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 Loan owing or payable to such Lender;

(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), the Loan shall bear interest on the outstanding principal amount thereof from the date made at a rate per annum equal to (i) the greater of (A) 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 the 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 the Loan pursuant to Sections 2.4 and 2.5.

(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 Agent to 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 any notice from 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 Loan, (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.

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2.4          Voluntary Prepayments

(a)           Subject to the terms of this Section 2.4 and Section 3.2, Borrower may prepay to Agent, for the ratable benefit of the applicable Lenders, the outstanding principal amount of the Loan, in whole or in part, at any time or from time to time.

(b)           If Borrower elects to make any prepayment of the Loan pursuant to this Section 2.4, Borrower Funds Administrator shall give irrevocable notice of such prepayment to Agent not less than three (3) Business Days prior to the date such prepayment is to be made, specifying (i) the date on which such prepayment is to be made, (ii) the amount of such prepayment and (iii) the amount of the Prepayment Premium, if any, and accrued interest applicable to such prepayment.  Such notice shall be accompanied by a certificate of a Responsible Officer of Borrower Funds Administrator on behalf of Borrower Funds Administrator stating that such payment is being made in compliance with this Section 2.4.  Notice of prepayment having been so given, the aggregate principal amount of the Loan so specified to be prepaid, together with accrued interest thereon and the applicable Prepayment Premium, shall be due and payable on the prepayment date set forth in such notice.

(c)           Any voluntary partial prepayment with respect to the Loan shall be applied in the following order of priority to the payment of:  (i) first, to all then unpaid fees and expenses of Agent under the Loan Documents, (ii) second, to all then unpaid fees and expenses of Lenders under the Loan Documents, including any Prepayment Premium, (iii) 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; (iv) fourth to accrued and unpaid interest on the portion of the principal balance of the Loan being prepaid; and (v) fifth to the principal balance of the Loan, which shall be applied to the scheduled installments thereof in inverse order of maturities.

(d)           All prepayments made pursuant to this Section 2.4 shall be designated as a prepayment pursuant to this Section 2.4 on the applicable wire.  The amount of any partial prepayment of the principal balance of the Loan shall not be less than $100,000 or, if in excess thereof, in integral multiples of $100,000 in excess thereof.

2.5          Mandatory Payments and Prepayments

(a)           The principal amount of the Loan shall be paid in installments on the dates and in the respective amounts set forth below:

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(b)           The then remaining unpaid principal amount of the Loan and all other Obligations under or in respect of the Loan shall be due and payable in full, if not earlier in accordance with this Agreement, on the Maturity Date.

(c)           If a Change of Control occurs that has not been consented to in writing by Agent prior to consummation thereof, or any Credit Party or any Subsidiary of any Credit Party (other than the Revolving Borrower and its Subsidiaries), 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 $100,000; or

(iv)       incurs any Indebtedness other than Permitted Indebtedness.

then Borrower shall prepay the Loan 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 Section 2.5(e); 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

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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 held by Agent in a cash collateral account pending such reinvestment.

(d)           On the day of the delivery to Agent of Borrower’s annual audited financial statements in accordance with the terms of this Agreement, but in any event no later than the ninetieth (90^th) day after the end of each fiscal year of Borrower (commencing with the fiscal year of Borrower ending December 31, 2006), Borrower shall furnish to Agent a written calculation of Excess Cash Flow for such fiscal year and deliver to Agent, for distribution to Lenders, an amount equal to fifty percent (50%) of such Excess Cash Flow, for application to the Loan and the other Obligations in accordance with Section 2.5(e).

(e)           All prepayments pursuant to Sections 2.5(c), and 2.5(d) shall be applied in the following order of priority: (i) first, to all then unpaid fees and expenses of Agent under the Loan Documents, (ii) second, to all then unpaid fees and expenses of Lenders under the Loan Documents, including any Prepayment Premium, (iii) 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; (iv) fourth to accrued and unpaid interest on the portion of the principal balance of the Loan being prepaid or required to be prepaid; and (v) fifth to the principal balance of the Loan, which shall be applied to the scheduled installments thereof in inverse order of maturities.

2.6          Promise to Pay; Manner of Payment.

Borrower absolutely and unconditionally promises to pay, when due and payable pursuant hereto, principal, interest and all other amounts and Obligations payable hereunder and under any other Loan Document, without any right of rescission and without any deduction whatsoever, including any deduction for set-off, recoupment or counterclaim, notwithstanding any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any property or improvements.  Any payments made by the Credit Parties shall be made by wire transfer on the date when due, without offset, deduction or counterclaim, in Dollars, 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 2:00 p.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.

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2.7          Payments by Agent

Should any Obligation required to be paid under any Loan Document remain unpaid beyond any applicable cure period, such Obligation may be paid by Agent, on behalf of Lenders.  Any sums expended or amounts paid by Agent and/or Lenders as a result of any Credit Party’s failure to pay, perform or comply with any Loan Document or any of the Obligations may be charged to Borrower’s account and added to the Obligations.

2.8          Computation of Interest and Fees; Lawful Limits

All interest and fees owing from time to time under the Loan Documents shall be computed on the basis of a year of 360 days and for the actual number of days elapsed in each calculation period, as applicable.  In no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges paid or agreed to be paid to Agent, for the benefit of Lenders, or Lenders for the use, forbearance or detention of money hereunder exceed the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  If, due to any circumstance whatsoever, fulfillment 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          Reallocation of Commitments

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

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III.           FEES

3.1          Commitment Fee

On the Closing Date, Borrower shall pay to Agent, for the ratable benefit of Lenders, a nonrefundable commitment fee equal to One Hundred Twenty Seven Thousand Five Hundred Dollars ($127,500), 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          Prepayment Premium.

If the Obligations are accelerated as a result of either (i) an Event of Default under Article VIII(a), (g)(ii) – (g)(v) or (h) or (ii) an Event of Default resulting from violation of any of the financial covenants set forth in Exhibit B-1 hereto or Borrower otherwise prepays, or is required to prepay, the Loan in full or in part (other than as a result of any mandatory prepayment under Sections 2.5(c)(iii) or 2.5(d)), then, on the effective date of such acceleration or prepayment, Borrower shall pay to Agent, for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest and other Obligations owing pursuant to the terms of this Agreement and any other Loan Document), as yield maintenance for the loss of bargain and not as a penalty, an amount equal to the Prepayment Premium (prior to giving effect to any payment of Obligations as a result thereof).  For purposes of determining the Prepayment Premium, if any, due upon acceleration of the Obligations, such acceleration shall be deemed to have occurred on the date the Event of Default giving rise to such acceleration first occurred.

IV.           CONDITIONS PRECEDENT

4.1          Conditions to Funding of the Loan and the Closing

The obligations of Agent and Lenders to consummate the transactions contemplated herein and to fund the Loan in each case are 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.

V.            REPRESENTATIONS AND WARRANTIES

Each Credit Party, jointly and severally, represents and warrants to the Lender Parties as follows as of the Closing Date and except as set forth in the disclosure schedule corresponding to such Section:

5.1          Organization and Authority

Each Credit Party, and each Subsidiary of each Credit Party, is a corporation, partnership or limited liability company, or other form of entity, as the case may be, duly organized or formed, validly existing and in good standing (to the extent such concept applies) under the laws of its jurisdiction of organization or formation.  Each Credit Party, and each Subsidiary of each Credit Party, (a) has all requisite corporate, partnership, limited liability company or other type

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of entity, 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 Revolving Loan Documents and the Related Documents, (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 type of entity, as the case may be, power and authority (i) to execute, deliver and perform the Loan Documents, the Revolving 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 Revolving Loan Documents and the Related Documents and (iv) to grant the Liens pursuant to the Security Documents to which it is a party.

5.2          Loan Documents, Revolving Loan Documents and Related Documents

The execution, delivery and performance by each Credit Party of the Loan Documents, the Revolving 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 form of entity, as the case may be, action of such Credit Party, and such Loan Documents, Revolving 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 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 Revolving 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, as defined herein, 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 Revolving 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).

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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 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) as of the Closing Date.  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 nonassessable and each Credit Party listed on Schedule 5.3 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 Permitted Liens.  Schedule 5.3 lists the directors and managers 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 securities and (d) is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire, repay, redeem or retire any of its equity securities or other convertible rights or options or debt securities.  No Credit Party has any stock appreciation rights, phantom stock plan or similar rights or obligations outstanding.

5.4          Properties

Each Credit Party is the sole owner and has good, valid and marketable title to, or a valid leasehold interest in, license of, or right to use, all of its material Properties, whether personal or real, in each instance, necessary or used in the Ordinary Course of Business, free and clear of all Liens other than Permitted Liens.  All material tangible personal Property of each Credit Party is in good repair, working order and condition (normal wear and tear excepted) and is suitable and adequate for the uses for which they are being used or are intended.

5.5          Other Agreements

Other than as listed in Schedule 5.5, no Credit Party is (a) a party to any judgment, order or decree or any agreement, document or instrument, or subject to any restriction, which adversely affects its ability to grant a security interest in the Collateral, take actions necessary to perfect the Lender’s Liens, execute and deliver, or perform its payment, guaranty, indemnification, release, waiver, and any material obligations under, any Loan Document, Revolving Loan Document or Related Document to which it is a party or to pay the Obligations,

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