Document:

Exhibit 10.1(c)

 

EVOLVING
SYSTEMS LIMITED

 

BRIDGE
BANK, N.A.

 

LOAN
AGREEMENT

 

 

 

 

This LOAN AGREEMENT
is entered into as of February 22, 2008, by and between BRIDGE BANK, N.A. (“Bank”) and EVOLVING
SYSTEMS LIMITED (“Borrower”).

 

RECITALS

 

Borrower wishes to obtain credit from time to time
from Bank, and Bank desires to extend credit to Borrower. This Agreement sets
forth the terms on which Bank will advance credit to Borrower, and Borrower
will repay the amounts owing to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.             DEFINITIONS
AND CONSTRUCTION.

 

1.1          Definitions. As used in this Agreement, the
following terms shall have the following definitions:

 

“Accounts” means, with respect to any Person, all
presently existing and hereafter arising accounts, contract rights, payment
intangibles, and all other forms of obligations owing to such Person arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by such Person,
whether or not earned by performance.

 

“Advance” or “Advances” means a cash advance or cash
advances under the Revolving Facility.

 

“Affiliate” means, with respect to any Person, any
other Person that controls directly or indirectly such Person, any other Person
that controls or is controlled by or is under common control with such Person,
and each of such Person’s senior executive officers and directors. 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

 

“Bank Expenses” means all: reasonable costs or
expenses (including reasonable attorneys’ fees and expenses) incurred in
connection with the preparation, negotiation, administration, and enforcement
of the Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable
attorneys’ fees and expenses incurred in amending, enforcing or defending the
Loan Documents (including fees and expenses of appeal), incurred before, during
and after an Insolvency Proceeding, whether or not suit is brought.

 

“Borrower’s Books” means all of Borrower’s books and
records including: ledgers; records concerning Borrower’s assets or
liabilities, the Collateral, business operations or financial condition; and
all computer programs, or tape files, and the equipment, containing such
information.

 

“Borrowing Base” means, as of any date of
determination, an amount equal to eighty percent (80%) of Eligible Accounts
plus one hundred percent (100%) of Eligible Cash, as determined by Bank with
reference to the most recent Borrowing Base Certificate delivered by Borrower.

 

“Borrowing Base Certificate” means such certificate
executed by Borrower and Parent (as to their respective Eligible Accounts and
Eligible Cash) in the form attached hereto as Exhibit C.

 

“Business Day” means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California or London,
United Kingdom are authorized or required to close.

 

“Capital Expenditures” means 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 required to be treated as capital expenditures
under GAAP.

 

 

1

 

 

“Capital Stock” means (i) with respect to any
Person that is a corporation, any and all shares, interests, participations or
other equivalents (however designated and whether or not voting) of corporate
stock, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership or other equity interests of such Person.

 

“Cash” means unrestricted  cash and cash equivalents.

 

“Change in Control” means (i) a transaction in
which any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of more than 50 percent (50%) of the total
voting power of Parent or (ii) the date a majority of members of the Board
of Directors of Parent is replaced during any 12-month period by directors
whose appointment or election is not endorsed by a majority of the members of
the Board of Directors of Parent before the date of the appointment or election
or (iii) the date any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
the person or group) ownership of stock of Parent possessing 30 percent (30%)
or more of the total voting power of the stock of Parent.

 

“Closing Date” means the date of this Agreement.

 

“Collateral” means collectively, all property,
interests in property, collateral and/or security granted and/or securities
pledged to Bank by Borrower 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.

 

“Contingent Obligation” means, as applied 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, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (a) for the purchase or payment of any such primary
obligation or (b) 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, (iii) 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, (iv) otherwise
to assure or to hold harmless the owner of such primary obligation against loss
in respect thereof, (v) with respect to any letter of credit of such
Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (vi) with respect to any agreement or arrangement designed to
protect such Person against fluctuation in interest rates, currency exchange
rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined 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; provided, however, that such amount shall not in
any event exceed the maximum amount of the obligations under the guarantee or
other support arrangement.

 

“Copyrights” means any and all copyright rights,
applications to register and registrations of the same, and like protections in
works of authorship and derivative work thereof.

 

“Credit Extension” means each Advance or any other
extension of credit by Bank for the benefit of Borrower hereunder.

 

“Credit Parties” means each of Borrower, the UK
Guarantor, the U.S. Guarantor and any other Subsidiary of Parent that becomes a
Credit Party pursuant to Section 6.13 hereof. For the avoidance of doubt,
Evolving Systems GmbH is not a Credit Party.

 

 

2

 

 

“Cross License Agreement” means, collectively, (i) the
Intercompany License Agreement, dated as of October 17, 2005, between
Parent as licensor, and Borrower, as licensee, and (ii) the Intercompany
License Agreement, dated as of October 17, 2005 between Borrower, as
licensor, and Parent, as licensee.

 

“Daily Balance” means the outstanding principal amount
of the Obligations owed at the end of a given day.

 

“Debenture” means the debenture dated on or about the
date hereof between Borrower and Bank.

 

“EBITDA” means 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 and expenses approved by Bank in its reasonable
discretion (but including, without requiring approval of Bank, non-cash charges
related to accounting for employee stock option plans as required by FAS 123R)
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;

 

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

 

                (v)           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.

 

“Eligible Accounts” means, at any time, those Accounts
of Borrower and Parent that arise in the ordinary course of Borrower’s or
Parent’s business that comply in all material respects with all of Borrower’s
and Parent’s representations and warranties to Bank set forth in the Loan
Documents to the extent such provisions are applicable to the Borrower’s or
Parent’s Accounts and shall include both (i) Accounts that create
offsetable deferred revenue and (ii) Accounts with respect to the account
debtors listed on Appendix 1 attached hereto (or any successor of any

 

 

3

 

 

such account debtor);
provided, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank’s reasonable judgment based upon the results of an audit
performed by Bank in accordance with Section 4.1 and upon notification
thereof to Borrower in accordance with the provisions hereof. Unless otherwise agreed to by
Bank, Eligible Accounts shall not include the following:

 

(a)           Accounts that the account debtor has failed to pay
within ninety (90) days of invoice date, other than Qwest, Vodafone Egypt and
Cable & Wireless Panama (or any of their respective successors), which
Accounts shall be included as Eligible Accounts provided that such Accounts are
within one hundred-twenty (120) days of invoice date;

 

(b)           Accounts with respect to an account debtor,
thirty-five percent (35%) of whose Accounts the account debtor has failed to
pay within ninety (90) days of invoice date (or, in the case of Qwest, Vodafone
Egypt and Cable & Wireless Panama, or any of their respective
successors, within one-hundred twenty (120) days of invoice date);

 

(c)           Accounts with respect to which the account debtor is
an officer, employee, or agent of Borrower;

 

(d)           Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional, in each case solely to the extent thereof;

 

(e)           Accounts with respect to which the account debtor is
an Affiliate of Borrower;

 

(f)            Accounts with respect to which the account debtor does
not have its principal place of business in the United States, except Eligible
Foreign Accounts;

 

(g)           Accounts with respect to which the account debtor is
the United States or any department, agency, or instrumentality of the United
States;

 

(h)           Accounts with respect to which Borrower or Parent is
liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower or Parent or for deposits or other property of the account
debtor held by Borrower or Parent, but only to the extent of any amounts owing
to the account debtor against amounts owed to Borrower or Parent, as the case
may be;

 

(i)            Accounts with respect to an account debtor, including
Subsidiaries and Affiliates of such account debtor, whose total obligations to
Borrower or Parent exceed thirty percent (30%) of all Accounts of Borrower and
Parent (other than for AT&T and T-Mobile (and any successor thereof) which
percentage shall be sixty-percent (60%)), to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank;

 

(j)            Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its reasonable discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; provided that so long as adequate post-petition financing is being
provided to such account debtor, post-petition Accounts of such account debtor
may be deemed Eligible Accounts by and to the extent of Bank in its reasonable
discretion;

 

(k)           Retentions and hold-backs;

 

(l)            Bonded Accounts; and

 

(m)          Accounts with respect to Accenture, American
Telecommunication, Inc., Bulgaria Telecom, MTN Nigeria, Vodafone Egypt, Vodafone
Japan, and Wireless Trade (or any of their respective successors), solely to
the extent of the percentage of foreign tax withholding set forth in the chart
in Appendix 1 for

 

 

4

 

 

 

the applicable account
debtor.

 

“Eligible Cash” means (i) Cash of Parent and its
U.S. Subsidiaries and (ii) Cash of Borrower and the other Subsidiaries of
Parent that are incorporated, organized or formed in the United Kingdom.

 

“Eligible Foreign Accounts” means Accounts of Borrower
and Parent with respect to which the account debtor does not have its principal
place of business in the United States and that (i) are supported by one
or more letters of credit in an amount and of a tenor, and issued by a
financial institution, acceptable to Bank, (ii) are owing from an account
debtor identified in Appendix 1 (or any successor of any such account debtor), (iii) are
billed and collected in the United Kingdom and that are the subject of a Lien
in accordance with the Security Documents or (iv) Bank approves on a
case-by-case basis.

 

“Equipment” means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.

 

“Event of Default” has the meaning assigned in Article 8.

 

“Fixed Charge Coverage Ratio” means 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 months then ending.

 

“Fixed Charges” means, 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.

 

“Foreign Subsidiary” means any Subsidiary of a Person
that is not a U.S. Subsidiary.

 

“GAAP” means generally accepted accounting principles
in the United States of America as in effect from time to time.

 

“Governmental Authority” means 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.

 

“Guarantees” means any guaranty executed by a
Guarantor to secure any of the Obligations including without limitation, the
guarantees entered into pursuant to Section 6.13.

 

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

 

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

 

“Indebtedness” of any Person means, without
duplication, (a) all indebtedness for borrowed money, (b) all
obligations for 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, (e) all
capital lease obligations and (f) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a) through
(e) above.

 

5

 

 

“Insolvency Proceeding” means (a) with respect to
a Person incorporated, organized or formed in a jurisdiction in the United
States, any proceeding commenced by or against such Person under any provision
of the United States Bankruptcy Code, as amended, or under any other bankruptcy
or insolvency law, including assignments for the benefit of creditors, formal
or informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief and (b) with
respect to a Person incorporated, organized or formed in the United Kingdom,
any proceeding commenced by or against such Person under the Insolvency Act
1986.

 

“Intellectual Property
Collateral” means all of Borrower’s right, title, and interest in and to the
following: (1) Copyrights, Trademarks, Patents, and trade secrets; (2) claims
for damages by way of past, present and future infringement of any of the
rights included above; (3) all licenses or other rights to use any of the
Copyrights, Patents or Trademarks included above, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights; (4) all amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents included above; and (5) all proceeds and
products of the foregoing, including, without limitation, all payments under
insurance or any indemnity or warranty payable in respect of any of the
foregoing included above.

 

“Interest Expense” means 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 Bank on the Closing Date under Section 2.5.

 

“Inventory” means all “inventory” (as defined in the
Code) in which Borrower has or acquires any interest, including work in process
and finished products intended for sale or lease or to be furnished under a
contract of service, of every kind and description now or at any time hereafter
owned by or in the custody or possession, actual or constructive, of Borrower,
including such inventory as is temporarily out of its custody or possession or
in transit.

 

“Investment” means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.

 

“Lending Office” means, with respect to Bank
(including any Transferee), the office or offices of Bank specified as its “Lending
Office” opposite its name on the applicable signature page hereto, or such
other office or offices of Bank as it may from time to time notify Borrower.

 

“Letter of Credit Exposure” means, at the time in
question, the sum, without duplication, of (i) the aggregate undrawn
amount of all outstanding Letters of Credit, plus (ii) the aggregate
unreimbursed amount of all drawn Letters of Credit, in each case at such time.

 

“Lien” means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.

 

“Loan Documents” means, collectively, this Agreement,
any promissory note executed by Borrower evidencing the Advances, and any other
agreement entered into in connection with this Agreement, all as amended or
extended from time to time.

 

“Material Adverse Effect” means a material adverse
effect on (i) the business operations or condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole or (ii) the
ability of Borrower to repay the Obligations or otherwise perform its
obligations under the Loan Documents or (iii) the enforceability or
priority of Bank’s security interests in the Collateral.

 

“Net Income” means, 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 US Loan Agreement) has a joint ownership

 

 

6

 

 

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 US Loan Agreement or that Person’s assets are acquired by a Credit Party or
a “Credit Party” under and as defined in the US 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.

 

“Obligations” means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any Loan Document, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding involving Borrower.

 

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

 

“Parent” means Evolving Systems, Inc., a Delaware
corporation.

 

“Patents” means all patents and patent applications,
including without limitation divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

“Permitted Indebtedness” means:

 

(a)           Indebtedness in favor of Bank arising under this
Agreement or any other Loan Document;

 

(b)           Indebtedness existing on the Closing Date and
disclosed in the Schedule 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 not to exceed an amount equal to $250,000
in the aggregate at any time outstanding constituting capital lease
obligations;

 

(d)           Indebtedness incurred after the Closing Date secured
by Liens permitted under clause (c)(i) of the definition of “Permitted
Liens” provided (i) the principal amount of such Indebtedness secured
thereby does not exceed 100% of the cost of the subject property and (ii) the
aggregate amount thereof outstanding at any given time does not exceed an
amount equal to $200,000;

 

(e)           Subordinated Debt;

 

(f)            inter-company unsecured Indebtedness arising from
loans made by Borrower to its Wholly-Owned Subsidiaries that are Credit Parties
to fund working capital requirements of such Subsidiaries in the ordinary
course of business; provided, that, upon the request of Bank, such Indebtedness
shall be evidenced by promissory notes having terms (including subordination
terms) satisfactory to Bank, the sole originally executed counterparts of which
shall be pledged and delivered to Bank as security for the Obligations;

 

(g)           inter-company unsecured Indebtedness not listed in the
Schedule on the Closing Date arising from loans made by Borrower to Evolving
Systems GmbH, a German corporation, so long as Evolving Systems GmbH is a
Wholly-Owned Subsidiary of Borrower, to fund working capital requirements of
such Subsidiary in the ordinary course of business; provided, that, that upon
the request of Bank, such Indebtedness shall

 

 

7

 

 

be evidenced by
promissory note(s) having terms (including subordination terms)
satisfactory to Bank, the sole originally executed counterpart(s) of which
shall be pledged and delivered to Bank as security for the Obligations;
provided, however, that the aggregate amount of Investments permitted pursuant
to subsection (i) of the definition of Permitted Investments and outstanding
Indebtedness permitted pursuant to this subsection (g) does not exceed
$100,000 at any time;

 

(h)           the incurrence by Borrower or any Subsidiary thereof
of Indebtedness up to an amount equal to $50,000 arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
drawn against insufficient funds, so long as such Indebtedness is covered
within five Business Days;

 

(i)            unsecured Indebtedness of Borrower 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 6.5
up to an amount equal to $500,000 in aggregate annual premiums;

 

(j)            Borrower or any of its Subsidiaries that are Credit
Parties may enter into guarantees of Indebtedness of Borrower or any such
Subsidiary that is a Credit Party otherwise permitted under the other
subsections of this definition of “Permitted Indebtedness”;

 

(k)           Borrower may enter into unsecured Hedging Agreements
in the ordinary course of business for bona fide hedging purposes and not for
speculation in an aggregate notional or contract amount not to exceed $250,000
outstanding at any time;

 

(l)            Contingent Obligations in respect of Borrower’s
guarantee of the expenses incurred by certain employees in connection with the
use of credit cards sponsored by Borrower in an aggregate amount not to exceed
$150,000 at any time outstanding;

 

(m)          Contingent Obligations incurred in the ordinary course
of business with respect to surety and appeal bonds, performance bonds and
other similar obligations; and

 

(n)           other unsecured Indebtedness of Borrower and its
Subsidiaries not to exceed an amount equal to $50,000 in the aggregate
outstanding at any time.

 

“Permitted Investment” means:

 

(a)           Investments existing on the Closing Date disclosed in
the Schedule;

 

(b)           (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having rating of at
least A-2 or P-2 from either Standard & Poor’s Corporation or
Moody’s Investors Service, (iii) certificates of deposit maturing no more
than one (1) year from the date of investment therein issued by Bank and (iv) Bank’s
money market accounts or other money market funds substantially all of whose
assets are comprised of securities of the type described in clauses (i) through
(iii) above;

 

(c)           Investments created by the Loan Documents;

 

(d)           trade credit extended by Borrower and its Subsidiaries
in the ordinary course of business and Investments received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss;

 

(e)           Investments constituting inter-company Permitted
Indebtedness;

 

(f)            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

 

 

8

 

equal to $25,000 in the
aggregate at any time outstanding;

 

(g)           the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business;

 

(h)           Investments constituting transactions otherwise
permitted under this Agreement;

 

(i)            Investments in the Capital Stock of Evolving Systems
GmbH not listed in the Schedule on the Closing Date; provided that the
aggregate amount of such Investments permitted under this subsection (i) and
the outstanding Indebtedness permitted under subsection (g) of the
definition of Permitted Indebtedness shall not exceed $100,000 at any time;

 

(j)            Investments by Borrower or any of its Subsidiaries in
any Subsidiary of Borrower that is or concurrent with such Investment becomes a
Credit Party;

 

(k)           Investments received in compromise or resolution of
litigation or arbitration proceedings with Persons who are not Affiliates of
Borrower up to an amount equal to $50,000 in the aggregate; and

 

(l)            Investments represented by prepaid expenses made in
the ordinary course of business.

 

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.

 

“Permitted Liens” means the following:

 

(a)           Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement, the other Loan Documents or
any of the US Loan Documents;

 

(b)           Liens for taxes, fees, assessments or other
governmental charges or levies, either (i) not delinquent or (ii) being
contested in good faith by appropriate proceedings and, with respect to this
clause (ii), all such items do not exceed $250,000 against Persons organized in
the United States in the aggregate at any time or such items do not exceed
$1,500,000 against Persons organized outside the United States in the aggregate
at any time;

 

(c)           (i) Purchase money Liens securing Indebtedness
permitted under clause (d) of the definition of “Permitted
Indebtedness”; 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 (ii) Liens
arising under capital leases permitted under clause (c) of the
definition of “Permitted Indebtedness” to the extent such Liens attach only to
the property that is the subject of such capital leases;

 

(d)           Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, provided that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase;

 

(e)           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;

 

(f)            Liens 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,

 

 

9

 

 

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);

 

(g)           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;

 

(h)           Easements, rights of way, restrictions, zoning
ordinances, reservations, covenants and other similar charges, title exceptions
or encumbrances relating to real property of Borrower and any Subsidiaries
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 Borrower and do not result in material diminution in value of the
property subject thereto;

 

(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; and

 

(k)           Liens of licensors and sublicensors on licenses and
sublicenses of Intellectual Property Collateral or other intellectual property
(if any) of Borrower or any Subsidiary thereof entered into in the ordinary
course of business.

 

“Person” means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental agency.

 

“Prime Rate” means the variable rate of interest, per
annum, that appears in The Wall Street Journal on the date of
measurement, whether or not such announced rate is the lowest rate available
from Bank.

 

“Responsible Officer” means, (a) with respect to
any Credit Party, the chief executive officer or the president of such Credit
Party, or any other officer having substantially the same authority and
responsibility; or (b) with respect to compliance with financial covenants
or delivery of financial information under this Agreement, the chief financial
officer or the treasurer of Borrower or Parent, as the case may be, or any
other officer having substantially the same authority and responsibility.

 

“Revolving Facility” means the facility under which
Borrower may request Bank to issue Advances, as specified in Section 2.1(a) hereof
or Letters of Credit, as specified in Section 2.1(b).

 

“Revolving Line Limit” means Five Million Dollars
($5,000,000).

 

“Revolving Maturity Date” means February 22,
2011.

 

“Schedule” means the schedule of exceptions attached
hereto and approved by Bank, if any.

 

“Security Documents” means, collectively, the
Debenture, the Guarantees, the Share Charge, 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.

 

“Senior Debt” means, on any date of determination, the
Obligations hereunder and all Indebtedness under the US Loan Agreement (provided that, for purposes of determining the
Indebtedness outstanding under this Agreement and under the “Revolving Loan
Facility” under (and as defined in) the US Loan Agreement as of the end of each
fiscal quarter, “Senior Debt” shall mean the average daily amount of outstanding
principal and accrued

 

 

10

 

 

interest on the Revolving
Facility and the “Revolving Facility” under (and as defined in) the US Loan
Agreement 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.

 

“Share Charge” means the charge by the UK Guarantor of
the entire issued share capital of Borrower in favor of Bank dated on or about
the date hereof.

 

“Shares” means (i) the Capital Stock owned or
held of record or beneficially by Borrower on the Closing Date as listed on
Annex A hereto (and the certificates, copies of which are attached hereto,
representing such shares, securities and/or interests, if any) and (ii) all
other Capital Stock, equity securities and ownership interests of any future
direct Subsidiary of Borrower; provided, however, that “Shares” shall not
include any shareholding in Evolving Systems GmbH.

 

“Subordinated Debt” means any debt incurred by
Borrower or any of its Subsidiaries that is subordinated to the debt owing by
Borrower to Bank on terms acceptable to Bank (and identified as being such by
Borrower and Bank).

 

“Subsidiary” means, 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.

 

“Total Debt” means, 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, US 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 revolving credit facility
(including this Agreement and the US 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” means, for any period, the sum
for Credit Parties and their consolidated Subsidiaries on a consolidated basis
of (a) scheduled payments of principal on any an 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 , and (d) Interest
Expense paid in cash or required to be paid in cash during such period.

 

“Trademarks” means any trademark and servicemark
rights, whether registered or not, applications to register and registrations
of the same, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

 

“Transfer Pricing Agreements” means (i) the
Master Services Agreement entered into between Parent and Evolving Systems
Networks India Pvt Ltd, dated as of the 31st day of August, 2004, as
amended December 8, 2004, June 1, 2005 and April 1, 2006, and
the Master Services Agreement entered into between Borrower and Evolving
Systems Networks India Pvt Ltd, dated as of the 1st day of June 2005,
amended April 1, 2006, and (ii) agreements on transfer pricing in
form and substance reasonably satisfactory to Bank.

 

“Treaty Lender” means a person which is beneficially
entitled to interest 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 person’s participation in this Agreement as a
lender is effectively connected or to which payments under this Agreement are
attributable; and (iii) is, pursuant to

 

 

11

 

 

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” means the deferred
payment obligations to the Sellers (as defined in Section 1.4 of the TSE
Purchase Agreement).

 

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

 

“UK Guarantor” means Evolving Systems Holdings Ltd and
each Subsidiary of such company (other than Borrower) incorporated under the
laws of England and Wales that subsequently becomes a Credit Party under this
Agreement.

 

“Unfinanced Capital Expenditures” means, 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 and the revolving loan
facility established pursuant to the US Loan Documents.

 

“U.S. Guarantor” means each of Parent and any other
U.S. Subsidiary of Parent that subsequently becomes a Credit Party under this
Agreement.

 

“U.S. Subsidiary” shall mean any Subsidiary of a
Person incorporated or otherwise organized under the laws of the United States
of America or a state of the United States of America or the District of
Columbia.

 

“US Loan Agreement” means the Loan and Security
Agreement dated the date hereof by and between Parent and Bank, as the same be
amended, modified, supplemented or restated from time to time.

 

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

 

“Wholly-Owned Subsidiary” shall mean, with respect to
any Person, any Subsidiary of such Person 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 such Person or by one or more of the other Wholly-Owned
Subsidiaries of such Person, or both.

 

Unless otherwise specified in any Loan Document, this
Agreement, any other Loan Document and any agreement or contract referred to
herein 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 the Loan Documents.

 

1.2          Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms “financial statements” shall include the notes and schedules thereto.

 

 

12

 

2.             LOAN AND TERMS OF PAYMENT.

 

2.1          Credit
Extensions.

 

                Borrower promises to pay to the
order of Bank, in lawful money of the United States of America, the aggregate
unpaid principal amount of all Credit Extensions made by Bank to Borrower
hereunder in accordance with the terms hereof. 
Borrower shall also pay interest on the unpaid principal amount of
Advances at rates in accordance with the terms hereof.

 

(a)           Revolving Advances.

 

(i)            Subject to and upon the terms and conditions of this
Agreement, Borrower may request, and Bank shall make available, Advances from
time to time in an aggregate outstanding amount not to exceed the lesser of (i) the
Revolving Line Limit or (ii) the Borrowing Base minus,
in each case, the Letter of Credit Exposure and the FX Amount.  Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1(a) may be
repaid and reborrowed at any time prior to the Revolving Maturity Date, at
which time all Advances under this Section 2.1(a) shall be immediately
due and payable.  Borrower may prepay any
Advances in whole or in part without penalty or premium.

 

(ii)           Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that
the Advance is to be made.  Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B
hereto.  Bank is authorized to make
Advances under this Agreement, based upon instructions received from a
Responsible Officer of Borrower or a designee of a Responsible Officer of
Borrower, or without instructions if in Bank’s discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid after
expiration of any applicable grace or cure period and the giving of any
required notice of such non-payment. 
Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof.  Bank will credit the amount of
Advances made under this Section 2.1(a) to such deposit account or
Obligation as Borrower specifies.

 

(b)           Letters of Credit. 
Subject to the terms and conditions of this Agreement, at any time prior
to the Revolving Maturity Date, Bank agrees to issue letters of credit for the
account of Borrower and the other Credit Parties (each, a “Letter of Credit”
and collectively, the “Letters of Credit”) in an aggregate outstanding face
amount not to exceed the lesser of the Revolving Line Limit or the Borrowing
Base minus, in each case, the aggregate
amount of the outstanding Advances and the FX Amount at any time, provided that
the aggregate face amount of all outstanding Letters of Credit shall not exceed
$500,000, and provided further that no Letter of Credit is used directly or
indirectly to benefit the holders of the Subordinated Notes (as defined in the
US Loan Agreement) or otherwise will violate Sections 151 to 158 of the
Companies Act 1985.  All Letters of
Credit shall be, in form and substance, acceptable to Bank in its reasonable
discretion and shall be subject to (i) the terms and conditions of Bank’s
form of standard application and letter of credit agreement with such changes
thereto as Borrower and Bank may agree (the “Application”) and (ii) payment
by Borrower of Bank’s standard fees.  In
the event of any conflict between the terms of the Agreement and the terms of
any Application, the terms of this Agreement shall control.  If Bank is obligated to advance funds under a
Letter of Credit, Borrower immediately shall reimburse the amount of the funds
so advanced not later than 10:00 a.m. (Pacific time) on the date that such
payment is made by Bank under the Letter of Credit, if Borrower shall have
received written or telephonic notice of such payment prior to 9:00 a.m.
(Pacific 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 10:00 a.m.
(Pacific time), on the first Business Day that Borrower has such notice prior
to prior to 9:00 a.m. (Pacific time), and, in the absence of such
reimbursement, the unreimbursed amount automatically shall be deemed to be an
Advance under Section 2.1(a).  To
the extent an unreimbursed amount under a Letter of Credit is deemed to be an
Advance hereunder, Borrower’s obligation to reimburse such amount shall be
discharged and replaced by the resulting Advance.  If any portion of the Letter of Credit
Exposure, whether or not then due and payable, remains unpaid or outstanding on
the Revolving Maturity Date or such earlier date as this Agreement may be
terminated, Borrower shall:  (A) provide
cash collateral therefor on terms reasonably acceptable to Bank; 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 Exposure, 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 

 

13

 

least 105% of the
aggregate maximum amount then available to be drawn under, such Letters of
Credit to which such outstanding Letter of Credit Exposure relate and shall be
issued by a Person, and shall be subject to such terms and conditions, as are
reasonably satisfactory to Bank.  The
obligation of Borrower to reimburse Bank for drawings made under Letters of
Credit shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement, the Application, and
such Letters of Credit, under all circumstances whatsoever; provided, however,
that after paying in full its reimbursement obligation hereunder, nothing herein
shall adversely affect the right of Borrower to commence any proceeding against
Bank for any wrongful disbursement made by Bank under a Letter of Credit as a
result or solely to the extent of acts or omissions constituting gross
negligence or willful misconduct on the part of Bank.  Borrower shall indemnify, defend, protect,
and hold Bank harmless from any loss, cost, expense or liability, including,
without limitation, reasonable attorneys’ fees, arising out of or in connection
with any Letters of Credit, except for expenses caused by Bank’s gross
negligence or willful misconduct.

 

(c)           Foreign
Exchange Sublimit.  Subject to and upon the terms and conditions
of this Agreement and any other agreement that Borrower may enter into with the
Bank in connection with foreign exchange transactions, including foreign
exchange services (“FX Contracts”) and subject to the availability under the
Revolving Line Limit and the Borrowing Base minus, in each
case, the aggregate amount of the outstanding Advances and the Letter of Credit
Exposure any time, Borrower may request Bank to enter into FX Contracts with
Borrower due not later than the Revolving Maturity Date.  Borrower shall pay any standard issuance and
other fees that Bank notifies Borrower in advance will be charged for issuing
and processing FX Contracts for Borrower. 
The FX Amount shall at all times be equal to or less than $500,000.  The “FX Amount” shall equal the amount
determined by multiplying (i) the aggregate amount, in United States
Dollars, of FX Contracts between Borrower and Bank remaining outstanding as of
any date of determination by (ii) the applicable Foreign Exchange Reserve
Percentage as of such date.  The “Foreign
Exchange Reserve Percentage” shall be a percentage as determined by Bank, in
its reasonable discretion from time to time. 
If at any time the Revolving Facility is terminated or otherwise ceases
to exist, Borrower shall promptly secure in cash all obligations under the
Foreign Exchange Sublimit on terms reasonably acceptable to Bank.

 

2.2          Overadvances. 
If the aggregate amount of the outstanding Advances plus the
aggregate amounts outstanding under the Letters of Credit, and the FX Amount,
exceeds the lesser of the Revolving Line Limit or the Borrowing Base at any
time, Borrower shall promptly pay to Bank, in cash, and/or cash collateralize
the obligations under outstanding Letters of Credit, in an aggregate amount
equal to such excess.

 

2.3          Interest Rates, Payments, and
Calculations.

 

(a)           Interest Rates.

 

(i)            Advances. 
Except as set forth in Section 2.3(b), the Advances shall bear
interest, on the outstanding Daily Balance thereof, at a rate per annum equal
to one half of one percent (0.50%) above the Prime Rate.

 

(b)           Late Fee; Default Rate. 
If any payment is not made within ten (10) days after the date such
payment is due, Borrower shall pay Bank a late fee equal to the lesser of (i) five
percent (5%) of the amount of such unpaid amount or (ii) the maximum
amount permitted to be charged under applicable law.  All Obligations shall bear interest, from and
after the occurrence and during the continuance of an Event of Default, at a
rate equal to four (4) percentage points above the interest rate
applicable immediately prior to the occurrence of the Event of Default.

 

(c)           Payments. 
Subject to Section 12.4(f), interest hereunder shall be due and
payable on the tenth calendar day of each month during the term hereof.  To the extent permitted by applicable law,
any interest not paid when due shall be compounded by becoming a part of the Obligations,
and such interest shall thereafter accrue interest at the rate then applicable
hereunder.  Subject to Section 12.4
(Taxes), all payments shall be free and clear of any taxes, withholdings,
duties, impositions or other charges, to the end that Bank will receive the
entire amount of any Obligations payable hereunder, regardless of source of
payment.  Payments will be made via wire
transfer to Bank.

 

14

 

(d)           Computation. 
In the event the Prime Rate is changed from time to time hereafter, the
applicable rate of interest hereunder shall be increased or decreased,
effective as of the day the Prime Rate is changed, by an amount equal to such
change in the Prime Rate.  All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.

 

2.4          Crediting Payments. 
If an Event of Default does not exist, Bank shall credit a wire transfer
of funds, check or other item of payment to such deposit account or Obligation
as Borrower specifies.  If an Event of
Default exists, the receipt by Bank of any wire transfer of funds, check, or
other item of payment shall be immediately applied to conditionally reduce
Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such
check or other item of payment is honored when presented for payment.  Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after
12:00 noon Pacific time shall be deemed to have been received by Bank as
of the opening of business on the immediately following Business Day.  Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

 

2.5          Fees.  Borrower
shall pay to Bank the following:

 

(a)           Facility Fee. 
On the Closing Date, a Facility Fee equal to $25,000, which shall be
nonrefundable; and

 

(b)           Bank Expenses. 
On the Closing Date, all Bank Expenses incurred through the Closing
Date, including reasonable attorneys’ fees and expenses and, after the Closing
Date, all Bank Expenses, including reasonable attorneys’ fees and expenses, not
later than ten Business Days after written demand therefor.  Bank shall endeavor to provide reasonable
supporting documentation for the amount of any Bank Expenses payable by
Borrower to Bank under this Section 2.5(b).

 

2.6          Term.  This
Agreement shall become effective on the Closing Date and, subject to Section 12.8,
shall continue in full force and effect for so long as any Obligations remain
outstanding (other than contingent indemnity obligations for which no claim has
been made) or Bank has any obligation to make Credit Extensions under this
Agreement.  Notwithstanding the
foregoing, Bank shall have the right to terminate its obligation to make Credit
Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default.  Notwithstanding termination, Bank’s Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding (other than contingent indemnity obligations for which no claim has
been made).

 

3.             CONDITIONS
OF LOANS.

 

3.1          Conditions Precedent to Initial Credit
Extension.  The obligation of Bank to make the initial
Credit Extension is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:

 

(a)           this Agreement, executed by Borrower;

 

(b)           a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;

 

(c)           a Guaranty from the UK Guarantor;

 

(d)           a Share Charge executed by the UK Guarantor together
with the certificates for the shares charged thereby and transfers of these
executed but undated and with the transferee left blank and together also with
a Members’ Resolution of the Borrower amending its Articles of Association;

 

15

 

(e)           a Guaranty from the U.S. Guarantor;

 

(f)            a certificate of the Secretary of each Guarantor with
respect to incumbency and resolutions authorizing the execution and delivery of
its respective Guaranty;

 

(g)           legal opinion from Borrower’s counsel, in a form
acceptable to Bank;

 

(h)           payoff letter from CapitalSource Finance LLC and any
documents required to terminate its security interest in Borrower’s assets;

 

(i)            the Debenture executed by Borrower;

 

(j)            payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;

 

(k)           most recent consolidated financial statements of
Parent;

 

(l)            an audit of the Collateral, the results of which shall
be satisfactory to Bank; and

 

(m)          such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.

 

3.2          Conditions Precedent to all Credit
Extensions.  The obligation of Bank to make each Credit
Extension, including the initial Credit Extension, is further subject to the
following conditions:

 

(a)           in the case of an Advance, the timely receipt by Bank
of the Payment/Advance Form as provided in Section 2.1; and

 

(b)           the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of
such Payment/Advance Form, in the case of an Advance, and on the effective date
of such Credit Extension as though made at and as of each such date (except, in
each case, to the extent where 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), and no Event of Default shall have
occurred and be continuing as of the date of such Credit Extension, or would
exist after giving effect to such Credit Extension.  The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section 3.2.

 

4.             INSPECTION
RIGHTS.

 

4.1          Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower’s usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower’s Books
and to make copies thereof and to check, test, and appraise the Collateral and
to audit Borrower’s Accounts in order to verify Borrower’s financial condition
or the amount, condition of, or any other matter relating to, the
Collateral.  Bank and any such officers,
employees and agents 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 12.9.  Until
the US Loan Agreement is terminated and so long as no Event of Default has
occurred and is continuing, Bank agrees to coordinate exercise of its rights
under this Section 4.1 with any exercise of Bank’s rights under Section 4.4
of the US Loan Agreement.

 

5.             REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and
warrants as follows:

 

5.1          Due Organization and Qualification. 
Borrower and each Subsidiary of Borrower is a corporation, partnership,
or other form of entity, as the case may be, validly existing under the laws of
its 

 

16

 

jurisdiction of
incorporation, organization or formation and qualified and licensed to do
business 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.

 

5.2          Due Authorization; No Conflict. 
The execution, delivery, and performance by Borrower of the Loan
Documents to which it is a party (a) are within Borrower’s powers, (b) have
been duly authorized by all requisite company action, (c) are not in
conflict with nor constitute a breach of any provision contained in Borrower’s
Organizational Documents, and (d) will not constitute an event of default
under any agreement to which Borrower is a party or by which Borrower is bound,
the effect of which would reasonably be expected to result in, either
individually or in the aggregate, a Material Adverse Effect.  Borrower is not in default under any
agreement to which it is a party or by which it is bound, the effect of which
would reasonably be expected to result in a Material Adverse Effect.

 

5.3          No Prior Encumbrances. 
Borrower has good and marketable title to, or a valid leasehold interest
in, license of, or right to use, all of its material property necessary or used
in its ordinary course of business, free and clear of Liens, except for
Permitted Liens.

 

5.4          Bona Fide Eligible Accounts. 
The Eligible Accounts identified in the Borrowing Base Certificate most
recently delivered to Bank are bona fide existing obligations.  The Borrowing Base Certificate most recently
delivered to Bank pursuant to this Agreement correctly identifies in all
material respects those Accounts of Borrower and Parent that are Eligible
Accounts as of the date of such Borrowing Base Certificate.

 

5.5          Intellectual Property Collateral. 
Borrower is the owner of, or has sufficient rights by license or
otherwise in, the Intellectual Property Collateral necessary for the conduct of
Borrower’s business, except for rights and licenses granted by Borrower in the
ordinary course of business and rights and licenses as set forth in the
Schedule.  As of the Closing Date, each
of the Patents of Borrower is valid and enforceable, and to Borrower’s
knowledge no part of the Copyrights, Patents or Trademarks of Borrower has been
judged invalid or unenforceable, in whole or in part, and to Borrower’s
knowledge no claim has been made that any part of the Copyrights, Patents or
Trademarks of Borrower infringes the Copyrights, Patents or Trademarks of any
third party.  After the Closing Date,
except as would not reasonably be expected to result in a Material Adverse
Effect:  (i) each of the Patents of
Borrower is valid and enforceable; (ii) to Borrower’s knowledge no part of
the Copyrights, Patents or Trademarks of Borrower has been judged invalid or
unenforceable, in whole or in part; and (iii) to Borrower’s knowledge no
claim has been made that any part of the Copyrights, Patents or Trademarks of
Borrower infringes the Copyrights, Patents or Trademarks of any third
party.  Except as set forth in the
Schedule as of the Closing Date, Borrower’s rights as a licensee of
intellectual property do not give rise to more than five percent (5%) of its
gross revenue in any given month, including without limitation revenue derived
from the sale, licensing, rendering or disposition of any product or service
(the “Materiality Threshold”).  Borrower
agrees to provide notice to Bank, with delivery of its monthly Compliance
Certificate, of any licenses that meet the foregoing Materiality
Threshold.  Except as set forth in the
Schedule or as disclosed in writing to Bank after the Closing Date, Borrower is
not a party to, or bound by, any license that meets the Materiality Threshold
that restricts the grant by Borrower of a security interest in Borrower’s
rights under such license.

 

5.6          Name; Location of Principal Place of
Business.  Except as disclosed in the Schedule, as of
the Closing Date Borrower has not done business under any name other than that
specified on the signature page hereof. 
As of the Closing Date, the principal place of business of Borrower is
located at the address indicated in Section 10 hereof.  As of the Closing Date, all Borrower’s
Inventory and Equipment is located only at the location set forth in Appendix 2
attached hereto.

 

5.7          Merchantable Inventory. 
All material Inventory is in all material respects of good and
marketable quality free from all material defects, except for Inventory for
which adequate reserves have been made.

 

5.8          Litigation. 
Except as set forth in the Schedule, there are no actions or proceedings
pending by or against Borrower or any Subsidiary that is a Credit Party before
any court or administrative agency which would reasonably be expected to have a
Material Adverse Effect, or a material adverse effect on Borrower’s interest or
Bank’s security interest in the Collateral.

 

17

 

5.9          No Material Adverse Change in
Financial Statements.  All consolidated and consolidating financial
statements related to Borrower and any consolidated Subsidiary that Bank has
received from Borrower fairly present in all material respects the consolidated
financial position and results of operations of Borrower (or such Subsidiary)
and its consolidated Subsidiaries as of the dates and for the relevant periods
indicated (subject in the case of unaudited financial statements, to year end
adjustments and matters that would be disclosed in financial statement
notes).  Since the date of the most
recent financial statements submitted to Bank, there has not occurred any
Material Adverse Effect or, to Borrower’s knowledge, any event or condition
that would reasonably be expected to result in a Material Adverse Effect.

 

5.10        Solvency, Payment of Debts. 
Borrower is and, after giving effect to the transactions and
Indebtedness contemplated by the Loan Documents, will be able to pay its debts
within the meaning of the Insolvency Act of 1986.

 

5.11        Regulatory Compliance. 
Neither Borrower nor any of its Subsidiaries that is a Credit Party 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
the Schedule.  Borrower is not an “investment
company” or a company “controlled” by an “investment company” within the
meaning of the Investment Company Act of 1940. 
Borrower is not engaged principally, or as one of the important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations T and U of the
Board of Governors of the Federal Reserve System).  Borrower is in compliance with all statutes,
laws, ordinances or rules applicable to it, except where any such
non-compliance would not reasonably be expected to result in a Material Adverse
Effect.

 

5.12        Environmental Condition. 
Except as disclosed in the Schedule, the properties or assets of
Borrower and its Subsidiaries that are Credit Parties have not been used by any
such Person or, to the best of Borrower’s knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower’s knowledge, none of the
properties or assets of Borrower and its Subsidiaries that are Credit Parties
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute; no lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by any
such Person; and none of the Borrower or any of its Subsidiaries that is a
Credit Party has received a written summons, citation, notice, or directive
from any governmental agency concerning any action or omission by any such
Person resulting in the releasing, or otherwise disposing of, hazardous waste
or hazardous substances into the environment.

 

5.13        Taxes.  As of the
Closing Date, Borrower and each Subsidiary of Borrower that is a Credit Party
has filed or caused to be filed all federal (if applicable) and all other tax
returns required to be filed by such Person, and have paid, or have made
adequate provision for the payment of, all taxes reflected therein (other than
taxes that are not at the time delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings
and for which adequate reserves shall have been set aside on the books of the
applicable Person in accordance with GAAP). 
After the Closing Date, Borrower and each Subsidiary of Borrower that is
a Credit Party has filed or caused to be filed all federal (if applicable) and
all other material tax returns required to be filed by such Person, and have
paid, or have made adequate provision for the payment of, all taxes reflected
therein (other than taxes that are not at the time delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves shall have been set
aside on the books of the applicable Person in accordance with GAAP).

 

5.14        Shares.  Borrower
has full power and authority to grant a security interest in the Shares and no
disability or contractual obligation (other than the contractual obligations of
Borrower to CapitalSource Finance LLC and related security, which will be
released and terminated effective as of the Closing Date) exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement.  There are no subscriptions, warrants, rights
of first refusal or other restrictions on, or options exercisable with respect
to the Shares, other than restrictions on transfer under applicable state and
federal securities laws.  The Shares have
been and will be duly authorized and validly issued, and are or will be fully
paid and non-assessable.  As of the
Closing Date, the Shares 

 

18

 

are not the
subject of any present or threatened suit, action, arbitration, administrative
or other proceeding, and Borrower knows of no reasonable grounds for the
institution of any such proceedings.

 

5.15        Subsidiaries. 
As of the Closing Date, Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

 

5.16        Government Consents. 
Borrower and each Subsidiary of Borrower that is a Credit Party have
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for the continued operation of such Person’s business as
currently conducted in the jurisdictions where such business is currently
conducted, except, where failure to do so would not reasonably, in each such
case, be expected to result in a Material Adverse Effect.

 

5.17        Accounts. 
Except as disclosed in the Schedule, as of the Closing Date, none of
Borrower’s nor any Subsidiary’s bank accounts are maintained with a Person
other than Bank.

 

5.18        Full Disclosure. 
No representation, warranty or other statement made by Borrower in any
certificate or written statement furnished to Bank in connection with the
transactions contemplated by or pursuant to the Loan Documents contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the factual statements contained in such certificates or
statements taken as a whole materially misleading as of the time made or
delivered in light of the circumstances under which it was made or delivered,
provided that notwithstanding anything else contained in this Agreement or any
Loan Document, Borrower does not make any representation, warranty or guaranty
as to any projections furnished to Bank (except that such projections have been
prepared by the Borrower 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).

 

6.             AFFIRMATIVE
COVENANTS.

 

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, Borrower shall do all of the following:

 

6.1          Good Standing. 
Borrower shall (a) except as permitted under Section 7.3,
maintain its and each of its Subsidiaries’ valid existence and good standing
(to the extent such concept applies) in its jurisdiction of incorporation,
organization or formation and (b) maintain qualification in each
jurisdiction in which it is required under applicable law except where failure
to maintain such qualification would not reasonably be expected to result in a
Material Adverse Effect.  Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, in force all
licenses, approvals and agreements, the loss of which would reasonably be
expected to have a Material Adverse Effect.

 

6.2          Government Compliance. 
Borrower shall comply, and shall cause each Subsidiary to comply, with
all statutes, laws, ordinances and government rules and regulations to
which it is subject, noncompliance with which would reasonably be expected to
have a Material Adverse Effect.

 

19

 

6.3          Financial
Statements, Reports, Certificates.  Borrower
shall deliver the following to Bank:  (a) as
soon as available, but in any event within thirty (30) days after the end of
each calendar month, a company prepared consolidated balance sheet, income, and
cash flow statement covering Parent’s consolidated operations during such
period, prepared in accordance with GAAP, consistently applied, in a form
reasonably acceptable to Bank and certified by a Responsible Officer; (b) as
soon as available, but in any event within one hundred twenty (120) days after
the end of Parent’s fiscal year, audited consolidated financial statements of
Parent prepared in accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) copies (which
may be in electronic form) of all statements, reports and notices sent or made
available generally by Parent or Borrower to its security holders or to any
holders of Subordinated Debt and, if applicable, all reports on Forms 10-K
and 10-Q filed with the Securities and Exchange Commission; (d) promptly
after any officer of any Credit Party obtains knowledge thereof, a report of
any legal actions pending or threatened in writing against Borrower or any
Subsidiary that would reasonably be expected to result in damages or costs to
Borrower or any Subsidiary to the extent the amount in controversy exceeds
$100,000 individually or $150,000 in the aggregate; (e) as soon as
available, but in any event within thirty (30) days after the end of Parent’s
fiscal year, an operating budget in a form reasonably acceptable to Bank and
approved by Parent’s board of directors; (f) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time; and (g) within ten (10) Business
Days after the reasonable request of Bank, a report signed by Borrower, in form
reasonably acceptable to Bank, listing any applications or registrations that
Borrower has made or filed in respect of any Patents, Copyrights or Trademarks
and the status of any active or pending material United States Patent,
Copyright or Trademark applications or registrations, as well as any material
change in Borrower’s Intellectual Property Collateral (other than Foreign
applications and registrations), including but not limited to any subsequent ownership
right of Borrower in or to any Trademark, Patent or Copyright not specified in
Exhibits A, B, and C of any Intellectual Property Security Agreement delivered
to Bank by Borrower in connection with this Agreement.

 

Within ten (10) days after the last day of each
month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer of Borrower and Parent in substantially the form of Exhibit C
hereto, together with aged listings of accounts receivable and accounts payable
of Borrower and Parent.

 

Borrower shall deliver to Bank with the monthly
financial statements a Compliance Certificate signed by a Responsible Officer
of Parent in substantially the form of Exhibit D hereto.

 

6.4          Inventory; Returns. 
Borrower shall keep all material Inventory in good and marketable
condition, free from all material defects except for Inventory for which
adequate reserves have been made. 
Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement.  Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).

 

6.5          Taxes.  Borrower
shall make, and shall cause each Subsidiary to make, due and timely payment or
deposit of all material taxes, assessments, or contributions required of it by
law, and will execute and deliver to Bank, following Bank’s reasonable request,
appropriate certificates attesting to the payment or deposit thereof; and
Borrower will make, and will cause each Subsidiary to make, timely payment or
deposit of all material tax payments and withholding taxes required of it by
applicable laws, and will, upon Bank’s reasonable request, furnish Bank with
proof satisfactory to Bank indicating that Borrower or a Subsidiary has made
such payments or deposits; provided that Borrower or a Subsidiary need not make
any payment referred to in this Section 6.5 if the amount or validity of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower or the applicable
Subsidiary.

 

6.6          Insurance.

 

(a)           Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as ordinarily
insured against by other owners in similar businesses conducted in the
locations where Borrower’s business is conducted on the date hereof.  Borrower shall also maintain insurance
relating to Borrower’s business, ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower’s.

 

20

 

(b)           All such policies of insurance shall be
in such form, with such companies, and in such amounts as are reasonably
satisfactory to Bank.  All such policies
of property insurance shall contain a lender’s loss payable endorsement, in a
form reasonably satisfactory to Bank, showing Bank as an additional loss payee
thereof, and all liability insurance policies, other than errors and omissions
and D&O policies, shall show the Bank as an additional insured and shall
specify that the insurer must give at least twenty (20) days notice to Bank
before canceling its policy for any reason. 
Upon Bank’s request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor.  Upon the occurrence and during
the continuance of any Event of Default, all proceeds payable under any such
policy shall, at the option of Bank, be payable to Bank to be applied on
account of the Obligations.

 

6.7          Accounts. 
Borrower shall maintain and shall cause each of its Subsidiaries to
maintain its primary depository, operating, and investment accounts with Bank
or shall cause its accounts to be listed in the Debenture and be subject to the
requirements and obligations set forth in the Debenture.

 

6.8          EBITDA.  Parent shall
have, measured at the end of each fiscal quarter beginning with the fiscal
quarter ending March 31, 2008, EBITDA for the twelve month period ending
on such date of not less than (a) $4,700,000 for the periods ending March 31,
2008 and June 30, 2008 or (b) $4,250,000 for any period thereafter.

 

6.9          Fixed Charge Coverage. 
Parent shall have, measured at the end of each fiscal quarter beginning
with the fiscal quarter ending March 31, 2008, a Fixed Charge Coverage
Ratio for the twelve month period ending on such date of at least (a) 1.30:1.00
for the period ending March 31, 2008 or (b) 1.15:1.00 for any period
thereafter.

 

6.10        Senior Leverage Ratio. 
Parent shall have, measured at the end of each fiscal quarter beginning
with the fiscal quarter ending March 31, 2008, a ratio of (a) Senior
Debt calculated on such date to (b) EBITDA for the twelve month period
ending on such date of at least (i) 2.00:1.00 on any date of measurement
to and including September 30, 2008 or (b) 1.75:1.00 on any date of
measurement thereafter.

 

6.11        Minimum Liquidity. 
Parent shall have, measured at the end of each month, a balance of Cash
on a consolidated basis plus Net Accounts of not less than $4,500,000.  “Net Accounts” means, without duplication,
Accounts of the Credit Parties and the “Credit Parties” under and as defined in
the US Loan Agreement aged less than 90 days (or, in the case of Qwest,
Vodafone Egypt and Cable & Wireless Panama, 120 days) from invoice
date.

 

6.12        Intellectual Property Rights.

 

(a)           Borrower shall promptly give Bank written
notice of any applications or registrations of Patents or Trademarks filed with
the United States Patent and Trademark Office, or the UK Intellectual Property
Office (with respect to patent or trademark filings), including the date of
such filing and the registration or application numbers, if any.  Borrower shall (i) give Bank not less
than 30 days prior written notice of the filing of any applications or
registrations with the United States Copyright Office or the UK Intellectual
Property Office (with respect to copyright filings), including the title of
such intellectual property rights to be registered, as such title will appear
on such applications or registrations, and the date such applications or
registrations will be filed, and (ii) prior to the filing of any such
applications or registrations, shall execute such documents as Bank may
reasonably request for Bank to maintain its perfection in such intellectual
property rights to be registered by Borrower, and upon the request of Bank,
shall file such documents against any such applications or registrations.  Upon filing any such applications or registrations
with the United States Copyright Office, Borrower shall promptly provide Bank
with (i) a copy of such applications or registrations, without the
exhibits, if any, thereto, (ii) evidence of the filing of any documents
requested by Bank to be filed for Bank to maintain the perfection and priority
of its security interest in such intellectual property rights, and (iii) the
date of such filing.

 

(b)           Bank may audit Borrower’s Intellectual Property
Collateral to confirm compliance with this Section, provided such audit will
occur at a time and place agreed to by both parties, will be designed not to
disrupt the business operations of Borrower and may not occur more often than
once per year, unless an Event of Default has occurred and is continuing.  Bank shall have the right, but not the obligation,
to take, at Borrower’s sole expense, any actions that Borrower is required
under this Section to take but which Borrower fails 

21

 

to take, after 15 days’
prior written notice to Borrower. 
Borrower shall reimburse and indemnify Bank for all reasonable
out-of-pocket costs and reasonable out-of-pocket expenses incurred in the
reasonable exercise of its rights under this Section.

 

6.13        Future
Stock Pledges and Guaranties.  Borrower
shall notify Bank at the time that any Person becomes a Subsidiary of Borrower
or a U.S. Subsidiary of Parent, and promptly thereafter (and in any event
within ten Business Days after the appropriate documents are provided to
Borrower by Bank) (a) cause such Subsidiary to execute and deliver to Bank
a joinder to the applicable Guaranty to become a Guarantor, and (b) pledge
the Capital Stock in such Subsidiary to Bank to secure the Obligations;
provided that, the foregoing provisions of this Section 6.13 to the
contrary notwithstanding, nothing in this Section 6.13 shall require a
Credit Party to grant any Lien in favor of Bank in relation to the Capital
Stock of Evolving Systems GmbH, nor shall Evolving Systems GmbH be required to
execute a joinder to the Guaranty.

 

6.14        Consent of Inbound Licensors.  Other than licenses in the ordinary course, prior to
or within a reasonable period of time after entering into or becoming bound by
any license or agreement, Borrower shall: 
(i) provide written notice to Bank of the material terms of such
license or agreement with a description of its likely impact on Borrower’s
business or financial condition; and (ii) in good faith use commercially
reasonable efforts to obtain the consent of, or waiver by, any person whose
consent or waiver is necessary for Borrower’s interest in such licenses or
contract rights to be deemed Collateral and for Bank to have a security
interest in it that might otherwise be restricted by the terms of the
applicable license or agreement, whether now existing or entered into in the
future, provided, however, that the failure to obtain any such consent or
waiver shall not constitute a default under this Agreement.

 

6.15        Further Assurances. 
At any time and from time to time Borrower shall execute and deliver
such further instruments and take such further action as may reasonably be
requested by Bank to effect the purposes of this Agreement.

 

7.             NEGATIVE
COVENANTS.

 

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 hereunder, Borrower will not do any of the following:

 

7.1          Dispositions. 
Convey, sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than:

 

(a)           Transfers of Inventory, use of cash, or liquidation or
sale of cash equivalents, in each case in the ordinary course of business;

 

(b)           Transfers of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business (such license may include a restriction on
assignability of the license and its continuation after a Change in Control);

 

(c)           Transfers (whether in a single transaction or a series
of transactions) of obsolete, worn out, replaced, damaged or excess property
that is no longer needed in the ordinary course of business and has a book
value not exceeding $200,000 in the aggregate in any fiscal year;

 

(d)           Transfers not specifically permitted otherwise in this
Section 7.1 (other than Capital Stock of a Credit Party to the extent
owned by another Credit Party) to the extent (i) 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, (ii) no Default or
Event of Default exists or otherwise would result therefrom, (iii) after
giving effect to such transaction, Parent is in compliance on a pro forma basis
with the financial covenants referenced in Sections 6.8 to 6.11 (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 (iv) the sole consideration therefor received by
Borrower or such Subsidiary is cash;

 

22

 

(e)           Transfers in connection with transactions otherwise
permitted under the other subsections of this Section 7 to the extent
permitted thereunder; and

 

(f)            Transfers of property to any other Credit Party.

 

7.2          Change in Business; Change in Control
or Principal Place of Business.  Engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than 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; or suffer or
permit a Change in Control; or without twenty (20) days prior written
notification to Bank, relocate its principal place of business or jurisdiction
of incorporation or formation or change its legal name; or without Bank’s prior
written consent, change the date on which its fiscal year ends.

 

7.3          Mergers or Acquisitions. 
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with or into any other business organization, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
Capital Stock or property of another Person, other than:

 

(a)           Permitted Investments; and

 

(b)           upon not less than ten (10) Business Days’ prior
written notice to Bank, any Subsidiary of Borrower may (A) 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 (B) merge with, or dissolve or
liquidate into, or transfer its property to a Wholly-Owned Subsidiary of Parent
as permitted by the US Loan Documents.

 

7.4          Indebtedness. 
Create, incur, assume or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.

 

7.5          Encumbrances; Negative Pledges.  (a) Create,
incur, assume or suffer to exist any Lien with respect to any of its property,
or assign or otherwise convey any right to receive income, including the sale
of any Accounts, or permit any of its Subsidiaries so to do, except for
Permitted Liens, or (b) agree with any Person other than Bank not to grant
a security interest in, or otherwise encumber, any of its property, or permit
any Subsidiary to do so except (i) 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, (ii) leased
equipment, intellectual property and general intangibles of Borrower to the
extent excluded from the Collateral, (iii) any Hedging Agreements, so long
as such prohibition is limited to the assets securing Borrower’s or such
Subsidiary’s obligations under the applicable Hedging Agreement and (iv) as
a result of the Loan Documents and the US Loan Documents.

 

7.6          Distributions. 
Pay any dividends or make any other distribution or payment on account
of or in redemption, retirement or purchase of any Capital Stock, or permit any
of its Subsidiaries to do so, except that:

 

(a)           Borrower and its Subsidiaries may make payments
pursuant to and in accordance with the Cross License Agreement and Transfer
Pricing Agreements; and

 

(b)           Borrower and any Wholly-Owned Subsidiary of Borrower
may declare and pay dividends and other distributions to Parent or to any other
Wholly-Owned Subsidiary of Parent that is a Credit Party.

 

7.7          Investments. 
Directly or indirectly acquire or own, or make any Investment in or to
any Person, or permit any of its Subsidiaries so to do, other than Permitted
Investments; or suffer or permit any Subsidiary to be a party to, or be bound
by, an agreement that restricts such Subsidiary from paying dividends or
otherwise distributing property to Borrower except (i) as a result of the
Loan Documents and the US Loan Documents and (ii) as permitted under the
Transfer Pricing Agreements.

 

23

 

7.8          Transactions with Affiliates. 
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for:

 

(a)           transactions expressly permitted by, and subject to
the terms of, this Agreement, the other Loan Documents and the US Loan
Documents;

 

(b)           compensation and employment arrangements with
employees, officers and directors in the ordinary course of business; and

 

(c)           (i) transactions between or among any of the
Credit Parties and/or their Wholly-Owned Subsidiaries that are, or concurrent
with such transaction becomes, a Credit Party and (ii) transactions
between or among the Parent and its Subsidiaries that are permitted by the US
Loan Agreement;

 

(d)           the Cross License Agreement and the Transfer Pricing
Agreements;

 

(e)           the agreements identified in the Schedule; and

 

(f)            other transactions that are in the ordinary course of
Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a
non-affiliated Person.

 

7.9          Subordinated Debt. 
Make any payment in respect of any Subordinated Debt, or permit any of
its Subsidiaries to make any such payment, except in compliance with the terms
of such Subordinated Debt, or amend any provision contained in any
documentation relating to the Subordinated Debt without Bank’s prior written
consent except as permitted under the applicable subordination agreement.

 

7.10        Inventory and Equipment. Store any Inventory or Equipment with a
fair market value in excess of $250,000 with a bailee, warehouseman, or other
third party unless the third party has been notified of Bank’s security
interest and Bank (a) has received an acknowledgment from the third party
that it is holding or will hold the Inventory or Equipment for Bank’s benefit
or (b) is in pledge possession of the warehouse receipt, where negotiable,
covering such Inventory or Equipment. Store or maintain any Equipment or
Inventory at a location other than (i) one or more of the locations set
forth in Appendix 2 attached hereto or (ii) any other location or
locations disclosed to Bank in writing.

 

7.11        Compliance. 
Become an “investment company” or be controlled by an “investment
company,” within the meaning of the Investment Company Act of 1940, or become
principally engaged in, or undertake as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying margin
stock, or use the proceeds of any Credit Extension for such purpose.

 

8.             EVENTS
OF DEFAULT.

 

Any one or more of the following events shall
constitute an Event of Default by Borrower under this Agreement:

 

8.1          Payment Default. 
If Borrower fails to pay (a) when due, any principal on any Advance
or (b) within two (2) Business Days after the same shall become due
and payable, any interest, Bank Expenses or other Obligations (other than
principal) provided for or required under this Agreement or the other Loan
Documents;

 

8.2          Covenant Default.

 

(a)           If Borrower fails to perform any obligation under Section 6.3
(Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance),
6.7 (EBITDA), 6.8 (Fixed Charge Coverage Ratio), 6.9 (Senior Leverage Ratio),
6.10 (Minimum Liquidity) or 6.13 (Future Stock Pledges and Guaranties) or
violates any of the covenants contained in Article 7 of this Agreement; or

 

24

 

(b)           If Borrower fails or neglects to perform or observe
any other material term, provision, condition, covenant contained in this
Agreement, or in any of the other Loan Documents and as to any default under
such other term, provision, condition or covenant that can be cured, has failed
to cure such default within 30 days after Borrower receives written notice
thereof or any officer of Borrower becomes aware thereof, and within such time
period the failure to have cured such default shall not be deemed an Event of
Default (provided that no Credit Extensions will be required to be made during
such cure period).

 

8.3          Material Adverse Effect. 
A Material Adverse Effect occurs;

 

8.4          Attachment.  (a) If
any expropriation, attachment, sequestration, distress or execution affects any
asset or assets of the Borrower having an aggregate value in excess of $175,000
individually or $350,000 in the aggregate and is not discharged within 30 days,
(b) if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs for more than fifteen (15) calendar days which is reasonably likely to
be, have or result in a Material Adverse Effect, (c) if a judgment or
other claim becomes a lien or encumbrance upon any material portion of Borrower’s
assets, which has an aggregate fair market value in excess of $175,000
individually or $350,000 in the aggregate and such lien or encumbrance has not
been released or removed within thirty (30) days of attaching, or (d) if a
notice of lien, levy, or assessment is filed of record with respect to any
material portion of Borrower’s assets which has an aggregate fair market value
in excess of $175,000 individually or $350,000 in the aggregate by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, and the same is not paid
within thirty (30) days after Borrower receives notice thereof, provided that
none of the foregoing as described in clauses (a) through (d) shall
constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower
(provided that no Credit Extensions will be required to be made during such
cure period);

 

8.5          Insolvency.  If (a) Borrower is unable or admits inability to
pay its debts as they fall due, suspends 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, (b) the value of the assets of the Borrower is less
than its liabilities (taking into account contingent and prospective
liabilities), or (c) a moratorium or other protection from its creditors
is declared or imposed in respect of any indebtedness of the Borrower.

 

8.6          Insolvency Proceedings. 
If any corporate action, legal proceedings or other procedure or step is
taken (including the making of an application, the presentation of a petition,
the filing or service of a notice or the passing of a resolution) in relation
to (a) 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 the Borrower other than, in
the case of a winding-up, a winding up petition which is proved to the
satisfaction of Bank (acting in good faith) to be an abuse of process or to
have no real prospect of success and which is, in any event, discharged, stayed
or dismissed within 14 days of its presentation and before it is advertise, (b) a
composition, compromise, assignment or arrangement with any creditor of the
Borrower, (c) the appointment of a liquidator, supervisor, receiver,
administrative receiver, administrator, compulsory manager, trustee or other
similar officer in respect of the Borrower, or (d) any analogous procedure
or step is taken in any jurisdiction.

 

8.7          Other Agreements. 
If there is (a) an “Event of Default” as defined in the US Loan
Agreement, (b) a default in the payment of any principal of or interest
when due on any Indebtedness of Borrower (other than the Obligations) in the
outstanding principal amount in excess of $250,000 in the aggregate, which
default is not cured or waived within any applicable grace or cure period, or (c) a
default or other failure to perform in any agreement to which Borrower is a
party or by which it is bound relating to any Indebtedness (other than the
Obligations) in the outstanding principal amount in excess of $750,000 in the
aggregate, which default or breach is not cured or waived within any applicable
grace or cure period, which results in a right by a third party or parties,
whether or not exercised, to accelerate the maturity of such Indebtedness;

 

8.8          Judgments. 
If a judgment or judgments for the payment of money in an amount of at
least $175,000 individually or $350,000 in the aggregate (excluding judgments
and decrees to the extent covered by third party insurance of Borrower where
such coverage has been acknowledged by the insurer) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of thirty (30)
days of being rendered

 

25

 

(provided that no Credit
Extensions will be required to be made prior to the satisfaction or stay of
such judgment);

 

8.9          Misrepresentations. 
If any warranty or representation set forth herein or in any certificate
delivered to Bank by Borrower pursuant to this Agreement or any other Loan
Document shall prove to have been incorrect in any material respect when made
or deemed made; or

 

8.10        Guaranty.  If any guaranty
of all or a portion of the Obligations (a “Guaranty”) ceases for any reason to
be in full force and effect, or any Guarantor fails to perform any obligation
under any Guaranty or a security agreement securing any Guaranty (collectively,
the “Guaranty Documents”) which failure to perform or  is not cured or waived within any applicable
grace or cure period, or any “event of default” occurs under any Guaranty
Document or any Guarantor revokes or purports to revoke a Guaranty, or any
warranty or representation of a Guarantor set forth in any Guaranty Document to
which such Guarantor is a party or in any certificate delivered to Bank by a
Guarantor in connection with any Guaranty Document shall prove to have been
incorrect in any material respect when made or deemed made, or if any of the
circumstances described in Sections 8.4, 8.5 or 8.6 (as to the UK Guarantor
only), 8.7 or 8.8 occur with respect to any Guarantor.

 

9.             BANK’S RIGHTS AND REMEDIES.

 

9.1          Rights and Remedies. 
Upon the occurrence and during the continuance of an Event of Default,
Bank may, at its election, without notice of its election and without demand,
do any one or more of the following, all of which are authorized by Borrower:

 

(a)           Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable (provided that upon the occurrence of an Event of Default described
in Section 8.5, all Obligations shall become immediately due and payable
without any action by Bank);

 

(b)           Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other Loan Document;

 

(c)           Exercise any or all of its rights, remedies, powers or
discretions to the extent such right, remedy or power arises as a result of an
Event of Default under the Loan Documents; and

 

(d)           Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral for the repayment of any future drawings under such Letters of
Credit, and (ii) pay in advance all Letters of Credit fees scheduled to be
paid or payable over the remaining term of the Letters of Credit, and borrower
shall promptly deposit and pay such amounts.

 

9.2          Accounts Collection. 
At any time after the occurrence and during the continuance of an Event
of Default, Bank may notify any Person owing funds to Borrower of Bank’s
security interest in such funds and verify the amount of such Account.  After the occurrence and during the
continuance of an Event of Default, Borrower shall collect all amounts owing to
Borrower for Bank, receive in trust all payments as Bank’s trustee, and
promptly deliver such payments to Bank in their original form as received from
the account debtor, with proper endorsements for deposit.

 

9.3          Bank Expenses. 
If Borrower fails to pay any amounts or furnish any required proof of
payment due to third persons or entities, as required under the terms of this
Agreement, then Bank may do any or all of the following after reasonable
written notice to Borrower:  (a) make
payment of the same or any part thereof; or (b) obtain and maintain
insurance policies of the type discussed in Section 6.5 of this Agreement,
and take any action with respect to such policies as Bank reasonably deems
prudent.  Any amounts so paid or
deposited by Bank shall constitute Bank Expenses, shall be due and payable
within 10 Business Days following demand, and, to the extent not paid when due,
shall bear interest at the then applicable rate hereinabove provided, and shall
be secured by the Collateral.  Any
payments made by Bank shall not constitute an agreement by Bank to make similar
payments in the future or a waiver by Bank of any Event of Default under this
Agreement.

 

26

 

9.4          Remedies
Cumulative.  Bank’s rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be
cumulative.  Bank shall have all other
rights and remedies not inconsistent herewith as provided by law, or in equity.  No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower’s part shall be deemed a continuing waiver.  No delay by Bank shall constitute a waiver,
election, or acquiescence by it.  No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and
for the specific purpose for which it was given.

 

9.5          Demand; Protest. 
Except as expressly provided for herein or in any other Loan Document,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default or any other
notice (to the maximum extent permitted by applicable law) of any kind in
connection with the Loan Documents or the Collateral.

 

10.          NOTICES.

 

Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to Borrower or to Bank, as the case may be, at its addresses set
forth below:

 

	
  If to Borrower:

  	
   

  	
  EVOLVING
  SYSTEMS LIMITED

  
	
   

  	
   

  	
  9777 Pyramid
  Court, Suite 100

  
	
   

  	
   

  	
  Englewood, CO
  80112

  
	
   

  	
   

  	
  Attn: Anita T.
  Moseley, Company Secretary

  
	
   

  	
   

  	
  FAX: (303) 802-1138

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Attn: Brian R.
  Ervine, Director

  
	
   

  	
   

  	
  FAX: (303)
  802-1420

  
	
   

  	
   

  	
   

  
	
  If to Bank:

  	
   

  	
  Bridge Bank, N.A.

  
	
   

  	
   

  	
  55 Almaden Blvd.

  
	
   

  	
   

  	
  San Jose, CA 95113

  
	
   

  	
   

  	
  Attn: Dan Pistone

  
	
   

  	
   

  	
  FAX: (408) 423-8520

  

 

The parties hereto may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other.

 

Notices sent by personal delivery or recognized
overnight delivery service, or mailed by first-class, certified or registered
mail, shall be deemed to have been given when received; notices sent by
telefacsimile shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day).  Notices delivered through electronic
communications to the extent provided in the next paragraph shall be effective
as provided in such paragraph.

 

Notices and other communications to Bank hereunder may
be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by Bank.  Bank may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided that approval of such
procedures may be limited to particular notices or communications.  Unless each of the Persons sending and
receiving particular notices or communications otherwise agree, (i) notices
and other communications sent to an e-mail address shall be deemed received
upon the sender’s receipt of an acknowledgement from the intended recipient by
return e-mail (but excluding automated return e-mail, such as e-mail sent by
the “return receipt requested” function) or other written acknowledgement,
provided that if such notice or other communication is not sent during the
normal business hours

 

27

 

of the recipient, such
notice or communication shall be deemed to have been sent at the opening of
business on the next Business Day, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication
is available and identifying the website address therefor.

 

11.          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 Borrower and Bank hereby submits to the non-exclusive jurisdiction of the
state and Federal courts located in the County of Santa Clara, State of
California.  BORROWER AND BANK EACH
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS 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, the Loan Documents 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.

 

12.          GENERAL
PROVISIONS.

 

12.1        Successors and Assigns. 
This Agreement shall bind and inure to the benefit of the respective successors
and permitted assigns of each of the parties; provided, however, that neither
this Agreement nor any rights hereunder may be assigned by Borrower without
Bank’s prior written consent, which consent may be granted or withheld in Bank’s
sole discretion.  Subject to compliance
with Section 12.4 by both Bank and the Transferee (as defined in Section 12.4
(Taxes)), Bank shall have the right without the consent of or notice to
Borrower’s to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits hereunder.

 

12.2        Indemnification. 
Borrower shall defend, indemnify and hold harmless Bank and its 

 

officers,
employees, and agents against:  (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement and
the other Loan Documents; and (b) all losses or Bank Expenses in any way
suffered, incurred, or paid by Bank as a result of or in any way arising out
of, following, or consequential to transactions between Bank and Borrower under
this Agreement and the other Loan Documents (including without limitation
reasonable attorneys’ fees and expenses), except for losses caused by the gross
negligence or willful misconduct of the Person seeking indemnification.

 

12.3        Time of Essence. 
Time is of the essence for the performance of all obligations set forth
in this Agreement.

 

12.4        Taxes

 

(a)           Subject to this Section 12.4,
any and all payments by Borrower or any other Credit Party to Bank 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 such taxes (including income taxes or franchise
taxes) as are imposed on or measured by the net income of Bank by the
jurisdiction under the laws of which Bank is 

 

 

28

 

 

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 12.4,
the Credit Parties shall indemnify and hold harmless Bank 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 12.4) paid by Bank 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 wilful breach by Bank of any law or regulation.  Payment under this indemnification shall be
made within three (3) Business Days from the date Bank 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 Bank, then, subject to this Section 12.4:

 

(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 12.4), Bank 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 Bank the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to Bank.

 

(f)            Subject to the proviso to this Section 12.4(f),
Bank shall not  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 Bank without a UK
Withholding Tax Deduction if Bank was entitled under a Treaty to a full
exemption from UK Withholding Tax Deductions in respect of interest payable
hereunder, but on such date Bank 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 in any existing law, regulation, treaty or
directive or in the interpretation or application thereof; provided that, in
the case of the first due date for the payment of interest under Section 2.3(c) (i.e.,
March 10, 2008), where Section 12.4(i)(ii) applies and has been
complied with by Bank, but an approval under the Treaty has not yet been
obtained, interest hereunder shall accrue but not be payable (and shall not
thereby be treated as an Advance) until the earlier of (x) an Event of
Default occurring, and (y) the relevant approval being granted and (z) the
date which (but for this provision) would have been the second due date for the
payment of interest under Section 2.3(c) (i.e., April 10, 2008)
and Section 2.3(c) shall be varied accordingly.  On the earlier of (i) three (3) Business
Days following Bank notifying Borrower that the relevant approval has been
granted or Borrower otherwise becoming aware thereof and (ii) such second
due date for the payment of interest under Section 2.3(c) (i.e., April 10,
2008), interest shall in any event be payable in accordance with Section 12.4(a) and
(d).

 

(g)           Notwithstanding any other provision
of any Loan Document but subject to the next following sentence, if at any time
after the Closing Date or the making of any Advance (x) any change in any
existing law, regulation, treaty or directive or in the interpretation or
application thereof, (y) any new law,

 

 

29

 

 

regulation, treaty or directive enacted or any
interpretation or application thereof, or (z) compliance by Bank with new
request or directive (whether or not having the force of law) from any
Governmental Authority: (i) subjects Bank 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 Bank 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 Bank 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 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 Bank), or (ii) imposes
on Bank 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 Bank 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 Bank any
additional amounts necessary to compensate Bank, on an after-tax basis, for
such additional cost or reduced amount as determined by Bank (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 such increased cost or reduced amount is attributable to
the wilful breach by Bank (or its Affiliate) of any law or regulation, (ii) to
the extent such increased cost or reduced amount is attributable to a
withholding for or on account of Tax in respect of which the Credit Parties
have complied with Section 12.4(d) or (iii) to the extent Bank
shall have already been compensated, or is not entitled to compensation, for
such increased cost or reduced amount under Section 12.4(c).  If Bank becomes entitled to claim any
additional amounts pursuant to this Section 12.4 it shall reasonably
promptly after obtaining knowledge thereof notify Borrower of the event by
reason of which Bank has become so entitled, and each such notice of additional
amounts payable pursuant to this Section 12.4 submitted by Bank 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 Bank
upon becoming aware of the same.  In
addition, Bank shall promptly notify Borrower 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 Bank
ceasing to beneficially own interest payable hereunder or otherwise.  If Bank ceases to be a Treaty Lender by
reason of an action taken by Bank or by reason of a failure by Bank to take any
action as required by this Agreement shall, upon becoming aware of such action
or failure, also promptly notify 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 Bank.

 

(i)            To the extent that the Borrower or
another Credit Party reasonably determines that (i) Bank may recover Taxes
deducted 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 12.4(d) or (ii) a
withholding or deduction for or on account of taxes may be avoided or reduced
if, in either case, Bank completes certain procedural formalities and/or
provides properly completed and executed documentation prescribed by applicable
law, Bank shall within a reasonable timeframe cooperate with Borrower to
complete such procedural formalities and/or provide such documentation to the
Borrower (in each case but save as further provided below, upon the Borrower’s
reasonable request and at the Borrower’s sole cost and expense); and provided
that (save as further provided below Bank determines in its sole, good faith
reasonable judgment that completing such procedural formalities and/or
providing such documentation will not disadvantage or prejudice Bank in any
manner and provided further that Bank acknowledges that Section 12.4(i)(ii) applies
(without limitation to any further application of this Section 12.4(i))
from the date of this Agreement until the date on which Bank receives approval
under the Treaty to a full exemption from UK Withholding Tax Deductions in
respect of interest payable hereunder and the costs of completing with the
requisite procedural formalities in respect of such approval shall be borne by
Bank.

 

 

30

 

 

(j)            If Bank 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.  Notwithstanding any other provision of this
Agreement, if Bank 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 12.4.

 

(k)           If, at any time, Borrower requests
Bank to deliver any forms or other documentation in addition to those forms
required to be delivered by such Lender pursuant to Section 12.4, then
Borrower shall, on demand reimburse Bank for any costs and expenses (including
attorneys’ fees and expenses) reasonably incurred by Bank in the preparation or
delivery of such forms or other documentation.

 

(l)            If Borrower is required to pay
additional amounts to Bank pursuant to Section 12.4, then Bank 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 Bank is not otherwise disadvantageous to Bank.  In addition to the foregoing and if Bank
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 Bank
pursuant to Sections 12.4, 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.  The
Borrower shall indemnify the Bank for all costs and expenses reasonably
incurred by the Bank as a result of steps taken by it pursuant to this Section 12.4(l).

 

(m)          If:

 

(i)            Bank
(the “Existing Bank”) assigns or transfers any of its rights or obligations
under this Agreement or changes its Lending Office; and

 

(ii)           as
a result of circumstances existing at the date the assignment, transfer or
change occurs, a Credit Party would be obliged to make a payment to the
assignee or transferee (the “Transferee”) or Bank acting through its new
Lending Office under this Section 12.4,

 

then the Transferee or Bank acting through its new Lending Office is
only entitled to receive payment under this Section 12.4 to the same
extent as the Existing Bank or Bank acting through its previous Lending Office
would have been if the assignment, transfer or change had not occurred.

 

(n)           On claiming reimbursement or
compensation pursuant to this Section 12.4 Bank shall deliver to Borrower
a certificate setting forth in reasonable detail the amount payable to Bank
hereunder and such certificate shall be conclusive and binding on the Credit
Parties in the absence of manifest error.

 

(o)           The agreements and obligations of the
Credit Parties in this Section 12.4 shall survive the payment of all other
Obligations.  Save as provided otherwise
in this Section 12.4, this Section 12 does not in any way limit the
obligations of any Credit Party under the Loan Documents.

 

12.5        Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

 

 

31

 

 

12.6        Amendments in Writing, Integration. 
Neither this Agreement nor the Loan Documents can be amended or
terminated orally.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the
Loan Documents, if any, are merged into this Agreement and the Loan Documents.

 

12.7        Counterparts. 
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy or electronic copy shall be effective
as delivery of a manually executed counterpart of this Agreement.

 

12.8        Survival.  All
covenants, representations and warranties made in this Agreement shall survive
the execution and delivery of the Loan Documents and the making and funding of
the Advances so long as any Obligations remain outstanding (other than
contingent indemnity obligations for which no claim has been made) or Bank has
any obligation to make Credit Extensions to Borrower.  The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 and the confidentiality provisions of Section 12.9
shall survive until all applicable statute of limitations periods with respect
to actions that may be brought have run.

 

12.9        Confidentiality. 
In handling any confidential information Bank and all employees and
agents of Bank, including but not limited to accountants, shall exercise the
same degree of care that it exercises with respect to its own proprietary
information of the same types to maintain the confidentiality of any non-public
information thereby received or received pursuant to this Agreement or the
other Loan Documents except that disclosure of such information may be made (i) to
the subsidiaries or affiliates of Bank in connection with their present or
prospective business relations with Borrower (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such information and instructed to keep such information confidential
in accordance with this Section 12.9), (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
(x) entered into a comparable confidentiality agreement in favor of
Borrower to which Borrower is a party or pursuant to which Parent and its
Subsidiaries are third party beneficiaries and (y) delivered a copy of
such confidentiality agreement to Borrower, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank by a regulatory authority or examiner regulating or
having jurisdiction over Bank and requiring or requesting such disclosure and (v) as
Bank may determine in connection with the enforcement of any remedies hereunder
at any time during the existence of an Event of Default.  Confidential information hereunder shall not
include information that either:  (a) is
in the public domain or in the knowledge or possession of Bank when disclosed
to Bank with no confidentiality obligations to a third party, or becomes part
of the public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party on a non-confidential basis other than as a
result of this Section 12.9, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.  Should Bank be required to disclose any such
information by virtue of a subpoena or similar process by any court, tribunal,
or agency pursuant to items (iii), (iv) or (v) above, then Bank shall
use commercially reasonable efforts to promptly notify Borrower thereof so as
to allow Borrower or the other applicable Credit Party, at its sole cost and
expense, to seek a protective order or to take any other appropriate action to
protect its rights.

 

12.10      Patriot Act.  To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens an account.  WHAT THIS MEANS FOR YOU:  when you open an account, we will ask your
name, address, date of birth, and other information that will allow us to
identify you.  We may also ask to see
your driver’s license or other identifying documents.

 

12.11      No Consequential Damages. 
No party to this Agreement or any other Loan Document, nor any agent or
attorney of such party or Bank, 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.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

32

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first above written.

 

	
   

  	
  EVOLVING
  SYSTEMS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Brian R. Ervine

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIDGE
  BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

 

33

 

 

APPENDIX
1

 

	
  NAME
  OF ACCOUNT DEBTOR

  	
   

  	
  % WH TAXES

  
	
  Accenture

  	
   

  	
  10%

  
	
  Alaska Communications

  	
   

  	
   

  
	
  Alcatel

  	
   

  	
   

  
	
  Alltel

  	
   

  	
   

  
	
  AT&T Bellsouth

  	
   

  	
   

  
	
  AT&T Cingular

  	
   

  	
   

  
	
  Comcast

  	
   

  	
   

  
	
  Cox

  	
   

  	
   

  
	
  Cable &
  Wireless — Panama

  	
   

  	
   

  
	
  Leap/Crickett

  	
   

  	
   

  
	
  Lucent

  	
   

  	
   

  
	
  Qwest

  	
   

  	
   

  
	
  AT&T (Formerly SBC)

  	
   

  	
   

  
	
  Shaw

  	
   

  	
   

  
	
  SNET

  	
   

  	
   

  
	
  Sprint/Nextel

  	
   

  	
   

  
	
  Embarq

  	
   

  	
   

  
	
  Telenor Pakistan

  	
   

  	
   

  
	
  Telcordia

  	
   

  	
   

  
	
  Tw Telecom

  	
   

  	
   

  
	
  TNS

  	
   

  	
   

  
	
  Vartec

  	
   

  	
   

  
	
  Verisign

  	
   

  	
   

  
	
  Verizon

  	
   

  	
   

  
	
  Accenture

  	
   

  	
   

  
	
  American
  Telecommunication, Inc.

  	
   

  	
  Brazil 25% &
  20%; Mexico 10%

  
	
  Bulgaria Telecom

  	
   

  	
  15%

  
	
  British Telecom

  	
   

  	
   

  
	
  Cable & Wireless

  	
   

  	
   

  
	
  Cybercity

  	
   

  	
   

  
	
  Danet

  	
   

  	
   

  
	
  Lebanon MIC 1 S.A.L.

  	
   

  	
   

  
	
  Hutchison UK

  	
   

  	
   

  
	
  Hutchison Whampoa

  	
   

  	
   

  
	
  Inmarsat

  	
   

  	
   

  
	
  Monet

  	
   

  	
   

  
	
  MTN SA

  	
   

  	
   

  
	
  MTN Nigeria

  	
   

  	
  5%

  
	
  NEC Japan

  	
   

  	
   

  
	
  NTL (Acquired By Virgin
  Media)

  	
   

  	
   

  
	
  Siemens AG/VIPNet

  	
   

  	
   

  
	
  Siemans CAC

  	
   

  	
   

  
	
  Nokia/Siemans

  	
   

  	
   

  
	
  SiMobile

  	
   

  	
   

  
	
  Swisscom

  	
   

  	
   

  
	
  T-Mobile

  	
   

  	
   

  
	
  Tele2

  	
   

  	
   

  
	
  Virgin Media

  	
   

  	
   

  
	
  VipNet

  	
   

  	
   

  
	
  Vodafone Egypt

  	
   

  	
  15%

  
	
  Vodafone Greece

  	
   

  	
   

  
	
  IBM Greece

  	
   

  	
   

  
	
  Vodafone Japan

  	
   

  	
  10%

  
	
  Vodafone UK

  	
   

  	
   

  
	
  Wireless Trade

  	
   

  	
  5%

  

 

34

 

Appendix
2

 

Locations of
Inventory and Equipment

 

	
  Office Locations

  
	
   

  
	
  Evolving Systems, Inc.

  9777 Pyramid
  Court, Suite 100

  Englewood, CO  80112

  USA

  
	
   

  
	
  Evolving Systems Limited

  One Angel
  Square

  Torrens Street

  London EC1V 1PL

  UK

  
	
   

  
	
  Evolving Systems Limited

  Riverside
  Buildings

  108 Walcot Street

  Bath BA1 5BG

  UK

  
	
   

  
	
  Tertio Deutschland GmbH

  Erich-Zeitler-Strasse
  12

  85737 Ismaning

  Munich

  Germany

  
	
   

  
	
  Evolving Systems Networks India
  Private Ltd.

  3rd Floor, HM
  Geneva House

  14, Cunningham Road

  Bangalore — 560 052

  India

  
	
   

  
	
  Evolving Systems Networks India
  Private Ltd.

  Shah Sultan
  Complex

  Door No. 17, Ali Asker Road

  Bangalore — 560 052

  India

  
	
   

  
	
  Evolving Systems Limited

  
	
  P-3-15, Plaza Damas

  
	
  60, Jalan Sri Hartamas
  1,

  
	
  Sri Hartamas

  
	
  50480 Kuala Lumpur

  
	
  Malaysia

  

 

35

 

EXHIBIT B

 

ADVANCE
REQUEST FORM

 

1

 

EXHIBIT C

 

BORROWING BASE CERTIFICATE

 

	
  Borrower:  EVOLVING SYSTEMS LIMITED

  	
   

  	
  Lender: Bridge Bank,
  N.A.

  
	
   

  	
   

  	
   

  
	
  Commitment Amount:  $5,000,000

  	
   

  	
   

  

 

	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts Receivable
  Book Value as of

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  2.

  	
  Additions (please
  explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  3.

  	
  TOTAL ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE
  DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Amounts over 90 days
  due*

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  5.

  	
  Balance of 35% over 90
  day accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  6.

  	
  Concentration Limits*

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Foreign Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  8.

  	
  Governmental Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  9.

  	
  Contra Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  10.

  	
  Demo Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  11.

  	
  Intercompany/Employee
  Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other (please explain
  on reverse)

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  13.

  	
  TOTAL ACCOUNTS
  RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  14.

  	
  Eligible Accounts (#3
  minus #13)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  15.

  	
  LOAN VALUE OF ELIGIBLE
  ACCOUNTS (80% of #14)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  16.

  	
  Eligible Cash

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  17.

  	
  LOAN VALUE OF ELIGIBLE
  CASH (100% of #16)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  18.

  	
  LOAN VALUE OF ACCOUNTS
  PLUS ELIGIBLE CASH (#15 plus #17)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  Maximum Loan Amount

  	
   

  	
   

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
  20.

  	
  Total Funds Available
  [Lesser of #18 or #19]

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  21.

  	
  Present balance owing
  on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  22.

  	
  Outstanding under
  Sublimits (Letters of Credit, FX Contracts)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  23.

  	
  AVAILABILITY (#20 minus
  #21 and #22)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
								

 

* Or 120 days in the case of
Accounts of Qwest, Vodafone Egypt and Cable & Wireless Panama (or any
of their respective successors)

 

The undersigned represents and
warrants that the foregoing is true, complete and correct in all material
respects, and that the information reflected in this Borrowing Base Certificate
complies in all material respects with the representations and warranties set
forth in the Loan and Security Agreement between the undersigned and Bridge
Bank, N.A..

 

	
  EVOLVING SYSTEMS LIMITED

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Authorized
  Signer

  	
   

  	
   

  
				

 

1

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
   

  	
  BRIDGE BANK, N.A.

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
  EVOLVING SYSTEMS LIMITED

  

 

    
The undersigned authorized officer of EVOLVING SYSTEMS LIMITED (“Borrower”)
hereby certifies, solely in his or her capacity as an authorized officer of
Borrower, that in accordance with the terms and conditions of the Loan
Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in
compliance for the period ending
                              
with all covenants except as noted below, (ii) no Default or Event of
Default exists as of the date hereof[, except as set forth in Schedule
[    ] attached hereto], and (iii) all representations
and warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof except [(x) as set forth in
Schedule [    ] attached hereto and (y)] to the extent that
such representations and warranties specifically refer to an earlier date, in
which case they are true and correct in all material respects as of such
earlier date.  Attached herewith are the
[audited/unaudited] financial statements required pursuant to Section 6.3[(a)][(b)]
of the Agreement.  Such financial
statements fairly present in all material respects the consolidated financial
position and results of operations of Borrower (or such Subsidiary) and its
consolidated Subsidiaries as of the dates and for the relevant periods
indicated (subject in the case of unaudited financial statements, to year end
adjustments and matters that would be disclosed in financial statement notes).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.

 

Please
indicate compliance status by circling Yes/No under “Complies” column.

 

	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial
  statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  A/R Audit

  	
   

  	
  Initial and Annual

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Operating Budget

  	
   

  	
  within 30 days of FYE

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  IP Report

  	
   

  	
  Upon Bank’s request
  within 10 days

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Deposit balances with
  Bank

  	
   

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Deposit balances
  outside Bank

  	
   

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  5% Licenses Report

  	
   

  	
  Monthly

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial
  Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EBITDA measured on a
  trailing 12 month basis*

  	
   

  	
  $4,700,000 through
  6/30/08 and $4,250,000 thereafter

  	
   

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Fixed Charge Coverage
  Ratio*

  	
   

  	
  1.30:1.00 through
  3/31/2008; 1.15:1.00 thereafter

  	
   

  	
        :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Senior Leverage Ratio*

  	
   

  	
  2.25:1.00 through
  9/30/2008; 1.75:1.00 thereafter

  	
   

  	
        :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  
	
  Minimum Liquidity

  	
   

  	
  $4,500,000

  	
   

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  	
  N/A

  

 

*beginning
March 31, 2008 and at the end of each fiscal quarter thereafter.

 

	
  Comments Regarding Exceptions: 
  See Attached.

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
  Received by:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  	
   

  
	
  TITLE

  	
   

  	
   

  
	
  Date:

  	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
										

 

1

 

ANNEX A

 

SHARES

 

None.

 

1Exhibit
10.1(d)

 

DATED  22  FEBRUARY 
2008

 

EVOLVING
SYSTEMS LIMITED

AND

 

BRIDGE
BANK, N.A.

 

DEBENTURE

 

 

 

 

19 Cavendish Square

London W1A 2AW

DX 42748
Oxford Circus North

telephone  +44(0)20 7636 1616

fax  +44 (0)20 7491 2899

Ref : 028176/00002/H3326953.5

 

 

CONTENTS

 

	
  CLAUSE

  	
   

  	
  PAGE

  
	
  1.

  	
  DEFINITIONS AND INTERPRETATION

  	
  2

  
	
  2.

  	
  COVENANT TO PAY

  	
  12

  
	
  3.

  	
  INTEREST

  	
  12

  
	
  4.

  	
  SECURITY

  	
  12

  
	
  5.

  	
  CONVERSION OF FLOATING CHARGE

  	
  14

  
	
  6.

  	
  FURTHER ASSURANCE

  	
  15

  
	
  7.

  	
  DEPOSIT OF DOCUMENTS AND TITLE DEEDS

  	
  16

  
	
  8.

  	
  NEGATIVE PLEDGE

  	
  16

  
	
  9.

  	
  THE DEPOSIT ACCOUNT

  	
  17

  
	
  10.

  	
  THE BOOK DEBTS ACCOUNT

  	
  17

  
	
  11.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  18

  
	
  12.

  	
  UNDERTAKINGS

  	
  18

  
	
  13.

  	
  Dividends and voting rights

  	
  21

  
	
  14.

  	
  COSTS AND BANK’S PERFORMANCE OF COVENANTS

  	
  23

  
	
  15.

  	
  DEFAULT

  	
  23

  
	
  16.

  	
  STATUTORY POWER OF SALE

  	
  24

  
	
  17.

  	
  RECEIVER OR ADMINISTRATOR

  	
  24

  
	
  18.

  	
  PROTECTION OF THIRD PARTIES

  	
  27

  
	
  19.

  	
  No LIABILITY AS MORTGAGEE IN POSSESSION AND INDEMNITY

  	
  27

  
	
  20.

  	
  REASSIGNMENT

  	
  28

  
	
  21.

  	
  POWER OF ATTORNEY

  	
  28

  
	
  22.

  	
  CUMULATIVE AND CONTINUING SECURITY

  	
  29

  
	
  23.

  	
  AVOIDANCE OF PAYMENTS

  	
  29

  
	
  24.

  	
  PRIOR CHARGES

  	
  29

  
	
  25.

  	
  OPENING A NEW ACCOUNT

  	
  30

  
	
  26.

  	
  SUSPENSE ACCOUNT

  	
  30

  
	
  27.

  	
  PAYMENTS AND WITHHOLDING TAXES

  	
  30

  
	
  28.

  	
  CURRENCY

  	
  31

  
	
  29.

  	
  SET-OFF

  	
  31

  
	
  30.

  	
  ASSIGNMENT

  	
  32

  
	
  31.

  	
  WAIVERS

  	
  32

  
	
  32.

  	
  SEVERABILITY

  	
  32

  
	
  33.

  	
  THE LAND REGISTRY

  	
  32

  
	
  34.

  	
  NOTICES

  	
  33

  
	
  35.

  	
  LAW AND JURISDICTION

  	
  33

  
	
  36.

  	
  COUNTERPARTS AND DELIVERY

  	
  33

  
				

 

1

 

THIS DEBENTURE is made as a
Deed  on the 22nd day of  February  2008

 

BETWEEN:

 

(1)                                  EVOLVING
SYSTEMS LIMITED (registered in England and
Wales under company number 02325854) the registered office of which is at One
Angel Square, Torrens Street, London EC1V 1PL (the “Chargor”); and

 

(2)                                  BRIDGE
BANK, N.A. of 55 Almaden
Boulevard, San Jose, A 95113, United States of America
(the “Bank”).

 

RECITALS

 

(A)                              The
Bank has agreed to make available to the Chargor a revolving loan facility of
up to US$5,000,000 (five million American dollars) subject to and upon the
terms and conditions contained in the Loan Agreement (as defined below).

 

(a)                                  The Bank requires
the Chargor, and the Chargor has agreed, to enter into this Debenture for the
purpose of providing security to the Bank for the Secured Liabilities.

 

IT IS AGREED as follows:

 

1.                                      DEFINITIONS
AND INTERPRETATION

 

1.1                                 Definitions

 

In this Debenture the following expressions have the following
meanings, unless the context otherwise requires:

 

	
  “Administrator”

  	
   

  	
  means any administrator appointed pursuant to this Debenture.

  
	
   

  	
   

  	
   

  
	
  “Book Debts”

  	
   

  	
  means:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
  all book and other debts in existence from time to
  time (including, without limitation, any sums whatsoever owed by banks or
  similar institutions), both present and future, due, owing to or which may
  become due, owing to or purchased or otherwise acquired by the Chargor; and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
  the benefit of all rights whatsoever relating to
  the debts referred to above including, without limitation, any related
  agreements, documents, rights and remedies (including, without limitation,
  negotiable or non-negotiable instruments, guarantees, indemnities, legal and
  equitable charges, reservation of proprietary rights, rights of tracing,
  unpaid vendors liens and all similar connected or related rights and assets).

  

 

2

 

	
  “Book Debts Account”

  	
   

  	
  means such separate and denominated account or accounts with the
  Bank, Royal Bank of Scotland plc or such bank as may be specified or approved
  in writing by the Bank for the purpose of receiving payments of the proceeds
  of realisation and collection of Book Debts (the Borrower’s account number
  21775153 with Royal Bank of Scotland plc (sort code 15 -10 -00) being so
  approved at today’s date).

  
	
   

  	
   

  	
   

  
	
  “Cash Deposit”

  	
   

  	
  means all sums from time to time standing to the credit of the
  Deposit Accounts and all interest on such sums.

  
	
   

  	
   

  	
   

  
	
  “Charged Property”

  	
   

  	
  means the whole or any part of the property, assets, income and
  undertaking of the Chargor from time to time mortgaged, charged or assigned
  to the Bank pursuant to this Debenture.

  
	
   

  	
   

  	
   

  
	
  “Contracts”

  	
   

  	
  means all the Chargor’s rights, title, interest and benefit in and to
  any contract the details of which are referred to in Schedule 3.

  
	
   

  	
   

  	
   

  
	
  “Costs”

  	
   

  	
  means all costs, charges or expenses of whatsoever nature (including,
  without limitation, legal fees) including, without limitation, disbursements
  and any Value Added Tax to be charged on such costs, charges, expenses and
  disbursements.

  
	
   

  	
   

  	
   

  
	
  “Default Rate”

  	
   

  	
  means the annual rate of interest specified in the second sentence of
  Clause 2.3(b) of the Loan Agreement.

  

 

3

 

	
  “Deposit Accounts”

  	
   

  	
  means the interest bearing accounts with Royal Bank of Scotland plc
  (sort code 15-10-00) Account Numbers or names 21775188, EVOSYS — USD1, TERTEL
  — EURI, Euro Money Fund and Sterling Money Fund and the Book Debts Account; 

   

  or such other accounts as the Bank may in its discretion, approve or
  require, as any such account may be redesignated or renumbered from time to
  time and “Deposit Accounts” means any of them.

  
	
   

  	
   

  	
   

  
	
  “Distribution Rights”

  	
   

  	
  means all allotments, accretions, offers, options, rights, bonuses,
  benefits and advantages, whether by way of conversion, redemption,
  preference, option or otherwise which at any time accrue to or are offered or
  arise in respect of any Investments or Shares, and includes all dividends,
  interest and other distributions paid or payable on or in respect of them.

  
	
   

  	
   

  	
   

  
	
  “Event of Default”

  	
   

  	
  means any of those events or circumstances set out in Clause 8
  (Events of Default) of the Loan Agreement and an Event of Default is
  “continuing” if it has not been remedied to the satisfaction of the Bank or
  waived by it in writing.

  
	
   

  	
   

  	
   

  
	
  “Facility Documents”

  	
   

  	
  means this Debenture, the Loan Agreement and each of the Security
  Documents.

  
	
   

  	
   

  	
   

  
	
  “Fixtures”

  	
   

  	
  means all assets of whatsoever nature, apart from land and buildings,
  forming part of any freehold or leasehold property owned by the Chargor and
  deemed by law to be immovable property other than tenant’s fixtures.

  
	
   

  	
   

  	
   

  
	
  “Future Plant and Machinery”

  	
   

  	
  means all plant and machinery, equipment, fittings, installations,
  apparatus, tools, motor vehicles and all other such assets (other than
  Fixtures) whatsoever, wherever situate, which become the property of the
  Chargor after the date of this Debenture.

  

 

4

 

	
  “Future Property”

  	
   

  	
  means all estates and other interests in any freehold, leasehold or
  other immovable property (including, without limitation, all Fixtures on such
  property) which become the property of the Chargor after the date of this
  Debenture, all proceeds of sale derived from such property and the benefit of
  all covenants to which the Chargor is entitled in respect of such property.

  
	
   

  	
   

  	
   

  
	
  “Insolvency Act”

  	
   

  	
  means the Insolvency Act 1986.

  
	
   

  	
   

  	
   

  
	
  “Intellectual Property”

  	
   

  	
  means all subsisting patents and subsisting rights of a similar
  nature held in any part of the world, applications for patents and such
  rights, divisions and continuations of such applications for patents,
  registered and unregistered trade marks (including but not limited to those
  listed in Schedule 1B), registered and unregistered service marks, registered
  designs, utility models (in each case for their full period and all
  extensions and renewals of them), applications for any of them and the right
  to apply for any of them in any part of the world, inventions, confidential
  information, Know-how, business names, trade names, brand names, copyright
  and rights in the nature of copyright, design rights and get-up and any
  similar rights existing in any country; and the benefit (subject to the
  burden) of any and all agreements, arrangements and licences in connection
  with any of the foregoing.

  
	
   

  	
   

  	
   

  
	
  “Investments”

  	
   

  	
  means all or any stocks, shares (other than any Shares and the
  Chargor’s shares in Evolving Systems GmbH), bonds and securities of any kind
  (marketable or otherwise), negotiable instruments and warrants and any other
  financial instruments as defined in the Regulations.

  

 

5

 

	
  “Know-how”

  	
   

  	
  means all the body of knowledge, technical experience, expertise and
  skills, technical processes, secret processes formulae and technical
  information held by the Chargor and relating to its business, which is not in
  the public domain.

  
	
   

  	
   

  	
   

  
	
  “Loan Agreement”

  	
   

  	
  means the Loan Agreement dated the date of this Debenture and made
  between the Bank (1) and the Chargor (2).

  
	
   

  	
   

  	
   

  
	
  “LPA”

  	
   

  	
  means the Law of Property Act 1925.

  
	
   

  	
   

  	
   

  
	
  “Material Adverse Effect”

  	
   

  	
  has the meaning given to it in the Loan Agreement (as if “Loan Agreement” and “Collateral”
  there were Facility Documents and Charged Property respectively and with such
  other changes as are necessary to fit the context).

  
	
   

  	
   

  	
   

  
	
  “Occupational Leases”

  	
   

  	
  means all leasehold interests and other occupational rights
  whatsoever (including, without limitation, all licences and agreements for
  leases) in existence from time to time relating to the whole or any part of
  the Property, the immediate reversion to which is vested in the Chargor.

  
	
   

  	
   

  	
   

  
	
  “Other Property”

  	
   

  	
  means all estates and other interests in any freehold, leasehold or
  other immovable property (including, without limitation, all Fixtures on such
  property) which are the property of the Chargor at the date of this Debenture
  and do not form part of the Scheduled Property, all proceeds of sale derived
  from such property and the benefit of all covenants to which the Chargor is
  entitled in respect of such property.

  
	
   

  	
   

  	
   

  
	
  “Permitted Lien”

  	
   

  	
  shall have the same meaning as in the Loan Agreement with such
  changes as are necessary to fit this context.

  

 

6

 

	
  “Permitted Transfer”

  	
   

  	
  (a)

  	
  means a conveyance, sale, lease, transfer or disposition by the Chargor
  permitted under Clause 7.1 of the Loan Agreement.

  
	
   

  	
   

  	
   

  	
   

  
	
  “Planning Acts”

  	
   

  	
  means the Planning and Compulsory Purchase Act 2004, the Town and
  Country Planning Act 1990, the Planning (Listed Buildings and Conservation
  Areas) Act 1990, the Planning (Hazardous Substances) Act 1990, the Planning
  and Compensation Act 1991, and the Local Government Planning and Land Act
  1980 .

  
	
   

  	
   

  	
   

  
	
  “Plant and Machinery”

  	
   

  	
  means all plant and machinery, equipment fittings, installations and
  apparatus, tools, motor vehicles and all other such assets (other than
  Fixtures) whatsoever, wherever situate, which are the property of the Chargor
  at the date of this Debenture.

  
	
   

  	
   

  	
   

  
	
  “Property”

  	
   

  	
  means the Scheduled Property, the Other Property and the Future
  Property.

  
	
   

  	
   

  	
   

  
	
  “Receiver”

  	
   

  	
  means any receiver appointed pursuant to this Debenture.

  
	
   

  	
   

  	
   

  
	
  “Regulations”

  	
   

  	
  means the Financial Collateral Arrangements (No 2) Regulations 2003
  (S.I. 2003/3226) or equivalent legislation in any applicable jurisdiction
  bringing into effect Directive 2002/47/EC on financial collateral
  arrangements, and “Regulation” means any of them.

  
	
   

  	
   

  	
   

  
	
  “Rights”

  	
   

  	
  means all the Chargor’s rights, title and interest from time to time
  in any lease, licence or occupational right whatsoever together with the
  entire benefit of all the Chargor’s rights, title and interest from time to
  time in any renewal of, replacement of or variation to any such lease,
  licence or occupational right (including, without limitation, all its rights,
  title and interest in any occupational Lease, agreement for any Occupational
  Lease and any associated agreements which may be granted by the Chargor or
  any person deriving title from the Chargor from time to time over or in
  respect of the whole or any part of the Property and any other properties
  (freehold or leasehold) in which the Chargor has an interest).

  

 

7

 

	
  “Scheduled Property”

  	
   

  	
  means all the property short particulars of which are set out in
  Schedule 1 (The Scheduled Property) (if any), including, without limitation,
  all Fixtures on such property.

  
	
   

  	
   

  	
   

  
	
  “Secured Liabilities”

  	
   

  	
  means all moneys, debts and liabilities from time to time due, owing
  or incurred by the Chargor to the Bank on any current or other account
  whatsoever pursuant to the Facility Documents, in each case: 

  
	
   

  	
   

  	
  (a) 

  	
  whether present or future;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
  whether alone or jointly with any other person; 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)

  	
  whether actual or contingent; 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)

  	
  whether as principal or as surety; 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)

  	
  in whatsoever name, form or style and whether not originally incurred
  by the Chargor to the Bank;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)

  	
  in whatsoever currency denominated; or 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (g)

  	
  otherwise; 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  including, without limitation, all liabilities in connection with
  foreign exchange transactions, accepting, endorsing or discounting notes or
  bills, under bonds, guarantees indemnities, documentary or other credits or
  any instruments from time to time entered into by the Bank for or at the
  request of the Chargor together with interest to the date of 

  

 

8

 

	
   

  	
   

  	
  payment at such rates and upon such terms as may from time to time be
  agreed and all commission, fees, costs (including, without limitation, legal
  fees) and other charges and provided always that no obligation or liability
  shall be included in the definition of Secured Liabilities to the extent
  that, if it were so included, this Debenture (or any part of it) would
  constitute unlawful financial assistance within the meaning of sections 151
  and 152 of the Companies Act 1985.

  
	
   

  	
   

  	
   

  
	
  “Security Documents”

  	
   

  	
  means any document entered into by any person from time to time
  creating (a) any Security Interest, directly or indirectly, for the
  obligations of the Chargor or any other person under the Facility Documents
  including, without limitation, this Debenture or (b) any guarantee,
  indemnity or other similar undertaking in respect of any such obligations.

  
	
   

  	
   

  	
   

  
	
  “Security Interest”

  	
   

  	
  means any mortgage, charge, assignment, pledge, lien, right of
  set-off, hypothecation encumbrance, priority or other security interest
  (whether fixed or floating) including, without limitation, any “hold-back” or
  “flawed asset” arrangement together with any preferential right, retention of
  title, deferred purchase, leasing, sale or purchase, sale and leaseback
  arrangement, trust agreement declaration of trust, trust arising by operation
  of law, any option or agreement for any of the same or any arrangement which
  has substantially the same commercial or substantive effect as the creation
  of security.

  
	
  “Shares”

  	
   

  	
  means all shares held by the Chargor in its Subsidiaries and which
  are listed in Schedule 1A but not including its shares in Evolving Systems
  GmbH.

  

 

9

 

 

1.2                               Interpretation

 

1.2.1                                        In this Debenture:

 

1.2.1.1                                       the Contents page and clause headings
are included for convenience only and do not affect the construction of this
Debenture;

 

1.2.1.2                                       words denoting the singular include the
plural and vice versa; and

 

1.2.1.3                                       words denoting one gender include each
other gender.

 

1.2.2                                           In this Debenture, unless the
context otherwise requires, references to:

 

1.2.2.1                                       persons include references to natural
persons, firms, partnerships, companies, corporations associations,
organisations and trusts (in each case whether or not having a separate legal
personality);

 

1.2.2.2                                       documents, instruments and agreements
(including, without limitation, this Debenture and any document referred to in
this Debenture) are references to such documents, instruments and agreements as
modified, amended, varied, supplemented or novated from time to time;

 

1.2.2.3                                       receivers are references to receivers of
whatsoever nature including, without limitation, receivers and managers and
administrative receivers;

 

1.2.2.4                                       the terms the “Bank” the “Receiver” and the
“Administrator” include, where the context so admits, references to any
delegate of any such person and any substitute person appointed in respect of
any of them;

 

1.2.2.5                                       a party to this Debenture include
references to its successors, transferees and assigns;

 

1.2.2.6                                       Recitals, Clauses and Schedules are
references to recitals to this Debenture, clauses of this Debenture and
schedules to this Debenture; and references to this Debenture include its
Schedules

 

10

 

1.2.2.7                                       paragraphs are references to paragraphs of
the Schedule in which the references appear;

 

1.2.2.8                                       statutory provisions (where the context so
admits and unless otherwise expressly provided) are construed as references to
those provisions as respectively amended, consolidated, extended or re-enacted
from time to time, and to any orders regulations instruments or other
subordinate legislation made under the relevant statute; and

 

1.2.2.9                                       a time of day is a reference to London
time.

 

1.3                               Loan Agreement defined terms

 

Unless otherwise defined in this Debenture, terms defined in the Loan
Agreement bear the same meaning in this Debenture.

 

1.4                               Conflict with Loan Agreement

 

If there is any conflict between the provisions of this Debenture and
the provisions of the Loan Agreement, the provisions of the Loan Agreement
shall prevail.

 

1.5                               Section 2(1) Law of Property
(Miscellaneous Provisions) Act 1989

 

The terms of the other Finance Documents and of any side letters
between any parties in relation to any Finance Document are incorporated in
this Deed to the extent required to ensure that any purported disposition of
the Charged Property contained in this Deed is a valid disposition in accordance
with section 2(1) Law of Property (Miscellaneous Provisions) Act 1989.

 

1.6                               Third party rights

 

Save as expressly provided in clause 18.2 and save for a Receiver or
Administrator and their delegates and sub-delegates or as otherwise expressly
provided to the contrary in a Facility Document a third party (being any person
other than the Chargor and the Bank) has no right under the Contracts (Rights
of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of
this Deed. Notwithstanding any term of any Facility Document, the consent of
any such third party is not required to rescind or vary this Deed at any time.

 

1.7                               Perpetuity Period

 

The perpetuity period applicable to all trusts declared by this Deed
shall be 80 years.

 

11

 

1.8                               Enterprise Act 2002

 

Paragraph 14 of Schedule B1 of the Insolvency Act 1986 (as inserted by
section 248 of, and Schedule 16 to, the Enterprise Act 2002) applies to the
floating charge created by this Deed.

 

2.                                      COVENANT TO
PAY

 

The Chargor shall on demand pay to the Bank or discharge, as the case
may be, all the Secured Liabilities when the Secured Liabilities become due.

 

3.                                      INTEREST

 

The Chargor shall pay to the Bank interest on the Secured Liabilities
(after as well as before any demand made or judgment obtained or the
liquidation or administration of the Chargor) at the rates and upon the terms
set out in Clause 2.3(a) of the Loan Agreement or if applicable the
Default Rate and shall be compounded and computed in accordance with such
Clause 2.3.

 

4.                                      SECURITY

 

By way of continuing security in favour of the Bank for the payment and
discharge of the Secured Liabilities, the Chargor with full title guarantee
hereby charges to the Bank or assigns to the Bank (as the case may be) the
property set out below in the manner set out below. (Each assignment set out
below is an absolute assignment for the purposes of Section 136 of the LPA
(Legal assignments of things in action) and is not made by way of charge only):

 

4.1                               Scheduled Property

 

By way of first fixed charge by way of legal mortgage, the Scheduled
Property and all Rights relating to the Scheduled Property in existence at the
date of this Debenture.

 

4.2                               Other Property and the Future Property

 

By way of first fixed charge:

 

4.2.1                                           the Other Property and the
Future Property;

 

4.2.2                                           all Rights relating to the
Other Property and the Future Property; and

 

4.2.3                                           all Rights relating to the
Scheduled Property coming into existence after the date of this Debenture.

 

12

 

4.3                               Contracts

 

By way of absolute legal assignment, the Contracts.

 

4.4                               Book Debts

 

By way of first fixed charge, the Book Debts.

 

4.5                               Cash Deposit and Deposit Accounts

 

4.5.1                                     By way of first fixed charge,
all the Chargor’s rights, title, interest and benefit in the Cash Deposit and
the Deposit Accounts

 

4.6                               Shares and Investments

 

The Chargor mortgages or (if to the extent that this
Debenture does not take effect as a mortgage) charges by way of fixed charge:

 

4.6.1                                        all Shares and Investments;
and

 

4.6.2                                        all related Distribution
Rights.

 

4.7                               Intellectual Property

 

By way of first fixed charge, all the Intellectual Property of the
Chargor.

 

4.8                                 Plant and Machinery

 

By way of first fixed charge, the Plant and Machinery.

 

4.9                               Future Plant and Machinery

 

By way of first fixed charge, the Future Plant and Machinery.

 

4.10                         Goodwill

 

By way of first fixed charge, all the goodwill and uncalled capital for
the time being of the Chargor.

 

4.11                         Floating charge

 

By way of first floating charge, all the undertaking and assets of the
Chargor whatsoever, wherever situate, whether movable, immovable, present or
future (including without limitation, its uncalled capital for the time being
and all the undertaking and assets of the Chargor referred to above which are,
for any reason not validly charged or assigned pursuant to Clauses 4.1
(Scheduled Property) to 4.10 (Goodwill) (inclusive) of this Debenture).

 

13

 

4.12                         Security Restrictions

 

4.12.1                       There shall be excluded from the charge created by
Clause 4 any property held by the Chargor under a lease or other agreement
which either precludes absolutely or conditionally (including requiring the
consent of any third party) the Chargor from creating any charge over its
interest in that property (each an Excluded Property) until the relevant
condition or waiver has been satisfied or obtained.

 

4.12.2                       For each Excluded Property (which shall not include
property held by the Chargor pursuant to standard form contracts leases or
other agreements entered into by it in and for the purposes of its ordinary
course of business), the Chargor undertakes, as soon as practicable after
receipt of a request in writing from the Bank, to:

 

(i)                                                                     apply for the relevant consent
or waiver of prohibition or conditions and, to use commercially reasonable
endeavours to obtain that consent or waiver of prohibition ;

 

(ii)                                                                  keep the Bank informed of its
progress in obtaining such consent or waiver; and forthwith upon receipt of such
consent or waiver, provide the Bank with a copy.

 

4.12.3                       Forthwith upon receipt of the relevant waiver or
consent, the relevant formerly Excluded Property shall stand charged to the
Bank under Clause 4. If required by the Bank at any time following receipt of
that waiver or consent, the Chargor will execute a valid fixed charge in such
form as the Bank shall require.

 

5.                                      CONVERSION
OF FLOATING CHARGE

 

5.1                               Conversion by notice

 

The Bank may by notice to the Chargor convert the floating charge
contained in this Debenture into a fixed charge as regards such Charged
Property as the Bank may specify (whether generally or specifically) in that
notice (i) if it considers (acting reasonably) that it would be desirable
to do so in order to protect, preserve or supplement the charges over the
Charged Property or the priority of those charges; or (ii) on, or at any
time following, the occurrence of an Event of Default (if the Event of Default
is continuing at the relevant time).

 

14

 

5.2                               Automatic conversion

 

If, without the prior written consent of the Bank:

 

5.2.1                                         the Chargor creates any Security Interest
over any of the Charged Property, or attempts to do so, other than a Permitted
Lien, or

 

5.2.2                                         any person levies or attempts to levy any
distress, attachment, execution or other legal process against any of such
Charged Property, or

 

5.2.3                                         a receiver is appointed over any Charged
Property, or

 

5.2.4                                         the Bank receives notice of a proposal or
intention to appoint an administrator of the Chargor (or one is appointed)

 

the floating charge created by this Debenture over the Charged Property
the subject of such Security Interest or process will automatically, without
notice, be converted into a fixed charge as soon as such event occurs but
without prejudice to any other circumstance in which such floating charge may
crystallise.

 

6.                                      FURTHER
ASSURANCE

 

6.1                               Grant of further security

 

The Chargor shall:

 

6.1.1                                         promptly, at any time if so required by the
Bank, at its own expense execute and deliver to the Bank such further legal or
other mortgages, charges, assignments securities, authorities and documents as
the Bank may in its reasonable discretion require of the whole or such part of
the Charged Property as the Bank may specify, in such form as the Bank may in
its reasonable discretion require, to secure the payment or discharge of the
Secured Liabilities, including, without limitation, in order to vest the whole
or such part of the Charged Property in the Bank, the nominee of the Bank or in
any purchaser from the Bank or the Receiver or Administrator;

 

6.1.2                                         pending the execution and delivery of any
such assignments, hold such Charged Property upon trust for the Bank subject to
the provisions of this Debenture; and

 

15

 

6.1.3                                         pending the execution and delivery of any
such mortgages, charges, or other security, hold such Charged Property subject
to the provisions of this Debenture.

 

6.2                               Notification of acquisition of property

 

6.2.1                                         The Chargor shall immediately notify the
Bank of any contract for the acquisition by the Chargor of any freehold or
leasehold property .  The Chargor shall,
in the case of any such property title to which (either before or after the
acquisition of such property) is registered at the Land Registry:

 

6.2.1.1                                    promptly notify the Bank of the title
number(s); and

 

6.2.1.2            at the same time as application is
made to the Land Registry for the registration of the Chargor as the Registered
Proprietor of such property, request the Chief Land Registrar to enter a Notice
of this Debenture on the Charges Register of the property so acquired by the
Chargor substantially in the form of the notice set out in Clause 33 (the Land
Registry).

 

6.2.2                                         The Chargor shall, promptly after its
acquisition supply the Bank with full details of any Future Property and
deposit with the Bank such documents relating to such assets as the Bank may in
its discretion require.

 

7.                                      DEPOSIT OF
DOCUMENTS AND TITLE DEEDS

 

7.1                               The Chargor shall deposit with the Bank
(and the Bank during the continuance of this security may hold and retain):

 

7.1.1                                         all deeds and documents of title relating
to the Scheduled Property, the Other Property and the Future Property
including, without limitation, all Occupational Leases; and

 

7.1.2                                         all such deeds and documents of title (if
any) relating to the Book Debts as the Bank may from time to time specify.

 

8.                                      NEGATIVE
PLEDGE

 

The Chargor shall not:

 

8.1                              create, purport to create or allow to
subsist, any Security Interest over the whole or any part of the Charged
Property except for any Permitted Lien;

 

8.2                              convey, assign, transfer, or agree to
convey, assign or transfer the whole or any part of the Charged Property except
by means of a Permitted Transfer;

 

16

 

8.3                              permit any other person to be registered at
the Land Registry as proprietor of any interest (including any easement or
overriding interest) in any of the Charged Property or

 

8.4                              release, exchange, compound, set off, grant
time or indulgence in respect of, or in any other manner deal with, all or any
of the Book Debts save as expressly provided in this Debenture or except in the
ordinary course of its business.

 

9.                                      THE
DEPOSIT ACCOUNT

 

9.1                               The Chargor shall open and maintain the
Deposit Accounts.

 

9.2                              The Chargor shall not withdraw from the
Deposit Accounts all or any of the Cash Deposit except that, unless and until
the security constituted by this Debenture has become enforceable in accordance
with Clause 15, the Chargor shall be entitled to withdraw (or direct any
transfer of) all or any part of the monies in the Deposit Accounts in and for
the purposes of the ordinary course of its business without the prior written
consent of the Bank, but following the Bank subsequently taking action to
enforce this Debenture, the Bank shall be entitled (in its absolute discretion)
to refuse to permit any such withdrawal or transfer.

 

9.3                              The Chargor shall forthwith give to the
financial institution with whom the Deposit Accounts are held an irrevocable
notice of charge in the form set out in Part 1 of Schedule 2 (Form of
notice to third party bank) or such other form as the Bank may in its
discretion reasonably requires.

 

10.                               THE BOOK
DEBTS ACCOUNT

 

Until all the security constituted by this Debenture is discharged the
Chargor shall:

 

10.1                        collect and realise all Book Debts in the ordinary
course of its business. For the avoidance of doubt, it is hereby declared that
for the purposes of this Debenture, the ordinary course of business of the
Chargor does not include or extend to the selling, assigning or in any other
way factoring or discounting any Book Debts. The Chargor shall hold the
proceeds of such collection and realisation of the Book Debts upon trust for
the Bank pending payment of such proceeds into the Book Debts Account;

 

10.2                        pay the proceeds of such collection and realisation
into the Book Debts Account unless and to the extent the Bank otherwise agrees
in writing;

 

10.3                        not withdraw from the Book Debts Account all or any
monies standing to the credit of the Book Debts Account except that, unless and
until the security constituted by this Debenture has become enforceable in
accordance with Clause 15, the Chargor shall

 

17

 

be entitled to withdraw (or direct any
transfer of) all or any part of the monies in the Book Debts Account in and for
the purposes of the ordinary course of its business without the prior written
consent of the Bank, but following the Bank subsequently taking action to
enforce this Debenture, the Bank shall be entitled (in its absolute discretion)
to refuse to permit any such withdrawal or transfer; and

 

10.4                        if called upon so to do by the Bank at any time after
the occurrence of an Event of Default which is continuing execute a legal
assignment of the Book Debts to the Bank in such terms as the Bank may in its
discretion require, give such notice of that legal assignment to the debtors
from whom the Book Debts are due, owing or incurred and take any such other
step as the Bank may in its discretion require to perfect such legal
assignment.

 

11.                               REPRESENTATIONS
AND WARRANTIES

 

11.1                         The Chargor represents and warrants to the Bank that:

 

11.1.1                               Ownership of the Charged Property

 

it is absolutely, solely and beneficially entitled to all the Charged
Property as from the date it or any part of it fails to be charged under this
Debenture and the rights of the Chargor in respect of the Charged Property are
free from any Security Interest of any kind other than a Permitted Lien;

 

11.1.2          No disposal

 

it has not sold or agreed to sell or otherwise disposed of, or agreed
to dispose of, the benefit of all or any of the Chargor’s right, title and
interest in and to the Charged Property except by means of a Permitted Transfer;

 

11.1.3          Shares and Investments

 

all Shares and Investments beneficially owned by it
as at the date of this Debenture are described opposite its name in Schedule
1A.

 

11.2                        The representations and warranties set forth in this
Clause are given and made on and as of the date of this Debenture, shall
survive the execution of this Debenture and are deemed to be repeated at each
time the representations and warranties in the Loan Agreement are deemed to be
repeated.

 

12.                               UNDERTAKINGS

 

The Chargor gives each of the undertakings contained in this Clause to
the Bank.

 

18

 

12.1                         Duration

 

The undertakings in this Clause shall remain in force during the
continuance of the security constituted by this Debenture.

 

12.2                         To provide information

 

The Chargor shall furnish to the Bank as soon as reasonably practicable
following written demand from the Bank such information and supply such
documents or papers relating to the Charged Property from time to time as the
Bank may in its discretion reasonably require.

 

12.3                         Notification of Event of Default

 

The Chargor shall notify the Bank in writing of the
happening of any Event of Default promptly upon any of its responsible
personnel becoming aware of the same.

 

12.4                         The Property

 

Except as permitted under the Loan Agreement, the Chargor shall:

 

12.4.1          at all times keep in good and
substantial repair and condition, all buildings, erections and structures on
and in the Property;

 

12.4.2          keep all Plant and Machinery and
future Plant and Machinery in good repair, working order and condition and fit
for its purpose; and

 

12.4.3          where it is uneconomic to repair any
part of the Charged Property, replace such part by another similar asset of
equal or greater quality and value.

 

12.5                         The Chargor shall not:

 

12.5.1                               carry out any material works of demolition
or construction in or to the Property;

 

12.5.2                               sever any Fixtures except for effecting any
necessary repairs or replacing the same with new or improved models; nor

 

12.5.3                               except with the prior written consent of
the Bank, carry on an development within the meaning of the Planning Acts in or
upon any part of the Property.

 

12.6                         Title

 

The Chargor shall:

 

19

 

12.6.1                                comply in all material respects with,
enforce and not waive, release or vary (or agree so to do) any restrictive or
other covenants or obligations affecting the Property;

 

12.6.2                                pay all rents, rates, Taxes and outgoings
however arising payable in respect of the whole or any part of the Property
owed by it or by the owner or occupier of the whole or any part of the Property
and comply in all material respects with all restrictive and other covenants
and obligations to be performed by it under any lease under which it holds the
whole or any part of the Property;

 

12.6.3                                if the Bank or the Receiver or
Administrator pays any such sum, reimburse the Bank or the Receiver or
Administrator in full, on demand, the amount of such sum together with interest
at the Default Rate calculated in accordance with Clause 3 (Interest) from the
date of payment by the Bank or the Receiver or Administrator until the date of
reimbursement;

 

12.6.4                                enforce all material restrictive or other
covenants and obligations owed to it by any lessor under any such lease;

 

12.6.5                                not waive, release or vary (or agree so to
do) any material obligation owed to it by any such lessor or any provision of
any such lease;

 

12.6.6                                not exercise any option or power to break
or terminate any such lease; not surrender or agree to surrender any such
lease;

 

12.6.7                                not do, or omit to do, anything under any
such lease whereby such lease might be forfeited; and

 

12.6.8                                except with the prior written consent of
the Bank, not agree any increase in the rent payable under any such lease.

 

12.7                         No creation of easements etc.

 

The Chargor shall not grant, create, or permit to be acquired, any
easement, right, interest or privilege relating to or affecting the whole or
any part of the Property.

 

12.8                         Leasing

 

The Chargor shall not

 

12.8.1                                exercise any statutory or other power of
leasing, agreeing to lease or accepting surrenders of leases otherwise
available to the Chargor of the whole or any part of the Property;

 

20

 

12.8.2                                grant or agree to grant or create any
Occupational Lease of any description or contractual right to occupy or use the
whole or any part of the Property; nor

 

12.8.3                                grant any licence or permission to assign,
underlet or part with, or share occupation or possession of the whole or any part
of the Property.

 

12.9                         Occupational Leases

 

The Chargor shall:

 

12.9.1                                comply with all restrictive and other
covenants and obligations, however arising, to be performed by it as lessor
under any Occupational Lease;

 

12.9.2                                enforce all restrictive and other covenants
and obligations, however arising, owed to it as lessor under any occupational
Lease;

 

12.9.3                                not waive, release or vary (or agree so to
do) any Rights or any provision of any occupational Lease;

 

12.9.4                                except with the prior written consent of
the Bank, not:

 

12.9.4.1                              exercise any option or power to break,
terminate, renew or extend any Occupational Lease;

 

12.9.4.2                              accept or agree to accept any surrender of
any Occupational Lease; nor

 

12.9.4.3                              grant any consent or licence as lessor or
grantor under any Occupational Lease; and

 

12.9.5                                comply with any provisions contained in any
Occupational Lease for the review of the rents thereby reserved and, except
with the prior written consent of the Bank, shall not settle or agree to settle
any such rent review.

 

12.10                   Investigation of title and other enquiries

 

The
Chargor shall, at its expense, grant the Bank or its solicitors on reasonable
request all such facilities within the power of the Chargor to enable the Bank
or such solicitors to carry out investigations of title to the Property and to
carry out general enquiries relating to the Property which a prudent mortgagee
might carry out.

 

13.                               DIVIDENDS
AND VOTING RIGHTS

 

13.1                         Before Default or demand

 

21

 

For so long as no Event of Default has occurred and is
continuing:

 

(a)                               the Chargor shall pay all monies arising
from the Distribution Rights relating to the Shares and Investments into the
Deposit Account;

 

(b)                              the Chargor shall not exercise any voting
and other rights and powers attached to the Shares and Investments in a manner
which is inconsistent with the security constituted or intended to be
constituted by this Debenture or is in breach of any of the provisions of any
of the Facility Documents; and

 

(c)                               promptly following receipt, the Chargor
shall forward to the Bank copies of any notice for an extraordinary or annual
general meeting of the company which has issued the Shares or Investments (as
the case may be) at which resolutions are proposed to either (a) to place
the company into any form of  winding up,
or (b) to apply for an administration order, or (c) to apply for an
automatic moratorium under the Insolvency Act 2000.

 

13.2                         After Default or Demand

 

After an Event of Default occurs and is continuing the
Chargor shall promptly pay over to the Bank all monies arising from the
Distribution Rights relating to the Shares and Investments which it may
receive, and exercise all voting and other rights and powers attached to the
Shares and Investments in any manner which the Bank may direct.

 

13.3                           Other obligations in respect
of Shares and Investments

 

 The Chargor
shall:

 

13.3.1             promptly copy to the Bank, and comply with, all
requests for information which is within its knowledge and which are made under
section 793 of the Companies Act 2006 or any similar provision contained in any
article of association or other constitutional document relating to any of its
Shares and Investments; and

 

13.3.2                  comply with all
other conditions and obligations assumed by it in respect of any of the Shares
and Investments where failure to so comply would adversely affect the interests
of the Bank.

 

22

 

 

14.                               COSTS AND
BANK’S PERFORMANCE OF COVENANTS

 

14.1                           Costs undertaking

 

14.1.1                                     The Chargor shall promptly on
demand pay or reimburse to the Bank and any Administrator or Receiver the
amount of all reasonable Costs incurred by the Bank and any Administrator or
Receiver (which shall form part of the Secured Liabilities) in connection with:

 

14.1.1.1                                      the negotiation, preparation,
printing, execution, registration, perfection and completion of this Debenture,
the Charged Property or any document referred to in this Debenture; or

 

14.1.1.2                                      any actual or proposed
amendment or extension of or any waiver or consent under this Debenture.

 

14.1.2                                     The Chargor shall promptly pay
on demand to the Bank and any Administrator or Receiver the amount of all Costs
in any way incurred by the Bank and/or the Administrator and/or the Receiver
..in relation to the protection, enforcement or preservation of any of the Bank’s
rights under this Debenture or in suing for or recovering any of the Secured
Liabilities (including, without limitation, the costs of any proceedings in
relation to this Debenture or the Secured Liabilities).

 

14.2                           Bank’s performance of
covenants

 

If the Chargor fails to perform any of the undertakings contained in
Clause 12.4 (Property) to Clause 12.9 (Occupational Leases) (inclusive), the
Bank may (save in relation to Environmental Matters) perform any such covenant
at the Chargor’s expense and the Chargor shall reimburse the Bank for the Costs
of such performance on demand. Nothing in this Debenture shall oblige the Bank
to perform any covenant of the Chargor.

 

15.                               DEFAULT

 

15.1                           Enforcement

 

This Debenture will become enforceable on the occurrence of any Event
of Default  which is continuing or if the
Chargor requests the Bank to appoint a Receiver or Administrator over the whole
or any part of its undertaking or. assets or if a petition is presented for an
administration order to be made in respect of the Chargor or any document or
notice is signed for the appointment of an administrator of the Chargor under
the Insolvency Act.

 

23

 

16.                               STATUTORY
POWER OF SALE

 

16.1                           For the purposes of all powers
implied by statute, and in particular the power of sale under Section 101
of the LPA (Powers incident to estate or interest in a mortgage), the Secured
Liabilities will be deemed to have become due when the security created by this
Debenture becomes enforceable and Section 103 of the LPA (Regulation of
exercise of power of sale) and Section 93 of the LPA (Restriction on consolidation
of mortgages) will not apply.

 

16.2                           The statutory powers of
leasing conferred on the Bank are extended so as to authorise the Bank to
lease, make arrangements for leases, accept surrender of leases and grant
options on such terms and conditions as the Bank may in its discretion think
fit. The Bank is not obliged to comply with any of the provisions of Section 99
(Leasing powers of mortgagor and mortgagee in possession) and Section 100
(Powers of mortgagor and mortgagee in possession to accept surrenders of
leases) of the LPA.

 

16.3                           Each of the Bank, the Receiver
and the Administrator may exercise such person’s statutory power of sale in
respect of the whole or any part of the Property.

 

17.                               RECEIVER
OR ADMINISTRATOR

 

17.1                           Appointment of Receiver or
Administrator

 

17.1.1                                     At any time after the security
constituted by this Debenture has become enforceable, whether or not the Bank
has entered into or taken possession of the whole or any part of the Charged
Property pursuant to this Debenture (in addition to, and without limiting, all
statutory and other powers of the Bank under the LPA, Insolvency Act or
otherwise):

 

17.1.1.1                                      the Bank may, by writing under
the hand of any authorised officer of the Bank, appoint any person to be a
Receiver or to be an Administrator of all or any part of the Charged Property
and such person shall, with effect from the date of such appointment, be a “Receiver”
or “Administrator” as the case may be;

 

17.1.1.2                                      the Bank may, from time to
time, in similar manner, remove the Receiver or Administrator and appoint
another in his place;

 

24

 

17.1.1.3                                      the Bank may, either at the
time of appointment or at any time thereafter, fix the remuneration of the
Receiver or Administrator;

 

17.1.1.4                                      the Bank may, without further
notice and without the restrictions contained in Section 103 of the Law of
Property Act 1925 (Regulation of exercise of power of sale), exercise in
respect of all or any part of the Shares and the Investments all the powers and
rights exercisable by the registered holder of the Shares and the Investments
and all other powers conferred on mortgagees by the Law of Property Act 1925 as
varied or extended by this Debenture; and

 

17.1.1.5                                      the Bank may apply any
dividends, interest or other payments received or receivable by the Bank in
respect of the Shares and the Investments as if they were proceeds of sale.

 

None of the restrictions imposed by the LPA in relation to the
appointment of receivers, the giving of notice or otherwise shall apply.

 

17.1.2                                     The Receiver or Administrator
may from time to time delegate, by power of attorney or otherwise, to any
person any of his powers and discretions, whether arising by statute, the
provisions of this Debenture or otherwise, upon such terms and for such periods
of time as he may in his discretion think fit and may from time to time
terminate any such delegation. The Bank shall not be liable to the Chargor for
any loss or damage arising from any such delegate’s act, default, neglect or misconduct
save to the extent arising from such delegate’s fraud, wilful default or gross
negligence.

 

17.2                           Powers

 

The Receiver and Administrator each has (but is not obliged to
exercise) all the powers (save in relation to Environmental Matters) to do or abstain
from doing anything which the Chargor could do or abstain from doing in
relation to the Charged Property in addition to the powers conferred by the LPA
and the Insolvency Act as if, in each case he was an administrative receiver
appointed thereunder.

 

17.3                           Receiver as agent of the
Chargor

 

The Receiver and Administrator are both at all times and for all
purposes the agent of the Chargor. Subject to the provisions of the Insolvency
Act, the Chargor is solely responsible for all the Receiver and Administrator’s
acts, defaults, neglect and 

 

25

 

misconduct of any nature whatsoever and for his remuneration and Costs,
to the exclusion of liability on the part of the Bank, save to the extent
arising from the Receiver or Administrator’s fraud, wilful default or gross
negligence.

 

17.4                           Several power

 

Where more than one Receiver or Administrator is appointed, each has
the power to act severally unless the Bank specifies otherwise in the
appointment.

 

17.5                           Powers exercisable by the Bank

 

17.5.1                                     The Bank may exercise all
powers granted to the Receiver or Administrator by this Debenture, whether as
attorney of the Chargor or otherwise.

 

17.5.2                                     The powers of the Receiver and
the Administrator are in addition to, and without prejudice to, all statutory
and other powers of the Bank as provided in Clause 16 (Statutory power of sale)
or otherwise and so that, inter alia, such powers are and remain exercisable by
the Bank in respect of that part of the Charged Property in respect of which no
appointment of a Receiver or Administrator by the Bank is from time to time
subsisting.

 

17.6                           Application of proceeds

 

The provisions of Sections 99 to 109 inclusive of the LPA are varied
and extended to the extent that all monies received by the Receiver or
Administrator be applied in the following order:

 

17.6.1                                     in full payment of his
remuneration and the Costs of realisation including, without limitation, all
Costs of, or incidental to, any exercise of any power referred to in this Debenture
including, without limitation, all outgoings paid by the Receiver or
Administrator;

 

17.6.2                                     providing for the matters
specified in paragraphs (I) to (iii) inclusive of Section 109 (8) of
the LPA (Appointment, powers, remuneration and duties of receiver);

 

17.6.3                                     in or towards satisfaction of
any debts or other imposts which are by statute made payable in preference to
the Secured Liabilities to the extent to which such debts or imposts are made
so payable;

 

17.6.4                                     if so required by the Bank in
its discretion, in or towards satisfaction of the Secured Liabilities: and

 

26

 

17.6.5                                     to the person entitled to any
surplus.

 

18.                               PROTECTION
OF THIRD PARTIES

 

18.1                           Any person (including, without
limitation, any purchaser. mortgagor or mortgagee) (in this Clause a “purchaser”)
dealing with the Bank may assume without inquiry that

 

18.1.1                                     some part of the Secured
Liabilities has become due;

 

18.1.2                                     a demand for such Secured
Liabilities has been duly made; and

 

18.1.3                                     such Secured Liabilities have
become due within the meaning of Section 101 of the LPA (Powers incident
to estate or interest in a mortgage).

 

18.2                           No purchaser dealing with the
Receiver Administrator or the Bank is to be concerned to enquire whether any power
exercised or purported to be exercised by the Receiver Administrator or the
Bank has become exercisable, or as to the propriety or regularity of any sale
by, or other dealing with, the Receiver or Administrator or the Bank. Any such
sale or dealing is deemed to be within the powers conferred by this Debenture
and to be valid and effective accordingly. All the protection to purchasers
contained in Section 104 (Conveyance on sale) and Section 107
(Mortgagee’s receipt, discharges etc.) of the LPA and Section 42(3) of
the Insolvency Act (Prohibition upon enquiry into administrative receiver’s
powers) apply to any purchaser.

 

19.                               NO
LIABILITY AS MORTGAGEE IN POSSESSION AND INDEMNITY

 

19.1                           Mortgagee’s liability

 

Neither the Bank nor the Receiver or Administrator is:

 

19.1.1                                     liable to account as mortgagee
in possession in respect of the Charged Property; nor

 

19.1.2                                     liable for any loss upon
realisation or exercise of any power, authority or right of the Bank or the
Receiver or Administrator arising under this Debenture, nor for any act,
default, neglect or misconduct of any nature whatsoever save to the extent of
its own fraud, wilful default or gross negligence.

 

19.2                           Possession

 

If the Bank or the Receiver or Administrator enters into possession of
the Charged Property, such person may at any time go out of possession at the
discretion of such person.

 

27

 

19.3                           Indemnity

 

The Chargor hereby agrees to indemnify and hold harmless the Bank, any
Administrator and any Receiver from and against all actions, claims, expenses,
demands and liabilities whether arising out of contract or in tort or in any
other way incurred or which may at any time be incurred by him or by any
manager, agent, officer, servant or workman for whose debt, default or
miscarriage he may be answerable for anything done or omitted to be done in the
exercise or purported exercise of his powers under the provisions of this
Debenture except for losses caused by the gross negligence or willful misconduct
of the person seeking indemnification.

 

20.                               REASSIGNMENT

 

Subject to Clause 23.1 (Avoidance of payments). upon irrevocable
discharge in full of the Secured Liabilities the Bank shall reassign to the
Chargor all the Chargor’s rights. title, interest and benefit in and to the
Charged Property and the Bank shall, at the request and cost of the Chargor,
take whatever action is necessary to release or re-assign the Charged Property
from this Debenture.

 

21.                               POWER OF
ATTORNEY

 

21.1                           The Chargor irrevocably appoints,
by way of security the Bank, each person deriving title from the Bank and the
Receiver and Administrator , jointly and severally to be its attorney (with
full power to appoint substitutes and to sub-delegate) for it, in its name, on
its behalf and as its act and deed or otherwise to sign or execute any deed or
document or do any act or thing which the Chargor is, or may become, obliged to
(but does not in a timely fashion) sign, execute or do pursuant to this
Debenture or which the Bank, the Receiver and Administrator or any person
deriving title from the Bank or the Receiver or Administrator may in the
discretion of such person think fit in connection with the exercise of any of
the powers of such person or the realisation of any security constituted by
this Debenture.

 

21.2                           Without prejudice to the
generality of the foregoing, the Chargor unconditionally undertakes to the
Bank, and separately to the Receiver and the Administrator and to each person
deriving title from the Bank or the Receiver or Administrator, that it shall
ratify and confirm anything done or purported to be done by any attorney
appointed pursuant to this Clause.

 

28

 

Each of the Bank, any the Receiver and Administrator
agrees that the power of attorney provided under this Clause 21 shall only be
relied upon and exercised by such person after the occurrence of an Event of
Default which a is continuing.

 

22.                               CUMULATIVE
AND CONTINUING SECURITY

 

22.1                           This Debenture is a continuing
security to the Bank regardless of any intermediate payment or discharge of the
whole or any part of the Secured Liabilities and will not be prejudiced or
affected by any act, omission or circumstance which, but for this Clause, might
affect or diminish its effectiveness.

 

22.2                           The security constituted by
this Debenture is in addition to, is not in substitution for, is without
prejudice to, and does not merge with, any rights whatsoever which the Bank may
have, whether in respect of the Secured Liabilities or otherwise, including,
without limitation, any rights arising under any other Security Interest, any
bill, note, guarantee, contract or applicable rule of law.

 

22.3                           Any receipt, release or
discharge of the security constituted by, or of any liability arising under,
this Debenture shall not release or discharge the Chargor from any liability
which may exist independently of this Debenture to the Bank.

 

22.4                           Where the security constituted
by this Debenture initially takes effect as a collateral or further security to
any other Security Interest held by the Bank then, notwithstanding any receipt,
release or discharge given in respect of such other Security Interest, this
Debenture shall take effect as an independent security for any monies,
liabilities or other sums secured by such other Security Interest.

 

23.                               AVOIDANCE
OF PAYMENTS

 

23.1                           Where any discharge (whether
in respect of the obligations of the Chargor this Debenture any other security
or otherwise) is made in whole or in part or any arrangement is made on the faith
of any payment, security or other disposition which is avoided or must be
restored on insolvency, liquidation or otherwise without limitation, the
Security and the liability of the Chargor under this Debenture shall continue
as if the discharge or arrangement had not occurred.

 

23.2                           The Bank may concede or
compromise any claim that any payment security or other disposition is liable
to avoidance or restoration.

 

24.                               PRIOR
CHARGES

 

24.1                           If there subsists any prior
Security Interest against the Charged Property and either any step is taken to
exercise any power or remedy conferred by such Security 

 

29

 

Interest or the Bank or the Receiver or
Administrator exercises any power of sale pursuant to this Debenture, the Bank
may redeem such prior Security Interest or procure the transfer of such
Security Interest to itself and may settle and pass the accounts of the person
entitled to such Security Interest. Any accounts so settled and passed are
conclusive and binding on the Chargor.

 

24.2                           The Chargor shall reimburse
the Bank for any Costs incurred by the Bank in exercise of its rights under
this Clause.

 

25.                               OPENING A
NEW ACCOUNT

 

25.1                           If the Bank receives notice of
any subsequent Security Interest affecting the Charged Property other than any
Permitted Lien, the Bank may open a new account for the Chargor in its books.

 

25.2                           If the Bank does not open such
new account, then, unless the Bank gives express written notice to the contrary
to the Chargor, all payments by or on behalf of the Chargor to the Bank will be
treated as from the time of receipt of notice of such subsequent Security
Interest by the Bank as having been credited to a new account of the Chargor
and not as having been applied in reduction of the amount of the Secured
Liabilities as at the time when the notice was received.

 

26.                               SUSPENSE
ACCOUNT

 

The Bank may, in its reasonable discretion credit to any suspense or
impersonal account and hold in such account, on such terms as the Bank may in
its reasonable discretion think fit, all monies received, recovered or realised
by the Bank pursuant to this Debenture (including, without imitation, the
proceeds of any conversion of currency) pending the application from time to
time (as the Bank may effect in its discretion) of such monies and accrued
interest if any, in or towards satisfaction of the Secured Liabilities.

 

27.                               PAYMENTS
AND WITHHOLDING TAXES

 

Subject to Clause 12 of the Loan Agreement, the Chargor shall pay and
discharge the Secured Liabilities without any set-off, counterclaim,
restriction or condition, without regard to any equities between the Chargor
and the Bank and free and clear of, and without deduction or withholding for,
or on account of, any Taxes, except to the extent that the Chargor is required
by law to deduct or withhold any Taxes, in which case it shall pay to the Bank
such additional amount as may be necessary in order to ensure that the net
amount received by the Bank after the required deduction or withholding
(including, without limitation, any required deduction or 

 

30

 

withholding on such additional amount) is equal to the amount that the
Bank would have received had no such deduction or withholding been made. Any
additional amount paid under this Clause shall be treated as agreed
compensation and not as interest.

 

28.                               CURRENCY

 

28.1                           All monies received or held by
the Bank or any Receiver in respect of the Secured Liabilities may, from time
to time after demand has been made, be converted into such other currency as
the Bank in its reasonable discretion considers necessary or desirable to cover
the obligations and liabilities actual or contingent of the Chargor in that
other currency at the exchange rate available to the Bank for purchasing that
other currency with the existing currency (the “Exchange
Rate”).

 

28.2                           If and to the extent that the
Chargor fails to pay the amount due on demand the Bank may in its absolute
discretion without notice to the Chargor purchase at any time thereafter so
much of any currency as the Bank considers necessary or desirable to cover the
obligations and liabilities of the Chargor in such currency hereby secured at
the Exchange Rate for purchasing such currency with another relevant currency  and the Chargor hereby agrees to indemnify
the Bank against the full American dollar cost incurred by the Bank for such
purchase.

 

28.3                           Neither the Bank nor any
Receiver shall be liable to the Chargor for any loss resulting from any
fluctuation in exchange rates before or after the exercise of the foregoing
powers.

 

28.4                           No payment to the Bank
(whether under any judgment or court order or otherwise) shall discharge the
obligation or liability of the Chargor in respect of which it was made unless
and until the Bank shall have received payment in full in the currency in which
such obligation or liability was incurred and to the extent that the amount of
any such payment shall, on actual conversion into such currency, fall short of
such obligation or liability actual or contingent expressed in that currency
the Bank shall have a further separate cause of action against the Chargor,
shall be entitled to enforce the security constituted by this Debenture to
recover the amount of the shortfall and such amount wilt bear interest in
accordance with Clause 3 (Interest) from the date of payment by the Bank until
the date of reimbursement.

 

29.                               SET-OFF

 

The Chargor agrees the Bank may at any time without notice or further
demand notwithstanding any settlement of account or other matter whatsoever,
combine or 

 

31

 

consolidate all or any of its then existing accounts wherever situate
(whether current, deposit, loan or of any other nature whatsoever whether
subject to notice or not and whether in sterling or in any other currency) and
set-off or transfer any sum standing to the credit of any one or more such
accounts in or towards satisfaction of the Secured Liabilities. Where such
combination set-off or transfer requires the conversion of one currency into
another, such conversion shall be calculated at the Exchange Rate for
purchasing the currency for which the Chargor is liable, with the existing
currency.

 

30.                               ASSIGNMENT

 

Neither the Bank nor the Chargor may assign, transfer, novate or
dispose of any of or any interest in, its rights and obligations under this
Debenture, save as provided in Clause 12.1 (Successors and Assigns) of the Loan
Agreement.

 

31.                               WAIVERS

 

No failure or delay or other relaxation or indulgence on the part of
the Bank to exercise any power, right or remedy shall operate as a waiver
thereof nor shall any single or partial exercise or waiver of any power, right
or remedy preclude its further exercise or the exercise of any other power,
right or remedy.

 

32.                               SEVERABILITY

 

Each of the provisions of this Debenture is distinct and severable from
the others and if at any time one or more of such provisions is or becomes
illegal, invalid or unenforceable the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.

 

33.                               THE LAND
REGISTRY

 

The Chargor hereby applies to the Chief Land Registrar to enter a
restriction in the Proprietorship Registers of the registered titles (if any)
of the Scheduled Property or, in the case of the first registration of the
whole or any part of the Scheduled Property, against the Scheduled Property, or
both, of a restriction in the following form:

 

“Except under an order of the Registrar no disposition or dealing by
the proprietor of the land is to be registered without the consent of the
proprietor for the time being of the charge hereby created”.

 

32

 

34.                               NOTICES

 

Each party may
give any notice, demand or other communication under or in connection with this
debenture in the manner set forth and subject to the terms of section 10 of the
loan agreement at the address identified with its name below.

 

35.                               LAW AND
JURISDICTION

 

This Debenture shall be governed by and construed in accordance with
English law.

 

36.                               COUNTERPARTS
AND DELIVERY

 

36.1                           This Debenture may be executed
in any number of counterparts, each of which is an original, and which together
constitute one and the same document.

 

36.2                           if this Debenture is executed
in more than one counterpart, this Debenture is deemed to be delivered and has
effect when:

 

36.2.1                                     each party other than the Bank
has executed a counterpart of this Debenture;

 

36.2.2                                     each party other than the Bank
has handed over such counterpart to one of the other parties to this Debenture;
and

 

36.2.3                                     each of the counterparts has
been dated.

 

36.3                           If this Debenture is not
executed in more than one counterpart, this Debenture is deemed to be delivered
and has effect when each party other than the Bank has executed this Debenture
and this Debenture has been dated. It shall take effect as a Deed even though
it may not be executed by the Bank at all or signed by it under hand.

 

36.4                           The execution (whether under
hand or as a deed) or sealing of this Debenture by or on behalf of a party
constitutes an authority to the solicitors or legal counsel acting for that
party in connection with this Debenture, or any agent or employee of such
solicitors or legal counsel, to deliver it as a deed on behalf of that party.

 

36.5                           Each party to this Debenture
agrees to be bound by this Debenture despite the fact that any other person
which was intended to execute or to be bound does not do so or is not
effectually bound and despite the fact that any Security Interest contained in
this Debenture is terminated or becomes invalid or unenforceable against any
other person whether or not such termination, invalidity or enforceability is
known to the Bank.

 

33

 

IN WITNESS WHEREOF this Debenture has
been executed and delivered as a deed on the date written at the beginning of
this Debenture.

 

34

 

 

 

 

SCHEDULE 1

 

THE SCHEDULED PROPERTY

 

 

 

 

 

	
  Short Description of Property

  	
   

  	
  Title Number (if any)

  
	
   

  	
   

  	
   

  
	
  None

  	
   

  	
   

  

 

 

35

 

 

SCHEDULE 1A

 

THE SHARES

 

 

 

 

 

	
  Name of Company

  	
   

  	
  Number of Shares

  
	
  None

  	
   

  	
   

  

 

SCHEDULE 1B

 

TRADEMARKS

 

	
  Mark

  	
   

  	
  Registration Number

  	
   

  	
  Class

  	
   

  	
  Filing Date

  
	
  Evident

  	
   

  	
  E1620657

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  07/04/2000

  
	
  Tertio

  	
   

  	
  E1023795

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  14/12/1998

  
	
  Provident

  	
   

  	
  E1022870

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  14/12/1998

  
	
  Evident

  	
   

  	
  2175392

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  20/08/1998

  
	
  Tertio

  	
   

  	
  2175389

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  20/08/1998

  
	
  Tertio

  	
   

  	
  1578744

  	
   

  	
  42

  	
   

  	
  20/07/1994

  
	
  Tertio

  	
   

  	
  2010862

  	
   

  	
  38

  	
   

  	
  10/02/1995

  
	
  Provident

  	
   

  	
  2184361

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  14/12/1998

  
	
  Tertio

  Technology with

  Business Sense

  	
   

  	
  2175453

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  28/08/1998

  
	
  Stylized

  Keyboard

  Design

  	
   

  	
  2201294

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  25/06/1999

  
	
  Observant

  	
   

  	
  2175386

  	
   

  	
  09,
  16, 38, 42

  	
   

  	
  20/08/1998

  
	
  Stylized

  Keyboard

  Design

  	
   

  	
  E1225598

  	
   

  	
  9,
  16, 42

  	
   

  	
  21/06/2000

  
	
  Observant

  (Expired)

  	
   

  	
  E681585

  	
   

  	
  9,
  16, 38, 42

  	
   

  	
  26/12/1999

  

 

 

36

 

 

SCHEDULE 2

 

FORM OF NOTICE TO THIRD PARTY BANK

 

Part I

 

Notice

 

[TO BE TYPED ON THE HEADED NOTEPAPER OF THE CHARGOR]

 

To:                                                        [                         ]

 

                                                             Attention
[                            ]

 

[Date]

 

Dear Sirs

 

Account No. [                      ] Sort Code [               ] (the “Deposit Account”)

 

Account No. [                      ] Sort Code [               ] (the “Book Debts Accounts”)

 

We hereby give you notice that by a Debenture dated the same date as
this letter, (the “Debenture”), we have charged to Bridge Bank, N.A. (the “Bank”) Bank all our rights, title, interest and benefit in
and to the Book Debts Accounts and the Deposit Account and all amounts standing
to the credit of such accounts from time to time, all interest on such sums and
all other amounts of whatever nature deriving directly or indirectly from such
sums.

 

Please return a copy of the attached letter on your own headed notepaper
with a receipted copy of this notice forthwith, to the Bank care of its
solicitors Howard Kennedy, facsimile number 020 7663 8713, attention Simon
Pullen Esq.

 

 

37

 

 

We hereby agree to indemnify you on demand for and against any and all
costs, losses and expenses suffered or incurred by you as a result of complying
with the undertakings contained in the attached letter to the Bank with which
you are hereby instructed to comply, together with all other instructions which
you may receive from the Bank from time to time in relation to such
undertakings.

 

Expressions defined in the Debenture shall have the same meanings when
used in this notice.

 

This notice shall be governed by and construed in accordance with
English law.

 

Yours faithfully

 

 

For and on behalf of

 

Evolving Systems Limited

 

 

38

 

 

Part 2

 

Acknowledgement from Third Party Bank (“TPB”)

 

[TO BE TYPED ON THE HEADED NOTEPAPER OF TPB]

 

	
  To:

  	
  Bridge Bank, N.A. (the “Bank”)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Care of

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Howard Kenney

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  19 Cavendish Square

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  London

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  W1A 2AW

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Simon Pullen Esq

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
  020 7663 8713

  	
   

  

 

[Date]

 

Dear Sirs

 

Evolving Systems Limited (the “Chargor”)

 

We refer to the notice received today from the Chargor (a copy of which
we attach, duly receipted) (the “Notice”).

 

Expressions defined in the Notice shall have the same meanings in this
letter.

 

1.                                       We hereby
acknowledge that the Chargor has charged to the Bank all of its rights, title,
interest and benefit in and to the Account and the Deposit Account (the “Accounts”).

 

2.                                       We hereby
irrevocably undertake to you that until receipt by us of a notice from you
confirming that you no longer have any interest in the Accounts we shall:

 

2.1                                 not exercise any
right of combination, consolidation, merger or set-off which we may have in
respect of, or otherwise exercise any other right which we may have to apply
any monies from time to time standing or accruing to the credit of the
Accounts;

 

2.2                                 promptly notify
you of (a) any renewal, renumbering or redesignation of the Accounts save
for any renewal, renumbering or redesignation which does not materially alter
the identity of the Accounts; and (b) any Security Interest in respect of
the Accounts 

 

 

39

 

 

on the part of a third party coming to our notice
(or the attempted creation of any such Security Interest);

 

2.3                                 promptly send to
you copies of all monthly Account statements, given or made by us in connection
with the Accounts;

 

2.4                                 upon receipt by
us of a notice from you declaring that an Event of Default has occurred and is
continuing not permit or effect any withdrawal or transfer from the Accounts
save for withdrawals and transfers requested by you in writing to us pursuant
to the terms of this letter; and

 

2.5                                 upon receipt by
us of a notice from you declaring that an Event of Default has occurred and is
continuing, comply with all instructions received by us from you or purportedly
from you from time to time on the Business Day following receipt with respect
to the conduct of the Accounts provided that such instructions are given in
writing, by facsimile to number [          ]
or post to
[                     ],
attention [          ] or as
otherwise notified to you by us from time to time and are signed by or
purportedly signed by [                             ]]
and provided further that such instructions are received by 12 noon (London
time) on any Business Day and [TPB] telephones telephone number [            ]
(or any other employee of the Bank approved by you to us, in writing from time
to time) by 5 p.m. (London time) on that same Business Day (or as soon
thereafter as is practicable) to obtain verification of such instructions and
provided further that, upon receipt by us of a notice from you declaring that
an Event of Default has occurred and is continuing,  we shall permit no withdrawals whatsoever
from the relevant account until we have complied with your instructions.

 

This letter shall be governed by and construed in accordance with
English law.

 

Yours faithfully

 

 

For and on behalf of

 

[TPB]

 

 

40

 

 

SCHEDULE 3

 

THE CONTRACTS

 

 

 

NONE

 

 

41

 

 

EXECUTED and DELIVERED as a DEED

 

for and on behalf of

 

EVOLVING
SYSTEMS  LIMITED
by:

 

	
   

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  

 

Notice  Details:

 

	
  Address:

  	
   

  	
  c/o Evolving Systems

  
	
   

  	
   

  	
  9777 Pyramid Court

  
	
   

  	
   

  	
  Suite 100

  
	
   

  	
   

  	
  Englewood

  
	
   

  	
   

  	
  Colorado

  
	
   

  	
   

  	
  80112 USA

  
	
   

  	
   

  	
   

  
	
  Fax No:

  	
   

  	
  001 303 802 1138

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
  Anita T. Moseley

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fax No:

  	
   

  	
  001 303 802 1420

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
  Brian R. Ervine

  

 

 

42

 

 

EXECUTED and DELIVERED as a DEED

 

for and on behalf of

 

BRIDGE BANK, N.A. by:

 

                                                                                               Authorised
Officer

 

 

Notice  Details:

 

	
  Address:

  	
  55 Almaden Boulevard

  
	
   

  	
   

  
	
   

  	
  San Jose

  
	
   

  	
   

  
	
   

  	
  CA 95113

  
	
   

  	
   

  
	
   

  	
   

  
	
  Fax No:

  	
  001 408 423 8520

  
	
   

  	
   

  
	
  Attention:

  	
  Dan Pistone

  

 

 

43

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