Document:

EXHIBIT 10.4

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Security Agreement”) is dated October 20, 2014 and made between:

 

	
(1)

	
NUGALE PHARMACEUTICAL INC., a corporation formed under the laws of the Province of Ontario (the “Corporation”); and

	 	 
	
(2)

	
GUO YIN (WYNN) XIE, an individual who resides in the Province of Ontario (“Xie”).

  

RECITALS:

 

	
(A)

	
GUO YIN (WYNN) XIE, as agent (in such capacity, the “Agent”) and on his own behalf as vendor and on behalf of JIAN LONG (“Long”), HONG SHU ZHU (“Zhu”), 2434689 Ontario Inc. (“XieCo”), 2434691 Ontario Inc. (“LongCo”), 2434694 Ontario Inc. (“ZhuCo” and together with Xie, Long, Zhu, XieCo and LongCo, the “Vendors”) have agreed to sell their shares of capital stock in Prime Nutrisource Inc., the Corporation, and Prime Nutrisource Inc. (New Jersey), as applicable, to E-World Canada Holding, Inc. (the “Purchaser”), in consideration of (among other things), and upon the terms and conditions contained in, a promissory note (the “Promissory Note”), dated as of the date hereof, issued by the Purchaser in favor of the Agent;

	 	 
	
(B)

	
The Agent is to hold for its own benefit and is to act as agent under the Promissory Note, inter alia, to hold as agent for the rateable benefit of the Vendors any and all security for the payment and performance of the obligations of the Purchaser under the Promissory Note;

	 	 
	
(C)

	
The Corporation has granted a guarantee in favour of the Vendors and the Agent (the “Nugale Guarantee”), dated as of the date hereof, pursuant to which the Corporation has agreed to guarantee the payment and performance of all liabilities and obligations of the Purchaser to the Vendors and the Agent arising pursuant to, or in respect of the Promissory Note; and

	 	 
	
(D)

	
The Corporation has agreed to execute and deliver this Security Agreement to and in favor of the Agent as security for the payment and performance of the Corporation’s obligations to the Vendors and the Agent under the Nugale Guarantee.

 

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Corporation and the Agent agree as follows:

 

ARTICLE I – Security

 

	
1.1 

	
Statutory and Other References

  

Terms defined in the Personal Property Security Act (Ontario) (as amended from time to time, the “PPSA”) and used in this Security Agreement have the same meanings. Any reference to the “STA” is a reference to the Securities Transfer Act, 2006 (Ontario) or, to the extent applicable, similar legislation of any other jurisdiction, as amended from time to time. Where a reference is made to the Agent, it includes, as applicable, any nominee appointed by the Agent to hold or otherwise take possession of the Collateral.

 

	 
	
1

	

  

	
1.2 

	
Grant of Security

  

The Corporation grants to the Agent, for its own benefit as a Vendor and as agent for the benefit of the other Vendors, a security interest in, and assigns, mortgages, charges, hypothecates and pledges to the Agent, for its own benefit as a Vendor and as agent for the benefit of the other Vendors, all the personal property and undertaking of the Corporation now owned or hereafter acquired by the Corporation (collectively, the “Collateral”) including, without limitation, any and all of the:

 

	 	
(a)

	
inventory of the Corporation including goods held for sale, lease or resale, goods provided or to be provided to third parties under contracts of lease, consignment or service, goods which are raw materials or work in process, goods used in or procured for packing and materials used or consumed in the business of the Corporation;

	 	
 

	 
	 	
(b)

	
equipment, machinery, furniture, fixtures, vehicles and other goods of every kind and description of the Corporation and all licences and other rights and all records, files, charts, plans, drawings, specifications, manuals and documents relating thereto;

	 	
 

	 
	 	
(c)

	
accounts due or accruing due to the Corporation and all agreements, books, invoices, documents and papers recording, evidencing or relating thereto;

	 	
 

	 
	 	
(d)

	
money, documents of title, chattel paper, instruments, securities and all other financial assets of the Corporation;

	 	
 

	 
	 	
(e)

	
securities accounts of the Corporation and all of the credit balances, security entitlements, other financial assets and items or property standing to the credit of the Corporation from time to time in such securities accounts;

	 	
 

	 
	 	
(f)

	
intangibles of the Corporation including all security interests, goodwill, choses in action, contracts and contractual rights, licenses and benefits;

	 	
 

	 
	 	
(g)

	
all trademarks, trade mark registrations and pending trade mark applications, patents and pending patent applications, copyrights, proprietary and non-public business information, trade and business names, web names and worldwide web addresses and other intellectual property and industrial property of the Corporation (collectively, the “Intellectual Property”);

	 	
 

	 
	 	
(h)

	
all authorizations, permits, approvals, grants, licenses, consents, rights, franchises, privileges, orders, awards or the like issued or granted by law or by rule or regulation of any public body issued or granted to the Corporation;

	 	
 

	 
	 	
(i)

	
substitutions and replacements of, and increases, additions and, where applicable, accessions to, the property described in Sections 1.2(a)-(h) inclusive; and

	 	
 

	 
	 	
(j)

	
proceeds in any form derived directly or indirectly from any dealing with all or any part of the property described in Sections 1.2(a)-(i) inclusive or the proceeds of such proceeds.

 

	 
	
2

	

 

	
1.3 

	
Obligations Secured

  

	 	
(a)

	
The security interest, assignment, mortgage, charge, hypothecation and pledge granted hereby (collectively, the “Security Interest”) secures the payment and performance of all debts, liabilities and obligations present or future, direct or indirect, absolute or contingent, matured or unmatured, at any time or from time to time due or accruing due, and owing by or otherwise payable by the Corporation to the Agent and the Vendors, however or wherever incurred, and in any currency, and whether incurred by the Corporation alone or with another or others and whether as principal, guarantor or surety of the Corporation to the Agent and the Vendors pursuant to or in connection with the Nugale Guarantee (collectively, and together with the expenses, costs and charges set out in Section 1.3(b), the “Obligations”).

	 	
 

	 
	 	
(b)

	
All reasonable expenses, costs and charges incurred by or on behalf of the Agent and the Vendors in connection with this Security Agreement, the Security Interest or the realization of the Collateral, including all legal fees, court costs, receiver’s or agent’s remuneration and other expenses of, or of taking or defending any action in connection with, taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral or other lawful exercises of the powers conferred by the Nugale Guarantee are payable on demand and shall be added to and form a part of the Obligations. Notwithstanding the foregoing, each of the parties hereto shall pay its or his own fees, costs and expenses incurred in connection with the negotiation, preparation, execution and delivery of this Security Agreement and the consummation of the transactions contemplated hereby.

 

	
1.4 

	
Attachment, Perfection, Possession and Control

 

	 	
(a)

	
The Corporation acknowledges that (i) value has been given, (ii) it has rights in the Collateral or the power to transfer rights in the Collateral to the Agent (other than after-acquired Collateral), (iii) it has not agreed to postpone the time of attachment of the Security Interest, and (iv) it has received a copy of this Security Agreement.

	 	
 

	 
	 	
(b)

	
The Corporation shall promptly inform the Agent in writing of the acquisition by the Corporation of any personal property which is not adequately described in this Security Agreement, and the Corporation shall execute and deliver, from time to time, at its own expense, amendments to this Security Agreement and its schedules or additional security agreements or schedules as may be required by the Agent in order to preserve, protect and perfect its Security Interest in such personal property.

 

	 
	
3

	

 

	 	
(c)

	
If the Corporation acquires Collateral consisting of chattel paper, instruments or negotiable documents of title (collectively, “Negotiable Collateral”), the Corporation shall, immediately upon receipt thereof, deliver to the Agent the Negotiable Collateral and shall, at the request of the Agent (i) endorse the same for transfer in blank or as the Agent may direct, (ii) cause any transfer to be registered wherever, in the opinion of the Agent, such registration may be required or advisable, and (iii) deliver to the Agent any and all consents or other documents which may be necessary or desirable to transfer the Negotiable Collateral.

	 	
 

	 
	 	
(d)

	
If the Corporation has or hereafter acquires Collateral consisting of certificated securities it shall immediately deliver to the Agent any and all certificates representing such Collateral (the “Pledged Certificated Securities”) and other materials (including effective endorsements) as may be required from time to time in the opinion of the Agent, to provide the Agent with control over all Pledged Certificated Securities in the manner provided under Section 23 of the STA, and at the request of the Agent, will cause all Pledged Certificated Securities to be registered in the name of the Agent or as it may direct.

	 	
 

	 
	 	
(e)

	
If the Corporation has or hereafter acquires Collateral consisting of uncertificated securities it shall deliver to the Agent any and all such documents, agreements and other materials as may be required from time to time in the opinion of the Agent, to provide the Agent with control over all such Collateral in the manner provided under Section 24 of the STA.

	 	
 

	 
	 	
(f)

	
If the Corporation has or hereafter acquires Collateral consisting of security entitlements or creates Collateral consisting of one or more securities accounts it shall deliver to the Agent any and all such documents, agreements and other materials as may be required from time to time in the opinion of the Agent, to provide the Agent with control over all such Collateral in the manner provided under Section 25 and 26 of the STA and Section 1(2)(e) of the PPSA.

	 	
 

	 
	 	
(g)

	
If the Corporation has or hereafter acquires Collateral consisting of an interest in a partnership or limited liability company, it shall take all steps necessary in the opinion of the Agent, to ensure that such property is and remains a security for the purposes of the STA.

	 	
 

	 
	 	
(h)

	
The Corporation shall not cause or permit any person other than the Agent to have control (as defined in the STA) of any investment property constituting part of the Collateral, other than control in favour of a depositary bank or securities intermediary which has subordinated its lien to the lien of the Agent pursuant to documentation in form and substance satisfactory to the Agent.

 

	 
	
4

	

 

	
1.5 

	
Special Provisions Relating to Pledged Investment Property

 

	 	
(a)

	
Provided no Event of Default (as defined in the Promissory Note) has occurred and is continuing, the Corporation has the right to exercise all voting, consensual and other powers of ownership pertaining to Collateral which is investment property (the “Pledged Investment Property”) for all purposes not inconsistent with the terms of this Security Agreement, the Promissory Note, and the Nugale Guarantee and the Corporation agrees that it will not vote the Pledged Investment Property in any manner that is inconsistent with such terms.

	 	
 

	 
	 	
(b)

	
Provided no Event of Default has occurred and is continuing, the Corporation may receive and retain any dividends, money, property, distributions or proceeds on the Pledged Investment Property.

	 	
 

	 
	 	
(c)

	
If an Event of Default has occurred and is continuing, whether or not the Agent exercises any right to declare any Obligations due and payable or seeks or pursues any other relief or remedy available to it under applicable law or under this Security Agreement or otherwise, upon notice to the Corporation, all dividends and other distributions on the Pledged Investment Property shall be paid directly to the Agent and retained by it as part of the Collateral, and, if the Agent so requests in writing, the Corporation will execute and deliver to the Agent any instruments or other documents necessary or desirable to ensure that the Pledged Investment Property is paid directly to the Agent.

 

	
1.6 

	
Scope of Security Interest

 

	 	
(a)

	
The Security Interest with respect to the trade-marks constitutes a security interest in, and a charge, hypothecation and pledge of, such Collateral in favor of the Agent, but does not constitute an assignment or mortgage of such Collateral to the Agent or any Vendors. Until the Security Interest becomes enforceable, the grant of the Security Interest in the Intellectual Property will not affect in any way the Corporation’s rights to commercially exploit it or defend or enforce the Corporation’s rights in it or with respect to it.

	 	
 

	 
	 	
(b)

	
The Security Interest does not extend to consumer goods.

	 	
 

	 
	 	
(c)

	
The Security Interest does not extend or apply to the last day of the term of any lease or sublease or any agreement for a lease or sublease, now held or hereafter acquired by the Corporation in respect of real property, but the Corporation shall stand possessed of any such last day upon trust to assign and dispose of it as the Agent may direct.

 

	 
	
5

	

 

	
1.7 

	
Care and Custody of Collateral

 

	 	
(a)

	
The Agent and the Vendors have no obligation to keep Collateral in their possession identifiable.

	 	
 

	 
	 	
(b)

	
The Agent and the Vendors shall exercise in the physical keeping of any Negotiable Collateral or securities, only the same degree of care as it would exercise in respect of its own such property kept at the same place.

	 	
 

	 
	 	
(c)

	
The Agent may, after the Security Interest has become enforceable, (i) notify any person obligated on an account, chattel paper or instrument to make payments to the Agent whether or not the Corporation was previously making collections on such accounts, chattel paper or instruments, and (ii) assume control of any proceeds arising from the Collateral.

  

	
1.8 

	
Amalgamation

  

In the event the Corporation amalgamates with any other corporation or corporations, unless otherwise agreed upon by the Corporation and the Agent, it is the intention of the parties that the Security Interest will (a) extend to all of the property and assets that (i) any of the amalgamating corporations own, or (ii) the amalgamated corporation thereafter acquires, and (b) secure the payment and performance of all debts, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or unmatured, at any time or from time to time due or accruing due and owing by or otherwise payable by any of the amalgamating corporations and the amalgamated corporation to the Agent and the Vendors in any currency, however or wherever incurred, and whether incurred alone or jointly with another or others and whether as principal, guarantor or surety and whether incurred prior to, at the time of, or subsequent to, the amalgamation. The Security Interest will attach to the property and assets of the amalgamating corporations not previously subject to this Security Agreement at the time of amalgamation and to any property or assets thereafter owned or acquired by the amalgamated corporation when same becomes owned or is acquired. Upon any such amalgamation, the defined term “Corporation” means, collectively, each of the amalgamating corporations and the amalgamated corporation, the defined term “Collateral” means all of the property, assets, undertaking and interests described in (a) above, and the defined term “Obligations” means the obligations described in (b) above.

 

ARTICLE II – Enforcement

 

	
2.1 

	
Enforcement

 

The Security Interest shall only be and become enforceable against the Corporation upon the occurrence and during the continuance of an Event of Default (as defined in the Promissory Note Agreement).

 

	 
	
6

	

 

	
2.2 

	
Remedies

 

Whenever the Security Interest becomes enforceable, the Agent may, in its sole discretion, realize upon the Collateral and enforce its right and the rights of the Vendors by:

 

	 	
(a)

	
entering onto any premises where Collateral consisting of tangible personal property may be located;

	 	
 

	 
	 	
(b)

	
entering into possession of the Collateral by any method permitted by applicable law;

	 	
 

	 
	 	
(c)

	
selling or leasing all or any part of the Collateral;

	 	
 

	 
	 	
(d)

	
holding, storing or keeping idle or operating all or any part of the Collateral;

	 	
 

	 
	 	
(e)

	
collecting any proceeds arising in respect of the Collateral;

	 	
 

	 
	 	
(f)

	
collecting, realizing, selling, or otherwise dealing with, the accounts;

	 	
 

	 
	 	
(g)

	
issuing any instructions or entitlement orders to an issuer or securities intermediary;

	 	
 

	 
	 	
(h)

	
instructing a financial institution to transfer funds held by it to an account maintained by the Agent;

	 	
 

	 
	 	
(i)

	
appointing by instrument in writing a receiver (which term as used in this Security Agreement includes a receiver and manager) or agent of all or any part of the Collateral and removing or replacing from time to time any receiver or agent;

	 	
 

	 
	 	
(j)

	
instituting proceedings in any court of competent jurisdiction for the appointment of a receiver of all or any part of the Collateral;

	 	
 

	 
	 	
(k)

	
instituting proceedings in any court of competent jurisdiction for sale or foreclosure of all or any part of the Collateral;

	 	
 

	 
	 	
(l)

	
filing proofs of claim and other documents to establish claims to the Collateral in any proceeding relating to the Corporation; and

	 	
 

	 
	 	
(m)

	
exercising any other remedy or proceeding authorized or permitted under the PPSA or otherwise by law or equity.

 

	 
	
7

	

 

	
2.3 

	
Additional Rights

 

In addition to the remedies set forth in Section 1.1, the Agent may, in its sole discretion, either directly or through its agents or nominees, whenever the Security Interest has become enforceable:

 

	 	
(a)

	
require the Corporation, at the Corporation’s reasonable expense, to assemble the Collateral at a place or places designated by notice in writing and the Corporation agrees to so assemble the Collateral;

	 	
 

	 
	 	
(b)

	
require the Corporation, by notice in writing, to disclose to the Agent the location or locations of the Collateral and the Corporation agrees to make such disclosure when so requested;

	 	
 

	 
	 	
(c)

	
repair, process, modify, complete or otherwise deal with the Collateral and prepare for the disposition of the Collateral, whether on the premises of the Corporation or otherwise;

	 	
 

	 
	 	
(d)

	
carry on all or any part of the business of the Corporation and, to the exclusion of all others including the Corporation, enter upon, occupy and use all or any of the premises, buildings, and other property of, or used or occupied by, the Corporation, free of charge, and the Agent and the Vendors are not liable to the Corporation for any act, omission or negligence in so doing or for any rent, charges, depreciation or damages incurred in connection with, or resulting from, such action;

	 	
 

	 
	 	
(e)

	
borrow for the purpose of carrying on the business of the Corporation or for the maintenance, preservation or protection of the Collateral and grant security interests in the Collateral, whether or not in priority to the Security Interest, to secure repayment;

	 	
 

	 
	 	
(f)

	
commence, continue or defend any judicial or administrative proceedings for the purpose of protecting, seizing, collecting, realizing or obtaining possession or payment of the Collateral, and give good and valid receipts and discharges in respect of the Collateral and compromise or give time for the payment or performance of all or any part of the accounts or any other obligation of any third party to the Corporation; and

	 	
 

	 
	 	
(g)

	
at any public or private sale, bid for and purchase any or all of the Collateral offered for sale and upon compliance with the terms of such sale, hold, retain and dispose of such Collateral without any further accountability to the Corporation or any other person with respect to such holding, retention or disposition, except as required by law.

 

	
2.4 

	
Concerning a Receiver

 

	 	
(a)

	
Any receiver appointed by the Agent shall be vested with all rights and remedies which could have been exercised by the Agent in respect of the Corporation or the Collateral and such other powers and discretions as are granted in the instrument of appointment and any supplemental instruments. The choice of receiver and its remuneration are within the sole and unfettered discretion of the Agent.

	 	
 

	 
	 	
(b)

	
Any receiver appointed by the Agent shall act as agent for the Agent for the purposes of taking possession of the Collateral, but otherwise and for all other purposes (except as provided below), as agent for the Corporation. The receiver may sell, lease, or otherwise dispose of Collateral as agent for the Corporation or as agent for the Agent as the Agent may determine in its discretion. The Corporation agrees to ratify and confirm all actions of the receiver acting as agent for the Corporation, and to release and indemnify the receiver in respect of all such actions, except with respect to the gross negligence or willful misconduct of the receiver.

	 	
 

	 
	 	
(c)

	
The Agent, in appointing or refraining from appointing any receiver, shall not incur any liability to the receiver, the Corporation or otherwise and is not responsible for any misconduct or negligence of such receiver.

 

	 
	
8

	

 

	
2.5 

	
Exercise of Remedies

  

Any remedy may be exercised separately or in combination and is in addition to, and not in substitution for, any other rights or remedies the Agent and the Vendors may have, however created. The Agent and the Vendors are not bound to exercise any right or remedy, and the exercise of rights and remedies is without prejudice to any other rights of the Agent and the Vendors in respect of the Obligations including the right to claim for any deficiency.

 

	
2.6 

	
Appointment of Attorney

  

The Corporation irrevocably appoints the Agent (and its officers) as attorney of the Corporation (with full power of substitution) to do, make and execute, in the name of and on behalf of the Corporation, upon the occurrence and during the continuance of an Event of Default, all such further acts, documents, matters and things which the Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement including the execution, endorsement and delivery of documents and any notices, receipts, assignments or verifications of the accounts. All acts of the attorney are hereby ratified and approved, and the attorney shall not be liable for any act, failure to act or any other matter or thing, except to the extent by its own gross negligence or willful misconduct. This power of attorney is irrevocable, is coupled with an interest, has been given for valuable consideration (the receipt and adequacy of which is acknowledged) and survives, and does not terminate upon, the bankruptcy, dissolution, winding up or insolvency of the Corporation. This power of attorney extends to and is binding upon the Corporation’s successors and permitted assigns.

 

	
2.7 

	
Dealing with the Collateral

 

	 	
(a)

	
The Agent and the Vendors are not obliged to exhaust their recourse against the Corporation or any other person or against any other security they may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the Agent considers desirable.

	 	
 

	 
	 	
(b)

	
The Agent and the Vendors may grant extensions or other indulgences, take and give up security, accept compositions, grant releases and discharges and otherwise deal with the Corporation and with other persons, guarantors, sureties or security as they may see fit without prejudice to the Obligations, the liability of the Corporation or the rights of the Agent and the Vendors in respect of the Collateral.

	 	
 

	 
	 	
(c)

	
The Agent and Vendors are not (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Collateral, (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Collateral or for the purpose of preserving any rights of any persons in respect of the Collateral, (iii) responsible for any loss occasioned by any sale of other dealing with the Collateral or by the retention of or failure to sell or otherwise deal with the Collateral, or (iv) bound to protect the Collateral from depreciating in value or becoming worthless.

  

	 
	
9

	

  

	 	
(d)

	
To the extent that applicable law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, and without prejudice to the ability of the Agent to dispose of the Collateral in any such manner, the Corporation acknowledges and agrees that it is not commercially unreasonable for the Agent to, and the Agent may, in its discretion (i) incur expenses reasonably deemed significant by the Agent to prepare the Collateral for disposition, (ii) exercise collection remedies directly or through the use of collection agencies, (iii) dispose of Collateral by way of public auction, public tender or private contract, with or without advertising and without any other formality, (iv) dispose of Collateral to a Vendor or to a customer or client of the Agent or a Vendor, (v) contact other persons, whether or not in the same business as the Corporation, for expressions of interest in acquiring all or any portion of the Collateral, (vi) hire one or more professional auctioneers to assist in the disposition of the Collateral, whether or not the Collateral is of a specialized nature, (vii) establish an upset or reserve bid or price in respect of the Collateral, and (viii) establish such terms as to credit or otherwise as the Agent may determine.

	 	
 

	 
	 	
(e)

	
The Corporation acknowledges that the Agent may be unable to complete public sale of any of all of the Collateral consisting or investment property by reason of certain prohibitions contained in applicable securities laws or otherwise. In connection therewith, it may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale thereof. Any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, the Corporation agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner by reason of it being a private sale. The Agent is under no obligation to delay a sale of any or all of the Collateral for the period of time necessary to permit the issuer thereof to register such Collateral for public sale under applicable securities law or otherwise, even if the issuer agrees to do so.

 

	
2.8 

	
Application of Proceeds

 

Any and all moneys realized by the Agent pursuant to this Security Agreement shall be applied by the Agent to such part of to the Obligations as the Agent in its sole discretion determines. The Agent may, at all times and from time to time, change any application so made in accordance with the Promissory Note.

 

	
2.9 

	
No Waiver

 

No delay or omission by the Agent, at any time or times, to require strict performance by the Corporation of any provision of this Security Agreement waives, affects or diminishes any right of the Agent thereafter to demand strict compliance and performance therewith. 

  

	 
	
10

	

 

	
2.10 

	
Dealings by Third Parties

  

	 	
(a)

	
No person dealing with the Agent, any of the Vendors or an agent or receiver is required to determine (i) whether the Security Interest has become enforceable, (ii) whether the powers which such person is purporting to exercise have become exercisable, (iii) whether any money remains due to the Agent or the Vendors by the Corporation, (iv) the necessity or expediency of the stipulations and conditions subject to which any sale or lease is made, (v) the propriety or regularity of any sale or other dealing by the Agent or any Vendor with the Collateral, or (vi) how any money paid to the Agent or Vendors has been applied.

	 	
 

	 
	 	
(b)

	
Any purchaser of Collateral shall hold the Collateral absolutely, free from any claim or right of any kind whatever, including any equity of redemption, of the Corporation. The Corporation waives (to the fullest extent permitted by law) as against any such purchaser, all rights of redemption, stay or appraisal which the Corporation has or may have under any rule of law or statute now existing or hereafter adopted.

  

	
2.11 

	
Corporation Liable for Deficiency

 

The Corporation is liable to the Agent and the Vendors for any deficiency after the proceeds of any sale or other disposition of Collateral are received by the Agent.

 

ARTICLE III – General

 

	
3.1 

	
Notices

 

Any notice, consent, waiver or other communication given under this Security Agreement must be in writing and may be given by delivering it or sending it by facsimile or other similar form of recorded communication addressed: 

  

	 	
(a)

	
to the Corporation at:

Nugale Pharmaceutical Inc.

41 Pullman Court, Scarborough

Ontario, Canada, MlX 1E4

Attention: Chairman

Fax No.: 416-298-7273

 

With a copy to:

 

E-World USA Holding, Inc.

9550 Flair Drive, Suite 308

El Monte, CA 91731

Attention: Ding Hua Wang

Fax No.: 626-448-2163

 

	 
	
11

	

 

 with a copy (which shall not constitute notice to the Corporation) to:

 

	 	

	
Loeb & Loeb LLP

10100 Santa Monica Blvd., Ste. 2200

Los Angeles, CA 90067

Attention: Christopher J. Kelly

Fax No.: 310-919-3974

E-mail: ckelly@loeb.com

 

	 	
(b)

	
to the Agent, on behalf of itself and each of the Vendors, at:

	 	
 

	
 

	 	
 

	
Guo Yin (Wynn) Xie

41 Pullman Court

Scarborough, ON M1W 1E4

Fax No.: 416-298-7275

E-mail: wx@primenutrisource.com

 

with a copy (which shall not constitute notice to the Agent) to:

 

	 	

	
Wildeboer Dellelce LLP

Wildeboer Dellelce Place

365 Bay St., Suite 800

Toronto, ON M5H 2V1

Attention: Peter Simeon

Fax No.: 416-361-1790

E-mail: psimeon@wildlaw.ca

 

Any such communication is deemed to have been delivered and received on the date of personal delivery or transmission by facsimile or other similar permitted form of recorded communication, as the case may be, if such day is a business day and such delivery or transmission was received by the recipient party prior to 5 pm (Toronto time) and otherwise on the next business day. Any party may change its address for service by notice given in accordance with the foregoing and any subsequent communication must be sent to such party at its changed address.

 

	
3.2 

	
Capitalized Terms

  

	 	
(a)

	
Capitalized terms used in this Security Agreement and not otherwise defined have the respective meanings given to them in the Promissory Note.

 

	 	
(b)

	
Any reference to this Security Agreement refers to this Security Agreement as the same may have been or may from time to time be amended, modified, extended, renewed, restated, replaced or supplemented.

 

	 
	
12

	

 

	
3.3 

	
Discharge and Termination

 

The Security Interest will be discharged, and this Security Agreement will be terminated and of no further force and effect, upon the full and indefeasible payment and performance of the Obligations. In that connection, the Agent will execute and deliver to the Corporation such releases and discharges as the Corporation may reasonably require at the expense of the Corporation.

 

	
3.4 

	
Amendment

  

This Security Agreement may only be amended, supplemented or otherwise modified by written agreement of the Agent and the Corporation.

 

	
3.5 

	
Waivers, etc.

 

	 	
(a)

	
No consent or waiver by the Agent in connection with this Security Agreement is binding unless made in writing and signed by the Agent. Any consent or waiver given under this Security Agreement is effective only in the specific instance and for the specific purpose for which it was given. No waiver of any of the provisions of this Security Agreement constitutes a waiver of any other provision.

	 	
 

	 
	 	
(b)

	
A failure or delay on the part of the Agent or a Vendor in exercising a right or remedy under this Security Agreement does not operate as a waiver of, or impair, any rights or remedies of the Agent or the Vendors however arising. A single or partial exercise of a right or remedy on the part of the Agent or a Vendor does not preclude any other or further exercise of that right or remedy or the exercise of any other rights or remedies by the Agent or the Vendors.

  

	
3.6 

	
No Merger

 

This Security Agreement shall not operate by way of merger of any of the Obligations and no judgment recovered by the Agent or any of the Vendors will operate by way of merger of, or in any way affect, the Security Interest, which is in addition to, and not in substitution for, any other security now or hereafter held by the Agent and the Vendors in respect of the Obligations.

 

	
3.7 

	
Further Assurances

  

The Corporation shall from time to time, whether before or after the Security Interest has become enforceable, do all acts and things and execute and deliver all transfers, assignments and agreements as the Agent may reasonably require for (a) protecting the Collateral, (b) perfecting the Security Interest, (c) obtaining control of the Collateral, (d) exercising all powers, authorities and discretions conferred upon the Agent, and (e) otherwise enabling the Agent and the Vendors to obtain the full benefits of this Security Agreement and the rights and powers herein granted. The Corporation shall, from time to time after the Security Interest has become enforceable, do all acts and things and execute and deliver all transfers, assignments and agreements as the Agent may require for facilitating the sale or other disposition of the Collateral in connection with its realization.

 

	 
	
13

	

  

	
3.8 

	
Supplemental Security

 

This Security Agreement is in addition to and without prejudice to all other security now held or which may hereafter be held by the Agent and the Vendors.

 

	
3.9 

	
Successors and Assigns

 

This Security Agreement is binding upon the Corporation, its successors and assigns, and inures to the benefit of the Agent, the Vendors and their respective its successors and assigns. This Security Agreement and all rights of the Agent and the Vendors are assignable without the consent of, or notice to the Corporation, and in any action brought by an assignee to enforce this Security Agreement or any right or remedy, the Corporation will not assert against the assignee any claim or defense which the Corporation now has or hereafter may have against the Agent or any of the Vendors. Neither this Security Agreement nor any rights, duties or obligations under this security agreement are assignable or transferable by the Corporation without the prior written consent of the Agent.

 

	
3.10 

	
Headings, etc.

 

The division of this Security Agreement into articles and sections and the insertion of headings are for convenient reference only and are not to affect or be used in the construction or interpretation of this Security Agreement.

 

	
3.11 

	
Gender and Number

 

Any reference in this Security Agreement to gender includes all genders and words importing the singular include the plural and vice versa.

 

	
3.12 

	
Entire Agreement

 

The provisions set forth in this Security Agreement constitute the entire enforceable agreement between the parties and supersede all prior oral or written agreements, understandings, representations and warranties and course of conduct and dealing between the parties with respect to the matters referred to in this Security Agreement.

 

	
3.13 

	
Waiver of Delivery

  

To the extent permitted by applicable law, the Corporation waives its right to receive a copy of any financing statement or financing change statement registered by or on behalf of the Agent, or any verification statement with respect to any financing or financing change statement registered by or on behalf of the Agent.

 

	
3.14 

	
Severability

 

If any provision of this Security Agreement is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be severed from this Security Agreement and the remaining provisions will continue in full force and effect.

 

	 
	
14

	

  

	
3.15 

	
Conflict

  

In the event of any conflict between the provisions of this Security Agreement and the provisions of the Promissory Note, where it is not possible for both provisions to be complied with, the provisions contained in the Promissory Note will prevail to the extent of such conflict.

 

	
3.16 

	
Governing Law and Submission to Jurisdiction

 

	 	
(a)

	
This Security Agreement is governed by and is to be interpreted, construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein, without regard to conflict of law principles.

	 	
 

	 
	 	
(b)

	
The Corporation irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of the courts of Ontario located in Toronto, (ii) agrees that all claims in respect of any suit, action or proceeding may be heard and determined in such court, (iii) waives, to the fullest extent permitted by law, any objection which it may have based upon doctrines of venue or forum incoveniens.

  

	
3.17 

	
Counterparts

 

This Security Agreement may be executed in any number of separate counterparts (including by facsimile or other electronic means) and all such signed counterparts will together constitute one and the same agreement. To evidence its execution of an original counterpart of this Security Agreement, a party may send a copy of its original signature on the execution page hereof to the other parties by facsimile or other means of recorded electronic transmission and such transmission with an acknowledgement of receipt shall constitute delivery of an executed copy of this Security Agreement to the receiving party.

 

[Remainder of page intentionally left blank.]

 

	 
	
15

	

  

IN WITNESS WHEREOF the Corporation and the Agent have executed and delivered this Security Agreement.

 

 

	 	NUGALE PHARMACEUTICAL INC.	 
	 	 	 	 
		By:	/s/ Ding Hua Wang	 
	 	 	DING HUA WANG, President and Chairman	 
	 	 		 
			 	
			 	
	 	 	/s/ Guo Yin Xie	 
			
GUO YIN (WYNN) XIE, in his capacity as Agent

	

 

 

 

16EXHIBIT 10.5

 

THIS GUARANTEE (this “Guarantee”) is dated October 20, 2014 and made between:

 

	
(1) 

	
PRIME NUTRISOURCE INC., a corporation existing under the laws of the Province of Ontario (the “Guarantor”); and

	 	 
	
(2)

	
GUO YIN (WYNN) XIE, an individual who resides in the Province of Ontario (“Xie”).

  

RECITALS:

 

	
(A)

	
GUO YIN (WYNN) XIE, as agent (in such capacity, the “Agent”) and on his own behalf as vendor and on behalf of JIAN LONG (“Long”), HONG SHU ZHU (“Zhu”), 2434689 Ontario Inc. (“XieCo”), 2434691 Ontario Inc. (“LongCo”), 2434694 Ontario Inc. (“ZhuCo” and together with Xie, Long, Zhu, XieCo and LongCo, the “Vendors”) have agreed to sell their shares of capital stock in Prime Nutrisource Inc., Nugale Pharmaceutical Inc. and Prime Nutrisource Inc. (New Jersey), as applicable, to E-World Canada Holding, Inc. (the “Corporation”), in consideration of (among other things), and upon the terms and conditions contained in, a promissory note (the “Promissory Note”), dated as of the date hereof, issued by the Corporation in favor of the Agent;

	 	 
	
(B)

	
The Guarantor has agreed with the Vendors and the Agent to guarantee the payment and performance of all liabilities and obligations of the Corporation to the Vendors and the Agent arising pursuant to, or in respect of, the Promissory Note;

	 	 
	
(C) 

	
The Corporation is the parent of the Guarantor and the Guarantor considers it to be in its best interest to provide this Guarantee.

 

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Guarantor agrees as follows:

 

Article 1 – Guarantee

 

	
1.1 

	
Guarantee

 

The Guarantor irrevocably and unconditionally guarantees to and in favor of the Vendors and the Agent by way of a continuing guarantee, the due and punctual payment and performance, whether at stated maturity, by acceleration or otherwise, of all liabilities and obligations of the Corporation to the Vendors and the Agent or any one of them arising pursuant to or in connection with the terms and conditions, and in respect of, the Promissory Note (such obligations, the “Guaranteed Obligations”).

 

	
1.2 

	
Indemnity

  

If any or all of the Guaranteed Obligations are not paid or performed by the Corporation and are not paid or performed by the Guarantor under Section 1.1, for any reason whatsoever, the Guarantor will, as a separate and distinct obligation, indemnify and save harmless each of the Vendors and the Agent from and against all losses, costs and expenses suffered or incurred by such Vendor or Agent arising from, or in connection with, or as a result of (a) any of the provisions of the Promissory Note being or becoming void, voidable, unenforceable or invalid, or (b) the failure of the Corporation to fully and promptly pay or perform any of the Guaranteed Obligations.

 

	 
	
1

	

 

	
1.3 

	
Primary Obligation

 

If any or all of the Guaranteed Obligations are not paid or performed by the Corporation or a Vendor or the Agent are not indemnified under Section 1.2, in each case, such Guaranteed Obligations will, as a separate and distinct obligation, be paid and performed by the Guarantor as primary obligor promptly upon written demand to the Guarantor by the Agent for such payment or performance.

 

	
1.4 

	
Absolute Liability

  

The Guarantor agrees that the liability of the Guarantor under Section 1.1, Section 1.2 and Section 1.3 is absolute and unconditional and the obligations of the Guarantor in this Guarantee shall remain in full force and effect until all Guaranteed Obligations have been validly and finally and irrevocably paid in full or until this Guarantee has been terminated and released. The liability and obligations of the Guarantor in this Guarantee shall not be affected by any matter or thing which but for this provision might operate to affect such liability or obligations, including:

 

	 	
(a)

	
the lack of validity or enforceability of any term of the Promissory Note;

	 	
 

	 
	 	
(b)

	
any contest by the Corporation or any other person as to the amount of the Guaranteed Obligations or the validity or enforceability of any terms of the Promissory Note or the perfection or priority of any security interest granted to the Agent or the Vendors by the Corporation or any other person;

	 	
 

	 
	 	
(c)

	
any taking or failure to take a security interest by the Agent or the Vendors or any loss of, or loss of value of, any security interest granted to the Agent or any of the Vendors;

	 	
 

	 
	 	
(d)

	
any defense, counter-claim or right of set-off available to the Corporation or any other person;

	 	
 

	 
	 	
(e)

	
any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Corporation, the Guarantor or any other person or any reorganization (whether by way of reconstruction, consolidation, amalgamation, merger, transfer, sale, lease or otherwise) of the Corporation, the Guarantor or any other person or their respective businesses;

	 	
 

	 
	 	
(f)

	
any extension of time or times for payment or performance of the Guaranteed Obligations or any releases, variations or indulgences which the Vendors or the Agent may grant to the Corporation or any other person or any extinguishment of all or any part of the Guaranteed Obligations by operation of law;

  

	 
	
2

	

 

	 	
(g)

	
any dealings with the security interests which the Vendors or the Agent hold or may hold pursuant to the Promissory Note, including the taking, giving up or exchange of security interests or any collateral subject thereto, the variation or realization thereof, the accepting of compositions and the granting of releases and discharges;

	 	
 

	 
	 	
(h)

	
any limitation of status or power, disability, incapacity or other circumstance relating to the Corporation, the Guarantor or any other person, including any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation, winding-up or other like proceeding involving or affecting the Corporation, the Guarantor or any other person or any action taken with respect to this Guarantee by any trustee or receiver, or by any court, in any such proceeding, whether or not the Guarantor has notice or knowledge of any of the foregoing;

	 	
 

	 
	 	
(i)

	
any impossibility, impracticability, frustration of purpose, force majeure or illegality of any of the Promissory Note or the Corporation’s performance in respect thereof, or the occurrence of any change in the law of any jurisdiction or by any present or future action of any governmental authority that amends, varies, reduces or otherwise affects, or purports to amend, vary, reduce or otherwise affect, any of the Guaranteed Obligations or the obligations of the Guarantor under this Guarantee, or the obtaining of any court order that amends, varies, reduces or otherwise affects any of the Guaranteed Obligations or the obligations of the Guarantor under this Guarantee;

	 	
 

	 
	 	
(j)

	
any invalidity, non-perfection or unenforceability of any security interest held by the Agent or the Vendors, or any exercise or enforcement of, or failure to exercise or enforce, security interests, or any irregularity or defect in the manner or procedure by which the Agent and the Vendors realize on such security interest;

	 	
 

	 
	 	
(k)

	
the assignment of all or any part of the benefits of this Guarantee; and

	 	
 

	 
	 	
(l)

	
any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Guarantor, the Corporation or any other person in respect of the Guaranteed Obligations or this Guarantee.

 

Article 2 – Enforcement

 

	
2.1 

	
Payment on Demand

 

The obligation of the Guarantor to pay the amount of the Guaranteed Obligations and all other amounts payable by it to the Agent and the Vendors under this Guarantee arises, and the Guarantor shall make such payments, promptly after demand for same is made in writing to it by the Agent, which demand may only be made when such Guaranteed Obligations become due pursuant to the terms and conditions of the Promissory Note.

 

	 
	
3

	

  

	
2.2 

	
Amount of Guaranteed Obligations

  

Any account settled or stated by or among the Vendors, the Agent and the Corporation, or if any such account has not been settled or stated immediately before demand for payment under this Guarantee, any account stated by the Agent shall, in the absence of manifest mathematical error, be accepted by the Guarantor as prima facie evidence of the amount of the Guaranteed Obligations which is due by the Corporation to the Vendors and the Agent or remains unpaid by the Corporation to the Vendors and the Agent.

 

	
2.3 

	
Interest

  

The liability of the Guarantor bears interest from the date of demand at the rate or rates of interest then applicable to the Guaranteed Obligations under, and calculated in the manner provided in, the Promissory Note (including any adjustment to give effect to the provisions of the Interest Act (Canada)).

 

	
2.4 

	
Assignment and Postponement

  

	 	
(a)

	
All obligations, liabilities and indebtedness of the Corporation to the Guarantor of any nature whatsoever and all security therefor (the “Intercorporate Indebtedness”) are hereby assigned and transferred to the Agent as continuing and collateral security for the Guarantor’s obligations under this Guarantee. Until notice by the Agent that the Guaranteed Obligations are due and payable, the Guarantor may receive payments in respect of the Intercorporate Indebtedness in accordance with its terms. The Guarantor shall not assign all or any part of the Intercorporate Indebtedness to any person other than the Agent or the Vendors.

	 	
 

	 
	 	
(b)

	
Upon the occurrence and continuance of an Event of Default, all Intercorporate Indebtedness shall be held in trust for the Vendors and the Agent and shall be collected, enforced or proved subject to, and for the purpose of, this Guarantee and any payments received the Guarantor in respect of the Intercorporate Indebtedness shall be segregated from other funds and property held by the Guarantor and immediately paid to the Agent on account of the Guaranteed Obligations.

	 	
 

	 
	 	
(c)

	
Upon the occurrence and continuance of an Event of Default, the Vendors and the Agent are entitled to receive payment of the Guaranteed Obligations in full before the Guarantor is entitled to receive any payment on account of the Intercorporate Indebtedness. In such case, the Intercorporate Indebtedness shall not be released by the Guarantor until the Agent’s prior written consent to such release has been obtained. The Guarantor shall not permit the prescription of the Intercorporate Indebtedness by any statute of limitations or ask for or obtain any security interest or negotiable paper for, or other evidence of, the Intercorporate Indebtedness except for the purpose of delivering the same to the Agent.

 

	 
	
4

	

 

	
2.5 

	
Remedies

 

The Agent and the Vendors need not seek or exhaust their recourse against the Corporation or any other person or realize on any security interest they may hold in respect of the Guaranteed Obligations before being entitled to (a) enforce payment and performance under this Guarantee, or (b) pursue any other remedy against the Guarantor. Should the Agent or the Vendors elect to realize on any security interest they hold, either before, concurrently with, or after demand for payment under this Guarantee, the Guarantor shall have no right of discussion or division.

 

	
2.6 

	
No Prejudice to Vendors or Agent

  

The Vendors and the Agent are not prejudiced in any way in the right to enforce any provision of this Guarantee by any act or failure to act on the part of the Corporation, the Vendors or the Agent. The Agent and the Vendors may, at any time and from time to time, in such manner as they may determine is expedient, without any consent of, or notice to, the Guarantor, and without impairing or releasing the obligations of the Guarantor, (a) change the manner, place or terms of payment or change or extend the time of payment of, or renew or alter, all or any part of, the Guaranteed Obligations, (b) renew, determine, vary or increase any credit or credit facilities to, or the terms or conditions in respect of any transaction with, the Corporation or any other person, (c) release, compound or vary the liability of the Corporation or any other person liable in any manner under or in respect of the Guaranteed Obligations, (d) accept compromises or arrangements from any person; (e) exercise or enforce or refrain from exercising or enforcing any right or security interest against the Corporation or any other person, (f) apply any sums from time to time received to the Guaranteed Obligations or any part thereof, and change any such application in whole or in part from time to time, and (g) otherwise deal with, or waive or modify their right to deal with, any person and security interest. In their dealings with the Corporation, the Agent and the Vendors need not enquire into the authority or power of any person purporting to act for or on behalf of the Corporation.

 

	
2.7 

	
Suspension of Guarantor Rights

  

So long as there are any Guaranteed Obligations, the Guarantor shall not exercise any rights which it may at any time have by reason of the performance of any of its obligations under this Guarantee to (a) be indemnified by the Corporation, (b) claim contribution from any other guarantor of the debts, liabilities or obligations of the Corporation, or (c) take the benefit of any rights of the Vendors or the Agent under the Promissory Note.

 

	
2.8 

	
No Subrogation

  

The Guarantor irrevocably waives any claim, remedy or other right which it now has or may hereafter acquire against the Corporation that arises from the existence, payment, performance or enforcement of the Guarantor’s obligations under this Guarantee, including any right of subrogation, reimbursement, exoneration, indemnification or any right to participate in any claim or remedy of the Vendors or the Agent against the Corporation or any collateral which the Vendors or the Agent now have or hereafter acquire, whether or not such claim, remedy or other right is reduced to judgment or is liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured, and whether or not such claim, remedy or other right arises in equity or under contract, statute or common law. The Guarantor further agrees that the Corporation is an intended third party beneficiary of the Guarantor’s waiver contained in this Section 2.8. If any amount is paid to the Guarantor in violation of the preceding sentence and, at such time, the Vendors’ and the Agent’s claims against the Corporation in respect of the Guaranteed Obligations have not been paid in full, any amount paid to the Guarantor will be deemed to have been paid to the Guarantor for the benefit of, and held in trust for, the Vendors and the Agent, and must immediately be paid to the Agent to be credited and applied upon such Guaranteed Obligations. The Guarantor acknowledges that it will receive direct and indirect benefits from the transactions contemplated by this Guarantee and that the waiver set forth in this Section 2.8 is knowingly made in contemplation of such benefits.

 

	 
	
5

	

  

	
2.9 

	
No Set-off by Guarantor

 

To the fullest extent permitted by applicable law, the Guarantor shall make all payments under this Guarantee without regard to any defense, counter-claim or right of set-off available to it.

 

	
2.10 

	
Successors of the Corporation

  

Any change or changes in the name of or reorganization (whether by way of reconstruction, consolidation, amalgamation, merger, transfer, sale, lease or otherwise) of the Corporation or its business will not affect or in any way limit or lessen the liability of the Guarantor under this Guarantee. This Guarantee extends to any person acquiring, or from time to time carrying on, the business of the Corporation.

 

	
2.11 

	
Continuing Guarantee and Continuing Obligations

 

The obligations of the Guarantor under Section 1.1 is a continuing guarantee and the obligations of the Guarantor under Section 1.2 and Section 1.3 are continuing obligations. Each of Sections 1.1, 1.2 and 1.3 extends to all present and future Guaranteed Obligations, applies to and secures the ultimate balance of the Guaranteed Obligations due or remaining due to the Agent and the Vendors and is binding as a continuing obligation of the Guarantor until the Guaranteed Obligations are paid in full. This Guarantee will continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Vendors or the Agent upon the insolvency, bankruptcy or reorganization of the Corporation or otherwise, all as though such payment had not been made.

 

	
2.12 

	
Termination

  

This Guarantee shall remain in full force and effect until the Guaranteed Obligations are fully, finally and indefeasibly paid. Upon payment and performance in full of the Guaranteed Obligations, the Agent shall deliver to the Guarantor such documents as it may reasonably request to evidence such termination.

 

	 
	
6

	

  

	
2.13 

	
Supplemental Security

  

This Guarantee is in addition and without prejudice to and supplemental to all other guarantees and security interests held or which may hereafter be held by the Vendors or the Agent.

 

	
2.14 

	
Right of Set-off

 

The Agent and each of the Vendors are authorized by the Guarantor at any time and from time to time and may, to the fullest extent permitted by applicable law, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent or the Vendors to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing irrespective of whether or not (a) the Vendors or the Agent have made any demand under this Guarantee, or (b) any of the obligations comprising the Guaranteed Obligations are contingent or unmatured. The Agent and each of the Vendors, as applicable, agree to promptly notify the Guarantor after any such set-off and application made by it provided that the failure to give such notice does not affect the validity of such set-off and application. The rights of the Agent and the Vendors under this Section 2.14 are in addition and without prejudice to and are supplemental to other rights and remedies which the Agent and the Vendors may have.

 

	
2.15 

	
Interest Act (Canada)

  

The Guarantor acknowledges that certain of the rates of interest applicable to the Guaranteed Obligations may be computed on the basis of a year of 360 days or 365 days, as the case may be and paid for the actual number of days elapsed. For purposes of the Interest Act (Canada), whenever any interest is calculated using a rate based on a year of 360 days or 365 days, as the case may be, such rate determined pursuant to such calculation, when expressed as an annual rate is equivalent to (a) the applicable rate based on a year of 360 days or 365 days, as the case may be, (b) multiplied by the actual number of days in the calendar year in which the period for such interest is payable (or compounded) ends, and (c) divided by 360 or 365, as the case may be.

 

	
2.16 

	
Taxes

  

	 	
(a)

	
All payments to the Agent and the Vendors by the Guarantor under this Guarantee shall be made free and clear of and without deduction or withholding for any and all taxes, levies, imposts, deductions, charges or withholdings and all related liabilities (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities being referred to as “Taxes”) imposed by the United States of America (or any political subdivision or taxing authority of it), unless such Taxes are required by applicable law to be deducted or withheld. If the Guarantor shall be required by applicable law to deduct or withhold any such Taxes from or in respect of any amount payable under this Guarantee (i) the amount payable shall be increased (and for greater certainty, in the case of interest, the amount of interest shall be increased) as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to any additional amounts paid under this Section 2.16), the Vendors and the Agent receive an amount equal to the amount they would have received if no such deduction or withholding had been made, (ii) the Guarantor shall make such deductions or withholdings, and (iii) the Guarantor shall immediately pay the full amount deducted or withheld to the relevant governmental authority in accordance with applicable law, provided, however, that no such additional amount shall be payable if any such Taxes are required to be paid by reason of the payee having some connection with a Canadian taxing jurisdiction other than the receipt of the payments to be made under this Guarantee.

 

	 
	
7

	

 

	 	
(b)

	
The Guarantor agrees to immediately pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, financial institutions duties, debits taxes or similar levies (all such taxes, charges, duties and levies being referred to as “Other Taxes”) which arise from any payment made by the Guarantor under this Guarantee or from the execution, delivery or registration of, or otherwise with respect to, this Guarantee.

	 	
 

	 
	 	
(c)

	
The Guarantor shall indemnify the Vendors and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable by the Guarantor under this Section 2.16 paid by the Vendors or the Agent and any liability (including penalties, interest and expenses) arising from or with respect to such Taxes, whether or not they were correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date the Agent or the relevant Vendor, as the case may be, make written demand for it. A certificate as to the amount of such Taxes or other Taxes submitted to the Guarantor by the Agent or the relevant Lender shall be conclusive evidence, absent manifest error, of the amount due from the Guarantor to the Agent or the Vendors, as the case may be.

 

	 	
(d)

	
The Guarantor shall furnish to the Agent and the Vendors the original or a certified copy of a receipt evidencing payment of Taxes or Other Taxes made by the Guarantor within 30 days after the date of any payment of Taxes or Other Taxes.

	 	
 

	 
	 	
(e)

	
The Provision of this Section 2.16 survive the termination of this Guarantee.

 

	
2.17 

	
Judgment Currency

 

	 	
(a)

	
If for the purposes of obtaining judgment in any court of competent jurisdiction it is necessary to convert all or any part of the Guaranteed Obligations or any other amount due to a Vendor or the Agent in respect of the Guarantor’s obligations under this Guarantee in any currency (the “Original Currency”) into another currency (the “Other Currency”), the Guarantor, to the fullest extent that it may effectively do so, agrees that the rate of exchange used will be that at which, in accordance with normal banking procedures, the Vendor or the Agent, as the case may be, could purchase the Original Currency with the Other Currency on the business day preceding that on which final judgment is paid or satisfied.

	 	
 

	 
	 	
(b)

	
The obligations of the Guarantor in respect of any sum due in the Original Currency from it to the Agent or any Vendor will, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the business day following receipt by the Agent or a Vendor of any sum adjudged to be so due in such Other Currency the Agent or such Vendor may, in accordance with its normal banking procedures, purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to the Agent or the Vendor in the Original Currency, the Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent or such Vendor against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due to the Agent or such Vendor in the Original Currency, the Agent or the Vendor, as applicable, agrees to remit such excess to the Guarantor.

 

	 
	
8

	

  

Article 3 – Representations and Warranties

 

The Guarantor represents and warrants to the Agent and each Vendor, acknowledging and confirming that the Agent and each Vendor is relying on such representations and warranties as follows.

 

	
3.1 

	
Incorporation

  

The Guarantor is a corporation incorporated, organized and existing under the laws of the Province of Ontario and is qualified, licensed or registered to carry on business under the laws applicable to it in all jurisdictions in which such qualification, licensing or registration is necessary.

 

	
3.2 

	
Corporate Power

  

The Guarantor has the corporate power and authority to (a) own, lease and operate its properties and assets and to carry on its business as now being conducted by it, and (b) enter into and perform its obligations under the Guarantee.

 

	
3.3 

	
No Conflict or Breach

  

The execution and delivery by the Guarantor of the Guarantee and the performance by it of its obligations thereunder do not and will not (a) conflict with or result in a breach or violation of any (i) of its charter documents, bylaws or other organizational documents, (u) shareholders’ agreement, (ii) applicable Law, (iii) contractual restriction binding on or affecting it or its properties, or (iv) judgment, injunction, determination or award which is binding on it, or (b) result in, require or permit the acceleration of the maturity of any debt binding on or affecting the Guarantor.

 

	 
	
9

	

  

	
3.4 

	
Corporate and Other Authorizations

  

The execution and delivery by the Guarantor of the Guarantee and the performance by it of its obligations thereunder have been duly authorized by all necessary corporate action. No authorization, consent, approval, registration, qualification, designation, declaration or filing with any governmental entity or other person, is or was necessary in connection with the execution, delivery and performance of obligations by the Guarantor under the Guarantee except as are in full force and effect, unamended, at the date of this Guarantee.

 

	
3.5 

	
Execution and Binding Obligation

  

This Guarantee has been duly executed and delivered by the Guarantor and constitute legal, valid and binding obligations of the Guarantor, enforceable against it in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar applicable laws affecting creditors’ rights generally or by general equitable principles affecting the enforcement of contracts.

 

Article 4 – General

 

	
4.1 

	
Notices, Etc.

  

Any notice, consent, waiver or other communication given under this Guarantee must be in writing and may be given by delivering it or sending it by facsimile or other similar form of recorded communication addressed:

 

	 	
(a)

	
to the Guarantor at:

Prime Nutrisource Inc.

41 Pullman Court, Scarborough

Ontario, Canada, MlX 1E4

Attention: Chairman

Fax No.: 416-298-7273

 

With a copy to:

 

E-World USA Holding, Inc.

9550 Flair Drive, Suite 308

El Monte, CA 91731

Attention: Ding Hua Wang

Fax No.: 626-448-2163

  

with a copy (which shall not constitute notice to the Guarantor) to:

 

	 	

	
Loeb & Loeb LLP

10100 Santa Monica Blvd., Ste. 2200

Los Angeles, CA 90067

Attention: Christopher J. Kelly

Fax No.: 310-919-3974

E-mail: ckelly@loeb.com

 

	 
	
10

	

 

	 	
(b)

	
to the Agent, on behalf of itself and each of the Vendors, at:

	 	
 

	
 

	 	
 

	
Guo Yin (Wynn) Xie

41 Pullman Court

Scarborough, ON M1W 1E4

Fax No.: 416-298-7275

E-mail: wx@primenutrisource.com

 

with a copy (which shall not constitute notice to the Agent) to:

 

	 	

	
Wildeboer Dellelce LLP

Wildeboer Dellelce Place

365 Bay St., Suite 800

Toronto, ON M5H 2V1

Attention: Peter Simeon

Fax No.: 416-361-1790

E-mail: psimeon@wildlaw.ca

  

Any such communication is deemed to have been delivered and received on the date of personal delivery or transmission by facsimile or other similar permitted form of recorded communication, as the case may be, if such day is a business day and such delivery or transmission was received by the recipient party prior to 5 pm (Toronto time) and otherwise on the next business day. Any party may change its address for service by notice given in accordance with the foregoing and any subsequent communication must be sent to such party at its changed address.

 

	
4.2 

	
Defined Terms

 

Capitalized terms used in this Guarantee and not otherwise defined have the respective meanings given to them in the Promissory Note.

 

	
4.3 

	
Gender and Number

  

Any reference in this Guarantee to gender includes all genders and words importing the singular include the plural and vice versa.

 

	
4.4 

	
Headings, etc.

  

The inclusion of a table of contents, the division of this Guarantee into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect or be used in the construction or interpretation of this Guarantee.

 

	 
	
11

	

 

	
4.5 

	
Currency

  

All monetary amounts in this Guarantee, unless otherwise specifically indicated, are stated in Canadian currency.

 

	
4.6 

	
No Merger, Survival of Representations and Warranties

  

The representations and warranties of the Guarantor in this Guarantee survive the execution and delivery of this Guarantee and notwithstanding any investigation made by or on behalf of the Agent or the Vendors, continue in full force and effect.

 

	
4.7 

	
Time of Essence

  

Time is of the essence in this Guarantee and the time for performance of the obligations of the Guarantor under this Guarantee may be strictly enforced by the Agent.

 

This Guarantee shall not be subject to or affected by any promise or condition affecting or limiting the liability of the Guarantor except as expressly set out in this Guarantee. No statement, representation, agreement or promise on the part of the Agent, a Vendor or any officer, employee or agent thereof, unless set out in this Guarantee, forms any part of this Guarantee or has induced its creation or shall be deemed in any way to have affected the liability of the Guarantor.

 

	
4.8

	

Further Assurances 

  

The Guarantor will do all acts and things and execute and deliver, or cause to be executed and delivered, all documents and instruments that the Agent or any of the Vendors may reasonably request to (a) give full effect to this Guarantee, and (b) to perfect and preserve the rights and powers of the Agent and the Vendors under this Guarantee.

 

	
4.9 

	
Payment of Expenses 

   

The Guarantor will pay on demand, and will indemnify and save the Agent and the Vendors harmless from, any and all costs and expenses (including reasonable legal fees and expenses) (a) incurred by or on behalf of the Agent and the Vendors in the administration or enforcement of this Guarantee, or (b) with respect to, or resulting from, any failure or delay by the Guarantor in performing or observing any of its obligations under this Guarantee.

 

	
4.10 

	
Amendment

  

This Guarantee may only be amended, supplemented or otherwise modified by written agreement of the Agent and the Guarantor.

 

	 
	
12

	

  

	
4.11 

	Waivers, etc.

  

	 	
(a)

	
No consent or waiver by the Agent or the Vendors in connection with this Guarantee is binding unless made in writing and signed by an authorized officer of the Agent. Any consent or waiver given under this Guarantee is effective only in the specific instance and for the specific purpose for which it was given. No waiver of any of the provisions of this Guarantee constitutes a waiver of any other provision.

	 	
 

	 
	 	
(b)

	
A failure or delay on the part of the Agent or the Vendors in exercising a right or remedy under this Guarantee does not operate as a waiver of, or impair, any rights or remedies of the Agent or the Vendors however arising. A single or partial exercise of a right or remedy on the part of the Agent or the Vendors does not preclude any other or further exercise of that right or remedy or the exercise of any other rights or remedies by the Agent or the Vendors.

 

	
4.12

	
Successors and Assigns

  

This Guarantee is binding upon the Guarantor, its successors and assigns, and inures to the benefit of the Vendors, the Agent and their respective successors and permitted assigns. All rights of the Agent and the Vendors are assignable without any requirement of consent on the part of the Guarantor and in any action brought by an assignee to enforce any such right, the Guarantor shall not assert against the assignee any claim or defense which the Guarantor now has or hereafter may have against the Agent or any of the Vendors. The Guarantor may not assign, transfer or delegate any of its rights or obligations under this Guarantee without the prior written consent of the Agent.

 

	
4.13 

	
Severability

 

If any provision of this Guarantee is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable that provision will be severed from this Guarantee and the remaining provisions will continue in full force and effect, without limitation.

 

	
4.14 

	
Governing Law

 

This Guarantee is governed by and is to be interpreted, construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, without regard to conflict of law principles. Each party to this Guarantee irrevocably submits and attorns to the non-exclusive jurisdiction of the courts of Ontario.

 

	
4.15 

	
Counterparts

  

This Guarantee may be executed in any number of separate counterparts (including by facsimile or other electronic means) and all such signed counterparts will together constitute one and the same agreement. To evidence its execution of an original counterpart of this Guarantee, a party may send a copy of its original signature on the execution page hereof to the other parties by facsimile or other means of recorded electronic transmission and such transmission with an acknowledgement of receipt shall constitute delivery of an executed copy of this Guarantee to the receiving party.

 

	
4.16 

	
Copy of Guarantee

 

The Guarantor acknowledges receipt of an executed copy of this Guarantee.

 

[Remainder of page intentionally left blank.]

 

	 
	
13

	

  

IN WITNESS WHEREOF the Guarantor has executed and delivered this Guarantee.

 

 

	 	PRIME NUTRISOURCE INC.	 
	 	 	 	 
		By:	/s/ Ding Hua Wang	 
	 	 	Ding Hua Wang, Chairman and CEO	 
	 	 		 

 

Accepted and agreed by the Agent on its own behalf and for and on behalf of each of the Vendors this 20th day of October, 2014.

 

 

	
Witness:

		/s/ Guo Yin Xie	 
	 	 	
GUO YIN (WYNN) XIE,

	 
			
in his capacity as agent

	

 

 

 

14

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