Document:

Exhibit 10.3

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Security Agreement”),
dated as of July 25, 2007, is made by TUCOWS INC., a Pennsylvania corporation (the
“Grantor”), in favor of BANK OF MONTREAL, as lender (the “Secured
Party”).

W  I  T  N  E  S  S  E  T  H:

WHEREAS, Tucows.com Co., a company organized under the
laws of Nova Scotia (the “Borrower”), the Secured Party and the Other
Loan Parties (defined below) executed that certain Bank of Montreal Loan
Authorization Agreement, dated as of the date hereof (as amended, supplemented,
amended and restated or otherwise modified from time to time, the “BMO Loan
Agreement”);

WHEREAS, in connection with the execution of the BMO
Loan Agreement, the Grantor executed that certain Guaranty, dated as of the
date hereof (as amended, supplemented, amended and restated or otherwise
modified from time to time, the “Guaranty”), guaranteeing in full the
obligations of the Borrower under the BMO Loan Agreement;

WHEREAS, the Borrower is a subsidiary of Grantor, and
the Grantor provides the Borrower with financial, management, administrative
support which enables each Borrower to conduct its business in an orderly and
efficient manner in the ordinary course;

WHEREAS, the Grantor will benefit, directly or
indirectly from credit and other financial accommodations extended by the
Secured Party to the Borrower;

WHEREAS, the Grantor has duly authorized the
execution, delivery and performance of this Security Agreement;

NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and in order to
induce the Secured Party to enter into the BMO Loan Agreement with the
Borrower, the Grantor agrees with the Secured Party as follows:

ARTICLE I

DEFINITIONS

Section 1.1.                                   Certain
Terms.  The following terms (whether
or not underscored) when used in this Security Agreement, including its
preamble and recitals, shall have the following meanings (such definitions to
be equally applicable to the singular and plural forms thereof):

“Accounts” shall have the meaning assigned to
it in Section 9-102(a)(2) of the U.C.C.

“Secured Party” is defined in the preamble.

“Collateral” is defined in Section 2.1.

“Equipment” is defined in clause (a) of Section
2.1.

“Filings” shall mean the filing or recording of
the Financing Statements relating to the Collateral existing on the Effective
Date, in the places specified in Item A of Schedule 1 hereto.

“Financing Statements” shall mean the financing
statements delivered to the Secured Party by the Grantor on the date hereof for
filing in the jurisdictions listed in Item A of Schedule I
hereto.

“General Intangibles” shall have the meaning
assigned to it in Section 9-102(a)(42) of the U.C.C.

“Goods” shall have the meaning assigned to it
in Section 9-102(a)(44) of the U.C.C.

“Grantor” is defined in the preamble.

“Inventory” is defined in clause (a) of Section
2.1.

“Investment Property” shall have the meaning
assigned to it in Section 9-102(a)(49) of the U.C.C.

“Lien” means, any security interest, mortgage,
pledge, hypothecation, assignment, deposit, arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in property, or any filing
or recording of any instrument or document in respect of the foregoing, to
secure payment of a debt or performance of an obligation or other priority or
preferential arrangement of any kind or nature whatsoever.

“Other Loan Parties” means Tucows (Delaware)
Inc., a Delaware corporation, Innerwise, Inc., an Illinois corporation,
Mailbank Nova Scotia Co., a company organized under the laws of Nova Scotia and
Tucows Domain Holdings Co., a company organized under the laws of Nova Scotia.

“Receivables” is defined in clause (b)
of Section 2.1.

“Related Contracts” is defined in clause (b)
of Section 2.1.

“Security Agreement” is defined in the preamble.

“Secured Party” is defined in the preamble.

“Specified Assets” shall mean the following
property and assets of the Grantor: (1) Equipment constituting fixtures; (2) uncertificated
securities; (3) Collateral for which the perfection of Liens thereon requires
filings in or other actions under the laws of

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jurisdictions outside the
United States of America, any State, territory or dependency thereof or the
District of Columbia; (4) Receivables or Related Contracts on which the United
States of America or any department, agency or instrumentality thereof is the
obligor, and property or assets subject to any rights reserved in favor of the
United States government as required under law; and (5) goods included in
Collateral received by any Person for “sale or return” within the meaning of
Section 2-326 of the Uniform Commercial Code of the applicable jurisdiction, to
the extent of claims of creditors of such Person.

“Subsequent Filings”:  any filings after the date hereof in any
jurisdiction as may be necessary under any requirement of law to perfect a Lien
on the Collateral in favor of the Secured Party.

“U.C.C.” means the Uniform Commercial Code as
in effect in the State of Delaware, as it may be amended from time to time.

Section 1.2.                                   U.C.C.
Definitions.  Unless otherwise
defined herein or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.

ARTICLE II

SECURITY INTEREST

Section 2.1.                                   Grant
of Security.  The Grantor hereby
pledges to the Secured Party, and hereby grants to the Secured Party, all of
the Grantor’s right, title and interest in and to all personal and real
property of the Grantor of whatever type or description, wherever located,
whether now or hereafter existing or acquired by the Grantor, including,
without limitation, the following (the “Collateral”):

(a)                                  all
Goods, including (i) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
(any and all of the foregoing being the “Equipment”) and (ii) all
inventory all of its forms of the Grantor, wherever located, including

(i)                                     all
raw materials and work in process therefor, finished goods thereof, and
materials used or consumed in the manufacture or production thereof,

(ii)                                  all
goods in which the Grantor has an interest in mass or a joint or other interest
or right of any kind (including goods in which the Grantor has an interest or
right as consignee), and

(iii)                               all
goods which are returned to or repossessed by the Grantor,

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and all accessions thereto, products thereof and documents therefor
(any and all such inventory, materials, goods, accessions, products and
documents being the “Inventory”);

(b)                                 all
Accounts (including health-care-insurance receivables), contracts, contract
rights, chattel paper (whether tangible or electronic), documents, instruments
and general intangibles (including payment intangibles and software), rental
agreement, or any part thereof, including, but not limited to Grantor’s right
to receive, either directly or indirectly, from any person, any rents or other
payments due and payable under such agreements) of the Grantor, whether or not
arising out of or in connection with the sale or lease of goods or the
rendering of services, and all rights of the Grantor now or hereafter existing
in and to all security agreements, guaranties, leases and other contracts
securing or otherwise relating to any such accounts, contracts, contract
rights, chattel paper, documents, instruments and general intangibles (any and
all such accounts, contracts, contract rights, chattel paper, documents,
instruments and general intangibles being the “Receivables”, and any and
all such security agreements, guaranties, leases and other contracts being the “Related
Contracts”);

(c)                                  all
books and records relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this Section 2.1;

(d)                                 all
General Intangibles;

(e)                                  all
Investment Property; and

(f)                                    all
products, rents, issues, profits, returns, income and proceeds of and from any
and all of the foregoing Collateral (including proceeds which constitute
property of the types described in clauses (a), (b), (c), (d)
and (e).

Notwithstanding anything herein to the contrary, the
Collateral shall exclude (i) the Grantor’s rights under contracts and
agreements which by their terms prohibit the granting of a security interest
therein or assignment thereof (except to the extent such prohibitions are
ineffective under Sections 9-406, 9-407, 9-408 and 9-409 of the U.C.C. or other
applicable law) and (ii) Equipment which is the subject of a capitalized lease
or purchase money financing.

Section 2.2.                                   Security
for Obligations.  The security
interests granted herein secure the payment of all obligations now or hereafter
existing under the BMO Loan Agreement (the “Obligations”), whether for
principal, interest, reimbursement obligations with respect to letters of
credit, costs, fees, expenses, indemnities or otherwise.

Section 2.3.                                   Continuing
Security Interest; Transfer of Loan. 
This Security Agreement shall create a security interest in the
Collateral and shall:

(a)                                  remain
in full force and effect until the payment in full of all Obligations (other
than contingent indemnification obligations);

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(b)                                 be
binding upon the Grantor, its successors, transferees and assigns; and

(c)                                  inure,
together with the rights and remedies of the Secured Party hereunder, to the
benefit of the Secured Party.

Without limiting the generality of the foregoing clause
(c), to the extent permitted under the terms of the BMO Loan Agreement, the
Secured Party may assign or otherwise transfer (in whole or in part) its rights
in the BMO Loan Agreement to any other Person or entity, and such other Person
or entity shall thereupon become vested with all the rights and benefits in
respect thereof granted to Secured Party under this Security Agreement.  Upon (i) the sale, transfer or other
disposition of Collateral in the ordinary course of business (other than a sale
of all or substantially all of the Collateral) or (ii) the payment in full of
all Obligations, the security interest granted herein shall automatically
terminate with respect to (x) such Collateral (in the case of clause (i)) or
(y) all Collateral (in the case of clause (ii)).  Upon any such termination, the Secured Party
will, at the Grantor’s sole expense, deliver any Collateral (or portion
thereof) to the extent held by the Secured Party hereunder and to the extent
the termination relates to such Collateral, and at the Grantor’s sole expense
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence termination of the security interest hereunder
relating to such portion or all of the Collateral, as the case may be.

Section 2.4.                                   Grantor
Remains Liable.  Anything herein to
the contrary notwithstanding:

(a)                                  the
Grantor shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein, and shall perform all of its duties
and obligations under such contracts and agreements to the same extent as if
this Security Agreement had not been executed, unless (i) such performance is
excused by breach of the other party or parties thereto or (ii) such failure to
perform would not otherwise constitute an Event of Default;

(b)                                 the
exercise by the Secured Party of any of its rights hereunder shall not release
the Grantor from any of its duties or obligations under any such contracts or
agreements included in the Collateral;

(c)                                  the
Secured Party shall have no obligation or liability under any such contracts or
agreements included in the Collateral by reason of this Security Agreement, nor
shall the Secured Party be obligated to perform any of the obligations or
duties of the Grantor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder, nor shall the Secured Party have any
obligation to preserve rights against prior parties with respect to any part of
the Collateral; and

(d)                                 except
for reasonable care of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Secured Party shall have no duty
as to any Collateral or responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or

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other matters
relative to any Collateral, whether or not the Secured Party has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral
or (c) exercising any rights to close out any option or exercising any put option
relative to any Collateral, whether or not the Secured Party has or is deemed
to have knowledge of it and regardless of any expiration or termination date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1.                                   Representations
and Warranties.  The Grantor
represents and warrants unto each Lender Party as set forth in this Article.

Section 3.1.1.                          Location
of Collateral, etc.  The place(s) of
business and chief executive office of the Grantor and the office(s) where the
Grantor keeps its records concerning the Receivables, are located at the
addresses as set forth in Item A of Schedule I hereto, and at
such other locations as are notified to the Secured Party pursuant to clause
(a) of Section 4.1.2.

Section 3.1.2.                          Validity,
etc.

(a)                                  This
Security Agreement is effective to create, as collateral security for the
Obligations of the Grantor, valid and enforceable Liens on the Collateral in
favor of the Secured Party, except as enforceability may be affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditor’s rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.

(b)                                 Except
with regard to Liens (if any) on Specified Assets, upon the completion of the
Filings (with respect to Collateral existing on the Effective Date) and
Subsequent Filings (with respect to Collateral acquired following the Effective
Date for which the Filings are not effective to perfect the Lien on such
after-acquired Collateral), the Liens created pursuant to this Security
Agreement will constitute valid Liens on and (to the extent provided herein)
perfected security interests in the Collateral in favor of the Secured Party,
and will be prior to all other Liens of all other Persons, except (i) to the
extent that the recording of an assignment or other transfer of title to the
Secured Party, or the recording of other applicable documents in the United
States Patent and Trademark Office or United States Copyright Office may be
necessary for perfection or enforceability, and (ii) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair
dealing.  Notwithstanding the foregoing,
the representation set forth above shall be deemed true and correct for all
purposes so long as the Grantor has

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complied with
its covenants set forth under Section 4.1.1, clause (a) of Section
4.1.2, and Section 4.1.4 of this Security Agreement, including the
delivery to the Secured Party of executed financing statements for Subsequent
Filings, whether or not the Secured Party has caused such financing statements
to be filed in the applicable filing offices. 
To the extent permitted at any time by the U.C.C., the Grantor hereby irrevocably
authorizes the Secured Party to supplement this Security Agreement with a more
itemized list of Collateral and complete and file on behalf of the Grantor
U.C.C. Financing Statements or similar documents necessary in the good faith
judgment of the Secured Party to perfect the security interests purported to be
created hereby.

ARTICLE IV

COVENANTS

Section 4.1.                                   Certain
Covenants.  The Grantor covenants and
agrees that, so long as any portion of the Obligations shall remain unpaid, the
Grantor will perform the obligations set forth in this Article IV.

Section 4.1.1.                          As
to Equipment and Inventory.  The
Grantor hereby agrees that it shall keep all Equipment and Inventory (except
for the obsolete Equipment and Inventory sold or otherwise disposed of, Inventory
in transit, Equipment sent to third parties for repair and mobile items) at the
places therefor specified in Section 3.1.1 or at such other places in a
jurisdiction where all representations and warranties set forth in Article
III (including Section 3.1.3) shall be true and correct.

Section 4.1.2.                          As
to Receivables.

(a)                                  The
Grantor shall give the Secured Party a supplement to Schedule I at the
end of each quarter, which shall set forth any changes as of such date to the
information set forth in Section 3.1.l, clause (b) of Section
4.1.2  or Schedule I.  The Grantor shall be entitled to deliver such
a supplement at other times in addition to the times set forth in the preceding
sentence.

(b)                                 The
Grantor shall keep its place(s) of business and chief executive office and the
office(s) where it keeps its records concerning the Receivables located at the
addresses set forth in Item B of Schedule I hereto, and shall not
change its legal name after the date hereof except upon 30 days’ prior written
notice to the Secured Party.

Section 4.1.3.                          Further
Assurances, etc.  The Grantor agrees
that, from time to time at its own expense, the Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that the Secured Party may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby in Collateral located in the United States or to
enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.

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(a)                                  With
respect to the foregoing and the grant of the security interest hereunder, the
Grantor hereby authorizes the Secured Party to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of the Grantor where permitted by
law.  A carbon, photographic or other
reproduction of this Security Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

(b)                                 The
Secured Party may at any time and from time to time file financing statements
and amendments thereto that describe the Collateral as all assets of any
Grantor or words of similar effect and which contain any other information
required by Part 5 of Article 9 of the U.C.C. for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether
such Grantor is an organization, the type of organization and any organization
identification number issued to such Grantor. 
Each Grantor agrees to furnish such information to the Secured Party
promptly upon request therefor.

ARTICLE V

THE SECURED PARTY

Section 5.1.                                   Secured
Party Appointed Attorney-in-Fact. 
The Grantor hereby irrevocably appoints the Secured Party the Grantor’s
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time in the Secured Party’s
discretion following a demand under the BMO Loan Agreement and notice to the
Grantor, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Security Agreement, including, without limitation:

(a)                                  to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral;

(b)                                 to
receive, endorse, and collect any drafts or other instruments, documents in
connection with clause (a) above; and

(c)                                  to
file any claims or take any action or institute any proceedings which the
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Secured Party with respect
to any of the Collateral.

The Grantor hereby acknowledges, consents and agrees
that the power of attorney granted pursuant to this Section is irrevocable and
coupled with an interest; provided, however, that the foregoing
power of attorney shall terminate upon the payment in full of all Obligations.

Section 5.2.                                   Secured
Party May Perform.  If the Grantor
fails to perform any agreement contained herein within 30 days after written
notice from the Secured Party, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of

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the Secured Party incurred in connection therewith shall be payable by
the Grantor pursuant to Section 6.2.

Section 5.3.                                   Secured
Party Has No Duty.  In addition to,
and not in limitation of, Section 2.4, the powers conferred on the
Secured Party hereunder are solely to protect its interest in the Collateral
and shall not impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Secured Party shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.

Section 5.4.                                   Reasonable
Care.  The Secured Party is required
to exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, that the Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as the Grantor reasonably requests in writing at times other than upon a demand
for repayment of all the Obligations, but failure of the Secured Party to
comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care.  In
no event shall the Secured Party have any obligation to preserve rights against
prior parties with respect to any of the Collateral.

ARTICLE VI

REMEDIES

Section 6.1.                                   Certain
Remedies.  If a demand for repayment
of all of the Obligations has been made, and such payment has not been made:

(a)                                  The
Secured Party may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party on default under the U.C.C. (whether or
not the U.C.C. applies to the affected Collateral) and also may:

(i)                                     require
the Grantor to, and the Grantor hereby agrees that it will, at its expense and
upon request of the Secured Party forthwith, assemble all or part of the
Collateral as directed by the Secured Party and make it available to the
Secured Party at a place to be designated by the Secured Party which is
reasonably convenient to both parties; and

(ii)                                  without
notice except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the Secured Party’s
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Secured Party may deem commercially reasonable.  The Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days’ prior notice to the
Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  The Secured

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Party shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given.  The Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned;

(b)                                 All
cash proceeds received by the Secured Party in respect of any sale of,
collection from or other realization upon all or any part of the Collateral
may, in the discretion of the Secured Party, be held by the Secured Party as
collateral for, and/or then or at any time thereafter applied against, all or
any part of the Obligations as follows: 
(i) first, to the reasonable out-of-pocket costs and expenses of the
Secured Party in connection with the retaking, holding, preparing for sale, selling
or other disposition of the Collateral, including, without limitation, all
court costs and the reasonable fees and expenses of its agents and legal
counsel; (ii) second, to the payment in full of the Obligations; and (ii)
third, to the Grantor, or its successors and assigns, or whomever may be
lawfully entitled to receive the same, of any surplus then remaining.

Section 6.2.                                   Indemnity
and Expenses.

(a)                                  The
Grantor agrees to indemnify the Secured Party from and against any and all
claims, losses and liabilities arising out of or resulting from this Security
Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from the Secured
Party’s gross negligence, bad faith or willful misconduct.

(b)                                 The
Grantor will upon demand pay to the Secured Party the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel (but not more than one firm and all local or special expert counsel, if
any, who may be retained by counsel to the Secured Party) and of any experts
and agents, which the Secured Party may incur in connection with:

(i)                                     the
administration of this Security Agreement;

(ii)                                  the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral;

(iii)                               the
exercise or enforcement of any of the rights of the Secured Party hereunder; or

(iv)                              the
failure by the Grantor to perform or observe any of the provisions hereof.

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ARTICLE VII

MISCELLANEOUS
PROVISIONS

Section 7.1.                                   Amendments;
etc.  No amendment to or waiver of
any provision of this Security Agreement nor consent to any departure by the
Grantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Secured Party and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.

Section 7.2.                                   Addresses
for Notices.  All notices and other
communications provided to the Grantor under this Security Agreement shall be
in writing or by facsimile and addressed, delivered or transmitted to the
Grantor at its address or facsimile number as set forth in the BMO Loan
Agreement, or at such other address or facsimile number as may be designated by
the Grantor in a notice to the other parties. 
Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received.  Any notice, if
transmitted by facsimile, shall be deemed given when transmitted.

Section 7.3.                                   Section
Captions.  Section captions used in
this Security Agreement are for convenience of reference only, and shall not
affect the construction of this Security Agreement.

Section 7.4.                                   Severability.  Wherever possible each provision of this Security
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Security
Agreement.

Section 7.5.                                   Governing
Law, Entire Agreement, etc.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE COMMONWEALTH OF
PENNSYLVANIA.  THIS SECURITY AGREEMENT
AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

Section 7.6.                                   Counterparts.  This Security Agreement may be executed by
the parties hereto in any number of counterparts, each of which shall be deemed
an original and all of which shall constitute together but one and the same
agreement.

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IN WITNESS WHEREOF, the Grantor has caused this
Security Agreement to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.

	
  

  	
  TUCOWS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elliot
  Noss

  
	
   

  	
  Name:

  	
   

  	
  Elliot Noss

  
	
   

  	
  Title:

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BANK OF MONTREAL

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neil
  dobbie

  
	
   

  	
  Name:

  	
  Neil Dobbie

  
	
   

  	
  Title:

  	
  Commercial Account Manager

  
								

Schedule I

LocationsExhibit
10.4

FINANCING COMMITMENT

	
  BORROWER:

  	
  TUCOWS.COM CO.

  
	
   

  	
   

  
	
  BANK:

  	
  BMO BANK OF MONTREAL

  
	
   

  	
   

  
	
  AMOUNT:

  	
  $10,000,000.00 Canadian

  
	
   

  	
   

  
	
  LOAN TYPE:

  	
  Committed Non-Revolving, Reducing Facility.

  
	
   

  	
  To be available in Canadian or US Dollar equivalent.
  Canadian Dollar Canadian Dollar Bankers’ Acceptances for terms of up to 12
  months (for Canadian dollar loans) and/or Fixed Rate Term Loan (‘FRTL’), the
  latter of which may be selected for terms of up to 1 year. U.S. Dollar
  Banker’s Acceptances for terms up to 12 months to also be made available
  subject to the prior approval of BMO Treasury.

  
	
   

  	
   

  
	
  LOAN PURPOSE:

  	
  To assist in the acquisition of Innerwise, Inc.
  Anticipated purchase price US$11,400,000.00

  
	
   

  	
   

  
	
   REPAYMENT:

  	
  To be repaid in equal monthly payments plus
  interest. Payments to be amortized over 5 years. Blended payments option to
  be available. All repayments will be made in the same currency as that
  advanced.

  
	
   

  	
   

  
	
  ADDITIONAL

  	
   

  
	
  MANDATORY

  	
   

  
	
  REPAYMENTS:

  	
  Mandatory repayments shall be required as follows: 

  
	
   

  	
   

  
	
   

  	
  A percentage of Annual Excess Cash Flow, based on
  the following schedule, within 120 days of each fiscal year-end based on
  audited year-end financial results:

  
	
   

  	
   

  
	
   

  	
  % of Annual Excess

  	
  Total Funded Debt

  
	
   

  	
  Cash
  Flow

  	
  to EBITDA

  
	
   

  	
   

  	
   

  
	
   

  	
  75%

  	
  > 3.00:1.00

  
	
   

  	
  50%

  	
  <3.00:1.00

  
	
   

  	
   

  	
   

  
	
   

  	
  Annual Excess Cash Flow means
  EBITDA on a consolidated basis less all scheduled principal payments on debt,
  cash taxes paid or payable for that period and cash interest expense.
  Payments to be applied as permanent reduction in inverse order of maturity.
  Cash flow sweep to be capped to $1.0MM in year 1 i.e. as measured on fiscal
  2007 financial results.

  
	
   

  	
   

  
	
  VOLUNTARY

  	
   

  
	
  PREPAYMENTS:

  	
  Upon five written days’ notice, prepayments will be
  permitted on floating rate and fixed rate advances. Prepayments of floating
  rate advances will not be subject to penalty. Prepayments of fixed rate
  advances will be subject to make-whole/ prepayment penalties determined at
  the time of prepayment.

  

 

 

	
  

  	
   

  
	
  REMUNERATION:

  	
  PBMO  Performance pricing will be applied
  annually using the Borrower’s full year’s audited results, and is
  re-evaluated based on each annual audited report thereafter (Bankers’ Acceptances (BA’s)/FRTL Cost of Funds +
  3.25% per annum)

  
	
   

  	
   

  
	
   

  	
   

  	
  Ratio
  of Total

  Funded

  Debt to

  EBITDA

  	
  Prime

  Rate /US Base

  Rate

  	
   

  
	
   

  	
   

  	
  >3.00 

  	
  + 1.25%

  	
   

  
	
   

  	
   

  	
   < 3.00

  	
  + 0.50%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  ANNUAL RENEWAL

  	
   

  
	
  FEE:

  	
  $10,000.00 per year, no
  fee in year 1

  
	
   

  	
   

  
	
  WORK
  FEE:

  	
  As a percentage of the
  committed amount: 10 basis points payable has been paid and considered
  earned.

  
	
   

  	
   

  
	
  APPLICATION
  FEE:

  	
  As a percentage of the
  committed amount: 75 basis points payable at financial close.

  
	
   

  	
   

  
	
  CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
   

  
	
  To Drawdown:

  	
  Those customarily found in loan
  documentation of this nature including, without limitation, the following:

  
	
   

  	
   

  
	
   

  	
  1.

  	
  Provision of final purchase and sale agreement
  relative to the Innerwise transaction. To confirm details as previously
  presented.

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Acceptance
  by the Borrower of a financing commitment from the Bank.

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Confirmation
  of ICANN Accreditation (to be obtained on an annual basis).

  
	
   

  	
   

  	
   

  
	
   

  	
  4.

  	
  Completion
  and registration of all security and loan documentation satisfactory to the
  Bank and its legal counsel.

  
	
   

  	
   

  	
   

  
	
   

  	
  5.

  	
  Appropriate Borrowing and
  Enabling Resolutions.

  
	
   

  	
   

  	
   

  
	
   

  	
  6.

  	
  So
  long as the Borrower is indebted to the Bank, the Borrower shall maintain its
  primary banking accounts solely with the BMO Bank of Montreal and further the
  Bank shall provide, at competitive rates, all auxiliary non-credit and
  treasury banking services to the Borrower (it is acknowledged that the
  Borrower will maintain Foreign Exchange Forward Contracts with HSBC at the
  time of financial close).

  
	
   

  	
   

  	
   

  
	
   

  	
  7.

  	
  Satisfactory
  legal opinions relating to all matters considered relevant by the Bank and
  its counsel, including the due authorization, execution, delivery and
  enforceability of the loan and security documentation by the Borrower.

  
	
   

  	
   

  	
   

  
	
   

  	
  8.

  	
  Nothing
  shall have occurred which would have a material adverse effect on the
  business, operations or properties of the Borrower, on the rights and
  remedies of the Bank, or on the ability of the Borrower to perform its
  obligations to the Bank.

  
	
   

  	
   

  	
   

  
	
   

  	
  9.

  	
  Payment
  of all expenses and fees due hereunder.

  
	
   

  	
   

  	
   

  
						

 

 

	
  

  	
   

  
	
  Reporting

  	
   

  
	
  Requirements:

  	
  Quarterly (within 45 days of quarter end):

  
	
   

  	
   

  
	
   

  	
  Internally prepared quarterly consolidated financial statements of the Borrower, supported
  by Management Discussion and Analysis including variance analysis
  providing explanations for material variances between actual results and
  projections presented to the Bank.  A
  Borrower signed quarterly compliance certificate will confirm all financial
  covenant positions. Certified aged accounts receivable and accounts payable
  lists are to be provided as part of the quarterly reporting package.

  
	
   

  	
   

  
	
   

  	
  Annually (within 120 days of fiscal year end):

  
	
   

  	
   

  
	
   

  	
  Audited annual consolidated financial statements of the Borrower supported by Management
  Discussion and Analysis including variance analysis providing
  explanations for material variances between actual results and projections
  presented to the Bank.

  
	
   

  	
   

  
	
   

  	
  Annual consolidated business plan of the Borrower
  for the next fiscal year, comprising of a minimum of a balance sheet, income
  statement operating budget, cash flow statement, capital and/or lease
  expenditures schedule, tax liabilities,
  and major assumptions utilized to be provided no later than 15 days prior to
  the end of the then current fiscal year.

  
	
   

  	
   

  
	
  Financial Covenants:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  At all times, the Borrower
  will observe and maintain the following financial covenants based on the Borrower’s consolidated financial
  statements (to be calculated on a rolling 4-quarter basis unless otherwise
  indicated).

  
	
   

  	
   

  
	
   

  	
  1.

  	
  Maximum Senior Funded
  Debt to EBITDA: 2.50:1
  at close, to reduce to 2.00:1 by December 31, 2007

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Maximum Total Funded Debt
  to EBITDA: 3.00:1 at
  close, to reduce to 2.50:1 by December 31, 2007.

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Minimum Fixed Charge
  Coverage: 1.20:1.

  
	
   

  	
   

  	
   

  
	
   

  	
  4.

  	
  Maximum Annual Capital
  Expenditures capped at
  $1,500,000 per annum, subject to covenant compliance both before and after
  such expenditures.  Any additional
  amounts will be considered based on the Bank’s satisfactory review of the
  Borrower’s capital expenditure budget, to be submitted annually. It is
  acknowledged that $750,000 will be expended by the borrower during the
  remainder of fiscal 2007.

  

 

 

	
  Definitions:

  	
   

  
	
   

  	
  EBITDA = Earnings  as defined
  in the Company’s consolidated financial statements prepared in accordance
  with Generally Accepted Accounting Principals (GAAP) before cash interest expense
  (i.e. accrued interest gets added back), taxes on earnings, depreciation and
  amortization, but excluding dividend, interest and extraordinary or
  non-recurring other income as set out in the financial statements (such
  latter items to be agreed-upon by BMO).

  
	
   

  	
   

  
	
   

  	
  Senior Funded Debt = the credit facilities hereunder and all
  interest bearing debt not subordinated to the credit facilities
  hereunder.  For greater clarity, Senior
  Funded Debt shall include, but not be limited to capital leases, guarantees
  and PMSI’s but will exclude any settlement risk associated with forward
  contracts.

  
	
   

  	
   

  
	
   

  	
  Total Funded Debt =  Senior
  Funded Debt plus sub-debt (if applicable), but excluding investor sub-debt
  where rights of acceleration are prohibited until full repayment of the
  senior debt hereunder, as set out under an inter-creditor agreement with the
  senior debt lenders hereunder, and will also exclude any settlement risk
  associated with forward contracts.

  
	
   

  	
   

  
	
   

  	
  Fixed Charge Coverage
  Ratio = EBITDA less cash
  taxes paid or  payable in that period
  and unfunded capital expenditures, divided by the aggregate of fixed
  principal repayments and cash interest expenses payable in respect of Total
  Funded Debt.  This calculation is to
  exclude the repayment of the $6,000,000 in unsecured notes associated with
  the Mailbank.com Inc. acquisition due in June 2008, subject to the Bank
  satisfying itself that there is sufficient cash available to effect
  repayment.

  
	
   

  	
   

  
	
  Non-Financial
  Covenants:

  	
   

  
	
   

  	
  Usual,
  including maintenance of insurance; payment of taxes; disposition of major
  assets; compliance with statutes and with environmental standards; Reporting
  Requirements as set out above; notices of default on a timely basis; no
  material judgments; access to books and records; no assumption of additional
  debt or guarantee obligations by the Borrower except for leases and/or
  purchase money security interests entered into with respect to capital
  expenditures to a maximum of the covenant limits hereunder in any consecutive
  12-month period; and no payment of dividends.

  
	
   

  	
   

  
	
   

  	
  So Long as the Borrower is indebted to the Bank, the
  Borrower and/or Corporate Guarantors agree that without the prior written
  consent of the Bank acting reasonably:

  
	
   

  	
   

  
	
   

  	
  Amalgamation and Mergers.  The Borrower and/or
  Corporate Guarantors shall not amalgamate merge or reorganize with any
  corporation without the prior written consent of the Bank, which consent
  shall not be unreasonably withheld.

  

 

 

	
  

  	
  Change of Control.  There shall be no change in control of the
  Borrower and /or Corporate Guarantors without the prior written approval of
  the Bank which shall not be unreasonably withheld.  Notwithstanding the foregoing, changes in
  the ownership of the issued and outstanding shares of the company, as the
  case may be, shall be permitted if such changes do not affect the control
  exercised directly or indirectly on the Borrower and/or Corporate
  Guarantors.  The Borrower shall not buy
  back any of its outstanding shares during the term of the Loan without the
  prior written consent of the Bank, which consent shall not be unreasonably
  withheld.

  
	
   

  	
   

  
	
   

  	
  Assets Subject to Security.  The Borrower and/or Corporate Guarantors
  shall not in any fiscal years, sell, alienate, assign, lease or otherwise
  dispose of any fixed asset, machinery, equipment or immovable property
  subject to the Security unless in the normal course of business;

  
	
   

  	
   

  
	
   

  	
  Corporate Distributions.  The Borrower and/or
  Corporate Guarantors shall not make subrogated loan principal or interest
  payments, dividend payments, principal payments on shareholder advances in
  any fiscal year if, as a result of such distributions the Financial Covenants
  are breached or would be by the making of such distributions which, but for
  the lapse of time or giving notice, or both, would constitute a breach of its
  Financial Covenants contemplated herein.

  
	
   

  	
   

  
	
   

  	
  Negative Pledge.  Except for permitted encumbrances, the
  Borrower and/or Corporate Guarantors shall not create, assume or permit to
  exist any, security interest, charge or other encumbrances on any of its
  assets, revenues and on its properties ranking or purporting to rank prior to
  or pari passu with or after the
  Security;

  
	
   

  	
   

  
	
   

  	
  Permitted
  Debt.  The Borrower and/or Corporate Guarantors
  shall not incur any additional debt other than the Bank’s credit facilities.
  Any renewal, extension or refinancing of the debts mentioned in this
  paragraph will be permitted provided that the principal amount of such Debt
  shall not be increased nor shall the security granted in relation thereto be
  extended to cover additional property or to secure additional Debt. The
  Borrower and/or Guarantors shall not incur any new Debt or new operating
  leases if the Borrower is in breach of its Financial Covenants.  If any Breach of covenants has occurred and
  is continuing, The Borrower and/or Corporate Guarantors may not incur any new
  debt including, without limitation, Subordinated Debt.

  
	
   

  	
   

  
	
  Security & Other

  	
   

  
	
  Documentation:

  	
  To  include but not limited to:

  
	
   

  	
   

  
	
   

  	
  1.

  	
  Credit
  Agreement setting out the Terms and Conditions of the facility including the
  usual conditions precedent, representations and warranties, reporting
  requirements and financial covenants.

  
	
   

  	
  2.

  	
  Registered
  General Security Agreement, providing the Bank with a first, fixed and
  floating charge over all assets, including accounts receivable, inventory,
  equipment, contract rights.

  
	
   

  	
  3.

  	
  Full
  covering corporate guarantee(s) from all material related and / or
  subsidiaries supported by registered general security agreements providing
  the Bank with a first, fixed and floating charge over all assets, including
  accounts receivable, inventory, equipment, contract

  

 

 

	
  

  	
   

  	
  rights.

  
	
   

  	
  4.

  	
  Priority
  agreement to be executed between the Borrower, the Bank, and HSBC relative to
  the cash security pledged in support of Foreign Exchange Forward Contracts.
  Amount of pledged cash is not to exceed $2,000,000 US dollars.

  
	
   

  	
  5.

  	
  Assignment
  of material contracts, insurance (fire/all risk and 3rd party liability), licenses, trademarks,
  copyrights, patents & other intellectual property as appropriate.

  
	
   

  	
  6.

  	
  Environmental
  Checklist and Indemnities, on the Bank’s standard form.

  
	
   

  	
  7.

  	
  Solicitor’s unqualified letter(s) of opinion for all
  security and loan documentation.

  
	
   

  	
   

  	
   

  
	
  Events of Default:

  	
   

  	
   

  
	
   

  	
  Those customarily found in loan
  documentation for similar financings including but not limited to failure to
  pay principal and interest when due; representations and warranties
  materially incorrect; breach of covenants and security undertakings;
  judgments in excess of $250,000 against the Borrower or its subsidiaries
  which remain undischarged, unvacated, unbonded or unstayed for more than 45
  days; bankruptcy, insolvency, proceedings or actions; failure to comply with
  the terms of other financing agreements of the Borrower and its subsidiaries
  (with notice and cure periods as applicable); cross-default to material
  obligations of the Borrower,
  non-compliance with any environmental regulation imposed by any government or
  agency, material change of ownership or control either directly or
  indirectly.

  
	
   

  	
   

  
	
  Assignment:

  	
   

  
	
   

  	
  Lender will have the right (i)
  assign all or a part of its loans or commitments in minimum amounts of
  $5,000,000 and (ii) to sell participations in all or part of its loans or
  commitments provided however that the Lender shall not assign or participate
  the loans to any competitor of the Borrower.

  
	
   

  	
   

  
	
  Required by OSFI:

  	
   

  
	
   

  	
  The Borrower hereby confirms that this new financing
  and related loan accounts will only be used for the Borrower’s own business
  and business transactions associated therewith.

  
	
   

  	
   

  
	
  Increased Costs, Taxes
  etc.:

  	
   

  
	
   

  	
  The Borrower will reimburse any additional costs the
  Lender incurs in performing its obligations under the facility to be made
  available to the Borrower, resulting from any change in law, including any
  reserve or special deposit requirement or any tax or capital requirement or
  any change in the compliance of the Lender therewith, that has the effect,
  directly or indirectly, of increasing the cost of funding to the Lender or
  reducing the effective return on its capital. All loan repayments shall be
  made free and clear of any present and future taxes, withholdings or any
  other deductions.

  

 

 

	
  Representations
  and Warranties:

  
	
   

  	
  Usual, including confirmation
  of corporate status and authority, non-violation of law or existing
  agreements, no material litigation, satisfactory insurance coverage,
  continued compliance with environmental regulations and other such
  representations and warranties customarily contained in loan agreements for
  similar financings.

  
	
   

  	
   

  
	
  Expenses:

  	
   

  
	
   

  	
  All legal and other out of
  pocket costs incurred by the Lender with respect to completion, preparation,
  negotiation and enforcement of loan documents shall be for the account of the
  Borrower whether or not the transaction is completed.  Any out-of-pocket expenses other than legal
  are to be pre-approved by the Borrower before being incurred.

  
	
   

  	
   

  
	
  Governing Law:

  	
   

  
	
   

  	
  Province of Ontario and
  jurisdiction of Canada.

  
	
   

  	
   

  

 

Financing terms accepted as
outlined above.

Dated this 19th day of July 2007

Tucows.Com Co

	
  /s/ ELLIOT NOSS

  	
   

  
	
  Name: 

  	
  Elliot Noss

  	
   

  
	
  Title:

  	
  CEO and President

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