Document:

EXHIBIT 4.4

 

EXECUTION COPY

 

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT, dated as of this 2nd day
of November, 2004, by and between Evolving Systems, Inc., a Delaware
corporation (the “Maker”), and Advent International Corporation, a
Delaware corporation, as collateral agent (in such capacity, “Collateral
Agent”) for the holders of the Notes (defined below) from time to time
(each individually a “Payee” and collectively, the “Payees”).

 

WHEREAS, the Maker has executed and delivered
the following notes in favor of Payees: 
(i) the Senior Secured Note dated of even date
herewith in the original principal amount of $4,000,000 (as the same may be
amended, restated, or modified from time to time, the “Initial Short Term
Note”) and (ii) the Senior Secured Notes dated of even date herewith in the
aggregate original principal amount of $11,950,000 (consisting of a non-escrow
note in the original principal amount of $10,355,000 and an escrow note in the
original principal amount of  $1,595,000)
(as the same may be amended, restated, modified or replaced in substitution
from time to time, the “Initial A Notes”);

 

WHEREAS, the Maker may execute and deliver in
the future the following notes in favor of Payees:  (i) additional
Senior Secured Notes to assignees of the holder of the Initial Short Term Note
(as they may be amended, restated, modified or replaced in substitution from
time to time, the “Additional Short Term Notes” and collectively with
the Initial Short Term Note, the “Short Term Notes”); (ii) additional
Senior Secured Notes to assignees of the holder of the Initial A Notes,
including, without limitation, any additional payment in kind notes as of a
later date in the same form (as they may be amended, restated, modified or
replaced in substitution from time to time, the “Additional A Notes”  and collectively with the Initial A Notes,
the “A Notes”); (iii) additional Senior Secured Notes in exchange for
the A Notes in an aggregate original principal amount to be determined in
accordance with the  A Notes (as they may
be amended, restated, or modified from time to time, the “B-1 Notes”);
and (iv) Senior Secured Convertible Notes in exchange for the A Notes in an
aggregate original principal amount to be determined in accordance with the A
Notes (as they may be amended, restated, or modified from time to time, the “Convertible
Notes”, and together with the Short Term Notes, the A Notes and the B-1
Notes, each individually a “Note” and collectively the “Notes”);
and

 

WHEREAS, to induce the Payees to incur the
indebtedness under the Notes, the Maker wishes to grant a security interest in
favor of the Collateral Agent for the benefit of the Payees as herein provided.

 

NOW, THEREFORE, in consideration of the
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

 

Section 1.       Definitions;
Inconsistencies with Notes.

 

(a)   All
capitalized terms used herein without definitions shall have the respective
meanings provided therefor in the Notes.  If there is a conflict between the terms of
this Security Agreement and those of the Notes, the terms of the Notes shall
control.

 

 

(b)   The
term “Aggregate Principal Indebtedness” means, as of any date of
determination, the sum of the principal amounts outstanding under the Notes in
effect at such time.

 

(c)   The
term “Agreement” or “Security Agreement” means this Security
Agreement, together with all Schedules and Exhibits hereto and all amendments,
modifications or restatements as may from time to time be in effect with
respect hereto.

 

(d)   The
term “Code” means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.

 

(e)   The
term “Event of Default” means an “Event of Default” under (and as
defined in) the Notes.

 

(f)    The
term “Guaranty Agreement” means the Guaranty Agreement dated of event
date herewith by the guarantors party thereto in favor of Collateral Agent for
the benefit of the Payees, as it may be amended, restated or modified from time
to time.

 

(g)   The
term “Loan Documents” means the Notes, this Security Agreement, the
Pledge Agreement and the Guaranty Agreement and any other documents, agreements
and instruments entered into in connection therewith, all as amended, restated
or modified from time to time; provided, however, that the term “Loan
Documents” shall not include the Stock Purchase Agreement or the Series B
Designation (each as defined in the Notes) or the Investor Rights Agreement (as
defined in the Stock Purchase Agreement) or any other document, agreement or
instrument entered into in connection with the documents referred to in this
proviso, all as amended, restated or modified from time to time.

 

(h)   The
term “Notice Date” means the date on which the Collateral Agent first
receives instructions from the Requisite Payees to enforce rights under this
Security Agreement.

 

(i)    The
term “Obligations” means any and all of the indebtedness, obligations
and liabilities of any kind and description arising in any way of the Maker to
the Payees, individual or collective, joint or several, direct or indirect,
absolute or contingent, secured or unsecured, due or to become due, contractual
or tortuous, arising by operation of law or otherwise, now existing or
hereafter arising under or in respect of any of the Loan Documents, whether
incurred by the Maker as principal, surety, endorser, guarantor, accommodation
party or otherwise, including without limitation any future advances, whether
obligatory or voluntary under, or refinancings,
renewals or extensions of or substitutions for, any existing or future debt,
principal, interest and fees, late fees and reasonable out-of-pocket expenses
(including, reasonable attorneys’ fees and costs), or that have been or may
hereafter be contracted or incurred and any and all reasonable out-of-pocket
costs, expenses and liabilities which may be made or incurred by any Payee or
the Collateral Agent in any way in connection with any of the obligations of
the Maker under the Loan Documents, and all interest, fees, costs and expenses
that may be owing to Payees after the commencement of bankruptcy proceedings
with respect to foregoing obligations of the Maker.

 

(j)    The
term “Person” means any individual, partnership, corporation, trust,
joint venture or unincorporated organization, including any government or
agency or political subdivision thereof.

 

(k)   The
term “Pledge Agreement” means the Pledge Agreement dated of even date
herewith by Maker in favor of Collateral Agent for the benefit of the Payees,
as it may be amended, restated or modified from time to time.

 

(l)    The
term “Requisite Payees” means, on any given date of determination,
Payees holding at least 50.1% of the Aggregate Principal Indebtedness.

 

 

(m)  The
term “State” means the State of Delaware. All terms defined in the
Uniform Commercial Code of the State and used herein shall have the same
definitions herein as specified therein. However, if a term is defined in
Article 9 of the Uniform Commercial Code of the State differently than in
another Article of the Uniform Commercial Code of the State, the term has the
meaning specified in Article 9.

 

(n)   The
term “Statement of Event of Default” means a written statement delivered
by the Requisite Payees to the Collateral Agent referring to any Note stating
that an Event of Default has occurred thereunder.

 

(o)   The
term “Termination Date” means the earlier of (i)
indefeasible payment in full of the Obligations and (ii) the date that the
aggregate outstanding balance of all of the Notes is equal to or less than ten
percent (10%) of the original aggregate principal amount of all of the Notes at
the time of issuance.

 

(p)   The
term “TSE” means Telecom Software Enterprises, LLC, a Colorado limited
liability company.

 

(q)   The
term “ TSE Promissory Notes” means the promissory notes issued by TSE to
Peter McGuire and Lisa Marie Maxson pursuant to the
Acquisition Agreement dated October 15, 2004 by and among the Maker, Peter
McGuire and Lisa Marie Maxson.

 

(r)    The
term “TSE Securities” has the meaning given to such term in Section 2.

 

Section 2.       Grant
of Security Interest.  The Maker
hereby grants to the Collateral Agent, for the benefit of the Payees, to secure
the due and punctual payment and performance in full in cash of all of the
Obligations, a continuing security interest in and general lien upon, and
pledges and assigns to the Collateral Agent, its right, title and interest in
the following properties, assets and rights of the Maker, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof,  and all personal and
fixture property of every kind and nature including without limitation all (all
of the same being hereinafter called the “Collateral”):

 

(a)   goods
(including without limitation inventory, equipment and any accessions thereto),

 

(b)   instruments
(including without limitation promissory notes),

 

(c)   documents,

 

(d)   accounts
(including without limitation health-care-insurance receivables),

 

(e)   chattel
paper (whether tangible or electronic),

 

(f)    deposit
accounts,

 

(g)   letter-of-credit
rights (whether or not the letter of credit is evidenced by a writing),

 

(h)   commercial
tort claims,

 

(i)    securities
and all other investment property,

 

(j)    supporting
obligations,

 

 

(k)   any
other contract rights or rights to the payment of money,

 

(l)    
insurance claims and proceeds, and

 

(m)  all
general intangibles (including without limitation all payment intangibles).

 

The Collateral Agent
acknowledges that the attachment of its security interest in any commercial
tort claim as original collateral is subject to the Maker’s compliance with
Section 4(g).  The security interests
granted herein are granted as security only and shall not subject the
Collateral Agent to, or in any way affect or modify, any obligation or
liability of the Maker with respect to any of the Collateral or any transaction
which gave rise thereto.

 

Notwithstanding the foregoing,
“Collateral” shall not include any of the following: (a) investment property
consisting of capital securities of TSE (the “TSE Securities”) for so
long as any obligations remain outstanding under the TSE Promissory Notes,  provided that the security interest in
such TSE Securities shall automatically attach hereunder when and after all obligations
under the TSE Promissory Notes have been paid in full; (b) any lease, license,
contract right, property right or agreement to which the Maker is a party or
any of its rights or interests thereunder if and for
so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any
right, title or interest of the Maker therein or (ii) in a breach or
termination pursuant to the terms of, or a default under, any such lease,
license, contract, property rights or agreement (other than to the extent that
any such term would be rendered ineffective pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the UCC (or any successor provision or provisions) of any
relevant jurisdiction or any other applicable law or principles of equity);
provided, however, that such security interest shall attach immediately at such
time as the condition causing such abandonment, invalidation, unenforceability,
other restriction or assignment shall be remedied and, to the extent severable, shall attach immediately to any portion of such
lease, license, contract, property rights or agreement that does not result in
any of the consequences specified in (i) or (ii)
including, without limitation, any proceeds of such lease, license, contract,
property rights or agreement; or
(c) investment property consisting of capital securities of an issuer that is a
Foreign Subsidiary (as defined below) of the Maker (other than a Foreign
Subsidiary that (i) is treated as a partnership under
the Code or (ii) is not treated as an entity that is separate from (A) Maker;
(B) any Person that is treated as a partnership under the Code or (C) any
“United States person” (as defined in Section 7701(a)(30) of the Code)), in
excess of 65% of the total combined voting power of all capital securities of
each such Foreign Subsidiary.  As used
herein, “Foreign Subsidiary” means any Subsidiary of the Maker that is not
organized under the laws of the United States or any state thereof.

 

In addition, upon the sale or
other disposition of Collateral in accordance with and to be the extent
permitted by the terms of the Loan Documents, the security interests granted
herein with respect to such Collateral shall automatically terminate.

 

Section 3.       Authorization
to File Financing Statements.

 

(a)   The
Maker hereby irrevocably authorizes the Collateral Agent at any time and from
time to time to file in the appropriate filing office in any applicable Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto as required by the Collateral Agent to establish or maintain the
validity, perfection and priority of the security interests granted by this
Security Agreement that (i) indicate the Collateral
(A) as all assets of the Maker or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the Uniform Commercial Code of the State or such jurisdiction,
or (B) as being of an equal or lesser scope or with greater detail, and (ii)
provide any other information required by part 5 of Article 9 of the Uniform
Commercial Code of the State or such other jurisdiction for the sufficiency or
filing office

 

 

acceptance of any financing statement or
amendment, including (A) whether the Maker is an organization, the type of
organization and any organization identification number issued to the Maker
and, (B) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.

 

(b)   The
Maker agrees to furnish any such information to the Collateral Agent promptly
upon the Collateral Agent’s reasonable request.

 

(c)   The
Maker also ratifies its authorization for the Collateral Agent to have filed in
any appropriate Uniform Commercial Code jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.

 

Section 4.       Other
Actions. Further to insure the attachment, perfection and first priority
of, and the ability of the Collateral Agent to enforce the Collateral Agent’s
security interest in the Collateral, unless the Collateral Agent otherwise
consents in writing, the Maker agrees, in each case at the Maker’s expense, to
take the following actions with respect to the following Collateral and without
limitation on the Maker’s other obligations contained in this Security
Agreement:

 

(a)   Promissory
Notes and Tangible Chattel Paper. In the case of any promissory note or tangible chattel paper, or any
group of related promissory notes or tangible chattel paper, which is included
in the Collateral and has a fair market value in excess of $10,000, Maker will,
at the request and option of the Collateral Agent, (i)
promptly deliver to the Collateral Agent the originals of such promissory notes
or tangible chattel paper the Maker shall forthwith endorse, assign and deliver
the same to the Collateral Agent, accompanied by such instruments of transfer
or assignment duly executed in blank as the Collateral Agent may from time to
time reasonably specify or (ii) mark such tangible chattel paper which is
included within the Collateral with a legend indicating that such tangible
chattel paper is subject to the security interest granted by this Security
Agreement.

 

(b)   Deposit
Accounts. For each deposit account that the Maker at any time opens or
maintains, the Maker shall, at the Collateral Agent’s request and option, use
its commercially reasonable efforts to, pursuant to an agreement in form and
substance reasonably satisfactory to the Collateral Agent, either (a) cause the
depositary bank to agree to comply, without further consent of the Maker, at
any time with instructions from the Collateral Agent to such depositary bank
directing the disposition of funds from time to time credited to such deposit
account, or (b) arrange for the Collateral Agent to become the customer of the
depositary bank with respect to the deposit account. The Collateral Agent
agrees with the Maker that the Collateral Agent shall not give any such
instructions or withhold any withdrawal rights from the Maker, unless an Event
of Default has occurred and is continuing, or, if effect were given to any
withdrawal prohibited by the Loan Documents, would occur.  The provisions of this paragraph shall not
apply to (i) any deposit account for which the Maker,
the depositary bank and the Collateral Agent have entered into a cash
collateral agreement specially negotiated among the Maker, the depositary bank
and the Collateral Agent for the specific purpose set forth therein, and (ii)
any deposit accounts specially and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of the
Maker’s salaried employees.

 

(c)   Investment
Property. If the Maker shall at any time hold or acquire any certificated
securities (other than the TSE Securities), the Maker shall, at the request and
option of the Collateral Agent, forthwith endorse, assign and deliver the same
to the Collateral Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Collateral Agent may from time to time
reasonably specify. If any securities now or hereafter acquired by the Maker
are uncertificated and are issued to the Maker or its
nominee directly by the issuer thereof, the Maker shall immediately notify the
Collateral Agent thereof and, at the Collateral Agent’s request and option, use
its commercially reasonable efforts to, pursuant to an agreement in form and
substance reasonably satisfactory to the

 

 

Collateral Agent, either (a) cause the issuer
to agree to comply, without further consent of the Maker or such nominee, at
any time with instructions from the Collateral Agent as to such securities, or
(b) arrange for the Collateral Agent to become the registered owner of the
securities. If any securities, whether certificated or uncertificated,
or other investment property now or hereafter acquired by the Maker are held by
the Maker or its nominee through a securities intermediary or commodity
intermediary, the Maker shall immediately notify the Collateral Agent thereof
and, at the Collateral Agent’s request and option, use its commercially
reasonable efforts to, pursuant to an agreement in form and substance reasonably
satisfactory to the Collateral Agent, either (i)
cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply, in each case without further consent of the
Maker or such nominee, at any time with entitlement orders or other
instructions from the Collateral Agent to such securities intermediary as to
such securities or other investment property, or (as the case may be) to apply
any value distributed on account of any commodity contract as directed by the
Collateral Agent to such commodity intermediary, or (ii) in the case of
financial assets or other investment property held through a securities
intermediary, arrange for the Collateral Agent to become the entitlement holder
with respect to such investment property. 
The Collateral Agent agrees with the Maker that the Collateral Agent
shall not give any such entitlement orders or instructions or directions to any
such issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by the
Maker, unless an Event of Default has occurred and is continuing, or, after
giving effect to any such investment and withdrawal rights prohibited by the
Loan Documents, would occur.  The
provisions of this paragraph shall not apply to any financial assets credited
to a securities account for which the Collateral Agent is the securities
intermediary.

 

(d)   Collateral
in the Possession of a Bailee. If any Collateral
is at any time in the possession of a bailee, the
Maker shall promptly notify the Collateral Agent thereof and, at the Collateral
Agent’s request and option, shall promptly obtain an acknowledgement from the bailee, in form and substance reasonably satisfactory to
the Collateral Agent, that the bailee holds such
Collateral for the benefit of the Collateral Agent and such bailee’s
agreement to comply, without further consent of the Maker, at any time with
instructions of the Collateral Agent as to such Collateral.  The Collateral Agent agrees with the Maker
that the Collateral Agent shall not give any such instructions unless an Event
of Default has occurred and is continuing or would occur after taking into
account any action by the Maker with respect to the bailee.

 

(e)   Electronic
Chattel Paper and Transferable Records. If the Maker at any time holds or
acquires an interest in any electronic chattel paper or any “transferable
record,” as that term is defined in Section 201 of the federal Electronic
Signatures in Global and National Commerce Act, or in § 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, the
Maker shall promptly notify the Collateral Agent thereof and, at the request
and option of the Collateral Agent, shall take such action as the Collateral Agent
may reasonably request to vest in the Collateral Agent control, under § 9-105
of the Uniform Commercial Code, of such electronic chattel paper or control
under Section 201 of the federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, § 16 of the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such transferable
record.  The Collateral Agent agrees with
the Maker that the Collateral Agent will arrange, pursuant to procedures
reasonably satisfactory to the Collateral Agent and so long as such procedures
will not result in the Collateral Agent’s loss of control, for the Maker to
make alterations to the electronic chattel paper or transferable record
permitted under UCC § 9-105 or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or § 16 of the
Uniform Electronic Transactions Act for a party in control to make without loss
of control, unless an Event of Default has occurred and is continuing or would
occur after taking into account any action by the Maker with respect to such
electronic chattel paper or transferable record.

 

 

(f)    Letter
of Credit Rights. If the Maker is at any time a beneficiary under a letter
of credit now or hereafter, the Maker shall promptly notify the Collateral
Agent thereof and, at the request and option of the Collateral Agent, the Maker
shall, use its commercially reasonable efforts to, pursuant to an agreement in
form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer or other
nominated person of such letter of credit to consent to an assignment to the
Collateral Agent of the proceeds of the letter of credit or (ii) arrange for
the Collateral Agent to become the transferee beneficiary of the letter of
credit, with the Collateral Agent agreeing, in each case, that the proceeds of
any drawing under such letter of credit are to be applied as specified in
Section 16(g).

 

(g)   Commercial
Tort Claims. If the Maker shall at any time hold or acquire a commercial
tort claim where the damages are likely to exceed $100,000, the Maker shall
immediately notify the Collateral Agent in a writing signed by the Maker of the
particulars thereof and, at the request and option of the Collateral Agent,
grant to the Collateral Agent in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Security Agreement, with
such writing to be in form and substance reasonably satisfactory to the Collateral
Agent.

 

(h)   Other
Actions as to any and all Collateral. The Maker further agrees, upon the
reasonable request of the Collateral Agent and at the Collateral Agent’s
option, to take any and all other actions as the Collateral Agent may determine
to be necessary or useful for the attachment, perfection and first priority of,
and the ability of the Collateral Agent to enforce, the Collateral Agent’s
security interest in any and all of the Collateral, including, without
limitation:

 

(i)            executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the Uniform Commercial Code, to the extent, if any, that
the Maker’s signature thereon is required therefore;

 

(ii)           complying
with any provision of any statute, regulation or treaty of the United States as
to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Collateral Agent to
enforce, the Collateral Agent’s security interest in such Collateral;

 

(iii)          use
its commercially reasonable efforts in obtaining governmental and other third
party waivers, consents and approvals in form and substance reasonably
satisfactory to the Collateral Agent, including, without limitation, any
consent of any licensor, lessor or other person
obligated on Collateral;

 

(iv)          use
its commercially reasonable efforts in obtaining waivers from mortgagees and landlords in form and substance reasonably
satisfactory to the Collateral Agent and

 

(v)           to
the extent commercially reasonable, taking all actions under any earlier
versions of the Uniform Commercial Code or under any other law, as reasonably
determined by the Collateral Agent to be applicable in any relevant Uniform
Commercial Code or other jurisdiction, including any foreign jurisdiction,
including any filings with Companies House with respect to capital securities
of Foreign Subsidiaries.

 

Notwithstanding anything to the contrary
herein, in no event shall Maker be required to cause the Collateral Agent’s
name to be noted as secured party on any certificate of title for any vehicles
subject to a certificate of title statute.

 

Section 5.       Relation
to Other Security Documents.  The
provisions of this Security Agreement shall be read and construed with the
other security documents referred to below in the manner so indicated.

 

 

(a)   Stock
Pledge Agreement.  Concurrently
herewith the Maker is executing and delivering to the Collateral Agent stock
pledge agreement(s) pursuant to which the Maker is pledging to the Collateral
Agent all the shares of the capital stock of the Maker’s subsidiaries (subject
to certain exceptions with respect to the TSE Securities and capital stock of
Foreign Subsidiaries). Such pledge(s) shall be governed by the terms of such
stock pledge agreement(s) and not by the terms of this Security Agreement.

 

(b)   Patent
and Trademark Security Agreements. 
Concurrently herewith the Maker is executing and delivering to the
Collateral Agent the Patent Security Agreement and the Trademark Security
Agreement for recording in the United States Patent and Trademark Office (the “Patent
and Trademark Office”) pursuant to which the Maker is granting the
Collateral Agent a security interest in certain Collateral consisting of United
States and foreign patents and patent rights and trademarks, service marks and
trademark and service mark rights, together with the goodwill appurtenant
thereto.  The provisions of the Patent
Security Agreement and the Trademark Security Agreement are supplemental to the
provisions of this Security Agreement, and nothing contained in the Patent
Security Agreement or the Trademark Security Agreement  shall derogate from any of the rights or
remedies of the Collateral Agent hereunder. Neither the delivery of, nor
anything contained in, the Patent Security Agreement or the Trademark Security
Agreement shall be deemed to prevent or postpone the time of attachment or
perfection of any security interest in such Collateral created hereby.

 

(c)   Copyright
Security Agreement.  If the Maker
registers any of its copyrights with the United States Copyright Office, then
the Maker will promptly notify the Collateral Agent of such registration and,
at the request and option of Collateral Agent, execute and deliver to the
Collateral Agent for recording in the United States Copyright Office (the “Copyright
Office”) a Copyright Security Agreement, in form and substance reasonably
satisfactory to the Collateral Agent, pursuant to which Maker grants to the
Collateral Agent a security interest in certain Collateral consisting of  United States or foreign copyrights and
copyrightable works.  The provisions of
any such Copyright Security Agreement shall be supplemental to the provisions
of this Security Agreement, and nothing contained in the Copyright Security
Agreement shall derogate from any of the rights or remedies of the Collateral
Agent hereunder. Neither the delivery of, nor anything contained in, the
Copyright Security Agreement shall be deemed to prevent or postpone the time of
attachment or perfection of any security interest in such Collateral created
hereby.

 

Section 6.       Representations
and Warranties.

 

(a)   Representations
and Warranties Concerning Maker’s Legal Status.  The Maker represents and warrants to the
Collateral Agent as follows:

 

(i)            the
Maker’s exact legal name is that indicated in Schedule 1 and on the signature
page hereof;

 

(ii)           the
Maker is an organization of the type, and is organized in the jurisdiction, set
forth in Schedule 1 hereto;

 

(iii)          Schedule
1 accurately sets forth the Maker’s organizational identification number or
accurately states that the Maker has none;

 

(iv)          Schedule
1 accurately sets forth the Maker’s place of business or, if more than one, its
chief executive office, as well as the Maker’s mailing address, if different;
and

 

 

 

(v)           Schedule
1 sets forth the locations (including the addresses) where all of the
Collateral and the books and records related thereto are located (including
locations owned or leased by third parties).

 

(b)   Representations
and Warranties Concerning Collateral, Etc. 
The Maker further represents and warrants to the Collateral Agent as
follows:

 

(i)            the
Maker is the owner of, or has other rights in or power to transfer, the
Collateral, free from any right or claim of any person or any adverse lien, security
interest or other encumbrance, except for the security interest created by this
Security Agreement, and other liens and security interests permitted by the
Notes and the other Loan Documents;

 

(ii)           none
of the Collateral constitutes, or is the proceeds of, “farm products” as
defined in § 9-102(a)(34) of the Uniform Commercial Code of the State;

 

(iii)          none
of the account debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral;

 

(iv)          the
Maker holds no commercial tort claim except as indicated in Schedule 1;

 

(v)           the
Maker has at all times operated its business in compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and with all
applicable provisions of federal, state and local statutes and ordinances
dealing with the control, shipment, storage or disposal of hazardous materials
or substances, in each case except to the extent noncompliance would not
reasonably be expected to have a Material Adverse Effect on the Collateral or
the Collateral Agent’s ability to realize thereon;

 

(vi)          this Security Agreement creates a
valid and enforceable security interest in the Collateral securing the payment
of the Obligations, and upon the filing of financing statements in the
jurisdictions set forth in Schedule 2 to this Security Agreement, such
security interest will be a perfected first priority security interest to the
extent perfection may be achieved by the filing of financing statements,
subject to liens permitted by the Notes and the other Loan Documents; and

 

(vii)         other
than the filing of financing statements and the filing of appropriate documents
with the United States Patent and Trademark Office or Copyright Office, no
authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required either (i) for the grant by the Maker of the security interest
granted hereby or for the execution, delivery or performance of this Security
Agreement by the Maker, or (ii) for the perfection of or the exercise by the
Collateral Agent of its rights and remedies hereunder (except, in the case of
investment property, as may be required in connection with such disposition by
laws affecting the offering and sale of securities generally).

 

Section 7.       Covenants.

 

(a)   Concerning
Maker’s Legal Status. Except as permitted or provided otherwise in the
Notes and the other Loan Documents, the Maker covenants and agrees with the
Collateral Agent as follows:

 

 

(i)            without
providing at least 20 days prior written notice to the Collateral Agent, the
Maker will not change its name, its place of business or, if more than one,
chief executive office, or its mailing address or organizational identification
number if it has one;

 

(ii)           if
the Maker does not have an organizational identification number and later
obtains one, the Maker will forthwith notify the Collateral Agent of such organizational
identification number, and

 

(iii)          the
Maker will not change its type of organization, jurisdiction of organization or
other legal structure.

 

(b)   Covenants
Concerning Collateral, Etc. Except as permitted or provided otherwise in
the Notes and the other Loan Documents, the Maker further covenants and agrees
with the Collateral Agent as follows:

 

(i)            the
Collateral, to the extent not delivered to the Collateral Agent pursuant to
Section 4, will be kept at those locations listed on Schedule 1 and the Maker
will not remove the Collateral from such locations, without providing at least
20 days prior written notice to the Collateral Agent;

 

(ii)           except
for the security interest herein granted and other liens and security interests
permitted by the Notes and the other Loan Documents, the Maker shall be the
owner of, or have other rights in, the Collateral free from any right or claim
of any other person or any lien, security interest or other encumbrance, and
the Maker shall, at its own expense, defend the same against all claims and
demands of all persons at any time claiming the same or any interests therein
adverse to the Collateral Agent;

 

(iii)          except
as permitted under the Notes and the other Loan Documents, the Maker shall not
pledge, mortgage or create, or suffer to exist any Lien (as defined in the
Notes) on the Collateral, and the Maker shall not permit any of the Collateral
to be levied upon under any legal process;

 

(iv)          the
Maker shall not permit any Collateral to become an accession to any property as
to which the Collateral Agent does not have a first priority security interest;

 

(v)           the
Maker shall not file or authorize or permit to be filed in any jurisdiction any
financing statement relating to any of the Collateral naming any secured party
other than the Collateral Agent;

 

(vi)          the
Maker will, at its own expense, keep the Collateral in good order and repair
(ordinary wear and tear excepted) and the Maker will not use any Collateral in
material violation of law or any policy of insurance thereon and will not
permit anything to be done that may materially impair the value of any
Collateral or the security intended to be afforded thereby;

 

(vii)         
the Maker will permit the Collateral Agent, or its designee, to inspect the
Collateral at any reasonable time, wherever located, provided that, so long as
no Event of Default has occurred and is continuing, the foregoing shall be
permitted only to the extent permitted under the Notes;

 

(viii)        the
Maker will, at its own expense, continue to operate its business in compliance
with all applicable provisions of the federal Fair Labor Standards Act, as
amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances, in each case except to the extent

 

 

noncompliance would not reasonably be
expected to have a Material Adverse Effect on the Collateral or the Collateral
Agent’s ability to realize thereon; and

 

(ix)           the
Maker will not sell or otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein except for sales or other
dispositions permitted under the Notes or the other Loan Documents.

 

Section 8.       Insurance.

 

(a)   Maintenance
of Insurance. The Maker will maintain with financially sound and reputable
insurers insurance with respect to its properties and business against such
casualties and contingencies as shall be in accordance with general practices
of businesses engaged in similar activities in similar geographic areas. The
Maker will (i) maintain all such workers’
compensation or similar insurance as may be required by law and (ii) maintain,
in amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of the Maker; business
interruption insurance; and product liability insurance.

 

(b)   Insurance
Proceeds. The proceeds of any casualty insurance in respect of any casualty
loss of any of the Collateral shall, subject to the rights, if any, of other
parties with an interest having priority in the property covered thereby, (i) so long as no Event of Default has occurred and is
continuing and to the extent the amount of such proceeds is less than $500,000,
be disbursed to the Maker for direct application by the Maker solely to the
repair or replacement of the Maker’s property so damaged or destroyed, (ii) so
long as no Event of Default has occurred and is continuing and to the extent
that the amount of such proceeds equals or exceeds $500,000, be disbursed to
the Maker, at Maker’s election, for direct application by the Maker solely to
the repair or replacement of the Maker’s property so damaged or destroyed
within 180 days following the date of such disbursement (and if Maker does not
so elect or such repair or restoration has not commenced within such 180 day
period, then such proceeds shall be held by the Collateral Agent as cash
collateral for the Obligations) and (iii) in all other circumstances (including
if an Event of Default has occurred and is continuing ), be held by the
Collateral Agent as cash collateral for the Obligations. The Collateral Agent
may, at its sole option, disburse from time to time all or any part of such
proceeds so held as cash collateral, upon such terms and conditions as the
Collateral Agent may reasonably prescribe, for direct application by the Maker
solely to the repair or replacement of the Maker’s property so damaged or
destroyed, or the Collateral Agent may apply all or any part of such proceeds
to the Obligations.

 

(c)   Continuation
of Insurance. All policies of insurance shall provide for at least 30 days
prior written cancellation notice to the Collateral Agent. In the event of
failure by the Maker to provide and maintain insurance as herein provided, the
Collateral Agent may, at its option, provide such insurance and charge the
amount thereof to the Maker. The Maker shall furnish the Collateral Agent with
certificates of insurance and policies evidencing compliance with the foregoing
insurance provision.

 

Section 9.       Collateral
Protection Expenses; Preservation of Collateral.

 

(a)   Expenses
Incurred by Collateral Agent. In the Collateral Agent’s discretion, if the
Maker fails to do so, the Collateral Agent may discharge taxes and other
encumbrances at any time levied or placed on any of the Collateral, make
repairs thereto and pay any necessary filing fees or insurance premiums. The
Maker agrees to reimburse the Collateral Agent upon written demand for all
expenditures so made; provided that the Collateral Agent shall provide to the
Maker a written statement as to the amount due, which shall set forth in reasonable
detail the calculations upon which the Collateral Agent

 

 

determined such amount. The Collateral Agent
shall have no obligation to the Maker to make any such expenditures, nor shall
the making thereof be construed as a waiver or cure any Event of Default.

 

(b)   Collateral
Agent’s Obligations and Duties. Anything herein to the contrary
notwithstanding, the Maker shall remain obligated and liable under each
contract or agreement comprised in the Collateral to be observed or performed
by the Maker thereunder. The Collateral Agent shall
not have any obligation or liability under any such contract or agreement by
reason of or arising out of this Security Agreement or the receipt by the
Collateral Agent of any payment relating to any of the Collateral, nor shall
the Collateral Agent be obligated in any manner to perform any of the
obligations of the Maker under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Collateral Agent or
to which the Collateral Agent may be entitled at any time or times. Other than
as required under § 9-207 of the Uniform Commercial Code of the State, the
Collateral Agent’s sole duty with respect to the custody, safe keeping and
physical preservation of the Collateral in its possession, shall be to deal
with such Collateral in the same manner as the Collateral Agent deals with
similar property for its own account.

 

Section 10.     Securities
and Deposits. The Collateral Agent may at any time following and during the
continuance of an Event of Default, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations.
Whether or not any Obligations are due, the Collateral Agent may following and
during the continuance of an Event of Default demand, sue for, collect, or make
any settlement or compromise which it deems desirable with respect to the
Collateral.  Regardless of the adequacy
of Collateral or any other security for the Obligations, any deposits or other
sums at any time credited by or due from the Collateral Agent to the Maker may
at any time during the continuance of any Event of Default be applied to or set
off against any of the Obligations.  The
Collateral Agent agrees to promptly notify Maker after any such application or
set off; provided, however, that failure to give such notice shall not affect
the validity of such application or set off.

 

Section 11.     Notification
to Account Debtors and Other Persons Obligated on Collateral.  If an Event of Default shall have occurred
and be continuing, the Maker shall, at the request and option of the Collateral
Agent, notify account debtors and other persons obligated on any of the
Collateral of the security interest of the Collateral Agent in any account,
chattel paper, general intangible, instrument or other Collateral and that
payment thereof is to be made directly to the Collateral Agent or to any financial
institution designated by the Collateral Agent as the Collateral Agent’s agent therefor, and the Collateral Agent may itself, if an Event
of Default shall have occurred and be continuing, without prior notice to or
demand upon the Maker, so notify account debtors and other persons obligated on
Collateral.  The Collateral Agent agrees
to promptly notify Maker after any such notification; provided, however, that
failure to give such notice shall not affect the validity of such
notification.  After the making of such a
request or the giving of any such notification, the Maker shall hold any
proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Maker as trustee for the
Collateral Agent without commingling the same with other funds of the Maker and
shall turn the same over to the Collateral Agent in the identical form
received, together with any necessary endorsements or assignments. The
Collateral Agent shall apply the proceeds of collection of accounts, chattel
paper, general intangibles, instruments and other Collateral received by the
Collateral Agent to the Obligations, such proceeds to be immediately credited
after final payment in cash or other immediately available funds of the items giving
rise to them.

 

 

Section 12.     Power
of Attorney.

 

(a)   Appointment
and Powers of Collateral Agent. The Maker hereby irrevocably constitutes
and appoints the Collateral Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorneys-in-fact with full
irrevocable power and authority in the place and stead of the Maker or in the
Collateral Agent’s own name, for the purpose of carrying out the terms of this
Security Agreement, to do the following:

 

(i)            upon
the occurrence and during the continuance of an Event of Default to take any
and all appropriate action and to execute any and all documents and instruments
that may be necessary or useful to accomplish the purposes of this Security
Agreement and, without limiting the generality of the foregoing, hereby gives
said attorneys the power and right, on behalf of the Maker, generally to sell,
transfer, pledge, make any agreement with respect to or otherwise dispose of or
deal with any of the Collateral in such manner as is consistent with the
Uniform Commercial Code of the State and as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and to do,
at the Maker’s expense, at any time, or from time to time, all acts and things
which the Collateral Agent deems necessary or useful to protect, preserve or
realize upon the Collateral and the Collateral Agent’s security interest
therein, in order to effect the intent of this Security Agreement, all no less
fully and effectively as the Maker might do, including, without limitation, (i) the filing and prosecuting of registration and transfer
applications with the appropriate federal, state or local agencies or
authorities with respect to trademarks, copyrights and patentable
inventions and processes, (ii) upon written notice to the Maker, the exercise
of voting rights with respect to voting securities, which rights may be
exercised, if the Collateral Agent so elects, with a view to causing the
liquidation of assets of the issuer of any such securities and (iii) the
execution, delivery and recording, in connection with any sale or other
disposition of any Collateral, of the endorsements, assignments or other
instruments of conveyance or transfer with respect to such Collateral; and

 

(ii)           to
the extent that the Maker’s authorization given in Section 3 is not sufficient,
to file such financing statements with respect hereto, with or without the
Maker’s signature, or a photocopy of this Security Agreement in substitution
for a financing statement, as the Collateral Agent may deem appropriate and to
execute in the Maker’s name such financing statements and amendments thereto
and continuation statements which may require the Maker’s signature.

 

(b)   Ratification
by Maker. To the extent permitted by law, the Maker hereby ratifies all
that said attorneys shall lawfully do or cause to be done by virtue hereof.
This power of attorney is a power coupled with an interest and is irrevocable.

 

(c)   No
Duty on Collateral Agent. The powers conferred on the Collateral Agent
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Collateral Agent shall
be accountable only for the amounts that it actually receives as a result of the
exercise of such powers, and the Maker agrees to hold harmless and indemnify
Collateral Agent and its officers, directors, employees or agents from and
against any and all claims, losses and liabilities arising out of or resulting
from the Agreement (including without limitation enforcement of this Security
Agreement) or Collateral Agent’s interest in the Collateral, except for claims,
losses or liabilities arising or resulting from the Collateral Agent’s own
gross negligence or willful misconduct.

 

Section 13.     Rights
and Remedies.

 

(a)   Exercise
of Rights and Remedies.  If an Event
of Default shall have occurred and be continuing, the Collateral Agent, without
any other notice to or demand upon the Maker (except the

 

 

notice specified below of time and place of
any public or private sale), shall have in any jurisdiction in which
enforcement hereof is sought, in addition to all other rights and remedies, the
rights and remedies of a secured party under the Uniform Commercial Code of the
State and any additional rights and remedies as may be provided to a secured
party in any jurisdiction in which Collateral is located, including, without
limitation, the right to take possession of the Collateral, and for that
purpose the Collateral Agent may, so far as the Maker can give authority therefor, enter upon any premises on which the Collateral
may be situated and remove the same therefrom. The
Collateral Agent may in its discretion require the Maker to assemble all or any
part of the Collateral at such location or locations within the jurisdiction(s)
of the Maker’s principal office(s) or at such other locations as the Collateral
Agent may reasonably designate. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Collateral Agent shall give to the Maker at least ten
(10) Business Days prior written notice of the time and place of any public
sale of Collateral or of the time after which any private sale or any other
intended disposition is to be made. The Maker hereby acknowledges that ten (10)
Business Days prior written notice of such sale or sales shall be reasonable
notice. In addition, to the extent permitted by applicable law, the Maker
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of the Collateral Agent’s rights and remedies hereunder,
including, without limitation, its right during the continuance of an Event of
Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.

 

(b)   Standards
for Exercising Rights and Remedies. To the extent that applicable law
imposes duties on the Collateral Agent to exercise remedies in a commercially
reasonable manner, the Maker acknowledges and agrees that it is not
commercially unreasonable for the Collateral Agent (solely as a result of any
one or more of the following):

 

(i)            to
fail to incur expenses reasonably deemed significant by the Collateral Agent to
prepare Collateral for disposition or otherwise to fail to complete raw
material or work in process into finished goods or other finished products for
disposition;

 

(ii)           to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain governmental
or third party consents for the collection or disposition of Collateral to be
collected or disposed of;

 

(iii)          to
fail to exercise collection remedies against account debtors or other persons
obligated on Collateral or to fail to remove liens or encumbrances on or any
adverse claims against Collateral;

 

(iv)          to
exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists;

 

(v)           to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature;

 

(vi)          to
contact other persons, whether or not in the same business as the Maker, for
expressions of interest in acquiring all or any portion of the Collateral;

 

(vii)         to
hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature;

 

(viii)        to
dispose of Collateral by utilizing Internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets;

 

 

(ix)           to
dispose of assets in wholesale rather than retail markets;

 

(x)            to
disclaim disposition warranties;

 

(xi)           to
purchase insurance or credit enhancements to insure the Collateral Agent
against risks of loss, collection or disposition of Collateral or to provide to
the Collateral Agent a guaranteed return from the collection or disposition of
Collateral; or

 

(xii)          to
the extent deemed appropriate by the Collateral Agent, to obtain the services
of other brokers, investment bankers, consultants and other professionals to
assist the Collateral Agent in the collection or disposition of any of the
Collateral.

 

The Maker acknowledges that the purpose of
this Section 13(b) is to provide non-exhaustive indications of what actions or
omissions by the Collateral Agent would not be commercially unreasonable in the
Collateral Agent’s exercise of remedies against the Collateral and that other
actions or omissions by the Collateral Agent shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 13(b).  Without limitation upon the foregoing,
nothing contained in this Section 13(b) shall be construed to grant any rights
to the Maker or to impose any duties on the Collateral Agent that would not
have been granted or imposed by this Security Agreement or by applicable law in
the absence of this Section 13(b).

 

Section 14.     Appointment
and Authorization of Collateral Agent.

 

(a)   Grant
of Authority.  Each Payee hereby
designates and appoints Advent International Corporation, a Delaware
corporation, to act as the Collateral Agent for such Payee under this Security
Agreement, and each Payee hereby authorizes the Collateral Agent, as Collateral
Agent acting on behalf of and for the benefit of such Payee, to execute and
enter into this Security Agreement and to take such action under the provisions
of this Security Agreement and all other instruments relating thereto and to
exercise such powers and perform such duties as are expressly delegated to the
Collateral Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto.

 

(b)   Limited
Agency.  Notwithstanding any
provision to the contrary set forth elsewhere in this Security Agreement, the
Collateral Agent shall not have any duties or responsibilities in its capacity
as Collateral Agent except those expressly set forth herein or therein, or any
fiduciary relationship with any Payee, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Security Agreement or otherwise exist against the Collateral Agent.

 

Section 15.     Collateral
Agency Provisions.

 

(a)   Delegation
of Duties.  The Collateral Agent may
exercise its powers and execute any of its duties under this Security Agreement
by or through employees, agents or attorneys-in-fact and shall be entitled to
take and to rely on advice of counsel concerning all matters pertaining to such
powers and duties.  The Collateral Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.  The Collateral Agent may utilize the services
of such Persons as the Collateral Agent in its sole discretion may determine
(acting reasonably) are necessary in connection with the exercise of the
Collateral Agent’s powers and execution of its duties under this Security
Agreement, and all reasonable out-of-pocket fees and expenses of such Persons
shall be borne by the Maker pursuant to the terms of the Notes and this
Security Agreement.  The only duties and
obligations which the Collateral Agent shall have are those set forth in this
Security Agreement.

 

(b)   Exculpatory
Provisions.  The Collateral Agent and
each of its officers, directors, employees, agents, attorneys-in-fact and
affiliates shall not be (i) liable for any action
lawfully taken or

 

 

omitted to be taken by it or such Person
under or in connection with this Security Agreement (except for its personal
liability for its own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Payees for any recitals, statements,
representations or warranties made by Maker or any officer thereof contained in
this Security Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received by, the Collateral Agent
under or in connection with this Security Agreement, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Security Agreement or for any failure of the Maker to perform its obligations thereunder.  The Collateral
Agent shall not be under any obligation to the Payee to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Security Agreement.

 

(c)   Reliance
by Collateral Agent.  The Collateral
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Maker), independent accountants and other experts selected by the Collateral
Agent with reasonable care.  The
Collateral Agent shall be fully justified in failing or refusing to take action
under this Security Agreement unless it shall first receive such advice or
concurrence of the Requisite Payees as is contemplated by Section 16 hereof and
it shall first be indemnified to its reasonable satisfaction by the Payees
against any and all liability and expense which may be incurred by it by reason
of taking, continuing to take or refraining from taking any such action.  The Collateral Agent, in all cases, shall be
fully protected in acting, or in refraining from acting, under this Security
Agreement in accordance with the provisions of Section 16 hereof and any action
taken or failure to act pursuant thereto shall be binding upon all the Payees.

 

(d)   Notice
of Event of Default.  The Collateral
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Event of Default unless it has received from a Payee a Statement of Event of
Default.  The Collateral Agent may rely
on a Statement of Event of Default without further inquiry.  When the Collateral Agent receives a
Statement of Event of Default, the Collateral Agent promptly (but in any event
within three Business Days of receipt of such notice) shall give notice thereof
to the Payees and shall schedule a meeting of all Payees to be held within five
Business Days of the sending of such notice at a mutually convenient time and
place.  At such meeting the Payees shall
consult with one another in an attempt to determine a mutually acceptable
course of conduct regarding the Maker and the collection of the outstanding
Obligations.  The Collateral Agent shall
take such action with respect to such Event of Default as shall be directed by
the Requisite Payees in accordance with Section 16 hereof, provided that unless
and until the Collateral Agent shall have received such directions, the
Collateral Agent may (but shall not be obligated to) take such action under
Section 16(b) hereof with respect to such Event of Default as it shall deem
advisable in the best interests of the Payees.

 

(e)   Non-Reliance
on Collateral Agent and Other Payees. 
Each Payee expressly acknowledges that neither the Collateral Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to such Payee and that no
act by the Collateral Agent hereinafter taken, including any review of the
affairs of the Maker, shall be deemed to constitute any representation or
warranty by the Collateral Agent to any Payee. 
Each Payee represents to the Collateral Agent that it has, independently
and without reliance upon the Collateral Agent or any other Payee, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and credit-worthiness of the Makers and made its
own decision to incur its indebtedness under the Notes.  Each Payee also represents that it will,
independently and without reliance upon the Collateral Agent or any other
Payee, and based on such documents and information as it shall deem appropriate
at the time,

 

 

continue to make its own credit analysis,
appraisals and decisions in taking or not taking (or directing the Collateral
Agent to take or not take) action under this Security Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Maker.  Except for notices, reports and
other documents expressly required to be furnished to the Payees by the
Collateral Agent hereunder, the Collateral Agent shall not have any duty or
responsibility to provide the Payees with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Maker which may come into the possession of the
Collateral Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.

 

(f)    Indemnification.  The Payees agree to indemnify the Collateral
Agent in its capacity as such (to the extent not reimbursed by the Maker and
without limiting the obligation of the Maker to do so), ratably according to
their respective share of the Aggregate Principal Indebtedness from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or asserted against the
Collateral Agent in any way relating to or arising out of actions or omissions
of the Collateral Agent specifically required or permitted by this Security
Agreement or by written instructions of the Requisite Payees delivered pursuant
thereto, provided that no Payee shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Collateral Agent’s gross negligence or willful misconduct.  The agreements in this subsection shall
survive the payment of the Obligations.

 

(g)   Successor
Collateral Agent.  The Collateral
Agent may resign as Collateral Agent hereunder upon 90 days’ notice to the
Payees and the Maker and may be removed at any time, with or without cause, by
the Requisite Payees upon 90 days’ notice to the Payees, the Maker and the
Collateral Agent.  If at any time the
Collateral Agent shall resign or be removed as Collateral Agent under this
Security Agreement, then the Requisite Payees shall appoint a successor agent
for the Payees, whereupon such successor agent shall succeed to the rights,
powers and duties of the Collateral Agent(any successor agent, a “Successor
Collateral Agent”); provided that, so long as no Event of Default has occurred
and is continuing, the consent of the Maker shall be required prior to the
appointment of any such Successor Collateral Agent, which consent shall not be
unreasonably withheld or delayed.  If the
appointment of such successor shall not have become effective (as hereafter
provided) within such ninety-day period after the Collateral Agent’s
resignation or upon removal of the Collateral Agent, then (i)
the Collateral Agent may assign the security interests granted pursuant to the
Security Agreement and its duties hereunder and under the Security Agreement to
the Payees, as their interests may appear, and in such case all references
herein to “Collateral Agent” shall be deemed to refer to “Requisite Payees” and
(ii) the Payees may petition a court of competent jurisdiction for the
appointment of a successor Collateral Agent and such court shall, after such
notice as it may deem proper, appoint a successor Collateral Agent meeting the
qualifications specified in this Section 15(g). 
The Payees hereby consent to such petition and appointment so long as
such criteria are met.  The term
“Collateral Agent” shall mean the successor agent effective upon its
appointment and upon its acceptance of such appointment, and the former
Collateral Agent’s rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part of such former
Collateral Agent or any of the parties to this Security Agreement, and the
Successor Collateral Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent.  The resigning or removed Collateral Agent
agrees that it shall take all actions and execute all documents which may be
reasonably required by the Payees and the Successor Collateral Agent to give
effect to its replacement as the Collateral Agent hereunder and shall be fully
indemnified under the terms of this Security Agreement in so doing.  After the Collateral Agent’s resignation or
removal hereunder as Collateral Agent, the provisions of this Section 15 shall
inure to its

 

 

benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent under this Security Agreement.

 

Section 16.     Actions
by Collateral Agent.

 

(a)   Requesting
Instructions.  The Collateral Agent
may at any time request directions from the Payees as to any course of action
or other matter relating to the performance of its duties under this Security
Agreement, and the Payees shall promptly comply with such request.  Directions given to the Collateral Agent by
the Requisite Payees shall be binding on each of the Payees. The Collateral
Agent, in taking action pursuant to this Section 16, shall be entitled to rely
on instructions given by the Requisite Payees.

 

(b)   Emergency
Actions.  If the Collateral Agent has
asked the Payees for instructions with regard to an Event of Default and if the
Payees have not yet responded to such request, the Collateral Agent shall be
authorized to take such actions with regard to such Event of Default which the
Collateral Agent, in good faith, believes to be reasonably required to promote
and protect the interests of the Payees and to maximize both the value of the
Collateral and the present value of the recovery by each of the Payees on the
Obligations; provided, however, that once instructions have been
received from the Requisite Payees which comply with Section 16(f) hereof, the
actions of the Collateral Agent shall be governed thereby and the Collateral
Agent shall not take any further action which would be contrary thereto.

 

(c)   Release
of Collateral.  The Collateral Agent
shall not release any Collateral without the written consent of all the Payees,
except releases of Collateral as expressly permitted by any of the Loan
Documents.

 

(d)   Expenses.  The Maker shall pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent and the Payees
incurred in connection with any release of Collateral, including but not
limited to all costs and expenses relating to financing statement filings and
terminations and document review and preparation, including but not limited to
reasonable fees and expenses of counsel for the Collateral Agent relating to
any of the foregoing.

 

(e)   Administrative
Actions.  The Collateral Agent shall
have the right to take such actions, or omit to take such actions, hereunder
and under this Security Agreement not inconsistent with the instructions of the
Requisite Payees, or the terms hereof, including without limitation actions the
Collateral Agent deems necessary or appropriate to perfect or continue the
perfection of the liens on the Collateral for the benefit of the Payees or to protect
or insure the Collateral.  Except as
provided above in Section 9(b) and as otherwise provided pursuant to applicable
law, the Collateral Agent shall have no duty as to the collection or protection
of the Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of rights pertaining to the
Collateral beyond the safe custody of any Collateral in the Collateral Agent’s
possession.

 

(f)    Exercise
of Remedies.  Except as otherwise
provided in Section 16(b), the Collateral Agent shall only be authorized to
take such actions under this Security Agreement and to enforce or prepare to
enforce the remedies available under this Security Agreement as are approved in
a written notice by the Requisite Payees; provided, however, that
no notice to release Collateral (except Collateral which is permitted to be
sold or otherwise disposed of pursuant to the terms hereof and the Notes) shall
be effective unless signed by all of the Payees.  In furtherance of the foregoing, the
Collateral Agent agrees to make such demands and give such notices under this
Security Agreement as may be reasonably requested by, and to take such action
to enforce this Security Agreement and to foreclose upon, collect and dispose
of the Collateral or any portion thereof as may be directed by the Requisite
Payees; provided, however, that (i) the Collateral
Agent shall not be required to take any action that is in its opinion contrary

 

 

to law or the terms of the Notes and this
Security Agreement and (ii) the Collateral Agent shall not be required to take
any action unless, upon its request, it is indemnified in accordance with the
provisions of Section 15(f) hereof.

 

(g)   Application
of Proceeds.  All amounts owing with
respect to the Obligations shall be secured pro
rata by the Collateral without distinction as to whether some
Obligations are then due and payable and other Obligations are not then due and
payable.  Upon any realization upon the
Collateral by the Collateral Agent, the Payees agree that the proceeds thereof
shall be applied:

 

(i)            first,
to the payment of reasonable out-of-pocket expenses incurred by the Collateral
Agent with respect to maintenance and protection of the Collateral and of
reasonable out-of-pocket expenses incurred with respect to the sale of or
realization upon any of the Collateral or the perfection, enforcement or
protection of the rights of the Payees (including reasonable attorneys’ fees
and expenses;

 

(ii)           second,
to all amounts of interest, expenses and fees constituting a part of the
Obligations according to the aggregate amounts thereof owing to each Payee on
the Notice Date in the same priority of the mandatory prepayments of the Notes;

 

(iii)          third,
to all amounts of principal constituting a part of the Obligations according to
the aggregate amounts thereof owing to each Payee on the Notice Date in the
same priority of the mandatory prepayments of the Notes;

 

(iv)          fourth,
to other amounts then due to the Payee under the Notes (including but not
limited to all fees, expenses and premiums) in the same priority of the
mandatory prepayments of the Notes; and

 

(v)           fifth,
the balance, if any, shall be returned to the Maker or such other Persons as
are entitled thereto.

 

(h)   Notes.

 

(i)            Except
as expressly provided in Section 16(g) with respect to the application of
proceeds of Collateral, nothing in this Security Agreement shall limit or
otherwise impair the ability of any Payee (i) to
proceed to enforce the payment of all or any sums due such Payee under the Notes
against the Maker, whether by acceleration or otherwise, or to enforce any
other legal or equitable right against the Maker thereunder
or (ii) to obtain payment (in whole or in part) from the Maker or any other
source for any amount owing under the Notes, whether or not an Event of Default
shall have occurred and be continuing, subject in each case to the terms and
conditions thereof.  Without limiting the
generality of the foregoing, no Payee shall be required to share any payment
received from the Maker or any other source on account of the Obligations with
any other Payee, whether or not an Event of Default shall have occurred and be
continuing, except as expressly provided in Section 16(g) and in the Notes.

 

(ii)           Nothing
in this Security Agreement shall limit the right of any Payee to amend,
supplement or otherwise modify the terms and conditions of the Notes in any
manner (including without limitation any such amendment, supplement or
modification that would increase any amounts owing by the Maker thereunder), subject in each case to the terms of the
Notes.

 

(i)    Retention
and Investment of Proceeds.

 

(i)            Proceeds
which, due to their nature, due to a restraining order or otherwise are not
permitted to be applied as set forth above, or due to the Collateral Agent
determining it

 

 

to be impractical to divide and apply such
proceeds to the payment of the Obligations, shall be held by the Collateral
Agent or, as the case may be, the Payee receiving such proceeds as agent for
the Payees until such proceeds (A) are converted into cash, (B) are permitted
to be applied or (C) become practical to divide at which time such proceeds
shall be applied in accordance with the terms of this Security Agreement.

 

(ii)           Pending
disbursement of any amounts held by the Collateral Agent pursuant to this
Security Agreement, the Collateral Agent shall (to the extent the Collateral
Agent deems practical) invest such amounts in Cash Equivalents (as defined in
the Notes).

 

Section 17.     Other
Collateral; Duty to Notify; Cooperation; Marshalling.

 

(a)   Additional
Collateral.  The Payees agree that
all of the provisions of this Security Agreement shall apply to any and all
properties, assets and rights of the Maker in which the Collateral Agent, at
any time, acquires a security interest or lien pursuant to this Security
Agreement.

 

(b)   Notification
of Event of Default.  Upon the
occurrence of any Event of Default, each Payee with knowledge thereof shall
promptly notify the Collateral Agent thereof, such notice to be given in
accordance with Section 15(d) and Section 26 hereof.

 

(c)   Cooperation;
Accountings.  To the extent that the
exercise of the rights, powers and remedies of the Collateral Agent in
accordance with this Security Agreement requires that any action be taken by
any Payee, such Payee shall take such action and cooperate with the Collateral
Agent to ensure that the rights, powers and remedies of all Payees are
exercised in full.  Each of the Payees
will, upon the reasonable request of another Payee, from time to time execute
and deliver or cause to be executed and delivered such further instruments and
do and cause to be done such further acts as may be necessary or proper to
carry out more effectively the provisions of this Security Agreement.

 

(d)   No
Other Collateral.  No Payee shall
take any security interest in the personal property or liens upon the real
property of any Maker other than security interests and liens which are
governed by the terms of this Security Agreement or the Pledge Agreement and
held in the name of the Collateral Agent for the benefit of all Payees.

 

(e)   Purchase
of Collateral.  Any Payee may
purchase all or any part of the Collateral at any public or private sale of
such Collateral and may make payment on account thereof by using any claim then
due and payable to such Payee from the Persons which granted a security
interest in such Collateral as a credit against the purchase price to the
extent, but only to the extent approved by the Requisite Payees.  Such Payee shall comply with Article 9 of the
UCC of the relevant jurisdiction as a secured party, notwithstanding that the
Collateral Agent holds the security interest pursuant to this Security
Agreement.  Each of the Payees shall
cooperate with each other Payee in order to obtain the maximum sale price
reasonably possible upon any foreclosure or other sale of all or any part of
the Collateral.  Notwithstanding the
foregoing, all sales, transfers and other dispositions of any Collateral shall
be accomplished in a commercially reasonable manner.

 

Section 18.     No
Waiver by Collateral Agent, etc.  The
Collateral Agent shall not be deemed to have waived any of its rights and
remedies in respect of the Obligations or the Collateral unless such waiver
shall be in writing and signed by the Collateral Agent. No delay or omission on
the part of the Collateral Agent in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. All rights and remedies of the
Collateral Agent with respect to the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be

 

 

cumulative and may be exercised
singularly, alternatively, successively or concurrently at such time or at such
times as the Collateral Agent deems expedient.

 

Section 19.     Suretyship Waivers by Maker.  The Maker waives demand, notice of demand,
notice of protest, notice of acceptance of this Security Agreement, notice of
loans made, credit extended, Collateral received or delivered or other action
taken in reliance hereon and all other demands and notices of any description
(other than notices expressly required by the terms of this Security Agreement
or the other Loan Documents).  With
respect to both the Obligations and the Collateral, the Maker assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of or failure to perfect any security
interest in any Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payment thereon
and the settlement, compromising or adjusting of any thereof, all in such
manner and at such time or times as the Collateral Agent may deem advisable.
Except as set forth in Section 9(b) and as otherwise provided pursuant to
applicable law, the Collateral Agent shall have no duty as to the collection or
protection of the Collateral or any income therefrom,
the preservation of rights against prior parties, or the preservation of any
rights pertaining thereto beyond the safe custody thereof as set forth in
Section 9(b).  To the extent permitted by
applicable law, the Maker further waives any and all other suretyship
defenses.

 

Section 20.     Marshalling.
The Collateral Agent shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the extent that
it lawfully may, the Maker hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Collateral Agent’s rights and remedies under this
Security Agreement or under any other instrument creating or evidencing any of
the Obligations or under which any of the Obligations is outstanding or by
which any of the Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, the Maker hereby irrevocably
waives the benefits of all such laws.

 

Section 21.     Proceeds
of Dispositions; Expenses. The Maker shall pay to the Collateral Agent upon
written demand therefor any and all reasonable
out-of-pocket expenses, including reasonable attorneys’ fees and disbursements,
incurred or paid by the Collateral Agent in protecting, preserving or enforcing
the Collateral Agent’s rights and remedies under or in respect of any of the
Obligations or any of the Collateral. After deducting all of said expenses, the
residue of any proceeds of collection or sale or other disposition of
Collateral shall, to the extent actually received in cash, be applied to the
payment of the Obligations in accordance with Section 16(g), proper allowance
and provision being made for any Obligations not then due. Upon the final
payment and satisfaction in full of all of the Obligations and after making any
payments required by Sections 9- 608(a)(1)(C) or 9-615(a)(3) of the Uniform
Commercial Code of the State, any excess shall be returned to the Maker. In the
absence of final payment and satisfaction in full of all of the Obligations,
the Maker shall remain liable for any deficiency.

 

Section 22.     Overdue
Amounts.  Until paid in full in cash,
all amounts due and payable by the Maker hereunder shall be a debt secured by
the Collateral and shall bear, whether before or after judgment, interest at
the highest rate of interest for overdue principal set forth in any Note.

 

Section 23.     Governing
Law.  THIS SECURITY AGREEMENT SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ANY
CONFLICT OF LAWS PRINCIPLES.

 

Section 24.     Consent
to Jurisdiction and Service of Process. 
Maker irrevocably appoints each and every owner, partner and/or officer
of Maker as its attorney upon whom may be served, by regular or certified

 

 

mail at the address set forth
in the Notes, any notice, process or pleading in any action or proceeding
against it arising out of or in connection with this Security Agreement.  Maker hereby consents that any action or
proceeding against it may be commenced and maintained in any court within the
State of Delaware or in the United States District Court for the District of Delaware
by service of process on any such owner, partner and/or officer.  Maker further agrees that such courts of the
State of Delaware and the United States District Court for the District of
Delaware shall have jurisdiction with respect to the subject matter hereof and
the person of Maker and all Collateral.

 

Section 25.     Judicial
Proceeding; Waivers.  EACH OF MAKER AND COLLATERAL AGENT
AGREES THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY ANY PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY
PARTY, ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS, THE COLLATERAL OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR
THERETO SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY.  EACH OF MAKER AND COLLATERAL AGENT HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY SUCH SUIT, ACTION OR PROCEEDING. 
FURTHER, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.  MAKER ACKNOWLEDGES AND AGREES
THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS SECURITY AGREEMENT
AND THAT THE PAYEE WOULD NOT EXTEND CREDIT IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS SECURITY AGREEMENT.

 

Section 26.     Notice.  All notices required to be given to the
Collateral Agent, the Maker or the Payees shall be in writing and shall be
deemed to have been sufficiently given for all purposes when presented
personally to such party or sent by certified or registered mail, return
receipt requested, delivered to such party (i) in the
case of the Maker or the Payees, as set forth in the notice section of each
Note and (ii) in the case of the Collateral Agent, c/o Advent International plc, 123 Buckingham Palace Road, London SW1W 9SL United
Kingdom.  Such notice shall be deemed to
be given when received if delivered personally or five (5) business days after
the date mailed.  Any notice mailed shall
be sent by certified or registered mail. 
Any notice of any change in such addresses shall also be given in the
manner set forth above.  Whenever the
giving of notice is required, the giving of such notice may be waived in
writing by the party entitled to receive such notice.

 

Section 27.     Counterparts.  This Security Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute on and the same agreement.

 

Section 28.     Successors
and Assigns.  This Security Agreement
shall be binding upon and shall inure to the benefit of the successors or
assigns of the Maker and the Collateral Agent and shall constitute a continuing
agreement, applying to all future as well as existing transactions between the
Maker and the Collateral Agent, or their successors and assigns.

 

Section 29.     Miscellaneous.
The headings of each section of this Security Agreement are for convenience
only and shall not define or limit the provisions thereof. This Security
Agreement and all rights and obligations hereunder shall be binding upon the
Maker and its successors and assigns, and shall inure to the benefit of the
Collateral Agent and its successors and assigns. If any term of this Security
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Security
Agreement shall be construed and be enforceable as if such invalid,

 

 

illegal or unenforceable term
had not been included herein. The Maker acknowledges receipt of a copy of this
Security Agreement.

 

Section 30.             Termination
of Security Agreement.  This Security
Agreement and the security interest created hereby shall terminate upon the
Termination Date and all rights to the Collateral shall revert to the  Maker. 
Upon such termination, the Collateral Agent shall at the Maker’s expense
(a)deliver to the Maker all Collateral in the Collateral Agent’s possession or
control and all instruments of assignment executed in connection therewith,
free and clear of the liens hereof and (b) take such other actions and execute
and deliver such other documents and instruments, as may be reasonably
requested by the Maker, in order to evidence the termination of this Security
Agreement and to release any lien or security interest in any Collateral
securing the Obligations.

 

 

[Signature
Page Follows]

 

 

IN WITNESS WHEREOF, intending to be legally
bound, the Maker has caused this Security Agreement to be duly executed as of
the date first above written.

 

	
   

  	
     MAKER:

  
	
   

  	
   

  
	
   

  	
  EVOLVING SYSTEMS,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEPHEN K. GARTSIDE, JR.

  
	
   

  	
  Name: 
  Stephen K. Gartside, Jr.

  
	
   

  	
  Title:   
  President and Chief Executive Officer

  
	
   

  	
   

  
	
  Acknowledged and Agreed:

  	
   

  
	
   

  	
   

  
	
  COLLATERAL AGENT:

  	
   

  
	
   

  	
   

  
	
  Advent
  International Corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ JANET L.
  HENNESSEY

  	
   

  	
   

  
	
  Name:: Janet
  L. Hennessey

  	
   

  
	
  Title:    Vice President

  	
   

  
	
   

  	
   

  
	
  for the purposes of Section 14 through Section 17:

  	
   

  
	
  PAYEES:

  	
   

  
	
   

  	
   

  
	
  Tertio
  Telecoms Group Ltd.

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  NIGEL CLIFFORD

  	
   

  	
   

  
	
   

  	
  Name: Nigel
  Clifford

  	
   

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  JAMES BROCKLEBANK

  	
   

  	
   

  
	
   

  	
  Name: James Brocklebank

  	
   

  	
   

  
	
   

  	
  Title: DirectorEXHIBIT 4.5

 

EXECUTION COPY

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (this “Pledge Agreement”), dated as of
this 2nd day of November, 2004 by Evolving Systems, Inc., a Delaware
corporation (“Maker”), in favor of Advent International Corporation, a
Delaware corporation, as collateral agent (in such capacity, “Collateral
Agent”) for the holders of the Notes (defined below) from time to time
(each individually a “Payee” and collectively, the “Payees”).

 

WITNESSETH:

 

WHEREAS, the Maker has executed and delivered the following notes in
favor of Payees:  (i) the Senior Secured
Note dated of even date herewith in the original principal amount of $4,000,000
(as the same may be amended, restated, or modified from time to time, the “Initial
Short Term Note”) and (ii) the Senior Secured Notes dated of even date
herewith in the aggregate original principal amount of $11,950,000 (consisting
of a non-escrow note in the original principal amount of $10,355,000 and an
escrow note in the original principal amount of 
$1,595,000) (as the same may be amended, restated, modified or replaced
in substitution from time to time, the “Initial A Notes”);

 

WHEREAS, the Maker may execute and deliver in the future the following
notes in favor of Payees:  (i) additional
Senior Secured Notes to assignees of the holder of the Initial Short Term Note
(as they may be amended, restated, modified or replaced in substitution from
time to time, the “Additional Short Term Notes” and collectively with
the Initial Short Term Note, the “Short Term Notes”); (ii) additional
Senior Secured Notes to assignees of the holder of the Initial A Notes,
including, without limitation, any additional payment in kind notes as of a
later date in the same form (as they may be amended, restated, modified or
replaced in substitution from time to time, the “Additional A Notes”  and collectively with the Initial A Notes,
the “A Notes”); (iii) additional Senior Secured Notes in exchange for
the A Notes in an aggregate original principal amount to be determined in
accordance with the  A Notes (as they may
be amended, restated, or modified from time to time, the “B-1 Notes”);
and (iv) Senior Secured Convertible Notes in exchange for the A Notes in an
aggregate original principal amount to be determined in accordance with the A Notes
(as they may be amended, restated, or modified from time to time, the “Convertible
Notes”, and together with the Short Term Notes, the A Notes and the B-1
Notes, each individually a “Note” and collectively the “Notes”);
and

 

WHEREAS, to induce the Payees to incur the indebtedness under the
Notes, the Maker wishes to grant a security interest in favor of the Collateral
Agent for the benefit of the Payees as herein provided.

 

NOW THEREFORE, for good and valuable consideration and intending to be
legally bound hereby, Maker agrees as follows:

 

Section 1.       Definitions;
Inconsistencies with Notes.

 

(a)   All
capitalized terms used herein without definitions shall have the respective
meanings provided therefor in the Notes. 
If there is a conflict between the terms of this Pledge Agreement and
those of the Notes, the terms of the Notes shall control.

 

 

 

(b)   The
term “Aggregate Principal Indebtedness” means, as of any date of
determination, the sum of the principal amounts outstanding under the Notes in
effect at such time.

 

(c)   The
term “Code” means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.

 

(d)   The
term “Event of Default” means an “Event of Default” under (and as
defined in) the Notes.

 

(e)   The
term “Guaranty Agreement” means the Guaranty Agreement dated of event
date herewith by the guarantors party thereto in favor of Collateral Agent for
the benefit of Payees, as it may be amended, restated or modified from time to
time.

 

(f)    The
term “Loan Documents” means the Notes, this Pledge Agreement, the
Security Agreement and the Guaranty Agreement and any other documents,
agreements and instruments entered into in connection therewith, all as
amended, restated or modified from time to time; provided, however, that the
term “Loan Documents” shall not include the Stock Purchase Agreement or the
Series B Designation (each as defined in the Notes) or the Investor Rights
Agreement (as defined in the Stock Purchase Agreement) or any other document,
agreement or instrument entered into in connection with the documents referred
to in this proviso, all as amended, restated or modified from time to time.

 

(g)   The
term “Notice Date” means the date on which the Collateral Agent first
receives instructions from the Requisite Payees to enforce rights under this
Pledge Agreement.

 

(h)   The
term “Obligations” means any and all of the indebtedness, obligations
and liabilities of any kind and description arising in any way of the Maker to
the Payees, individual or collective, joint or several, direct or indirect,
absolute or contingent, secured or unsecured, due or to become due, contractual
or tortuous, arising by operation of law or otherwise, now existing or
hereafter arising under or in respect of any of the Loan Documents, whether
incurred by the Maker as principal, surety, endorser, guarantor, accommodation
party or otherwise, including without limitation any future advances, whether
obligatory or voluntary under, or refinancings, renewals or extensions of or
substitutions for, any existing or future debt, principal, interest and fees,
late fees and reasonable out-of-pocket expenses (including, reasonable
attorneys’ fees and costs), or that have been or may hereafter be contracted or
incurred and any and all reasonable out-of-pocket costs, expenses and
liabilities which may be made or incurred by any Payee or the Collateral Agent
in any way in connection with any of the obligations of the Maker under the
Loan Documents, and all interest, fees, costs and expenses that may be owing to
Payees after the commencement of bankruptcy proceedings with respect to the
foregoing obligations of the Maker.

 

(i)    The
term “Person” means any individual, partnership, corporation, trust,
joint venture or unincorporated organization, including any government or
agency or political subdivision thereof.

 

(j)    The
term “Requisite Payees” means, on any given date of determination,
Payees holding at least 50.1% of the Aggregate Principal Indebtedness.

 

(k)   The
term “Security Agreement” means the Security Agreement dated of even
date herewith by Maker in favor of Collateral Agent for the benefit of Payees,
as it may be amended, restated or modified from time to time.

 

(l)    The
term “Statement of Event of Default” means a written statement delivered
by the Requisite Payees to the Collateral Agent referring to any Note stating
that an Event of Default has occurred thereunder.

 

 

(m)  The
term “Termination Date” means the earlier of (i) indefeasible payment in
full of the Obligations and (ii) the date that the aggregate outstanding
balance of all of the Notes is equal to or less than ten percent (10%) of the
original aggregate principal amount of all of the Notes at the date of
issuance.

 

(n)   The
term “TSE” means Telecom Software Enterprises, LLC, a Colorado limited liability
company.

 

(o)   The
term “ TSE Promissory Notes” means the promissory notes issued by TSE to
Peter McGuire and Lisa Marie Maxson pursuant to the Acquisition Agreement dated
October 15, 2004 by and among the Maker, Peter McGuire and Lisa Marie Maxson.

 

(p)   The
term “TSE Securities” has the meaning given to such term in Section 2.

 

Section 2.       Pledge
of Securities.  Maker hereby assigns,
pledges and grants to Collateral Agent for the benefit of the Payees a security
interest in the shares of capital stock and/or other securities of the
Subsidiaries of Maker now owned by or standing in the name of Maker or in which
Maker has a legal or beneficial interest, which are described on Schedule A
attached hereto and made a part hereof (as the same may from time to time be
amended in writing by the parties hereto), (hereinafter referred to as the “Securities,”
which Securities together with all additions thereto, substitutions or
exchanges therefor, proceeds thereof and distributions thereon shall be
referred to collectively herein as the “Collateral”), as collateral
security for the payment and performance of the Obligations.

 

Notwithstanding the foregoing, “Securities”
shall not include any of the following: (a) capital securities of TSE (the
“TSE Securities”) for so long as any obligations remain outstanding
under the TSE Promissory Notes,  provided
that the security interest in such TSE Securities shall automatically attach
hereunder when and after all obligations under the TSE Promissory Notes have
been paid in full; or (b) capital securities of an issuer that is a Foreign
Subsidiary (as defined below) of Maker (other than a Foreign Subsidiary that
(i) is treated as a partnership under the Code or (ii) is not treated as an
entity that is separate from (A) Maker; (B) any Person that is treated as a
partnership under the Code or (C) any “United States person” (as defined in
Section 7701(a)(30) of the Code)), in excess of 65% of the total combined
voting power of all capital securities of each such Foreign Subsidiary.  As used herein, “Foreign Subsidiary” means
any Subsidiary of Maker that is not organized under the laws of the United
States or any state thereof.

 

Section 3.       Representations
and Warranties.  Maker represents and
warrants that:

 

(a)   Maker
has good title to the Securities free and clear of all liens and encumbrances
except the security interest created hereby; and such Securities constitute the
percentages of the issued and outstanding shares of capital stock of each
Subsidiary set forth on Schedule A.

 

(b)   The
Securities are validly issued, fully paid and nonassessable and, except as
disclosed in Schedule B, are not subject to any charter, bylaw, statutory,
contractual or other restrictions governing their issuance, transfer, ownership
or control except as indicated on the stock certificates for the Securities.

 

(c)   Maker
has delivered to Collateral Agent all stock certificates, promissory notes,
bonds, debentures or other instruments or documents representing or evidencing
the Securities, together with corresponding assignment or transfer powers duly
executed in blank by Maker, and this Pledge Agreement and such powers have been
duly and validly executed and are binding and enforceable against Maker in
accordance with their terms except as such enforcement may be limited by
bankruptcy, insolvency or similar laws of general application relating to the
enforcement of creditors’ rights; and the

 

 

taking possession by Collateral Agent of all
stock certificates, promissory notes, bonds, debentures or other instruments or
documents representing or evidencing the Securities, together with
corresponding assignment or transfer powers, or the filing of financing
statements with the Secretary of State (or equivalent government official) of
the State in which Maker is organized will perfect, and establish the first
priority of, Collateral Agent’s security interest in the Securities securing
payment of the Obligations. Maker covenants and agrees to take all actions and
steps reasonably requested by Collateral Agent within ten (10) days of the date
hereof to perfect a security interest granted hereunder in the securities of
any Foreign Subsidiary, including any filings with Companies House.

 

(d)   Other
than the filing of financing statements that have been authorized by the Maker
in the appropriate filing offices therefor, no authorization, approval, or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by Maker of the
Securities pursuant to this Pledge Agreement or for the execution, delivery or
performance of this Pledge Agreement by Maker or (ii) for the exercise by
Collateral Agent of the voting or other rights provided for in this Pledge
Agreement or the remedies in respect of the Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such disposition by
laws affecting the offering and sale of securities generally).

 

Section 4.       Covenants.

 

(a)   Except
as permitted or provided otherwise in the Notes and the other Loan Documents,
Maker covenants and agrees not to (i) sell or otherwise dispose of, or grant
any option with respect to, any of the Collateral, or (ii) create or permit to
exist any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Collateral, except the security interest under this
Pledge Agreement.  Maker agrees to pledge
hereunder, immediately upon acquisition (directly or indirectly) thereof, any
and all additional shares of stock or other securities of any Subsidiary.

 

(b)   Maker
covenants and agrees to take all actions (and execute and deliver from time to
time all instruments and documents) necessary or appropriate or reasonably
requested by Collateral Agent to continue the validity, enforceability and perfected
status of the pledge of Securities hereunder.

 

Section 5.       Dividends;
Distributions.  Prior to the
Termination Date, Collateral Agent shall be entitled to receive, as additional
Collateral any and all additional shares of stock or any other property of any
kind distributable on or by reason of the Securities pledged hereunder, whether
in the form of or by way of stock dividends, warrants, partial liquidation,
conversion, prepayments or redemptions (in whole or in part), liquidation, or
otherwise with the exception of (a) normal, regularly declared cash dividends
or cash interest payments as the case may be and (b) other dividends or
distributions permitted or not otherwise restricted or prohibited by the Loan
Documents (collectively, the “Permitted Distributions”).  If any of such property, other than such
Permitted Distributions, shall come into the possession or control of Maker,
Maker shall hold or control and forthwith transfer and deliver the same to
Collateral Agent subject to the provisions hereof.

 

Section 6.       No
Event of Default.  So long as no
Event of Default has occurred and is continuing:

 

(a)   Maker
shall be entitled to receive and retain any Permitted Distributions on the
Securities pledged hereunder.

 

(b)   Maker
may exercise all voting rights, if any, pertaining to the Securities for any
purpose not inconsistent with the terms hereof or of the Obligations or Loan
Documents.  In the event the Securities
have been transferred into the name of Collateral Agent or a nominee or
nominees of Collateral Agent prior to such Event of Default, Collateral Agent
or its nominee will execute and deliver upon request of Maker an appropriate
proxy in order to permit Maker to vote, if applicable, the same.

 

 

Section 7.       No
Liability.  Other than as required under
§ 9-207 of the Uniform Commercial Code of the State of Delaware, Collateral
Agent shall be under no obligation to take any actions and shall have no
liability (except for gross negligence or willful misconduct) with respect to
the preservation or protection of the pledged Securities or any underlying
interests represented thereby as against any prior or other parties.  In the event Maker requests that Collateral
Agent take or omit to take action(s) with respect to the Collateral not
required by the terms of this Pledge Agreement, Collateral Agent may refuse so
to do with impunity if Maker does not, upon request of Collateral Agent, post
sufficient, creditworthy indemnities with Collateral Agent which, in Collateral
Agent’s sole discretion, are sufficient to hold it harmless from any possible
liability of any kind in connection therewith.

 

Section 8.       Modification
of Obligations.  With respect to both
the Obligations and the Collateral, the Maker assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security
interest in any Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payment thereon
and the settlement, compromising or adjusting of any thereof, all in such
manner and at such time or times as the Collateral Agent may deem advisable.

 

Section 9.       Remedies
after Event of Default.  If an Event
of Default shall have occurred and be continuing:

 

(a)   Collateral
Agent may transfer or cause to be transferred any of the Pledged Securities
into its own or a nominee’s or nominees’ names.

 

(b)   Collateral
Agent shall be entitled to receive and apply in payment of the Obligations any
cash dividends, interest or other payment on the Pledged Securities.

 

(c)   Collateral
Agent shall be entitled to exercise in Collateral Agent’s discretion all voting
rights, if any, pertaining thereto and in connection therewith and at the
written request of Collateral Agent, Maker shall execute any appropriate
dividend, payment or brokerage orders or proxies.

 

(d)   Maker
shall take any action necessary or required or reasonably requested by
Collateral Agent, in order to allow Collateral Agent fully to enforce the pledge
of the Securities hereunder and realize thereon to the fullest possible extent,
including but not limited to the filing of any claims with any court,
liquidator or trustee, custodian, receiver or other like person or party.

 

(e)   Collateral
Agent shall have all the rights and remedies granted or available to it
hereunder, under the Uniform Commercial Code as in effect from time to time in
Delaware, under any other statute or the common law, or under any of the Loan
Documents, including the right to sell the pledged Securities or any portion
thereof at one or more public or private sales upon ten (10) days’ written
notice and to bid thereat or purchase any part or all thereof in its own or a
nominee’s or nominees’ names,  free and
clear of any equity of redemption; and to apply the net proceeds of the sale,
after deduction for any expenses of sale, 
including the payment of all Collateral Agent’s reasonable attorneys’
fees in connection with the Obligations and the sale, to the payment of the
Obligations in any manner or order which Collateral Agent in its sole
discretion may elect, without further notice to or consent of Maker and without
regard to any equitable principles of marshalling or other like equitable
doctrines.

 

(f)    Collateral
Agent may increase, in its sole discretion, but shall not be required to do so,
the Obligations by making additional advances or incurring expenses for the
account of Maker deemed appropriate or desirable by Collateral Agent in order
to protect, enhance, preserve or otherwise further the sale or disposition of
the Collateral or any other property it holds as security for the Obligations.

 

 

Section 10.     Sale
of Securities.  Maker recognizes that
Collateral Agent may be unable to effect a sale to the public of all or part of
the Securities by reason of certain prohibitions or restrictions in the federal
or state securities laws and regulations (herein collectively called the “Securities
Laws”), or the provisions of other federal and state laws, regulations or
rulings, but may be compelled to resort to one or more sales to a restricted
group of purchasers who will be required to agree to acquire the Securities for
their own account, for investment and not with a view to the further
distribution or resale thereof without restriction.  Maker agrees that any sale(s) so made may be
at prices and on other terms less favorable to Maker than if the Securities
were sold to the public, and that Collateral Agent has no obligation to delay
sale of the Securities for period(s) of time necessary to permit the issuer
thereof to register the Securities for sale to the public under any of the
Securities Laws.  Maker agrees that
negotiated sales whether for cash or credit made under the foregoing
circumstances shall not be deemed for that reason not to have been made in a
commercially reasonable manner.  Maker
shall cooperate with Collateral Agent and shall uses its commercially
reasonable efforts to satisfy any requirements under the Securities Laws
applicable to the sale or transfer of the Securities by Collateral Agent.

 

In connection with any sale or disposition of the Collateral,
Collateral Agent is authorized to comply with any limitation or restriction as
it may be advised by its counsel is necessary or desirable in order to avoid
any violation of applicable law or to obtain any required approval of the
purchaser(s) by any governmental regulatory body or officer and it is agreed
that such compliance shall not result in such sale being considered not to have
been made in a commercially reasonable manner nor shall Collateral Agent be
liable or accountable by reason of the fact that the proceeds obtained at such
sale(s) are less than might otherwise have been obtained.

 

Collateral Agent may elect to obtain the advice of any independent
nationally-known investment banking firm, which is a member firm of the New
York Stock Exchange, with respect to the method and manner of sale or other
disposition of any of the Collateral, the best price reasonably obtainable
therefor, the consideration of cash and/or credit terms, or any other details
concerning such sale or disposition. 
Collateral Agent, in its sole discretion, may elect to sell on such
credit terms which it deems commercially reasonable.

 

Section 11.     Appointment
and Authorization of Collateral Agent.

 

(a)   Grant
of Authority.  Each Payee hereby
designates and appoints Advent International Corporation, a Delaware
corporation, to act as the Collateral Agent for such Payee under this Pledge
Agreement, and each Payee hereby authorizes the Collateral Agent, as Collateral
Agent acting on behalf of and for the benefit of such Payee, to execute and
enter into this Pledge Agreement and to take such action under the provisions
of this Pledge Agreement and all other instruments relating thereto and to
exercise such powers and perform such duties as are expressly delegated to the
Collateral Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto.

 

(b)   Limited
Agency.  Notwithstanding any
provision to the contrary set forth elsewhere in this Pledge Agreement, the
Collateral Agent shall not have any duties or responsibilities in its capacity
as Collateral Agent except those expressly set forth herein or therein, or any
fiduciary relationship with any Payee, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Pledge Agreement or otherwise exist against the Collateral Agent.

 

Section 12.     Collateral
Agency Provisions.

 

(a)   Delegation
of Duties.  The Collateral Agent may
exercise its powers and execute any of its duties under this Pledge Agreement
by or through employees, agents or attorneys

 

 

-in-fact and shall be entitled
to take to rely on advice of counsel concerning all matters pertaining to such
powers or duties.  The Collateral Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.  The Collateral Agent may utilize the services
of such Persons as the Collateral Agent in its sole discretion may determine
(acting reasonably) are necessary in connection with the exercise of the
Collateral Agent’s powers and execution of its duties under this Pledge
Agreement, and all reasonable out-of-pocket fees and expenses of such Persons shall
be borne by the Maker pursuant to the terms of the Notes and this Pledge
Agreement.  The only duties and
obligations which the Collateral Agent shall have are those set forth in this
Pledge Agreement.

 

(b)   Exculpatory
Provisions.  The Collateral Agent and
each of its officers, directors, employees, agents, attorneys-in-fact and
affiliates shall not be (i) liable for any action lawfully taken or omitted to
be taken by it or such Person under or in connection with this Pledge Agreement
(except for its personal liability for its own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Payees for any
recitals, statements, representations or warranties made by Maker or any
officer thereof contained in this Pledge Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received
by, the Collateral Agent under or in connection with this Pledge Agreement, or
for the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Pledge Agreement or for any failure of the Maker to perform its
obligations thereunder.  The Collateral
Agent shall not be under any obligation to the Payee to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Pledge Agreement.

 

(c)   Reliance
by Collateral Agent.  The Collateral
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Maker), independent accountants and other experts selected by the Collateral
Agent with reasonable care.  The
Collateral Agent shall be fully justified in failing or refusing to take action
under this Pledge Agreement unless it shall first receive such advice or
concurrence of the Requisite Payees as is contemplated by Section 13 hereof and
it shall first be indemnified to its reasonable satisfaction by the Payees
against any and all liability and expense which may be incurred by it by reason
of taking, continuing to take or refraining from taking any such action.  The Collateral Agent, in all cases, shall be
fully protected in acting, or in refraining from acting, under this Pledge
Agreement in accordance with the provisions of Section 13 hereof and any action
taken or failure to act pursuant thereto shall be binding upon all the Payees.

 

(d)   Notice
of Event of Default.  The Collateral
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Event of Default unless it has received from a Payee a Statement of Event of
Default.  The Collateral Agent may rely
on a Statement of Event of Default without further inquiry.  When the Collateral Agent receives a
Statement of Event of Default, the Collateral Agent promptly (but in any event
within three Business Days of receipt of such notice) shall give notice thereof
to the Payees and shall schedule a meeting of all Payees to be held within five
Business Days of the sending of such notice at a mutually convenient time and
place.  At such meeting the Payees shall
consult with one another in an attempt to determine a mutually acceptable
course of conduct regarding the Maker and the collection of the outstanding
Obligations.  The Collateral Agent shall
take such action with respect to such Event of Default as shall be directed by
the Requisite Payees in accordance with Section 13 hereof, provided that unless
and until the Collateral Agent shall have received such directions, the Collateral
Agent may (but shall not be obligated to) take such action under Section 13(b)
hereof with respect to such Event of Default as it shall deem advisable in the
best interests of the Payees.

 

(e)   Non-Reliance
on Collateral Agent and Other Payees. 
Each Payee expressly acknowledges that neither the Collateral Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to such Payee and that no
act by

 

 

the Collateral Agent hereinafter taken,
including any review of the affairs of the Maker, shall be deemed to constitute
any representation or warranty by the Collateral Agent to any Payee.  Each Payee represents to the Collateral Agent
that it has, independently and without reliance upon the Collateral Agent or
any other Payee, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and credit-worthiness of
the Makers and made its own decision to incur its indebtedness under the
Notes.  Each Payee also represents that
it will, independently and without reliance upon the Collateral Agent or any
other Payee, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking (or directing the Collateral Agent to
take or not take) action under this Pledge Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Maker.  Except for notices, reports and
other documents expressly required to be furnished to the Payees by the
Collateral Agent hereunder, the Collateral Agent shall not have any duty or
responsibility to provide the Payees with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Maker which may come into the possession of the
Collateral Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.

 

(f)    Indemnification.  The Payees agree to indemnify the Collateral
Agent in its capacity as such (to the extent not reimbursed by the Maker and
without limiting the obligation of the Maker to do so), ratably according to
their respective share of the Aggregate Principal Indebtedness from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or asserted against the
Collateral Agent in any way relating to or arising out of actions or omissions
of the Collateral Agent specifically required or permitted by this Pledge
Agreement or by written instructions of the Requisite Payees delivered pursuant
thereto, provided that no Payee shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Collateral Agent’s gross negligence or willful misconduct.  The agreements in this subsection shall
survive the payment of the Obligations.

 

(g)   Successor
Collateral Agent.  The Collateral
Agent may resign as Collateral Agent hereunder upon 90 days’ notice to the
Payees and the Maker and may be removed at any time, with or without cause, by
the Requisite Payees upon 90 days’ notice to the Payees, the Maker and the
Collateral Agent.  If at any time the
Collateral Agent shall resign or be removed as Collateral Agent under this
Pledge Agreement, then the Requisite Payees shall appoint a successor agent for
the Payees, whereupon such successor agent shall succeed to the rights, powers
and duties of the Collateral Agent (any successor agent, a “Successor
Collateral Agent”); provided that, so long as no Event of Default has
occurred and is continuing, the consent of the Maker shall be required prior to
the appointment of any such Successor Collateral Agent, which consent shall not
be unreasonably withheld or delayed.  If
the appointment of such successor shall not have become effective (as hereafter
provided) within such ninety-day period after the Collateral Agent’s
resignation or upon removal of the Collateral Agent, then (i) the Collateral
Agent may assign the security interests granted pursuant to the Pledge
Agreement and its duties hereunder and under the Pledge Agreement to the
Payees, as their interests may appear, and in such case all references herein
to “Collateral Agent” shall be deemed to refer to “Requisite Payees” and (ii)
the Payees may petition a court of competent jurisdiction for the appointment
of a successor Collateral Agent and such court shall, after such notice as it
may deem proper, appoint a successor Collateral Agent meeting the
qualifications specified in this Section 12(g). 
The Payees hereby consent to such petition and appointment so long as
such criteria are met.  The term “Collateral
Agent” shall mean the successor agent effective upon its appointment and upon
its acceptance of such appointment, and the former Collateral Agent’s rights,
powers and duties as Collateral Agent shall be terminated, without any other or
further act

 

 

or deed on the part of such
former Collateral Agent or any of the parties to this Pledge Agreement, and the
Successor Collateral Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Collateral Agent.  The resigning or removed Collateral Agent
agrees that it shall take all actions and execute all documents which may be
reasonably required by the Payees and the Successor Collateral Agent to give
effect to its replacement as the Collateral Agent hereunder and shall be fully
indemnified under the terms of this Pledge Agreement in so doing.  After the Collateral Agent’s resignation or
removal hereunder as Collateral Agent, the provisions of this Section 12 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Collateral Agent under this Pledge Agreement.

 

Section 13.     Actions
by Collateral Agent.

 

(a)   Requesting
Instructions.  The Collateral Agent
may at any time request directions from the Payees as to any course of action
or other matter relating to the performance of its duties under this Pledge
Agreement, and the Payees shall promptly comply with such request.  Directions given to the Collateral Agent by
the Requisite Payees shall be binding on each of the Payees. The Collateral
Agent, in taking action pursuant to this Section 13, shall be entitled to rely
on instructions given by the Requisite Payees.

 

(b)   Emergency
Actions.  If the Collateral Agent has
asked the Payees for instructions with regard to an Event of Default and if the
Payees have not yet responded to such request, the Collateral Agent shall be
authorized to take such actions with regard to such Event of Default which the
Collateral Agent, in good faith, believes to be reasonably required to promote
and protect the interests of the Payees and to maximize both the value of the
Collateral and the present value of the recovery by each of the Payees on the
Obligations; provided, however, that once instructions have been
received from the Requisite Payees which comply with Section 13(f) hereof, the
actions of the Collateral Agent shall be governed thereby and the Collateral
Agent shall not take any further action which would be contrary thereto.

 

(c)   Release
of Collateral.  The Collateral Agent
shall not release any Collateral without the written consent of all the Payees,
except releases of Collateral as expressly permitted by any of the Loan
Documents.

 

(d)   Expenses
of Release and Reimbursement.  The
Maker shall pay all reasonable out-of-pocket costs and expenses of the
Collateral Agent and the Payees incurred in connection with any release of
Collateral, including but not limited to costs and expenses relating to
financing statement filings and terminations and document review and
preparation, including but not limited to reasonable fees and expenses of
counsel for the Collateral Agent relating to any of the foregoing.

 

(e)   Administrative
Actions.  The Collateral Agent shall
have the right to take such actions, or omit to take such actions, hereunder
and under this Pledge Agreement not inconsistent with the instructions of the
Requisite Payees, or the terms hereof, including without limitation actions the
Collateral Agent deems necessary or appropriate to perfect or continue the
perfection of the liens on the Collateral for the benefit of the Payees or to
protect or insure the Collateral.  Except
as provided above and as otherwise provided pursuant to applicable law, the
Collateral Agent shall have no duty as to the collection or protection of the
Collateral or any income thereon, nor as to the preservation of rights against
prior parties, nor as to the preservation of rights pertaining to the
Collateral beyond the safe custody of any Collateral in the Collateral Agent’s
possession.

 

(f)    Exercise
of Remedies.  Except as otherwise
provided in Section 13(b), the Collateral Agent shall only be authorized to
take such actions under this Pledge Agreement and to enforce or prepare to
enforce the remedies available under this Pledge Agreement as are approved in a
written notice

 

 

by the Requisite Payees; provided, however,
that no notice to release Collateral (except Collateral which is permitted to
be sold or otherwise disposed of pursuant to the terms hereof and the Notes)
shall be effective unless signed by all of the Payees.  In furtherance of the foregoing, the
Collateral Agent agrees to make such demands and give such notices under this
Pledge Agreement as may be reasonably requested by, and to take such action to
enforce this Pledge Agreement and to foreclose upon, collect and dispose of the
Collateral or any portion thereof as may be directed by the Requisite Payees; provided,
however, that (i) the Collateral Agent shall not be required to take any
action that is in its opinion contrary to law or the terms of the Notes and
this Pledge Agreement and (ii) the Collateral Agent shall not be required to
take any action unless, upon its request, it is indemnified in accordance with
the provisions of Section 12(f) hereof.

 

(g)   Application
of Proceeds.  All amounts owing with
respect to the Obligations shall be secured pro
rata by the Collateral without distinction as to whether some
Obligations are then due and payable and other Obligations are not then due and
payable.  Upon any realization upon the
Collateral by the Collateral Agent, the Payees agree that the proceeds thereof
shall be applied:

 

(i)            first,
to the payment of reasonable out-of-pocket expenses incurred by the Collateral
Agent with respect to maintenance and protection of the Collateral and of
reasonable out-of-pocket expenses incurred with respect to the sale of or
realization upon any of the Collateral or the perfection, enforcement or
protection of the rights of the Payees (including reasonable attorneys’ fees
and expenses);

 

(ii)           second,
to all amounts of interest, expenses and fees constituting a part of the
Obligations according to the aggregate amounts thereof owing to each Payee on
the Notice Date in the same priority of the mandatory prepayments of the Notes;

 

(iii)          third,
to all amounts of principal constituting a part of the Obligations according to
the aggregate amounts thereof owing to each Payee on the Notice Date in the
same priority of the mandatory prepayments of the Notes;

 

(iv)          fourth,
to other amounts then due to the Payee under the Notes (including but not
limited to all fees, expenses and premiums) in the same priority of the
mandatory prepayments of the Notes; and

 

(v)           fifth,
the balance, if any, shall be returned to the Maker or such other Persons as
are entitled thereto.

 

Section 14.     Notes.

 

(a)   Except
as expressly provided in Section 13(g) with respect to the application of
proceeds of Collateral, nothing in this Pledge Agreement shall limit or
otherwise impair the ability of any Payee (i) to proceed to enforce the payment
of all or any sums due such Payee under the Notes against the Maker, whether by
acceleration or otherwise, or to enforce any other legal or equitable right
against the Maker thereunder or (ii) to obtain payment (in whole or in part)
from the Maker or any other source for any amount owing under the Notes,
whether or not an Event of Default shall have occurred and be continuing,
subject in each case to the terms and conditions thereof.  Without limiting the generality of the
foregoing, no Payee shall be required to share any payment received from the
Maker or any other source on account of the Obligations with any other Payee,
whether or not an Event of Default shall have occurred and be continuing,
except as expressly provided in Section 13(f) and in the Notes.

 

(b)   Nothing
in this Pledge Agreement shall limit the right of any Payee to amend,
supplement or otherwise modify the terms and conditions of the Notes in any
manner (including without

 

 

limitation any such amendment, supplement or
modification that would increase any amounts owing by the Maker thereunder),
subject in each case to the terms of the Notes.

 

Section 15.     Retention
and Investment of Proceeds.

 

(a)   Proceeds
which, due to their nature, due to a restraining order or otherwise are not
permitted to be applied as set forth above, or due to the Collateral Agent
determining it to be impractical to divide and apply such proceeds to the
payment of the Obligations, shall be held by the Collateral Agent or, as the
case may be, the Payee receiving such proceeds as agent for the Payees until
such proceeds (A) are converted into cash, (B) are permitted to be applied or
(C) become practical to divide at which time such proceeds shall be applied in
accordance with the terms of this Pledge Agreement.

 

(b)   Pending
disbursement of any amounts held by the Collateral Agent pursuant to this
Pledge Agreement, the Collateral Agent shall (to the extent the Collateral
Agent deems practical) invest such amounts in Cash Equivalents (as defined in
the Notes).

 

Section 16.     Other
Collateral; Duty to Notify; Cooperation; Marshalling.

 

(a)   Additional
Collateral.  The Payees agree that
all of the provisions of this Pledge Agreement shall apply to any and all
properties, assets and rights of the Maker in which the Collateral Agent, at
any time, acquires a security interest or lien pursuant to this Pledge
Agreement.

 

(b)   Notification
of Event of Default.  Upon the
occurrence of any Event of Default, each Payee with knowledge thereof shall
promptly notify the Collateral Agent thereof, such notice to be given in
accordance with Section 12(d) and Section 17 hereof.

 

(c)   Cooperation;
Accounting.  To the extent that the
exercise of the rights, powers and remedies of the Collateral Agent in
accordance with this Pledge Agreement requires that any action be taken by any
Payee, such Payee shall take such action and cooperate with the Collateral
Agent to ensure that the rights, powers and remedies of all Payees are
exercised in full.  Each of the Payees
will, upon the reasonable request of another Payee, from time to time execute
and deliver or cause to be executed and delivered such further instruments and
do and cause to be done such further acts as may be necessary or proper to
carry out more effectively the provisions of this Pledge Agreement.

 

(d)   Marshalling.  The Collateral Agent shall not be required to
marshal any present or future security for (including, without limitation, the
Collateral), or guarantees of, the Obligations or any of them, or to resort to
such security or guaranties in any particular order; and all of each of such
Person’s rights in respect of such security and guaranties shall be cumulative
and in addition to all other rights, however existing or arising.  To the extent that they lawfully may, the
Payees hereby agree that they will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Payees’ rights under this Pledge Agreement or under any other instrument
evidencing any of the Obligations or under which any of the Obligations are
outstanding or by which any of the Obligations is secured or guaranteed, and to
the extent that they lawfully may, the Payees hereby irrevocably waive the
benefits of all such laws.

 

(e)   No
Other Collateral.  No Payee shall
take any security interest in the personal property or liens upon the real
property of the Maker other than security interests and liens which are
governed by the terms of this Pledge Agreement or the Security Agreement and
held in the name of the Collateral Agent for the benefit of all Payees.

 

(f)    Purchase
of Collateral.  Any Payee may
purchase all or any part of the Collateral at any public or private sale of
such Collateral and may make payment on account thereof by using any

 

 

claim then due and payable to such Payee from
the Persons which granted a security interest in such Collateral as a credit
against the purchase price to the extent, but only to the extent approved by
the Requisite Payees.  Such Payee shall
comply with Article 9 of the UCC of the relevant jurisdiction as a secured
party, notwithstanding that the Collateral Agent holds the security interest
pursuant to this Pledge Agreement.  Each
of the Payees shall cooperate with each other Payee in order to obtain the
maximum sale price reasonably possible upon any foreclosure or other sale of
all or any part of the Collateral. 
Notwithstanding the foregoing, all sales, transfers and other
dispositions of any Collateral shall be accomplished in a commercially
reasonable manner.

 

Section 17.     Notice.  All notices required to be given to the
Collateral Agent, the Maker or the Payees shall be in writing and shall be
deemed to have been sufficiently given for all purposes when presented
personally to such party or sent by certified or registered mail, return
receipt requested, delivered to such party (i) in the case of the Maker or the
Payees , as set forth in the notice section of each Note and (ii) in the case
of the Collateral Agent, to c/o Advent International plc, 123 Buckingham Palace
Road, London SW1W 9SL United Kingdom. 
Such notice shall be deemed to be given when received if delivered
personally or five (5) business days after the date mailed.  Any notice mailed shall be sent by certified
or registered mail.  Any notice of any
change in such addresses shall also be given in the manner set forth
above.  Whenever the giving of notice is
required, the giving of such notice may be waived in writing by the party
entitled to receive such notice.

 

Section 18.     Expenses.  Maker will pay Collateral Agent the amount of
any reasonable out-of-pocket expenses including reasonable counsel fees and
expenses incurred by Collateral Agent in connection with (i) the administration
of this Pledge Agreement, (ii) the custody, preservation, sale or collection or
realization of the Collateral, (iii) the exercise or enforcement of Collateral
Agent’s rights hereunder, or (iv) the failure of Maker to perform hereunder.

 

Section 19.     Successors
and Assigns.  This Pledge Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, personal representatives, successors and assigns and
shall be governed as to its validity, interpretation and effect by the laws of
the State of Delaware; and any terms used herein which are defined in the
Uniform Commercial Code as enacted in Delaware shall have the meanings therein
set forth.

 

Section 20.     No
Waiver.  If Collateral Agent shall
waive any rights or remedies arising hereunder or under any applicable law,
such waiver shall not be deemed to be a waiver upon the later occurrence or
recurrence of any of said events.  No
delay by Collateral Agent in the exercise of any right or remedy shall under
any circumstances constitute or be deemed to be a waiver, express or implied,
of the same and no course of dealing between the parties hereto shall
constitute a waiver of Collateral Agent’s rights or remedies.

 

Section 21.     Attorney
in Fact.  Upon the occurrence and
during the continuance of an Event of Default, Maker hereby irrevocably
appoints Collateral Agent as its attorney-in-fact to execute, deliver and
record, if appropriate, from time to time any instruments or documents in
connection with the Collateral, in Maker or Collateral Agent’s names.

 

Section 22.     Entire
Agreement.  This Pledge Agreement,
the Security Agreement and the Notes represent the entire understanding of the
parties with respect to the subject matter and no modification or change herein
shall be effective unless contained in a writing signed by the parties hereto.

 

Section 23.     Governing
Law.  THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ANY CONFLICT
OF LAWS PRINCIPLES.

 

 

Section 24.     Consent
to Jurisdiction and Service of Process. 
Maker irrevocably appoints each and every owner, partner and/or officer
of Maker as its attorney upon whom may be served, by regular or certified mail
at the address set forth in this Pledge Agreement, any notice, process or
pleading in any action or proceeding against it arising out of or in connection
with this Pledge Agreement.  Maker hereby
consents that any action or proceeding against it may be commenced and
maintained in any court within the State of Delaware or in the United States
District Court for the District of Delaware by service of process on any such
owner, partner and/or officer.  Maker
further agrees that such courts of the State of Delaware and the United States
District Court for the District of Delaware shall have jurisdiction with respect
to the subject matter hereof and the person of Maker and all Collateral.

 

Section 25.     Judicial
Proceeding; Waivers.  EACH OF MAKER AND COLLATERAL AGENT
AGREES THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY ANY PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY
PARTY, ON OR WITH RESPECT TO THIS PLEDGE AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS, THE COLLATERAL OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR
THERETO SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY.  EACH OF MAKER AND COLLATERAL AGENT HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY SUCH SUIT, ACTION OR PROCEEDING. 
FURTHER, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.  MAKER ACKNOWLEDGES AND AGREES
THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS PLEDGE AGREEMENT
AND THAT THE PAYEE WOULD NOT EXTEND CREDIT IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS PLEDGE AGREEMENT.

 

Section 26.     Termination
of Pledge Agreement.  This Pledge
Agreement and the security interest created hereby shall terminate upon the Termination
Date and all rights to the Collateral shall revert to the Maker.  Upon such termination, the Collateral Agent
shall at the Maker’s expense (a) deliver to the Maker all Collateral in the
Collateral Agent’s possession or control and all instruments of assignment
executed in connection therewith, free and clear of the liens hereof and (b)
take such other actions and execute and deliver such other documents and
instruments, as may be reasonably requested by the Maker, in order to evidence
the termination of this Pledge Agreement and to release any lien or security
interest in any Collateral securing the Obligations.

 

[Signature
Page Follows]

 

 

IN WITNESS
WHEREOF, the undersigned has executed this Pledge Agreement as of the date
first set forth above.

 

	
   

  	
  EVOLVING SYSTEMS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEPHEN K. GARTSIDE, JR.

  	
   

  
	
   

  	
  Name :Stephen K. Gartside

  
	
   

  	
  Title:   President and Chief
  Financial Officer

  
	
   

  	
   

  
	
  Acknowledged and Agreed:

  	
   

  
	
   

  	
   

  
	
  COLLATERAL
  AGENT:

  	
   

  
	
   

  	
   

  
	
  Advent
  International Corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ JANET L. HENNESSEY

  	
   

  	
   

  
	
  Name: Janet L. Hennessey

  	
   

  
	
  Title: Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  for the purposes of Section 1 and Section 11 through Section 15:

  	
   

  
	
  PAYEES:

  	
   

  
	
   

  	
   

  
	
  Tertio
  Telecoms Group Ltd.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ NIGEL
  CLIFFORD

  	
   

  	
   

  
	
  Name: Nigel
  Clifford

  	
   

  
	
  Title:
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ D K C GIBBON

  	
   

  	
   

  
	
   

  	
  Name: D KC Gibbon

  	
   

  	
   

  
	
   

  	
  Title: Director

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