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Exhibit 10.1(e)
REVOLVING FACILITY AGREEMENT
among
EVOLVING SYSTEMS, LTD. as Borrower and a Credit Party
EVOLVING SYSTEMS HOLDINGS, LTD. EVOLVING SYSTEMS, INC. TELECOM SOFTWARE ENTERPRISES, LLC EVOLVING SYSTEMS HOLDINGS, INC as a Credit Party
and
CSE FINANCE, INC as Lender
CAPITALSOURCE FINANCE LLC, as Agent
Dated as of November 14, 2005
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REVOLVING FACILITY AGREEMENT
This REVOLVING FACILITY AGREEMENT (this “Agreement”), dated as of November 14, 2005, is entered into by and among EVOLVING SYSTEMS LTD., a company incorporated under the laws of England & Wales with registration number 2325854 (“Borrower”); EVOLVING SYSTEMS HOLDINGS LTD., a company incorporated under the laws of England & Wales with registration number 5272751 (a “UK Guarantor”), EVOLVING SYSTEMS, INC., a Delaware Corporation, TELECOM SOFTWARE ENTERPRISES, LLC, a Colorado limited liability company and EVOLVING SYSTEMS HOLDINGS, Inc., a Delaware Corporation as Credit Parties; CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (in its individual capacity, “CapitalSource”), as administrative, payment and collateral agent for the Lenders (CapitalSource, in such capacities, “Agent”); CSE FINANCE INC as a Lender, a Delaware corporation (“CSE Finance”); and the Lenders from time to time parties hereto.
WHEREAS , the Credit Parties have requested that Lenders make available to Borrower (i) a revolving credit facility (including a letter of credit sub-facility ) (the “Revolving Facility”) in a maximum aggregate amount not to exceed the Facility Cap in effect from time to time (the amount of which, initially, shall be $4,500,000), shall be used by Borrower for purposes permitted under, and otherwise in accordance with and subject to the terms of, this Agreement.
WHEREAS , Lenders are willing to make the Revolving Facility available to Borrower, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE , in consideration of the foregoing, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which hereby are acknowledged, the parties hereto hereby agree as follows:
I. DEFINITIONS(a) For purposes of the Loan Documents and all schedules, exhibits, annexes and attachments thereto, in addition to the definitions elsewhere in this Agreement and the other Loan Documents, the terms listed in Appendix A hereto shall have the respective meanings assigned to such terms in Appendix A hereto, which is incorporated herein and made a part hereof. All capitalized terms used which are not specifically defined herein shall have the respective meanings assigned to them in Article 9 of the UCC to the extent the same are used or defined therein. Unless otherwise specified in any Loan Document, this Agreement, any other Loan Document and any agreement or contract referred to herein or in Appendix A hereto shall mean such agreement or contract, as modified, amended, supplemented or restated and in effect from time to time, subject to any applicable restrictions set forth in such Loan Document. Unless otherwise specified, as used in the Loan Documents or in any certificate, report, instrument or other document made or delivered pursuant to any of the Loan Documents, all accounting terms not defined in Appendix A hereto or elsewhere in this Agreement or any other Loan Document shall have the meanings assigned to such terms in and shall be interpreted in accordance with GAAP. If any change in GAAP results in a change in the calculation of the financial covenants or interpretation of related provisions of this Agreement or any other Loan Document, then
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Borrower, Agent, Lenders and the other Credit Parties agree to amend such provisions of this Agreement so as to equitably reflect such changes in GAAP with the desired result that the criteria for evaluating the Credit Parties’ financial condition shall be the same after such change in GAAP as if such change had not been made, provided that, notwithstanding any other provision of this Agreement, the Requisite Lenders’ agreement to any amendment of such provisions shall be sufficient to bind all Lenders; and, provided further, until such time as the financial covenants and the related provisions of this Agreement have been amended in accordance with the terms of this paragraph, the calculations of financial covenants and the interpretation of any related provisions shall be calculated and interpreted in accordance with GAAP as in effect immediately prior to such change in GAAP.II. CREDITS2.1 Revolving Facility(a) Subject to the terms and conditions set forth in this Agreement, each Lender agrees to make available to Borrower its Pro Rata Share of Advances under the Revolving Facility from time to time during the Term; provided, that (i) the Pro Rata Share of Advances of any Lender shall not at any time exceed such Lender’s Commitment under the Revolving Facility and (ii) the aggregate amount of all Advances at any time outstanding under the Revolving Facility shall not exceed the lesser of (x) the Facility Cap in effect at such time less the Letter of Credit Usage then in effect and (y) the Aggregate Borrowing Availability then in effect. The obligations of the Lenders under the Revolving Facility shall be several, and not joint or joint and several. The Revolving Facility is a revolving credit facility that may be drawn, repaid and redrawn from time to time as permitted under this Agreement. Borrower may not at any time increase, reduce or otherwise adjust the Facility Cap. Agent shall have the right to establish and readjust from time to time, in its Permitted Discretion, reserves under the Revolving Facility, which reserves shall have the effect of reducing the amounts otherwise available to be disbursed to Borrower under the Revolving Facility.(b) Subject to Section 2.1(a) Borrower shall maintain a minimum outstanding balance at all times of Advances in the amount of at least $2,000,000 from the Closing Date until delivery of the Compliance Certificate for the quarter ending December 31, 2005 and at a variable amount, to be adjusted thereafter following delivery of the Compliance Certificate after the end of each fiscal quarter, as follows:
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2.2 Evidence of Loans
(a) Each Lender shall maintain, in accordance with its usual practice, electronic or written records evidencing the indebtedness and obligations to such Lender resulting from each Loan made by such Lender from time to time, including, without limitation, the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.(b) Agent shall maintain electronic or written records in which it will record (i) the amount of each Loan made hereunder, the class and type of each Loan made and any applicable interest rate periods, (ii) the amount of any principal and/or interest due and payable and/or to become due and payable from Borrower to each Lender hereunder and (iii) all amounts received by Agent hereunder from Borrower and each Lender’s share thereof.(c) The entries in the electronic or written records maintained pursuant to Section 2.2(b) (the “Register”), which shall include the promissory notes, if any, issued pursuant to Section 2.2(e) hereof, shall in the absence of manifest error be prima facie evidence of the existence and amounts of the obligations and indebtedness therein recorded; provided, however, that the failure of Agent to maintain such records or any error therein shall not in any manner affect the obligations of Borrower to repay the Loans or Obligations in accordance with their terms. The Register shall be subject to the terms of Section 12.4(c).(d) Agent will account to Borrower monthly with a statement of Advances under the Revolving Facility and any charges and payments made pursuant to this Agreement, and in the absence of demonstrable error, such accounting rendered by Agent shall be deemed final, binding and conclusive unless Agent is notified by Borrower in writing to the contrary within fifteen (15) calendar days of Receipt of such accounting, which notice shall be deemed an objection only to items specifically objected to therein.(e) Borrower agrees that:(i) upon written notice by Agent to Borrower that a promissory note or other evidence of indebtedness or replacement of a lost Note is requested by Agent (for itself or on behalf of any Lender) to evidence the Loans and other Obligations owing or payable to, or to be made by, such Lender, Borrower promptly shall (and in any event within five (5) Business Days of any such request and in the event of a lost Note upon receipt of customary affidavits and indemnities) execute and deliver to Agent an appropriate promissory note or notes in form and substance reasonably satisfactory to Agent and Borrower, payable to the order of such Lender in a principal amount equal to the amount of the Loans owing or payable to such Lender;
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(ii) all references to “Notes” in the Loan Documents shall mean Notes, if any, to the extent issued (and not returned to Borrower for cancellation) hereunder, as the same may be amended, supplemented, modified, divided and/or restated and in effect from time to time which shall be included in the Register maintained by the Agent; and(iii) upon Agent’s written request (for itself or on behalf of any Lender), and in any event within five (5) Business Days of any such request, Borrower shall execute and deliver to Agent new Notes and/or split or divide the Notes, or any of them, in exchange for the then existing subject Notes, in such smaller amounts or denominations as Agent or such Lender shall specify; provided, that the aggregate principal amount of such new, split or divided Notes shall not exceed the aggregate principal amount of the Notes outstanding at the time such request is made; and provided, further, that such Notes that are replaced shall then be deemed no longer outstanding hereunder and replaced by such new Notes, promptly cancelled and returned to Borrower within a reasonable period of time after Agent’s receipt of the replacement Notes.2.3 Interest(a) Subject to Section 2.3(c), each Loan shall bear interest on a daily basis on the outstanding principal amount thereof from the date made (each a “Borrowing Date”) at a rate per annum equal to (i) the greater of (A) the daily LIBOR Rate in effect from time to time or (B) 3.75%, plus (ii) the Applicable Margin in effect from time to time.(b) Interest on each Loan shall be due and payable in cash in arrears on each Interest Payment Date and on the date of any prepayment (actual or due) of Loans pursuant to Sections 2.5 and 2.6.(c) Upon the occurrence and during the continuance of any Event of Default, the Obligations shall bear interest at the Default Rate upon written notice of such increase given by the Agent to the Borrower; provided, that from and after the occurrence of any Event of Default under Sections VIII(a), (g) or (h), such increase shall be automatic and without notice from the Agent, Requisite Lenders or any other Person. In all such events, unless otherwise provided in the applicable notice by Agent to Borrower, and notwithstanding the date on which application of the Default Rate is communicated to Borrower, the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is waived in writing in accordance with the terms of this Agreement and shall be payable in cash upon demand. Neither Agent nor Lenders shall be required to (i) accelerate the maturity of the Loans, (ii) terminate any Commitment or (iii) exercise any other rights or remedies under the Loan Documents or applicable law in order to charge interest hereunder at the Default Rate.2.4 Procedures for Advances under the Revolving FacilityEach Advance under the Revolving Facility shall be made upon Borrower’s irrevocable written notice to Agent requesting an Advance under the Revolving Facility in the form of a completed Borrowing Certificate, which Borrowing Certificate shall be delivered to Agent not later than 12:00p.m. (New York City time) at least one (1) but not more than four (4) Business
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Days prior to the proposed Business Day on the Borrowing Date. Each such completed Borrowing Certificate requesting an Advance under the Revolving Facility shall:
(a) specify the proposed Borrowing Date of the requested Advance, which shall be a Business Day;(b) specify the principal amount of the requested Advance (which shall be in an aggregate minimum principal amount of $50,000 and integral multiples of $25,000 in excess thereof); and(c) certify the matters contained in Section 4.2.On each Borrowing Date, Borrower irrevocably authorizes Agent and the Lenders to disburse the proceeds of the requested Advance to the Borrower’s account at:
or such other account to which Agent agrees (and which shall be subject to the Security Documents) (or to such other account, if approved by Agent, as to which Borrower shall instruct Agent in writing), for credit to Borrower via Federal funds wire transfer no later than 3:00p.m. (New York City time). Anything herein contained to the contrary notwithstanding, Agent and Lenders shall be entitled to rely upon the authority of any officer of Borrower for communications with and instructions from Borrower, including, without limitation, for purposes of this Section 2.4, until Agent has received written notice from Borrower that such officer no longer has such authority.
2.5 Mandatory Payments and Prepayments
(a) The principal amount of the Advances under the Revolving Facility, and all other Obligations under or in respect of the Revolving Facility shall be due and payable in full, if not earlier in accordance with this Agreement, on the Maturity Date.(b) If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund, issue or maintain its participation in any Advance or other Obligation:
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(i) that Lender shall promptly notify the Agent upon becoming aware of that event;(ii) upon the Agent notifying the Borrower, the Commitment of that Lender will be cancelled on the earlier of immediately or on the date (if applicable) required by law; and(iii) the Borrower shall repay that Lender’s participation in any Advances or Obligations to that Borrower promptly after the Agent has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).(c) If a Change of Control occurs that has not been consented to in writing by the Agent prior to consummation thereof, or any Credit Party or any Subsidiary of any Credit Party (other than to the extent any Credit Party is obliged to apply such proceeds in accordance with the terms of the Term Loan Agreement), whether in a single transaction or a series of transactions:(i) sells or transfers any Property (other than any Qualified Asset Sale);(ii) sells or issues any Capital Stock (excluding sales or issuances of Permitted Securities to the extent no Default or Event of Default has occurred and is continuing or would be caused thereby or result therefrom, but specifically including any sale or issuance of Capital Stock pursuant to a Public Offering) ;(iii) receives any property damage insurance award or any other insurance proceeds of any kind, including, without limitation, proceeds from any life insurance (including the Life Insurance Policy) or business interruption insurance in excess of an amount equal to $100,000; or(iv) incurs any Indebtedness other than Permitted Indebtedness,then Borrower shall prepay the Loans and the other Obligations in an amount equal to one hundred percent (100%) of the Net Proceeds received by the Credit Parties and their Subsidiaries in connection therewith (or such lesser amount as is required to irrevocably pay in cash in full the Obligations), which prepayment shall be applied thereto in accordance with this Section 2.5(c); provided, that, the foregoing notwithstanding, if Borrower reasonably expects the Net Proceeds of any such sale or transfer in respect of the foregoing clause (i) or any such property damage insurance award under the foregoing clause (iii), or a portion thereof, to be reinvested in productive assets of a kind then used or usable in the Business, and, within one hundred eighty (180) days after such occurrence, enters into a binding commitment to make such reinvestment (which reinvestment shall be made within two hundred seventy (270) days after such occurrence), then Borrower shall deliver an amount equal to such Net Proceeds, or applicable portion thereof, to Agent to be, at Agent’s election, (x) applied to the Revolving Loans (without resulting in a permanent reduction in the Revolving Loan Commitment) or (y) held by Agent in a cash collateral account pending such reinvestment.
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(d) All prepayments pursuant to this Section 2.5(b) and 2.5(c) shall be applied in the following order of priority: first , to all then unpaid fees and expenses of Agent under the Loan Documents, second, to all then unpaid fees and expenses of Lenders under the Loan Documents, third, to any and all Obligations that are due and owing pursuant to the terms of the Loan Documents, except the principal balance of the Loan and accrued and unpaid interest thereon; fourth, to all accrued and unpaid interest on the Revolving Loan; fifth, to the principal amount of Revolving Loans (with a corresponding permanent reduction in the Facility Cap).(e) Any balance of Advances under the Revolving Facility outstanding at any time in excess of the lesser of (a) the Facility Cap in effect at such time less the Letter of Credit Usage then in effect and (b) the Aggregate Borrowing Availability in effect at such time (determined by reference to the Borrowing Base Certificate then most recently delivered to Agent in accordance with the terms hereof), shall be immediately due and payable by Borrower without the necessity of any notice or demand unless remedied within three (3) Business Days of the date of determination by the Borrower or notification by the Agent to the Borrower.2.6 Promise to Pay; Manner of PaymentBorrower absolutely and unconditionally promises to pay, when due and payable pursuant hereto, principal, interest and all other amounts and Obligations payable hereunder and under any other Loan Document, without any right of rescission and without any deduction whatsoever, including any deduction for set-off, recoupment or counterclaim, notwithstanding any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any property or improvements. Any payments made by the Credit Parties (other than payments automatically paid through Advances under the Revolving Facility as provided herein) shall be made by wire transfer on the date when due, without offset, deduction or counterclaim in immediately available funds to such account as may be indicated in writing by Agent to Borrower from time to time. Any such payment received after 2:00p.m. (New York City time) on any date shall be deemed received on the next succeeding Business Day, and any applicable interest or fees shall continue to accrue in respect thereof. Whenever any payment under any Loan Document shall be stated to be due or shall become due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate in effect during such extension) and/or fees, as the case may be. All payments of principal, interest, fees, expenses and all other amounts hereunder shall be payable in Dollars.
2.7 Payments by AgentShould any Obligation required to be paid under any Loan Document remain unpaid beyond any applicable cure period, such Obligation may be paid by Agent, on behalf of Lenders, which non-payment shall be deemed an automatic request for an Advance under the Revolving Facility as of the date such payment is or was due, and Borrower hereby irrevocably authorizes disbursement of any such funds to Agent, for the benefit of Lenders, by way of direct payment of the relevant amount, interest or other Obligation without necessity of any demand. Any sums expended or amounts paid by Agent and/or Lenders as a result of any Credit Party’s failure to
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pay, perform or comply with any Loan Document or any of the Obligations may be charged to Borrower’s account as an Advance under the Revolving Facility and added to the Obligations.
2.8 Computation of Interest and Fees; Lawful LimitsAll interest and fees owing from time to time under the Loan Documents shall be computed on the basis of a year of 360 days and for the actual number of days elapsed in each calculation period, as applicable. In no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges paid or agreed to be paid to Agent, for the benefit of Lenders, or Lenders for the use, forbearance or detention of money hereunder exceed the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If, due to any circumstance whatsoever, fulfilment of any provision hereof, at the time performance of such provision shall be due, shall exceed any such limit, then, the obligation to be so fulfilled shall be reduced to such lawful limit, and, if Agent or Lenders shall have received interest or any other charges of any kind which might be deemed to be interest under applicable law in excess of the maximum lawful rate, then such excess shall be applied first to any unpaid fees and charges hereunder, then to the unpaid principal balance owed by Borrower hereunder, and if the then remaining excess interest is greater than the previously unpaid principal balance, Agent and Lenders shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. The terms and provisions of this Section 2.8 shall control to the extent any other provision of any Loan Document is inconsistent herewith.
2.9 CollectionsIn accordance with the Debenture, the Borrower and the UK Guarantor shall cause all cash payments received by them for their benefit to be promptly deposited into a Security Account for which a first priority perfected Lien has been created thereon in favour of the Lender Parties.
2.10 Reallocation of CommitmentsThe Credit Parties, Agent and the Lenders agree and acknowledge that, on terms and conditions satisfactory to the Borrower, each Term Borrower, Agent, each of the Lenders, and the Term Lender, any Commitment of any Lender hereunder and the Term Lender under the Term Loan Agreement for the benefit of the Borrower or Term Borrower may be reallocated and adjusted from time to time with any other Commitment or Commitments of such Lender under this Agreement or Lender for the benefit of the other Borrower or Term Borrowers, and the outstanding Loans thereunder and hereunder reclassified or re-categorized in connection therewith and herewith to evidence or effectuate any such reallocation and adjustment, without constituting a novation, for any purpose, including, without limitation, for purposes of accurately reflecting each Borrower’s or Term Borrower’s relative contribution to, or allocable amount or share of, Evolving System’s Consolidated EBITDA, earnings, revenue, assets and/or liabilities. For clarification purposes, any such reallocation and adjustment shall require the written consent of the Borrower, each Term Borrower, Agent, each Lender and Term Lender and shall not, in any event, result in (a) a reduction of the aggregate Commitments contained herein and in the Term Loan Agreement or (b) any breach of Sections 151 to 158 of the Act.
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2.11 Market disruption(a) If a Market Disruption Event occurs in relation to a Loan, then the rate of interest on each Lender’s share of that Loan shall be the rate per annum which is the sum of:(i) the Applicable Margin;(ii) the greater of (A) rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Loan, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Loan from whatever source it may reasonably select or (B) 3.75%; and(iii) any Eurocurrency Reserve Requirement of the Lenders if applicable.(b) In this Agreement “Market Disruption Event” means:(i) at or about noon on the Borrowing Date the Screen Rate is not available to determine the LIBOR Rate; or(ii) before close of business in London on the Borrowing Date, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 25 per cent of that Loan) that the cost to it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR.(c) Alternative basis of interest or funding(i) If a Market Disruption Event occurs and the Agent or the Borrower so requires, the Agent and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest.(ii) Any alternative basis agreed pursuant to clause 2.11(c) shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.2.12 Increased Costs(a)(i) Subject to clause 2.11(c) and 2.12(d) the Borrower shall, within three Business Days of a demand by the Agent, pay for the account of a Lender the amount of any Increased Costs incurred by that Lender as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.(ii) In this Agreement “Increased Costs” means:
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(1) a reduction in the rate of return from the Revolving Facility or on a Lender Party’s (or its Affiliate’s) overall capital;(2) an additional or increased cost; or(3) a reduction of any amount due and payable under any Loan Document,which is incurred or suffered by a Lender to the extent that it is attributable to that Lender having entered into its Commitment or funding or performing its obligations under the Loan Document or Letter of Credit provided, however that any amounts that such Lender is already receiving by adjusting the Eurocurrency Reserve Requirements pursuant to the definition of Libor Rate shall not be included in the Increased Costs.
(b)(i) A Lender intending to make a claim pursuant to clause 2.12(a) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrower.(ii) Each Lender shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.(c)(i) Clause 2.12(a) does not apply to the extent any Increased Cost is:(1) attributable to a Tax deduction required by law to be made by a Credit Party;(2) compensated for by clause 13.1 but was not so compensated solely because any of the exclusions in clause 13.1 applied or is attributable to Taxes for which no compensation is required in clause 13.1; and(3) attributable to the wilful breach by the relevant Lender Party or its Affiliates of any law or regulation.(d) Each Lender agrees to designate a different lending office if such designation will avoid the need for, or reduce the amount of, any compensation pursuant to this Section and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.2.13 Letter of Credit.Subject to the terms and conditions set forth in this Agreement and on Appendix B hereto, Borrower shall have the right to request, and the Lenders agree to incur, or purchase participations in, Letters of Credit in respect of Borrower and the other Credit Parties so long as
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none of the Letters of Credit are used directly or indirectly to benefit the Subordinated Note Holders or otherwise violate Sections 151 to 158 of the Act.
III. FEES
3.1 Commitment FeeOn the Closing Date, Borrower shall pay to Agent, for the rateable benefit of Lenders, a nonrefundable commitment fee equal to Sixty Seven Thousand Five Hundred Dollars ($67,500.00), which commitment fee shall be deemed fully earned and due and payable on the Closing Date and in addition to any other fee from time to time payable under the Loan Documents.
3.2 Management FeeBorrower shall pay to Agent a management fee (the “Management Fee”) in an amount equal to one-half of one percent (0.5%) per annum of the daily average of the aggregate of (i) the Facility Cap for each day of each month and (ii) any additional amounts advanced under the Revolving Facility in excess of the Facility Cap for each day outstanding. The Management Fee shall be payable monthly in arrears on the first day of each calendar month, commencing with the month immediately succeeding the month in which the Closing Date occurs, provided that the amount payable for the first and last month shall be proportional to the number of days in such month in which the Commitment is outstanding.
3.3 Letter of Credit FeesBorrower shall pay to Agent, for the rateable benefit of Lenders, a Letter of Credit fee equal to (i) two or three quarters percent (2.75%) per annum of the aggregate undrawn face amount of all outstanding Standby Letters of Credit issued for the account of Borrower (the “Standby Letter of Credit Fee”), which fee shall be payable in arrears on each Interest Payment Date and (ii) one quarter of one percent (.25%) of the aggregate undrawn face amount of any such Documentary Letter of Credit issued for the account of Borrower and payable upon issuance (together with the Standby Letter of Credit Fees plus normal and customary issuance, presentation, amendment, processing and other administrative costs and expenses incurred by L/C Issuer, the “Letter of Credit Fees”). Upon the occurrence and during the continuance of any Event of Default, all Letter of Credit Fees shall be payable on demand at a rate equal to the Letter of Credit Fee, plus four percent (4.00%) per annum, in each case on the aggregate undrawn face amount of all outstanding Letters of Credit issued for the account of Borrower. Borrower shall also pay on demand the normal and customary administrative charges for issuance, amendment, negotiation, renewal or extension of any Standby Letter of Credit or Documentary Letter of Credit imposed by the L/C Issuer.
On demand by Agent at any time after the occurrence and during the continuance of any Event of Default, Borrower will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Letter of Credit Usage, and Borrower hereby irrevocably authorizes Agent, in its discretion, on Borrower’s behalf and in Borrower’s name, to open such an account and to make and maintain
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deposits therein, or in an account opened by Borrower, in the amounts required to be made by Borrower, out of the proceeds of Accounts or other Collateral or out of any other funds of any Credit Party coming into any Lender’s possession at any time. Agent will invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Agent in its Permitted Discretion may determine and the net return on such investments shall be credited to such account and constitute additional cash collateral. Borrower may not withdraw amounts credited to any such account except upon the earlier of (i) payment and performance in full of all Obligations (other than contingent indemnification obligations under the Loan Documents for which no claim giving rise thereto has been asserted) and termination of this Agreement and (ii) at such time as such Event of Default no longer exists unless Agent determines in its Permitted Discretion not to release such amounts but in any event, Agent shall apply any amounts in such account to the repayment of any Letter of Credit disbursements.
IV. CONDITIONS PRECEDENT4.1 Conditions to Initial Advance and the ClosingThe obligations of Agent and Lenders to consummate the transactions contemplated herein, to make the initial Advance under the Revolving Facility (the “Initial Advance”) are, in addition to the conditions precedent specified in Section 4.2, subject to the delivery of all documents listed on, the taking of all actions set forth on and the satisfaction of each of the conditions precedent listed on Exhibit D hereto, all in a manner, form and substance satisfactory to Agent in its sole discretion.
4.2 Conditions to each AdvanceThe obligations of Lenders to make any Advance under the Revolving Facility (including, without limitation, the Initial Advance) are subject, in each case, to the satisfaction of each of the following:
(a) the Borrower shall have delivered to Agent a Borrowing Certificate for such Advance and a Borrowing Base Certificate setting forth the Borrowing Base and the Aggregate Borrowing Availability as of the most recent month;(b) each of the representations and warranties made by each Credit Party in the Loan Documents, except sections 5.4, 5.5(d), 5.7, 5.8, 5.10(c) and (d), 5.11(a), 5.14, 5.16 and 5.20 of the this Agreement, shall be true and correct in all respects before and after giving effect the making of such Advance (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall have been true and correct in all respects as of such earlier date);(c) no Default or Event of Default is continuing or would result from the requested Advance on the relevant Borrowing Date; and(d) immediately after giving effect to the requested Advance, the aggregate outstanding principal amount of Advances under the Revolving Facility shall not exceed the
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lesser of (i) the Facility Cap then in effect less the Letter of Credit Usage then in effect; and (ii) the Aggregate Borrowing Availability then in effectEach Borrowing Certificate submitted shall constitute a representation and warranty by each Credit Party, as of the date of each such notice and as of the relevant Borrowing Date, that the conditions in this Section 4.2 are satisfied.
V. REPRESENTATIONS AND WARRANTIESEach Credit Party, jointly and severally, represents and warrants to the Lender Parties as follows except as set forth in the disclosure schedule corresponding to such Section as of the Closing Date, and each time such representation is to be made pursuant to Section 4.2(b):
5.1 Organization and AuthorityAs of the Closing Date each Credit Party, and each Subsidiary of each Credit Party, is duly incorporated, organized or formed, validly existing and in good standing (to the extent such concept applies) under the laws of its jurisdiction of incorporation, organization or formation. Each Credit Party, and each Subsidiary of each Credit Party, (a) has all requisite corporate, partnership, limited liability company or other company, as the case may be, power and authority to own its Properties and carry on its business as now being conducted and as contemplated in the Loan Documents, the Term Loan Documents and the Related Documents to the extent a party thereto, (b) is duly qualified and licensed to do business in and in good standing (to the extent such concept applies) in each jurisdiction where the failure so to qualify or be licensed or qualified would reasonably be expected to result in a Material Adverse Effect, and (c) has all requisite corporate, partnership, limited liability company or other company, as the case may be, power and authority (i) to execute, deliver and perform the Loan Documents, the Term Loan Documents and the Related Documents to which it is a party, (ii) with respect to Borrower, to borrow hereunder, (iii) to consummate the transactions contemplated by the Loan Documents, the Term Loan Documents and the Related Documents to which it is a party and (iv) to grant the Liens pursuant to the Security Documents to which it is a party.
5.2 Loan Documents and Related DocumentsThe execution, delivery and performance by each Credit Party of the Loan Documents, the Term Loan Documents and the Related Documents to which it is a party, and the consummation by such Credit Party of the transactions contemplated thereby, (a) have been duly authorized by all requisite corporate, partnership, limited liability company or other company, as the case may be, action of such Credit Party, and such Loan Documents, Term Loan Documents and Related Documents to which it is a party have been duly executed and delivered by or on behalf of such Credit Party; (b) do not violate any provisions of (i) any applicable law, statute, rule, regulation, ordinance or tariff, (ii) any order, injunction, writ or decree of any Governmental Authority binding on such Credit Party or any of their respective Properties, or (iii) the Organizational Documents of such Credit Party, or any agreement between such Credit Party and its shareholders, members, partners or equity owners or, to the knowledge of the Credit Parties, among any such shareholders, members, partners or equity owners; (c) are not in conflict
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with, and do not result in a breach or default of or constitute an event of default, or an event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, any indenture, agreement or other instrument to which such Credit Party is a party, or by which the Properties of such Credit Party are bound, the effect of which would reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect; (d) except as contemplated or expressly permitted by the Loan Documents and the Term Loan Documents, will not result in the creation or imposition of any Lien of any nature upon any of the Collateral or other material Properties of any Credit Party; and (e) except for filings in connection with the perfection and/or registration of the Liens created by the Security Documents, filings required to be made by Evolving Systems with the SEC under the Securities Exchange Act of 1934, as amended, and rules and regulations thereunder, and consents, approvals authorizations, filings, registrations and qualifications that have been obtained, made or done, do not require the consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person. Each of the Loan Documents, the Term Loan Documents and the Related Documents to which each Credit Party, is a party constitutes the legal, valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors’ rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity).
5.3 Subsidiaries, Capitalization and Ownership Interests
As of the Closing Date, no Credit Party has any Subsidiaries other than those Persons listed as Subsidiaries on Schedule 5.3 . Schedule 5.3 states, as of the Closing Date, the authorized and issued capitalization of each Credit Party, the number and class of equity securities and/or ownership, voting or partnership interests issued and outstanding of such Credit Party the number and class of Capital Stock authorized and issued pursuant to each employee stock option plan and stock purchase plan and, except as to the holders of the common stock of Evolving Systems and Capital Stock issued pursuant to employee stock option plans and stock purchase plans, the beneficial and record owners thereof (including options, warrants, convertible notes and other rights to acquire, or exchangeable or exercisable for, any of the foregoing). Except as listed on Schedule 5.3 , the outstanding equity securities and/or ownership, voting or partnership interests of each Credit Party have been duly authorized and validly issued and are fully paid and non-assessable (as applicable) and each Credit Party listed on Schedule 5.3 as of the Closing Date owns beneficially and of record all of the equity securities it is listed as owning free and clear of any Liens other than Liens created by the Security Documents and the Permitted Liens. Schedule 5.3 lists the directors and secretaries of each Credit Party as of the Closing Date. Except as listed on Schedule 5.3 , no Credit Party (a) owns any interest or participates or engages in any joint venture, partnership or similar arrangements with any Person, (b) is a party to or has knowledge of any agreements restricting the transfer of its equity securities excluding the equity securities of Evolving Systems, (c) has issued any rights which can be convertible into or exchangeable or exercisable for any of its equity securities, or any rights to subscribe for or to purchase, or any options for the purchase of, or any rights of pre-emption or conversion of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, or other commitments or claims of any character relating to, any of its equity securities or any securities convertible into or exchangeable or exercisable for any of its equity
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securities and (d) is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire, repay, redeem or retire any of its equity securities or other convertible rights or options or debt securities. No Credit Party has any stock appreciation rights, phantom stock plan or similar rights or obligations outstanding.
5.4 PropertiesEach Credit Party is the sole owner and has good, valid and marketable title to, or a valid leasehold interest in, license of, or right to use, all of its material Properties, whether personal or real, in each instance, necessary or used in the Ordinary Course of Business, free and clear of all Liens other than Permitted Liens. All material tangible personal Property of each Credit Party is in good repair, working order and condition (normal wear and tear excepted) and is suitable and adequate for the uses for which they are being used or are intended.
5.5 Other AgreementsOther than as listed in Schedule 5.5 , no Credit Party is (a) a party to any judgment, order or decree or any agreement, document or instrument, or subject to any restriction, which adversely affects its ability to grant a security interest in the Collateral, take actions necessary to perfect the Lenders Liens, execute and deliver, or perform its payment, guarantee, indemnification, release, waiver, and any material obligations under, any Loan Document, Term Loan Documents or Related Document to which it is a party or to pay the Obligations, (b) in default in any material respect in the performance, observance or fulfilment of any obligation, covenant or condition contained in any Related Document, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a material conflict, breach, default or event of default under, any of the Related Documents, (c) in default in the performance, observance or fulfilment of any obligation, covenant or condition contained in any other agreement, document or instrument to which it is a party or to which any of its Properties are subject, which default would reasonably be expected to result in a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which would reasonably be expected to result in a Material Adverse Effect, or (d) a party or subject to any agreement, document or instrument with respect to, or obligation to pay any, service or management fee to an Affiliate with respect to, the ownership, operation, leasing or performance of any of its Business other than the Cross License Agreements and Transfer Pricing Agreements.
5.6 LitigationExcept as set forth on Schedule 5.6 , (i) there are no actions, suits, or proceedings pending against any Credit Party, (ii) to the knowledge of the Credit Parties, there are no investigations pending against any Credit Party and (iii) to the knowledge of the Credit Parties, there are no actions, suits, investigations or proceedings threatened against any Credit Party that, in each case, (a) questions or would reasonably be expected to prevent the validity of any of the Loan Documents, Term Loan Documents or Related Documents or the right of such Credit Party to enter into any Loan Document, Term Loan Documents or any Related Document to which it is a party or to consummate the transactions contemplated thereby, or (b) would reasonably be
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expected to result in, either individually or in the aggregate, a Material Adverse Effect. Except as listed on Schedule 5.6 , no Credit Party is a party or subject to any order, writ, injunction, judgment or decree of any Governmental Authority as of the Closing Date, and after the Closing Date that, in the case of any order, writ, injuction, judgment or decree to which any Credit Party becomes a party would reasonably be expected to have a Material Adverse Effect.
5.7 Environmental MattersEach Credit Party is, and the operations of each Credit Party are, in compliance with all applicable Environmental Laws in all material respects. No Credit Party has been notified in writing of any action, suit, proceeding or investigation (a) relating in any way to compliance by or liability of such Credit Party under any Environmental Laws, (b) which otherwise deals with any Hazardous Substance or any Environmental Law, or (c) which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Substance.
5.8 Tax Returns; Governmental ReportsExcept as set forth on Schedule 5.8 , each Credit Party (a) has filed all federal (if applicable) and all other material tax returns and other material reports which are required by law to be filed by such Credit Party, and (b) has paid all taxes, assessments, fees and other governmental charges, including, without limitation, payroll and other employment related taxes, in each case that are due and payable, except for items that such Credit Party currently is contesting in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP and no notice of Lien has been filed or recorded.5.9 Financial Statements and ReportsAll financial statements relating to any Credit Party that have been and hereafter may be delivered to Agent or any Lender by any Credit Party (a) are consistent with the books of account and records of such Credit Party, (b) have been prepared in accordance with GAAP on a consistent basis throughout the indicated periods, subject to, in the case of interim unaudited financial statements, the lack of footnote disclosure and normal year-end adjustments, and (c) present fairly in all material respects the consolidated financial position and results of operations of such Credit Party and its consolidated Subsidiaries at the dates and for the relevant periods indicated in accordance with GAAP on a basis consistently applied. Except as (a) listed on Schedule 5.9 and for items arising after the Closing Date, disclosed to Agent in accordance with Section 6.1 and (b) permitted under this Agreement and not required to be disclosed on a Credit Party’s financial statements under GAAP, the Credit Parties have no material obligations or liabilities of any kind that are not disclosed in such financial statements, and since the date of the most recent financial statements submitted to Agent and Lenders, there has not occurred any Material Adverse Effect or, to Credit Parties’ knowledge, any event or condition that would reasonably be expected to result in a Material Adverse Effect.
5.10 Compliance with Law; ERISA, Pensions; Business(a) Except as set forth on Schedule 5.10(c) , each Credit Party (a) is in compliance with all laws, statutes, rules, regulations, ordinances and tariffs of any Governmental
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Authority applicable to such Credit Party, the Business and/or such Credit Party’s Properties or operations, including, without limitation and where applicable, ERISA and any other laws or regulations pertaining to the Business, and (b) is not in violation of any order of any Governmental Authority or other board or tribunal, except, in the case of both (a) and (b), where any such noncompliance or violation would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect. There is no event, fact, condition or circumstance known to a Credit Party which, with notice or passage of time, or both, would constitute or result in any noncompliance with, or any violation of, any of the foregoing, in each case except where any such noncompliance or violation would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect.(b) No Subsidiary of Evolving Systems is required to file, or files, any form, report or other document with the SEC or similar foreign Governmental Authority regulating public issuance of securities.(c) No Credit Party or any of its Subsidiaries has at any time operated or had maintained for the benefit of it and/or any of its employees a defined benefit occupation pension scheme other than as listed in Schedule 5.10 .(d) Except as set forth on Schedule 5.10(c) , no Credit Party subject to ERISA has (i) engaged in any “Prohibited Transactions,” as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, (ii) failed to meet any applicable minimum funding requirements under Section 302 of ERISA in respect of its plans and no funding requirements have been postponed or delayed, (iii) knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any of its employee benefit plans, (iv) any fiduciary responsibility under ERISA for investments with respect to any plan existing for the benefit of Persons other than its employees or former employees, or (v) withdrawn, completely or partially, from any multi-employer pension plans so as to incur liability under the MultiEmployer Pension Plan Amendments of 1980, except in each case under clauses (i) through (v) with respect to any matters arising after the Closing Date, as would not reasonably be expected to have a Material Adverse Effect. With respect to each Credit Party, there exists no event described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12 C.F.R. § 2615.3 has not been waived except, with respect to events occurring after the Closing Date, for events that would not reasonably be expected to have a Material Adverse Effect. Each Credit Party has maintained all material records required to be maintained by any applicable Governmental Authority except, after the Closing Date, where the failure to do so would not reasonably be expected to have a Material Adverse Effect. UK Guarantor has not engaged, does not presently engage and does not propose to engage in any business other than the ownership of the equity securities of Borrower and activities incidental thereto.5.11 Intellectual Property(a) Except as set forth on Schedule 5.11 , no Credit Party or Subsidiary of a Credit Party owns or licenses any material patents, patent applications, registered trademarks, trademark applications, trade names, trade name applications, registered service marks, service
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mark applications, registered copyrights or copyright applications other than off-the-shelf licenses readily available in the open market.(b) Each Credit Party and each Subsidiary of a Credit Party owns directly, or is entitled to use by license or otherwise, all Intellectual Property necessary for or material to the conduct of such Credit Party’s business (such Intellectual Property, the “Necessary Intellectual Property”). The ownership or license interests of all of the Credit Parties” and each of their Subsidiaries’ in the items listed on Schedule 5.11 as of the Closing Date are and, at all times after the Closing Date (except to the extent no longer deemed necessary for or material to the conduct of the business of the Credit Parties and their Subsidiaries in the good faith business judgment of the Credit Parties) will be: (a) subsisting and have not been adjudged invalid or unenforceable, in whole or part; and (b) valid, in full force and effect and not in known conflict with the rights of any Person. Each Credit Party and Subsidiary of a Credit Party has made all filings and recordations necessary in the exercise of reasonable business judgment to protect its ownership or license interest in the Necessary Intellectual Property of such Credit Party or Subsidiary of a Credit Party in the United States Patent and Trademark Office, and United States Copyright Office and in corresponding offices throughout the world, as appropriate. Each Credit Party and Subsidiary of a Credit Party has performed all acts and has paid and will continue to pay all required fees and taxes to maintain each and every item of its ownership or license interest in Necessary Intellectual Property in full force and effect, except such items of its Necessary Intellectual Property as are no longer deemed necessary for or material to the conduct of its businesses in its reasonable business judgment. As of the Closing Date, no litigation is pending or, to the knowledge of each Credit Party, threatened against any Credit Party or Subsidiary thereof, which contains allegations respecting the validity, enforceability, infringement or ownership of the interest of any Credit Party or Subsidiary of a Credit Party in the Necessary Intellectual Property. No Credit Party or Subsidiary of a Credit Party is in breach of or default under the provisions of any of the licenses under which it has obtained rights to license any Necessary Intellectual Property, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any such license agreement which would reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect. All personnel (including employees, agents, consultants and contractors) of the Credit Parties and each Subsidiary thereof, who have contributed to or participated in the conception or development of the Necessary Intellectual Property used in the business of the Credit Parties and their Subsidiaries either (i) have been a party to a “work-for-hire” or other arrangements or agreements with the Credit Parties or their Subsidiaries in accordance with applicable international, national and other applicable laws that has accorded the Credit Parties and their Subsidiaries full, effective, exclusive and original ownership of all tangible and intangible property and intellectual property rights thereby arising or relating thereto, or (ii) have executed appropriate instruments of assignment in favor of the Credit Parties or their Subsidiaries as assignee that have conveyed to such Person effective and exclusive ownership of all intellectual property rights thereby arising and related thereto.5.12 Permits; LabourEach Credit Party is in compliance with, and has, all Permits necessary or required by applicable law or Governmental Authorities for the operation of its Business as presently
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conducted and as proposed to be conducted, and for the execution, delivery and performance by, and enforcement against, such Credit Party of each Loan Document, Term Loan Document and Related Document, except where noncompliance, violation or lack thereof would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect. Except as listed in Schedule 5.12 , (a) there is not any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing Permits, in each case which would reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect, and (b) no Credit Party is nor has been involved in any group labor dispute, strike, walkout or union organization.
5.13 No Default; Solvency(a) No Default or Event of Default exists.(b) Evolving Systems and each U.S. Subsidiary is and, after giving effect to the transactions and the Indebtedness contemplated by the Loan Documents and the transactions contemplated by the Term Loan Document and the Related Documents, will be Solvent.(c) Borrower and UK Guarantor are not and, after giving effect to the transactions and the Indebtedness contemplated by the Loan Documents and the transactions contemplated by the Term Loan Documents and the Related Documents (to the extent a party thereto), will not be unable to pay their respective debts within the meaning of the Insolvency Act 1986.(d) No corporate action, legal proceeding, or other procedure or step described in Article VIII(g) or process described in Article VIII(h) has been taken or threatened, to such Credit Party’s knowledge, in relation to any Credit Party.5.14 InsuranceAll insurance policies of the Credit Parties or otherwise relating to their Properties as of the Closing Date are listed and described on Schedule 5.14 .
5.15 Margin Stock; Regulated Entities; Tax Regulations; OFAC; Patriot Act(a) The Credit Parties are not engaged in the business of extending credit for the purpose of purchasing or carrying any “margin stock” or “margin security” (within the meaning of Regulations T, U or X issued by the Board of Governors of the Federal Reserve System), and no proceeds of the Loans will be used to purchase or carry any margin stock or margin security or to extend credit to others for the purpose of purchasing or carrying any margin stock or margin security within the meaning of such Regulations T, U or X.
(b) No Credit Party or any Person controlling any Credit Party is (a) an “investment company” within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness.
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(c) No Credit Party intends to treat the Loans, the Commitments and/or any letters of credit and related transactions as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4).
(d) No Credit Party (i) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of such Section 2, or (iii) is a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order (“OFAC”).
(e) Each Credit Party is in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.16 Broker’s or Finder’s CommissionsExcept as set forth on Schedule 5.16 no broker’s, finder’s or placement fee or commission is or will be payable to any broker, investment banker or agent engaged by any Credit Party or any of its officers, directors or agents with respect to the transactions contemplated by this Agreement, the other Loan Documents, Term Loan Documents and the Related Documents, except for fees payable to Agent and Lenders.
5.17 DisclosureNo Loan Document or any other agreement, document, written report, certificate or statement (including without limitation the Security Agreement Questionnaire submitted by letter dated October 3, 2005 (as supplemented prior to the date hereof as described in such letter) to the security questionnaire for the Borrower and the UK Guarantor) furnished to Agent or any Lender by or on behalf of any Credit Party in connection with the transactions contemplated by or pursuant to the Loan Documents, nor any representation or warranty made by any Credit Party in any Loan Document, contains any untrue statement of a material fact or omits to state any material fact necessary to make the factual statements therein taken as a whole not materially misleading as of the time made or delivered in light of the circumstances under which it was made or furnished; provided that notwithstanding anything else contained in this Agreement or any Loan Document, none of the Credit Parties make any representation, warranty or guaranty as to any projections furnished to Agent or the Lenders (except that such projections have been prepared by the applicable Credit Party or Subsidiary of a Credit Party on the basis of assumptions which were believed to be reasonable as of the date of such projections in light of current and reasonably foreseeable business conditions).
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5.18 Governing Law and Enforcement(a) The choice of English Law as the governing law of this Agreement and the Security Documents governed by English law will be recognized and enforced in the Relevant Jurisdictions.(b) Any final judgement obtained in England in relation to this Agreement and the Security Documents governed by English law will be recognized and enforced in the Relevant Jurisdictions.5.19 Centre of main interests and establishmentsFor the purposes of The Council of the European Union Regulation No. 1346/2000 on Insolvency Proceedings (the “Regulation” ), the centre of main interest (as that term is used in Article 3(1) of the Regulation) for the Borrower and UK Guarantor is situated in England and Wales and other than in relation to Evolving Systems Ltd’s branch office in Malaysia, has no “establishment” (as that term is used in Article 2(h) of the Regulations) in any other jurisdiction.
5.20 Incorporation of Certain Representations and WarrantiesEach of the representations and warranties contained in the Related Documents and, at the Closing Date, the Term Loan Documents made by any Credit Party is true and correct in all material respects (except to the extent already qualified by materiality, in which case it shall have been true and correct in all respects and shall not have been false or, misleading in any respect taken as a whole and in light of the circumstances under which it was made or furnished) and to the knowledge of each Credit Party as of the Closing Date, each of the representations and warranties contained in the Related Documents made by Persons other than a Credit Party Agent or any Lender is true and correct in all material respects.
5.21 SurvivalEach Credit Party agrees that the representations and warranties contained in the Loan Documents are made with the knowledge and intention that Agent and Lenders are relying and will rely thereon. All such representations and warranties will survive the execution and delivery of this Agreement, the Closing and the making of any and all Advances and/or the funding of the Term Loan.
VI. AFFIRMATIVE COVENANTSEach Credit Party, jointly and severally, covenants and agrees that, until the full performance and satisfaction, and indefeasible payment in full in cash, of all the Obligations (other than contingent indemnification Obligations to the extent no claim giving rise thereto has been asserted) and the termination of the Commitments:
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6.1 Reporting, Collateral and Other Information(a) Reporting . The Credit Parties shall maintain and shall cause each of their Subsidiaries to maintain a system of accounting established and administered in accordance with sound business practices to permit the preparation of financial statements in conformity with GAAP (provided that interim financial statements shall not be required to have footnote disclosure and may be subject to normal year-end adjustments).(b) The Credit Parties shall furnish to Agent and each Lender, at the times, for the periods and otherwise in accordance with the terms of Exhibit C attached hereto, all statements (financial or otherwise), budgets, projections, reports, listings, calculations, certificates, notices and other materials described on such Exhibit C-1.(c) Collateral Deliverables; Related Actions . Each Credit Party shall, and shall cause each other Credit Party to comply with each of the agreements, covenants and undertakings set forth in Exhibit C-2, applicable to such Credit Party in accordance with the terms thereof, and represents and warrants to the Lender Parties that the representations and warranties thereon contained are true, correct and complete in all material respects (except to the extent already qualified by materiality, in which case it shall have been true and correct in all respects) and shall not have been false or misleading in any respect taken as a whole and in light of the circumstances under which it was made or furnished.6.2 Conduct of Business; Maintenance of Existence and AssetsEach Credit Party shall, and shall cause each of its Subsidiaries to:
(a) engage solely in the Business in accordance with good business practices customary to its industry, and use commercially reasonable efforts to preserve the goodwill and business of the customers, suppliers and others having material business relations with it;(b) use commercially reasonable efforts to collect its Accounts in the Ordinary Course of Business;(c) maintain and preserve all of its material Properties used or useful in its Business in good working order and condition (normal wear and tear excepted and except as may be disposed of in accordance with the terms of the Loan Documents) and from time to time make all reasonably necessary repairs, renewals and replacements thereof;(d) except as permitted under Section 7.4(h), maintain and preserve in full force and effect its organizational existence under the laws of its state or jurisdiction of incorporation, organization or formation, as applicable;(e) maintain and preserve in full force and effect all Permits and qualifications to do business and remain in good standing (to the extent such concept applies to such entity) in each jurisdiction in which the ownership or lease of its property or the nature of its business makes such Permits or qualification necessary, in each case except as would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect; and
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(f) maintain, comply with and keep in full force and effect and renew its rights in Intellectual Property except where the non-preservation, non-compliance or loss of which or failure to maintain would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.6.3 Compliance with Legal and Other ObligationsEach Credit Party shall, and shall cause each of its Subsidiaries to:
(a) comply with all laws, statutes, rules, regulations, ordinances and tariffs of all Governmental Authorities applicable to it or its Business, Properties or operations, except where the failure to comply would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect;(b) comply in all material respects with the Securities Act and Exchange Act and the rules promulgated under such acts in all material respects and make all material filings required by such acts within the required filing period;(c) pay all taxes, assessments, governmental fees and charges except taxes, assessments, governmental fees and charges being contested in good faith by appropriate proceedings diligently prosecuted and against which adequate reserves are being maintained in accordance with GAAP and, with respect to such items, all such items do not exceed an amount equal to $250,000 against Persons organized in the United States in the aggregate at any time or such items do not exceed an amount equal to $1,500,000 against Persons organized outside the United States in the aggregate at any time;(d) subject to any subordination provisions in favor of the Lender Parties and/or other restrictions herein set forth, perform in accordance with its terms each contract, agreement or other arrangement to which it is a party or by which it or any of the Collateral is bound, except where the failure to so perform would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect;(e) pay and perform, before the same shall become delinquent and as the same shall be required to be performed, all of its obligations, liabilities and Indebtedness, but subject to any subordination provisions contained herein and/or in any instrument or agreement evidencing or pertaining to such Indebtedness, except where the failure to so pay or perform would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect;(f) with respect to the Credit Parties other than Borrower and any of its Subsidiaries, pay and perform, before the same shall become delinquent and as the same shall be required to be performed, but subject to any subordination provisions contained herein and in the Subordination Agreement, and preserve and enforce all of its material rights, duties and obligations under each of the Related Documents and the TSE Purchase Agreement except as provided in Section 7.5(f); and
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(g) properly file all reports required to be filed with any Governmental Authority, except where the failure to file would not reasonably be expected to result in a Material Adverse Effect.6.4 InsuranceEach Credit Party shall or if applicable Evolving Systems shall cause such Credit Party to (a) ensure that the Life Insurance Policy is fully paid and in full force and effect at all times; and (b) keep all of its insurable Properties adequately insured against losses, damages and hazards as are customarily insured against by businesses engaging in similar activities or the Business or owning similar Properties and of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, and at least the minimum amount required by applicable law and any other agreement to which such Credit Party is a party or pursuant to which such Credit Party provides any services, including, without limitation, liability, property and business interruption insurance, as applicable; provided the amount of business interruption insurance shall not be less than projected EBITDA for all Credit Parties and their Subsidiaries on a consolidated basis without duplication for a period of not less than six (6) months and, in any event, not less than an amount equal to $1,500,000; and maintain general liability insurance at all times against liability on account of damage to Persons and Property having such limits, deductibles, exclusions and co-insurance and other provisions as are customary for a business engaged in activities similar to those of such Credit Party under such circumstances and (c) maintain directors and officers liability insurance at all times against risks and liabilities customarily insured; all of the foregoing insurance policies and coverage levels to (i) be satisfactory to Agent in its Permitted Discretion, (ii) name Agent, for the benefit of the Lender Parties, as loss payee/mortgagee in respect of property damage and casualty insurance, additional insured in respect of liability insurance (excluding errors and omissions insurance and directors and officers liability insurance) and prior to the repayment in full of the Obligations as defined in and under the Term Loan Agreement sole beneficiary of the Life Insurance Policy (after indefeasible repayment of such Obligations, the Agent need not be the sole beneficiary of the Life Insurance Policy), and (iii) expressly provide that they cannot be altered, amended, modified, cancelled or terminated without at least thirty (30) days (10 days in the event of a termination for non-payment of premiums) prior written notice to Agent from the insurer except to add in the Ordinary Course of Business additional customers as loss payee/mortgagee or additional insured pursuant to this subsection (iii), and that they inure to the benefit of Agent, for the benefit of the Lender Parties, notwithstanding any action or omission or negligence of or by such Credit Party, or any insured thereunder. Upon request of Agent or any Lender, Evolving Systems shall furnish to Agent, with sufficient copies for each Lender, at reasonable intervals (but not more than once per calendar year) a certificate of a Responsible Officer on behalf of Evolving Systems (and, if requested by Agent, any insurance broker of Evolving Systems) setting forth the nature and extent of all insurance maintained by Evolving Systems and its Subsidiaries in accordance with this Section 6.4. Unless Evolving Systems provides Agent with evidence of the insurance coverage required by this Agreement, Agent may purchase insurance at Borrower’s expense to protect Agent’s and Lenders’ interests in the Credit Parties’ Properties. This insurance may, but need not, protect the Credit Parties’ interests. The coverage that Agent purchases may not pay any claim that any Credit Party makes or any claim that is made against any Credit Party in connection with said Property. Evolving Systems may later cancel any insurance purchased by Agent, but only after providing Agent with satisfactory evidence to
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Agent, and written acknowledgment thereof, that Evolving Systems has obtained insurance as required by this Agreement. If Agent purchases insurance, Borrower shall be responsible for the costs of that insurance, including interest and any other charges Agent may impose in connection with the placement of insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance shall be added to the Obligations and payable on demand. The costs incurred by Agent of the insurance may be more than the costs of insurance Evolving Systems may be able to obtain on its own.
6.5 Inspection Management Meetings(a) Each Credit Party shall permit the representatives of Agent from time to time during normal business hours upon reasonable notice to (i) visit and inspect any of such Credit Party’s and the Subsidiaries of such Credit Parties’ offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine and/or audit all of such Credit Party’s books of account, records, reports and other papers, (ii) make copies and extracts therefrom and (iii) discuss such Credit Party’s Business, operations, prospects, properties, assets, liabilities, condition and/or Accounts with its officers and, so long as officers and employees of the Credit Party or such Subsidiary are entitled to be present, independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing); provided, however, that (x) the Credit Parties shall not be obligated to reimburse Agent for more than an aggregate of two (2) visits, inspections, examinations and/or audits under this Section 6.5(a) and pursuant to the Term Loan Agreement (whether any such visit, inspection, examination or audit includes or covers some or all of the “Credit Parties” and their respective “Subsidiaries” under and as defined in this Agreement and the Term Loan Agreement) during any fiscal year in which no Event of Default exists, of which one (1) visit, inspection, examination and/or audit in which employees and agents of Agent located within North America travel outside North America which visits shall, to the extent practicable and appropriate in the Permitted Discretion of the Agent, be coordinated to occur at the same time as the semi-annual meetings provided for in clause (b) below (it being agreed and understood that the Borrower shall be obligated to reimburse Agent for all such visits, inspections, examinations and audits conducted while any Event of Default exists), and (y) no notice shall be required to do any of the foregoing if any Event of Default has occurred and is continuing.(b) The Credit Parties shall cause their senior management to hold meetings with Agent in person, on a semi-annual basis or more frequently in the Permitted Discretion of the Agent, to discuss the financial performance and projections of Evolving Systems and its Subsidiaries. The format and content of the meetings shall be substantially similar to discussion of such matters in meetings of the board of directors of Evolving Systems. Credit Parties’ shall reimburse Agent for all reasonable out-of-pocket expenses incurred in connection with attendance at such meetings.(c) Agent and such representatives shall maintain the confidentiality of all non-public information (whether written or verbal and whether specifically identified as “confidential”) obtained during such visits, inspections, examinations, audits or meetings in accordance with Section 12.12.
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6.6 Use of ProceedsThe Borrower shall use the proceeds from the Advances under the Revolving Facility solely for the following purposes at the election of Borrower: (i) for the purchase or generation from time to time of receivables and inventory and for payments of amounts owing from time to time to Agent and Lenders under the Loan Documents, and (ii) for permitted corporate purposes in compliance with applicable law and not in violation of this Agreement . The Borrower shall not use the proceeds from the Advances under the Revolving Facility for the acquisitions of companies, businesses or undertakings or for repayment or prepayment of the Term Loan or the obligations under the Subordinated Loan Documents or to make any loans or payments to any Credit Party organized in the United States other than (x) any dividend payment as permitted by section 7.5 or for the avoidance of doubt not for any purpose which would result in a breach of Sections 151 to 158 of the Act.
6.7 Further Assurances; Post Closing Deliveries(a) Except as authorized by Agent in its Permitted Discretion, each Credit Party shall, and shall cause each Credit Party to, within five (5) Business Days after demand by Agent or Requisite Lenders, take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, assignments, instructions or documents as may be requested in their Permitted Discretion in form and substance satisfactory to the Agent in its Permitted Discretion in order to carry out the purposes, terms and conditions of the Loan Documents and the transactions contemplated thereby, whether before, at or after the performance and/or consummation of the transactions contemplated hereby or the occurrence of any Default or Event of Default.(b) Without limiting any other provision of any Loan Document, each Credit Party shall, and shall cause each of its Subsidiaries to, execute and deliver, or cause to be executed and delivered, to Agent all agreements, instruments, documents and other deliveries, and take or cause to be taken all actions, and otherwise perform, observe and comply with all obligations and covenants, set forth on Schedule 6.7 hereto within the applicable time periods set forth thereon.(c) Each Credit Party shall, and shall cause its Subsidiaries to, (i) execute, deliver and/or record any and all financing statements, continuation statements, stock powers, transfers, instruments and other documents, or cause the execution, delivery and/or recording of any and all of the foregoing, that are necessary or required under law or otherwise requested by Agent in its Permitted Discretion to create, perfect or preserve the pledge of the Collateral to Agent and the Lien on the Collateral in favor of Agent, for the benefit of the Lender Parties under the Loan Documents (and each Credit Party irrevocably grants Agent the right, at Agent’s option, to file any or all of the foregoing), and (ii) defend the Collateral and the Lien in favor of Agent, for the benefit of the Lender Parties under the Loan Documents, against all claims and demands of all Persons (other than Permitted Liens). Without limiting the generality of the foregoing and except as otherwise approved in writing by Requisite Lenders, (i) each Guarantor shall, and each Credit Party shall cause its Subsidiaries (other than Borrower) to, guaranty the Obligations of Borrower, and grant to Agent, for the benefit of the Lender Parties under the Loan Documents, a Lien on all of its Property to secure such guaranty, (ii) each Credit Party shall
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pledge the equity interests in their Subsidiaries to Agent, for the benefit of the Lender Parties, to secure the Obligations, and (iii) each Credit Party shall grant a first priority Lien (other than with respect to Property subject to Priority Permitted Liens) on all of its Property (other than accounts used exclusively for employee payroll and employee benefits and any other Property that is not required to constitute Collateral pursuant to the Security Documents) and, without limiting the foregoing, pledge the stock and other equity interests and securities of each of its Subsidiaries, in each case to Agent, for the benefit of the Lender Parties, to secure the Obligations. In furtherance thereof, each Subsidiary of a Credit Party other than Borrower shall execute a Joinder Agreement and become a Guarantor. Nothing in this Section 6.7(c) shall require a Credit Party to grant any Lien in favor of the Agent, for the benefit of the Lender Parties under the Loan Documents, in relation to the Capital Stock of Evolving Systems GmbH, nor shall Evolving Systems GmbH and Evolving Systems Networks India PVT Ltd be required to execute a Joinder Agreement or grant any Lien in favor of the Agent, for the benefit of the Lender Parties under the Loan Documents unless such Subsidiary has EBITDA representing five (5) per cent or more, or net turnover representing five (5) per cent or more, of the EBITDA or net turnover respectively of the Credit Parties and their consolidated Subsidiaries as a whole without duplication.(d) Concurrently with (i) the execution by any Credit Party, as lessee, of any lease pertaining to real property, such Credit Party shall deliver to Agent (a) an executed copy thereof, (b) a Landlord Waiver and Consent from the Landlord under such lease in form and substance acceptable to Agent in its Permitted Discretion and (c), except for extensions of leases listed on Schedule 6.7(c) as of the Closing Date and for leases of real property, requiring no more than an amount equal to $200,000 in annual rent payments, (I) at the option of Agent, either a leasehold mortgage upon or a collateral assignment of such lease in favor of Agent, for the benefit of the Lender Parties under the Loan Documents, in either case in form and substance acceptable to Agent in its Permitted Discretion, and (II) at the option of Agent, a lender’s policy of title insurance for the benefit of the Lender Parties under the Loan Documents, in such form and amount and containing such endorsements as shall be satisfactory to Agent in its Permitted Discretion, insuring the Lien of such leasehold mortgage or collateral assignment of lease, together with a survey of such real property, which survey shall be of a recent enough date and in sufficient detail so as to permit the title company issuing such policy to eliminate any survey exceptions to such policy and (d) such other documents and assurances with respect to such real property as Agent may require in its Permitted Discretion, and (ii) the execution by any Credit Party of any contract relating to the acquisition by such Credit Party of real property, an executed copy of such contract and, concurrently with the closing of the purchase of such real property, (a) a first mortgage or deed of trust in favor of Agent, for the benefit of the Lender Parties under the Loan Documents, on such real property, in form and substance acceptable to Agent in its Permitted Discretion, (b) a lender’s policy of title insurance for the benefit of the Lender Parties under the Loan Documents, in such form and amount and containing such endorsements as shall be satisfactory to Agent in its Permitted Discretion, (c) a survey of such real property, which survey shall be of a recent enough date and in sufficient detail so as to permit the title company issuing such policy to eliminate any survey exceptions to such policy, (d) a recent environmental assessment of such real property by a third party acceptable to Agent, and the results thereof shall be satisfactory to Agent in its Permitted Discretion, and (e) such other documents and assurances with respect to such real property as Agent may require in its Permitted Discretion.
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VII. NEGATIVE COVENANTSEach Credit Party, jointly and severally, covenants and agrees that, until the full performance and satisfaction, and indefeasible payment in full in cash, of all Obligations (other than contingent indemnification Obligations to the extent no claim giving rise thereto has been asserted) and the termination of all Commitments:
7.1 Financial CovenantsNo Credit Party shall, and no Credit Party shall cause or permit any of its Subsidiaries to, violate any of the financial covenants set forth in Exhibit B-1 hereto, calculated and determined as of the respective dates and for the respective periods set forth thereon.
7.2 IndebtednessNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except the following (collectively, “Permitted Indebtedness”):
(a) Indebtedness of the Credit Parties evidenced by the Loan Documents or the Term Loan Documents;(b) any Indebtedness of Evolving Systems and its Subsidiaries existing on the Closing Date and set forth on Schedule 7.2 hereto, including extensions and replacements thereof provided that the principal amount of such Indebtedness as of the date of such extension or replacement is not increased and the maturity and weighted average life thereof are not shortened;(c) Indebtedness of Evolving Systems and its Subsidiaries not to exceed an amount equal to $250,000 in the aggregate at any time outstanding constituting Capital Lease Obligations;(d) Indebtedness of Evolving Systems and its Subsidiaries incurred after the Closing Date secured by Liens permitted under Section 7.3(e)(i) provided the aggregate amount thereof outstanding at any time does not exceed an amount equal to $200,000;(e) inter-company unsecured Indebtedness arising from loans made by Evolving Systems to its Wholly-Owned Subsidiaries that are Credit Parties to and as defined in the Term Loan Agreement to fund working capital requirements of such Subsidiaries in the Ordinary Course of Business; provided, that, that upon the request of Agent, such Indebtedness shall be evidenced by promissory notes having terms (including subordination terms) satisfactory to the Agent, the sole originally executed counterparts of which shall be pledged and delivered to the Agent, for the benefit of the Lender Parties, as security for the Obligations;(f) inter-company unsecured Indebtedness not listed in Schedule 7.2 on the Closing Date arising from loans made by Evolving Systems to Evolving Systems Networks India PVT LTD, an India corporation, and Evolving Systems GmbH, a German corporation, so long as such Persons are Wholly-Owned Subsidiaries of Evolving Systems, to fund working capital
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requirements of such Subsidiaries in the Ordinary Course of Business; provided that, that upon the request of Agent, such Indebtedness shall be evidenced by promissory notes having terms (including subordination terms) satisfactory to Agent, the sole originally executed counterparts of which shall be pledged and delivered to Agent, for the benefit of the Lender Parties, as security for the Obligations; provided, however, that the aggregate amount of Investments permitted pursuant to Section 7.4(i) and outstanding Indebtedness permitted pursuant to this subsection 7.2(f) does not exceed an amount equal to $100,000 at any time.(g) Subordinated Debt of Evolving Systems evidenced by the Subordinated Notes to the extent such Indebtedness remains subject to the terms and conditions of the Seller Subordination Agreement;(h) Contingent Obligations to the extent constituting Indebtedness and permitted under Section 7.8 hereof;(i) the incurrence by any Credit Party or any Subsidiary thereof of Indebtedness in an amount up to an amount equal to $50,000 arising from the honouring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds, so long as such Indebtedness is covered within five Business Days;(j) reimbursement obligations under the letters of credit listed on Schedule 7.2 ;(k) unsecured Indebtedness of a Credit Party or its Subsidiaries incurred in connection with the financing of insurance premiums in the Ordinary Course of Business with respect to insurance required or permitted under Section 6.4 up to an amount equal to $500,000 in aggregate annual premiums; and;(l) other unsecured Indebtedness of Evolving Systems and its Subsidiaries not to exceed an amount equal to $50,000 in the aggregate outstanding at any time.7.3 LiensNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon, in, against or with respect to any part of, or any pledge of, any of the Collateral or any of its other Property or Capital Stock (other than the Capital Stock of Evolving Systems) whether now owned or hereafter acquired, except the following (collectively, “Permitted Liens”):
(a) Liens created by the Loan Documents or the Term Loan Documents or otherwise arising in favor of Agent, for the benefit of the Lender Parties;(b) Liens imposed by law for taxes, assessments, fees or charges of any Governmental Authority (i) that are not yet delinquent or (ii) which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Credit Party or Subsidiary in accordance with GAAP and, with respect to this clause (ii), all such Liens secure claims not exceeding amounts set forth in Section 6.3(c);
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(c) statutory Liens of landlords, carriers, warehousemen, mechanics and/or materialmen and other similar Liens imposed by law or that arise by operation of law in the Ordinary Course of Business that, in any such case, are only for amounts not yet delinquent or which are being contested in good faith by appropriate proceedings (which have the effect of preventing or staying the forfeiture or sale of the Property subject thereto) and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP;(d) Liens (other than any Lien imposed by ERISA) incurred or deposits or pledges made in the Ordinary Course of Business (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, trade contracts, statutory obligations and other similar obligations (other than for the repayment of Indebtedness);(e) (i) purchase money Liens securing Indebtedness permitted under Section 7.2(d); provided, that (x) any such Lien attaches to the subject Property concurrently with or within twenty (20) days after the acquisition thereof, (y) such Lien attaches only to the subject Property and (z) the principal amount of such Indebtedness secured thereby does not exceed 100% of the cost of such Property; and (ii) Liens arising under Capital Leases permitted under Section 7.2(c) to the extent such Liens attach only to the Property that is the subject of such Capital Leases;(f) any attachment or judgment Lien provided that the enforcement of such Liens is effectively stayed, satisfied, vacated, dismissed or discharged within 30 days of issuance or execution and such Liens secure claims not otherwise constituting an Event of Default;(g) easements, rights of way, restrictions, zoning ordinances, reservations, covenants and other similar charges, title exceptions or encumbrances relating to real Property of the Credit Parties incurred in the Ordinary Course of Business that, either individually or in the aggregate, are not substantial in amount, do not interfere in any material respect with the use of the Property affected or the ordinary conduct of the Business of the Credit Parties and do not result in material diminution in value of the Property subject thereto;(h) Liens disclosed on Schedule 7.3 as of the Closing Date;(i) Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off, recoupment, combination of accounts or similar rights as to deposit accounts or other funds maintained with a creditor depository institution;(j) Liens that arise under customary non-assignment provisions in contracts, leases, subleases, licenses and sublicenses entered into with unaffiliated third parties in the Ordinary Course of Business;(k) transfer restrictions that arise under any agreement for a sale, lease, transfer, conveyance, assignment or other disposition of any Property or any interest therein that is permitted pursuant to Section 7.7 that imposes restrictions only on the Properties that are the subject of such agreement pending the consummation of such transaction;
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(l) restrictions under federal, state or foreign securities laws or the rules or regulations promulgated thereunder;(m) Liens on Capital Stock of Evolving Systems not held by any Credit Party or Subsidiary of a Credit Party; and(n) Liens of licensors and sublicensors on licenses and sublicenses of Intellectual Property of a Credit Party or Subsidiary thereof entered into in the Ordinary Course of Business.7.4 Consolidations, Mergers and InvestmentsNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, (i) merge, liquidate, amalgamate or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all its Property to or in favor of, any other Person, (ii) purchase, own, hold, invest in or otherwise acquire any obligations or stock or other securities of, or any other ownership interest in, any other Person (including the establishment or creation of any Subsidiary) or any joint venture, or otherwise consummate or commit to make any Acquisition (including by way of merger, consolidation or other combination), (iii) purchase, own, hold, invest in or otherwise acquire any “investment property” (as defined in the UCC) issued by any other Person, or (iv) except as permitted by Section 7.2 or Section 7.8 make, permit to exist or commit to make any loans, advances or extensions of credit to or for the benefit of any Person, or assume, guarantee, indemnify, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of, any Person (the items described in the foregoing clauses (ii), (iii) and (iv) sometimes are referred to as “Investments”), except:
(a) Investments created by the Loan Documents and the Term Loan Documents;(b) trade credit extended by Evolving Systems and its Subsidiaries in the Ordinary Course of Business and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;(c) Investments constituting inter-company Indebtedness to the extent permitted under Sections 7.2(e) and 7.2(f);(d) loans to employees and advances for business travel and similar temporary advances made in the Ordinary Course of Business to officers, directors and employees, not to exceed an amount equal to $25,000 in the aggregate at any time outstanding;(e) the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business;(f) (i) Investments by the Credit Parties in Cash Equivalents with respect to which Agent, for the benefit of the Lender Parties, has a first priority and perfected Lien, as
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security for the Obligations and (ii) Investments in Cash Equivalents by Evolving Systems Networks India PVT LTD and Evolving Systems GmbH;(g) Evolving Systems and its Subsidiaries may consummate transactions otherwise permitted under Sections 7.2, 7.5, 7.7 and 7.8;(h) upon not less than ten (10) Business Days’ prior written notice to Agent, (i) any Subsidiary of Borrower may merge with, or dissolve or liquidate into, or transfer its Property to, Borrower or a Wholly-Owned Subsidiary of Borrower that is a Credit Party, provided that, with respect to any such merger, Borrower or such Wholly-Owned Subsidiary shall be the continuing or surviving entity and (ii) a Subsidiary of Evolving Systems may merge with or dissolve or liquidate into or transfer its Property to a Wholly-Owned Subsidiary of Evolving Systems as permitted by the Term Loan Documents;(i) Investments in the Capital Stock of Evolving Systems Networks India PVT LTD and Evolving Systems GmbH not listed in Schedule 7.4 on the Closing Date; provided that the aggregate amount of such Investments and the outstanding Indebtedness permitted under Section 7.2(f) shall not exceed an amount equal to $100,000 at any time;(j) Investments by any Credit Party other than Borrower or its Subsidiaries in any Wholly-Owned Subsidiary of Evolving Systems that is a U.S. Subsidiary and that is or concurrent with such Investment becomes a Credit Party and Investments by Evolving Systems and its Subsidiaries in a Subsidiary of Evolving Systems that is or concurrent with such Investment becomes a Credit Party as defined in and under the Term Loan Agreement;(k) Investments existing as of the Closing Date by a Credit Party in its Subsidiaries set forth on Schedule 7.4 ;(l) Investments received in compromise or resolution of litigation or arbitration proceedings with Persons who are not Affiliates of a Credit Party up to an amount equal to $50,000 in the aggregate;(m) Investments represented by prepaid expenses made in the Ordinary Course of Business; and(n) without duplication of any quantitative limits, Evolving Systems and its US Subsidiaries which are Credit Parties may make Investments permitted under the Term Loan Agreement.
For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.
7.5 Restricted PaymentsNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, (i) declare, pay or make any dividend or distribution of cash, securities or other Property on any shares of its Capital Stock or other equity or ownership interests or securities, (ii) apply any of its
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Property to the acquisition, redemption or other retirement of any of its Capital Stock or other equity or ownership interests or securities or of any warrants, options or other rights to purchase or acquire, exchangeable or exercisable for, or convertible into, any of the foregoing, (iii) make any payment or prepayment of principal, premium, if any, interest, or fees on any Subordinated Debt, make any sinking fund or similar payment with respect to, any Subordinated Debt, or redeem, exchange, purchase, retire, defease or setoff against any Subordinated Debt; (iv) make any payment or prepayment of any TSE Contingent Obligation, make any sinking fund or similar payment with respect to any TSE Contingent Obligation, or redeem, exchange, purchase, retire, defease or setoff against any TSE Contingent Obligation or (v) pay any management, service, consulting, non-competition or similar fee or any compensation to any Affiliate of any Credit Party (the items described in clauses (i), (ii), (iii), (iv) and (v) above sometimes are referred to herein as “Restricted Payments”). Notwithstanding the foregoing:
(a) any Wholly-Owned Subsidiary of Evolving Systems may declare and pay dividends and other distributions to Evolving Systems or to any other Wholly-Owned Subsidiary of Evolving Systems that is a Credit Party and the Wholly-Owned Subsidiaries of Evolving Systems party to the Term Loan Agreement may declare and pay dividends permitted under the Term Loan Agreement;(b) Evolving Systems may, upon termination, resignation or retirement of an officer or employee of a Credit Party, redeem for cash any equity securities or warrants or options to acquire any equity securities of Evolving Systems owned by such officer or employee so long as the restrictions and limitations in the Term Loan Agreement are complied with;(c) Borrower may pay dividends to Intermediate Holdco solely sufficient to permit Intermediate Holdco to pay as and when due and payable franchise taxes and other similar ordinary course licensing expenses and other general and customary holding company costs and expenses incurred in the Ordinary Course of Business and otherwise relating to activities in which Intermediate Holdco otherwise is permitted to engage under the Loan Documents to the extent no Default or Event of Default has occurred and is continuing or would arise as a result of such distributions;(d) Evolving Systems may make payments on the Subordinated Debt evidenced by the Subordinated Notes only to the extent expressly permitted under the applicable Seller Subordination Agreement;(e) the Credit Parties and their Subsidiaries may pay (i) reasonable compensation (including Permitted Securities issued as equity compensation) to officers and employees for actual services rendered to Evolving Systems and its Subsidiaries in the Ordinary Course of Business, including reasonable severance compensation upon termination of employment, and (ii) reasonable directors’ fees, meeting fees and reimbursement of actual out-of-pocket expenses incurred in connection with attending board of director meetings;(f) Evolving Systems may pay the TSE Contingent Obligation due on November 15, 2005 in an amount up to $300,000 and TSE Contingent Obligations on or promptly thereafter the day of delivery to Agent of quarterly financial statements for such fiscal
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quarter; provided, that all of the following conditions are satisfied with respect to each such payment:(i) no Default or Event of Default has occurred and is continuing or would arise as a result of such distribution;(ii) the Credit Parties are compliance with the financial covenants referenced in Section 7.1(a) and provide evidence to Agent to such effect; and(iii) the aggregate amount of such distributions shall not exceed $2,900,000 during the Term;(g) Evolving Systems may declare and make dividend payments or other distributions payable solely in Permitted Securities; and(h) the Credit Parties and their Subsidiaries may make payments pursuant to and in accordance with the Cross License Agreement and Transfer Pricing Agreements.7.6 Transactions with AffiliatesNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, enter into or consummate any transaction with any Affiliate of such Person other than:
(a) as expressly permitted by, and subject to the terms of, this Agreement, the other Loan Documents and the Term Loan Documents;(b) compensation and employment arrangements (including Permitted Securities issued as equity compensation) with employee, officers and directors in the Ordinary Course of Business and to the extent otherwise permitted under Section 7.5(e);(c) other transactions pursuant to written agreements between a Credit Party or its Subsidiary and any such Affiliates that are entered into in the Ordinary Course of Business and pursuant to the reasonable requirements of the business of such Credit Party; provided, that such transactions and agreements are on fair and reasonable terms not less favorable to such Person than would be obtained in an arm’s length transaction between unrelated parties of equal bargaining power;(d) transactions between or among (i) Evolving Systems and any of its Wholly Owned Subsidiaries that are U.S. Subsidiaries and Credit Parties under and as defined in the Term Loan Agreement and (ii) between or among UK Guarantor and its Wholly Owned Subsidiaries that are, or concurrent with such transaction becomes, a Credit Party;(e) the Cross License Agreement and the Transfer Pricing Agreements in form and substance satisfactory to the Agent in its Permitted Discretion; and(f) the agreements identified on Schedule 7.6 .
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7.7 Transfer of AssetsNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, sell, lease, transfer, convey, assign or otherwise dispose of (whether in a single transaction or a series of transactions) any Property or any interest therein, or agree to do any of the foregoing, except that:
(a) Evolving Systems and its Subsidiaries may sell, lease, transfer, convey, assign or otherwise dispose of (whether in a single transaction or a series of transactions) obsolete, worn out, replaced, damaged or excess Property that is no longer needed in the Ordinary Course of Business and has a book value not exceeding an amount equal to $200,000 in the aggregate in any fiscal year;(b) Evolving Systems and its Subsidiaries may sell or otherwise dispose of inventory and use cash in the Ordinary Course of Business and liquidate or sell Cash Equivalents in the Ordinary Course of Business;(c) Evolving Systems and its Subsidiaries may sell, lease, transfer, convey, assign or otherwise dispose of other Properties not specifically permitted otherwise in this Section 7.7 (other than Capital Stock of a Credit Party to the extent owned by another Credit Party) to the extent (a) Evolving Systems or such Subsidiary complies with the mandatory prepayment provisions of Section 2.5(c) in connection therewith (to the extent the proceeds thereof are not reinvested in accordance with the terms of such Section 2.5(c)(i)), (b) such sale is for fair market value and the aggregate fair market value of all assets so sold does not exceed an amount equal to $250,000 in any fiscal year, (c) no Default or Event of Default exists or otherwise would result therefrom (d) after giving effect to such transaction, the Credit Parties are in compliance on a pro forma basis with the financial covenants referenced in Section 7.1(a) (recomputed for the most recent period for which financial statements have been delivered in accordance with the terms hereof after giving effect thereto as of the first day of such period), and (e) the sole consideration therefor received by Evolving Systems or such Subsidiary is cash;(d) transactions otherwise permitted under Sections 7.2, 7.3, 7.4, 7.5, 7.6 and 7.8 to the extent permitted thereunder;(e) Any Credit Party may sell, transfer, convey, assign or otherwise dispose of Property to any other Credit Party;(f) Evolving Systems and its Subsidiaries may license and sublicense their Intellectual Property in the Ordinary Course of Business on a non-exclusive basis so long as such license does not restrict the ability of Agent and Lenders to exercise their rights and remedies under the Loan Documents and the Term Loan Documents with respect to such Intellectual Property subject to such license. Such licence may include a restriction on the assignability of the license and its continuation after a Change of Control;(g) Evolving Systems and its Subsidiaries (other than Borrower and its Subsidiaries) may dispose of Property to the extent permitted by the Term Loan Documents.
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7.8 Contingent ObligationsNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, enter into, create, assume, suffer to exist or incur any Contingent Obligations or assume, guarantee, indemnify, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any Person, except:
(a) Evolving Systems or any of its Subsidiaries which are Credit Parties may enter into guarantees of Indebtedness of any other Credit Party permitted under Section 7.2;(b) Evolving Systems and its Subsidiaries may endorse cheques for collection in the Ordinary Course of Business;(c) Evolving Systems and Borrower may enter into unsecured Hedging Agreements in the Ordinary Course of Business for bona fide hedging purposes and not for speculation in an aggregate notional or contract amount not to exceed an amount equal to $250,000 outstanding at any time;(d) Contingent Obligations of Evolving Systems and its Subsidiaries incurred in the Ordinary Course of Business with respect to workers’ compensation claims, unemployment insurance and other types of social security benefits, self-insurance obligations, bankers’ acceptances, performance bonds, appeal and surety bonds and other similar obligations;(e) Contingent Obligations of Evolving Systems and its Subsidiaries arising under indemnity agreements to title insurers to cause such title insurers to issue to Agent title insurance policies;(f) the TSE Contingent Obligations;(g) Contingent Obligations of any Credit Party or Subsidiary thereof arising from indemnification obligations to its directors, officers and employees in the Ordinary Course of Business;(h) indemnities given by any Credit Party or any Subsidiary thereof to its customers, vendors, independent contractors, purchasers or sellers of Property or other third parties in the Ordinary Course of Business; and(i) Contingent Obligations in respect of Evolving Systems’ guarantee of the expenses incurred by certain employees in connection with the use of credit cards sponsored by Evolving Systems in an aggregate amount not to exceed an amount equal to $150,000 at any time outstanding.
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7.9 Organizational Documents; Accounting Changes; Use of Proceeds; Insurance; BusinessNo Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to:
(a) amend, modify, restate or change any of its articles or memorandum of incorporation, bylaws, certificate of formation, operating agreement and other charter documents in any respect adverse to Agent or Lenders (including changing its name), or make any material change to its equity capital structure or, without the prior written consent of Agent (but without limiting the mergers or other transactions involving any Credit Party otherwise permitted under Section 7.4(h)), reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the Closing Date;(b) make any significant change in accounting treatment or reporting practices, except as required by GAAP or to accommodate FAS 123R, or change its fiscal year;(c) use any proceeds of any Loans, directly or indirectly, for “purchasing” or “carrying” “margin stock” as defined in Regulations T, U or X of the Board of Governors of the Federal Reserve System, or to repay or refinance Indebtedness incurred to so “purchase” or “carry” “margin stock,” or otherwise in violation of applicable law or this Agreement;(d) amend, modify, restate or change any insurance policy in any material respect including, without limitation, any material increase in the amount of any deductibles payable by the Credit Parties under any such insurance policy or any material change in the scope of coverage, coverage amount, beneficiaries, loss payees and/or additional insureds except additional insureds permitted by Section 6.4(c), but excluding changes in the term of coverage in connection with renewals thereof in the Ordinary Course of Business;(e) engage, directly or indirectly, in any business other than the Business; or(f) allow Intermediate Holdco to engage in any business other than the ownership of the equity securities of UK Guarantor and activities incidental thereto.7.10 Related Documents, Subordinated Debt and TSE Contingent Obligations(a) No Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, (i) amend, supplement, waive or otherwise modify any of the terms or provisions of, and will not fail to enforce or diligently pursue its remedies under, any Related Document, as in effect on the Closing Date, in any manner adverse to Agent or any Lender or which would reasonably be expected to result in a Material Adverse Effect, or (ii) take or fail to take any other action under any Related Document that would reasonably be expected to result in a Material Adverse Effect.(b) No Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, amend, supplement or otherwise modify the terms of any Subordinated Debt except as expressly permitted under the applicable Subordination Agreement.
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(c) No Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, amend, terminate, supplement or otherwise, without the prior written consent of the Agent in its Permitted Discretion, modify the terms of the TSE Purchase Agreement, the Cross License Agreement or Transfer Pricing Agreements or any TSE Contingent Obligations in any material respect or in any manner adverse to Agent or Lenders; provided, however, that the parties may amend the TSE Purchase Agreement so long as such amendment is not adverse to the interests of Agent or Lenders under the Loan Documents or the Term Loan Documents and does not extend the duration of the agreement, increase the aggregate amounts due thereunder, or accelerate payment dates. The Credit Parties shall notify and promptly provide Agent with copies of any amendment, modification, restatement or change to such agreements.7.11 Negative PledgesExcept as a result of the Loan Documents and the Term Loan Documents, no Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual restriction or encumbrance of any kind on the ability of any such Subsidiary to pay dividends or make any other distribution on any of such Subsidiary’s equity securities or to pay fees or make other payments and distributions to Borrower or any of its Subsidiaries except as permitted under the Transfer Pricing Agreements. No Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries to, directly or indirectly, enter into, assume or become subject to any contract or agreement that prohibits or otherwise restricts the existence of any Lien upon any of its Property in favor of Agent, for the benefit of the Lender Parties under the Loan Documents, whether now owned or hereafter acquired except (a) in connection with any document or instrument governing Liens related to purchase money Indebtedness and Capital Leases which, in each case, otherwise constitute Permitted Liens and (b) leased equipment, Intellectual Property and General Intangibles of any Credit Party to the extent excluded from Collateral in the Security Documents.
7.12 Certain Specific AgreementsNeither any Credit Party nor any Subsidiary of any Credit Party (i) will be or become a Person whose Property or interests in Property are blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001), (ii) will engage in any in any dealings or transactions prohibited by Section 2 of such executive order, or otherwise be associated with any such Person in any manner violative of Section 2 of such executive order, or (iii) otherwise will become a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or executive order.7.13 Shareholder Blocking RightsNo Credit Party shall issue any Capital Stock which grants or provides any direct or indirect owner or equityholder thereof any Shareholder Blocking Rights.
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VIII. EVENTS OF DEFAULTThe occurrence of any one or more of the following shall constitute an “ Event of Default ”:
(a) any Credit Party shall fail to pay when due and payable (i) any principal provided for or required under this Agreement and/or the Notes, or (ii) within two (2) Business Days after the same shall become due and payable, any interest, fees or other Obligations (other than principal or premium) provided for or required under this Agreement or the other Loan Documents, in any such case described in the foregoing clause (i) or (ii), whether on any payment date, at maturity, by reason of acceleration, by notice of intention to prepay, by required prepayment or otherwise);(b) any representation, statement or warranty made or deemed made by or on behalf of any Credit Party in any Loan Document or Term Loan Document or in any other certificate, document, report or opinion delivered pursuant to any Loan Document or Term Loan Document to which it is a party shall not be true and correct in all material respects or shall have been false or misleading in any material respect taken as a whole and in light of the circumstances under which it was made or furnished on the date when made or deemed to have been made (except to the extent already qualified by materiality, in which case it shall have been true and correct in all respects and shall not have been false or misleading in any respect taken as a whole and in light of the circumstances under which it was made or furnished on the date when made or deemed to have been made);(c) any Credit Party thereto shall be in violation, breach or default of, or shall fail to perform, observe or comply with, any covenant, obligation or agreement set forth in, or any event of default occurs under, any Loan Document and such violation, breach, default, event of default or failure shall not be cured within the applicable period, if any, set forth in the applicable Loan Document; provided that, with respect to the affirmative covenants set forth in Article VI (other than Sections 6.1, 6.3(c), 6.4, 6.5 or 6.7(b), for which no cure period shall apply), any such violation, breach, default, event of default or failure shall result in any Event of Default only if it remains uncured for thirty (30) calendar days after the earlier of (i) Receipt (as defined in Section 12.7) by such Person of written notice of such violation, breach, default, event of default or failure and (ii) the time at which any officer of a Credit Party knew or became aware, or should reasonably have known or been aware, of such violation, breach, default, event of default or failure;(d) (i) any of the Loan Documents ceases for any reason to be in full force and effect or (ii) any Lien, except any Liens the Agent chooses not to perfect created under any Loan Documents ceases (other than pursuant to the express terms of the applicable Loan Document) to constitute a valid first priority perfected Lien (other than with respect to Property subject only to Priority Permitted Liens) on the Collateral in accordance with the terms thereof;(e) one or more judgments or decrees is or are rendered against the Credit Parties, any Subsidiary of any Credit Party or any of them in an outstanding amount, at any time in excess of an amount equal to $175,000 individually or an amount equal to $350,000 in the aggregate (excluding judgments and decrees to the extent covered by third party insurance of
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such Persons where such coverage has been acknowledged by the insurer), which is/are not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being rendered;(f) any Credit Party or any Subsidiary of any Credit Party shall, or there shall occur:(i) default in the payment of any principal of or interest when due on any Indebtedness (other than the Obligations and the “Obligations” as defined in the Term Loan Agreement) in the outstanding principal amount in excess of an amount equal to $250,000 in the aggregate, which default is not cured or waived within any applicable grace or cure period;(ii) default or breach the terms of any note, agreement, indenture or other document evidencing or relating to any Indebtedness (other than the Obligations and the “Obligations” as defined in the Term Loan Agreement) in the outstanding principal amount in excess of an amount equal to $750,000 in the aggregate, which default or breach is not cured or waived within any applicable grace or cure period and the effect of which is to cause, or to permit the holder or holders of any such Indebtedness to cause, such Indebtedness to become due (whether by acceleration or otherwise) prior to the stated maturity thereof;(iii) default or breach the terms of any agreement, contract, document or instrument that is between any Credit Party and Agent or any Lender or any Affiliate of Agent or any Lender (other than the Loan Documents) beyond all applicable grace or cure periods;(iv) upon written notice from Agent, any default or breach in the performance, observance or fulfilment of any provision contained in any Material Contract and such default or breach continues beyond all applicable grace or cure period and permits the other party thereto to terminate such Material Contract or otherwise reduce or limit any material amounts owed by such other party thereunder;(v) an Event of Default (as defined in the Subordinated Notes); or(vi) an “Event of Default” (as defined in the Term Loan Agreement).(g) any of the following shall occur:(i) A Credit Party or any Subsidiary of a Credit Party is unable to or admits inability to pay its debts as they fall due or is deemed to or declared to be unable to pay its debts under applicable law, suspends or threatens to suspend making payments on any of its debts other than as a result of a bona fide dispute being contested in good faith or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
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(ii) The value of the assets of any Credit Party or any Subsidiary of a Credit Party is less than its liabilities (taking into account contingent and prospective liabilities).(iii) A moratorium is declared in respect of any indebtedness of any Credit Party or any Subsidiary of a Credit Party. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.(h) Any corporate action, legal proceedings or other procedure or step is taken in relation to:(i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Credit Party or Subsidiary of a Credit Party other than a solvent liquidation or reorganization of any Subsidiary of a Credit Party which is not a Credit Party;(ii) a composition, compromise, assignment or arrangement with any creditor of any Credit Party or any Subsidiary of a Credit Party;(iii) the appointment of a liquidator (other than in respect of a solvent liquidation of a Subsidiary of a Credit Party which is not a Credit Party), receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any Credit Party or any Subsidiary of a Credit Party or any of its assets,or any analogous procedure or step is taken in any jurisdiction.
This clause shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement or, if earlier, the date on which it is advertised;
(i) any Change of Control or any Material Adverse Effect occurs;(j) Agent or any Lender receives any evidence that any Credit Party has directly or indirectly been engaged in any type of activity which, in Agent’s Permitted Discretion, would reasonably be expected to result in forfeiture of any material portion of Collateral to any Governmental Authority, which shall have continued unremedied for a period of twenty (20) calendar days after written notice from Agent;(k) uninsured damage to, or uninsured loss, theft or destruction of, any portion of the Collateral occurs that exceeds an amount equal to $250,000 in the aggregate;(l) (i) any Credit Party is criminally indicted or convicted (A) of a felony or (B) under any law that would reasonably be expected to lead to forfeiture of any material portion of Collateral, or (ii) any director or senior officer of any Credit Party is convicted (A) of a felony for fraud or dishonesty in connection with the Business or (B) under any law that would reasonably be expected to lead to forfeiture of any material portion of Collateral;
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(m) the issuance of any process for levy, attachment or garnishment or execution upon or any judgment against any Credit Party or any of its material Property or against any of the Collateral which has an aggregate fair market value in excess of an amount equal to $175,000 individually or $350,000 in the aggregate, in any case which is not satisfied, stayed, vacated, dismissed or discharged within thirty (30) calendar days of being issued or executed;(n) (i) the subordination provisions of the Seller Subordination Agreement and/or the subordination provisions contained in or otherwise pertaining to any agreement or instrument governing any Subordinated Debt shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or (ii) any Person shall raise a non-frivolous claim in court contesting in any manner the validity or enforceability thereof, (iii) any Person shall take any action in violation thereof or fail to take any action required by the terms thereof that would reasonably be expected to have an adverse effect on the rights and remedies of Agent or Lenders, or (iv) the Obligations, for any reason shall not have the priority contemplated by this Agreement, the Seller Subordination Agreement or such subordination provisions;(o) an “Event of Default” under any other Loan Document occurs (to the extent, with respect to any such other Loan Document, not otherwise constituting an Event of Default hereunder);(p) any Credit Party is enjoined, restrained or in any way prevented by the order of any court or other Governmental Authority from conducting all or any material part of its business for more than fifteen (15) calendar days which is reasonably likely to be, have or result in a Material Adverse Effect;(q) if the “Shelf Registration Statement” (as defined in the Certificate of Designation of Evolving System’s Series B Convertible Preferred Stock (“Certificate of Designation”)) to be prepared and filed by the Corporation (as defined in the Certificate of Designation) in accordance with the terms and conditions of Section 2.3 of the Investor Rights Agreement (as defined in the Certificate of Designation) by and among the Corporation and the holders of the Series B Preferred Stock dated as of the Series B Original Issue Date (as defined in the Certificate of Designation) (i) is not declared effective by the SEC as contemplated by Section 2.3 or (ii) if declared effective, is not kept continuously effective as contemplated by Section 2.4 of the Investor Rights Agreement, or any other event occurs which with the passage of time and/or giving of notice would grant a holder of Evolving System’s preferred stock the rights described in section 5 of the Certificate of Designation;(r) The occurrence of a “Liquidation” as defined in the Certificate of Designation or any other event which with the passage of time and/or giving of notice would give rise to a “Liquidation” to which Agent has not previously expressly consented in writing;If an Event of Default occurs and is continuing, notwithstanding any other provision of any Loan Document, (I) Agent may (and at the request of Requisite Lenders, shall), by notice to Borrower (i) terminate Lenders’ Commitments and obligations hereunder, whereupon the same shall immediately terminate, and (ii) declare all or any of the Loans and/or any Notes, all interest thereon and all other Obligations to be due and payable immediately (provided, that in the case
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of any Event of Default under Article VIII(g) , (h) , (q), or (r) all of the foregoing automatically and without any act by Agent or any Lender shall be due and payable immediately and Lenders’ Commitments and obligations hereunder shall immediately terminate; in each case without presentment, demand, protest or notice of any kind, all of which hereby are expressly waived by the Credit Parties), and (II) without limiting any of the other rights and/or remedies of Agent and Lenders, no action permitted to be taken under Article VII hereof may be taken to the extent such action is expressly prohibited during the existence of an Event of Default.
IX. RIGHTS AND REMEDIES AFTER DEFAULT9.1 Rights and Remedies(a) In addition to the acceleration and other provisions set forth in Article VIII , upon the occurrence and during the continuation of an Event of Default, Agent shall have the right to (and at the request of Requisite Lenders, shall) exercise any and all rights and remedies provided for in any Loan Document or any Term Loan Document, at law or in equity, including, without limitation, the right to the extent permitted by applicable law, to (i) apply any Property of any Credit Party held by Agent, for the benefit of the Lender Parties, or any Lender to reduce the Obligations, (ii) foreclose the Liens created under the Loan Documents or the Term Loan Documents, (iii) enforce, realize upon, take possession of and/or sell or otherwise transfer any Collateral or securities pledged, with or without judicial process, (iv) exercise all rights and powers with respect to the Collateral as any Credit Party might exercise, (v) collect and send notices regarding the Collateral, with or without judicial process, (vi) by its own means or with judicial assistance, enter any premises at which Collateral and/or pledged securities are located, or render any of the foregoing unusable or dispose of the Collateral and/or pledged securities on such premises without any liability for rent, storage, utilities, or other sums, and no Credit Party shall resist or interfere with such action, (vii) at Credit Parties’ expense, require that all or any part of the Collateral be assembled and made available to Agent at any place where the Credit Parties regularly maintain inventory or Property designated by Agent in its Permitted Discretion, (viii) reduce or otherwise change the Facility Cap, Availability, Aggregate Borrowing Availability and/or any component of the foregoing and/or (ix) relinquish or abandon any Collateral or securities pledged or any Lien thereon. Notwithstanding any provision of any Loan Document, Agent, in its Permitted Discretion, shall have the right, at any time that any Credit Party fails to do so, and from time to time, without prior notice, to: (i) obtain insurance covering any of the Collateral to the extent required hereunder; (ii) pay for the performance of any of the Obligations; (iii) discharge taxes, levies and/or Liens on any of the Collateral that are in violation of any Loan Document; and (iv) pay for the maintenance, repair and/or preservation of the Collateral. Such expenses and advances shall be added to the Obligations until reimbursed to Agent and shall be secured by the Collateral and payable on demand, and such payments by Agent shall not be construed as a waiver by Agent or Lenders of any Event of Default or any other rights or remedies of Agent and Lenders. Notwithstanding anything to the contrary in this Agreement, neither the Agent nor any Lender shall have any right or authority to take possession of and/or sell or otherwise transfer any Collateral pledged by the Borrower and UK Guarantor under the Revolving Loan Documents for the benefit of any Lender under the Term Loan Documents or the payment of any amounts under the Subordinated Notes, or in repayment or
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satisfaction of any amount owing by any of the Credit Parties under and as defined in the Term Loan Documents.(b) The Credit Parties jointly and severally agree that notice received by any of them at least ten (10) calendar days before the time of any intended public sale, or the time after which any private sale or other disposition of Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Agent without prior notice to any Credit Party. At any sale or disposition of Collateral or securities pledged, Agent may (to the extent permitted by applicable law) purchase all or any part thereof free from any right of redemption by the Credit Parties, which right hereby is waived and released. The Credit Parties jointly and severally covenant and agree not to, and not to permit or cause any of their Subsidiaries to, interfere with or impose any obstacle to Agent’s exercise of its rights and remedies with respect to the Collateral. In dealing with or disposing of the Collateral or any part thereof, Agent and Lenders shall not be required to give priority or preference to any item of Collateral or otherwise to marshal assets or to take possession or sell any Collateral with judicial process.(c) Each Credit Party hereby grants to Agent, for the benefit of the Lender Parties, after the occurrence and during the continuance of an Event of Default, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Credit Party) to use, assign, license or sublicense any Intellectual Property, (unless such use, assignment, license or sublicense is expressly prohibited under a license agreement and would result in a breach under such agreement for which such agreement would reasonably be expected to be terminated by such licensor) and now owned or hereafter acquired by such Credit Party, and wherever the same may be located, including in such license reasonable access as to all media in which any of the licensed items may be recorded or stored and to all computer programs and used for the compilation or printout thereof. All proceeds received by Agent or Lenders in connection with such license shall be used by Agent or Lenders to satisfy the Obligations.(d) In addition to the acceleration and other provisions set forth in Article VIII , upon the occurrence and during the continuation of an Event of Default, each Credit Party shall take any action that Agent, for the benefit of itself and the Lenders, may request in order to enable Agent to obtain and enjoy the full rights and benefits granted to Agent hereunder.9.2 Application of ProceedsIn addition to any other rights and remedies Agent and Lenders have under the Loan Documents or the Term Loan Documents, the UCC, at law or in equity, all payments received after the occurrence and during the continuation of any Event of Default, and all proceeds collected or received from collecting, holding, managing, renting, selling or otherwise disposing of all or any part of the Collateral or any proceeds thereof upon exercise of remedies hereunder upon the occurrence and during the continuation of an Event of Default, shall be applied in the following order of priority:
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(i) first , to the payment of all costs and expenses of such collection, holding, managing, renting, selling or disposition, and of conducting the Credit Parties’ Businesses and of maintenance, repairs, replacements, alterations, additions and improvements of or to the Collateral, and to the payment of all sums which Agent or Lenders may be required or may elect to pay, if any, for taxes, assessments, insurance and other charges upon the Collateral or any part thereof, and all other payments that Agent or Lenders may be required or authorized to make under any provision of the Loan Documents (including, without limitation, in each such case, in-house documentation and diligence fees and legal expenses, search, audit, recording, professional and filing fees and expenses and reasonable attorneys’ fees and all expenses, liabilities and advances made or incurred in connection therewith);(ii) second , to payment of all accrued unpaid interest on the Obligations and fees owed to the Agent and Lenders;(iii) third , to payment of principal of the Obligations;(iv) fourth , to payment of any other amounts owing constituting Obligations; and(v) fifth , any surplus then remaining to the Credit Parties, unless otherwise provided by law or directed by a court of competent jurisdiction;provided that the Credit Parties shall be liable for any deficiency if such proceeds are insufficient to satisfy all of the Obligations or any of the other items referred to in this Section. In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category; and (y) each of the Lenders shall receive an amount equal to its pro rata share of amounts available to be applied pursuant to clauses (i), (ii), (iii) and (iv) above.9.3 Rights to Appoint ReceiverWithout limiting any other rights, options and remedies Agent and Lenders have under the Loan Documents or the Term Loan Documents, the UCC, at law or in equity, upon the occurrence and during the continuation of an Event of Default, Agent shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction in any action taken by Agent to enforce its and Lenders’ rights and remedies in order to manage, protect and preserve the Collateral, to sell or dispose of the Collateral and continue the operation of the Businesses of the Credit Parties and to collect all revenues and profits thereof and apply the same to the payment of all expenses and other charges of such receivership including the compensation of the receiver and to the payments as aforesaid until a sale or other disposition of such Collateral shall be finally made and consummated. To the extent not prohibited by applicable law, each Credit Party hereby irrevocably consents to, and waives any right to object to or otherwise contest, the appointment of, a receiver as provided above.
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9.4 Rights and Remedies not ExclusiveAs among the Lender Parties on one hand and the Credit Parties on the other hand, Agent and Lenders shall have the right in their sole discretion to determine which rights, Liens and/or remedies Agent and/or Lenders may at any time pursue, relinquish, subordinate or modify, and such determination shall not in any way modify or affect any of Agent’s or Lenders’ rights, Liens or remedies under any Loan Document, Term Loan Documents applicable law or equity. The enumeration of any rights and remedies in any Loan Document, or any Term Loan Document, is not intended to be exhaustive, and all rights and remedies of Agent and the Lenders described in any Loan Document and the Term Loan Documents are cumulative and are not alternative to or exclusive of any other rights or remedies which Agent and Lenders otherwise may have, subject to the limitation contained in the last sentence of Section 9.1(a) . The partial or complete exercise of any right or remedy shall not preclude any other further exercise of such or any other right or remedy.
X. WAIVERS10.1 Certain WaiversExcept as expressly provided for herein or in any other Loan Document, each Credit Party hereby waives set-off, counterclaim, demand, presentment, protest, all defenses with respect to any and all instruments and all notices and demands of any description, and the | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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