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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"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,
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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
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hereof.
"Financing
Statement" shall have
the meaning given to such term in Section
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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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"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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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
reasonably request, all in reasonable detail and in form and substance
rea
