EXHIBIT 10.1(ii)
DEED OF COVENANTS
THIS DEED OF COVENANTS, dated as of February 4, 2005, is entered into
by LONG DISTANCE BILLING SERVICES, INC., a Nevada corporation (the "Borrower"),
in favor of NS8 CORPORATION, a Delaware corporation (the "Lender") as an
inducement to the Lender making a $200,000 term loan (the "Term Loan") to the
Borrower and on the understanding that the Lender is making such loan in
reliance.
ARTICLE I
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COVENANTS
Until the $200,000 Term Note dated February 3, 2005, and all of the
Borrower's other obligations to the Lender under the Security Agreement dated
February 3, 2005, both in relation to the Term Loan, shall have been paid and
satisified in full, unless the Lender shall otherwise consent in writing:
Section 1.1 Use of Proceeds. The Borrower will use the proceeds of the
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Term Loan only for working capital, to pay outstanding tax liabilities and other
costs and expenses approved by the Lender in writing.
Section 1.1 Merger. The Borrower will not merge or consolidate or enter
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into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution).
Section 1.2 Sale of Assets. The Borrower will not, and will not permit any
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subsidiary to, sell, transfer, lease or otherwise convey all or any substantial
part of its assets except for sales and leases of inventory in the ordinary
course of business.
Section 1.3 Dividends. The Borrower will not pay any dividends or
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otherwise make any distributions on, or redemptions of, any of its outstanding
stock.
Section 1.4 Capital Expenditures. The Borrower will not, and will not
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permit any subsidiary to, make expenditures for fixed or capital assets in an
amount exceeding $25,000 on a consolidated basis in any fiscal year.
Section 1.5 Investments. The Borrower will not, and will not permit any
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subsidiary to, make any loans, advances or extensions of credit to any other
Person (except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms)
Section 1.6 Indebtedness. The Borrower will not, and will not permit any
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subsidiary to, borrow any money or issue any bonds, debentures or other debt
securities or otherwise become obligated on any interest-bearing indebtedness
except for the Term Loan.
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Section 1.7 Contingent Obligations. The Borrower will not, and will not
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permit any subsidiary to, guarantee or otherwise become liable on the
indebtedness of any other person.
ARTICLE II
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MISCELLANEOUS
Section 2.8 Waivers, etc. No failure on the part of the Lender or the
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holder of the Term Note to exercise and no delay in exercising any power or
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The rights and remedies of
the Lender hereunder are cumulative and not exclusive of any right or remedy the
Lender otherwise has.
Section 2.9 Notices. Except when telephonic notice is expressly
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authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed.
SECTION 2.10 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION
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AND ENFORCEABILITY OF THIS AGREEMENT AND THE TERM NOTE SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF WASHINGTON, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF.
SECTION 2.11 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER, THIS
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AGREEMENT AND THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR WASHINGTON STATE
COURT SITTING IN KING COUNTY; AND THE BORROWER CONSENTS TO THE JURISDICTION AND
VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO JURISDICTION AND VENUE
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
SECTION 2.12 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
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IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE AND ANY OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 2.13 Counterparts. This Agreement may be executed in any number
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of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LONG DISTANCE BILLING SERVICES, INC.
By /s/ Xxxxxx Xxxxx
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Print Name Xxxxxx Xxxxx
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Title President & CEO
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