Document:

Exhibit
10.1

 

	
  

  	
  Operating
  Loan Agreement with 

  Availment in U.S. Dollars

  
	
   

  	
   

  
	
  To: Bank of Montreal

  	
   

  
	
   

  	
   

  
	
   

  	
  Date: 01st Sept 2010

  

 

The undersigned hereby
requests Bank of Montreal (the “Bank”) to provide a credit facility to the
undersigned, subject to the following terms and conditions:

 

1.                                      DEFINED TERMS

 

In
this Agreement:

 

1.01                           “Account”
shall mean the U.S. Dollar Account No. 0002-4605-193 at the Bank.

 

1.02                           “Canadian
Dollar Equivalent Amount” shall mean, at any time, the amount of Canadian
dollars into which U.S. dollars may be converted at the Bank’s applicable noon
spot buying rate at such time.

 

1.03                           “Facility Fee”
shall mean a fixed monthly fee of $500.00.

 

1.04                           “Loan”
shall mean the credit facility (if any) provided pursuant to this Agreement and
the amount of the Loan shall mean at any time the aggregate of all amounts
debited to the Account (including without limitation cheques, transfers,
withdrawals, interest, costs, charges and fees) less the aggregate of all
amounts credited to the Account for which the Bank has given value.

 

1.05                           “Loan Limit”
shall mean One Million Dollars ($1,000,000.00) or such lesser amount as may be
determined by the Bank from time to time including, without limitation,
pursuant to a calculation under the Lending Margin Calculation, if any, set out
in the Addendum hereto.

 

1.06                           “Loan Rate”
shall mean a rate equal to the Bank’s U.S. Base Rate plus 1.30 per cent (1.30%)
per annum.

 

1.07                           “U.S. Base
Rate” shall mean the floating annual rate of interest established from time
to time by the Bank as the reference rate it will use to determine the rate of
interest payable to the Bank by borrowers from the Bank in U.S. dollars in
Canada and designated by the Bank as its U.S. Base Rate.  The U.S. Base Rate on the date hereof is Three
and Three Quarters per cent (3.75%) per annum.

 

1.08                           “Overdraft
Rate” shall mean the annual rate of interest established from time to time
by the Bank as the interest rate it will use to calculate the interest payable
on overdrawn accounts and designated by the Bank as the “Overdraft Rate”.  The Overdraft Rate on the date hereof is
Twenty-one per cent (21%) per annum.

 

2.                                      ACCOUNT

 

2.01                           Cheques drawn
and debits of other kinds made on the Account (including, without limitation,
transfers and withdrawals) shall be drawn in U.S. dollars.

 

2.02                           The undersigned
shall not at any time permit the Loan to exceed the Loan Limit and shall use
the Account for business purposes only.

 

2.03                           The Bank is
authorized to debit the Account for all fees and interest required hereunder
and for all costs, charges and expenses referred to in paragraph 6.01 and in
any other agreement(s) the undersigned has entered into with the Bank.

 

3.                                      FEES AND INTEREST

 

3.01                           The undersigned
shall pay the Facility Fee to the Bank, on the last day of each month in
addition to all other fees applicable to the Account.  Notwithstanding paragraph 1.03, the amount of
the Facility Fee may be revised by the Bank from time to time and the revised
fee will be effective once the Bank advises the undersigned by 

 

1

 

notice
as herein provided.  The Facility Fee
shall be payable for the credit facility provided hereunder and for other
standard reporting services provided by the Bank in connection with the
Account.

 

3.02                           The undersigned
shall, both before and after demand or judgment, pay interest at the Loan Rate
on the daily closing balance of the Loan up to the Loan Limit, such interest to
be calculated and payable monthly on the last day of each month.

 

3.03                           The undersigned
shall, both before and after demand or judgment, pay interest at the Overdraft
Rate on the amount of any daily closing balance of the Loan in excess of the
Loan Limit, such interest to be calculated and payable monthly on the last day
of each month.

 

3.04                           Nothing herein
shall oblige the Bank to permit the Loan to exceed the Loan Limit.  In the
event the Loan exceeds the Loan Limit, (i) the Bank may at any time
terminate the Loan hereunder and immediately demand payment of the Loan by
notice as herein provided and (ii) for each occurrence the undersigned will
be charged a fee of 1% per annum calculated on the amount of excess over the
Loan Limit or $100, whichever is greater, and a $5 overdraft handling charge
per item that creates or increases the excess.

 

4.                                      DEMAND AND TERMINATION

 

4.01                           The undersigned
shall pay the Loan to the Bank ON DEMAND, regardless of any covenants,
conditions, obligations or events of default set out herein including, without
limitation, any provisions set out in the Addendum hereto. The Bank may at any
time terminate the Loan provided hereunder and demand payment of the Loan by
notice as herein provided.

 

4.02                          THE BANK MAY REFUSE
TO HONOUR ANY CHEQUE OR PERMIT ANY TRANSFER OR WITHDRAWAL FROM THE ACCOUNT UPON
(A) ANY DEFAULT BY THE UNDERSIGNED IN THE PERFORMANCE OF ANY OBLIGATION OF
THE UNDERSIGNED TO THE BANK WHETHER CONTAINED HEREIN OR IN ANY OTHER AGREEMENT
BETWEEN THE UNDERSIGNED AND THE BANK, (B) THE DEATH OF ANY GUARANTOR OF
ANY INDEBTEDNESS OF THE UNDERSIGNED OR RECEIPT BY THE BANK OF NOTICE OF
TERMINATION OF ANY GUARANTEE OF ANY INDEBTEDNESS OF THE UNDERSIGNED, (C) THE
LOAN EXCEEDING THE LOAN LIMIT, OR (D) ANY DEMAND BEING MADE FOR PAYMENT OF
THE LOAN, WHETHER OR NOT ANY TIME PERIOD HAS LAPSED AFTER THE TIME OF THE
DEMAND.

 

5.                                      DOCUMENTATION

 

5.01                           The undersigned
shall deliver to the Bank from time to time, promptly on request, in form and
substance satisfactory to the Bank:

 

(a)               any security
required by the Bank; and

 

(b)              all other documents and information required by the
Bank.

 

5.02                           Any security
document delivered hereunder shall be held as additional security for the
indebtedness of the undersigned for the Loan, and not in substitution or in
satisfaction thereof.

 

6.                                      COSTS

 

6.01                           The undersigned
shall pay all reasonable costs, charges and expenses incurred by the Bank in
the preparation or enforcement of this Agreement or any security required in
connection with the Loan.

 

7.                                      NOTICES

 

7.01                           The Bank shall
not be required to notify the undersigned of changes to the U.S. Base Rate or
the Overdraft Rate or in the Bank’s calculations of the Lending Margin
Calculation, if any.

 

7.02                           Any request for
any document or information, notice of termination, demand for payment or other
notice to be sent in connection with this Agreement or either of the Accounts
may be delivered, or mailed by prepaid ordinary mail or transmitted by
facsimile if to the undersigned (or any one of them, if more than one) at the
last known address or facsimile number for the undersigned (or any one of them,
if more than one) in the Bank’s records or if to the Bank at the Branch where
the Account is maintained.  The
undersigned or the Bank, as applicable, shall be deemed to have received such
request or notice on the date of delivery, if delivered, on the first business
day following the date of transmission if transmitted by facsimile, and four
(4) days after mailing, if mailed. 

 

2

 

8.                                      AMENDED AND RESTATED AGREEMENT

 

x                                  8.01                           This Agreement
hereby amends and restates the
                                     
                                           
              
                   
                                                            (Insert
name of agreement) Agreement dated the
                          
day of
                                                              ,
                ,
as heretofore amended and supplemented from time to time (the “Existing
Agreement”), between the undersigned and the Bank with effect as and from the
date hereof (the “Effective Date”), the whole without any novation whatsoever.

 

x                                  8.02                           The parties
hereby expressly agree that as and from the Effective Date all of the
undersigned’s obligations, indebtedness and liabilities to the Bank under or
pursuant to the Existing Agreement including, without limitation, the
outstanding principal amount of the loan thereunder, all interest accrued
thereon, all interest on overdue interest and all other amounts owing by the
undersigned to the Bank under or pursuant to the Existing Agreement shall be
governed by the terms hereof.

 

x                                  8.03                           The undersigned
hereby ratifies, confirms, acknowledges and agrees that it is and continues to
be bound by all of the obligations, indebtedness and liabilities of and grants
of security made by it under each of the  security
documents under, pursuant to or in connection with the Existing Agreement,
including without limitation any agreement or instrument creating or granting a
hypothec, security under the Bank Act
(Canada), mortgage, pledge, fixed or floating charge, assignment by way of
security or any other security interest securing payment or performance of an
obligation under or pursuant to the Existing Agreement (herein, collectively,
the “Security Documents”) and each certificate or other document delivered
pursuant to or in connection with the Existing Agreement or the Security
Documents (the Security Documents and such certificates or other documents are
herein, collectively, the “Loan Documents”), and the undersigned acknowledges
that the Bank is relying expressly upon the Loan Documents and such
ratifications, confirmations, acknowledgement and agreements by the undersigned
herein in entering into this Agreement and providing any accommodations
hereunder, notwithstanding the amendment and restatement set forth herein.

 

x                                  8.04                           As and from the
Effective Date, all references to the Existing Agreement in any of the Loan
Documents shall be construed as being a reference to the Existing Agreement as
amended and restated by this Agreement.

 

x                                  8.05                           This Article 8
is made under express reserve of all the terms and conditions of this Agreement
and the Loan Documents and all rights in favour of the Bank hereunder and
thereunder and without novation of any kind or derogation from the rank and
priority of the Security Documents. Without derogating from or restricting in
any way the Security Documents, all obligations under or pursuant to the
Existing Agreement and hereunder shall continue to be secured by the Security
Documents. All of the provisions of this Article 8 are without novation.

 

9.                                      GENERAL

 

9.01                           The provisions
of the Addendum, if any, shall be incorporated into this Agreement and form
part hereof.

 

9.02                           The Bank’s
statements of the Account at any time shall constitute prima facie evidence of
the Loan.

 

9.03                           The undersigned
will immediately notify the Bank if any guarantor of the indebtedness of the
undersigned to the Bank dies.

 

9.04                           This Agreement
shall be binding upon the undersigned and the respective executors,
administrators, successors and assigns of the undersigned, but the undersigned
shall not assign any of the rights or obligations of the undersigned hereunder
without the prior written consent of the Bank.

 

9.05                           The failure of
either the undersigned or the Bank to require performance by the other of any
provision hereof shall in no way affect the right thereafter to enforce such
provision; nor shall the waiver by either party of any breach of any covenant,
condition or proviso of this Agreement or any other agreement between the Bank
and the undersigned be taken or held to be a waiver of any further breach of
the same covenant, condition or proviso.

 

9.06                           Subject to Article 8
above (if applicable) this Agreement shall be in addition to and not in
substitution for any other agreement between the undersigned and the Bank.

 

9.07                           The undersigned
agrees that the balance shown in any statement of the Account provided to the
undersigned shall be deemed to be a correct and accurate statement of the Loan
as at the date of the statement.

 

9.08                           All payments relating
to the Loan made by the undersigned pursuant to this Agreement shall be paid in
U.S. dollars.  All other amounts owing
hereunder shall be paid in Canadian dollars except as otherwise provided
herein.

 

3

 

In the event the Bank is
required to recover any amount owing hereunder by way of judicial proceeding,
or otherwise, all amounts owing hereunder shall be payable in Canadian
dollars.  Notwithstanding the foregoing,
any obligation of the undersigned under this Agreement to make payments in U.S.
dollars shall not be discharged or satisfied by any tender or recovery pursuant
to any judgment expressed in or converted into Canadian dollars except to the
extent that such tender or recovery shall result in the effective receipt by
the Bank of the full equivalent amount of U.S. dollars so payable
hereunder.  Accordingly, the obligation
of the undersigned shall be enforceable as an alternative or additional cause
of action for the purpose of recovery in Canadian dollars of the amount (if
any) by which such payment of a U.S. dollar obligation hereunder in a currency
other than U.S. dollars shall fall short of the full amount of U.S. dollars so
payable hereunder and shall not be affected by any judgment being obtained for
any other sums due hereunder.

 

For
purposes of recovery by the Bank of amounts debited to the Account, the
Canadian Dollar Equivalent Amount shall apply, with the applicable rate of
currency conversion being no less than the rate of conversion at the time of
default hereunder or the time of demand hereunder, whichever is greater.

 

9.09                           If any other
provision of this Agreement would oblige the undersigned to pay or entitle the
Bank to receive any amount that is prohibited by law, then, notwithstanding such
provision, such amount shall be deemed to have been adjusted with retroactive
effect to the maximum permitted amount by law. 
Notwithstanding the foregoing, if the Bank receives an amount in excess
of the maximum permitted, then the undersigned shall be entitled, on providing
written notice to the Bank, to obtain reimbursement of such excess.  Pending reimbursement, such excess shall be
deemed to be payable by the Bank.  The
Bank and the undersigned disavow any intent to receive or pay any amount in excess
of that is permitted by law.

 

9.10                           Time shall be
of the essence of this Agreement.

 

9.11                           If more than
one party signs this Agreement, the obligations of the undersigned are joint
and several.

 

9.12                           It is the
express wish of the parties that this Agreement and any related documents be
drawn up and executed in English.  Les parties conviennent que la présente convention et
tous les documents s’y rattachant soient rédigés et signés en anglais.

 

By
executing this Agreement below the undersigned hereby agrees to the foregoing
terms and conditions.

 

DATED
as of the date set forth above.

 

 

Tucows.com
Co.

(Name
of Entity)

 

	
  By:

  	
  /s/
  Michael Cooperman

  	
   

  
	
  Name:

  	
  Michael
  Cooperman

  	
   

  
	
  Title:

  	
  Chief
  Financial Officer of Tucows Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Reva Kogan

  	
   

  
	
  Name:

  	
  Reva
  Kogan

  	
   

  
	
  Title:

  	
  Controller
  of Tucows Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

4

 

ADDENDUM TO

OPERATING LOAN AGREEMENT

 

Lending Margin Calculation
and/or Additional Provisions

 

The Bank may in its
discretion reduce the Loan Limit by the amount of any other indebtedness or
liability of the undersigned (or any one of them, if more than one) to the Bank
including, without limitation, the amount of any bankers acceptances or letters
of credit.

 

Without limiting the foregoing,
the following Lending Margin Calculation is applicable to the attached Loan
Agreement. The calculation and the amount of the Lending Margin Calculation is
in the sole and complete discretion of the Bank, and in cases of dispute, the
Lending Margin Calculation calculated by the Bank shall prevail.

 

The
Lending Margin Calculation (if applicable) shall be an amount equal to: N/A

 

Reporting

Requirements:

Quarterly (within 45 days of
quarter end):

 

Internally prepared
quarterly consolidated financial statements of the Tucows Inc. (includes
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 Tucows Inc. (includes 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 Tucows Inc. (includes 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.

 

5Exhibit 10.2

 

OFFER LETTER

 

Information
contained in this document is confidential and should not be disclosed,
copied or discussed with any other person(s) not directly involved with the
proposal without the prior written approval of BMO Bank of Montreal. A formal
commitment by BMO Bank of Montreal will require formal authorization through
BMO Bank of Montreal’s internal credit approval process.

 

	
  Borrower:

  	
   

  	
  Tucows.com Co

  
	
   

  	
   

  	
   

  
	
  Lender:

  	
   

  	
  BMO Bank of Montreal (the
  “Bank”/ “Lender”/ “BMO”)

  
	
   

  	
   

  	
   

  
	
  Existing Credit Facilities:

  
	
   

  	
   

  	
   

  
	
  Credit
  Facility # 1 (Existing)

  	
   

  	
  Demand Loan Non-Revolving,
  Reducing Facility

  
	
   

  	
   

  	
   

  
	
  Amount:

  	
   

  	
  USD 2,103,483.60 (As of
  August 30,2010)

  
	
   

  	
   

  	
   

  
	
  Loan Purpose:

  	
   

  	
  To assist in the acquisition of Innerwise
  Inc. Advanced in July 2007.

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  At the Borrower’s option by way of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a)

  	
  US
  Base Rate based loans; and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b)

  	
  LIBOR with terms of 3 or 6 months subject
  to availability of funds. Repayment permitted only on rollover date.

  
	
   

  	
   

  	
   

  
	
  Repayment:

  	
   

  	
  To be repaid in equal monthly payments of
  USD 159,520.15 plus interest.

  
	
   

  	
   

  	
   

  
	
  Interest Rate:

  	
   

  	
  a)

  	
  BMO Bank of Montreal US Base Rate based
  loans: U.S. Base Rate + 1.30% (amended from U.S. Base Rate +1.50%);

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b)

  	
  LIBOR
  based loans: LIBOR + 3.25%.

  
	
   

  	
   

  	
   

  
	
  Credit
  Facility # 2 (Existing)

  	
   

  	
  Treasury Risk Management
  Facility

  
	
   

  	
   

  	
   

  
	
  Amount:

  	
   

  	
  USD 3,500,000.00

  
	
   

  	
   

  	
   

  
	
  Loan Purpose:

  	
   

  	
  Settlement risk line to assist with hedging
  USD exposure via Foreign Exchange Forward Contracts and / or Currency
  options. Maximum 18 month contracts at market rates.

  
	
   

  	
   

  	
   

  
	
  Proposed Credit Facilities:

  
	
   

  	
   

  	
   

  
	
  Credit
  Facility # 3 (Proposed)

  	
   

  	
  Operating Demand Loan
  (“ODL”) 

  
	
   

  	
   

  	
   

  
	
  Amount:

  	
   

  	
  USD 1,000,000.00

  
	
   

  	
   

  	
   

  
	
  Loan Purpose:

  	
   

  	
  Operating requirements.

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  To be available in Canadian or US Dollar
  equivalent. Not subject to Margin.

  

 

1

 

	
  Repayment:

  	
   

  	
  Direct advances are to fluctuate widely
  with periodic clean-up on a minimum annual basis. Interest is payable monthly
  in arrears.

  
	
   

  	
   

  	
   

  
	
  Interest Rate:

  	
   

  	
  BMO Bank of Montreal U.S. Base Rate +1.30%
  payable monthly in arrears.

  
	
   

  	
   

  	
   

  
	
  Facility Fees:

  	
   

  	
  A monthly monitoring fee of $500.00 in
  regards to the provision of the facility. This does not include standard
  transaction charges for account activity.

  
	
   

  	
   

  	
   

  
	
  Credit
  Facility #4 (Proposed)

  	
   

  	
  Demand Loan Non-Revolving,
  Reducing Facility

  
	
   

  	
   

  	
   

  
	
  Amount:

  	
   

  	
  USD 2,000,000.00

  
	
   

  	
   

  	
   

  
	
  Loan Purpose:

  	
   

  	
  To finance repurchase of shares of the
  Borrower.

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  At the Borrower’s option by way of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a)              US Base Rate
  based loans; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b)             LIBOR with
  terms of 3 or 6 months subject to availability of funds with minimum draws of
  USD 500,000 and multiples of USD 100,000 thereafter.

  
	
   

  	
   

  	
  Repayment permitted only
  on rollover date.

  
	
   

  	
   

  	
   

  
	
  Repayment:

  	
   

  	
  Amortized over 60 months. Equal monthly
  principal payments plus interest.

  
	
   

  	
   

  	
   

  
	
  Amortization:

  	
   

  	
  60 months.

  
	
   

  	
   

  	
   

  
	
  Interest Rate:

  	
   

  	
  a)              BMO Bank of Montreal US
  Base Rate based loans: U.S. Base Rate + 1.30% (amended from U.S. Base Rate
  +1.50%);

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b)             LIBOR based loans: LIBOR +
  3.25%.

  
	
   

  	
   

  	
   

  
	
  Standby Fees:

  	
   

  	
  0.20%. Payable on the undrawn available
  aggregate of Facility #4. This fee is payable quarterly in arrears. (Standby
  Fees is waived till first Draw).

  
	
   

  	
   

  	
   

  
	
  Conditions
  Precedent:

  (Specific to Facility# 4)

  	
   

  	
   

  
	
   

  	
   

  	
  1.               Satisfactory due diligence
  review of the Borrower based on most recent interim financial statements of
  the Borrower;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.               Confirmation of compliance
  with all financial covenants based on most recent quarterly financial
  statements;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.               No material adverse change
  in the financial condition or the performance of the Borrower prior to
  advance;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.               No event of default shall
  be in existence nor shall any Event of Default be created upon advance of the
  Loan (i.e. Borrower must be in compliance with covenants on a pro-forma basis
  after giving effect to the subject financing);

  

 

2

 

	
   

  	
   

  	
  5.               Execution of Promissory
  Notes.

  

 

	
  GENERAL TERMS AND CONDITIONS

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  ODL facility and DLNR
  facility are on a demand basis and may be terminated in whole
  or in part and amounts outstanding there under shall be payable in whole or
  in part upon demand by the Bank, notwithstanding the payment or non-payment
  of principal interest or fees by the Borrower or compliance or non-compliance
  with any undertaking or covenant given to the Bank herein or elsewhere.

  
	
   

  	
   

  	
   

  
	
  Conditions

  Precedent:

  	
   

  	
  1.               Execution and delivery of
  acceptable credit and security documentation which embodies the terms and
  conditions contained herein.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.               Payment of all fees and
  expenses payable to the Bank including (if required) the payment of Lender’s
  counsel.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.               There shall not have been
  a Material Adverse change, as determined in the sole discretion of the Bank.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.               Acceptance by the Borrower
  of the Bank’s Offer Letter.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.               Satisfactory legal opinion
  if required.

  
	
   

  	
   

  	
   

  
	
  Representations
  and Warranties:

  	
   

  	
  Those usual and customary for transactions
  of this type, including but not limited to (a) confirmation of corporate
  status and authority, (b) no material adverse change, (c) no
  existing security interests, and (d) compliance with laws including
  environmental laws and regulations and other environmental matters.

  
	
   

  	
   

  	
   

  
	
  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 Cash Flow

  	
   

  	
  Total Funded Debt to EBITDA

  	
   

  
	
   

  	
   

  	
  75%

  	
   

  	
  > 2.50:1.00

  	
   

  
	
   

  	
   

  	
  50%

  	
   

  	
  <2.50:1.00 to > 1.75:1.00

  	
   

  
	
   

  	
   

  	
  25%

  	
   

  	
  <1.75:1.00

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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 but before any
  dividend payments. Payments to be applied as permanent reduction to Facility
  #1 and Facility # 4 in inverse order of maturity. Operating Demand Loan
  balances are not subject to cash-flow sweep 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.

  

 

3

 

	
   

  	
   

  	
  So Long as the Borrower is indebted to the
  Lender, the Borrower and/or Corporate Guarantors agree that without the prior
  written consent of the Lender 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 Lender, 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 Lender 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. While share repurchase is
  permitted, Borrower shall be in compliance with all Financial Covenants pre
  and post share repurchase;

   

  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;

   

  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 debt other than the Lender’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.

  
	
   

  	
   

  	
   

  
	
  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: 2.00:1

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2. Maximum Total Funded
  Debt to EBITDA: 2.50:1

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3. Minimum Fixed Charge
  Coverage: 1.25:1

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4. Maximum Annual Capital
  Expenditures capped at $3,600,000.00 per annum, based on management forecast, and to be reviewed on
  an annual basis. Subject to covenant compliance both before and
  after such expenditures.

  

 

4

 

	
  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, less
  unfunded capital expenditures, less unfunded share repurchase and less dividends
  paid, divided by the aggregate of fixed principal repayments and cash
  interest expenses payable in respect of Total Funded Debt.

  
	
   

  	
   

  	
   

  
	
  Fees:

  	
   

  	
  The
  standard application fee of $9,500.00 is now payable to the Bank.

   

  This fee is acknowledged by the Borrower to
  represent reasonable compensation duly earned by the Bank for its time,
  effort and expense in reviewing all documents and information provided by the
  Borrower, in establishing the terms of the financing offer and for
  reservation by the Bank of funds for purposes of providing the credit
  facilities contemplated hereby, and not as a penalty.

  
	
   

  	
   

  	
   

  
	
  Reporting
  Requirements:

  	
   

  	
   

  
	
   

  	
   

  	
  Quarterly (within 45 days
  of quarter end):

   

  Internally prepared quarterly consolidated
  financial statements of the Tucows Inc. (includes 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 Tucows Inc. (includes 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 Tucows Inc. (includes 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.

  

 

5

 

	
  Security:

  (Already Held)

  	
   

  	
  All security already held by the Bank
  remains in place unaltered.

  
	
   

  	
   

  	
   

  
	
  Security:

  (To be Obtained)

  	
   

  	
  1.               Promissory Notes for each Draw for
  financing for share redemptions.

  
	
   

  	
   

  	
  2.               Executed
  Offer Letter.

   

  3.               Operating
  Demand Loan Agreement.

   

  4.               Necessary LIBOR Agreements.

   

  5.               Letter of
  Acknowledgement Signed by the Borrower acknowledging that the cash-flow sweep
  is waived on a one-time basis and does not set a precedent to future actions
  of the Bank.

   

  6.               Such other documentation as may be
  necessary to establish the Facilities.

  
	
   

  	
   

  	
   

  
	
  Expenses:

  	
   

  	
  All
  reasonable out-of-pocket costs and expenses incurred by the Bank including fees
  and disbursements of legal counsel will be for the account of the Borrower
  after acceptance of an Offer Letter, whether or not the transaction
  contemplated herein is completed.

  
	
   

  	
   

  	
   

  
	
  Acknowledgement

  	
   

  	
  The
  Borrower(s) acknowledges that the Credit Facilities contained herein are
  for use by the Borrower and will be used for the Borrower’s business purposes
  only.

  
	
   

  	
   

  	
   

  
	
  Governing
  Law:

  	
   

  	
  Province
  of Ontario

  
	
   

  	
   

  	
   

  
	
   

  	
  Summary of Terms and
  Conditions is hereby accepted:

  
	
   

  	
   

  
	
   

  	
  TUCOWS.COM CO. (“BORROWER”)

  
	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
  /s/
  Michael Cooperman, Chief Financial Officer of Tucows Inc., September 10, 2010

  	
   

  
	
   

  	
   

  	
   

  	
  Name/Title/Date

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
  /s/
  Reva Kogan, Controller of Tucows Inc., September 10, 2010

  	
   

  
	
   

  	
   

  	
   

  	
  Name/Title/Date

  	
   

  
							

 

6

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