MOVABLE HYPOTHEC AND GENERAL SECURITY AGREEMENT

 

This Movable Hypothec and General Security Agreement (the “Agreement”), dated as
of July 1, 2016, is entered into between Quest Solution Canada Inc., a Canadian
corporation (“Quest Solution Canada”), Quest Exchange Ltd., a Canadian
Corporation (“Quest Exchange”), Quest Solution, Inc., a Delaware corporation
(“Quest Solution”), Bar Code Specialties, Inc., a California corporation (“Bar
Code”), and Quest Marketing, Inc., an Oregon corporation (“Quest Marketing”)
(each, a “Debtor” and collectively, the “Debtors”) in favor of ScanSource, Inc.,
a South Carolina Corporation (“Secured Party”).

 

RECITALS:

 

Secured Party and its subsidiaries and affiliates have and may in the future,
from time to time, extend credit to one or more Debtors, including the extension
of credit in the form of sales of inventory, equipment and services on account.
As a condition to the extensions of such credit, Secured Party is requiring that
the Debtors execute this Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1. Security Interest and Hypothec. As general and continuing security for the
payment and performance of all Obligations (as defined in Section 3 below), each
Debtor hereby grants to Secured Party a security interest in, and a hypothec on,
all of the Debtor’s present and after-acquired undertaking and property, both
real and personal (movable), tangible (corporeal) and intangible (incorporeal)
(collectively called the “Collateral”), and, as further general and continuing
security for the payment and performance of the Obligations, the Debtor hereby
also assigns the Collateral (other than trademarks) to Secured Party and
mortgages and charges the Collateral as and by way of a fixed and specific
mortgage and charge to Secured Party. Without limiting the generality of the
foregoing, the Collateral includes all right, title and interest that each
Debtor now has or may hereafter have or acquire in any manner whatsoever
(including by way of amalgamation) in all property of the following kinds:

 

  (a) Receivables: all debts, accounts, claims and choses in action for monetary
amounts (collectively, the “Receivables”);         (b) Inventory: all inventory
of whatever kind and wherever situated (collectively, the “Inventory”);        
(c) Equipment: all machinery, equipment, fixtures, furniture, plant, vehicles
and other tangible personal property that are not Inventory (collectively, the
“Equipment”);         (d) Chattel Paper: all chattel paper;         (e)
Documents of Title: all warehouse receipts, bills of lading and other documents
of title, whether negotiable or not;         (f) Securities: all shares, bonds,
debentures, and other securities (collectively, the “Securities”);

 

 

 

 

  (g) Intangibles: all intangibles not otherwise described in this Section
including, but not limited to, all goodwill, patents, trademarks, copyrights and
other intellectual property;         (h) Instruments and Money: all bills,
notes, cheques and other instruments and all coins or bills or other medium of
exchange adopted for use as part of the currency of Canada or of any foreign
government;         (i) Books, Records, Etc.: all books, invoices, documents and
other records in any form evidencing or relating to the Collateral;         (j)
Real Property: all real and immovable property, both freehold and leasehold,
together with all buildings and fixtures (collectively, the “Real Property”),
and all rights under any lease or agreement relating to Real Property;        
(k) Substitutions, Etc.: all replacements of, substitutions for and increases,
additions and accessions to any of the property described in this Section; and  
      (l) Proceeds: all proceeds of any Collateral in any form derived directly
or indirectly from any dealing with the Collateral or that indemnifies or
compensates for the loss of or damage to the Collateral;

 

provided, that the said grant of a security interest, hypothec, assignment,
mortgage and charge will not render Secured Party liable to observe or perform
any term, covenant or condition of any agreement, document or instrument to
which each Debtor is a party or by which it is bound.

 

The hypothec created by each Debtor hereunder is granted for the sum of Fifty
Million and 00/100 Dollars ($50,000,000.00) in lawful currency of Canada, with
interest thereon at the rate of eighteen percent (18%) per annum from the date
of this Agreement.

 

2. Attachment of Security Interest. Each Debtor acknowledges that value has been
given and agrees that the security interest granted hereby attaches upon the
execution of this Agreement by each Debtor (or, in the case of any
after-acquired property, at the time of acquisition by each Debtor of any rights
therein).

 

3. Obligations Secured. This Agreement secures the payment and performance of
all indebtedness, liabilities and obligations of the Debtors or any of their
respective subsidiaries and affiliates (collectively with the Debtors, the
“Obligors”) to Secured Party, now existing and arising prior to the date hereof,
including but not limited to amounts arising from the sale of goods and services
prior to the date hereof by Secured Party to any Obligor and all obligations
arising under or in connection with that certain Secured Promissory Note, dated
of even date herewith, made by Debtors in favor of Secured Party in the original
principal amount of Four Hundred Eighty-Three Thousand One Hundred Seventy-Three
and 60/100 Canadian Dollars ($483,173.60) (as amended or modified from time to
time, the “CAD Note”), and that certain Secured Promissory Note made by Debtors
in favor of Secured Party in the original principal amount of Twelve Million
Four Hundred Ninety-Two Thousand One Hundred Thirty-Six and 51/100 Dollars
($12,492,136.51) (as amended or modified from time to time, the “USD Note” and,
together with the CAD Note, the “Notes”), and all costs and expenses of Secured
Party in collecting any such obligations or enforcing its rights or remedies
hereunder (collectively, the “Obligations”).

 

4. Nature of Hypothec. The hypothec granted herein does not constitute and shall
not constitute nor be construed as a floating hypothec within the meaning of
Article 2715 of the Civil Code of Quebec. The hypothec granted herein is
continuing security and will subsist notwithstanding any fluctuation or
repayment of the obligations hereby secured. Each Debtor shall be deemed to
obligate itself again, as provided in Article 2797 of the Civil Code of Quebec,
with respect to any future obligation hereby secured.

 

 

 

 

5. Exception for Contractual Rights. The security interest granted hereby does
not and will not extend to, and Collateral will not include any agreement,
right, franchise, licence or permit (the “contractual rights”) to which each
Debtor is a party or of which each Debtor has the benefit, to the extent that
the creation of the security interest herein would constitute a breach of the
terms of or permit any person to terminate the contractual rights, but each
Debtor must hold its interest therein in trust for Secured Party and will assign
such contractual rights to Secured Party forthwith upon obtaining the consent of
the other party thereto. Each Debtor agrees that it will, upon the request of
Secured Party, use all commercially reasonable effort to obtain any consent
required to permit any contractual rights to be subjected to the security
interest.

 

6. Real Property. With respect to (and only to) Real Property, the security
granted hereby is constituted by way of floating charge, but will become a fixed
charge upon the earlier of (i) the Obligations becoming immediately payable, or
(ii) the occurrence of any other event that by operation of law would result in
such floating charge becoming a fixed charge. The assignment, mortgage and
charge granted hereby will not extend to the last day of the term of any lease
or agreement relating to Real Property, but each Debtor will hold such last day
in trust for the Secured Party and, upon the enforcement by Secured Party of its
security, will assign such last day as directed by Secured Party.

 

7. Representations and Warranties. Each Debtor hereby represents and warrants to
Secured Party that:

 

  (a) the chief executive office and the registered office of each Debtor, and
the office where such Debtor keeps its books & records relating to Receivables,
are located at the addresses specified in Exhibit “A”;         (b) the
Inventory, Equipment and Securities of each Debtor are located in the provinces
or states specified in Exhibit “A”, except for goods in transit or on lease or
consignment; and         (c) the Collateral of each Debtor is the sole property
of such Debtor free from any liens, charges, hypothecs, security interests or
other encumbrances.

 

8. Change of Name/Status and Notice of Changes. Without the prior written
consent of Secured Party’s Vice President of Worldwide Reseller Financial
Services or Senior Vice President of Finance and Principal Accounting Officer
(individually, “Authorized Representative”), no Debtor shall change its name,
change its corporate form, status, chief executive office, registered office or
domicile, use any trade name or engage in any business not reasonably related to
its business as presently conducted. Each Debtor shall provide an advance notice
of at least five (5) business days to Secured Party’s Authorized Representative
of (i) any material change in the Collateral, (ii) the intent to change any
Debtor’s name, trade name, corporate form, status, chief executive office,
registered office, domicile, residence or location, (iii) a material change in
any material matter warranted or represented by any Debtor in this Agreement, or
in any of the loan documents furnished to Secured Party pursuant to or in
connection with this Agreement, (iv) the relocation of any Inventory, Equipment
or Securities of such Debtor from the provinces specified in Exhibit “A” with
respect to such Debtor to provinces not mentioned in Exhibit “A” with respect to
such Debtor, and (v) the occurrence of an Event of Default (hereinafter
defined). Each Debtor agrees that from time to time, at the expense of Debtors,
such Debtor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest and hypothec granted or purported to be granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.

 

 

 

 

9. Creation/Formation of New Entity. In the event that any of the Debtors create
or form any new entity, whether a direct or indirect subsidiary, such new entity
shall execute a joinder to become party to this Agreement.

 

10. Filing and Registration. Each Debtor authorizes Secured Party to prepare,
file and register any financing statements, financing change statements,
registration applications, other amendments and renewals covering the Collateral
and any other necessary documents, whenever and wherever determined by Secured
Party and each Debtor hereby ratifies any financing statement filed previously
by Secured Party. Each Debtor will deliver such instruments of future assignment
or assurance, and such other agreements, as Secured Party may from time to time
request to carry out the intent of this Agreement, and will join with Secured
Party in executing any documents in form satisfactory to Secured Party, and
hereby authorizes Secured Party to sign for such Debtor, or to file without
signature, any financing statements, amendments and other documents and
instruments from time to time as Secured Party may deem advisable, and pay any
cost of filing the same, including all recordation, transfer, indebtedness and
other taxes and fees, deemed advisable by Secured Party.

 

11. Maintenance and Insurance. Each Debtor shall maintain the Collateral in good
condition and repair and shall pay and timely discharge all taxes, levies, and
other impositions levied thereon, and all rent due on premises where any of the
Collateral may be located. Each Debtor shall maintain insurance on all
Collateral against any loss damage in amounts which are commercially reasonable.
All proceeds of such insurance shall be applied to reduce the Obligations
secured hereunder. All insurance policies must name Secured Party as an
additional insured and loss payee thereof, as Secured Party’s interests may
appear, and must provide that the insurer will give Secured Party at least 15
days written notice of intended cancellation or non-renewal. At Secured Party’s
request, each Debtor must furnish Secured Party with evidence satisfactory to
Secured Party that the required insurance coverage is in effect.

 

12. Inspection and Reports. Upon five (5) days advance written notice, and at
any time after any default under this Agreement, each Debtor shall allow Secured
Party, by or through any of its agents, to examine and inspect the Collateral
wherever located and all books, records and documentation with respect thereto,
and to make copies or extracts from such books, records and documentation as
Secured Party may deem to be advisable.

 

In addition to the above:

 

  i. Annual Financial Statements. Debtors shall deliver to Secured Party, within
one hundred twenty (120) days after the end of each fiscal year, Certified
Public Accountant prepared and audited financial statements reflecting its
operations during such fiscal year, which shall include, without limitation, a
balance sheet, profit and loss statement, and a statement of cash flow, with
supporting schedules and management notes, all prepared on a consolidated and
consolidating basis, in reasonable detail, and in conformity with Generally
Accepted Accounting Principles (“GAAP”) and certified to its correctness by the
Debtors’ principal financial officer.         ii. Annual Monthly Budgeted
Financial Statements. Debtors shall deliver to Secured Party, within sixty (60)
days after the end of each fiscal year, management prepared budgeted financial
statements with respect to Debtors and their subsidiaries and/or affiliates
reflecting their consolidated projected monthly operations for the current
fiscal year, which shall include, without limitation, a balance sheet, profit
and loss statement, and a statement of cash flow, with supporting schedules, all
prepared on a consolidated and consolidating basis, in reasonable detail, and in
conformity with GAAP.

 

 

 

 

  iii. Quarterly Financial Statements. Debtors shall deliver to Secured Party,
within forty-five (45) days after the end of each fiscal quarter, management
prepared and reviewed financial statements reflecting its operations during such
fiscal quarter, which shall include, without limitation, a balance sheet, profit
and loss statement, and a statement of cash flow, with supporting schedules, all
prepared on a consolidated and consolidating basis, in reasonable detail, and in
conformity with GAAP and certified to its correctness by the Debtors’ principal
financial officer.         iv. Monthly Financial Statements. Debtors shall
deliver to Secured Party, within thirty (30) days after the end of each fiscal
month, management prepared and unaudited financial statements reflecting its
operations during such fiscal month, which shall include, without limitation, a
balance sheet, profit and loss statement, and a statement of cash flow, with
supporting schedules, all prepared on a consolidated and consolidating basis, in
reasonable detail, and in conformity with GAAP and certified to its correctness
by the Debtors’ principal financial officer.         v. Collateral Reports. Upon
written request by Secured Party, Debtors shall submit to Secured Party an aged
summary of its accounts receivable and inventory detail, certified by a
principal financial officer of Debtors.         vi. Collateral Base Certificate.
Beginning October 1, 2016, Debtors shall submit to Secured Party, no later than
the fifteenth (15th) day after the end of each fiscal month, and at such other
times as requested by Secured Party, a certificate in the form of Exhibit “B”
attached hereto, certified by a principal financial officer of Debtors.

 

13. Financial Covenants. Until such time as the Obligations are paid in full:

 

  i. Tangible Net Worth. At all times, Debtors shall maintain a Tangible Net
Worth of not less than negative Thirty-Seven Million and 00/100 Dollars
($37,000,000.00).         ii. Total Liabilities. Debtors shall not create,
incur, assume or suffer to exist or otherwise become liable in respect of any
Liabilities in excess of Fifty-Six Million and 00/100 Dollars ($56,000,000.00)
in the aggregate. As used herein, “Liabilities” means any and all obligations to
pay an amount in money, goods, or services to any internal or external party, as
reflected in the Debtors’ balance sheet, prepared on a consolidated and
consolidating basis, in reasonable detail, including, without limitation, any
and all liabilities (contingent or otherwise) and in conformity with GAAP.      
  iii. Preservation of Existence. Each Debtor shall preserve its legal existence
and shall not, in one transaction or a series of related transactions, merge
into or consolidate with any other entity, or sell all or substantially all of
its assets.         iv. Collateral Base. Beginning October 1, 2016, if, at any
time the amount of Credit Party Debt exceeds the Collateral Base, Debtor shall,
on demand, repay the Credit Party Debt in an amount sufficient to reduce the
Credit Party Debt by an amount equal to such excess.

 

For purposes of this Section 13, Debtors’ rights and obligations in respect of
Key Man life insurance policies shall be excluded from such covenant and
Collateral Base calculations.

 

 

 

 

For purposes of this Section 13, the following terms are used with the meanings
set forth below:

 

“Collateral Base” means an amount equal to: (i) Eighty-Five percent (85%) of
Eligible Accounts plus (ii) Fifty percent (50%) of Eligible Inventory minus
(iii) the aggregate amount of any indebtedness for borrowed money (including
guarantees thereof) owed to any senior secured creditor approved by Secured
Party.

 

“Eligible Accounts” means those accounts receivable of Debtors in which Secured
Party, for the benefit of itself and the other Credit Parties, has a first
priority security interest under the terms of this Agreement and that Secured
Party, in its reasonable credit judgment, deems to be an Eligible Account.
Without limiting the generality of the foregoing, no account receivable shall be
an Eligible Account unless (i) the account receivable arose in the ordinary
course of a Debtor’s business, (ii) the right to payment has been fully earned
by completed performance and, if inventory is involved, such inventory has been
shipped by a Debtor (or if not shipped by a Debtor, is held by a Debtor under a
“bill and hold” arrangement approved in writing by Secured Party in its sole
discretion), (iii) the account receivable includes only that portion which is
not subject to any offset, defense, counterclaim, credit, allowance or
adjustment, (iv) a Debtor’s title to the account receivable is absolute and is
subject to no prior assignment, claim, lien or security interest, (v) the full
amount reflected on a Debtor’s books and on any invoice or statement delivered
to Secured Party related to the account receivable is owing to a Debtor and no
partial payment has been made on the account receivable, (vi) the account
receivable is due and payable not more than thirty (30) days from invoice date
and no more than ninety (90) days (or such other period as Secured Party may by
written notice from an Authorized Representative to a Debtor approve) have
elapsed from invoice date, (vii) the account receivable did not arise out of a
contract or purchase order containing provisions prohibiting assignment thereof
or the creation of a security interest therein, and no Debtor has received a
note, trade acceptance, draft or other instrument with respect to such
receivable or in payment of such account, (viii) no Debtor has received notice
of the death of the account debtor or of the dissolution, termination of
existence, insolvency, bankruptcy, appointment of a receiver for any part of the
property of, or assignment for the benefit of creditors made by, the account
debtor, (ix) the account receivable is not payable by any foreign person
(provided that persons present in possessions of the United States of America or
Canada shall not be considered foreign persons), unless it is payable in the
full amount of its face value in United States dollars or Canadian dollars and
is supported by an irrevocable letter of credit in form and substance acceptable
to Secured Party and issued by a bank satisfactory to Secured Party (and, if
requested by Secured Party, such letter of credit or the proceeds thereof, as
Secured Party shall require, have been assigned to Secured Party), (x) the
account receivable is not payable by the United States of America or any
political subdivision or agency thereof, unless Secured Party and the applicable
Debtor have complied with the Assignment of Claims Act with respect to the
account receivable, (xi) the account debtor is not located in the State of New
Jersey unless the applicable Debtor has filed a Notice of Business Activities
Report with the New Jersey Division of Taxation for the then current year, (xii)
the account receivable is not payable by any person who is the account debtor
for other accounts receivable and who is past due (as provided in (vi) above)
with regard to fifty percent (50%) or more of the aggregate amount of such other
accounts receivable, (xiii) the account receivable is not, at the discretion of
Secured Party, deemed doubtful for collection for whatever reason, (xiv) the
account receivable is not a contra account, (xv) the account receivable is not
an account in dispute for any reason, (xvi) the account receivable does not
represent a commission or expense receivable, (xvii) the account receivable does
not represent a retainage associated with an account receivable, and (xviii) the
account receivable does not represent an amount due for which Secured Party or
any other Credit Party has advanced credit and which is subject to a joint
purchase order or a lease.

 

 

 

 

“Eligible Inventory” means the inventory of Debtors, consisting of new, used and
refurbished products as reflected in the most recent collateral report delivered
to Secured Party pursuant to Section 12(v) hereof, that (i) is in a Debtor’s
possession, (ii) is in good, saleable and new condition, (iii) is subject to
Secured Party’s duly perfected, first priority security interest, and (iv) is
deemed by Secured Party, in its reasonable credit judgment, to be Eligible
Inventory.

 

“Credit Party Debt” means, at any time, all outstanding indebtedness for
borrowed money (including outstanding principal and accrued but unpaid interest,
and including all amounts constituting the deferred purchase price for the sale
of goods) then owing by the Debtors and their subsidiaries and affiliates to the
Credit Parties, or any of them.

 

“Tangible Net Worth” means the amount by which total assets, less goodwill and
other intangible assets, exceed total liabilities as determined in accordance
with generally accepted accounting principles in the United States, as in effect
from time to time, applied on a consistent basis throughout the period involved.

 

14. Events of Default. Each Debtor shall be in default under this agreement if:
(a) any Debtor or any other Obligor shall fail to pay, when due, any amount due
from any Obligor to Secured Party; (b) there shall be any default under any
covenant, term or condition of this Agreement or of any other contract or
agreement between any Debtor or any other Obligor and Secured Party, including
without limitation, the Notes; (c) any Debtor or any other Obligor breaches any
representation or warranty in this Agreement or any other such contract or
agreement; (d) there is a substantial change in any fact warranted or
represented in this Agreement; (e) there is the filing of a petition either by
or against any Debtor or any other Obligor under the Bankruptcy and Insolvency
Act (Canada), the United States Bankruptcy Code or any similar state or federal
law or regulation relating to insolvency or debtor relief or the application by
or against any Debtor or any other Obligor for the appointment of a receiver,
trustee or custodian for the Collateral or any other of the such Debtor’s or
Obligor’s assets; (f) there is the dissolution or other termination of any
Debtor’s or any other Obligor’s existence or business operations; (g) there is
the merger or consolidation of any Debtor or any other Obligor with another; (h)
there is substantial loss, theft, destruction, sale, reduction in value,
encumbrance of, damage to, or change in the Collateral; (i) there is a material
modification of, or breach of, any contract, the rights to which are part of the
Collateral; (j) there is a levy on, seizure, or attachment of the Collateral;
(k) there is a judgment against any Debtor or any other Obligor for the payment
of money which is not covered by insurance or as to which the applicable insurer
disputes coverage; (l) there is the filing or registration of any authorized
financing statement or security with regard to the Collateral (other than in
favor of Secured Party); (m) there is any seizure, vesting or intervention by or
under authority of a government by which the management of any Debtor or any
other Obligor is displaced or its authority in the control of its business is
curtailed; (n) any Debtor or any other Obligor (or any of their subsidiaries or
affiliates) defaults or otherwise fails to comply (beyond any applicable notice
or cure periods) with any of the payment or other provisions of any other
agreement under which any loan or other extension of credit is made by any other
person or entity to such Debtor or other Obligor (or any of its subsidiaries or
affiliates); (o) it is Secured Party’s reasonable and documented belief that the
prospect of payment of any part of the Obligations balance or the performance of
any part of this Agreement is impaired; or (p) (i) any subordination or
intercreditor agreement in favor of Secured Party with respect to any of the
Obligations shall for any reason be revoked or invalidated, or otherwise cease
to be in full force and effect (other than in accordance with its terms), (ii)
any Debtor or any other Obligor shall contest in any manner the validity or
enforceability thereof or deny that it has any further liability or obligation
thereunder, (iii) the Collateral securing the Obligations, for any reason shall
not have the priority contemplated by any such subordination or intercreditor
agreement, or (iv) any other party (other than Secured Party) to any
subordination or intercreditor agreement fails to perform or observe, in any
material respect, any material term, covenant or agreement contained therein.
Nothing herein shall prevent Secured Party from canceling or suspending further
extensions of credit to any Debtor or any other Obligor pursuant to any
contract, agreement or other arrangement in effect at any time between Secured
Party, on one hand, and any Debtor or any other Obligor, on the other hand, in
the event of a default by any Debtor under this Agreement (each such event being
an “Event of Default”).

 

 

 

 

15. Remedies. If an Event of Default shall have occurred and be continuing, the
security interest and hypothec hereby granted shall become immediately
enforceable and Secured Party, without any other notice to or demand upon the
Debtors (except as may be required by applicable law), shall, in addition to all
other rights and remedies, be entitled to exercise any and all hypothecary
rights prescribed by the Civil Code of Quebec, and any additional rights and
remedies which may be provided to a secured party in any jurisdiction in which
Collateral is located, including, without limitation:

 

  (a) Secured Party may take possession of the Collateral, and for that purpose
Secured Party may, so far as any Debtor can give authority therefor, enter upon
any premises on which the Collateral may be situated and remove the same
therefrom. Secured Party may in its discretion require any Debtor to assemble
all or any part of the Collateral at such location or locations within the
jurisdiction(s) of such Debtor’s principal office(s) or at such other locations
as Secured Party may reasonably designate;         (b) Secured Party may sell,
lease or otherwise dispose of the Collateral at public auction, by private
tender, by private sale or otherwise, upon such terms and conditions as Secured
Party may determine. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Secured Party’s Authorized Representative shall give to any Debtor at least ten
(10) days prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. Each Debtor hereby acknowledges that ten (10) days
prior written notice of such sale or sales shall be reasonable notice;        
(c) Secured Party may appoint by instrument in writing a receiver or receiver
and manager (hereinafter referred to as the “Receiver”) of all or any part of
the Collateral and remove or replace such Receiver from time to time or may
institute proceedings in any court of competent jurisdiction for the appointment
of such a Receiver. Where Secured Party is referred to in this agreement the
term shall, where the context permits, include any Receiver so appointed and the
officers, employees, servants or agents of such Receiver;         (d) Secured
Party may carry on, or concur in the carrying on of, all or any part of the
business of any Debtors and may take such steps as it considers desirable to
maintain, preserve or protect the Collateral;

 

In addition, each Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of Secured Party’s rights
and remedies hereunder, including, without limitation, its right following an
Event of Default to take immediate possession of the Collateral and to exercise
its rights and remedies with respect thereto. Each Debtor shall pay all
expenses, including solicitors’ and Receivers’ fees and disbursements incurred
by Secured Party or its agents (including any Receiver) in connection with the
enforcement of this Agreement; all of which expenses shall be payable forthwith
upon demand and shall form part of the Obligations secured hereby.

 

Secured Party may (a) grant extensions of time, (b) take and perfect or abstain
from taking and perfecting security, (c) give up any security, (d) accept
compositions or compromises, (e) grant releases and discharges, and (f)
otherwise waive rights against any Debtor, debtors of the Debtors, guarantors
and others and with respect to the Collateral and other security as Secured
Party sees fit. No such action or omission will reduce the Obligations or affect
the Secured Party’s rights hereunder.

 

 

 

 

16. Deficiency Claim. If the monies collected by or received by Secured Party in
respect of any realization upon or sale of the Collateral are not sufficient to
satisfy all obligations and liability of any Debtor to Secured Party, each
Debtor shall remain responsible to the Secured Party for any deficiency, and
Secured Party shall be entitled to claim such amount and all interest and costs
associated therewith from any Debtor.

 

17. Remedies Cumulative. Secured Party shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder. No
failure to exercise nor any delay in exercising on the part of Secured Party of
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. Except to the extent that Secured Party has
specifically and expressly waived such remedies in writing, the rights and
remedies of Secured Party hereunder and under any other agreement, contract,
document or instrument, are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
Secured Party may resort to and realize on the Collateral simultaneously with
any acts or proceedings initiated by Secured Party in its sole and conclusive
discretion to resort to or realize upon any other sources of repayment of the
Obligations, including, but not limited to, collateral granted by other security
agreements and the liability of the Debtor. Secured Party shall be entitled to
apply the proceeds of any Collateral to such of the Obligations and in such
order as it may determine in their sole and absolute discretion.

 

18. Dealing with the Collateral by Debtor.

 

  (a) Each Debtor may collect its Receivables forming part of the Collateral
until Secured Party withdraws such authorization to do so following the
occurrence of an Event of Default. Upon such withdrawal, Secured Party may
collect such Receivables and shall be reimbursed its reasonable costs and
expenses incurred in connection therewith which it may deduct from amounts
collected.         (b) Following the occurrence of an Event of Default, Secured
Party may give notice of this Agreement and the security granted hereby to any
account debtor of the Debtors or to any other person liable to the Debtors and
may give notice to any such account debtors or other person to make all further
payments to Secured Party. Any payment or other proceeds of Collateral received
by the Debtors from account debtors or from any other person liable to the
Debtors after the occurrence of such Event of Default and exercise of such
rights and remedies will be held by the Debtors in trust for Secured Party and
must be held separate and apart from other money of the Debtors and paid over to
Secured Party on request.         (c) Subject to compliance with each Debtor’s
covenants contained herein, each Debtor in the ordinary course of its business
may, until the occurrence of an Event of Default, sell any Inventory included in
the Collateral so that the purchaser thereof takes title clear of the security
interest and hypothec hereby created, but if such sale results in an account or
other proceeds, such account or other proceeds are subject to the security
interest and hypothec hereby created.

 

 

 

 

19. Expenses. Each Debtor will upon demand pay to Secured Party the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its outside counsel and the reasonable fees and expenses of any experts and
agents which Secured Party may incur in connection with (i) any action, suit or
other proceeding affecting the Collateral or any part thereof commenced, in
which action, suit or proceeding Secured Party is made a party or participates
or in which the right to use the Collateral or any part thereof is threatened,
or in which it becomes necessary in the judgment of Secured Party to defend or
uphold the lien hereof, (ii) the collection of the Obligations, (iii) the
enforcement and administration hereof, (iv) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(v) the exercise or enforcement of any of the rights of Secured Party, or (vi)
the failure by any Debtor to perform or observe any of the provisions hereof.
All amounts expended by Secured Party and payable by any Debtor under this
Section 19 shall be due upon demand therefor and shall be part of the
Obligations. Each Debtor’s obligations under this Section 19 shall survive the
termination hereof and the discharge of such Debtor’s other obligations under
this Agreement.

 

20. Waivers and Indemnity. Except as prohibited by applicable law, each Debtor
unconditionally and irrevocably waives (i) all claims, damages and demands it
may acquire against Secured Party arising out of the exercise by Secured Party
or any Receiver of any rights or remedies under this Agreement or at law, and
(ii) all of the rights, benefits and protections given by any present or future
statute that imposes limitations on the rights, powers or remedies of a secured
party or on the methods of, or procedures for, realization of security,
including any “seize or sue” or “anti-deficiency” statute or any similar
provision of any other statute. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Debtors and an Authorized Representative of
Secured Party.

 

21. Release of Information. Each Debtor expressly authorizes Secured Party to
provide any and all statements, copies and information as may be requested by a
creditor, a sheriff or a person with an interest in the Collateral.

 

22. Governing Law. This Agreement shall be governed by and construed in
accordance with the applicable laws of the Province of Quebec and the applicable
laws of Canada, provided that to the extent that the laws of any jurisdiction in
which any Collateral is situated govern the validity or perfection of the
security constituted hereunder, the domestic laws of such jurisdiction will
govern those issues. The provisions of and the terms used in this Agreement will
also be interpreted in order to give effect to the intent of the parties that
the security constituted hereunder be valid and enforceable in all jurisdictions
where the Collateral may be situated and in all other jurisdictions where the
rights and remedies of Secured Party may have to be exercised and also that the
Secured Party shall be entitled to exercise all rights and remedies of a secured
creditor under the laws of any such jurisdictions.

 

23. Successors and Assigns. This Agreement will ensure to the benefit of, and be
binding on, each Debtor and its successors and permitted assigns, and will
ensure to the benefit of, and be binding on, Secured Party and its successors
and assigns. No Debtor shall assign this Agreement, or any of its rights or
obligations under this Agreement, without the prior written consent of Secured
Party’s Authorized Representative.

 

24. Acknowledgment/Waiver. Each Debtor acknowledges receipt of an executed copy
of this Agreement and, to the extent permitted by applicable law, waives the
right to receive a copy of any financing statement, financing change statement,
registration application or verification statement in respect of any registered
financing statement, registration application or financing change statement
prepared, registered or issued in connection with this Agreement.

 

25. Counterparts. Delivery by any party or other signatory of an executed
counterpart of this Agreement by facsimile or electronic mail or in PDF format
shall be equally effective as delivery of an original executed counterpart of
this Agreement.

 

 

 

 

26. Miscellaneous. (a) Any notice or communication given or required to be given
to Secured Party or any Debtor hereunder shall be in writing and given to such
Debtor and Secured Party at the address set forth below. Such written notices
and communications shall be delivered by hand or overnight courier service, or
mailed by first class mail, postage prepaid, addressed to the parties hereto at
the addresses referred to herein or to such other addresses as either party may
designate to the other party by a written notice given in accordance with the
provisions of this Agreement. (b) The captions of the paragraphs of this
Agreement are for convenience only and shall not be deemed to constitute a part
hereof or used in construing the intent of the parties. (c) If any part of any
provision of this Agreement shall be invalid or unenforceable under applicable
law, such part shall be ineffective to the extent of such invalidity only,
without in any way affecting the remaining parts of such provision or the
remaining provisions of this Agreement.

 

27. Language. The parties hereto confirm that they have requested this Movable
Hypothec and all related documents be drafted in English. Les parties aux
présentes ont exigé que la présente hypothèque mobilière et tous les documents
connexes soient rédigés en anglais.

 

Executed as of the day and year first above written.

 

[Signature Page to Follow]

 

 

 

 

SECURED PARTY:   ScanSource, Inc.                       By:   /s/ Cleveland
McBeth, Jr.         Name:   Cleveland McBeth, Jr.             Vice President,
Worldwide Reseller Financial Services                       Address:   6 Logue
Court             Greenville, SC 29615                       DEBTOR:   Quest
Solution, Inc.   DEBTOR:   Quest Marketing, Inc.               By:   /s/ Gilles
Normand Gaudreault   By:   /s/ Gilles Normand Gaudreault Name:   Gilles Normand
Gaudreault   Name:   Gilles Normand Gaudreault     Chief Executive Officer      
Chief Executive Officer               Address:   860 Conger Street   Address:  
860 Conger Street     Eugene, OR 97402       Eugene, OR 97402              
DEBTOR:   Bar Code Specialties, Inc.   DEBTOR:   Quest Exchange Ltd.            
  By:   /s/ Gilles Normand Gaudreault   By:   /s/ Gilles Normand Gaudreault
Name:   Gilles Normand Gaudreault   Name:   Gilles Normand Gaudreault     Chief
Executive Officer       Chief Executive Officer               Address:   860
Conger Street   Address:   860 Conger Street     Eugene, OR 97402       Eugene,
OR 97402               DEBTOR:   Quest Solution Canada Inc.                    
  By:   /s/ Gilles Normand Gaudreault         Name:   Gilles Normand Gaudreault
            Chief Executive Officer                       Address:   860 Conger
Street             Eugene, OR 97402        

 

 

 

 

EXHIBIT “A”

 

Quest Solution Canada Inc.

 

ADDRESS(ES) OF PLACE(S) OF BUSINESS , LOCATION OF BOOKS AND RECORDS RELATING TO
RECEIVABLES

 

  ● Chief executive office: 8102 TransCanada Hwy, St-Laurent, Quebec, Canada H4S
1M5         ● Registered/head office: 8102 TransCanada Hwy, St-Laurent, Quebec,
Canada H4S 1M5         ● Other place(s) of business:

 

  8102 TransCanada Hwy, St-Laurent, Quebec, Canada H4S 1M5       651 Avenue
Harwood Nord, Unite 1, Ajax (Ontario), Canada, L1Z0K4       6 Shields Court,
Suite 205, Markham, Ontario, L3R 4S1       530 Berry Street, Unit 530, Winnipeg,
Manitoba, Canada, R3H OR9       101-1737 3rd Avenue West, Vancouver, British
Columbia, Canada, V6J 1K7

 

  ● Books & records relating to Receivables:

 

8102 TransCanada Hwy, St-Laurent, Quebec, Canada, H4S 1M5

 

PROVINCE OR STATE OF INVENTORY, EQUIPMENT AND SECURITIES:

 

8102 TransCanada Hwy, St-Laurent, Quebec, Canada H4S 1M5

 

651 Avenue Harwood Nord, Unite 1, Ajax (Ontario), Canada L1Z0K4

 

6 Shields Court, Suite 205, Markham, Ontario, Canada, L3R 4S1

 

530 Berry Street, Unit 530, Winnipeg, Manitoba, Canada, R3H OR9

 

101-1737 3rd Avenue West, Vancouver, British Columbia, Canada V6J 1K7

 

Quest Exchange Ltd.

 

ADDRESS(ES) OF PLACE(S) OF BUSINESS , LOCATION OF BOOKS AND RECORDS RELATING TO
RECEIVABLES

 

  ● Chief executive office: 8102 TransCanada Hwy, St-Laurent, Quebec, Canada H4S
1M5         ● Registered/head office: 8102 TransCanada Hwy, St-Laurent, Quebec,
Canada H4S 1M5         ● Other place(s) of business: None         ● Books &
records relating to Receivables:

 

8102 TransCanada Hwy, St-Laurent, Quebec, Canada H4S 1M5

 

PROVINCE OR STATE OF INVENTORY, EQUIPMENT AND SECURITIES:

 

None

 

 

 

 

Quest Solution, Inc.

 

ADDRESS(ES) OF PLACE(S) OF BUSINESS , LOCATION OF BOOKS AND RECORDS RELATING TO
RECEIVABLES

 

  ● Chief executive office: 860 Conger Street, Eugene OR 97402         ●
Registered/head office: 380 Delaware Ave, Wilmington, DE 19801         ● Other
place(s) of business: None         ● Books & records relating to Receivables:
860 Conger Street, Eugene, OR 97402

 

PROVINCE OR STATE OF INVENTORY, EQUIPMENT AND SECURITIES:

 

None

 

Bar Code Specialties, Inc.

 

ADDRESS(ES) OF PLACE(S) OF BUSINESS , LOCATION OF BOOKS AND RECORDS RELATING TO
RECEIVABLES

 

  ● Chief executive office: 12272 Monarch Street, Garden Grove, CA 92841        
● Registered/head office: 12272 Monarch Street, Garden Grove, CA 92841         ●
Other place(s) of business: None         ● Books & records relating to
Receivables: 12272 Monarch Street, Garden Grove, CA 92841

 

PROVINCE OR STATE OF INVENTORY, EQUIPMENT AND SECURITIES:

 

12272 Monarch Street, Garden Grove, CA 92841

 

Quest Marketing, Inc.

 

ADDRESS(ES) OF PLACE(S) OF BUSINESS , LOCATION OF BOOKS AND RECORDS RELATING TO
RECEIVABLES

 

  ● Chief executive office: 860 Conger Street, Eugene, OR 97402         ●
Registered/head office: 860 Conger Street, Eugene, OR 97402         ● Other
place(s) of business: None

 

Books & records relating to Receivables: 860 Conger Street, Eugene, OR 97402

 

PROVINCE OR STATE OF INVENTORY, EQUIPMENT AND SECURITIES:

 

860 Conger Street, Eugene OR 97402

 

 

 

 

EXHIBIT “B”

COLLATERAL BASE CERTIFICATE

 

Month:_________________

 

1. Eligible Receivables (< 90 Days Old)  

 

  CURRENT   30 - 60   60 - 90   TOTAL                                

 

2. Percentage of Receivables Available for Collateral (85%) 85%       3.
Eligible Receivables Base for Collateral       (Line 1 X Line 2)       4. Total
Inventory         5. Percentage of Inventory Available for Collateral (50%) 50%
      6. Eligible Inventory Base for Collateral       (Line 4 X Line 5)       7.
Total Collateral Base         8. Balance on Bank Line of Credit / Senior debt  
      9. Collateral Available to Secure Trade Credit Extension       (Line 7 -
Line 8)

 

This certificate is true, accurate and complete to the best of my knowledge.

 

Company Name / signature of       Officer/ Date