Document:

Exhibit 10.1(g)

 

UNCONDITIONAL
GUARANTY  

(US GUARANTOR)

 

BRIDGE BANK, N.A. (“Lender”) proposes to enter into a loan transaction
with EVOLVING SYSTEMS  LIMITED (“Borrower”),
which is an indirect, Wholly-Owned Subsidiary of the undersigned guarantor (“Guarantor”).  The loan and other credit extensions are
being made by Lender to Borrower pursuant to a Loan Agreement dated as of February 22,
2008 (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced from time to time (the “Agreement”).  Guarantor expects to derive economic benefit
from Lender’s doing so and dealing with Borrower in accordance with the
Agreement and other Loan Documents.   All
terms used without definition in this Guaranty shall have the meaning assigned
to them in the Agreement.  Terms defined
in the California Uniform Commercial Code as in effect from time to time (the “Code”)
and not otherwise defined in this Guaranty or the Agreement shall have the
meanings defined for those terms in the Code. 
With respect to terms defined in more than one article of the Code,
unless otherwise specified such terms will have the meaning specified in Article 9
of the Code.

 

For and in consideration of the loans and other credit
extensions by Lender to Borrower, and acknowledging that Lender would not enter
into the Agreement without the benefit of this Guaranty (“Guaranty”), Guarantor
hereby unconditionally and irrevocably guarantees the prompt and complete
payment and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.

 

NOW, THEREFORE, Guarantor and the Lender agree as
follows:

 

1.             If Borrower does not pay or perform when due any of
the Obligations in strict accordance with the Agreement, Guarantor shall
promptly pay all amounts due thereunder (including, without limitation, all
principal, interest, and fees) and otherwise to proceed to perform the
Obligations.

 

2.             If there is more than one guarantor, the obligations
hereunder are joint and several, and whether or not there is more than one
guarantor, the obligations hereunder are independent of the obligations of
Borrower and any other person or entity, and a separate action or actions may
be brought and prosecuted against Guarantor whether action is brought against
Borrower or whether Borrower be joined in any such action or actions.  Guarantor waives the benefit of any statute
of limitations affecting its liability hereunder or the enforcement thereof, to
the extent permitted by law.  Guarantor’s
liability under this Guaranty is not conditioned or contingent upon the
genuineness, validity, regularity or enforceability of the Agreement.

 

3.             Guarantor authorizes Lender, without notice or demand
to Guarantor and without affecting its liability hereunder, from time to time
in accordance with the applicable provisions of the Agreement and the other
Loan Documents to (a) renew, extend, or otherwise change the terms of the
Agreement or any part thereof; (b) take and hold security for the payment
of this Guaranty or the Agreement, and exchange, enforce, waive and release any
such security; and (c) apply such security and direct the order or manner
of sale thereof as Lender in its sole discretion may determine.

 

4.             Guarantor waives any right to require Lender to (a) proceed
against Borrower, any guarantor or any other person; (b) proceed against
or exhaust any security held from Borrower; or (c) pursue any other remedy
in Lender’s power whatsoever.  Lender
may, at its election, exercise or decline or fail to exercise any right or
remedy it may have against Borrower or any security held by Lender, including
without limitation the right to foreclose upon any such security by judicial or
nonjudicial sale, without affecting or impairing in any way the liability of
Guarantor hereunder.  Guarantor waives
any defense arising by reason of any disability or other defense of Borrower or
by reason of the cessation from any cause whatsoever of the liability of
Borrower other than satisfaction in full of the Obligations.  Guarantor waives any setoff, defense or
counterclaim that Borrower may have against Lender other than satisfaction in
full of the Obligations.  Guarantor
waives any defense arising out of the absence, impairment or loss of any right
of reimbursement or subrogation or any other rights against Borrower.  Until the Obligations have been paid in full,
(other than contingent indemnification Obligations to the extent no claim
giving rise thereto has been asserted), Guarantor shall have no right of subrogation
or reimbursement, contribution or other rights against Borrower arising out or
relating to, this Guaranty or any sums paid by Guarantor hereunder, and
Guarantor waives any right to enforce any remedy that Lender now has or may
hereafter have against Borrower arising out or relating to this Guaranty or any
sums paid by such Guarantor hereunder. 
Guarantor waives all presentments, demands for 

 

 

performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance of this Guaranty and of the existence, creation, or incurring of
new or additional indebtedness. 
Notwithstanding the foregoing, Guarantor does not hereby waive any
notices specifically required in any Loan Document to which Guarantor is a party
but agrees that the failure of Lender to provide any such notices pursuant to
the provisions of any such Loan Document shall not release or diminish
Guarantor’s obligations, liabilities, agreements or duties hereunder, or
otherwise affect this Guaranty in any way. 
Guarantor assumes the responsibility for being and keeping itself
informed of the financial condition of Borrower and of all other circumstances
bearing upon the risk of nonpayment of any indebtedness or nonperformance of
any obligation of Borrower, warrants to Lender that it will keep so informed,
and agrees that absent a request for particular information by Guarantor,
Lender shall not have any duty to advise Guarantor of information known to
Lender regarding such condition or any such circumstances.  Guarantor waives the benefits of California
Civil Code sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and
3433.   The waivers of rights in this Section 4
are made to the extent permitted by applicable law and are made in favor of Lender
only and shall not be deemed a waiver of such rights for the benefit of any
other Person.

 

5.             If Borrower becomes insolvent or is adjudicated
bankrupt or files a petition for reorganization, arrangement, composition or
similar relief under any present or future provision of the United States
Bankruptcy Code or if such a petition is filed against Borrower, and in any
such proceeding some or all of any indebtedness or obligations under the
Agreement are terminated or rejected or any obligation of Borrower is modified
or abrogated, or if Borrower’s obligations are otherwise avoided for any
reason, Guarantor agrees that Guarantor’s liability hereunder shall not thereby
be affected or modified and such liability shall continue in full force and
effect as if no such action or proceeding had occurred.  This Guaranty shall continue to be effective
or be reinstated, as the case may be, if any payment must be returned by Lender
upon the insolvency, bankruptcy or reorganization of Borrower, Guarantor, any
other guarantor, or otherwise, as though such payment had not been made.

 

6.             Until all of the Obligations
(other than contingent indemnification Obligations to the extent no claim
giving rise thereto has been asserted) have been paid in full, any indebtedness
of Borrower now or hereafter held by Guarantor is hereby subordinated to any
indebtedness of Borrower to Lender; provided that so long as no Event of
Default has occurred and is continuing, Guarantor may continue to receive and
retain payments on such obligations and indebtedness provided such payments are
not prohibited under the Agreement. 
During the existence of an Event of Default, such indebtedness of
Borrower to Guarantor shall be collected, enforced and received by Guarantor as
trustee for Lender and, if Lender so requests, be paid over to Lender on
account of the indebtedness of Borrower to Lender but without reducing or
affecting in any manner the liability of Guarantor under the other provisions
of this Guaranty.

 

7.             Guarantor agrees to pay, not later than five Business
Days after written demand therefor, reasonable attorneys’ fees and all other
costs and expenses which may be incurred by Lender in the enforcement of this
Guaranty and any agreements executed by Guarantor in connection with this
Guaranty (including without limitation security agreements).  Lender shall endeavor to provide reasonable
supporting documentation for the amount of any claims under the foregoing
sentence.  No terms or provisions of this
Guaranty may be changed, waived, revoked or amended except by a written
instrument executed by Lender and Guarantor. 
Should any provision of this Guaranty be determined by a court of
competent jurisdiction to be unenforceable, all of the other provisions shall
remain effective.  This Guaranty, together
with any agreements (including without limitation any security agreements or
any pledge agreements) executed by Guarantor in connection with this Guaranty,
embodies the entire agreement among the parties hereto with respect to the
matters set forth herein, and supersedes all prior agreements among the parties
with respect to the matters set forth herein. 
No course of prior dealing among the parties, no usage of trade, and no
parol or extrinsic evidence of any nature shall be used to supplement, modify
or vary any of the terms hereof. There are no conditions to the full
effectiveness of this Guaranty.  Lender
may assign this Guaranty to a permitted assignee of Lender under the Agreement
without in any way affecting Guarantor’s liability under it.  This Guaranty shall inure to the benefit of
Lender and its successors and permitted assigns.  This Guaranty is in addition to the
guaranties of any other guarantors and any and all other guaranties of Borrower’s
indebtedness or liabilities to Lender.

 

8.             Guarantor represents and warrants to Lender that (i) Guarantor
has taken all necessary and appropriate corporate action to authorize the
execution, delivery and performance by Guarantor of this Guaranty and (ii) execution,
delivery and performance of this Guaranty by Guarantor do not conflict with or
result in a breach of or constitute a default under (x) Guarantor’s
organizational documents or (y) agreements to which it is party or by 

 

 

which it is bound, the
effect of which default under this clause (y) would reasonably be expected
to result in, either individually or in the aggregate, a Material Adverse
Effect.

 

9.             So long as any Obligation shall remain unpaid (other
than contingent indemnification Obligations to the extent no claim giving rise
thereto has been asserted) and Bank shall have any commitment to make Credit
Extensions under the Agreement, Guarantor shall do all of the following, except
as otherwise permitted under the Agreement:

 

9.1          Guarantor shall maintain its
existence, remain in good standing in its jurisdiction of organization, and
continue to qualify in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a material adverse effect on the business
operations or condition (financial or otherwise) of Guarantor.  Guarantor shall maintain in force all
licenses, approvals and agreements, the loss of which would reasonably be
expected to have a material adverse effect on its business operations or
condition (financial or otherwise).

 

9.2          Guarantor shall comply in
all material respects with the provisions of its organizational documents, and
shall not amend any such documents in any manner materially adversely affecting
Lender without Lender’s prior written consent, which will not be unreasonably
withheld.  Guarantor shall comply with
all statutes, laws, ordinances, directives, orders, and government rules and
regulations to which it is subject if non-compliance with such laws would
reasonably be expected to materially adversely affect the business operations
or condition (financial or otherwise) of Guarantor.

 

10.          This Guaranty shall be governed by the laws of the
State of California, without regard to conflicts of laws principles.  GUARANTOR WAIVES ANY RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS.  Guarantor submits to the
jurisdiction of the state and federal courts located in Santa Clara County,
California for purposes of this Guaranty and the Agreement.  If the jury waiver in this Section is
for any reason unenforceable, Lender and Guarantor will resolve all disputes by
reference to a referee pursuant to Code of Civil Procedure Section 638 et seq,
sitting without a jury, such referee to be by mutual agreement or, if none, as
selected by the Presiding Judge of the California Superior Court for Santa
Clara County.

 

11.          All payments made by Guarantor hereunder
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any governmental
authority or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding any tax imposed on or
measured by the net income or profits of a bank pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If any Taxes are so levied or imposed,
Guarantor agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Guaranty, after withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein and in the Agreement and
related loan documents.  Notwithstanding
the foregoing provisions of this Section 11, Guarantor shall have the full
benefits and rights afforded to Borrower in Section 12.4 of the Agreement
with respect to any and all payments made by Guarantor under this Guaranty.

 

12.          To secure performance of this Guaranty and any
amounts due under this Guaranty, Guarantor grants Lender a security interest in
all of such Guarantor’s personal property, now owned or hereafter arising,
including accounts, inventory, equipment, general intangibles, intellectual
property, copyrights, patents, trademarks, financial assets, securities,
instruments, deposit accounts, chattel paper, investment property, and the
proceeds thereof (collectively, the “Collateral”).  Guarantor shall not encumber, sell, license
or otherwise dispose of any interest in the Collateral without Lender’s prior
written consent, except
as permitted under that certain Loan and Security Agreement, dated as of February 22,
2008, between Guarantor and Lender, as such agreement may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced from
time to time  

 

 

Guarantor authorizes Lender to file a financing statement, and take
such other actions as Lender deems appropriate to perfect this security
interest.

 

Notwithstanding the
foregoing, the “Collateral” does not include any property that constitutes the
capital stock of a controlled foreign corporation (as defined in the Internal
Revenue Code of 1986, as amended, and the regulations thereunder) in excess of
65% of the voting power of all classes of capital stock of such controlled foreign
corporations entitled to vote.

 

Notwithstanding the
foregoing, the “Collateral” does not include any lease under which Guarantor is
a lessee, license under which Guarantor is a licensee, other contract right,
property right or agreement to which Guarantor is a party, any securities or
other investment property owned by Guarantor that is subject to contractual
prohibitions against or limitations on the transfer or pledging of such
securities or property, or any equipment owned by Guarantor that is subject to
a purchase money Lien or capitalized lease obligation if the contract or other
agreement in which such Lien is granted (or in the documentation for such
capitalized lease obligations) validly prohibits the creation of any other Lien
on such equipment, or any of its rights or interests thereunder if and for so
long as the grant of such security interest shall constitute or result in (i) the
abandonment, invalidation or unenforceability of any right, title or interest
of Guarantor therein or (ii) in a breach or termination pursuant to the
terms of, or a default under, any such lease, license, contract, property
rights, agreement or documentation (other than to the extent that any such term
would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or
9-409 of the Code (or any successor provision or provisions) of any relevant
jurisdiction or any other applicable law or principles of equity); provided,
however, in each such case, consent has not been obtained despite Guarantor’s
commercially reasonable efforts to obtain it; and provided further, that such
security interest shall attach immediately at such time as the condition
causing such abandonment, invalidation, unenforceability, other restriction or
assignment shall be remedied and, to the extent severable, shall attach
immediately to any portion of such lease, license, contract, property right or
agreement that does not result in any of the consequences specified in (i) or
(ii) including, without limitation, any proceeds of such lease, license,
contract, property rights, agreement, securities, other investment property, or
equipment.

 

IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty
as of February 22, 2008.

 

	
   

  	
  EVOLVING SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:  Brian
  R. Ervine

  
	
   

  	
   

  
	
   

  	
  Title: Executive Vice
  President, Chief Financial and 

  
	
   

  	
  Administrative OfficerExhibit 10.1 (h)

 

SUBORDINATION AGREEMENT

 

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

 

INTRODUCTION

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

2

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

3

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

4

 

 

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

 

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

 

2.             Subordination.

 

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

 

2.2          Proceedings.

 

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

 

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

 

 

5

 

 

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

 

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

 

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

 

2.3          Junior Debt Payments.

 

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

 

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

 

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

 

 

6

 

 

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

 

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

 

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

 

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

 

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

 

 

7

 

 

2.4          Restriction on Action by the Junior
Creditors.

 

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

 

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

 

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

 

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

 

 

8

 

 

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

 

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

 

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

 

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

 

2.5          No Liens.

 

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

 

 

9

 

 

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

 

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

 

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

 

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

 

 

10

 

 

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

 

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

 

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

 

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

 

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

 

 

11

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

14

 

Notices shall be addressed
as follows:

 

	
  (a)

  	
  If to the Junior
  Creditors:

  
	
   

  	
   

  
	
   

  	
  Karen
  Singer

  
	
   

  	
   

  
	
   

  	
  c/o Romulus Holdings

  
	
   

  	
  2200 Fletcher Avenue,
  Fifth Floor

  
	
   

  	
  Fort Lee, NJ 07024

  
	
   

  	
   

  
	
   

  	
  with
  copies to:

  
	
   

  	
   

  
	
   

  	
  Andrews
  Kurth LLP

  
	
   

  	
  450
  Lexington Avenue

  
	
   

  	
  New
  York, NY 10017

  
	
   

  	
  Attention:

  	
  Paul
  Silverstein, Esq.

  
	
   

  	
  Fax
  No:

  	
  212-850-2929

  
	
   

  	
   

  
	
   

  	
  Milfam
  II Limited Partnership

  
	
   

  	
  4550
  Gordon Drive

  
	
   

  	
  Naples,
  FL 34102

  
	
   

  	
  Attention:

  	
  Lloyd
  I. Miller, Managing Partner

  
	
   

  	
   

  
	
   

  	
  with
  copies to:

  
	
   

  	
   

  
	
   

  	
  Andrews
  Kurth LLP

  
	
   

  	
  450
  Lexington Avenue

  
	
   

  	
  New
  York, NY 10017

  
	
   

  	
  Attention:

  	
  Paul
  Silverstein, Esq.

  
	
   

  	
  Fax
  No:

  	
  212-850-2929

  
	
   

  	
   

  
	
  (b)

  	
  If to the US Obligors:

  
	
   

  	
   

  
	
   

  	
  Evolving
  Systems, Inc.

  
	
   

  	
  9777 Pyramid Court

  
	
   

  	
  Suite 100

  
	
   

  	
  Englewood, Colorado 80112

  
	
   

  	
  Attention:

  	
  Anita T. Moseley, General
  Counsel

  
	
   

  	
  Facsimile:

  	
  (303) 802-1138

  
	
   

  	
   

  
	
  (c)

  	
  If
  to the Senior Creditor:

  
	
   

  	
   

  
	
   

  	
  Bridge Bank, N.A.

  
	
   

  	
  55 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  
	
   

  	
  Attn: Dan Pistone

  
	
   

  	
  FAX: (408) 423-8520

  

 

15

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

(Signatures appear on the following page.)

 

18

 

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

 

	
   

  	
  JUNIOR CREDITORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KAREN SINGER

  

 

 

 

[Counterpart Signature Page to Subordination
Agreement]

 

 

	
   

  	
  JUNIOR CREDITORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MILFAM II LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

 

[Counterpart Signature Page to Subordination
Agreement]

 

 

	
   

  	
  US OBLIGORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EVOLVING SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Brian R.
  Ervine

  
	
   

  	
  Title:

  	
  Executive
  Vice President and Chief 

  
	
   

  	
   

  	
  Financial
  Officer

  

 

 

 

[Counterpart Signature Page to Subordination
Agreement]

 

 

	
   

  	
  SENIOR CREDITOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIDGE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

 

[Counterpart Signature Page to Subordination
Agreement]

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