8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

_____________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  November 19, 2012

TUCOWS INC.

(Exact Name of Registrant Specified in Charter)

  Pennsylvania (State or Other Jurisdiction of Incorporation)   0-28284 (Commission File Number)   23-2707366 (I.R.S. Employer Identification No.)

96 Mowat Avenue, Toronto, Ontario, Canada, Suite 200	M6K 3M1
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:   (416) 535-0123

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01          Entry into a Material Definitive Agreement.

On November 19, 2012, Tucows Inc. (the “Company”), through its wholly-owned subsidiary Tucows.com Co. (the “Borrower”), amended its existing credit facility (as amended, the “Amended Credit Facility”) with the Bank of Montreal (“BMO” or the “Bank), the terms of which are more fully described in Item 2.03 below.  The effectiveness of the amendment is subject to the finalization of revised loan and account documentation between the Company and the Bank.

Item 2.03          Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of Registrant.

Existing Credit Facility

The terms of the Company’s existing credit facility provided for (i) an aggregate of US$8,000,000 in funds available through a demand loan revolving facility (the “2011 DLR Loan”) and a demand loan revolving, reducing facility (the “2011 DLRR Loan”, and together with the 2011 DLR Loan, the “2011 Demand Loan Facilities”) to finance repurchases shares of the Company’s common stock (“Company Common Stock”) and for certain permitted acquisitions, (ii) a US$3,500,000 Treasury Risk Management Facility (the “Treasury Risk Management Facility”) and (iii) a US$1,000,000 operating demand loan (the “Existing Operating Demand Loan”) to fund operational requirements.

The 2011 Demand Loan Facilities were governed by the terms of the Offer Letter, dated as of July 27, 2011, by and between the Borrower and the Bank (the “2011 Offer Letter”), which have been described more fully in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 3, 2011, and such description is incorporated herein by reference. The Treasury Risk Management Facility is governed by the terms of the Loan Agreement, dated as of July 25, 2007 (as amended from time to time, the “2007 Loan Agreement”) by and among the Company, the Borrower and certain subsidiaries of the Company named therein (the “Guarantors”), and the Financing Commitment, dated as of July 19, 2007, by and between the Borrower and Bank (the “Term Sheet” and together with the 2007 Loan Agreement, as amended from time to time, the “2007 Loan Documents”).  The terms of the 2007 Loan Documents have been described more fully in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007, and such description is incorporated herein by reference.  The Existing Operating Demand Loan is governed by the terms of the Operating Loan Agreement with the Bank (the “2010 Loan Agreement”), which such terms are described in the Offer Letter, dated as of August 30, 2010, by and between the Company and the Bank (the “2010 Offer Letter” and together with the 2010 Loan Agreement, the “2010 Loan Documents”). The terms of the 2010 Loan Documents have been described more fully in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 13, 2010, and such description is incorporated herein by reference.

Amended Credit Facility

Overview

On November 19, 2012, the Company and the Bank amended its credit facility, subject to the finalization of revised loan and account documentation.  The Amended Credit Facility continues to provide for (i) the Treasury Risk Management Facility and (ii) the Existing Operating Demand Loan.  Under the Amended Credit Facility, the terms of the 2011 DLR Loan and the 2011 DLLR have been amended to provide an aggregate of US$14,000,000 in funds available through a demand loan revolving facility (the “2012 DLR Loan”) and a demand loan revolving, reducing facility (the “2012 DLRR Loan”, and together with the 2012 DLR Loan, the “2012 Demand Loan Facilities”).   Advances under the 2012 Demand Loan Facilities are to be used to finance repurchases of Company Common Stock and for certain permitted acquisitions.  The 2012 Demand Loan Facilities are governed by the terms of the Offer Letter, dated as of November 19, 2012, by and between the Borrower and the Bank (the “2012 Offer Letter”).

Treasury Risk Management Facility

The Amended Credit Facility continues to provide for a US$3,500,000 settlement risk line to assist the Borrower with hedging U.S. dollar exposure through foreign exchange forward contracts and/or currency options.  The Borrower may enter into such agreements at market rates with terms not to exceed 18 months.

Existing Operating Demand Loan

Under the Amended Credit Facility, the Borrower has agreed to continue to pay to the order of the Bank any outstanding principal amounts under the Existing Operating Demand Loan plus interest at a rate of BMO U.S. Base Rate plus 1.25%.  Interest is payable monthly in arrears with any borrowing under the Existing Operating Demand Loan fluctuating widely with periodic clean-up, at a minimum on an annual basis.  The Borrower has also agreed to pay to the Bank a monthly monitoring fee of US$500.The Existing Operating Demand Loan is payable on demand at any time, at the sole discretion of the Bank, with or without cause, and the Bank may terminate the Existing Operating Demand Loan at any time.   TheBorrowerintends to use the Existing Operating Demand Loan to meetitsoperating requirements.

2012 Demand Loan Facilities

Under the terms of the Amended Credit Facility, the 2011 Demand Loans have been amended to provide an aggregate of US$14,000,000 in funds available through the 2012 Demand Loan Facilities, which consist of the 2012 DLR Loan and the 2012 DLRR Loan.  The 2012 DLR Loan accrues interest at the BMO U.S. Base Rate plus 1.25%.   The Borrower may elect to pay interest on the 2012 DLRR Loan either at the BMO U.S. Base Rate plus 1.25% or LIBOR plus 2.50%. Aggregate advances under the 2012 Demand Loan Facilities may not exceed US$14,000,000 (amended from US$8,000,000) and no more than US$2,000,000 of such advances may be used to finance repurchases of Company Common Stock, provided that a one-time repurchase of Company Common Stock of up to US$10,000,000 may be made via Dutch Auction which must be completed by March 31, 2013. The 2012 Demand Loan Facilities are subject to an undrawn aggregate standby fee of 0.20% following the first draw, which such fee is payable quarterly in arrears.

Repayment of advances under the 2012 DLR Loan consists of interest only payments made monthly in arrears and prepayment is permitted without penalty.  The outstanding balance under the 2012 DLR Loan as of December 31st of each year is to be fully repaid within 30 days of December 31st through an equivalent advance made under the 2012 DLRR Loan. Advances under the 2012 DLRR Loan will be made annually and solely for such purpose.  Each advance under the 2012 DLRR Loan is to be repaid in equal monthly principal payments plus interest, over a period of four years from the date of such advance.

Advances under the 2012 DLR Loan may be used to finance acquisitions that are approved by the Bank and meet the requirements set forth in the 2012 Offer Letter and to finance repurchases of Company Common Stock.  Multiple draws may be made on the 2012 DLR Loan in any given year; provided, however, that the Borrower may draw on the 2012 DLR Loan only if, at the time of the draw, (i) no event of default is occurring or will occur as a result of the transaction and (ii) the Borrower is in compliance with the covenants set forth in the 2012 Offer Letter. Outstanding amounts under the 2012 Demand Loan Facilities are payable on demand at any time, at the sole discretion of the Bank, with or without cause, and the Bank may terminate these loan facilities at any time.  

Amended Credit Facility – General Terms and Conditions

Under the Amended Credit Facility, the Borrower will no longer be required to make annual cash sweep payments to the Bank; which payments were previously applied to amounts outstanding under the 2011 DLRR Loan in inverse order of maturity.

All obligations under the Amended Credit Facility are guaranteed by the Company pursuant to a Guaranty, dated July 25, 2007 (the “Guaranty”), executed by the Company in favor of the Bank, and are secured by a security interest in substantially all of the Company’s assets granted under the Security Agreement (the “Security Agreement”), dated July 25, 2007, executed by the Company in favor of the Bank. Each other Guarantor has similarly guaranteed and secured the Borrowers’ obligations and have entered into similar Guaranty and Security Agreements in favor of the Bank.

Pursuant to the Amended Credit Facility, the Borrower has agreed to comply with certain customary non-financial covenants regarding maintenance of insurance; payment of taxes; disposition of major assets; compliance with statutes and with environmental standards; reporting requirements; timely provision of notices of default; absence of material judgments; access to books and records; prohibition on assumption of additional debt or guarantee obligations by the Borrower, subject to certain exceptions for capital expenditures; and prohibition on the payment of dividends.

The Amended Credit Facility also requires that Borrower comply with the following financial covenants, which are to be calculated on a rolling four quarter basis: (i) Maximum Total Funded Debt to EBITDA of 2.00:1 (amended from 2.50:1); and (ii) Minimum Fixed Charge Coverage of 1.20:1.  Further, the Borrower’s Maximum Annual Capital Expenditures cannot exceed US$3,600,000 per year, which such limit will be reviewed on an annual basis.

The Amended Credit Facility prohibits the Borrower, without the prior written consent of the Bank acting reasonably, from, among other things: (i) amalgamating, merging or reorganizing with any corporation; (ii) selling, assigning or otherwise disposing of any fixed asset, machinery, equipment or immovable property subject to the Bank’s security interest; (iii) creating, assuming or permitting to exist any, security interest or other encumbrances on any of its assets ranking prior to or pari passu with or after the assets secured under the Security Agreement, except for permitted encumbrances; and (iv) incurring any new debt other than the Loan.

Under the Amended Credit Facility, the acquisition of any business or entity requires the prior written consent of the Bank.  In addition, any such acquisitions are permitted only so long as (i) no default or event of default exists; (ii) the acquisition is related to the Borrower’s existing lines of business (but may be in a new vertical market or new jurisdiction); (iii) the acquisition is not hostile; and (iv) the Borrower is in compliance with all covenants, representations and warranties under the 2012 Offer Letter and completion of the acquisition will not cause the Borrower to not be in compliance with such covenants, representations and warranties.

The foregoing summary of the Amended Credit Facility, including the 2012 Offer Letter, 2011 Offer Letter, 2010 Loan Agreement, 2010 Offer Letter, 2007 Loan Agreement, Guaranty Agreement and Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of each of the 2012 Offer Letter, 2011 Offer Letter, 2010 Loan Agreement, 2010 Offer Letter, 2007 Loan Agreement, Guaranty and Security Agreement, which are included as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.7, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 9.01          Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No. Description

10.1 Offer Letter, dated November 19, 2012, between Tucows.com Co. and the Bank of Montreal.

10.2 Offer Letter, dated July 27, 2011, between Tucows.com Co. and the Bank of Montreal (incorporated herein by reference to Exhibit 10.1 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 3, 2011).

10.3 Operating Loan Agreement, dated September 10, 2010, between Tucows.com Co. and the Bank of Montreal (incorporated herein by reference to Exhibit 10.1 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 13, 2010).

10.4 Offer Letter, dated August 30, 2010, between Tucows.com Co. and the Bank of Montreal (incorporated herein by reference to Exhibit 10.2 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 13, 2010).

10.5 Loan Agreement, dated as of June 25, 2007, by and among Tucows.com Co., Tucows (Delaware) Inc., Tucows Inc., Mailbank Nova Scotia Co., Tucows Domain Holdings Co., Innerwise, Inc. and Bank of Montreal (incorporated herein by reference to Exhibit 10.1 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007).

10.6 Guaranty, dated July 25, 2007, by Tucows Inc. in favor of the Bank of Montreal (incorporated herein by reference to Exhibit 10.2 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007).

10.7 Security Agreement, dated July 25, 2007, by Tucows Inc. in favor of the Bank of Montreal (incorporated herein by reference to Exhibit 10.3 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TUCOWS INC.
By:	/s/ Michael Cooperman
	Michael Cooperman
	Chief Financial Officer

Dated: November 21, 2012

Exhibit Index

Exhibit No. Description

10.1 Offer Letter, dated November 19, 2012, between Tucows.com Co. and the Bank of Montreal.

10.2 Offer Letter, dated July 27, 2011, between Tucows.com Co. and the Bank of Montreal (incorporated herein by reference to Exhibit 10.1 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 3, 2011).

10.3 Operating Loan Agreement, dated September 10, 2010, between Tucows.com Co. and the Bank of Montreal (incorporated herein by reference to Exhibit 10.1 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 13, 2010).

10.4 Offer Letter, dated August 30, 2010, between Tucows.com Co. and the Bank of Montreal (incorporated herein by reference to Exhibit 10.2 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 13, 2010).

10.5 Loan Agreement, dated as of June 25, 2007, by and among Tucows.com Co., Tucows (Delaware) Inc., Tucows Inc., Mailbank Nova Scotia Co., Tucows Domain Holdings Co., Innerwise, Inc. and Bank of Montreal (incorporated herein by reference to Exhibit 10.1 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007).

10.6 Guaranty, dated July 25, 2007, by Tucows Inc. in favor of the Bank of Montreal (incorporated herein by reference to Exhibit 10.2 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007).

10.7 Security Agreement, dated July 25, 2007, by Tucows Inc. in favor of the Bank of Montreal (incorporated herein by reference to Exhibit 10.3 to Tucows Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 31, 2007).

EX-10.1

Exhibit 10.1

19 November 2012

BORROWER:	Tucows.com Co. (Nova Scotia)
GUARANTORS:	Corporate Guarantee signed by Tucows (Delaware) Inc, and Tucows Inc.,
LENDER:	Bank of Montreal
CURRENCY:	All amounts herein are expressed in Canadian Dollars unless otherwise specified.
Credit Facility #1	Demand Loan Revolving (“DLR”)
(R)
Amount	Advances under Fac. 1 & 2 not to exceed USD$14,000,000 (CAD $14,854,000 @ 1.061)
Loan Purpose	The Facility shall  be used by the Borrower for the following: i.To finance Permitted Acquisitions; and ii.To finance repurchase of shares of the Borrower Provided that the Borrower is at such time within the covenants and no event of default is occurring or will occur as a result of such a transaction.
Availability	US Base Rate based loans Drawdowns will be available in multiple draws limited to the loan purpose stated above in any given year. All balances outstanding under this Facility shall be fully repaid within 30 days of December 31st of each year end (that being the Company’s fiscal year end) through an equivalent advance under Facility 2. One time funded share repurchase of up to $10,000,000 via Dutch Auction to be completed by [March 31, 2013]; at all other times, funded share repurchases are not to exceed $2,000,000 at any time within the global $14,000,000 authorization for Facilities 1 & 2.
Interest Rate	U.S. Base Rate + 1.25%
Repayment	Interest only payments made monthly in arrears.
Standby Fees:	0.20%. Payable on the undrawn available aggregate under Facility 1&2. This fee is payable quarterly in arrears.
Facility #2	Demand Loan Revolving, Reducing (DLRR)
Amount	Advances under Fac. 1 & 2 not to exceed USD$14,000,000 (CAD $14,854,000 @ 1.061)
Loan Purpose	To term out acquisition advances and the Borrower’s share repurchases previously funded under Facility #1.
Availability	Advances made annually will be for the sole reason of terming out the outstanding advances under Facility #1 within 30 days of December 31st of each year. At the Borrower’s option by way of: i.US Base Rate ii.LIBOR with terms of 3 or 6 months subject to availability of funds with minimum draws of USD $100,000 and multiples of $50,000 thereafter. Repayment permitted only on rollover date.

19 November 2012

Repayment	Equal monthly principal payments plus interest.
Voluntary Repayment	Loans bearing interest based on US$ Base Rate may be prepaid at any time without penalty with 1-3 days written notice. LIBOR cannot be prepaid.
Amortization	48 months
Interest Rate	i.US Base Rate + 1.25% ii.LIBOR + 2.50%
CREDIT FACILITY #3 (R)	Operating Demand Loan (“ODL”) &/or Commercial Letter of Credit (“CLC”)
AMOUNT:	US$1,000,000 * 1.061 (Nominal Conversion factor) = CAD$1,061,000
	CLC: Max 1 yr term (subject to renewal). Standard terms and fees to apply.
LOAN PURPOSE:	Operating Requirements
AVAILABILITY:	To be available in Canadian or US Dollar equivalent. Not subject to Margin.
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 + 1.25% 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.
Facility #4 (R)	Treasury Risk Management Facility.
Amount	US$3,500,000 * 1.061 (Nominal Conversion factor) = CAD$3,714,000
Loan Type:	Settlement riskline to assist with hedging US$ exposure via FEFC and / or Currency options. Maximum 18 month contracts at market rates. Proper facility parameters in place with regards to deemed risk, replacement risk, and settlement risk confirmed by FX Group BMO Capital Markets.
LOAN PURPOSE:	To manage / hedge exposure to US Dollar currency fluctuations.
REMUNERATION:	Priced at market rates as advised by BMO Capital Markets
SETTLEMENT RISK	$3,500,000 Settlement Risk line for settlement of FEFC; No draws permitted. Represents the maximum face value of maturing FEFC on any given day.

Note: Applicable interest rates shall increase by 200bps upon the occurrence of and during continuance of an event of default.

Note:  All interest rates and fees shall be calculated on a 365 or 366 day basis as appropriate. All LIBOR advances shall be calculated on a 360 day year with interest payments payable the earlier of note maturity and quarterly.

19 November 2012

Structuring Fee A fee of $25,000 shall be payable at Closing.

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 (d) compliance with laws including environmental laws and regulations and other environmental matters, and (e) payment of taxes.

Consolidated financial statements of Tucows Inc. must reflect, at all times, no less than 85% of assets and EBTIDA of the borrower or its secured subsidiaries.

Conditions Precedent to Current Closing

1.        Completion of amended and revised loan and account documentation;

2.        Payment of fees and expenses;

3.        No material adverse change since the date of the latest financial statements provided to the Lender; and

4.        Such other conditions as the Lender may reasonably request.

Conditions Precedent for Funding under Facility #1

1.        With respect to any acquisition:

o   Description of acquired business, business rational for acquisition, timing and pro-forma covenant calculations indicating the Borrower is in compliance with all financial covenants based on the most recent quarterly financial statements both before and after making subject draw, and any other financial information the lender may require;

o   Acquisitions must be accretive to EBITDA and not deemed hostile by the target;

o   Any indebtedness of the target is repaid upon closing and all encumbrances discharged (subject to permitted baskets);

o   First ranking security (GSA) to be provided over the assets of any target acquisition within 30 days of acquisition closing;

o   Such other documents the Lender may reasonably request to ensure the Bank is not at a legal, environmental, reputational or financial risk.

2.        No material adverse change in the business, operations, properties, or prospects of the Borrower taken as a whole, or in the rights and remedies of the Lender;

3.        All representations and warranties being true and correct in all material respects;

4.        No material adverse change;

5.        Timely receipt of notice of borrowing.

Permitted Acquisitions

Acquisitions must be permitted with the prior written consent of the Bank** provided that:

i.        No default or event of default exists;

ii.        Acquisition is related to the Borrower’s existing lines of business (but may be in a new vertical market or new jurisdiction);

iii.        Acquisition is not hostile;

iv.        Borrower is in compliance with all covenants and representations and warranties under the Offer Letter and will remain in compliance as a result of the completion of the acquisition.

19 November 2012

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. Signed by the Borrower quarterly compliance certificate will confirm all financial covenant positions.

Annually (within 120 days of fiscal year end):

1.        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;

2.        Signed compliance certificate confirming all financial covenant positions;

3.        Certified aged accounts receivable and accounts payable lists;

4.        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.

Accounting Terms GAAP: Except as otherwise expressly provided herein, all terms of accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. All calculations of the components of financial information for the purposes of determining compliance with the financial ratios and financial covenants contained herein shall be made on a basis consistent with GAAP in existence as at the date of this Agreement and used in preparation of the consolidated financial statements of the Borrower. Upon adoption by the Borrower of International Financial Reporting Standards (IFRS), or in event of a change in GAAP, the Borrower and the Bank shall negotiate in good faith to revise (if appropriate) such ratios and covenants to give effect to the intention of the parties under this agreement at the closing date, and any new ratio or covenant shall be subject to the approval of the Bank.  In the event that such a negotiation is unsuccessful, all calculations thereafter made for the purpose of determining compliance with the financial ratios and financial covenants contained herein shall be made on a basis consistent with GAAP in existence at the closing date.

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 Total Funded Debt to EBITDA: 2.00:1.

2.        Minimum Fixed Charge Coverage: 1.20:1.

3.        Maximum Annual Capital Expenditures capped at $3,600,000 per annum, based on management forecast, and to be reviewed on an annual basis. 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.

Definitions: EBITDA = Earningsas 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).

19 November 2012

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 PMSIs 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 cash dividends paid and any other cash distributions, divided by the aggregate of fixed principal repayments and cash interest expenses payable in respect of Total Funded Debt.

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.  The Borrower shall comply with all material laws (including environmental) and maintain its assets and property in good working condition and maintain satisfactory insurance.

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 if any contemplated amalgamation or merger meets the criteria as defined within Permitted Acquisitions.

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.

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. All permitted distributions may be made annually on the basis of the most recent annual Financial Statements of the Borrower;

Negative Pledge. Except for permitted encumbrances, the Borrower and/or Corporate Guarantors shall not create, assume or permit to exit 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.

19 November 2012

Security:

Currently Held:

1.   LF130 Ontario Security Agreement (P.P.S.A.). Signed by Tucows.com Co.PPSA file No. 637354656.

2.   Guarantee (Guaranty) for Indebtedness of a Corporation signed by Tucows ( Delaware) Inc.

3.   Security Agreement by Tucows ( Delaware) Inc.

4.   Guarantee (Guaranty) for Indebtedness of a Corporation.  Signed by Tucows Inc.

5.   Security Agreement by Tucows Inc.

6.   Guarantee for Indebtedness of a Corporation. Signed by Mailbank Nova Scotia Co.

7.   LF 130 General Security Agreement signed by Mailbank Nova Scotia Co.

8.   Loan Agreement signed by Tucows.com Inc. Borrower and Bank.

9.   LF 44 Guarantee for indebtedness of a Corporation signed by Tucows Domain Holdings Co. in favour of Tucows.com Co.

10.   LF130 Ontario Security Agreement. Registration File No. 637507458.

11.   Guarantee (Guaranty) Indebtedness of a Corporation. Signed by Innerwise

12.   Security Agreement by Innerwise Inc.

13.   Estoppel Letter from HSBC to Bank of Montreal.

14.   Assignment of fire insurance policy.

15.   Solicitors favourable letter of opinion.

16.   Environmental checklist/indemnity (copy only).

17.   Copy of final executed purchase and sale agreement.

18.   Confirmation of ICANN Accreditation.

19.   LF 823 U.S.Dollars base rate Loans-Promissory Note.

20.   Executed Purchase and Sale Agreement.

21.   Executed Offer Letter.

22.   Letter of Acknowledgement. Tucows ( Delaware) Inc, Tucows Inc, to sign indicating current corporate guarantee to support increased advances.

23.   Letter of Acknowledgement outlining the temporary waiver of the cap on share repurchases until March 31, 2011.

24.   Promissory Notes in the amount of $4MM.

To be obtained:

1.   Relevant documentation reflecting increase in corporate guarantee to $19,269M.

2.   Guarantee in a form acceptable to the Lender for any subsidiaries not included in current security package: Ting Inc. (Delaware).

3.   Signed updated terms sheet.

Expiration: This term sheet shall be open for Acceptance by the Borrower until November 30, 2012.  At that time, the Lender shall have no obligation to fund the increases to Facilities 1 and 2 proposed herein.

Evidence of  obligations (noteless advances)

The Lender may, but shall not be obliged to, request the Borrower to execute and deliver from time to time such promissory notes as may be required in order to evidence its Obligations in connection with the Facilities.  The Lender shall open and maintain, in accordance with its usual practice, an account or accounts evidencing such Obligations, and the information entered in such accounts shall be deemed to be prima facie correct.

19 November 2012

Bank of Montreal

___________________________     ____________________________

Per:                                                      Per:

         Director                                               Senior Manager

This Terms and Conditions is accepted as presented

this ________ day of ________________, 2012

Tucows.com Co.

Per: ___________________________________

Name/Title

Per: ___________________________________

Name/Title