority of the United States or any other
country or any political subdivision thereof asserts a claim that Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or properly completed or for
any other reason other than the gross negligence or wilful misconduct of
Agent), such Lender shall indemnify Agent fully for all amounts paid, directly
or indirectly, by Agent as tax, withholding therefore, or otherwise, including
penalties, interest and additions to tax, and including taxes imposed by any
jurisdiction on amounts payable to Agent under this paragraph, together with
all costs and expenses related thereto (including attorneys fees and time
charges of attorneys for Agent, which attorneys may be employees of
Agent).  The obligations of the Lenders
under this paragraph shall survive the payment of the Obligations and
termination of this Agreement.


 


(m)          If Agent or any Lender determines in its
sole, good faith reasonable judgment that it has received a remission for, or a
refund or direct credit in respect of and specifically associated with any
Taxes or Other Taxes as to which it has been indemnified by any Credit Party,
or with respect to which such Credit Party has paid additional amounts, it
shall promptly notify the Credit Party of such remission, refund or direct
credit and shall within 30 days from the date of receipt of such refund or
benefit of such remission or direct credit pay over the amount of such refund
or benefit of such remission or direct credit (including any interest paid or
credited by the relevant Governmental Authority attributable to such remission,
refund or direct credit) to the Credit Party but only to the extent of
indemnity payments made, or additional amounts paid, by such Credit Party with
respect to the Taxes or Other Taxes giving rise to such remission, refund or
direct credit, net of all out-of-pocket expenses of such Person.


 


69





















 


Notwithstanding
any other provision of this Agreement, if Agent or any Lender has made a
payment to any Credit Party in respect of a remission, refund or direct credit
of Taxes or Other Taxes pursuant to the preceding sentence, to the extent any
remission is withdrawn or any refund or direct credit is required to be repaid
to the relevant taxing authority, such amount shall be treated as a Tax subject
to indemnification under this Section 13.1.


 


(n)           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, 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.


 


(o)           If Borrower is required to pay additional
amounts to any Lender or Agent pursuant to Section 13.1, 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, and, to the extent
any such refund or credit is obtained, apply such amounts to the outstanding
Obligations owing by such Credit Party under this Agreement.


 


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.        GUARANTEE AND INDEMNITY


 


14.1        Guarantee
and indemnity


 


Each UK Guarantor irrevocably and unconditionally jointly and
severally:


 


(a)           guarantees to each Lender Party punctual
performance by each Borrower of all that Borrower’s obligations under the Loan
Documents;


 


(b)           undertakes with each Lender Party that
whenever a Borrower does not pay any amount when due under or in connection
with any Loan Document, that UK Guarantor shall immediately on demand pay that
amount as if it was the principal obligor; and


 


70





















 


(c)           indemnifies each Lender Party immediately on
demand against any cost, loss or liability suffered by that Lender Party if any
obligation guaranteed by it is or becomes unenforceable, invalid or
illegal.  The amount of the cost, loss or
liability shall be equal to the amount which that Lender Party would otherwise
have been entitled to recover.


 


14.2        Continuing
guarantee


 


This guarantee is a continuing guarantee and will extend to the
ultimate balance of sums payable by any Credit Party under the Loan Documents,
regardless of any intermediate payment or discharge in whole or in part.


 


14.3        Reinstatement


 


If any payment by a Credit Party or any discharge given by a Lender
Party (whether in respect of the obligations of any Credit Party or any
security for those obligations or otherwise) is avoided or reduced as a result
of insolvency or any similar event:


 


(a)           the liability of each Credit Party shall
continue as if the payment, discharge, avoidance or reduction had not occurred;
and


 


(b)           each Lender Party shall be entitled to
recover the value or amount of that security or payment from each Credit Party,
as if the payment, discharge, avoidance or reduction had not occurred.


 


14.4        Waiver
of defenses


 


The obligations of each UK Guarantor under this clause 14 will not
be affected by an act, omission, matter or thing which, but for this
clause 14, would reduce, release or prejudice any of its obligations under
this clause 14 (without limitation and whether or not known to it or any
Lender Party) including:


 


(a)           any time, waiver or consent granted to, or
composition with, any Credit Party or other person;


 


(b)           the release of any other Credit Party or any
other person under the terms of any composition or arrangement with any
creditor of any Credit Party;


 


(c)           the taking, variation, compromise, exchange,
renewal or release of, or refusal or neglect to perfect, take up or enforce,
any rights against, or security over assets of, any Credit Party or other
person or any non-presentation or non-observance of any formality or other
requirement in respect of any instrument or any failure to realize the full
value of any security;


 


(d)           any incapacity or lack of power, authority
or legal personality of or dissolution or change in the members or status of an
Credit Party or any other person;


 


(e)           any amendment (however fundamental) or
replacement of a Loan Document or any other document or security;


 


71





















 


(f)            any unenforceability, illegality or
invalidity of any obligation of any person under any Loan Document or any other
document or security; or


 


(g)           any insolvency or similar proceedings.


 


14.5        Immediate recourse


 


Each UK Guarantor waives any right it may have of first requiring any
Lender Party (or any trustee or agent on its behalf) to proceed against or
enforce any other rights or security or claim payment from any person before
claiming from that UK Guarantor under this Article 14.  This waiver applies irrespective of any law
or any provision of a Loan Document to the contrary.


 


14.6        Appropriations


 


Until all amounts which may be or become payable by the Credit Parties
under or in connection with the Loan Documents have been irrevocably paid in
full, each Lender Party (or any trustee or agent on its behalf) may:


 


(a)           refrain from applying or enforcing any other
monies, security or rights held or received by that Lender Party (or any
trustee or agent on its behalf) in respect of those amounts, or apply and
enforce the same in such manner and order as it sees fit (whether against those
amounts or otherwise) and no Guarantor shall be entitled to the benefit of the
same; and


 


(b)           hold in an interest-bearing suspense account
any monies received from any Guarantor or on account of any Guarantor’s
liability under this clause 14.


 


14.7        Deferral
of Guarantors’ rights


 


Until all amounts which may be or become payable by the Obligors under
or in connection with the Loan Documents have been irrevocably paid in full and
unless the Agent otherwise directs, no UK Guarantor will exercise any rights
which it may have by reason of performance by it of its obligations under the
Loan Documents:


 


(a)           to be indemnified by an Credit Party;


 


(b)           to claim any contribution from any other
guarantor of any Credit Party’s obligations under the Loan Documents; and/or


 


(c)           to take the benefit (in whole or in part and
whether by way of subrogation or otherwise) of any rights of the Lender Parties
under the Loan Documents or of any other guarantee or security taken pursuant
to, or in connection with, the Loan Documents by any Lender Party.


 


14.8        Release
of UK Guarantors’ right of contribution


 


If any UK Guarantor (a “Retiring
Guarantor”) ceases to be a UK Guarantor in accordance with the terms
of the Loan Documents for the purpose of any sale or other disposal


 


72





















 


of that Retiring UK Guarantor then on the
date such Retiring UK Guarantor ceases to be a UK Guarantor:


 


(a)           that Retiring UK Guarantor is released by
each other UK Guarantor from any liability (whether past, present or future and
whether actual or contingent) to make a contribution to any other UK Guarantor
arising by reason of the performance by any other UK Guarantor of its
obligations under the Loan Documents; and


 


(b)           each other UK Guarantor waives any rights it
may have by reason of the performance of its obligations under the Loan
Documents to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Lender Parties under any Loan
Document or of any other security taken pursuant to, or in connection with, any
Loan Document where such rights or security are granted by or in relation to
the assets of the Retiring UK Guarantor.


 


14.9        Additional
security


 


This guarantee is in addition to and is not in any way prejudiced by
any other guarantee or security now or subsequently held by any Lender Party.


 


14.10      Guarantee
limitations


 


This guarantee does not apply to any liability to the extent that it
would result in this guarantee constituting unlawful financial assistance
within the meaning of sections 151 and 152 of the Act or any equivalent and
applicable provisions under the laws of the jurisdiction of incorporation of
the relevant Guarantor.


 


73





















 


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


 


	
  BORROWER:

  	
  EVOLVING SYSTEMS LTD

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Brian R. Ervine

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
  9777 Pyramid Court, Suite 100

  
	
   

  	
  Englewood, CO 80112

  
	
   

  	
  Attention:

  	
  Anita T. Moseley, Company

  Secretary

  
	
   

  	
  Telephone:

  	
  303 802-2599

  
	
   

  	
  FAX:

  	
  303 802-1138

  
	
   

  	
  E-MAIL:

  	
  atm@evolving.com

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  UK GUARANTOR:

  	
  Executed and delivered as a Deed by:

  EVOLVING SYSTEMS HOLDINGS LTD

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Brian R. Ervine

  
	
   

  	
  Name:

  	
  Brian R. Ervine

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anita T. Moseley

  
	
   

  	
  Name:

  	
  Anita T. Moseley

  
	
   

  	
  Title:

  	
  Company Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  9777 Pyramid Court, Suite 100

  
	
   

  	
  Englewood, CO 80112

  
	
   

  	
  Attention:

  	
  Anita T. Moseley, Company

  Secretary

  
	
   

  	
  Telephone:

  	
  303 802-2599

  
	
   

  	
  FAX:

  	
  303 802-1138

  
	
   

  	
  E-MAIL:

  	
  atm@evolving.com

  
				



 


[SIGNATURE PAGE TO REVOLVING FACILITY
AGREEMENT]


 





















 


	
  CREDIT PARTY:

  	
  Executed and delivered as a Deed by:

  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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CREDIT PARTY:

  	
  Executed and delivered as a Deed by:

  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

  
				



 


[SIGNATURE PAGE TO REVOLVING FACILITY
AGREEMENT]


 





















 


	
  CREDIT PARTY:

  	
  Executed and delivered as a Deed by:

  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

  
				



 


[SIGNATURE PAGE TO REVOLVING FACILITY
AGREEMENT]


 





















 


	
  AGENT:

  	
  CAPITALSOURCE FINANCE LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Steven A. Museles

  
	
   

  	
  Name:

  	
  Steve A. Museles

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LENDER:

  	
  CSE FINANCE, INC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Steven A. Museles

  
	
   

  	
  Name:

  	
  Steven A. Museles

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CSE Finance, Inc

  
	
   

  	
  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

  
				



 


[SIGNATURE PAGE TO REVOLVING FACILITY
AGREEMENT]


 





















 


	
  Appendix A

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Definitions

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Appendix B

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Letters
  of Credit

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Borrowing Certificate

  	
   

  
	
  Exhibit B-1

  	
  Financial
  Covenants

  	
   

  
	
  Exhibit B-2

  	
  Form of
  Compliance Certificate

  	
   

  
	
  Exhibit C

  	
  Reporting
  Requirements

  	
   

  
	
  Exhibit D

  	
  Closing Conditions

  	
   

  
	
  Exhibit E

  	
  Form of Borrowing Base
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule A

  	
  Lenders/Commitments

  	
   

  
	
  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 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 31 January 2006, the Credit Parties and their 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 31 December 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 A


 


Form of Borrowing
Certificate


 


BORROWING CERTIFICATE


 


DATED AS OF                    ,
20    


 


EVOLVING SYSTEMS LTD., (“Borrower”), by the undersigned
duly authorized officer(s) of Borrower, hereby certifies to Agent and Lenders,
in accordance with the Revolving Facility Agreement dated as of [          ]
2005, among Borrower the other Credit Parties named therein, CapitalSource
Finance LLC, as Agent, and certain other Lenders party thereto from time to
time (as amended, supplemented or modified from time to time, the “Credit
Agreement;” all capitalized terms not defined herein have the meanings given
them in the Credit Agreement), and the other Loan Documents, that:


 


1.             In accordance with
Sections 2.1 and 4.2(a) of the Credit Agreement, Borrowers hereby
irrevocably request from Lenders an Advance under the Revolving Facility
pursuant to the Credit Agreement in the aggregate principal amount of $             
(“Requested Advance”) to be made on                                     ,
20           (the “Borrowing
Date”), which day is a Business Day.


 


2.             Immediately after giving
effect to the Requested Advance, the aggregate outstanding principal amount of
Advances under the Revolving Facility will not exceed the lesser of (i) the
Facility Cap less any Letter of Credit Usage outstanding and (ii) the
Aggregate Borrowing Availability in existence on the Borrowing Date.


 


3.             Attached hereto are all
consents, approvals and agreements from third parties necessary with respect to
the Requested Advance.


 


4.             The certifications,
representations, calculations and statements herein will be true and correct as
of the date hereof and on the Borrowing Date.


 


5.             All conditions and
provisions of Section 4.2 and, if applicable, Section 4.1, of the
Credit Agreement are as of the date hereof, and will be as of the Borrowing Date
(if applicable), fully satisfied or waived


 


6.             To the best of Borrowers’
knowledge, no recoupments and/or recoupments of any third-party payor are being
sought, requested or claimed, or, to Borrowers’ knowledge, threatened against
any Credit Party or any Credit Party’s Affiliates except the following amounts:                   .


 





















 


IN WITNESS WHEREOF, the undersigned has caused this
certificate to be executed as of the day first written above.


 


	
   

  	
  EVOLVING SYSTEMS, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  



 


[SIGNATURE PAGE TO BORROWING CERTIFICATE]


 


2





















 


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

  	
   

  	
  2.00:1

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31 2008, March 31 2009
  and the end of each calendar 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 Term 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 or is merged into or consolidated with a Credit Party or a “Credit
Party” under and as defined in the Term Loan Agreement or that Person’s assets
are acquired by a Credit Party or a “Credit Party” under and as defined in the
Term 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 Term
Loan Agreement (provided that, for purposes of determining the Indebtedness
outstanding under the 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, Term
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 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 HOLDINGS LIMITED


AND EVOLVING SYSTEMS LIMITED]


 


This Compliance Certificate (this “Certificate”)
is given by EVOLVING SYSTEMS LIMITED (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 Borrower, 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
Borrower this
                  day
of                                        ,
20    .


 


	
   

  	
  EVOLVING SYSTEMS LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  



 





















 


COMPLIANCE
CERTIFICATE


Date:                   ,
20


 


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 U.S. Subsidiaries, (2) 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 U.S. Subsidiaries, (2) 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 U.S.
Subsidiaries, (2) 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.


 


Each month (or
more frequently upon the request of Agent) and each time a request for an Advance is
made, Borrower shall deliver to Agent and each Lender a Borrowing Base
Certificate accompanied by a separate detailed aging and categorization of
Borrower’s accounts receivable and accounts payable and such other supporting
documentation with respect to the figures and information in the Borrowing Base
Certificate as Agent shall request in its Permitted Discretion.


 


(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 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 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 Subsidiary of a
Credit Party’s Property to the extent (A) the amount in controversy
exceeds an amount equal to $100,000 individually or an amount equal to $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 an amount equal to $250,000 individually or an amount equal to
$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;


 


(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;


 


(x)            any
default or breach in the performance, observance or fulfilment 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;


 


(xi)           any
representation or warranty contained in any Related Document made by Persons
other than a Credit Party, Agent or any Lender is not true and correct in all
material respects to the knowledge of each Credit Party.


 


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 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.


 





















 


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 an amount greater than an amount equal to
$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 an amount equal to
$50,000 and any claims in excess of an amount equal to $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 contained in Section 6.7(c) of this Agreement,
certificated Securities (or Capital Stock) (accompanied by transfer certificate
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, negotiable Documents or
Chattel Paper pursuant to the terms hereof, each such Instrument (excluding
checks, drafts and similar instruments that are customarily endorsed or
presented for collection or deposit in the Ordinary Course of Business),
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 party, for the benefit of certain Lender Parties” in each case in
accordance with the terms of any applicable Security Document;


 





















 


(v)           deliver
to Agent an updated Schedule I (Filing Jurisdictions), Schedule II
(Capital Stock, Instruments, Documents, Letter of Credit Rights and Chattel
Paper), 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.


 





















 


Exhibit D


 


Closing Conditions


 


(a)


 


(i)            A
copy of the Organizational Documents and of the constitutional documents of
each Credit Party.


 


(ii)           A
copy of a resolution of the board of directors of each Credit Party:


 


(1) approving the
terms of, and the transactions contemplated by, the Loan Documents to which it
is a party and resolving that it execute, deliver and perform the Loan
Documents to which it is a party;


 


(2) authorizing
a specified person or persons to execute the Loan Documents to which it is a
party on its behalf; and


 


(3) authorizing
a specified person or persons, on its behalf, to sign and/or deliver all
documents and notices to be signed and/or delivered by it under or in
connection with the Loan Documents to which it is a party;


 


(iii)          A
specimen of the signature of each person authorized by the resolution referred
to in paragraph (ii) above in relation to the Loan Documents and any
related documents referred to in paragraph (ii)(3) above.


 


(iv)          A
copy of a resolution signed by all the holder of the issued shares in Evolving
Systems Holdings Limited, approving the terms of, and the transactions
contemplated by, the Loan Documents to which Evolving Systems Holdings Limited
is a party.


 


(v)           A
certificate of the Borrower (signed by a director) confirming that borrowing or
guaranteeing or securing, as appropriate, the Facility Cap would not cause any
borrowing, guarantee, security or similar limit binding on any Credit Party to
be exceeded.


 


(vi)          A
certificate of an authorized signatory of each of the Borrower and the UK
Guarantor certifying that each copy document relating to it and delivered
pursuant to clauses (a) (i) to (v) above to which it is a party
is correct, complete and in full force and effect and has not been amended or
superseded as at a date no earlier than the date of this Agreement.


 


(b)           Agent shall have received (i) the Loan
Documents executed by each Credit Party and the other parties thereto, (ii) executed
copies of the Term Loan Documents and (iii) a completed Borrowing
Certificate for the Initial Advance executed by Borrower;


 





















 


(c)           Agent shall have received evidence (i) of
repayment in full and termination of all liabilities and obligations of the
Credit Parties to The Royal Bank of Scotland plc and all related documents,
agreements and instruments and of all Liens, (ii) of release and
termination of, or Agent’s authority to release and terminate, any and all
Liens in, on, against or with respect to any of the Collateral, other than
Permitted Liens, and (iii) that all prior lockbox and blocked account
arrangements are terminated;


 


(d)           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 Term
Loan Documents and the Related Documents (including, but not limited to, those
relating to corporate and capital structures of each Credit Party);


 


(e)           Agent shall have received (i) the
written legal opinion of counsel to the Agent with respect to the Loan
Documents, and (ii) a certificate executed by an Responsible Officer of
Borrower, which contains a representation and warranty by Borrower as of the
Closing Date that the conditions contained in this Agreement have been
satisfied;


 


(f)            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;


 


(g)           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;


 


(h)           Agent shall have received (or shall receive
simultaneously with the funding of the Initial Advance, as applicable) all
fees, charges and expenses due and payable to Agent and Lenders on or prior to
the Closing Date pursuant to the Loan Documents;


 


(i)            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;


 


(j)            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;


 





















 


(k)           There shall be no event of default under a
Material Contract as of the Closing Date;


 


(l)            no Material Adverse Effect shall have
occurred since June 30, 2005 and Agent shall have received the audited
financial statements of Evolving Systems and its Consolidated Subsidiaries for
the fiscal year ended December 31, 2004 and the unaudited financial
statements Evolving Systems and its Consolidated Subsidiaries on a
consolidated, consolidating and pro-forma basis for the eight (8)-month period
ending and as of August 31, 2005;


 


(m)          Agent shall have received evidence that (i) consolidated
EBITDA of Evolving Systems (calculated, for purposes of this subsection 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);


 


(n)           Agent shall have received a completed
Borrowing Base Certificate setting forth the Borrowing Base as of a date not
more than thirty (30) days prior to the Closing Date, and not more than
$2,000,000 in Revolving Loans shall be advanced on the Closing Date, and, after
the funding of the any Loans on the Closing Date;


 


(o)           Agent shall have received evidence that all
Shareholder Blocking Rights, if any, have been waived pursuant to an agreement,
in form and substance satisfactory to Agent in its Permitted Discretion, by
such applicable shareholders;


 


(p)           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;


 


(q)           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, marketable securities
and Availability under the Revolving Facility;


 


(r)            The Term Loan shall be drawn down in full
simultaneously with or prior to any Loans under this Agreement; and


 


(s)           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.


 





















 


Exhibit E


 


Form of Borrowing Base Certificate


 


BORROWING
CERTIFICATE


 


DATED AS OF                ,
2005


 


Evolving Systems Limited (“Borrower”), by the undersigned duly authorized officer(s),
hereby certify to Agent and Lenders, in accordance with the Revolving Facility
Agreement dated as of October     , 2005, between
Borrower, certain of its Affiliates, CapitalSource Finance LLC, as a Lender and
as Agent, and certain other Lenders party thereto from time to time (as
amended, supplemented or modified from time to time, the “Loan
Agreement;” all capitalized terms not defined herein have the
meanings given them in the Loan Agreement), and other Loan Documents that the
following information is true and accurate in all respects and determined in
accordance with the Loan Agreement and GAAP:


 


Evolving
Systems


 


Borrowing
Base Certificate


[Date]


 


Availability


 


	
  Aggregate Borrowing Availability

  	
   

  	
   

  	
   

  
	
  Senior
  Leverage Ratio

  	
   

  	
   

  	
   

  
	
  Senior Debt

  	
   

  	
   

  	
   

  
	
  UK Revolving
  Loan

  	
   

  	
   

  	
   

  
	
  Letter of
  Credit

  	
   

  	
   

  	
   

  
	
  US Term Loan

  	
   

  	
   

  	
   

  
	
  Total Senior
  Debt

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Most Recent
  EBITDA

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrowing
  Base Multiple

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Maximum
  Senior Leverage

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Leverage
  Based Availability

  	
   

  	
   

  	
   

  
	
  UK Revolving
  Loan Cap

  	
   

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Availability Cap

  	
   

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  UK
  Revolving Loan

  	
   

  	
  —

  	
   

  
	
  LC’s

  	
   

  	
  —

  	
   

  
	
  Reserves

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Remaining
  Availability

  	
   

  	
  4,500,000

  	
   

  



 


Revolving Loan


 


	
  Beginning Balance

  	
   

  	
   

  	
   

  
	
  - Cash (Checks/ACH)

  	
   

  	
  —

  	
   

  
	
  - Cash (Wire)

  	
   

  	
  —

  	
   

  
	
  (+/-) Adjustments

  	
   

  	
  —

  	
   

  
	
  + Advance Request

  	
   

  	
  —

  	
   

  
	
  Adjusted Balance

  	
   

  	
  —

  	
   

  



 





















 


	
  Prepared By

  	
   

  
	
  Title

  	
  Date

  
	
   

  	
   

  
	
  Approved By

  	
   

  
	
  Title

  	
  Date

  



 


IN WITNESS WHEREOF, the undersigned has
caused this certificate to be executed as of the day first written above.


 


	
   

  	
  Evolving
  Systems Ltd

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					



 


[SIGNATURE PAGE TO BORROWING BASE
CERTIFICATE]


 





















 


APPENDIX A


 


DEFINITIONS


 


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


 


	
  “Agent”

  	
   

  	
  Preamble

  
	
  “Agreement”

  	
   

  	
  Preamble

  
	
  “Borrower”

  	
   

  	
  Preamble

  
	
  “Borrowing Date”

  	
   

  	
  2.3

  
	
  “Capital Expenditure Limitation”

  	
   

  	
  Exhibit B-1

  
	
  “Capital Expenditures

  	
   

  	
  Exhibit B-1

  
	
  “CapitalSource”

  	
   

  	
  Preamble

  
	
  “Confidential Information”

  	
   

  	
  12.12

  
	
  “EBITDA”

  	
   

  	
  Exhibit B-1

  
	
  “Documentary Letter of Credit”

  	
   

  	
  Appendix B

  
	
  “Dispute”

  	
   

  	
  12.2

  
	
  “Event of Default”

  	
   

  	
  VIII

  
	
  “Fixed Charge Coverage Ratio”

  	
   

  	
  Exhibit B-1

  
	
  “Indemnified Persons”

  	
   

  	
  12.6

  
	
  “Initial Advance”

  	
   

  	
  4.1

  
	
  “Insured Event”

  	
   

  	
  12.7

  
	
  “Interest Settlement Date”

  	
   

  	
  11.4(a)(iii)

  
	
  “Investments”

  	
   

  	
  7.4

  
	
  “L/C Undertaking”

  	
   

  	
  Appendix B

  
	
  “Letter of Credit”

  	
   

  	
  Appendix B

  
	
  “Letter of Credit Fees”

  	
   

  	
  3.3

  
	
  “Leverage Ratio”

  	
   

  	
  Exhibit D

  
	
  “Management Fee”

  	
   

  	
  3.2

  
	
  “Necessary Intellectual Property”

  	
   

  	
  5.11

  
	
  “Non-U.S. Lender

  	
   

  	
  13.1(i)

  
	
  “Other Taxes”

  	
   

  	
  13.1(b)

  
	
  “Participant”

  	
   

  	
  12.4(b)

  
	
  “Permitted Indebtedness”

  	
   

  	
  7.2

  
	
  “Permitted Liens”

  	
   

  	
  7.3

  
	
  “Receipt”

  	
   

  	
  12.8

  
	
  “Register”

  	
   

  	
  2.2

  
	
  “Restricted Payments”

  	
   

  	
  7.5

  
	
  “Settlement Date”

  	
   

  	
  11.5(a)(ii)

  
	
  “Standby Letter of Credit”

  	
   

  	
  Appendix B

  
	
  “Standby Letter of Credit Application”

  	
   

  	
  Appendix B

  
	
  “Standby Letter of Credit Fee”

  	
   

  	
  3.3

  
	
  “Taxes”

  	
   

  	
  13.1(a)

  
	
  “Transferee”

  	
   

  	
  12.4(a)

  
	
  “UK Witholding Tax Deduction”

  	
   

  	
  13.1(f)

  
	
  “UK Guarantor”

  	
   

  	
  Preamble

  



 


1





















 


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


 


“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.


 


“Act” means the Companies Act 1985.


 


“Advance” shall mean any borrowing under the Revolving Facility.


 


“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
10 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.


 


“Aggregate Borrowing Availability”
shall mean, at any time, the Borrowing Base then in effect less any Letter of
Credit Usage then in effect.


 


“an amount equal to” shall mean, where a provision of this
agreement requires that an amount in any other currency must be converted into
an equivalent amount in Dollars, such amount converted into Dollars at the rate
of exchange of the Agent for that currency on the day the provision requires
the amount to be converted.  For purposes
of covenant compliance, such amount shall be determined only once, and only as
of the date of the transaction resulting in the need to determine such amount
(or, in the case of any sale, lease, transfer, conveyance, assignment or
disposal of Property or any interest therein, if earlier, the date a binding
commitment to make such sale, lease, transfer, conveyance, assignment or
disposal is entered into).


 


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


 


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


 


“Availability” shall mean, at any time
of determination, the amount by which the lesser of (A) the Facility Cap
in effect at such time


 


2





















 


less any letter of Credit Usage
in effect at such time and (B) the Aggregate Borrowing Availability in
effect at such time, exceeds the outstanding principal amount of all Advances
under the Revolving Facility then outstanding.


 


“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.


 


“Borrowing Base” shall
mean the value equal to (A) for any period ending prior to delivery of the
financial statements for the quarter ended December 31, 2005 pursuant to Section 6.1(b),
annualized EBITDA of the Credit Parties and their Subsidiaries on a
consolidated basis, without duplication, for the three-fiscal-quarter-period
ended September 30, 2005 or (B) for any period ending
after December 31, 2005, annualized EBITDA for the most recently concluded
two-fiscal-quarter-period for which financial statements have been delivered
pursuant to Section 6.1(b); multiplied by (B) the Borrowing Base
Multiple, minus (C) Senior Debt calculated as of the close of the most
recently concluded fiscal quarter for which financial statements have been
delivered pursuant to Section 6.1(b).


 


“Borrowing Base Certificate”
shall mean a Borrowing Base Certificate substantially in the form of Exhibit E
hereto.


 


“Borrowing Certificate” shall mean a Borrowing Certificate
substantially in the form of Exhibit A hereto.


 


“Borrowing Base Multiple” shall mean:


 


	
  For the period from November 14, 2005
  through and including November 14, 2006

  	
   

  	
  2.50

  	
   

  
	
  For the period after November 14, 2006
  through and including November 14, 2007

  	
   

  	
  2.25

  	
   

  
	
  For the period after November 14, 2007
  through and including November 14, 2008

  	
   

  	
  2.00

  	
   

  
	
  For the period after November 14, 2008
  and thereafter

  	
   

  	
  1.75

  	
   

  



 


“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.


 


“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.


 


3





















 


“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.


 


“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


 


4





















 


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 owns or controls such Capital Stock as of the Closing
Date;


 


(v)           Stephen
K. Gartside, Jr. ceases to be employed as Chief Executive Officer of Evolving Systems 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 and 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.


 


“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
Initial Advance 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 the amount in
Dollars of the Commitment to fund the Loans for each Lender set out in Schedule A
hereto or in the most recent Lender Addition Agreement relating to such Lender,
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.


 


5





















 


“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 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 the Borrower, the UK Guarantor, the Guarantors pursuant to the US
Guarantee and each Subsidiary of Evolving Systems (other than Borrower) that
becomes a Credit Party pursuant to Section 6.7(c).


 


“Credit Parties” shall mean the Borrower, the UK Guarantor, the Guarantors pursuant to the US
Guarantee and each Subsidiary of Evolving Systems (other than Borrower) that
becomes a Credit Party pursuant to Section 6.7(c).


 


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


 


“Debenture” means the debenture dated on or about the date
hereof between certain of the Credit Parties and the Agent.


 


“Debtor Relief Law” shall mean, collectively, as to Evolving
Systems and all of its U.S. Subsidiaries, 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 and, with respect to Borrower and U.K.
Guarantor the Insolvency Act 1986.


 


6





















 


“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 the Applicable Margin in effect
from time to time, 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 the
Applicable Margin in effect from time to time with respect to Revolving
Advances, plus the Applicable Default Margin.


 


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


 


“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 (a) with respect to each
Credit Party other than Borrower and UK Guarantor, 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 Substance Control Act, the Clean Air
Act, the Clean Water Act, any other “Superfund” or “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.


 


(b)           with
respect to the Borrower and UK Guarantor, collectively, any applicable law or
regulation which relates to:


 


(c) the pollution or protection of the
environment;


 


(d) harm to or the protection of human health;


 


(e) the conditions of the workplace; or


 


(f) any emission or substance capable of
causing harm to any living organism or the environment.


 


“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


 


7





















 


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 States 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.


 


“Evolving Systems” means Evolving Systems, Inc, a Delaware
Corporation.


 


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


 


“Facility Cap” shall mean, initially, $4,500,000, as reduced from time to time in accordance with the terms of
this Agreement.


 


“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 U.S. 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.


 


“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.


 


“Guarantee” shall mean any guaranty executed by a Guarantor to
secure any of the Obligations, including, without limitation, the guarantee
effectuated by Article XIV of this Agreement and the US Guarantee.


 


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


 


“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.


 


8





















 


“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.


 


“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.


 


“Intermediate Holdco” shall mean Evolving Systems Holdings, Inc.


 


9





















 


“Inventory”
shall mean all “inventory” of the Borrower (or, if referring to another Person,
of such other Person), now owned or hereafter acquired, and all documents of
title or other documents representing any of the foregoing, and all collateral
security and guaranties of any kind, now or hereafter in existence, given by
any Person with respect to any of the foregoing.


 


“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, provided that references to Lenders herein
shall only apply to Lenders in their capacity as a Lender under this Agreement
and the Loan Documents and not in their capacity as a lender under the Term
Loan Documents.


 


“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 the Commitments, Loans 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.


 


“Letter of Credit Usage” shall mean, as of any date of
determination, the sum, without duplication, of (i) the aggregate undrawn
amount of all outstanding Letters of Credit, plus (ii) 100% of the amount
of outstanding time drafts accepted by an Underlying Issuer as a result of


 


10





















 


drawings under Underlying Letters of Credit,
plus (iii) the aggregate unreimbursed amount of all drawn Letters of
Credit, in each case as of such date of determination.


 


L/C Disbursement” shall mean any payment by the L/C Issuer
pursuant to a Letter of Credit.


 


“L/C Issuer” shall mean a national banking association, or any
Lender that, at the request of Agent, agrees, in such Lender’s sole discretion,
to become an L/C Issuer for purposes of issuing Letters of Credit or L/C
Undertakings pursuant to Section 2.3.


 


“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 11:00a.m. (London time) 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) prior
to indefeasible payment in full of the Obligations as defined in and under the
Term Loan Agreement 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 cancelled without at least thirty (30) Business
Days’ prior written notice to Agent.


 


“Loan” or “Loans” shall mean, individually or
collectively, respectively, the Advances under the Revolving Facility.


 


“Loan Documents” shall mean, collectively, this Agreement, the
Notes, if any, the Security Documents, all Borrowing Certificates, 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 a Credit Party in
connection with any of the foregoing or the Loans, in each case as the same may
be amended, modified or supplemented from time to time.


 


“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:


 


11





















 


(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
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 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 an amount equal to $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:


 


(a)           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


 


(b)           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 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


 


12





















 


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 Documents 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 and/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.


 


“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


 


13





















 


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 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.


 


“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 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 Loans outstanding and such Lender’s Commitments by (ii) the
aggregate amount of all Lenders’ share of the Loans outstanding and all Lenders’
Commitments; in any case above, 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 or, for Borrower or UK Guarantor, a successful application being made for
the listing of any part of its Capital Stock on a recognized stock exchange or
the sale or issue by way of floatation or public offering.


 


“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.


 


14





















 


“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 Loans for any Lender or any Person described in clause (a) above.


 


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


 


“Relevant Jurisdiction” means, in relation to a Credit Party:


 


(i)            its jurisdiction of
incorporation;


 


(ii)           any jurisdiction where
any asset subject to or intended to be subject to the Security Documents
governed by English law to be created by it is situated; and


 


(iii)          the jurisdiction whose
laws govern the perfection of any of the Security Documents governed by English
law entered into by it.


 


“Requisite Lenders” shall mean at any time Lenders then holding
more than fifty percent (50%) of the sum of the Commitments then in
effect.  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, 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, or any other officer having substantially the same
authority and responsibility.


 


“Revolving Facility” shall have the meaning assigned to such
term in the recitals of this Agreement.


 


“Revolving Note” shall mean a Revolving Note and any additional
promissory note payable to the order of a Lender executed by Borrower
evidencing the Revolving Facility and Advances hereunder, together with any
promissory note issued in substitution thereof or replacement therefor, in each
case as the same may be amended, modified, divided, split, supplemented and/or
restated from time to time.


 


“Security Account” has the meaning given to it in the Debenture
for any accounts maintained in England or Wales.


 


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


 


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“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 Debenture, the Guarantees, any Mortgages, the Intellectual
Property Security Agreements, all Account Control Agreements, all Landlord
Waivers and Consents 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, some Credit Parties, 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 Evolving Systems 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


 


16





















 


Lenders, including, without limitation, the
unsecured Indebtedness of Evolving System 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 acknowledgement 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.


 


“Taxes Act” means the Income and Corporate Taxes Act 1988.


 


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


 


“Term Borrower” shall mean Evolving Systems, Inc., a
Delaware corporation and Telecom Software Enterprises, LLC, a Colorado limited
liability company, each as a “Borrower” under the Term Loan Agreement.


 


“Term Lenders” shall mean Lenders as defined in the Term Loan
Agreement.


 


“Term Loan” shall mean the term loan made by Term Lenders to
Borrower on the Closing Date pursuant to the Term Loan Agreement, and all
Obligations related thereto.


 


“Term Loan Agreement” shall mean the Credit Agreement, dated the
date hereof by and among Evolving Systems, Telecom Software Enterprises, LLC,
Evolving Systems Holdings, Inc. and CapitalSource Finance LLC.


 


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


 


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


 


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“Treaty Lender” means a Lender which is beneficially entitled to
interest payable to such Lender under the Revolving Facility and (i) is
treated as a resident of a Treaty State for the purposes of a Treaty, (ii) does
not carry on a trade or business in the United Kingdom through a permanent
establishment with which such Lender’s participation in this Agreement is
effectively connected or to which payments under this Agreement are
attributable; and (iii) is, pursuant to the terms of the relevant Treaty,
entitled to full exemption from or repayment of United Kingdom tax in respect
of interest payable by Borrower under the Revolving Facility.


 


“Treaty State” means a jurisdiction having a double taxation
agreement (a “Treaty”) with the United Kingdom that makes provision for
exemption from tax imposed by the United Kingdom on interest.


 


“TSE Contingent Obligations” shall mean the Deferred Payment
obligations to the Sellers (as defined in Section 1.4 of 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.


 


“UK Guarantor” shall mean Evolving Systems Holdings Ltd and each
subsidiary of such company incorporated under the laws of England and Wales
that subsequently becomes a Credit Party under this Agreement.


 


“Underlying
Issuer” shall mean a third Person that is the beneficiary of an L/C
Undertaking and has issued a letter of credit at the request of the L/C Issuer
for the benefit of Borrower.


 


“Underlying
Letter of Credit” shall mean a letter of credit that has been issued by an
Underlying Issuer.


 


“US Guarantee” shall mean the guarantee in favor of the Lender
Parties with respect to the Obligations dated on or about the date hereof and
given by Evolving Systems Inc, Telecom Software Enterprises LLC and
Intermediate Holdco.


 


“U.S. Subsidiaries” 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.


 


“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.


 


18





















 


Appendix B


 


Letters of Credit


 


(a)           Subject to the terms and conditions of this
Agreement, Agent agrees to cause the L/C Issuer from time to time during the
Term to issue standby letters of credit or documentary letters of credit for
the account of Borrower (each standby letter of credit or documentary letter of
credit, as applicable, a “Letter of Credit”) or to purchase participations or
execute indemnities or reimbursement obligations (each such undertaking, an “L/C
Undertaking”) with respect to documentary letters of credit which comply with
the provisions of this Appendix B issued by an Underlying Issuer for the
account of Borrower (each Letter of Credit or L/C Undertaking, as the context
requires, constituting or relating to a documentary letter of credit is
referred to in this Agreement as a “Documentary Letter of Credit” and each
Letter of Credit or L/C Undertaking, as the context requires, constituting or
relating to a standby letter of credit is referred to in this Agreement as a “Standby
Letter of Credit”); provided, however, that the L/C Issuer will
not be required to issue, purchase or execute a requested Documentary Letter of
Credit or a requested Standby Letter of Credit if any of the following would
result after giving effect thereto:  (i) the
Letter of Credit Usage would exceed the Facility Cap minus the amount of
Advances then outstanding or (ii) the aggregate face amount of all Standby
Letters of Credit and Documentary Letters of Credit then outstanding would
exceed $500,000.  If L/C Issuer is
obligated to advance funds under a Documentary Letter of Credit or Standby
Letter of Credit, Borrower immediately shall reimburse such L/C Disbursement to
L/C Issuer by paying to Agent an amount equal to such L/C Disbursement not
later than 1:00 p.m. (New York City time) on the date that such L/C
Disbursement is made, if Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 12:00 p.m. (New York City time)
on such date, or, if such notice has not been received by Borrower prior to
such time on such date, then not later than 1:00 p.m. (New York City
time), on the first Business Day that Borrower has such notice prior to 12:00 p.m.
(New York City time), and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the Applicable Rate for
Advances.  To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrower’s obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance.  The portion of the
face amount of the Documentary Letters of Credit and Standby Letters of Credit
that has not been drawn upon shall not bear interest.


 


(b)           Borrower may from time to time upon notice
not later than (i) 12:00 noon (New York City time), at least one (1) Business
Day in advance, request Agent and L/C Issuer to assist Borrower in establishing
or opening a Standby Letter of Credit by delivering to L/C Issuer with a copy
to Agent, at the Payment Office, the L/C Issuer’s standard form of standby
letter of credit application (with such changes thereto as Borrower, Agent and
L/C Issuer may agree) (the “Standby Letter of Credit Application”) completed to
the satisfaction of Agent and the L/C Issuer (each in the exercise of its
Permitted Discretion), and such other certificates, documents and other papers
and information as Agent or L/C Issuer may reasonably request, and (ii) 12:00
noon (New York City time) at least one (1) Business Day in advance,
request Agent and L/C Issuer to assist Borrower in establishing a Documentary
Letter of Credit by delivering to L/C Issuer, with a copy to Agent, at the
Payment Office, the L/C Issuer’s standard form of documentary letter of credit
application (each “Documentary Letter of Credit Application”)


 


1





















 


completed to
the satisfaction of the Agent and L/C Issuer (in the exercise of its Permitted
Discretion), and such other certificates, documents and other papers and
information as Agent or L/C Issuer may reasonably request.  If requested by Agent or L/C Issuer, Borrower
also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking.  Borrower acknowledges that, unless L/C Issuer
otherwise agree, the issuance of any Letter of Credit shall occur no sooner
than three (3) Business Days following the submission of a Standby Letter
of Credit Application or Documentary Letter of Credit Application, as the case
may be, to, and to the satisfaction of Agent and the L/C Issuer (each in the
exercise of its Permitted Discretion).


 


(c)           Each Documentary Letter of Credit and each
Standby Letter of Credit (and, in each case, each corresponding Underlying
Letter of Credit) shall, among other things, (i) be in form and substance
acceptable to the L/C Issuer (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable
in Dollars, (ii) provide for the payment of sight or time drafts when
presented for honour thereunder in accordance with the terms thereof and when
accompanied by the documents described therein, (iii) in the case of a
Documentary Letter of Credit, have an expiry date not later than one hundred
and eighty (180) days after such Documentary Letter of Credit’s date of
issuance and in no event later than 30 days prior to the last day of the Term,
and (iv) in the case of a Standby Letter of Credit, have an expiry date
not later than twelve (12) months after such Standby Letter of Credit’s date of
issuance and in no event later than 30 days prior to the last day of the
Term.  Each Standby Letter of Credit
Application and each Standby Letter of Credit shall be subject to the
International Standby Practices (ISP98) issued by the Institute for
International Banking Law and Practice, Inc., and any amendments or
revision thereof.


 


(d)           In connection with the issuance of any
Letter of Credit, Borrower shall indemnify, save and hold Agent, each Lender
and each L/C Issuer harmless from any loss, cost, expense or liability,
including, without limitation, payments made by Agent, any Lender or any L/C
Issuer, and reasonable out-of-pocket expenses and reasonable attorneys’ fees
incurred by Agent, any Lender or any L/C Issuer arising out of, or in connection
with, any Letter of Credit to be issued for the account of Borrower, except for
any such losses, costs, expenses or liabilities arising out of Agent’s, such
Lender’s or such L/C Issuer’s gross negligence or willful misconduct.  Borrower shall be bound by the L/C Issuer’s
regulations and reasonable good faith interpretations of any Letter of Credit
issued or created for Borrower’s account, although this interpretation may be
different from Borrower’s own.  Neither
Agent nor any Lender, any L/C Issuer, nor any of its correspondents shall be
liable for any error, negligence, or mistakes, whether of omission or commission,
in following Borrower’s instructions or those contained in any Letter of Credit
or of any modifications, amendments or supplements thereto or in issuing or
paying any Letter of Credit, except for, and solely to the extent of, Agent’s,
any Lender’s, such L/C Issuer’s or such correspondents’ gross negligence or
wilful misconduct.


 


(e)           Borrower shall authorize and direct each
Underlying Issuer to name Borrower as the “Account Party” therein and to accept
and rely upon the L/C Issuer’s instructions and agreements with respect to all
matters arising in connection with the documentary letters of credit issued by
it and the applications therefor.


 


2





















 


(f)            In connection with all Documentary Letters
of Credit issued or caused to be issued by the L/C Issuer under this Agreement,
Borrower hereby appoints Agent, L/C Issuer and each Underlying Issuer, or the
respective designee(s) of any of them, as its attorney, with full power and
authority, after the occurrence and during the continuance of an Event of
Default, and in each case with respect to the Property shipped under such
Documentary Letter of Credit, and any documents, instruments or agreements
under or in connection with such Documentary Letter of Credit for such Property
(i) to sign and/or endorse Borrower’s name upon any warehouse or other
receipts or any letter of credit applications; (ii) to sign Borrower’s
name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department (“Customs”) in the name of
Borrower, L/C Issuer, Underlying Issuer, Agent or Agent’s, L/C Issuer’s or
Underlying Issuer’s designee, and to sign and deliver to Customs officials
powers of attorney in the name of Borrower for such purpose; (iv) to
complete in the name of Agent, L/C Issuer, Underlying Issuer or Agent’s, L/C
Issuer’s or Underlying Issuer’s designee, any order, sale or transaction,
obtain the necessary documents in connection therewith, and collect the
proceeds thereof; (v) to clear and resolve any questions of non-compliance
of documents; (vi) to give any instructions as to acceptance or rejection
of any documents or goods; (vii) to execute any and all applications for
steamship or airways guarantees, indemnities or delivery orders; (viii) to
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and (ix) to agree
to any amendments, renewals, extensions, modifications, changes or cancellation
of any of the terms or conditions of any of the applications, Documentary
Letters of Credit, drafts or acceptances; all in Agent’s, L/C Issuer’s or
Underlying Issuer’s sole name, and the L/C Issuer shall be entitled to comply
with and honour any and all such documents or instruments executed by or
received solely from Agent, all without notice to or consent from
Borrower.  Agent, L/C Issuer, Underlying
Issuer and their agents or attorneys will not be liable for any acts or
omissions or for any error of judgment or mistakes of fact or law, except gross
negligence or wilful misconduct.  This
power, being coupled with an interest, may only be exercised by Agent or L/C
Issuer if an Event of Default has occurred and is continuing and is irrevocable
as long as any Documentary Letters of Credit remain outstanding.  Borrower hereby authorizes and directs any
Underlying Issuer to deliver to the L/C Issuer all instruments, documents, and
such other writings and property received by such Underlying Issuer pursuant to
such Underlying Letters of Credit and to accept and rely upon the L/C Issuer’s
instructions with respect to all matters arising in connection with such
Underlying Letter of Credit and the related application.


 


(g)           Except as expressly provided for herein,
neither Agent, L/C Issuer, any Lender nor any Underlying Issuer shall be
responsible for: the existence, character, quality, quantity, condition,
packing, value or delivery of the goods purporting to be represented by any
documents; any differences or variation in the character, quality, quantity,
condition, packing, value or delivery of the goods from that expressed in the
documents; the validity, sufficiency or genuineness of any documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent, or forged; the time, place,
manner or order in which shipment is made; partial or incomplete shipment, or
failure or omission to ship any or all of the goods referred to in the
Documentary Letters of Credit or documents; any deviation from instructions,
delay, default, or fraud by the shipper and/or any one else in connection with
the Collateral or the shipping thereof; or any breach of contract between the
shipper or vendors and Borrower.


 


3





















 


(h)           Borrower must ensure that any necessary
import, export or other licenses or certificates for the import or handling of
the Collateral shipped under a Documentary Letter of Credit will have been
promptly procured; all foreign and domestic governmental laws and regulations
in regard to the shipment and importation of such Collateral or the financing
thereof will have been promptly and fully complied with in all material
respects; and any certificates in that regard that Agent and/or L/C Issuer may
at any time request will be promptly furnished. 
Borrower warrants and represents that all shipments made under any such
Documentary Letters of Credit are in accordance in all material respects with
the governmental laws and regulations of the countries in which the shipments
originate and terminate, and are not prohibited by any such law and
regulations.  Borrower assumes all risk,
liability and responsibility for, and agrees to pay and discharge all present
and future local, state, federal or foreign taxes, duties, or levies in respect
of such Collateral and/or the applicable Documentary Letter of Credit.  Any embargo, restriction, laws, customs or
regulations of any country, state, city or other political subdivision where
such Collateral is or may be located or wherein payments are to be made or
wherein drafts may be drawn, negotiated, accepted, or paid shall be solely at Borrower’s
risk, liability and responsibility.


 


(i)            Each Lender shall, to the extent of its Pro
Rata Share of the aggregate amount of all disbursements made with respect to
the Letters of Credit, be deemed to have irrevocably purchased an undivided
participation in each L/C Disbursement and each Advance made as a consequence
of such disbursement.  If at the time a
L/C Disbursement is made the unpaid balance of Advances exceeds or would
exceed, with the making of such L/C Disbursement, the Facility Cap and if such
L/C Disbursement is not reimbursed by Borrower within one (1) Business
Day, then Agent shall promptly notify each Lender, and upon Agent’s demand each
Lender shall pay to Agent such Lender’s Pro Rata Share of such unreimbursed
disbursement together with such Lender’s Pro Rata Share of Agent’s unreimbursed
costs and expenses relating to such unreimbursed disbursement.  Upon receipt by Agent of a repayment from
Borrower of any amount disbursed by Agent for which Agent had already been
reimbursed by the Lenders, Agent shall deliver to each of the Lenders that
Lender’s Pro Rata Share of such repayment. 
Each Lender’s participation commitment shall continue until the last to
occur of any of the following events: (i) L/C Issuer ceases to be
obligated to issue or to cause the issuance of Letters of Credit hereunder; (ii) no
Letter of Credit remains outstanding and uncancelled; or (iii) all Persons
(other than Borrower) have been fully reimbursed for all payments made under or
relating to all Letters of Credit.


 


(j)            The obligations of a Lender to make
payments to Agent for the account of Agent or the L/C Issuer with respect to a
Letter of Credit shall be irrevocable, without any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without limitation, any of
the following circumstances:


 


(i)            any
lack of validity or enforceability of this Agreement or any of the Loan
Documents;


 


(ii)           the
existence of any claim, setoff, defense or other right that Borrower may have
at any time against a beneficiary named in such Letter of Credit or any
transferee of such Letter of Credit (or any Person for which any such
transferee may


 


4





















 


be acting), Agent, L/C Issuer,
any Lender, or any other person, whether in connection with this Agreement,
such Letter of Credit, the transactions contemplated herein or any related
transactions (including any underlying transactions between Borrower or any
other party and the beneficiary named in such Letter of Credit);


 


(iii)          any
draft, certificate or any other document presented under such Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;


 


(iv)          the
surrender or impairment of any security for the performance or observance of
any of the terms of this Agreement or any of the Loan Documents;


 


(v)           any
failure by Agent or the L/C Issuer to provide any notices required pursuant to
this Agreement relating to such Letter of Credit;


 


(vi)          any
payment by the L/C Issuer under any of the Letters of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit (if, in the good faith opinion of the L/C Issuer, such
prepayment is deemed to be appropriate); or


 


(vii)         the
occurrence and continuation of any Default or Event of Default;


 


provided, however, that after paying in
full its reimbursement obligation hereunder, nothing herein shall adversely
affect the right of Borrower or any Lender, as the case may be, to commence any
proceeding against such L/C Issuer for any wrongful disbursement made by such
L/C Issuer under a Letter of Credit as a result or solely to the extent of acts
or omissions constituting gross negligence or wilful misconduct on the part of
such L/C Issuer;


 


(k)           If by reason of (i) any change in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application thereof by any Governmental Authority, or (ii) compliance
by any Underlying Issuer or Lender with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal Reserve Board as
from time to time in effect (and any successor thereto):


 


(1) any reserve,
deposit, or similar requirement is or shall be imposed or modified in respect
of any Letter of Credit issued hereunder, or


 


(2) there shall
be imposed on any Underlying Issuer, Lender or Agent any other condition
regarding any Letter of Credit issued pursuant hereto;


 


and the result of the foregoing is to increase, directly or indirectly,
the cost to any Underlying Issuer, Lender or Agent of issuing, making,
guaranteeing, or maintaining any Letter of Credit or to reduce the amount
receivable in respect thereof by any Underlying Issuer, Lender or Agent, then,
and in any such case, Agent may, at any time within a reasonable period after
the additional cost is incurred or the amount received is reduced, notify
Borrower, and Borrower shall pay on demand such amounts as necessary to
compensate Agent and Lenders for such additional cost or


 


5





















 


reduced receipt, together with interest on such amount from the date of
such demand until payment in full thereof at the Applicable Rate for
Advances.  The determination by Agent of
any amount due pursuant to this Section (k), as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.


 


(l)            Borrower acknowledges and agrees that
certain of the Documentary Letters of Credit may provide for the presentation
of time drafts to the Underlying Issuer. 
If an Underlying Issuer accepts such a time draft that is presented
under and in accordance with an Underlying Letter of Credit, it is acknowledged
and agreed that (i) the Documentary Letter of Credit will require the L/C
Issuer to reimburse the Underlying Issuer for amounts paid on account of such
time draft on or after the maturity date thereof, (ii) the pricing
provisions hereof (including Section 3.3) shall continue to apply, until
payment of such time draft on or after the maturity date thereof, as if the
Underlying Letter of Credit were still outstanding, and (iii) on the date
on which L/C Issuer makes payment to the Underlying Issuer of the amounts paid
on account of such time draft, Borrower promptly shall reimburse such amount to
L/C Issuer as provided in Section (a) above and such amount shall
constitute an L/C Disbursement hereunder.


 


If any
portion of the Letter of Credit Usage, whether or not then due and payable,
remains unpaid or outstanding on the Revolving Loan Maturity Date or such
earlier date as this Agreement may be terminated, Borrower shall:  (A) provide cash collateral therefor in
the manner described in Section 3.3; or (B) cause all such Letters of
Credit and guaranties thereof, if any, to be cancelled and returned; or (C) deliver
a stand-by letter (or letters) of credit in guarantee of such portion of the
Letter of Credit Usage, which stand-by letter (or letters) of credit shall be
of like tenor and duration (plus thirty (30) additional days) as, and in an
amount equal to at least 105% of the aggregate maximum amount then available to
be drawn under, such Letters of Credit to which such outstanding Letter of
Credit Usage relate and shall be issued by a Person, and shall be subject to
such terms and conditions, as are satisfactory to Agent in its Permitted
Discretion.


 


6





















 


SCHEDULE A

Lenders/Commitments


 


	
  Lenders

  	
   

  	
  Revolving
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CSE
  Finance, Inc.

  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: rladd@capitalsource.com

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Wire
  Instructions:

  	
   

  	
   

  	
   

  
	
  Bank:

  	
  Bank of America,
  Baltimore, MD 

  	
   

  	
   

  	
   

  
	
  Account:

  	
  003939396662

  	
   

  	
   

  	
   

  
	
  ABA:

  	
  026009593

  	
   

  	
   

  	
   

  
	
  Account Name:

  	
  CapitalSource
  Funding LLC - CFG 

  	
   

  	
   

  	
   

  
	
  Reference:

  	
  Evolving Systems

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  4,500,000

  	
   

  



 


7