Security Agreement dated April 23, 2012 between 0935493 B.C. Ltd and Foundation Freehold Ltd

SECURITY AGREEMENT

IN CONSIDERATION OF Foundation Freehold Ltd. (“Foundation”) loaning CAD$475,000 to Quantum Solar Power Corp. (“Quantum”), the undersigned 0935493 B.C. Ltd. ("0935493") hereby covenants, agrees, warrants, represents, acknowledges and confirms to and with Foundation and creates and grants the mortgages, charges and security interests hereinafter set forth as follows:

1.1         For the consideration aforesaid, 0935493 does hereby mortgage and charge as and by way of a fixed and specific charge to and in favour of Foundation, and assign and transfer to Foundation and grant to Foundation, by way of mortgage, charge, assignment and transfer, a security interest in all of 0935493's right, title and interest, in the equipment described in Schedule A.

1.2         The mortgages, charges, assignments and transfers and security interests created or granted pursuant to sections 1.1 are hereinafter collectively called the "Security Interest", and all property, assets, interests and undertakings (including Proceeds) subject to the Security Interest or otherwise charged or secured hereby or expressed to be charged, assigned or transferred or secured by any instruments supplemental hereto or in implementation hereof are hereinafter collectively called the "Collateral".

1.3         The terms "Chattel Paper", "Document of Title", "Equipment", "Consumer Goods", "Instrument", "Intangible", "Investment Property", "Proceeds", "Inventory", "Accessions", "Money", “Securities Accounts”, “Security Entitlements” “Entitlement Orders” Securities Intermediary”, “Uncertificated Security”, "financing statement", "financing change statement" and "verification statement" whenever used herein and whether expressed in the singular or the plural shall, unless otherwise defined herein or otherwise required by the context, be interpreted pursuant to their respective meanings when used in the Personal Property Security Act of the province of British Columbia, as amended from time to time, which Act, including amendments thereto and any Act substituted therefor and amendments thereto is herein referred to as the "P.P.S.A.", unless this Agreement is expressed to be governed by the laws of some jurisdiction other than British Columbia, in which event the term "P.P.S.A." shall mean and the above terms shall derive their respective meanings from the Personal Property Security Act of that jurisdiction, as amended from time to time, or any Act substituted therefor, as amended from time to time, and in interpreting any of the above terms the singular shall include and may be read and interpreted to include the plural, and vice versa. Provided always that the term "Inventory" when used herein shall include livestock and the young thereof after conception and crops that become such within six months of execution of this Security Agreement. Any reference herein to "Collateral" shall, unless the context otherwise requires, be deemed a reference to "Collateral or any part thereof". The term "Proceeds" whenever used herein and interpreted as above shall by way of example include trade-ins, equipment, cash, bank accounts, notes, chattel paper, goods, contract rights, accounts and any other personal property or obligation received when such collateral or proceeds are sold, exchanged, collected or otherwise disposed of. The term "licence" whenever used herein means any licence or similar right at any time owned or held by 0935493 including but without being limited to a "licence" as defined in the P.P.S.A., and the meaning of the term "crops" whenever used herein includes but is not limited to "crops" as defined in the P.P.S.A.

1.4         Attachment

0935493 hereby acknowledges and confirms that the Security Interest hereby created attaches upon the execution of this Security Agreement, that value has been given, and that 0935493 has rights in the Collateral.

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1.5         Prohibitions

Without the prior written consent of Foundation, 0935493 shall not and shall not have the power to grant, create or permit to be created any security interest in, charge, encumbrance or lien over, or claim against any of its property, assets, or undertakings which ranks or could in any event rank in priority to or pari passu with any Security Interest created by this Security Agreement.

(a)         the Collateral is genuine and owned by 0935493 free of all security interests, mortgages, liens, claims, charges or other encumbrances (hereinafter collectively called "Encumbrances"), save for the Security Interest and those Encumbrances shown on Schedule "A" or hereafter approved in writing by Foundation, prior to their creation or assumption, and 0935493 has good right and lawful authority to grant a security interest in the Collateral as provided by this Security Agreement;

(b)         the locations specified in Schedule "A" with respect to goods constituting Collateral are accurate and complete; and

(c)         this Security Agreement is granted, if 0935493 is a corporation, in accordance with resolutions of the directors (and of the shareholders, if necessary) of 0935493 or, if 0935493 is a partnership, of the partners of 0935493, and all other matters and things have been done and performed so as to make the execution and delivery of this Security Agreement, and the performance of 0935493's obligations hereunder, legal, valid and binding.

(a)         to defend the Collateral for the benefit of Foundation against the claims and demands of all other parties claiming the same or an interest therein; to keep the Collateral free from all Encumbrances, except for the Security Interest and those hereafter approved in writing by Foundation, prior to their creation and not to sell, exchange, transfer, assign, lease, or otherwise dispose of Collateral or any interest therein without the prior written consent of Foundation;

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(b)         to notify Foundation promptly of:

(c)         to keep the Collateral in good order, condition and repair and not to use Collateral in violation of the provisions of this Security Agreement or any other agreement relating to Collateral or any policy insuring Collateral or any applicable statute, law, by-law, rule, regulation or ordinance;

(d)         to do, execute, acknowledge and deliver such financing statements and further assignments, transfers, documents, acts, matters and things (including further schedules hereto) as may be reasonably requested by Foundation of or with respect to Collateral in order to give effect to these presents and to confirm and perfect, and maintain the perfection of, the Security Interest hereby granted, and to pay all costs for searches and filings in connection therewith;

(e)         to pay all taxes, rates, levies, assessments and other charges of every nature which may be lawfully levied, assessed or imposed against or in respect of 0935493 or Collateral as and when the same become due and payable;

(f)         to prevent Collateral from being or becoming an Accession to other property not covered by this Security Agreement;

(g)         to carry on and conduct the business of 0935493 in a proper and efficient manner and so as to protect and preserve the Collateral and to keep, in accordance with generally accepted accounting principles, consistently applied, proper books of account for 0935493's business as well as accurate and complete records concerning Collateral, and mark any and all such records and Collateral at Foundation's request so as to indicate the Security Interest;

(h)         to deliver to Foundation from time to time promptly upon request:

(i)         to permit Foundation and its representatives, at all reasonable times, access to all its property, assets and undertakings and to all its books of account and records for the purpose of inspection and to render all assistance necessary for such inspection;

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(j)         to forthwith pay all security interests, charges, encumbrances, liens and claims which rank or could in any event rank in priority to any security interest created hereby and to forthwith reimburse and indemnify Foundation for all costs, charges, expenses and legal fees and disbursements which may be incurred by Foundation in:

6.1         0935493 covenants that at all times while this Security Agreement is in effect 0935493 shall:

(a)         maintain or cause to be maintained insurance on the Collateral with an insurer, of kinds, for amounts and payable to such person or persons, all as Foundation may require, and in particular but without limitation maintain insurance on the Collateral to its full insurable value against loss or damage by fire including extended coverage endorsement and in the case of motor vehicles and other mobile Collateral, maintain insurance against theft; and

(b)         pay all premiums in connection with such insurance, and deliver all such policies to Foundation, if it so requires.

6.2         If proceeds of any insurance required hereunder become payable Foundation may, in its absolute discretion, apply such proceeds to such part or parts of the Indebtedness as Foundation may see fit or Foundation may release any such insurance proceeds to 0935493 for the purpose of repairing, replacing or rebuilding, but any release of insurance proceeds to 0935493 shall not operate as a payment on account of the Indebtedness or in any way affect this Security Agreement.

6.3         0935493 will forthwith, on the happening of loss or damage to the Collateral, notify Foundation thereof and furnish to Foundation at 0935493's expense any necessary proof and do any necessary act to enable Foundation to obtain payment of the insurance proceeds, but nothing herein contained shall limit Foundation's right to submit to the insurer a proof of loss on its own behalf.

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6.4         0935493 hereby irrevocably authorizes and directs the insurer under any policy of insurance required hereunder to include the name of Foundation as a loss payee on any cheque or draft which may be issued with respect to a claim under and by virtue of such insurance, and the production by Foundation to any insurer of a certified copy of this Security Agreement shall be its full and complete authority for so doing.

6.5         If 0935493 fails to maintain insurance as required hereby, Foundation may, but shall not be obliged to, maintain or effect such insurance coverage, or so much thereof as Foundation considers necessary for its protection.

7.1         Except as herein provided, without the prior written consent of Foundation, 0935493 will not:

(a)         sell, lease or otherwise dispose of the Collateral;

(b)         release, surrender or abandon possession of the Collateral; or

(c)         move or transfer the Collateral from the jurisdictions in which the Security Interests hereby created have been perfected.

8.1         The happening of any of the following events or conditions (each a "default") shall constitute default hereunder unless waived by Foundation:

(a)         the occurrence of a default under or the failure of 0935493 to observe or perform any obligation, covenant, term, provision or condition contained in this Security Agreement or the Guarantee Agreement between 0935493 and Foundation;

(b)         the bankruptcy or insolvency of 0935493; the filing against 0935493 of a petition in bankruptcy; the making of an authorized assignment for the benefit of creditors by 0935493; the appointment of a receiver, receiver-manager or trustee for 0935493 or for any assets of 0935493 or the institution by or against 0935493 of any other type of insolvency proceeding under the Bankruptcy and Insolvency Act or otherwise;

(c)         the institution by or against 0935493 of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against or winding up of affairs of 0935493;

(d)         if any Encumbrances affecting Collateral become enforceable against Collateral;

(e)         if 0935493 ceases or threatens to cease to carry on business or makes or agrees to make a bulk sale of assets without complying with applicable law or commits or threatens to commit an act of bankruptcy;

(f)         if any execution, sequestration, extent or other process of any court becomes enforceable against 0935493 or if a distress or analogous process is levied upon the assets of 0935493 or any part thereof;

(g)         if any certificate, statement, declaration, representation, warranty or audit report heretofore or hereafter furnished by or on behalf of 0935493 pursuant to or in connection with this Security Agreement, or otherwise (including, without limitation, the representations and warranties contained herein) or as an inducement to Foundation to extend any credit to or to enter into this or any other agreement with 0935493 or Quantum Solar Power Corp., proves to have been false in any material respect at the time as of which the facts therein set forth were stated or certified, or proves to have omitted any substantial contingent or unliquidated liability or claim against 0935493; or if upon the date of execution of this Security Agreement, there shall have been any material adverse change in any of the facts disclosed by any such certificate, representation, statement, declaration, warranty or audit report, which change shall not have been disclosed to Foundation at or prior to the time of such execution;

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(h)         if without the prior written consent of Foundation, 0935493 creates or permits to exist any security interest in, charge, encumbrance, lien on or claim against any of the Collateral which ranks or could in any event rank in priority to or pari passu with any of the Security Interests created hereby;

(i)         if 0935493 without the prior written consent of Foundation enters into an amalgamation, a merger or other similar arrangement with any other person;

(j)         if Foundation in good faith believes and has commercially reasonable grounds to believe that the prospect of payment or performance of any of the Obligations is or is about to be impaired or that any of the Collateral is or is about to be placed in jeopardy;

(k)         if any proceedings with respect to 0935493 are commenced under the Companies' Creditors Arrangement Act;

(l)         if 0935493 is more than 30 days in arrears of rent payable under any lease or if 0935493 allows any amount outstanding from 0935493 to the Crown pursuant to Federal or Provincial statute to remain unpaid for a period in excess of 30 days;

(m)         if 0935493 shall permit any sum which has been admitted as due by it or is not disputed to be due by it and which forms or is capable of being made a charge upon any of the Collateral to remain unpaid for 30 days after proceedings have been taken to enforce the same as such charge;

(n)         if 0935493 carries on any business that it is restricted from carrying on by its Memorandum;

(o)         if in the opinion of Foundation there is a material adverse change in the financial condition of 0935493;

(p)         if legal proceedings are initiated or legal positions are taken by or against 0935493 or by any third party which could in the opinion of Foundation have a material adverse effect on this Security Agreement or the Security Interest or any other security held by Foundation for all or any part of the Indebtedness;

(q)         if there is a change in the ownership or control of 0935493 which is not acceptable to Foundation.

(a)         Foundation may take possession of, collect, demand, sue on, enforce, recover and receive Collateral and give valid and binding receipts and discharges therefor and in respect thereof and, upon default, Foundation may sell, lease or otherwise dispose of Collateral in such manner, at such time or times and place or places, for such consideration and upon such terms and conditions as to Foundation may seem reasonable.

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(b)         In addition to those rights granted herein and in any other agreement now or hereafter in effect between 0935493 and Foundation and in addition to any other rights Foundation may have at law or in equity, Foundation shall have, both before and after default, all rights and remedies of a secured party under the P.P.S.A. Provided always, that Foundation shall not be liable or accountable for any failure to exercise its remedies, take possession of, collect, enforce, realize, sell, lease or otherwise dispose of Collateral or to institute any proceedings for such purposes. Furthermore, Foundation shall have no obligation to take any steps to preserve rights against prior parties to any Instrument or Chattel Paper whether Collateral or Proceeds and whether or not in Foundation's possession and shall not be liable or accountable for failure to do so.

(c)         0935493 acknowledges that Foundation may take possession of Collateral wherever it may be located and by any method permitted by law and 0935493 agrees upon request from Foundation or any such Receiver to assemble and deliver possession of Collateral at such place or places as directed by Foundation or any Receiver.

(d)         0935493 agrees to pay all costs, charges and expenses reasonably incurred by Foundation or any Receiver appointed by it, whether directly or for services rendered (including reasonable solicitors and auditors costs and other legal expenses), in preparing or enforcing this Security Agreement, taking custody of, preserving, repairing, processing, preparing for disposition and disposing of Collateral and all such costs, charges and expenses as permitted hereby, shall be secured hereby and shall be paid from the proceeds of realization, collection or disposition of Collateral in the following order of priority:

(e)         Foundation will give 0935493 such notice, if any, of the date, time and place of any public sale or of the date after which any private disposition of collateral is to be made, as may be required by the P.P.S.A.

(f)         0935493 agrees that Foundation may exercise its rights and remedies hereunder immediately upon default, except as may be otherwise provided in the P.P.S.A., and 0935493 hereby expressly confirms that except as may be otherwise provided herein or in the P.P.S.A., Foundation has not given any covenant, express or implied, and is under no obligation to allow 0935493 any period of time to remedy any default prior to Foundation exercising its rights and remedies hereunder.

(g)         Foundation shall not be responsible or liable for any debts contracted by it, for damages to persons or property or for salaries or non-fulfilment of contracts during any period when Foundation shall manage the Collateral upon entry, as herein provided, nor shall Foundation be liable to account as mortgagee in possession or for anything except actual receipts or be liable for any loss on realization or for any default or omission for which a mortgagee in possession may be liable. Foundation shall not be bound to do, observe or perform or to see to the observance or performance by 0935493 of any obligations or covenants imposed upon 0935493. 0935493 hereby waives any applicable provision of law permitted to be waived by it which imposes higher or greater obligations upon Foundation than aforesaid.

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(h)         0935493 hereby irrevocably appoints Foundation with full power of substitution, to be the attorney of 0935493 for and in the name of 0935493 to sign, endorse or execute under seal or otherwise any deeds, documents, transfers, instruments, demands, assignments, assurances or consents that 0935493 is obliged to sign, endorse or execute and generally to use the name of 0935493 and to do all things as may be necessary or incidental to the exercise of all or any of the powers conferred on Foundation, as the case may be, pursuant to this Security Agreement.

(a)         0935493 hereby authorizes Foundation to file such financing statements, financing change statements and other documents and do such acts, matters and things (including completing and adding schedules hereto identifying Collateral or any permitted Encumbrances affecting Collateral or identifying the locations at which 0935493's business is carried on and Collateral and records relating thereto are situate) as Foundation may deem appropriate to perfect on an ongoing basis and continue the Security Interest, to protect and preserve Collateral and to realize upon the Security Interest and 0935493 hereby irrevocably constitutes and appoints the Manager or Acting Manager or any officer from time to time of Foundation with which 0935493 deals the true and lawful attorney of 0935493, with full power of substitution, to do any of the foregoing in the name of 0935493 whenever and wherever it may be deemed necessary or expedient.

(b)         Without limiting any other right of Foundation, whenever Indebtedness is immediately due and payable or Foundation has the right to declare Indebtedness to be immediately due and payable (whether or not it has so declared), Foundation may, in its sole discretion, set off against Indebtedness any and all amounts then owed to 0935493 by Foundation in any capacity, whether or not due, and Foundation shall be deemed to have exercised such right to set off immediately at the time of making its decision to do so even though any charge therefor is made or entered on Foundation's records subsequent thereto.

(c)         Upon 0935493's failure to perform any of its duties hereunder, Foundation may, but shall not be obligated to, perform any or all of such duties without prejudice to any other rights and remedies of Foundation hereunder, and 0935493 shall pay to Foundation, forthwith upon written demand therefor, an amount equal to the expense incurred by Foundation in so doing plus interest thereon from the date such expense is incurred until it is paid at the rate of 15% per annum.

(d)         Foundation may from time to time and at any time waive in whole or in part any right, benefit or default under any provision of this Security Agreement but any such waiver of any right, benefit or default on any occasion shall be deemed not to be a waiver of any such right, benefit or default thereafter, or of any other right, benefit or default, as the case may be. No waiver shall be effective unless it is in writing.

(e)         Foundation may grant extensions of time and other indulgences, take and give up security, accept compositions, compound, compromise, settle, grant releases and discharges and otherwise deal with 0935493, Quantum, debtors of 0935493, and others and with Collateral and other security as Foundation may see fit without prejudice to the liability of 0935493 or Foundation's right to hold and realize the Security Interest.

(f)         No delay or omission by Foundation in exercising any right or remedy hereunder under any agreement with Quantum or with respect to any Indebtedness or any default shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. Furthermore, Foundation may remedy any default by 0935493 hereunder or with respect to any Indebtedness in any reasonable manner without waiving the default remedied and without waiving any other prior or subsequent default by 0935493. All rights and remedies of Foundation granted or recognized herein are cumulative and may be exercised at any time and from time to time independently or in combination.

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(g)         0935493 waives protest of any Instrument constituting Collateral at any time held by Foundation on which 0935493 is in any way liable and, subject to the provisions of P.P.S.A., notice of any other action taken by Foundation.

(h)         Save for any schedules which may be added hereto pursuant to the provisions hereof, no modification, variation or amendment of any provision of this Security Agreement shall be made except by a written Agreement, executed by the parties hereto.

(i)         Subject to the requirements of the P.P.S.A. or as otherwise provided herein, whenever either party hereto is required or entitled to notify or direct the other or to make a demand or request upon the other, such notice, direction, demand or request shall be in writing and shall be sufficiently given in the case of Foundation, if delivered to it or sent by prepaid registered mail addressed to it at its address herein set forth or as changed pursuant hereto and, in the case of 0935493, if delivered to it or sent by prepaid registered mail addressed to it at its last address known to Foundation. Either party may notify the other pursuant hereto of any change in such party's principal address to be used for the purposes hereof.

(j)         This Security Agreement and the security afforded hereby is in addition to and not in substitution for any other security now or hereafter held by Foundation and is, and is intended to be a continuing Security Agreement and shall remain in full force and effect until Foundation shall actually receive written notice of its discontinuance; and, notwithstanding such notice, shall remain in full force and effect thereafter until all Obligations contracted for or created before the receipt of such notice by Foundation, and any extensions or renewals thereof (whether made before or after receipt of such notice) together with interest accruing thereon after such notice, shall be paid in full.

(k)         This Security Agreement shall not operate so as to create any merger or discharge of any of the Obligations, or of any assignment, transfer, guarantee, mortgage, lien, contract, promissory note, bill of exchange or security interest of any form held or which may hereafter be held by Foundation from 0935493 or from any other person whomsoever. The taking of a judgment with respect to any of the Obligations will not operate as a merger of any of the covenants contained in this Security Agreement.

(l)         All rights and remedies of Foundation set out in this Security Agreement and in any agreement with Quantum, and in any other security agreement held by Foundation from 0935493 or any other person whomsoever to secure payment and performance of the Obligations, are cumulative and no right or remedy contained herein or therein is intended to be exclusive but each is in addition to every other right or remedy contained herein or therein or in any future security agreement, or now or hereafter existing at law, in equity or by statute, or pursuant to any other agreement between 0935493 and Foundation that may be in effect from time to time.

(m)         Foundation may, without further notice to 0935493, at any time assign, transfer or grant a security interest in this Security Agreement and the Security Interests created hereby. 0935493 expressly agrees that the assignee, transferee or secured party, as the case may be, shall have all of Foundation's rights and remedies under this Security Agreement and 0935493 will not assert any defense, counterclaim, right of set-off or otherwise any claim which it now has or hereafter acquires against Foundation in any action commenced by such assignee, transferee or secured party, as the case may be, and will pay the Obligations to the assignee, transferee or secured party, as the case may be, as the Obligations become due.

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(n)         Any partial payment or satisfaction of the Obligations or any ceasing by 0935493 to be indebted to Foundation shall be deemed not to be a redemption or discharge of this Security Agreement. 0935493 shall be entitled to a release and discharge of this Security Agreement upon full payment and satisfaction of all Obligations, and upon written request by 0935493 and payment to Foundation of a discharge fee to be fixed by Foundation and payment of all costs, charges, expenses and legal fees and disbursements (on a solicitor and his own client basis) incurred by Foundation in connection with the Obligations and such release and discharge.

(o)         This Security Agreement shall enure to the benefit of Foundation and its successors and assigns, and shall be binding upon the heirs and executors, if applicable, and the successors and permitted assigns of 0935493. If more than one Debtor executes this Security Agreement, the obligations of such Debtors hereunder shall be joint and several.

(p)         The headings used in this Security Agreement are for convenience only and are not to be considered a part of this Security Agreement and do not in any way limit or amplify the terms and provisions of this Security Agreement.

(q)         When the context so requires, the singular number shall be read as if the plural were expressed and vice versa, and the provisions hereof shall be read with all grammatical changes necessary dependent upon the person referred to being a male, female, firm or corporation.

(r)         In the event any provisions of this Security Agreement, as amended from time to time, shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this Security Agreement shall remain in full force and effect.

(s)         Nothing herein contained shall in any way obligate Foundation to grant, continue, renew, extend time for payment of or accept anything which constitutes or would constitute Indebtedness.

(t)         0935493 acknowledges and agrees that in the event it amalgamates with any other company or companies it is the intention of the parties hereto that the term "0935493" when used herein shall apply to each of the amalgamating companies and to the amalgamated company, such that the Security Interest granted hereby shall secure the "Indebtedness" (as that term is herein defined) of each of the amalgamating companies and the amalgamated company to Foundation at the time of amalgamation and any "Indebtedness" of the amalgamated company to Foundation thereafter arising. The Security Interest shall attach to "Collateral" owned by each company amalgamating with 0935493, and by the amalgamated company, at the time of amalgamation, and shall attach to any "Collateral" thereafter owned or acquired by the amalgamated company when such becomes owned or is acquired.

(u)         0935493 hereby authorizes Foundation to provide a copy of this Security Agreement and such other information and documents specified under the P.P.S.A. to any person entitled pursuant to the P.P.S.A. to demand and receive same.

(v)         This Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the province of British Columbia as the same may from time to time be in effect.

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BUSINESS DEBTOR NAME AND ADDRESS

0935493 B.C. LTD.
Suite 950 – 650 West Georgia Street
Vancouver, BC V6B 4N8

IN WITNESS WHEREOF 0935493 has executed this Security Agreement on the date indicated below.

OFFICER CERTIFICATION:
Your signature constitutes a representation that you are a solicitor, notary public or other person authorized by the Evidence Act, R.S.B.C. 1996, c. 124, to take affidavits for use in British Columbia and certifies the matters set out in Part 5 of the Land Title Act as they pertain to the execution of this instrument.

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SCHEDULE "A"
To Security Agreement

(DESCRIPTION OF PROPERTY)

All located at Simon Fraser University 4D Labs 8888 University Drive, Burnaby, BC, Canada V5A 1S6.

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