swyv8k20090602ex10-1a.htm


    
      

      

    

    

      EXCHANGE
AGREEMENT

      


      THIS
EXCHANGE AGREEMENT (this “Agreement”), dated as
of May 20, 2009, by and among SEAWAY VALLEY CAPITAL CORPORATION, a Delaware
corporation (the "Company"), and SC
PARTNERS, LLC (the
“Buyer”).

       

      WITNESSETH

      


      WHEREAS,                                pursuant
to that certain Assignment Agreements (the “Assignment
Agreement”) dated the date hereof the Buyer purchased from various
shareholders (the “Shareholders”) the
following: (i) 138,500 Series C Preferred Shares, dated October 23, 2007,
between the Company and the Shareholders in the original amount of $554,000,
(ii) 379,260 Series C Preferred Shares, dated October 23, 2007, between the
Company and the Shareholders in the original amount of $1,517,040, (iii) 442,150
Series C Preferred Shares, dated October 23, 2007, between the Company and the
Shareholders in the original amount of $1,768,600, (iv) 40,000 Series C
Preferred Shares, dated October 23, 2007, between the Company and the
Shareholders in the original amount of $160,000, and (v) 28,500 Series C
Preferred Shares, dated October 23, 2007, between the Company and the
Shareholders in the original amount of $114,000, in aggregate 1,028,410 Series C
Preferred Shares the “Shares” and each a
“Share) with an
aggregate face amount of $4,113,640;

       

      WHEREAS, total aggregate
balance of the Shares (including principal, interest, and costs) is $4,113,640;
and

       

      WHEREAS, pursuant to the terms
hereof, the parties desire to exchange the Shares for a secured convertible
debenture in the form of Exhibit A attached hereto in the aggregate principal
amount equal to $4,113,640 (the “Debenture”), which
Debenture shall be convertible into common stock, par value $0001, per share of
the Company (“Common
Stock”, and as converted the “Conversion
Shares”).

       

      NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:

       

      1.      ISSUANCE OF
SECURITIES. Pursuant to the terms and conditions of this Agreement,
contemporaneously with the execution and delivery of this Agreement, (i) the
Buyer shall exchange the instruments evidencing the Shares for the Debenture for
no consideration.  Upon surrender, the instruments evidence the Shares
shall be retired by the Company and the outstanding balances shall hereinafter
be evidenced by the Debenture.

       

      2.      HOLDING PERIOD, TACKING, AND
LEGAL OPINION.  The Company represents, warrants and agrees
that for the purposes of Rule 144, the Company acknowledges and agrees that the
holding period of the Debenture issued hereunder (including the corresponding
Conversion Shares) will include the holding period of the Shares from October
23, 2007, the date that the Company guarantied the obligations under the
Shares.  The Company agrees not to take a position contrary to this
Section 2.  At the Closing, counsel to the Company shall provide an
opinion in a form reasonably satisfactory to the Buyer to the
forgoing.  Assuming (A) no change in facts and circumstances and no
contrary law or any rule, regulation or instruction of or from the Commission,
(B) that the Buyer is not, at any relevant time, an “affiliate” of the Company
as defined in Securities Act Rule 144(a)(1), and (C) that the Buyer provides a
written representation to the Company and its counsel that it is not an
affiliate of the Company and has not been an affiliate of the Company during the
preceding 3 months, as well as other representations customarily given in
connection with the removal of restrictive legends under Rule 144, the Company
will rely upon the opinion provided to it by counsel to the Company
contemporaneous with consummation of the transactions contemplated hereby, that
the holding period for the Debenture issued to the Buyer (and the corresponding
Conversion Shares issuable thereunder) in exchange for the Shares will include
the holding period for such surrendered Shares from October 23,
2007.  The Company acknowledges and understands that the
representations and agreements of the Company in this Section 3 is a material
inducement to the Buyer’s decision to consummate the transaction contemplated
herein.

       


      
        
           


        

        
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      3.      BUYER’S REPRESENTATIONS AND
WARRANTIES.

       

      Each
Buyer represents and warrants, severally and not jointly, that:

       

      (a)           Investment
Purpose.  The Buyer is acquiring the Debenture and the
underlying Conversion Shares, the Warrant, and the underlying Warrant Shares
(collectively, the “Securities”) for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the Buyer reserves the right to dispose of
the Securities at any time in accordance with or pursuant to an effective
registration statement covering such Securities or an available exemption under
the Securities Act.  The Buyer does not presently have any agreement
or understanding, directly or indirectly, with any Person to distribute any of
the Securities.

       

      (b)           Accredited Investor
Status.  The Buyer is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act
of 1933 (the “Securities
Act”).

       

      (c)           Transfer or
Resale.  The Buyer understands that: (i) the Securities have
not been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) the Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration
requirements, or (C) the Buyer provides the Company with reasonable assurances
(in the form of seller and broker representation letters) that such Securities
can be sold, assigned or transferred pursuant to Rule 144 in each case following
the applicable holding period set forth therein; (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register the Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption
thereunder.

       

      (d)           Legends.  The
Buyer agrees to the imprinting, so long as is required by this Section 4(d), of
a restrictive legend in substantially the following form:

       

      THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.


      
        
           


        

        
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      Certificates
evidencing the Conversion Shares or Warrant Shares shall not contain any legend
(including the legend set forth above), (i) while a registration statement
covering the resale of such security is effective under the Securities Act, (ii)
following any sale of such security pursuant to Rule 144, (iii) if such
Conversion Shares or Warrant Shares are eligible for sale without any
restrictions under Rule 144, or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
SEC).  The Buyer, agrees that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4(d) is
predicated upon the Company’s reliance that the Buyer will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a registration statement,
they will be sold in compliance with the plan of distribution set forth
therein.

       

      (e)           Authorization,
Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

       

      4.      REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.

       

      Except as
set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the representations and warranties set
forth below to the Buyer (in addition to those set forth in Section 3
hereof):

       

      (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each subsidiary free and clear of any
liens, and all the issued and outstanding shares of capital stock of each
subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.

       

      (b)           Organization and
Qualification.  The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted.  Each of the Company and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have or reasonably be expected to
result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect on
the results of operations, assets, business or condition (financial or
otherwise) of the Company and the subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a “Material Adverse
Effect”) and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification..

       

      (c)           Authorization, Enforcement,
Compliance with Other Instruments.  (i) The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Debentures, the Warrants, the Irrevocable
Transfer Agent Instructions, the Amendments and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively the “Transaction
Documents”) and to issue the Securities and amend the Amended Debentures
in accordance with the terms hereof and thereof, (ii) the execution and delivery
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Securities, the reservation for issuance and the issuance of the
Conversion Shares, and the reservation for issuance and the issuance of the
Warrant Shares, have been duly authorized by the Company’s Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.


      
        
           


        

        
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      (d)           Issuance of
Securities.  The issuance of the Debentures and Warrants is
duly authorized and the Debentures and Warrants are free and clear of
all  taxes, liens, claims, pledges, mortgages, restrictions,
obligations, security interests and encumbrances of any kind, nature and
description.  Upon conversion in accordance with the terms of the
Debenture or exercise in accordance with the Warrants, as the case may be, the
Conversion Shares and Warrant Shares, respectively, when issued will be validly
issued, fully paid and nonassessable, free from all taxes, liens, claims,
pledges, mortgages, restrictions, obligations, security interests and
encumbrances of any kind, nature and description.  The Company has
reserved from its duly authorized capital stock the appropriate number of shares
of Common Stock as set forth in this Agreement.

       

      (e)           No
Conflicts.   The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Securities and reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation of
any certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or any of its
subsidiaries, any capital stock of the Company or any of its subsidiaries or
bylaws of the Company or any of its subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the National Association of
Securities Dealers Inc.’s OTC Bulletin Board) applicable to the Company or any
of its subsidiaries or by which any property or asset of the Company or any of
its subsidiaries is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.  The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted in violation of any material law, ordinance, or regulation of
any governmental entity.  Except as specifically contemplated by this
Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement in accordance with the terms
hereof or thereof.  All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof.  The Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.

       

      (f)           SEC Documents; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (all of the foregoing
filed prior to the date hereof or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the “SEC Documents”) on
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Document prior to the expiration of any such
extension.  The Company has delivered to the Buyers or their
representatives, or made available through the SEC’s website at
http://www.sec.gov., true and complete copies of the SEC
Documents.  As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.  As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided by or on behalf of the
Company to the Buyers which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(i) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made and not misleading.

       

      
        
           


        

        
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      (g)           Absence of
Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect.

       

      (h)           No Integrated
Offering.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Securities under the
Securities Act or cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act.

       

      (i)       
    Listing and Maintenance
Requirements.  The Company’s Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to terminate, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the SEC is
contemplating terminating such registration.  The Company has not, in
the twelve (12) months preceding the date hereof, received notice from any
Primary Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Primary Market.  The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

       

      (j)       
    Dilutive
Effect.  The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Debenture and the
Warrant Shares issuable upon exercise of the Warrants will increase in certain
circumstances.  The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Debenture in accordance with
its terms and this Agreement and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants, in
each case, is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.


      
        
           


        

        
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      (k)           Purchase of WiseBuys Stores,
Inc..  On October 23, 2007, the Company completed the purchase
of WiseBuys Stores, Inc. and in connection with such purchase, exchanged,
guarantied and assumed WiseBuys Stores, Inc.’s obligations under the
Shares.

       

      (l)       
    The Company represents and warrants that the Shares are
enforceable against the Company and that the Company presently has no claims or
defenses of any nature whatsoever with respect to the Shares.

       

      (m)           As
of the date hereof, the total obligations of the Company under the Shares,
including principal, interest, cost, and fees, equals $4,113,640, as set forth
in more detail on Schedule 5(m).

       

      5.      COVENANTS.

       

      (a)           Reporting
Status.  With a view to making available to the Buyer the
benefits of Rule 144 or any similar rule or regulation of the SEC that may at
any time permit the Buyer to sell securities of the Company to the public
without registration, and as a material inducement to the Buyer’s purchase of
the Securities, the Company represents, warrants, and covenants to the
following:

       

      (i)           The
Company’s Common Stock is registered under Section 12(g) of the Exchange
Act.

       

      (ii)           The
Company is not and for at least the last 12 months prior to the date hereof has
not been a “shell company,” as defined in paragraph (i)(1)(i) of Rule 144 or
Rule 12b-2 of the Exchange Act.

       

      (iii)           The
Company is subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act and has filed all required reports under section 13 or 15(d) of the
Exchange Act during the 12 months prior to the date hereof (or for such shorter
period that the issuer was required to file such reports), other than Form 8-K
reports;

       

      (iv)           from
the date hereof until all the Securities either have been sold by the Buyer, or
may permanently be sold by the Buyer without any restrictions pursuant to Rule
144, (the “Registration Period”)
the Company shall file with the SEC in a timely manner all required reports
under section 13 or 15(d) of the Exchange Act and such reports shall conform to
the requirement of the Exchange Act and the SEC for filing
thereunder;

       

      (v)           The
Company shall furnish to the Buyer so long as the Buyer owns Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Buyers to sell such securities pursuant to
Rule 144 without registration; and

       

      (b)           During
the Registration Period the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would otherwise permit such
termination.

       

      (c)           Reservation of
Shares.  On the date hereof, the Company shall reserve for
issuance to the Buyers 1,000,000,000 shares for issuance upon conversions of the
Debenture and exercise of the Warrants (collectively, the “Share
Reserve”).  The Company represents that it has sufficient
authorized and unissued shares of Common Stock available to create the Share
Reserve after considering all other commitments that may require the issuance of
Common Stock.  The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the full
conversion of the Convertible Debentures and the full exercise of the
Warrants.  If at any time the Share Reserve is insufficient to effect
the full conversion of the Convertible Debentures or the full exercise of the
Warrants, the Company shall increase the Share Reserve
accordingly.  If the Company does not have sufficient authorized and
unissued shares of Common Stock available to increase the Share Reserve, the
Company shall call and hold a special meeting of the shareholders within thirty
(30) days of such occurrence, for the sole purpose of increasing the number of
shares authorized.  The Company’s management shall recommend to the
shareholders to vote in favor of increasing the number of shares of Common Stock
authorized.  Management shall also vote all of its shares in favor of
increasing the number of authorized shares of Common Stock.


      
        
           


        

        
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      (d)           Listings or
Quotation.  The Company’s Common Stock shall be listed or
quoted for trading on any of (a) the American Stock Exchange, (b) New York Stock
Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e)
the Nasdaq OTC Bulletin Board (“OTCBB”) (each, a
“Primary
Market”).  The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents.

       

      (e)           Fees.  Each
of the Company and the Buyer shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents.

       

      (f)           Corporate
Existence.  So long as any obligations remain outstanding under
the Debenture, the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, reverse stock split consolidation, sale
of all or substantially all of the Company’s assets or any similar transaction
or related transactions (each such transaction, an “Organizational
Change”) unless, prior to the consummation an Organizational Change, the
Company obtains the written consent of each Buyer.  In any such case,
the Company will make appropriate provision with respect to such holders’ rights
and interests to insure that the provisions of this Section 6(f) will thereafter
be applicable to the Debenture.

       

      (g)           Neither
the Buyer nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer agrees that it shall not, and that it will
cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.

       

      (h)           Disclosure of
Transaction.  Within two business days following the date of
this Agreement, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the Transaction Documents in the
form required by the Exchange Act and attaching the material Transaction
Documents as exhibits to such filing.

       

      (i)      
     Acknowledgement of
Obligations.  The Company hereby acknowledges, confirms and
agrees that the obligations of the Company to the Buyer under the Shares, and
immediately after the exchange of the Shares for the Debenture as contemplated
hereunder, under the Debenture, are unconditionally owing by the Company to SC
Partners, LLC without offset, defense or counterclaim of any kind, nature or
description whatsoever.


      
        
           


        

        
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      (j)  
         Acknowledgement of Security
Interests.  The Company hereby acknowledges, confirms and
agrees that SC Partners, LLC has and shall continue to have valid, enforceable
and perfected liens upon and security interests in the collateral heretofore
granted to SC Partners, LLC pursuant to the security agreements entered into in
connection with the Shares, and the Debenture, or otherwise granted to or held
by SC Partners, LLC.   

       

      (k)      
     Binding Effect of
Documents.  The Company hereto acknowledges, confirms and
agrees that:  (a) each of the documents and agreements entered
into in connection with the Shares, the Debenture to which it is a party has
been duly executed and delivered to SC Partners, LLC by the Company, and each is
in full force and effect as of the date hereof, (b) the agreements and
obligations of the Company contained in such documents and in this Agreement
constitute the legal, valid and binding obligations of the Company, enforceable
against each in accordance with their respective terms, and the Company has no
valid defense to the enforcement of such obligations, and (c) SC Partners,
LLC is and shall be entitled to the rights, remedies and benefits provided for
in such documents and applicable law, without setoff, defense or counterclaim of
any kind, nature or descriptions whatsoever.

       

      (l)      
     The Company and all of its affiliates authorize
the Buyer to file mortgage assignments and UCC assignments
in all jurisdictions as may be
necessary to perfect the assignment to the Buyer of any mortgage and UCC-1
financing statements filed in the name of
the Company and/or any of its affiliates as debtor, which are in favor of the
Buyer as secured party, in relation to the security assigned in accordance with
the Debenture or any other Agreements, including the Secured Convertible
Debenture and Security Agreement. 

       

      6.      TRANSFER AGENT
INSTRUCTIONS.

       

      (a)           NONE

       

      7.      CLOSING
DATE; DELIVERIES.  The transactions contemplated hereby shall occur at
the offices of Seaway Valley Capital Corporation (or such other place as is
mutually agreed to by the Company and the Buyer(s)) simultaneously with the
execution of this Agreement by the Parties (or such other date as is mutually
agreed to by the Company and the Buyer, the “Closing Date”). On
the Closing Date, prior to or contemporaneously with the execution and delivery
of this Agreement:

       

      (a)           the
Buyer shall deliver the Shares to the Company; and

       

      (b)           the
Company shall issue the Debenture and the Warrants to the Buyer;

       

      8.      GOVERNING LAW:
MISCELLANEOUS.

       

      (a)           Governing
Law.  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws.  The parties further agree that any
action between them shall be heard in St. Lawrence County, New York, and
expressly consent to the jurisdiction and venue of the Superior Court of New
York.

       

      (b)           Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery
hereof.

       

      (c)           Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.


      
        
           


        

        
          8

          
            

          

        

        
           


        

      

       

      (d)           Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

       

      (e)           Entire Agreement,
Amendments.  This Agreement supersedes all other prior oral or
written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters.  No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

       

      (f)           Notices.  Any
notices, consents, waivers, or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same.  The
addresses and facsimile numbers for such communications shall be:

       

      
        	
                If
      to the Company, to:

              	
                Seaway
      Valley Capital Corporation

              
	 
      	
                10-18
      Park Street, 2nd
      Floor

              
	 
      	
                Gouverneur,
      NY 13642

              
	 
      	
                Attention:
      Chief Executive Officer

              
	 
      	 
      
	
                With
      a copy to:

              	
                Law
      Office of William M. Aul

              
	 
      	
                7676
      Hazard Center Drive, Suite 500

              
	 
      	
                San
      Diego, CA 92108

              
	 
      	
                Attention:  William
      M. Aul

              
	 
      	
                Telephone:  619-497-2555

              
	 
      	
                Facsimile:    
      619-542-0555

              
	 
      	 
      
	
                If
      to the Buyer, to:

              	
                SC
      Partners, LLC

              
	 
      	
                22
      Park Street, 1st
      Floor

              
	 
      	
                Gouverneur,
      NY 13642

              
	 
      	
                Attention:
      President

              
	 
      	 
      
	 
      	 
      


      

      If to the
Buyer, to its address and facsimile number on Schedule I, with copies to the
Buyer’s counsel as set forth on Schedule I.  Each party shall provide
five (5) days’ prior written notice to the other party of any change in address
or facsimile number.

       

      (g)           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns.  Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.

       

      (h)           No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any


      
        
           


        

        
          9

          
            

          

        

        
           


        

      

       

      (i)        
   Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

       

      


      [SIGNATURE
PAGE AND EXHIBITS TO FOLLOW]

      


      


      



      
        
           


        

        
          10

          
            

          

        

        
           


        

      

      


      IN WITNESS WHEREOF, each Buyer and the Company
have caused their respective signature page to this Restructure Agreement to be
duly executed as of the date first written above.

       

      


      
        	 
      	
                COMPANY:

              
	 
      	
                SEAWAY
      VALLEY CAPITAL CORPORATION

              
	 
      	 
      
	 
      
	 
      
	 
      
	 
      	
                By:                                                                

              
	 
      	
                Name:  Thomas
      W. Scozzafava

              
	 
      	
                Title:    Chief
      Executive Officer

              
	 
      	 
      


      

      


       

      IN WITNESS WHEREOF, each Buyer and the Company
have caused their respective signature page to this Restructure Agreement to be
duly executed as of the date first written above.

       

      


      
        	 
      	
                BUYER:

              
	 
      	
                SC
      PARTNERS, LLC

              
	 
      	 
      
	 
      
	 
      
	 
      
	 
      
	 
      	
                By:                                                                 
      

              
	 
      	
                Name:   President
      and CEO

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                BUYER:

              
	 
      	
                SC
      PARTNERS, LLC

              
	 
      	 
      
	 
      
	 
      
	 
      
	 
      
	 
      	
                By:                                                                  
      

              
	 
      	
                Name:  Vice
      President and COO

              
	 
      	 
      
	 
      	 
      


      

      



      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      LIST OF
EXHIBITS:

      


      Disclosure
Schedule

      


      Exhibit A
– Form Debenture

      


      Exhibit B
- Form Warrant

      


      Exhibit C
– Form Security Agreement

      


      Schedule
I – SC Partners, LLC list of Share purchases

      


      Schedule
II - Obligations under the Shares (Series C Preferred Stock Amended Certificate
of Designation)

      


      


      



      
        
           


        

        
          12

          
            

          

        

        
           


        

      


      DISCLOSURE
SCHEDULE

      


      Schedule
I

        

       

      
 


      
        
           


        

        
          13

          
            

          

        

        
           


        

      


      Schedule
II

      


       

       

       

       

      
        14