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EXHIBIT 10.1(iii)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February 3, 2005, is made
and given by
LONG DISTANCE BILLING SERVICES, INC., a Nevada corporation (the
"Grantor"), to
NS8 CORPORATION, a Delaware corporation (the "Secured
Party").
RECITALS
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A. The Grantor will or may become, or is now, indebted to the
Secured
Party under that certain promissory note in the amount of
$200,000, dated
February 3, 2005 (the "Note").
B. The Secured Party has required the Grantor to execute this
Security
Agreement and the Grantor has agreed to do so.
C. The Grantor finds it advantageous, desirable and in its best
interests
to comply with the requirement that it execute and deliver this
Security
Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and in order to
induce the
Secured Party to extend or continue credit accommodations to the
Grantor, the
Grantor hereby agrees with the Secured Party for the Secured
Party's benefit as
follows:
Section 1. Defined Terms.
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1 (a) As used in this Agreement, the following terms shall have
the
meanings indicated:
"Account" shall mean the rights of the Grantor to payment for
goods sold or
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leased or for services rendered which is not evidenced by an
Instrument or
Chattel Paper, whether or not such right has been earned by
performance, all
guaranties and security therefor, and all interests in the goods
the sale or
lease of which gave rise thereto, including the right to stop
such goods in
transit.
"Account Debtor" shall mean a Person who is obligated on or
under any
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Account, Chattel Paper, Instrument or General Intangible.
"Chattel Paper" shall mean a writing or writings which evidence
both a
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monetary obligation and a security interest in or lease of
specific goods; when
a transaction is evidenced by both a security agreement or a
lease and by an
Instrument or a series of Instruments, the group of writings
taken together
constitutes Chattel Paper.
"Collateral" shall mean all property and rights in property now
owned or
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hereafter at any time acquired by the Grantor in or upon which a
Security
Interest is granted to the Secured Party by the Grantor under
this Agreement.
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<PAGE>
"Document" shall mean any bill of lading, dock warrant, dock
receipt,
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warehouse receipt or order for the delivery of goods, together
with any other
document or receipt which in the regular course of business or
financing is
treated as adequately evidencing that the Person in possession
of it is entitled
to receive, hold and dispose of the document and the goods it
covers.
"Equipment" shall mean all machinery, equipment, motor vehicles,
furniture,
---------
furnishings and fixtures, including all accessions, accessories
and attachments
thereto, and any guaranties, warranties, indemnities and other
agreements of
manufacturers, vendors and others with respect to such
Equipment.
"Event of Default" shall have the meaning given to such term in
Section 18
----------------
hereof.
"Financing Statement" shall have the meaning given to such term
in Section
--------------------
4 hereof.
"General Intangibles" shall mean any personal property (other
than goods,
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Accounts, Chattel Paper, Documents, Instruments and money)
including choses in
action, causes of action, contract rights, corporate and other
business records,
inventions, designs, patents, patent applications, service
marks, trademarks,
tradenames, trade secrets, internet domain names, engineering
drawings, good
will, registrations, copyrights, licenses, franchises, customer
lists, tax
refund claims, royalties, licensing and product rights, rights
to the retrieval
from third parties of electronically processed and recorded data
and all rights
to payment resulting from an order of any court.
"Instrument" shall mean a draft, check, certificate of deposit,
note, bill of
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exchange, security or any other writing which evidences a right
to the payment
of money and is not itself a security agreement or lease and is
of a type which
is transferred in the ordinary course of business by delivery
with any necessary
endorsement or assignment.
"Inventory" shall mean any and all goods owned or held by or for
the
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account of the Grantor for sale or lease, or for furnishing
under a contract of
service, or as raw materials, work in process, materials
incorporated in or
consumed in the production of any of the foregoing and supplies,
in each case
wherever the same shall be located, whether in transit, on
consignment, in
retail outlets, warehouses, terminals or otherwise, and all
property the sale,
lease or other disposition of which has given rise to an Account
and which has
been returned to the Grantor or repossessed by the Grantor or
stopped in
transit.
"Lien" shall mean any security interest, mortgage, pledge, lien,
charge,
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encumbrance, title retention agreement or analogous instrument
or device
(including the interest of the lessors under capitalized
leases), in, of or on
any assets or properties of the Person referred to.
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<PAGE>
"Note" shall have the meaning indicated in Recital A.
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"Obligations" shall mean (a) all principal of, and interest on,
the Note
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and any extension, renewal or replacement thereof, (b) all
liabilities of the
Grantor under this Agreement.
"Person" shall mean any individual, corporation, partnership,
limited
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partnership, limited liability company, joint venture, firm,
association, trust,
unincorporated organization, government or governmental agency
or political
subdivision or any other entity, whether acting in an
individual, fiduciary or
other capacity.
"Security Interest" shall have the meaning given such term in
Section 2
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hereof.
1 (b) All other terms used in this Agreement which are not
specifically
defined herein shall have the meaning assigned to such terms in
the Uniform
Commercial Code in effect in the State of Washington as of the
date of this
Agreement to the extent such other terms are defined
therein.
1 (c) Unless the context of this Agreement otherwise clearly
requires,
references to the plural include the singular, the singular, the
plural and "or"
has the inclusive meaning represented by the phrase "and/or."
The words
"include," "includes" and "including" shall be deemed to be
followed by the
phrase "without limitation." The words "hereof," "herein,"
"hereunder" and
similar terms in this Agreement refer to this Agreement as a
whole and not to
any particular provision of this Agreement. References to
Sections are
references to Sections in this Security Agreement unless
otherwise provided.
Section 2. Grant of Security Interest. As security for the
payment and
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performance of all of the Obligations, the Grantor hereby grants
to the Secured
Party a security interest (the "Security Interest") in all of
the Grantor's
right, title, and interest in and to the following, whether now
or hereafter
owned, existing, arising or acquired and wherever located:
2 (a) All Accounts.
2 (b) All Chattel Paper.
2 (c) All Documents.
2 (d) All Equipment.
2 (e) All General Intangibles.
2 (f) All Instruments.
2 (g) All Inventory.
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2 (h) To the extent not otherwise included in the foregoing, (i)
all other
rights to the payment of money, including rents and other sums
payable to the
Grantor under leases, rental agreements and other Chattel Paper
and insurance
proceeds; (ii) all books, correspondence, credit files, records,
invoices, bills
of lading, and other documents relating to any of the foregoing,
including,
without limitation, all tapes, cards, disks, computer software,
computer runs,
and other papers and documents in the possession or control of
the Grantor or
any computer bureau from time to time acting for the Grantor;
(iii) all rights
in, to and under all policies insuring the life of any officer,
director,
stockholder or employee of the Grantor, the proceeds of which
are payable to the
Grantor; and (iv) all accessions and additions to, parts and
appurtenances of,
substitutions for and replacements of any of the foregoing.
2 (i) To the extent not otherwise included, all proceeds and
products of
any and all of the foregoing.
Section 3. Grantor Remains Liable. Anything herein to the
contrary
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notwithstanding, (a) the Grantor shall remain liable under the
Accounts, Chattel
Paper, General Intangibles and other items included in the
Collateral to the
extent set forth therein to perform all of its duties and
obligations thereunder
to the same extent as if this Agreement had not been executed,
(b) the exercise
by the Secured Party of any of the rights hereunder shall not
release the
Grantor from any of its duties or obligations under any items
included in the
Collateral, and (c) the Secured Party shall have no obligation
or liability
under Accounts, Chattel Paper, General Intangibles and other
items included in
the Collateral by reason of this 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.
Section 4. Title to Collateral. The Grantor has (or will have at
the time
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it acquires rights in Collateral hereafter acquired or arising)
and will
maintain so long as the Security Interest may remain
outstanding, title to each
item of Collateral (including the proceeds and products
thereof), free and clear
of all Liens except the Security Interest. The Grantor will
defend the
Collateral against all claims or demands of all Persons (other
than the Secured
Party) claiming the Collateral or any interest therein. As of
the date of
execution of this Security Agreement, no effective financing
statement or other
similar document used to perfect and preserve a security
interest under the laws
of any jurisdiction (a "Financing Statement") covering all or
any part of the
Collateral is on file in any recording office, except such as
may have been
filed in favor of the Secured Party relating to this
Agreement,.
Section 5. Disposition of Collateral. The Grantor will not sell,
lease or
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otherwise dispose of, or discount or factor with or without
recourse, any
Collateral, except sales of items of Inventory in the ordinary
course of
business.
Section 6. Names, Offices, Locations. The Grantor does business
solely
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under its own name and the trade names and styles, if any, set
forth on Schedule
II hereto. Except as noted on said Schedule, no such trade names
or styles and
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no trademarks or other similar marks owned by the Grantor are
registered with
any governmental unit. The chief place of business and chief
executive office
and the office where it keeps its books and records concerning
the Accounts and
General Intangibles and the originals of all Chattel Paper,
Documents and
Instruments are located at its address set forth on the
signature page hereof.
All items of Equipment and Inventory existing on the date of
this Agreement are
located at the places specified on Schedule I hereto. The
Grantor will
immediately notify the Secured Party of any additional state in
which any item
of Inventory or Equipment is hereafter located. The Grantor will
from time to
time at the request of the Secured Party provide the Secured
Party with current
lists as to the locations of the Equipment and Inventory. The
Grantor will not
permit any Inventory, Equipment, Chattel Paper or Documents or
any records
pertaining to Accounts and General Intangibles to be located in
any state or
area in which, in the event of such location, a financing
statement covering
such Collateral would be required to be, but has not in fact
been, filed in
order to perfect the Security Interest. The Grantor will not
change its name or
the location of its chief place of business and chief executive
office unless
the Secured Party has been given at least 30 days prior written
notice thereof
and the Grantor has executed and delivered to the Secured Party
such Financing
Statements and other instruments required or appropriate to
continue the
perfection of the Security Interest.
Section 7. Rights to Payment. As of the date of execution of
this
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Security Agreement, the Accounts aged 60 days or less have a
value in excess of
US$1,000,000. Each Account, Chattel Paper, Document, General
Intangible and
Instrument constituting or evidencing Collateral is (or, in the
case of all
future Collateral, will be when arising or issued) the valid,
genuine and
legally enforceable obligation of the Account Debtor or other
obligor named
therein or in the Grantor's records pertaining thereto as being
obligated to pay
or perform such obligation. Without the Secured Party's prior
written consent,
the Grantor will not agree to any modifications, amendments,
subordinations,
cancellations or terminations of the obligations of any such
Account Debtors or
other obligors except in the ordinary course of business and in
amounts not
exceeding $1,000 per Account Debtor or other obligor in any
calendar year. The
Grantor will perform and comply in all material respects with
all its
obligations under any items included in the Collateral and
exercise promptly and
diligently its rights thereunder.
Section 8. Further Assurances; Attorney-in-Fact.
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8 (a) The Grantor agrees that from time to time, at its expense,
it 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 and protect the Security Interest
granted or
purported to be granted hereby or to enable the Secured Party to
exercise and
enforce its rights and remedies hereunder with respect to any
Collateral (but
any failure to request or assure that the Grantor execute and
deliver such
instrument or documents or to take such action shall not affect
or impair the
validity, sufficiency or enforceability of this Agreement and
the Security
Interest, regardless of whether any such item was or was not
executed and
delivered or action taken in a similar context or on a prior
occasion). Without
limiting the generality of the foregoing, the Grantor will,
promptly and from
time to time at the request of the Secured Party: (i) mark, or
permit the
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<PAGE>
Secured Party to mark, conspicuously its books, records, and
accounts showing or
dealing with the Collateral, and each item of Chattel Paper
included in the
Collateral, with a legend, in form and substance satisfactory to
the Secured
Party, indicating that each such item of Collateral and each
such item of
Chattel Paper is subject to the Security Interest granted
hereby; (ii) deliver
and pledge to the Secured Party, all Instruments and Documents,
duly indorsed or
accompanied by duly executed instruments of transfer or
assignment, with full
recourse to the Grantor, all in form and substance satisfactory
to the Secured
Party; (iii) execute and file such Financing Statements or
continuation
statements in respect thereof, or amendments thereto, and such
other instruments
or notices (including fixture filings with any necessary legal
descriptions as
to any goods included in the Collateral which the Secured Party
determines might
be deemed to be fixtures, and instruments and notices with
respect to vehicle
titles), as may be necessary or desirable, or as the Secured
Party may request,
in order to perfect, preserve, and enhance the Security Interest
granted or
purported to be granted hereby; and (iv) obtain waivers, in form
satisfactory to
the Secured Party, of any claim to any Collateral from any
landlords or
mortgagees of any property where any Inventory or Equipment is
located.
8 (b) The Grantor hereby authorizes the Secured Party to file
one or more
Financing Statements or continuation statements in respect
thereof, and
amendments thereto, relating to all or any part of the
Collateral without the
signature of the Grantor where permitted by law. A photocopy or
other
reproduction of this Agreement or any Financing Statement
covering the
Collateral or any part thereof shall be sufficient as a
Financing Statement
where permitted by law.
8 (c) The Grantor will furnish to the Secured Party from time to
time
statements and schedules further identifying and describing the
Collateral and
such other reports in connection with the Collateral as the
Secured Party may
reasona
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