seaway10ksba1123107ex10-7.htm


    
      

      

    

    EXHIBIT 10.7

     

    
      CONVERTIBLE PROMISSORY
NOTE

      $1,200,000
PLUS INTEREST DUE & PAYABLE

      DOCUMENT
B-12102007

      
 

      THIS NOTE
AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE
EXEMPTION OR SAFE HARBOR PROVISION.

      


      FOR VALUE
RECEIVED, on the Effective Date, as defined below  Seaway Valley Capital
Corp. as Obligor ("Borrower,” or “Obligor”), hereby promises to pay to
the Lender (“Lender” or “ Holder”), as defined below, the Principal Sum, as
defined below, along with the Interest Rate, as defined below, according to the
terms herein.

      


      


      
        	
                 

                The
      "Effective Date" shall be:

              	
                 

                December
      10, 2007

              
	
                 

                The
      "Lender" shall be:

              	
                 

                JMJ
      Financial / Its Principal, or Its Assignees

              
	
                 

                The
      "Principal Sum" shall be:

              	
                 

                $1,200,000
      (one million two hundred thousand) US Dollars; Subject to the following:
      accrued, unpaid interest shall be added to the Principal Sum.  The
      Principal Sum includes a one-time $200,000 original issue discount
      immediately incurred at the Effective Date.

              
	
                 

                The
      “Consideration” shall be:

              	
                 

                $1,000,000
      (one million) dollars in the form of the Secured & Collateralized
      Promissory Note Document C-12102007 (including Security & Collateral
      Agreement).

              
	
                 

                The
      "Interest Rate" shall be:

              	
                 

                10%
      one-time interest charge on the Principal Sum incurred at the Effective
      Date.   No interest or principal payments are required until the
      Maturity Date, but both principal and interest may be included in
      conversion prior to maturity date.  

              
	
                 

                 

                The
      "Conversion Price" shall be the following price:

              	
                 

                As
      applied to the Conversion Formula set forth in 2.2, the lesser of (a)
      $0.01 or (b) 75% of the lowest trade price in the 20 trading days previous
      to the conversion; as applies to Seaway Valley Capital Corp. voting common
      stock.

              
	
                 

                The
      "Maturity Date" is the date upon which the Principal Sum of this Note, as
      well as any unpaid interest shall be due and payable, and that date shall
      be:

              	
                 

                 

                December
      10, 2011

              
	
                 

                The
      “Prepayment Terms” shall be:

              	
                 

                Prepayment
      is permitted at any time by payment in the form of any of the following:
      (1) cash, or (2) other  negotiated form of payment mutually agreed to
      in writing, or (3) by surrender of the Secured & Collateralized
      Promissory Note Document C-12102007.   Prepayment will incur a 5%
      annual charge penalty on the outstanding balance of principal and accrued
      interest amount.

              


      

      


      
 

      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      

       

      ARTICLE
1 PAYMENT-RELATED PROVISIONS

      


      1.1    
Interest Rate. Subject to the Holder's right to convert, interest payable on
this Note will accrue interest at the Interest Rate and shall be applied to the
Principal Sum.  Interest Rate is defined as 10% one-time interest charge on
the Principal Sum incurred at the Effective Date.   

       

      


      ARTICLE
2 CONVERSION RIGHTS

      


      The
Holder will have the right to convert the Principal Sum and accrued interest
under this Note into Shares of the Borrower's Common Stock as set forth
below.

      


      2.1   
Conversion Rights and Cashless Exercise. Subject to the terms set forth in
Section 2.7, the Holder will have the right at its election from and after the
Effective Date, and then at any time, to convert all or part of the outstanding
and unpaid Principal Sum and accrued interest into shares of fully paid and
nonassessable shares of common stock of Seaway Valley Capital Corp. (as such
stock exists on the date of issuance of this Note, or any shares of capital
stock of Seaway Valley Capital Corp.  into which such stock is hereafter
changed or reclassified, the "Common Stock") as per the Conversion Formula set
forth in Section 2.2. Any such conversion shall be cashless, and shall not
require further payment from Holder.  Unless otherwise agreed in writing by
both the Borrower and the Holder, at no time will the Holder convert any amount
of the Note into common stock that would result in the Holder owning more than
4.99% of the common stock outstanding of Seaway Valley Capital Corp.
  Shares from any such conversion will be delivered to Holder within 2
(two) business days of conversion notice delivery (see 3.1) via 10:30am priority
overnight delivery service (see Section 2.6).

       

      2.2.  
Conversion Formula. The number of shares issued through conversion is the
conversion amount divided by the conversion price.

      


      # Shares
= Conversion
Amount

           Conversion
Price

       

           
2.3     Conversion Formula Adjustments. The Conversion
Formula described in Sections 2.2 and the number and kind of shares or other
securities to be issued upon conversion is subject to adjustment upon any of the
events as described in 2.3.1 to 2.3.3, or any other event as mutually agreed in
writing by both the Holder and Borrower.  The adjustment due to any of the
described events shall be: The result of the Conversion Formula described in 2.2
above shall be multiplied by (2) two, such that the number of shares calculated
in the Conversion Formula would be doubled.

      


      2.3.1.
Merger, Consolidation or Sale of Assets. If the Borrower at any time
consolidates with or merges into, or sells or conveys all or substantially all
of its assets to, any other entity where the Borrower is not the surviving
entity, the unpaid Principal Sum of this Note and accrued interest thereon will
thereafter be deemed to evidence the right to purchase such number and kind of
shares or other securities and property as would have been issuable or
distributable, on account of such consolidation, merger, sale or conveyance,
upon or with respect to the securities subject to the conversion or
purchase right immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision will similarly apply to successive
transactions of a similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the anti-dilution provisions of this
Note will apply to such securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.

      


      


      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


      2.3.2.
Reclassification. If the Borrower at any time, by reclassification or otherwise,
changes the Common Stock into the same or a different number of securities of
any class or classes, the unpaid Principal Sum of this Note and accrued interest
thereon will thereafter be deemed to evidence the right to purchase such number
and kind of securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such reclassification or
other change.

      


      2.3.3.
Stock Splits, Stock Dividends, and Combinations.  If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a stock dividend is paid on the Common Stock.

      


      2.4.   
Adjustment Upon Dilutive Offers, Agreements, or Sales.  If the Borrower, at
any time while this Note is outstanding, enters into an agreement subsequent to
the Effective Date under which it issues or agrees to issue either its common
stock, options, or warrants to purchase or convert to its common stock at a
price or exercise price or conversion price (a "Subsequent Share Price"), as the
case may be, that is less than the conversion price or subsequent conversion
formula result set forth in Section 2.2, then the conversion price set forth in
Section 2.2. shall be automatically adjusted to equal the Subsequent Share
Price.

      


      2.5   
Reservation of Shares. As of the issuance date of this Note and for the
remaining period during which the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note constitutes full authority to its officers, agents and
transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.

      


      2.6.
  Delivery of Conversion Shares.  Shares from any such conversion will
be delivered to Holder within 2 (two) business days of conversion notice
delivery (see 3.1) via 10:30am priority overnight delivery service (see “Share
Delivery” attachment).  If those shares are not delivered in accordance
with this timeframe stated in this Section 2.6, at any time for any reason prior
to offering those shares for sale in a private transaction or in the public
market through its broker, Holder may rescind that particular conversion to have
the conversion amount returned to the note balance with the conversion shares
returned to the Borrower.

      


      2.7.
  Discharge By Payment.  Conversions under this Convertible Promissory
Note Document B-12102007 are available only after the Conversion Amount
described herein is discharged by payment of equal or greater value from the
Secured & Collateralized Promissory Note Document C-12102007 by either, at
the Holder’s choice, cash payment, or surrender of security/collateral, or other
negotiated form of payment mutually agreed to in writing.

      


       

      


      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      ARTICLE
3 MISCELLANEOUS

      


      3.1.  
Notices. Any notice required or permitted hereunder must be in writing and
either personally served, sent by facsimile or email transmission, or sent by
overnight courier.  Notices will be deemed effectively delivered at the
time of transmission if by facsimile or email, and if by overnight courier the
business day after such notice is deposited with the courier service for
delivery.

      


      3.2.  
Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument, means this instrument as originally executed, or if
later amended or supplemented, then as so amended or supplemented.

      


      3.3.  
Assignability. This Note will be binding upon the Borrower and its successors
and permitted assigns, and will inure to the benefit of the Holder and its
successors and permitted assigns, and may be assigned by the
Holder.

      


      3.4.  
Governing Law. This Note will be governed by, and construed and enforced in
accordance, with the laws of the State of Florida, without regard to the
conflict of laws principles thereof.

      


      3.5.  
Maximum Payments. Nothing contained herein may be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required to
be paid or other charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum will be credited against amounts owed by the
Borrower to the Holder and thus refunded to the Borrower.

      


      3.6.   
Attorney Fees. In the event any attorney is employed by either party to this
Note with regard to any legal or equitable action, arbitration or other
proceeding brought by such party for the enforcement of this Note or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Note, the prevailing party in such proceeding will be
entitled to recover from the other party reasonable attorneys' fees and other
costs and expenses incurred, in addition to any other relief to which the
prevailing party may be entitled.

      


      3.7.   
No Public Announcement. No public announcement may be made regarding this Note,
payments, or conversions without written permission by both Borrower and
Holder.

      


      3.8.   
Opinion of Counsel. In the event that an opinion of counsel is needed for any
matter related to this Note, Holder has the right to have any such opinion
provided by its counsel.  Holder also has the right to have any such
opinion provided by Borrower’s counsel.

      


      3.9.   
Additional Financing.  The Holder, at its option, may invest up to an
additional $1,000,000 (one million dollars), in part, whole, and/or multiple
transactions, in Seaway Valley Capital Corp. on the same terms as set forth in
this agreement for a period of two years from the Effective Date.  In the
event that Holder wishes to exercise this right, the Borrower will be notified
by the Notice of Additional Financing Form, and any additional financing will be
memorialized by an additional Convertible Promissory Note(s), and if applicable
Secured & Collateralized Promissory Note by the Holder.

       

      


      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      3.10. 
Effective Date.  This Note will become effective only upon occurrence of
the three following events: the Effective Date of December 10, 2007 has been
reached, execution by both parties, and delivery of valid payment by the Lender
in the form of the Secured & Collateralized Promissory Note Document
C-12102007 (including Security & Collateral Agreement)..  

      


      3.11.
Director’s Resolution.  Once effective, Borrower will execute and deliver
to Holder a copy of a Board of Director’s resolution resolving that this note is
validly issued, paid, and effective.

      


      


      
        	
                BORROWER[S]:

              	 
      
	 
      	
                LENDER/HOLDER:

              
	 
      	 
      
	 
      	 
      
	 
      	
                /s/ JMJ FINANCIAL

              
	
                /s/ Thomas Scozzafava

              	 
      
	 
      	
                 JMJ
      Financial / Its Principal

              
	
                Thomas
      Scozzafava

              	 
      
	
                Chairman
      & CEO

              	 
      
	
                Seaway
      Valley Capital Corp.

              	 
      


      

      


       

      


      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SAMPLE

      


      NOTICE OF
CONVERSION

      


      (To be
executed by the Holder in order to convert the Note)

      


      The
undersigned hereby elects to convert a portion of the Note issued by Seaway
Valley Capital Corp. on December 10, 2007 into Shares of Common Stock of Seaway
Valley Capital Corp. according to the conditions set forth in such Note, as of
the date written below.

      


      Date of
Conversion:________________________________________________

      


      Conversion
Amount:__________________________________________________

      


      Conversion
Price:__________________________________________________

      


      Shares To
Be Delivered:_____________________________________________

      


      Signature:________________________________________________________

      


      Print
Name:______________________________________________________

      


      Address:________________________________________________________

      


      _______________________________________________________________

      


       _______________________________________________________________

      


      


      


      


      Shares
must be delivered to Holder within 2 (two) business days of conversion notice
via 10:30am priority overnight delivery service in accordance with Section 2.6.
 

      


      


      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      NOTICE OF ADDITIONAL FINANCING FORM

      


      (To be
executed by Holder when intending to invest additional funds)

      


      


      This Form
is notification that I intend to invest additional funds into Seaway Valley
Capital Corp. as set forth in Section 3.9 of the Convertible Promissory Note
dated December 10, 2007,

      


      


      Intended
Amount: $_______________________

      


      


      Intended
Execution Date of Documentation: ________________________________

      


      


      Intended
Delivery Date of Payment: _____________________________

      


      


      


      


      


      _______________________________________

      


      


      Dated:____________________________________

      


      


      


      DOCUMENT
B-12102007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SHARE
DELIVERY ATTACHMENT

      


      EXAMPLE

      


      2.6.
 Delivery of Conversion Shares.  Shares from any such conversion will
be delivered to Holder within 2 (two) business days of conversion notice
delivery (see 3.1) via 10:30am priority overnight delivery service.  If
those shares are not delivered in accordance with this timeframe stated in this
Section 2.6, at any time for any reason prior to offering those shares for sale
in a private transaction or in the public market through its broker, Holder may
rescind that particular conversion to have the conversion amount returned to the
note balance with the conversion shares returned to the Borrower.

      


      Example:

      


      Holder
delivers conversion notice to Borrower at 4:45pm eastern time on Monday January
1 st
..

      


      Borrower’s
transfer agent must send shares to Holder via 10:30am overnight delivery no
later than Tuesday January 2 nd
..

      


      Holder
must have received the shares or received delivery attempt no later than 10:30am
eastern time on Wednesday January 3 rd
..

      


      


      


      DOCUMENT
B-12102007