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): September 20, 2018 (May 30, 2018)

 

QUEST SOLUTION, INC.

(Exact name of registrant as specified in charter)

 

Delaware   000-09047   20-3454263
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)

 

860 Conger Street, Eugene, OR 97402

(Address of Principal Executive Offices) (Zip Code)

 

(714) 899-4800

(Registrant’s Telephone Number, Including Area Code)

 

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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mart if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

     
 

 

Item 1.01 Entry into a Material Agreement

 

On September 14, 2018, Quest Solution, Inc. (the “Company”) formally entered into the following agreements (the “Modification Agreements”) with ScanSource, Inc. (“ScanSource”) its senior creditor concerning its outstanding secured promissory note with ScanSource dated July 1, 2016 (the “Original Note”), and other agreements originally entered into with ScanSource on July 1, 2016 (the “Original ScanSource Agreements”):

 

(i) Amendment to Security Agreement;

(ii) Amendment to Pledge and Security Agreement;

(iii) Prepayment Agreement;

(iv) Amendment #9 to Trade Credit Extension Letter; and

(v) Amendment #6 to Secured Promissory Note.

 

The Company had been in default on the Original Note which had an original balance of $12,492,136.51 and a current balance of $1,926,915.61. In addition, the Company owed ScanSource $6,763,549.41 under the Trade Credit Extension Letter dated July 1, 2016. The Company and ScanSource agreed to amend the amount of the Original Note (the “Modified Note”) to include the $6,763,549.41 balance under the Trade Credit Extension Letter for a total amount of $8,690,465.02. The Modified Note, as amended, provides for repayment as follows:

 

(i) $300,000 on September 15, 2018 (which payment has been made);

(ii) $300,000 on October 15, 2018;

(iii) $300,000 on November 15, 2018;

(iv) $500,000 on December 15, 2018; and

(v) The balance on January 15, 2019.

 

The Modified Note bears interest at 12% per annum and is secured by all of the Company’s assets pursuant to the Company’s Security Agreement with ScanSource dated July 1, 2016 which has been amended in connection with this new arrangement. These terms are identical to the Original ScanSource Agreements.

 

The Company and ScanSource also amended the Trade Credit Extension Letter originally dated July 1, 2016 to provide for the establishment of a New Temporary Trade Credit Extension amount of $8,753,752.02. Accordingly, as the Company makes the payments under the Note as outlined above, the Company will have additional trade credit available.  

 

While the Modification Agreements are each dated September 7, 2018, they were formally entered into on September 14, 2018. The foregoing description of the Modification Agreements entered into is not complete and are qualified in their entirety to the full text of such Modification Agreements which are filed as Exhibits 10.1 - 10.5 of this Current Report on Form 8-K.

 

     
 

 

Item 2.03 Creation of a Direct Financial Obligation

 

As described in Item 1.01 above, the Company issued ScanSource a new promissory note in the principal amount of $8,690,465.02 (the “Modified Note”) which encompasses the total amount owed by the Company to ScanSource.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

 

Exhibit    
Number   Description
10.1   Amendment to Security Agreement with ScanSource, Inc. dated September 7, 2018
10.2   Amendment to Pledge and Security Agreement with ScanSource, Inc. dated September 7, 2018
10.3   Prepayment Agreement with ScanSource, Inc. dated September 7, 2018
10.4   Amendment #9 to Trade Credit Extension Letter with ScanSource, Inc. dated September 7, 2018
10.5   Amendment #6 to Secured Promissory Note with ScanSource, Inc. dated September 7, 2018 (the “Modified Note”)

 

     
 

 

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.

 

Date: September 20, 2018

 

  QUEST SOLUTION, INC.
     
  By: /s/ Shai S. Lustgarten
    Shai S. Lustgarten
    President and CEO

 

     
 

 

AMENDMENT TO SECURITY AGREEMENT

 

This Amendment to the Security Agreement (this “Amendment”) is made as of this 7 th day of September, 2018 by and among Quest Solution, Inc., a Delaware corporation (“Quest Solution”), Quest Marketing, Inc., an Oregon corporation (“Quest Marketing”), and Quest Exchange Ltd., a Canadian corporation (“Quest Exchange” and, together with Quest Solution and Quest Marketing, the “Debtors” and individually, a “Debtor”) , and ScanSource, Inc., a South Carolina corporation and/or its subsidiaries and affiliates (collectively, “Secured Party”), and, in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

WITNESSETH:

 

WHEREAS, Secured Party and/or its subsidiaries and affiliates have, from time to time, extended trade and other credit to Debtors; and

 

WHEREAS, the Debtors and Secured Party have entered into that certain Security Agreement dated as of July 1, 2016 (the “Security Agreement”), pursuant to which each Debtor has granted security interests in and liens on the Collateral (as defined in the Security Agreement) to Secured Party to secure the Obligations (as defined in the Security Agreement); and

 

WHEREAS, Secured Party has previously released each of Bar Code Specialties, Inc., and Quest Solution Canada Inc., from its respective obligations under the Security Agreement; and

 

WHEREAS, pursuant to a Collateral Agency Agreement, Secured Party and/or its subsidiaries and affiliates, have appointed Secured Party as Collateral Agent for such secured parties with respect to the Collateral and Secured Party has accepted such appointment; and

 

WHEREAS, Secured Party and the Debtors desire to amend the Security Agreement as described herein;

 

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

 

1. Definitions. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Security Agreement, as applicable.

 

2.        Amendment to Security Agreement. The Security Agreement is hereby amended by amending and restating the following sections:

 

(a)       Section 9 (i) of the Security Agreement is hereby amended and restated in its entirety to read as follows:

 

“i. Tangible Net Worth. At all times, Debtors shall maintain a Tangible Net Worth of not less than negative Twenty-Two Million and 00/100 Dollars ($22,000,000.00)”

 

 

 

 

(b)       Section 9 (ii) of the Security Agreement is hereby amended and restated in its entirety to read as follows:

 

“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 Thirty-Three Million and 00/100 Dollars ($33,000,000.00) 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 Debtor’s 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.”

 

3.        Reaffirmation of Security Interest. As security for the payment or performance, as the case may be, in full of the Obligations, each Debtor hereby bargains, assigns, mortgages, pledges, hypothecates and transfers to the Collateral Agent, including without limitation its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, in each case for the benefit of itself and its subsidiaries, a lien on and security interest in, all of Debtor’s right, title and interest in the Collateral on the terms and conditions set forth in the Security Agreement, as amended hereby.

 

4.        Miscellaneous .

 

(a)       This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

 

(b)       This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

(c)       Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Amendment.

 

(d)       Each Debtor warrants and represents that it has consulted with independent legal counsel of its selection in connection with this Amendment and is not relying on any representations or warranties of Secured Party or its counsel in entering into this Amendment.

 

(e)       THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

 

  DEBTOR:
     
  QUEST SOLUTION, INC.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  DEBTOR:
     
  QUEST MARKETING, INC.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  DEBTOR:
     
  QUEST EXCHANGE LTD.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  SECURED PARTY:
     
  SCANSOURCE, INC., as Collateral Agent
     
  By: /s/ Cleveland McBeth
  Name: Cleveland McBeth, Jr.
  Title: Vice President, Worldwide Reseller Financial Services

 

 

 

 

 

 

AMENDMENT TO PLEDGE AND SECURITY AGREEMENT

 

This Amendment to the Pledge and Security Agreement (this “Amendment”) is made as of this 7 th day of September, 2018 by and among Quest Solution, Inc., a Delaware corporation (“Quest Solution”) , Quest Marketing, Inc., an Oregon corporation (“Quest Marketing”), and Quest Exchange Ltd., a Canadian corporation (“Quest Exchange” and, together with Quest Solution and Quest Marketing, the “Debtors” and individually, a “Debtor”), and ScanSource, Inc., a South Carolina corporation and/or its subsidiaries and affiliates (collectively, “Secured Party”), and, in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

WITNESSETH:

 

WHEREAS, Secured Party and/or its subsidiaries and affiliates have, from time to time, extended trade and other credit to Debtors; and

 

WHEREAS, the Debtors and Secured Party have entered into that certain Pledge and Security Agreement dated as of July l, 2016 (the “Pledge and Security Agreement”), pursuant to which each Debtor has granted security interests in and liens on the Collateral (as defined in the Pledge and Security Agreement) to Secured Party to secure the Obligations (as defined in the Pledge and Security Agreement); and

 

WHEREAS, Secured Party has previously released each of Bar Code Specialties, Inc., and Quest Solution Canada Inc., from its respective obligations under the Pledge and Security Agreement; and

 

WHEREAS, pursuant to a Collateral Agency Agreement, Secured Party and/or its subsidiaries and affiliates, have appointed Secured Party as Collateral Agent for such secured parties with respect to the Collateral and Secured Party has accepted such appointment; and

 

WHEREAS, Secured Party and the Debtors desire to amend the Pledge and Security Agreement as described herein;

 

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

 

1. Definitions. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Pledge and Security Agreement, as applicable.

 

2. Amendment to Pledge and Security Agreement. The Pledge and Security Agreement is hereby amended by amending and restating the following sections:

 

 
 

 

(a) Section 9 (i) of the Pledge and Security Agreement is hereby amended and restated in its entirety to read as follows:

 

“i. Tangible Net Worth. At all times, Debtors shall maintain a Tangible Net Worth of not less than negative Twenty-Two Million and 00/ I 00 Dollars ($22,000,000.00)”

 

(b) Section 9 (ii) of the Pledge and Security Agreement is hereby amended and restated in its entirety to read as follows:

 

“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 Thirty-Three Million and 00/100 Dollars ($33,000,000.00) 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 Debtor’s 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.”

 

3. Reaffirmation of Security Interest. As security for the payment or performance, as the case may be, in full of the Obligations, each Debtor hereby bargains, assigns, mortgages, pledges, hypothecates and transfers to the Collateral Agent, including without limitation its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, in each case for the benefit of itself and its subsidiaries, a lien on and security interest in, all of Debtor’s right, title and interest in the Collateral on the terms and conditions set forth in the Pledge and Security Agreement, as amended hereby.

 

4. Miscellaneous .

 

(a) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

 

(b) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

(c) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Amendment.

 

(d) Each Debtor warrants and represents that it has consulted with independent legal counsel of its selection in connection with this Amendment and is not relying on any representations or warranties of Secured Party or its counsel in entering into this Amendment.

 

(e) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

[SIGNATURE PAGE FOLLOWS]

 

 
 

 

IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

 

  DEBTOR:
     
 

QUEST SOLUTION, INC.

     
  By:   /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lus tga
  Title: Chief Executive Officer
     
  DEBTOR:
     
  QUEST MARKETING, INC.
     
  By:   /s/ Shai Shalom Lustgarten
  Name:

Shai Shalom Lustgarten

  Title: Chief Executive Officer
     
  DEBTOR:
     
  QUEST EXCHANGE LTD.
     
  By:   /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  SECURED PARTY:
   
    SCANSOURCE, INC., as Collateral Agent
     
  By:   /s/ Cleveland McBeth
  Name: Cleveland McBeth, Jr.
  Title: Vice President, Worldwide Reseller Financial Services

 

 
 

 

 

PREPAYMENT AGREEMENT

 

THIS PREPAYMENT AGREEMENT (this “Agreement”), dated as of September 13, JQ1. is made by and among Quest Solution, Inc., Quest Marketing, Inc., Quest Exchange Ltd. (collectively, “Quest”) and ScanSource, Inc., a South Carolina corporation, on behalf of itself and its subsidiaries and affiliates (collectively, “ScanSource”) , and, in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

RECITALS

 

A. ScanSource has, from time to time, extended trade and other credit to Quest;

 

B. Quest and ScanSource have entered into that certain Restated Trade Credit Extension Letter dated as of July 1, 2016 (together with any amendments thereto, the “Trade Credit Extension Letter”); and

 

C. Quest has requested that ScanSource continue to extend trade and other credit to Quest pursuant to the Trade Credit Extension Letter, Transaction Documents (as defined in the US Promissory Note dated as of July 1, 2016, as amended), and this Agreement, subject to the terms and conditions of the Trade Credit Extension Letter, US Promissory Note, and this Agreement.

 

NOW, THEREFORE, in consideration of the promises and further valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Defined Terms. Capitalized terms used but not otherwise defined herein have the respective meanings given to them in the Trade Credit Extension Letter.

 

2. Acknowledgement and Incorporation by Reference of Recitals. Quest acknowledges and agrees that the Recitals set forth herein are true and correct statements of fact, are incorporated herein, and form a substantive part of this Agreement.

 

3. Agreement Regarding Prepayment. On or before September 28, 2018, Quest shall prepay the obligations evidenced by the US Promissory Note in an amount equal to the greater of (i) One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00), and (ii) an amount equal to 50% of the increase of any commitments to advance funds in favor of Quest under any existing or future revolving credit facilities or factoring facilities above Five Million and 00/100 Dollars ($5,000,000.00). Any such prepayment shall be applied to the outstanding principal amount of the US Promissory Note and shall reduce the amount of each principal installment due hereunder in the inverse order of maturity. Quest shall not incur indebtedness in excess of Eight Million and 00/100 Dollars ($8,000,000.00) under or in connection with any existing or future revolving credit facilities or factoring facilities.

 

4. Representations and Warranties. To induce ScanSource to enter into this Agreement, Quest hereby represents and warrants to ScanSource that (a) the execution, delivery and performance of this Agreement have been authorized by all requisite corporate or limited liability company action (as applicable) on the part of Quest and will not violate the certificate of incorporation or formation (as applicable), bylaws or limited liability company agreement (as applicable) or other applicable organization or governing documents of Quest; (b) this Agreement constitutes the legal, valid and binding obligation of Quest, enforceable against Quest in accordance with its terms except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law); (c) the representations and warranties contained in the Trade Credit Extension Letter are true and correct in all material respects on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate to an earlier date in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; and (d) no Default or Event of Default under the Trade Credit Extension Letter or any related document has occurred and is continuing.

 

 
 

 

5. Release of Claims. Quest acknowledges and agrees that (i) ScanSource has at all times acted in good faith with respect to the Trade Credit Extension Letter and any other matter, (ii) ScanSource has not exercised any control over the business affairs of Quest, and (iii) Quest has no claims against ScanSource, whether for actions taken or not taken. To the extent that Quest may have any such claim, defense, setoff or counterclaim or any other recoupments, Quest releases and forever discharges each of ScanSource and its present and former affiliates and subsidiaries, predecessors in interest, present and former officers, agents, directors, attorneys and employees, and the respective heirs, executors, successors and assigns of all of the foregoing, whether past, present or future (collectively with ScanSource, the “ScanSource Affiliates”) of and from any and all manner of action and actions, cause and causes of action, suits, rights, debts, torts, controversies, damages, judgments, executions, recoupments, claims and demands whatsoever, asserted or unasserted, in law or in equity which, against any ScanSource Affiliate, Quest ever had or now has by reason of any matter, cause, causes or thing whatsoever, including, without limitation, any presently existing claim, recoupment, or defense, whether or not presently suspected, contemplated or anticipated.

 

6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

7. No Third Party Beneficiaries . Other than ScanSource’s subsidiaries and affiliates, there shall be no third party beneficiaries to this Agreement.

 

8. Transaction Document. This Agreement is a “Transaction Document” as such term is defined in the US Promissory Note.

 

9. Counterparts. This Agreement may be executed in any number of counterparts and by facsimile or PDF, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

[Signature Page Follows]

 

  2  
 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

 

  QUEST SOLUTION, INC.
     
  By : /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  QUEST MARKETING, INC.
     
  By : /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  QUEST EXCHANGE LTD.
     
  By : /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  SCANSOURCE, INC.
     
  By: /s/ Cleveland McBeth
  Name: Cleveland McBeth, Jr.
  Title: Vice President, Worldwide Reseller Financial Services

 

[Prepayment Agreement]

 

 
 

 

 

AMENDMENT #9 TO TRADE CREDIT EXTENSION LETTER

 

This Amendment to the Trade Credit Extension Letter (this “Amendment”) is made as of this 7 th day of September, 2018 by and among Quest Solution, Inc., Quest Marketing, Inc., Quest Exchange Ltd. (collectively, “Quest”) , and ScanSource, Inc., a South Carolina corporation and/or its subsidiaries and affiliates (collectively, “ScanSource”) , and, in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

W I T N E S S E T H:

 

WHEREAS, ScanSource and/or its subsidiaries and affiliates have, from time to time, extended trade and other credit to Quest; and

 

WHEREAS, Quest and ScanSource have entered into that certain Trade Credit Extension Letter dated as of July 1, 2016, as amended by those certain Amendments to Trade Credit Extension Letter dated as of September 27, 2016, October 10, 2016, November 30, 2016, December 20, 2016, April 6, 2017, April 12, 2017, November 15, 2017, and February 14, 2018 (as amended, the “Trade Credit Extension Letter”); and

 

WHEREAS, ScanSource and Quest desire to amend the Trade Credit Extension Letter as described herein;

 

NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows:

 

1. Definitions. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Trade Credit Extension Letter, as applicable.

 

2. Amendment to Trade Credit Extension Letter. The Trade Credit Extension Letter is hereby amended as follows:

 

Section 3 (b) is hereby amended and restated in its entirety to read as follows:

 

“b. Upon expiration of the Temporary Trade Credit Extension, and assuming that Reseller is at all times otherwise in compliance with all ScanSource Agreements, including but not limited to its invoice terms and conditions and the terms and covenants set forth herein, a new temporary trade credit extension will be established in the aggregate principal amount at any time outstanding of up to Eight Million Seven Hundred Fifty-Three Thousand Seven Hundred Fifty-Two and 08/100 Dollars ($8,753,752.08) (the “New Temporary Trade Credit Extension”). The New Temporary Trade Credit Extension shall include any and all indebtedness and other obligations owing to ScanSource from time to time, including without limitation the Promissory Notes referenced in Section 3h below, and any other outstanding amounts at any time owed by the Reseller to ScanSource.”

 

     
 

 

Section 3 (e) is hereby amended and restated in its entirety to read as follows:

 

“e. Quest has previously issued in favor of ScanSource a Secured Promissory Note in the form of Exhibit C hereto with respect to certain of the US Invoiced Indebtedness in the original principal amount of Twelve Million Four Hundred Ninety-Two Thousand One Hundred Thirty-Six and 51/100 USO ($12,492,136.51 USD) and bearing interest at an annual rate of twelve percent (12%) (as amended or modified from time to time, the “US Promissory Note”). The principal amount evidenced by the US Promissory Note, together with accrued interest, shall be paid as set forth in the US Promissory Note, and in any event shall be fully paid no later than January 31, 2019.”

 

3. Miscellaneous .

 

(a) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

 

(b) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof. Except as hereby specifically amended, modified or supplemented, the Trade Credit Extension Letter and all other documents, instruments and agreements entered into in connection therewith, are hereby confirmed and ratified in all respects and shall be and remain in full force and effect according to their respective terms.

 

(c) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Amendment.

 

(d) Quest warrants and represents that it has consulted with independent legal counsel of its selection in connection with this Amendment and is not relying on any representations or warranties of ScanSource or its counsel in entering into this Amendment.

 

(e) As of September 7, 2018, Quest’s aggregate outstanding trade account balance owing to ScanSource was equal to Eight Million Seven Hundred Fifty-Three Thousand Seven Hundred Fifty-Two and 08/100 Dollars ($8,753,752.08), which amount Quest acknowledges and agrees is due and owing without setoft: defense or counterclaim, and itemized as follows:

 

  1. Eight Million Six Hundred Ninety Thousand Four Hundred Sixty-Five and 02/100 Dollars ($8,690,465.02) of indebtedness representing the US Promissory Note; and
     
  2. Sixty-Three Thousand, Two Hundred Eighty-Seven and 06/100 Dollars ($63,287.06) of indebtedness representing orders that have been released but not yet invoiced

 

     
 

 

Quest acknowledges and agrees that all such amounts (together with interest thereon in accordance with the Note and the other ScanSource Agreements) are due and payable to ScanSource without any defense, setoff, or counterclaim.

 

(f) Quest acknowledges that certain Cross Guaranty Agreement dated July 1 , 2016 (the “Guaranty”) made by Quest Solu tion, Inc., Quest Marketing, Inc., Quest Exchange Ltd.(individually, a “Guarantor,” and collectively, the “Guarantors”) and the other parties thereto in favor of ScanSource, Inc. and/or its subsidiaries and affiliates (“ScanSource”) regarding the obligations of each Guarantor. The Guarantors confirm and agree that the Guaranty remains in full force and effect and that the obligations guaranteed thereunder shall include, without limitation, all the trade credit extended by ScanSource to any Guarantor. Without limitation of the terms of the Guaranty, the Guarantors hereby waive any requirement that ScanSource protect, secure, perfect or insure any lien or security interest or property subject thereto or exhaust any right to take any action against any Guarantor or any other guarantor of the obligations or any collateral prior to enforcing ScanSource’s rights and remedies under the Guaranty. Pursuant to the Consent and Limited Release letter dated November 30, 2016, ScanSource agreed that Quest Solution Canada Inc. was automatically released, discharged, and relieved of any payment obligations under the Guaranty.

 

(g) Quest acknowledges and agrees that (i) ScanSource has at all times acted in good faith with respect to the Trade Credit Extension Letter and any other matter, (ii) ScanSource has not exercised any control over the business affairs of Quest, and (iii) Quest has no claims against ScanSource, whether for actions taken or not taken. To the extent that Quest may have any such claim, defense, setoff or counterclaim or any other recoupments, Quest releases and forever discharges each of ScanSource and its present and former affiliates and subsidiaries, predecessors in interest, present and former officers, agents, directors, attorneys and employees, and the respective heirs, executors, successors and assigns of all of the foregoing, whether past, present or future (collectively with ScanSource, the “ScanSource Affiliates”) of and from any and all manner of action and actions, cause and causes of action, suits, rights, debts, torts, controversies, damages, judgments, executions, recoupments, claims and demands whatsoever, asserted or unasserted, in law or in equity which, against any ScanSource Affiliate, Quest ever had or now has by reason of any matter, cause, causes or thing whatsoever, including, without limitation, any presently existing claim , recoupment, or defense, whether or not presently suspected, contemplated or anticipated.

 

(h) THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

[Signature Page to Follow]

 

     
 

 

IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

 

  QUEST SOLUTION, INC.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  QUEST MARKETING, INC.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  QUEST EXCHANGE LTD.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  SCANSOURCE, INC.
     
  By: /s/ Cleveland McBeth
  Name: Cleveland McBeth, Jr.
  Title: Vice President, Worldwide Reseller Financial Services

 

     
 

 

 

AMENDMENT #6 TO SECURED PROMISSORY NOTE

 

This Amendment to the Secured Promissory Note (this “Amendment”) is made and effective as of this 7 th day of September, 2018 by and among Quest Solution, Inc., Quest Marketing, Inc., Quest Exchange Ltd., and their subsidiaries and/or affiliates, with principal offices at 860 Conger Street, Eugene, Oregon 97402 (collectively, “Quest”), and ScanSource, Inc., a South Carolina corporation and/or its subsidiaries and affiliates (collectively, “ScanSource”) , and, in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

W I T N E S S E T H:

 

WHEREAS, ScanSource and/or its subsidiaries and affiliates have, from time to time, extended trade and other credit to Quest; and

 

WHEREAS, Quest and ScanSource have entered into that certain Secured Promissory Note 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) dated as of July 1, 2016 (as amended, the “Note”) ; and

 

WHEREAS, ScanSource and Quest desire that Six Million Seven Hundred Sixty-Three Thousand Five Hundred Forty-Nine and 41/100 Dollars ($6,763,549.41) of the outstanding obligations owing by Quest to ScanSource (the “Specified Trade Credit Amounts”) shall be incorporated into the Note; and

 

WHEREAS, the outstanding balance of the Note as of September 7, 2018 is One Million Nine Hundred Twenty-Six Thousand Nine Hundred Fifteen and 61/100 Dollars ($1,926,915.61), ScanSource and Quest desire to amend the Note as described herein, to, among other things, add the Specified Trade Credit Amounts to the outstanding principal amount of the Note to be repaid in accordance with the terms thereof;

 

NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows:

 

1. Definitions. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Note, as applicable.

 

2. Amendment to Note. The Note is hereby amended as follows:

 

(a) The aggregate outstanding principal amount of the Note is hereby increased by an amount equal to Six Million Seven Hundred Sixty-Three Thousand Five Hundred Forty-Nine and 41/100 Dollars ($6,763,549.41), which amount represents the Specified Trade Credit Amounts owing by the Debtors to ScanSource.

 

(b) The opening paragraph of the Note is hereby amended by replacing “March 31, 2018 (the “Maturity Date”)” therein with “January 31, 2019 (the “Maturity Date”), effective March 31, 2018.”

 

(c) Section I is hereby amended and restated in its entirety to read as follows :

 

     
 

  

t. Principal and Interest Payments

 

The Principal amount of the Note shall be repaid in Five (5) installments of principal and accrued interest with any remaining Principal and accrued interest due and payable on the Maturity Date. The first such installment in the Principal amount of a minimum of Three Hundred Thousand and 001100 Dollars ($300,000.00), plus all accrued interest on the principal through such payment date, shall be due by September 15, 2018. The second such installment in the Principal amount of a minimum of Three Hundred Thousand and 00/100 Dollars ($300,000.00), plus all accrued interest on the principal through such payment date, shall be due by October 15, 2018. The third such installment in the Principal amount of a minimum of Three Hundred Thousand and 00/100 Dollars ($300,000.00), plus all accrued interest on the principal through such payment date, shall be due by November 15, 2018. The fourth such installment in the Principal amount of a minimum of Five Hundred Thousand and 00/100 Dollars ($500,000.00), plus all accrued interest on the principal through such payment date, shall be due by December 15, 2018. The fifth such installment in the Principal amount of a minimum of Five Hundred Thousand and 00/100 Dollars ($500,000.00), plus all accrued interest on the principal through such payment date, shall be due by January 15, 2019. The remaining Principal balance of this Note and all accrued interest shall be due and payable in full on the Maturity Date. Interest shall be charged at the rate of Twelve percent (12.0%) per annum; provided, that following the occurrence and during the continuance of an Event of Default (as defined in Section 5 herein), interest on the Principal shall accrue at the Default Rate (as defined in Section 5 herein) and shall be due and payable on demand.

 

Each payment of principal, interest or other amounts due under this Note shall be paid to ScanSource, in United States Dollars via wire transfer, to JP Morgan Chase Bank, NA, 270 Park Avenue, New York, New York 10017, Beneficiary: ScanSource, Inc., Routing Number: 021000021, Account Number: 771070588, SWIFT Code: CHASUS33 so that it is received by ScanSource on the date that is specified for payment under this Note. All payments or prepayments on this Note shall be applied, first, to fees, costs and expenses of ScanSource under this Note and the other agreements executed in connection herewith, second, to the interest accrued on this Note through the date of such payment or prepayment, and then to the outstanding Principal balance hereunder. All payments under this Note shall be made without any set-off, counterclaim or deduction whatsoever, and the Debtors hereby irrevocably waive all rights of set-off, counterclaim and deduction.

 

This Note may be prepaid in whole or in part any time without premium or penalty, but only together with all interest then accrued under this Note.

 

Debtors shall prepay the obligations evidenced by this Note immediately upon receipt by any Debtor of any proceeds of any indebtedness (including proceeds of any advances on any existing or future revolving credit facilities or factoring facilities) in an amount equal to twelve and a half percent (12.5%) of such proceeds. Any such prepayments received during any month shall be applied as follows: (i) amounts received during such month up to but not exceeding the amount of the one (I) next installment of Principal and interest due under this Note shall be applied to such one (1) next installment; and (ii) any amounts received during such month in excess of the amount applied in accordance with clause (i) shall be applied to the outstanding Principal amount of this Note and shall reduce the amount of each Principal installment due hereunder in the inverse order of maturity. The remaining amount of any installment due hereunder which is not paid in accordance with clause (i) shall be paid as set forth above.”

 

     
 

 

3. Miscellaneous .

  

(a) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

 

(b) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

(c) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Amendment.

 

(d) Quest warrants and represents that it has consulted with independent legal counsel of its selection in connection with this Amendment and is not relying on any representations or warranties of ScanSource or its counsel in entering into this Amendment.

 

(e) As of September 7, 2018, after adding the Specified Trade Credit Amounts to such Principal balance, the outstanding Principal balance on the Note owing to ScanSource is equal to Eight Million Six Hundred Ninety Thousand Four Hundred Sixty- Five and 02/100 Dollars ($8,690,465.02), which amount Quest acknowledges and agrees is due and owing without setoff, defense or counterclaim.

 

(f) Quest acknowledges and agrees that: (i) ScanSource has at all times acted in good faith with respect to the Note and any other matter, (ii) ScanSource has not exercised any control over the business affairs of Quest, (iii) the Note is secured by Security Agreements, and (iv) Quest has no claims against ScanSource, whether for actions taken or not taken. To the extent that Quest may have any such claim, defense, setoff or counterclaim or any other recoupments, Quest releases and forever discharges each of ScanSource and its present and former affiliates and subsidiaries, predecessors in interest, present and former officers, agents, directors, attorneys and employees, and the respective heirs, executors, successors and assigns of all of the foregoing, whether past, present or future (collectively with ScanSource, the “ScanSource Affiliates”) of and from any and all manner of action and actions, cause and causes of action, suits, rights, debts, torts, controversies, damages, judgments, executions, recoupments, claims and demands whatsoever, asserted or unasserted, in law or in equity which, against any ScanSource Affiliate, Quest ever had or now has by reason of any matter, cause, causes or thing whatsoever, including, without limitation, any presently existing claim, recoupment, or defense, whether or not presently suspected, contemplated or anticipated.

 

THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

[Signature Page to Follow]

 

     
 

 

IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

 

  QUEST SOLUTION, INC.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  QUEST MARKETING, INC.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  QUEST EXCHANGE LTD.
     
  By: /s/ Shai Shalom Lustgarten
  Name: Shai Shalom Lustgarten
  Title: Chief Executive Officer
     
  SCANSOURCE, INC.
     
  By: /s/ Cleveland McBeth
  Name: Cleveland McBeth, Jr.
  Title: Vice President, Worldwide Reseller Financial Services